<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1996
REGISTRATION NUMBER 333-4122
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
RUTHERFORD-MORAN OIL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 1311 76-0499690
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
</TABLE>
5 GREENWAY PLAZA, SUITE 220
HOUSTON, TEXAS 77046
(713) 622-5555
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
MICHAEL D. MCCOY
RUTHERFORD-MORAN OIL CORPORATION
5 GREENWAY PLAZA, SUITE 220
HOUSTON, TEXAS 77046
(713) 622-5555
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
Christopher E. H. Dack, Esq. Christine B. LaFollette, Esq.
FULBRIGHT & JAWORSKI L.L.P. ANDREWS & KURTH L.L.P.
1301 McKinney, Suite 5100 4200 Texas Commerce Tower
Houston, Texas 77010-3095 Houston, Texas 77002
(713) 651-5151 (713) 220-4200
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
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, check the following box. / /
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. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF OFFERING PRICE REGISTRATION FEE
SECURITIES TO BE REGISTERED (1) (2)
<S> <C> <C>
Common Stock, $0.01 par value................................................. $101,200,000 $34,897
</TABLE>
(1)Estimated solely for purposes of calculating the registration fee pursuant to
Rule 457(o). Includes shares subject to an over-allotment option.
(2)A registration fee of $33,310 was paid upon the initial filing of this
registration statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be used in
connection with an offering in the United States and Canada (the "U.S.
Prospectus") and the other to be used in connection with a concurrent offering
outside the United States and Canada (the "International Prospectus"). The U.S.
Prospectus and the International Prospectus are identical in all respects except
that they contain different front cover pages.
The form of U.S. Prospectus is included herein and is followed by the front
cover page to be used on the International Prospectus which differs from that in
the U.S. Prospectus. The front cover page for the International Prospectus
included herein is labeled "Alternate Front Cover Page for International
Prospectus."
<PAGE>
RUTHERFORD--MORAN OIL CORPORATION
------------------------
CROSS-REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-1 ITEM AND CAPTION LOCATION OR PROSPECTUS CAPTION
- ---------------------------------------------------------------------- -----------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Front Outside Front Cover Page
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front and Outside Back Cover Pages of Prospectus;
Risk Factors
3. Summary Information, Risk Factors, and Ratio of Earnings to Prospectus Summary; Risk Factors
Fixed Charges
4. Use of Proceeds Use of Proceeds; Management's Discussion and Analysis of
Financial Condition and Results of Operations; Certain
Related Party Transactions
5. Determination of Offering Price Outside Front Cover Page of Prospectus; Underwriting
6. Dilution Risk Factors; Dilution
7. Selling Security Holders Not applicable
8. Plan of Distribution Outside Front Cover Page of Prospectus; Underwriting
9. Description of Securities to be Registered Capitalization; Description of Capital Stock
10. Interests of Named Experts and Counsel Not applicable
11. Information with Respect to the Registrant Outside Front Cover Page; Prospectus Summary; Risk Factors;
The Company; Use of Proceeds; Capitalization; Selected
Financial Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations; Business
and Properties; Management; Certain Related Party
Transactions; Security Ownership of Management;
Description of Capital Stock; Shares Eligible for Future
Sale; Combined Financial Statements
12. Disclosure of Commission Position on Indemnification for Not Applicable
Securities Act Liabilities
</TABLE>
<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 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.
<PAGE>
PROSPECTUS Subject to Completion
Dated June 3, 1996
4,000,000 SHARES
[LOGO]
RUTHERFORD-MORAN OIL CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
All of the Common Stock offered hereby is being offered by Rutherford-Moran Oil
Corporation ("RMOC" or the "Company"). Of the 4,000,000 shares of Common Stock
offered, 3,200,000 shares are being offered initially in the United States and
Canada by the U.S. Underwriters (the "U.S. Underwriters") and 800,000 shares are
being offered initially outside the United States and Canada in a concurrent
offering by the International Managers (the "International Managers" and,
together with the U.S. Underwriters, the "Underwriters"). See "Underwriting."
The Offerings are contingent upon consummation of certain share exchanges and
transactions. See "The Transactions." Following the Offerings, Patrick R.
Rutherford and John A. Moran (collectively the "Principal Stockholders") will
own directly or indirectly approximately 76.0% of the outstanding shares of
Common Stock (or 74.3% if the U.S. Underwriters' over-allotment option is
exercised in full).
Prior to the Offerings, there has been no public market for the Common Stock. It
is currently anticipated that the initial public offering price will be between
$20 and $22 per share. See "Underwriting" for information relating to the
factors considered in determining the initial public offering price.
The Common Stock has been approved for quotation on the Nasdaq National Market,
under the symbol "RMOC."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- ------------------------------------------------------------------------------------------------------
Total (3) $ $ $
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1)The Company and the Principal Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2)Before deducting expenses of the Offerings payable by the Company estimated
at $ .
(3)The Company has granted the U.S. Underwriters an option to purchase up to an
additional 600,000 shares of Common Stock, on the same terms as set forth above,
solely to cover over-allotments, if any. If such option is exercised in full,
the total Price to Public, Underwriting Discount, and Proceeds to Company will
be $ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock being offered by this Prospectus are being offered by
the U.S. Underwriters, subject to prior sale, when, as and if delivered to and
accepted by the U.S. Underwriters, and subject to approval of certain legal
matters by Andrews & Kurth L.L.P., counsel for the Underwriters. It is expected
that delivery of the shares of Common Stock will be made against payment
therefor on or about , 1996 at the offices of J.P. Morgan Securities
Inc., 60 Wall Street, New York, New York.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
, 1996
<PAGE>
DESCRIPTION OF THE MAP ON THE INSIDE FRONT PAGE UNDER THE TITLE OF:
"RUTHERFORD-MORAN B8/32 CONCESSION GULF OF THAILAND 1.3 MILLION ACRES"
The map depicts the Gulf of Thailand showing the relative locations of Bangkok,
Khanom, the Block B8/32 Concession, the Satun, Erawan, Pailin and Bongkot
fields, and the 34", 36" and 33" pipelines. An enlargment of the Block B8/32
Concession area shows the relative locations of the North Benchamas, Benchamas,
Pakakrong, Maliwan, Pattalung, Tantawan and Yungthong fields, the 34" and 36"
pipelines running north-south through and along the western portion of Block
B8/32, the FPSO and the 33-mile spur pipeline running east-west across the
central portion of the Block connecting the 36" pipeline to the FPSO. Also
indicated on the map are shaded areas depicting the areas for proposed 3-D
seismic, unexplored blocks, exploration, development and prospects.
No person has been authorized to give any information or make any
representations not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any Underwriter. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, the Common Stock in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation.
No action has been or will be taken in any jurisdiction by the Company or by any
Underwriter that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. Persons into
whose possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any restrictions as to
the offering of the Common Stock and the distribution of this Prospectus.
In this Prospectus, references to "dollar" and "$" are to United States dollars,
and the terms "United States" and "U.S." mean the United States of America, its
states, its territories, its possessions and all areas subject to its
jurisdiction.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................................... 4
Risk Factors.......................................... 9
The Company........................................... 15
The Transactions...................................... 15
Use of Proceeds....................................... 17
Dividend Policy....................................... 17
Capitalization........................................ 18
Dilution.............................................. 19
Selected Historical and Unaudited Pro Forma
Financial Data..................................... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 21
Business and Properties............................... 25
Management............................................ 39
<CAPTION>
PAGE
<S> <C>
Certain Related Party Transactions.................... 43
Certain Relationships................................. 44
Security Ownership of Management...................... 45
Description of Capital Stock.......................... 46
Shares Eligible for Future Sale....................... 48
Certain United States Federal Tax Considerations for
Non-U.S. Holders of Common Stock................... 49
Underwriting.......................................... 52
Legal Matters......................................... 54
Experts............................................... 54
Available Information................................. 54
Certain Definitions................................... 55
Index to Financial Statements......................... F-1
Summary Reserve Report................................ A-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
Prior to the Offerings, the Company has not been subject to the reporting
requirements of the Securities Exchange Act of 1934 (the "Exchange Act"). The
Company intends to furnish stockholders with annual reports containing
consolidated financial statements audited by its independent auditors and such
quarterly reports containing unaudited financial statements for the first three
quarters of each fiscal year.
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
</TABLE>
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS. CERTAIN OIL AND GAS RELATED TERMS ARE DEFINED UNDER "CERTAIN
DEFINITIONS." UNLESS OTHERWISE NOTED HEREIN, THE INFORMATION CONTAINED IN THIS
PROSPECTUS ASSUMES THE U.S. UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE
EXERCISED. AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK, AND INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET
FORTH UNDER THE HEADING "RISK FACTORS." UNLESS THE CONTEXT INDICATES OTHERWISE,
REFERENCES IN THIS PROSPECTUS TO "RMOC" OR THE "COMPANY" ARE TO RUTHERFORD-MORAN
OIL CORPORATION, A DELAWARE CORPORATION, AND ITS SUBSIDIARIES, AFTER GIVING
EFFECT TO THE TRANSACTIONS DESCRIBED UNDER "THE TRANSACTIONS."
THE COMPANY
Rutherford-Moran Oil Corporation, a Delaware corporation ("RMOC" or the
"Company"), is an independent energy company engaged in the acquisition,
exploration, development and production of oil and gas properties in Southeast
Asia. Currently the Company's exploration and development activities are
entirely in the Gulf of Thailand and are conducted through its subsidiary, Thai
Romo Limited, a limited liability company existing under the laws of Thailand
("Thai Romo").
The Company is one of four concessionaires in Block B8/32 (sometimes referred to
as the "Block" or the "Concession") currently covering approximately 1.3 million
acres in the central portion of the Gulf of Thailand. Subsidiaries of Pogo
Producing Company ("Pogo") and Maersk Olie og Gas AS ("Maersk") and The
Sophonpanich Co. Limited ("Sophonpanich") are currently the other
concessionaires (together with the Company, the "Concessionaires") in the Block.
The Company was instrumental in identifying the Block as a viable prospect and
organizing the Concessionaires to submit a joint bid for the Block. The Company
and two of the Concessionaires, Pogo and Sophonpanich (collectively the
"Tantawan Concessionaires"), own all of the interests in the Tantawan production
area (the "Tantawan Field"), which is located on the eastern border of the
Block. The Company, as a non-operator, owns a 46.34% interest in the Tantawan
Field and a 31.66% interest in the remainder of the Block. The other
Concessionaires own interests in the Tantawan Field and the remainder of the
Block equal to or smaller than those of the Company. As of January 1, 1996, the
Company had net proved undeveloped reserves of 246 Bcfe, 74% of which were in
the southern portion of the Tantawan Field. Appraisal wells drilled by the
Concessionaires in three established areas within the Block (Tantawan, Benchamas
and Pakakrong) have tested at prolific flow rates of hydrocarbons and
established the potential for significant additional reserves in those areas.
The Tantawan Concessionaires have entered into a 30-year Gas Sales Agreement
(the "GSA") with the Petroleum Authority of Thailand ("PTT"), and production is
expected to commence in January 1997.
BUSINESS STRATEGY
The Company's business strategy is to increase its reserve base and production
through exploration, development and acquisition primarily in Southeast Asia.
The Company focuses its exploration efforts in countries and areas that offer:
(i) large reserve potential, (ii) manageable geologic risk, (iii) proximity to
infrastructure, (iv) growing local market demand for petroleum products and (v)
favorable business climates.
The Company believes the characteristics of the Block fit well within the
Company's strategy of seeking properties with large reserve potential. Block
B8/32 is situated within the Pattani Basin, which has seen major hydrocarbon
discoveries over the past 24 years. The surface area of Block B8/32 currently
covers an area of approximately 1.3 million acres, subject to relinquishment of
unexplored acreage, unless extended before August 1, 1997. A comparison to the
U.S. Gulf of Mexico would result in an equivalent acreage position of
approximately 260 Federal Offshore Louisiana Blocks. Management believes Block
B8/32 contains significant unexplored areas that provide the Company with
additional exploration opportunities and potential reserve growth for the
foreseeable future. In addition, the Company believes that the close proximity
of the Block to infrastructure, its long-term natural gas marketing arrangements
already in place, the growing Thai demand for petroleum products and the
favorable business climate of Thailand are all consistent with the Company's
strategy.
Management believes its role as one of the leaders of the Block B8/32 project,
its knowledge of the geology of the area, its important Thai relationships
developed over the past decade, its large ownership interest, and its close
working relationships with its co-Concessionaires will allow the Company to
continue to have considerable influence on the exploration and development
activities in the Block. See "Business and Properties--History of the Company's
Gulf of Thailand Block B8/32 Operations."
4
<PAGE>
BUSINESS ACTIVITIES
The Company has identified a number of exploration and development prospects
within Block B8/32, which include the Tantawan and Benchamas fields and the
Pakakrong prospect.
TANTAWAN. Through May 31, 1996, the Company has participated in drilling a
total of 14 exploration wells and 15 development wells in the Tantawan Field,
all but one of which have encountered hydrocarbons. Of the 28 wells that
encountered hydrocarbons, 24 are deemed capable of commercial flow rates. All of
these successful wells have been drilled in the southern portion of the Tantawan
Field, and have encountered an average of 170 feet of net pay. As of January 1,
1996, net proved undeveloped reserves for the Tantawan Field were 181 Bcfe.
Cumulatively, a total of 28 zones have been tested and have yielded 254.4 MMcfd
of natural gas and 21.4 Mbpd of oil and condensate. A sixteenth development well
is currently being drilled, and an additional four development wells and five
appraisal wells are currently planned to be drilled in 1996. Approval to produce
oil and gas from the Tantawan Field (covering approximately 68,000 acres) was
given by the Thai Petroleum Committee and the Ministry of Industry in August
1995. All gas from the Tantawan Field will be sold to PTT under the GSA. Under
the GSA, PTT is required to purchase from the Tantawan Concessionaires at least
75 MMcfd of gas for the first year of production (expected to commence in
January 1997) rising to at least 85 MMcfd in the second year. An oil sales
agreement with PTT is under negotiation, and the Tantawan Concessionaires expect
that all oil produced will be sold to PTT.
Under the development plan for the Tantawan Field, two platforms and production
facilities will be installed by August 1996, with installation of additional
platforms after first production. The oil and gas will be separated on each
platform and processed on a Floating Production, Storage and Offloading vessel
("FPSO") currently under construction and scheduled for delivery in December
1996. Oil will be exported via tankers, and gas will be transported through a
33-mile spur pipeline currently under construction by PTT and expected to be
completed in July 1996. Production is expected to commence in January 1997.
BENCHAMAS. Through May 31, 1996, the Concessionaires have drilled a total of
four exploration wells in the Benchamas field, all of which have encountered
hydrocarbons. Additional appraisal wells are currently planned to be drilled in
1996. To date, all wells drilled by the Concessionaires along an 18 mile
North-South axis of the Benchamas field have identified reserves. The four
successful wells have encountered an average of 225 feet of net pay. As of
January 1, 1996, net proved undeveloped reserves of 65 Bcfe were assigned to two
of the successful wells. Cumulatively, a total of 12 zones have been tested and
have yielded 103.3 MMcfd of natural gas and 17.5 Mbpd of oil and condensate. The
Concessionaires acquired a 104 square mile 3-D seismic survey of the Benchamas
field in 1993, and in August 1996 will acquire an additional 120 square miles of
3-D seismic data, which the Company expects will better define the extent of the
northern portion of the Benchamas field. Thereafter, the Company plans to
participate in drilling additional appraisal wells and refine a development plan
for the Benchamas field. The Company's preliminary plan of development for the
Benchamas field avails itself of the infrastructure of the nearby Tantawan Field
and contemplates the installation of satellite wellhead platforms and a central
processing facility platform with a daily capacity of 150 MMcf of natural gas,
25 MBbl of oil and condensate and 25 MBbl of water. The Company expects that the
Concessionaires will apply for approval to develop the Benchamas field in late
1996 with production to commence in 1998.
PAKAKRONG AND OTHER AREAS WITHIN BLOCK B8/32. Exploration efforts also continue
on those portions of the Block outside the Tantawan and Benchamas fields.
Through May 31, 1996, the Concessionaires have drilled three exploration wells
outside the Tantawan and Benchamas fields, all of which encountered
hydrocarbons, including two wells on the Pakakrong structure that are deemed
capable of commercial flow rates. Widespread seismic anomalies that are
associated with the same sequence identified as productive in the Benchamas
field are present in Pakakrong. Additionally, the Pakakrong wells encountered
and tested hydrocarbons at depths considerably shallower than found to date by
the Concessionaires elsewhere within Block B8/32. In addition to the Benchamas
field and the Pakakrong prospect, the Concessionaires have identified several
other potentially promising seismic structures on the approximately 1.2 million
acres currently outside the Tantawan Field.
OTHER ACTIVITIES. In the future, the Company intends to capitalize on its
experience in the Block by identifying and prudently pursuing additional oil and
gas investment opportunities in the Gulf of Thailand. The Company also is
currently reviewing exploratory prospects in other parts of Southeast Asia.
RISK FACTORS
For a discussion of risks associated with the Company's business activities,
including commencement of production and estimating quantities of hydrocarbons,
see "Risk Factors."
5
<PAGE>
THE TRANSACTIONS
The business of the Company has been conducted through Thai Romo and
Rutherford-Moran Exploration Company, a Texas corporation ("RMEC"), whose only
activity is in the Concession through an ownership interest in Thai Romo.
Immediately before consummation of the Offerings, certain transactions will take
place to effect exchanges of shares of Common Stock of the Company for (i)
shares of common stock of each of Thai Romo and RMEC (the "Share Exchanges") and
(ii) certain notes issued by Thai Romo (the "Note Exchanges"). The Company will
concurrently consummate the following transactions: (i) the Share Exchanges and
the Note Exchanges, (ii) a loan to RMEC of $24.6 million for (A) the payment of
$12.2 million in principal and interest on the notes issued by RMEC to its
shareholders, including Messrs. Rutherford and Moran, and (B) the redemption
from Messrs. Rutherford and Moran of a portion of their RMEC shares for $12.4
million, (iii) a transfer of the Thai Romo shares and notes received from all
Thai Romo shareholders except RMEC to Thai Romo Holdings, Inc., a Delaware
corporation wholly owned by the Company ("TRH"), in exchange for TRH stock, (the
transactions referred to in clauses (i) through (iii) are collectively referred
to herein as the "Transactions"), and (iv) the Offerings. As a result of the
Transactions, the Company will own 100% of RMEC and, except for five qualifying
shares, will own through RMEC and TRH 100% of Thai Romo. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity."
In the Share Exchanges, all of the shareholders of RMEC, including Messrs.
Rutherford and Moran, who own 50.0% and 47.2% of RMEC's shares, respectively,
will exchange all of the outstanding shares of common stock of RMEC that have
not previously been redeemed, for an aggregate of 12,051,082 shares of Common
Stock. Concurrently with the exchange of RMEC shares, all of the shareholders of
Thai Romo (other than RMEC) will exchange (i) all of their shares of common
stock of Thai Romo and (ii) $9.3 million in aggregate principal amount of notes
issued by Thai Romo, for an aggregate of 8,903,580 shares of Common Stock,
except that an affiliate of an executive officer of the Company and two
affiliates of each of Messrs. Rutherford and Moran will each retain one share of
Thai Romo as a qualifying share to satisfy minimum shareholder requirements
under Thai law. Immediately following the Share Exchanges and the Note
Exchanges, the Company will transfer the Thai Romo shares and notes received
from all Thai Romo shareholders except RMEC to TRH in exchange for TRH stock.
The Offerings are each contingent upon consummation of the Transactions.
Following consummation of the Transactions and the Offerings, Messrs. Rutherford
and Moran will own directly or indirectly 38.6% and 37.4%, respectively, or an
aggregate of approximately 76.0%, of the outstanding shares of Common Stock (or
74.3% if the U.S. Underwriters' over-allotment option is exercised in full). See
"The Transactions," "Use of Proceeds," "Certain Related Party Transactions" and
"Certain Relationships."
6
<PAGE>
THE OFFERINGS
The offering of 3,200,000 shares of Common Stock initially being offered in the
United States and Canada (the "U.S. Offering") and the offering of 800,000
shares of Common Stock initially being offered outside the United States and
Canada (the "International Offering") are collectively referred to herein as the
"Offerings."
<TABLE>
<S> <C>
COMMON STOCK OFFERED (1):
U.S. Offering................................................. 3,200,000 shares
International Offering........................................ 800,000 shares
TOTAL OFFERINGS (1)............................................... 4,000,000 shares
COMMON STOCK OUTSTANDING AFTER THE OFFERINGS (1)(2)............... 25,000,000 shares
USE OF PROCEEDS................................................... To repay all existing bank
indebtedness of approximately
$47.9 million and to lend $24.6
million to RMEC for the repayment
of notes and the redemption of
RMEC shares held by the Principal
Stockholders in connection with
the Transactions, with the
remainder to fund capital
expenditures and for general
corporate purposes.
LISTING........................................................... The Common Stock has been
approved for quotation on the
Nasdaq National Market.
PROPOSED NASDAQ NATIONAL MARKET SYMBOL............................ "RMOC"
</TABLE>
- ------------
(1) The Offerings are contingent upon consummation of the Transactions. See "The
Transactions." Assumes the U.S. Underwriters' over-allotment option for up to
600,000 shares of Common Stock is not exercised. See "Underwriting."
(2) Includes 44,338 shares of restricted stock to be issued to employees of the
Company at the time of the Offerings, but does not include the remainder of the
550,000 shares reserved for issuance pursuant to the Company's 1996 Key Employee
Stock Plan and 1996 Non-Employee Director Stock Option Plan. See
"Management--Key Employee Stock Plan" and "Non-Employee Director Stock Option
Plan."
SUMMARY OIL AND GAS RESERVE DATA
The following table sets forth information with respect to the Company's proved
undeveloped reserves as estimated by Ryder Scott Company, independent petroleum
engineers ("Ryder Scott"), after giving effect to the Transactions. In preparing
such estimates as of December 31, 1995, Ryder Scott used $18.71 per Bbl of oil
and $2.02 per Mcf of gas, the prices that the Company estimated that it would
have received at December 31, 1995 had the Tantawan and Benchamas fields been
producing at such time. For additional information relating to the Company's
reserves, see "Risk Factors--Uncertainties in Estimating Reserves and Future Net
Cash Flows," "Business and Properties--Proved Undeveloped Reserves and Estimated
Net Cash Flows," Notes to Combined Financial Statements and the Summary Reserve
Report of Ryder Scott included as Appendix A to this Prospectus.
<TABLE>
<S> <C> <C> <C>
--------------------------------
DECEMBER 31,
1993 1994 1995
--------- --------- ----------
TOTAL NET PROVED UNDEVELOPED RESERVES
Oil and condensate (MBbls) 5,425 7,674 18,997
Natural gas (MMcf) 33,474 56,739 131,607
Natural gas equivalent (MMcfe) 66,024 102,783 245,589
PRESENT VALUE (DISCOUNTED AT 10%) OF ESTIMATED FUTURE NET CASH FLOWS, BEFORE INCOME
TAXES (IN THOUSANDS) $ 17,166 $ 52,112 $ 131,631
</TABLE>
7
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The summary historical financial data set forth below for the Company have been
derived from the audited and unaudited financial statements and notes thereto
contained elsewhere in this Prospectus. The unaudited pro forma balance sheet
data assume the consummation of the Transactions and the Offerings and are not
necessarily indicative of the results that actually would have been obtained if
such Transactions and Offerings had occurred on March 31, 1996, or of future
results. See "The Transactions" and "Use of Proceeds." The pro forma financial
data should be read in conjunction with the more detailed unaudited pro forma
consolidated balance sheet, including notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
DOLLARS IN THOUSANDS 1993 1994 1995 1995 1996
--------- --------- ----------- ----------- -----------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest income $ 24 $ 6 $ 5 -- --
Expenses:
Interest expense 76 107 190 $ 37 $ 414
Depreciation expense -- 2 5 -- 2
Salaries and wages 113 109 114 21 35
General and administrative 74 181 208 48 53
--------- --------- ----------- ----------- -----------
Total expenses 263 399 517 106 504
--------- --------- ----------- ----------- -----------
Net loss $(239) $(393) $(512 ) $(106) $(504)
--------- --------- ----------- ----------- -----------
--------- --------- ----------- ----------- -----------
-----------------------------------------------------------
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
DOLLARS IN THOUSANDS 1993 1994 1995 1995 1996
--------- --------- ----------- ----------- -----------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOW DATA:
Cash flows provided by (used in) operating activities $ 67 $ (197) $ (1,681 ) $(1,173) $(1,754)
Cash flows used in investing activities (6,469) (8,178) (36,787 ) (1,433) (9,695)
Cash flows provided by financing activities 4,763 8,696 47,876 2,427 4,515
-----------------------------------------------------------
AT DECEMBER 31, AT MARCH 31, 1996
<CAPTION>
DOLLARS IN THOUSANDS 1994 1995
--------- --------- ACTUAL PRO FORMA
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) $ (3,504) $ (32,900) $(43,098) $19,272
Oil and gas properties, at cost 18,944 55,951 65,748 65,748
Total assets 19,427 67,669 73,287 87,941
Stockholders' equity 15,484 23,269 22,765 83,172
</TABLE>
8
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of risk.
The following factors should be carefully considered, together with the
information provided elsewhere in this Prospectus, in evaluating an investment
in the Common Stock offered hereby.
PROPERTIES UNDER DEVELOPMENT
Development of Block B8/32 is not completed and production therefrom has not
commenced. Production from the Tantawan Field is expected to commence in January
1997, contingent upon various factors including timely delivery of the FPSO by
its lessor, the completion of the new 33-mile spur pipeline being constructed by
PTT, and ongoing development drilling and field facilities construction by the
Tantawan Concessionaires and their contractors, which factors are in large part
beyond the control of the Company. On August 1, 1997, unless extended, the
Concessionaires are required to relinquish the remaining exploration acreage of
the Block and will retain only those areas for which production approvals have
been applied for or granted. The properties in the Block are not fully developed
and do not have a large amount of proved reserves attributable to them. Although
the Company believes that these properties have potential for significant
reserve additions from presently contemplated exploration and development
activities, the success of such activities cannot be assured. The ultimate value
of these properties, and thus of the Common Stock, will depend not only upon the
commencement of production but also upon the success of such activities. Also,
there can be no assurance that wells would be able to sustain production rates
commensurate with the drill stem tests. In addition, the geology of the Tantawan
Field and other areas in Block B8/32 is highly complex with considerable
faulting, which may or may not appear on 3-D seismic interpretation. See
"--Substantial Capital Requirements."
PROPERTY CONCENTRATION
All of the Company's reserves are located within the Thailand Petroleum
Concession for Block B8/32. The Concession and regulations promulgated pursuant
to Thai law (collectively, "Concession Obligations") contain requirements
regarding quality of service, capital expenditures, legal status of the
Concessionaires, restrictions on transfer and encumbrance of assets and other
restrictions. Failure to comply with these Concession Obligations could result,
under certain circumstances, in the revocation of the Concession. Termination or
revocation of the Concession for any reason would have a material adverse effect
on the Company. Initially, the Company's sole source of operating revenue will
be from the expected sale of production from wells in the Tantawan Field in
Block B8/32. This concentration of operations increases the Company's exposure
to any regional events that may increase costs, reduce availability of equipment
or supplies, restrict drilling activities, reduce demand or limit or delay
production. The adverse impact that any of these risks may have upon the Company
is increased due to the close geographic proximity of the Company's properties
and the small number of properties held by the Company. Increased development of
proved reserves in Block B8/32 will not reduce this concentration. See "Business
and Properties."
SINGLE CUSTOMER
All oil and natural gas produced from the Tantawan Field is expected to be sold
to PTT, which maintains a monopoly over oil and gas transmission and
distribution in Thailand. The Concessionaires are required to give first
priority to the Thai government to purchase the oil and natural gas produced by
the Concessionaires. Failure of PTT or the Concessionaires to comply with the
terms of the purchase contracts would have a material adverse effect on the
Company. See "Business and Properties-- Marketing."
DEVELOPMENT STAGE COMPANY
The Company and its predecessors have been in existence since 1990 and their
activities to date have been limited to oil and gas exploration and development
activities in the Gulf of Thailand without any oil or natural gas production;
therefore, prospective investors have limited historical financial information
about the Company upon which to base an evaluation of the Company's performance
and an investment in the Common Stock offered hereby. In addition, prospective
investors should be aware of the difficulties encountered by enterprises in the
development stage, like the Company, especially in view of the highly
competitive nature of the oil and gas industry and in view of the fact that to
date the Company's operations have been in a limited geographic area.
9
<PAGE>
LACK OF PROFITABLE OPERATIONS
To date, the Company's exploration and development activities have not generated
revenues, causing the Company to incur losses as it has expended funds to start
up its operations. In addition, because the Company's natural gas and oil
production is not expected to commence until 1997, the Company expects that it
will continue to incur losses for the remainder of 1996 and into 1997. Drilling
activities are subject to many risks, including that no commercially productive
reservoirs will be encountered. See "--Reserve Exploration, Development and
Production Risks." There can be no assurance that any well drilled by the
Company will be productive or that the Company will recover all or any portion
of its investment. The Company's ability to generate income or positive cash
flow will depend upon the success of its exploration and development drilling
program. Further, the drilling of several dry holes, without an increase in
current reserves, could require a write-down of the Company's oil and natural
gas properties if all costs of acquisition, exploration and development of
reserves (net of depreciation, depletion and amortization) exceed the present
value of the estimated future net cash flow from the Company's proved reserves
calculated in accordance with the applicable requirements of the Securities and
Exchange Commission ("SEC"). To the extent cash flow from operations does not
significantly increase and external sources of capital become limited or
unavailable, the Company's ability to make the necessary capital investment to
maintain or expand its asset base would be impaired. See "--Substantial Capital
Requirements" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
UNCERTAINTIES IN ESTIMATING RESERVES AND FUTURE NET CASH FLOWS
Proved reserves of oil and natural gas are estimated quantities that geological
and engineering data demonstrate with reasonable certainty to be economically
producible under existing conditions. There are numerous uncertainties inherent
in estimating quantities and values of proved undeveloped reserves and in
projecting future rates of production and the timing of development
expenditures, including factors involving reservoir engineering, pricing and
both operating and regulatory constraints, especially for the stage of
development and complex and faulted nature of Block B8/32. Reserve assessment is
a subjective process of estimating the recovery from underground accumulations
of hydrocarbons that cannot be measured in an exact way. All reserve estimates
are to some degree speculative, and various classifications of reserves only
constitute attempts to define the degree of speculation involved. The accuracy
of any reserve estimate is a function of available data, engineering and
geological interpretations and judgments based on the data, and assumptions
regarding oil and gas prices. Accordingly, as further information is acquired
for Block B8/32, reserve estimates are likely to differ from the quantities of
hydrocarbons that are ultimately recovered. The reserve data included in this
Prospectus are based upon volumetric information as no production history exists
from wells within the Block. Results of drilling, testing and production history
from the Company's wells and changes in oil and natural gas prices and cost
estimates subsequent to the date of its reserve estimates could require
substantial adjustments, either upward or downward, to those estimates. Any
downward adjustment could adversely affect the Company's financial condition,
future prospects and market value of its Common Stock.
The present value of future net cash flows referred to in this Prospectus should
not be construed as the current market value of the estimated oil and natural
gas reserves attributable to the Company's properties. In accordance with
applicable requirements of the SEC, the estimated discounted future net cash
flows from proved reserves are generally based on prices and costs as of the
date of the estimate, whereas actual future prices and costs may be materially
higher or lower, especially in light of the early stage of development of Block
B8/32. Actual future net cash flows also will be affected by factors such as the
amount and timing of actual production, supply and demand for oil and gas,
curtailments or increases in consumption by purchasers, actual amounts paid
pursuant to the Concession including royalties and Special Remuneratory
Benefits, which vary from zero to 75% of Annual Petroleum Profits (as defined
below) and changes in governmental regulations and taxation. The timing of
actual future net cash flows from proved undeveloped reserves, and thus their
actual present value, will be affected by the timing of both the production and
the incurrence of expenses in connection with development and production of oil
and gas properties. In addition, the 10% discount rate, which is required by the
SEC to be used to calculate discounted future net cash flows for reporting
purposes, is not necessarily the most appropriate discount rate based on
interest rates in effect from time to time and risks associated with the Company
or the oil and gas industry in general.
SUBSTANTIAL CAPITAL REQUIREMENTS
The Company makes, and will continue to make, substantial capital expenditures
for the acquisition, exploration, development and production of oil and natural
gas reserves. Since its inception, the Company has financed these expenditures
primarily with cash generated by loans from stockholders, bank borrowings, and
the sale of common stock. The Company intends to make an
10
<PAGE>
aggregate of approximately $60.0 million in capital expenditures in 1996, which,
the Company believes, based on current estimates, includes all capital
expenditures required for the commencement of production in 1997. The Company
believes that it will have sufficient cash provided by anticipated borrowings
under its proposed credit facility and the Offerings to fund such planned
capital expenditures. If, after production commences, revenues or reserves
decline, the Company may have limited ability to expend the capital necessary to
undertake or complete future drilling programs. There can be no assurance that
debt or equity financing or cash generated by operations will be available or
that, if available it will be on terms acceptable to the Company, or sufficient
to meet these requirements or for other corporate purposes. Moreover, future
activities may require the Company to alter its capitalization significantly.
See "--Reserve Exploration, Development and Production Risks," "--Reliance on
Development of Additional Reserves," and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Capital Resources and
Liquidity" and "Business and Properties--History of the Company's Gulf of
Thailand Block B8/32 Operations" and "Current Fields and Prospects."
RESERVE EXPLORATION, DEVELOPMENT AND PRODUCTION RISKS
The Company's oil and gas exploration, development and planned production
operations involve risks normally incident to such activities, including
blowouts, oil spills and fires (each of which could result in damage to or
destruction of wells, production facilities or other property, or injury to
persons), geologic uncertainties and unusual or unexpected formations and
pressures, which may result in dry holes, failure to produce oil or gas in
commercial quantities or inability to fully produce discovered reserves. The
Company's offshore operations are also subject to hazards inherent in marine
operations, such as capsizing, sinking, grounding, collision and damage from
severe weather conditions. Oil and gas exploration may involve unprofitable
efforts, not only from dry wells, but from wells that are productive but do not
produce sufficient net revenues to return a profit after drilling, operating and
other costs. Completion of a well does not assure a profit on the investment or
recovery of drilling, completion and operating costs. In addition, drilling
hazards or environmental damage could greatly increase the cost of operations,
and various field operating conditions may adversely affect the Company's
production from successful wells. These conditions include delays in obtaining
regulatory approvals, shut-in of connected wells resulting from extreme weather
conditions, insufficient storage or transportation capacity or other geological
and mechanical conditions. While close well supervision and effective
maintenance operations can contribute to maximizing production rates over time,
production delays and declines from normal field operating conditions cannot be
eliminated and can be expected to adversely affect revenue and cash flow levels
to varying degrees.
In the event that the required reserves or production rates of natural gas at a
specified quality level are not delivered, then the Company and the other
Tantawan Concessionaires will be obliged to contribute to PTT's capital costs
incurred in the construction of the 33-mile spur pipeline. Also, under the GSA,
the Tantawan Concessionaires' liability for failure to deliver the minimum
contracted daily rate is limited to PTT's right to take from subsequent
deliveries an amount equal to the quantity of natural gas not delivered at 75%
of the contracted price.
Although the Company maintains insurance coverage that it believes is in
accordance with customary industry practice, it is not fully insured against
certain of these risks, either because such insurance is not available or
because of high premium costs. The occurrence of a significant event that the
Company is not fully insured against could have a material adverse effect on the
Company's financial position and results of operations.
RELIANCE ON DEVELOPMENT OF ADDITIONAL RESERVES
The Company must continually acquire, explore for and develop new hydrocarbon
reserves to replace those to be produced and sold. Without successful
development and exploratory drilling for, or acquisition of, reserves, the
Company's reserve base and revenues will decline when production commences.
Drilling activities are subject to numerous risks, including the risk that no
commercially viable oil or natural gas accumulations will be encountered. The
decision to purchase a property interest or explore or develop a property will
depend in part on geophysical and geological analyses and engineering studies,
the results of which may be inconclusive or subject to varying interpretations.
The cost of drilling, completing and operating wells is often uncertain.
Drilling may be curtailed, delayed or canceled as a result of many factors,
including title problems, weather conditions, compliance with government
permitting requirements, shortages of or delays in obtaining equipment,
reductions in product prices or limitations in the market for products. Wells
may be shut in for lack of a market or due to inadequacy or unavailability of
pipeline or tanker storage capacity.
11
<PAGE>
MARKET CONDITIONS AND CHANGING OIL AND GAS PRICES
The revenues expected to be generated by the Company's future operations will be
highly dependent upon the prices of, and demand for, oil and natural gas.
Natural gas produced from the Company's Tantawan Field is subject to the GSA
with PTT with prices subject to semi-annual adjustment based on movements in,
among other things, currency exchange rates, oil prices and inflation. The price
received by the Company for its oil and gas production and the level of
production will depend on numerous factors beyond the Company's control,
including the condition of the world economy, political and regulatory
conditions in Thailand and other oil and gas producing countries and the actions
of the Organization of Petroleum Exporting Countries. Decreases in the prices of
oil and gas could have an adverse effect on the carrying value of the Company's
proved reserves and the Company's revenues, profitability, cash flow and
borrowing base availability under the proposed credit facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity."
In order to manage its exposure to price risks in the marketing of its oil and
natural gas, the Company has entered into crude oil swaps and may enter into
other financial swaps and oil and natural gas futures contracts as hedging
devices. Such contracts may expose the Company to the risk of financial loss in
certain circumstances, including instances when production is less than
expected, the contract purchasers fail to purchase or deliver the contracted
quantities of oil or natural gas, or a sudden, unexpected event materially
impacts oil or natural gas prices. Such contracts may also restrict the ability
of the Company to benefit from unexpected increases in oil and natural gas
prices. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Capital Resources and Liquidity."
INTERNATIONAL OPERATIONS AND CURRENCY
The Company expects that sales outside the United States will account for all of
its revenue. Certain risks are inherent in international operations, such as
difficulties in management, unexpected changes in regulatory requirements,
tariffs and other trade barriers, unique local technical requirements, risk of
political instability, potentially adverse tax consequences and the burdens of
complying with foreign legislation. There is no assurance that such factors will
not have an adverse effect on the Company's financial condition or on its
results of operations. See "Business and Properties--Tax Regulation."
Currently all of the Company's sales are expected to be recognized in Baht, the
Thai currency. Accordingly, fluctuations in the exchange rates between Baht and
U.S. dollars could have an adverse effect on the Company's financial condition
or on the results of its operations. See "Business and Properties--Marketing."
GOVERNMENT REGULATION
The Company's business is currently regulated by the laws and regulations of the
Kingdom of Thailand relating to the development, production, marketing, pricing,
transportation and storage of natural gas and crude oil, taxation and
environmental and safety matters. The Company does not believe that
environmental regulations will have any material adverse effect on its capital
expenditures, results of operations or competitive position, and does not
anticipate that any material expenditures will be required to enable it to
comply with existing laws and regulations. However, the modification of existing
laws or regulations or the adoption of new laws or regulations curtailing
exploratory or developmental drilling for oil and gas for economic,
environmental or other reasons could have a material adverse effect on the
Company's operations.
The Company's assets and operations are subject to various political, economic
and other uncertainties, including, among other things, the risks of war,
expropriation, nationalization, renegotiation or nullification of existing
concessions and contracts, taxation policies, foreign exchange and repatriation
restrictions, changing political conditions, international monetary
fluctuations, currency controls and foreign governmental regulations that favor
or require the awarding of drilling contracts to local contractors or require
foreign contractors to employ citizens of, or purchase supplies from, a
particular jurisdiction. In addition, in the event of a dispute arising from
foreign operations, the Company may be subject to the exclusive jurisdiction of
foreign courts or may not be successful in subjecting foreign persons to the
jurisdiction of courts in the U.S. The Company may also be hindered or prevented
from enforcing its rights with respect to a governmental instrumentality because
of the doctrine of sovereign immunity. See "Business and Properties--Thai
Concession Terms."
COMPETITION
The oil and gas industry is highly competitive. The Company's competitors for
the acquisition, exploration, production and development of oil and natural gas
properties in Southeast Asia, and for capital to finance such activities,
include companies that
12
<PAGE>
have greater financial and personnel resources available to them than the
Company. The Company's ability to acquire additional properties, to discover
reserves and to participate in drilling opportunities in the future will be
dependent upon its ability to select and evaluate suitable properties and to
consummate transactions in a highly competitive environment. See "Business and
Properties--History of the Company's Gulf of Thailand Block B8/32 Operations."
DEPENDENCE ON KEY PERSONNEL AND MANAGEMENT OF GROWTH
Successful implementation of the Company's business plan will result in an
increase in the level of responsibility for key personnel. To manage its growth
effectively, the Company will be required to continue to implement and improve
its operating and financial systems and controls and to expand and manage its
employee base. There can be no assurance that the management, technical
personnel, systems and controls currently in place or to be implemented will be
adequate for such growth or that any steps taken to hire personnel or to improve
such systems and controls will be sufficient. There can be no assurance that the
Company will be able to attract or retain key personnel. The Company does not
maintain "key person" life insurance policies on any of its key personnel.
The success of the Company will be highly dependent on senior management
personnel. Loss of the services of any of these individuals could have an
adverse impact on the Company's operations. There can be no assurance regarding
the future affiliation of any of these senior management personnel or that there
will not be competition between the Company and such individuals. See "Certain
Relationships."
CONTROL BY PRINCIPAL STOCKHOLDERS
Upon completion of the Offerings, Messrs. Rutherford and Moran will own directly
and indirectly in the aggregate approximately 76.0% of the outstanding Common
Stock (or 74.3% if the U.S. Underwriters' over-allotment option is exercised in
full). Accordingly, Messrs. Rutherford and Moran will be able to elect all of
the directors of the Company and to control the Company's management, operations
and affairs, including the ability to effectively prevent or cause a change in
control of the Company. See "Security Ownership of Management," "Certain Related
Party Transactions" and "Shares Eligible for Future Sale."
BENEFITS OF THE OFFERINGS TO PRINCIPAL STOCKHOLDERS
In addition to the benefits to be derived from the Company becoming publicly
held with a market for Common Stock, the Principal Stockholders of RMEC will
benefit from the application of the proceeds of the Offerings in that the
Company will use $12.4 million of the net proceeds to fund the redemption by
RMEC from Messrs. Rutherford and Moran of certain RMEC shares and will use $12.2
million of the net proceeds to fund the repayment by RMEC of loans to existing
stockholders of RMEC, including Messrs. Rutherford and Moran. In addition, the
Principal Stockholders will have unrealized potential gains in the value of
their investments in RMEC and Thai Romo, based upon the difference between the
amount of such investments and aggregate value of their shares of Common Stock
based upon the initial offering price of the Common Stock. The total investment
by Messrs. Rutherford and Moran for acquiring shares of Common Stock in the
Transactions is approximately $9 million and their shares would have a value of
approximately $399 million based upon an assumed initial offering price of
$21.00 per share. See "The Transactions" and "Use of Proceeds."
ABSENCE OF PUBLIC MARKET
Prior to the Offerings, there has been no public market for the Common Stock.
Although the Common Stock has been approved for quotation on the Nasdaq National
Market, there can be no assurance that an active trading market will develop or
continue upon completion of the Offerings. The initial public offering price of
the Common Stock will be determined by negotiations between the Company and the
representatives of the Underwriters and may not be indicative of the market
price of the Common Stock after the Offerings. For a discussion of the factors
to be considered in determining the initial public offering price, see
"Underwriting." The market price of the Common Stock could be subject to
significant fluctuations in response to variations in quarterly and yearly
operating results, the success of the Company's business strategy, general
trends in the oil and gas industry, competition, changes in federal regulations
affecting the Company or the oil and gas industry and other factors. In
addition, the stock market in recent years has experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of affected companies. These broad fluctuations may
adversely affect the market price of the Common Stock.
13
<PAGE>
ADVERSE EFFECT ON MARKET PRICE DUE TO SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the Offerings, there will be outstanding 25,000,000 shares
of Common Stock. Sales of a substantial number of shares of Common Stock by the
Company or its existing stockholders may adversely affect the market price of
the Common Stock. Following the expiration of the lock-up agreements with the
Underwriters with respect to the Offerings, each of the Company's directors,
executive officers and existing stockholders who will hold upon completion of
the Offerings approximately 84% of the outstanding shares of Common Stock (82%
if the U.S. Underwriters' over-allotment option is exercised in full) may sell
such shares subject to the requirements of Rule 144 under the Securities Act of
1933 (the "Securities Act"). In addition, the Principal Stockholders will have
rights to require the Company to register their shares in a public offering.
Sales of a substantial amount of Common Stock, or a perception that such sales
may occur, could adversely affect the prevailing market price of the Common
Stock. See "Shares Eligible for Future Sale," "Certain Related Party
Transactions" and "Underwriting."
DILUTION
A purchaser of Common Stock in the Offerings will experience an immediate and
substantial dilution of $17.67 per share in the net tangible book value of its
shares. See "Dilution."
NO ANTICIPATED DIVIDENDS
The Company expects to retain cash generated from future operations to support
its cash needs and does not anticipate the payment of any dividends on the
Common Stock for the foreseeable future. In addition, dividends or distributions
by Thai Romo may be restricted by Thai Romo's credit facility. See "Dividend
Policy," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business and Properties--Tax Regulation--Certain
Thailand Tax Consequences."
TAXES
Thai Romo will be required to pay Thai Petroleum Income Tax (currently 50% of
net profits), royalties and other amounts to the Thai government for any
production of reserves in Thailand. See "Business and Properties--Tax
Regulation--Certain Thailand Tax Consequences." It is possible that the amount
of Thai Petroleum Income Tax treated as a creditable tax for United States
federal income tax purposes will be less than 35%, with the result that the
Company will owe residual United States federal income taxes on its pro rata
share of Thai Romo's net taxable income allocated to the Company. Moreover, it
is expected that the Company will be subject to the United States federal
alternative minimum tax on its pro rata share of Thai Romo's net taxable income
allocated to the Company because the alternative minimum tax foreign tax credit
will not fully offset the Company's alternative minimum taxable income. See
"Business and Properties--Tax Regulation--Certain United States Federal Income
Tax Consequences to the Company."
ANTI-TAKEOVER PROVISIONS; PREFERRED STOCK
The Company's Certificate of Incorporation, Bylaws and employee benefit plans
contain provisions which may have the effect of delaying, deferring or
preventing a change in control of the Company. The Company's Board of Directors
has the authority to issue shares of Preferred Stock in one or more series and
to fix the rights and preferences of the shares of any such series without
shareholder approval. Any series of Preferred Stock is likely to be senior to
the Common Stock with respect to dividends, liquidation rights and possibly,
voting. The Company has no present plans to issue any preferred stock to
discourage any change of control. However, the ability to issue Preferred Stock
could have the effect of discouraging unsolicited acquisition proposals. The
Company's 1996 Key Employee Stock Plan contains provisions that allow for, among
others, the acceleration of vesting or payment of awards granted under such plan
in the event of a "change of control," as defined in such plan. The Company has
entered into a severance agreement with an executive officer allowing for cash
payments upon termination of employment following a change in control of the
Company. Because the Company's Principal Stockholders can currently (and after
the Offerings will continue to be able to) elect all directors of the Company
and control the outcome of all matters submitted to a vote of stockholders,
these provisions currently have limited significance. See "Description of
Capital Stock" and "Management-- Severance Arrangement."
14
<PAGE>
THE COMPANY
The Company is an independent energy company engaged in the acquisition,
exploration, development and production of oil and gas properties in Southeast
Asia. Currently the Company's exploration activities are entirely in the Gulf of
Thailand and are conducted through its subsidiary, Thai Romo.
The Company is one of four Concessionaires in Block B8/32 currently covering
approximately 1.3 million acres in the central portion of the Gulf of Thailand.
Subsidiaries of Pogo and Maersk and Sophonpanich are currently the other
Concessionaires in the Block. The Company was instrumental in identifying the
Block as a viable prospect and organizing the Concessionaires to submit a joint
bid for the Block. The Company and two of the Concessionaires, Pogo and
Sophonpanich, own all of the interests in the Tantawan Field, which is located
on the eastern border of the Block. The Company, as a non-operator, owns a
46.34% interest in the Tantawan Field and a 31.66% interest in the remainder of
the Block. The other Concessionaires own interests in the Tantawan Field and the
remainder of the Block equal to or smaller than those of the Company. As of
January 1, 1996, the Company had net proved undeveloped reserves of 246 Bcfe,
74% of which were in the southern portion of the Tantawan Field. See "Business
and Properties--History of the Company's Gulf of Thailand Block B8/32
Operations."
The Company's principal executive offices are located at 5 Greenway Plaza, Suite
220, Houston, Texas 77046, and its telephone number is (713) 622-5555.
THE TRANSACTIONS
RMOC was incorporated in the State of Delaware on March 8, 1996 to acquire and
own all of the outstanding shares of common stock of TRH and RMEC. TRH was
incorporated in the state of Delaware on May 23, 1996, to hold all of the
outstanding shares of common stock of Thai Romo other than the Thai Romo shares
held by RMEC and a nominal number of qualifying Thai Romo shares. RMEC was
formed as a Texas corporation in 1990 under the name Rutherford/Moran Oil
Corporation, changed to its current name in April 1996 and following the
Offerings will reincorporate in the State of Delaware. RMEC's only activity in
the Concession has been holding an interest in Thai Romo. Thai Romo, a limited
liability company formed in Thailand in 1991, is one of the four Concessionaires
and one of the three Tantawan Concessionaires.
The Company will concurrently consummate the following transactions: (i) the
Share Exchanges and the Note Exchanges as described below, (ii) a loan to RMEC
of $24.6 million for (A) the payment of $12.2 million in principal and interest
on the notes issued by RMEC to its shareholders, including Messrs. Rutherford
and Moran, and (B) the redemption from Messrs. Rutherford and Moran of a portion
of their RMEC shares for $12.4 million (the "Redemption"), (iii) a transfer of
the Thai Romo shares and notes received from all Thai Romo shareholders except
RMEC to TRH in exchange for TRH stock (the transactions referred to in clauses
(i) through (iii) are collectively referred to herein as the "Transactions"),
and (iv) the Offerings.
All of the shareholders of RMEC, including Messrs. Rutherford and Moran who own
50.0% and 47.2% of RMEC's shares, respectively, will exchange all of the
outstanding shares of common stock of RMEC that have not previously been
redeemed, for an aggregate of 12,051,082 shares of Common Stock. Concurrently
with the exchange of RMEC shares, all of the shareholders of Thai Romo (other
than RMEC) will exchange (i) all of their shares of common stock of Thai Romo
and (ii) $9.3 million in aggregate principal amount of notes issued by Thai
Romo, for an aggregate of 8,903,580 shares of Common Stock, except that an
affiliate of an executive officer of the Company and two affiliates of each of
Messrs. Rutherford and Moran will each retain one qualifying share of Thai Romo
to satisfy minimum shareholder requirements under Thai law. Immediately
following the Share Exchanges and the Note Exchanges, the Company will transfer
the Thai Romo shares and notes received from all Thai Romo shareholders except
RMEC to TRH in exchange for TRH Stock. After the Transactions, RMOC will be the
parent company of TRH and RMEC and will control the oil and gas activities of
RMEC, TRH and Thai Romo. All Thai Romo shares will be subject to provisions of
the Articles of Association of Thai Romo restricting the transfer thereof and
subject to a pledge under the Company's credit facility. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity" and "Business and Properties--Tax
Regulation--Certain United States Federal Income Tax Consequences to the
Company."
The Offerings are each conditioned upon consummation of the Transactions.
Following consummation of the Transactions and the Offerings, Messrs. Rutherford
and Moran will each own directly or indirectly 38.6% and 37.4%, respectively, or
an aggregate of approximately 76.0%, of the outstanding shares of Common Stock
(an aggregate of 74.3% if the U.S. Underwriters' over-allotment option is
exercised in full). See "Use of Proceeds," "Certain Related Party Transactions"
and "Certain Relationships."
15
<PAGE>
The effective ownership structure of the Company before and after the
consummation of the Transactions and the Offerings is shown in the following
charts:
[CHART]
- ------------
(1) Prior to the Transactions, Messrs. Rutherford, Moran and Sidney F. Jones,
Jr., hold 50%, 47.2% and 2.8% of the outstanding shares of RMEC, respectively.
(2) Other shareholders include Red Oak Holdings, Inc., an affiliate of the
Company's lender, RMOC, TRH and affiliates of Michael D. McCoy, Sidney F. Jones,
Jr. and Susan R. Rutherford.
[CHART]
- ------------
(1) After the Transactions, Messrs. Rutherford and Moran will hold 38.6% and
37.4% of the outstanding shares of RMOC, respectively (assuming the U.S.
Underwriters' over-allotment option is not exercised).
DESCRIPTIONS OF THE CHARTS REFLECTING OWNERSHIP STRUCTURE ON PAGE 16:
OWNERSHIP BEFORE OFFERINGS: the chart shows that RMEC, Patrick R. Rutherford and
affiliates, John A. Moran and affiliates and other shareholders own 57.5%,
17.4%, 17.5% and 7.6% of Thai Romo, respectively.
OWNERSHIP AFTER OFFERINGS: the charts shows that RMOC owns 100% of the capital
stock TRH and of RMEC, which in turn own 43% and 57% of the shares of Thai Romo,
respectively.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are estimated to be
approximately $77.7 million (or $89.4 million if the U.S. Underwriters'
over-allotment option is exercised in full), assuming an initial public offering
price of $21.00 per share and after deducting estimated underwriting discounts
and expenses payable by the Company.
The Company intends to use approximately $47.9 million of the net proceeds of
the Offerings to repay all of the outstanding bank indebtedness of Thai Romo,
which was incurred to fund the exploration and the initial development
activities in the Block. At May 31, 1996, the outstanding bank indebtedness of
the Company consists of $42.5 million, due June 28, 1996 with an annual interest
rate of the LIBOR rate plus 4% (9.4% at May 31, 1996) and $5.4 million due June
30, 1996, with an interest rate, at the Company's option, of the prime rate plus
1% or the LIBOR rate plus 2.75% (8.25% at May 31, 1996). After such repayment,
the Company's existing credit facilities will terminate and, subject to
negotiation of definitive agreements, it expects to have borrowing availability
under a proposed credit facility. See "Risk Factors--Substantial Capital
Requirements." For a description of the terms of the existing and proposed
credit facilities, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Capital Resources and Liquidity."
The Company intends to lend to RMEC $24.6 million of the net proceeds of the
Offerings to enable RMEC to repay outstanding indebtedness under certain demand
notes, including notes held by Messrs. Rutherford and Moran, and to redeem
certain RMEC shares held by Messrs. Rutherford and Moran. See "The
Transactions." At May 31, 1996, the outstanding indebtedness to Messrs.
Rutherford and Moran was $4.3 million and $4.0 million, respectively and is due
on demand. Of the total outstanding indebtedness to Messrs. Rutherford and Moran
of $8.3 million, $1.4 million incurred prior to 1995 accrues interest at a prime
rate (8.25% at May 31, 1996) and $6.9 million incurred during 1995 accrues
interest at a prime rate plus 1% (9.25% at May 31, 1996). In addition, prior to
the Offerings an additional $3.0 million of indebtedness will be outstanding
under demand notes that will bear interest at a prime rate, which notes in an
amount of $1.5 million and $1.4 million will be held by Messrs. Rutherford and
Moran, respectively. For a description of the purpose of such indebtedness as
well as the terms of such indebtedness, see "Certain Related Party
Transactions." The Company intends to use the remaining net proceeds from the
Offerings to fund capital expenditures and for general corporate purposes.
DIVIDEND POLICY
The Company has not paid cash dividends since its formation and does not
anticipate that cash dividends will be paid in the foreseeable future since the
Company presently intends to retain any future earnings from Thai Romo's
operations to finance the development and growth of its business. The
declaration and payment in the future of any cash dividends will be at the
discretion of the Company's Board of Directors and will depend upon the
earnings, capital requirements and financial position of the Company, any
restrictions in the Company's credit facility and any future loan covenants,
general economic conditions and other pertinent factors.
17
<PAGE>
CAPITALIZATION
The following table sets forth at March 31, 1996 the historical capitalization
of the Company and as adjusted to give effect, as of that date, to the
consummation of the Transactions and the issuance of shares of Common Stock in
the Offerings (based on an assumed initial public offering price of $21.00 per
share) and the application of the estimated net proceeds thereof as described in
"Use of Proceeds." This table should be read in conjunction with "The
Transactions," "Selected Historical and Unaudited Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity," and the Combined Financial
Statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<S> <C> <C>
----------------------
AT MARCH 31, 1996
<CAPTION>
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
Debt:
Loans from stockholders $ 8,490 --
Notes payable to a bank 38,900 --
--------- -----------
Total short term debt 47,390 --
--------- -----------
Stockholders'/partners' equity:
Preferred Stock, 10,000,000 shares authorized,
no shares issued and outstanding, $0.01 par value -- --
Partners' equity(1) 11,640 --
Common Stock, 5,000,000 shares authorized,
1,250,000 issued and outstanding, $1 par value(2) 1,250 --
Common Stock, 40,000,000 shares authorized,
25,000,000 issued and outstanding, $0.01 par value(3) -- $ 250
Additional paid-in capital 11,520 82,922
Deficit accumulated during the development stage(4) (1,645) --
--------- -----------
Total stockholders'/partners' equity 22,765 83,172
--------- -----------
Total capitalization $ 70,155 $ 83,172
--------- -----------
--------- -----------
</TABLE>
- ------------
(1) Share capital in excess of par is considered shareholder loans. For purposes
of the above table, capital in excess of par of approximately $9,900,000 is
reported as partners' equity consistent with the presentation used in the
financial statements included elsewhere in this Prospectus.
(2) The Actual amount reflects the outstanding common stock of RMEC.
(3) The As Adjusted amount reflects the aggregate par value of the Common Stock
that will be outstanding after the Offerings. Assumes the U.S. Underwriters'
over-allotment option for up to 600,000 shares of Common Stock is not exercised,
see "Underwriting." Assumes 44,338 shares of restricted stock to be issued to
employees of the Company contemporaneously with the Offerings are outstanding,
but not any of the remaining shares reserved for issuance pursuant to the
Company's 1996 Key Employee Stock Plan and 1996 Non-Employee Director Stock
Option Plan, see "Management--Key Employee Stock Plan" and "--Non-Employee
Director Stock Option Plan."
(4) The deficit accumulated during the development stage has been reclassified
to additional paid-in capital as required in instances where RMEC, an
S-corporation, and Thai Romo, a tax partnership, become subject to federal
income taxes through RMOC.
18
<PAGE>
DILUTION
"Dilution" means the difference between the initial public offering price per
share of Common Stock and the pro forma net tangible book value per share of
Common Stock after giving effect to the Transactions and the Offerings. "Net
tangible book value per share" at any date is determined by dividing total
tangible assets less total liabilities at such date by the total number of
shares of Common Stock outstanding at such date. At March 31, 1996, the
Company's net tangible book value per share of Common Stock after giving effect
to the Transactions and the Offerings was $3.33 per share.
<TABLE>
<S> <C> <C>
--------------------
Assumed initial public offering price per share of Common Stock $ 21.00
Net tangible book value per share at March 31, 1996 before the Transactions
and the Offerings(1) $ 1.08
Increase in net tangible book value per share attributable to new investors 2.25
---------
Pro forma net tangible book value per share after the Transactions and the
Offerings(2) 3.33
---------
Dilution per share to new investors $ 17.67
---------
---------
</TABLE>
If the U.S. Underwriters' over-allotment option is exercised in full, the
increase in net tangible book value per share attributable to the Transactions
and the Offerings, pro forma net tangible book value, as adjusted, per share
after the Transactions and the Offerings, and dilution per share to new
investors would be $2.63, $3.71 and $17.29, respectively.
- ------------
(1) Determined by dividing the 21,000,000 shares of Common Stock outstanding
immediately prior to the Offerings into the net tangible book value allocable to
such shares.
(2) Determined by dividing the total number of 25,000,000 shares of Common Stock
assumed to be outstanding after the Offerings into the pro forma tangible net
worth of the Company allocable to such shares, after giving effect to the
application of the net proceeds of the Offerings (assuming the U.S.
Underwriters' over-allotment option is not exercised).
The following table sets forth, as of March 31, 1996, the differences between
the existing stockholders of the Company and the new investors with respect to
the number of shares of Common Stock purchased or to be purchased from the
Company, the average price per share, and the total consideration paid or to be
paid.
<TABLE>
<CAPTION>
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE
SHARES PURCHASED(1) PRICE PER TOTAL CONSIDERATION
NUMBER PERCENT SHARE AMOUNT PERCENT
--------- --------- ---------- ---------- ---------
Initial Stockholders(2) 21,000,000 84.0% $ .26 $5,402,302(3) 6.0%
Investors in the Common Stock Offerings 4,000,000 16.0 21.00 84,000,000 94.0
--------- --------- ---------- ---------- ---------
Total 25,000,000 100.0% $ 3.58 $89,402,302 100.0%
--------- --------- ---------- ---------- ---------
--------- --------- ---------- ---------- ---------
</TABLE>
- ------------
(1) Assumes that the U.S. Underwriters do not exercise their over-allotment
option.
(2) The initial stockholders of the Company upon the consummation of the
Transactions are Messrs. Rutherford and Moran, limited partnerships and
corporations controlled by Messrs. Rutherford, Moran and an officer and other
investors.
(3) Total consideration for the initial stockholders represents the net assets
and liabilities contributed as of March 31, 1996.
19
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following table sets forth selected combined financial data for the Company
as of the dates and for the periods indicated. The combined data were derived
from available audited and unaudited financial statements of the Company. The
unaudited pro forma balance sheet data assume the consummation of the
Transactions and the Offerings and are not necessarily indicative of the results
that actually would have been obtained if such Transactions and the Offerings
had occurred on March 31, 1996, or of future results. See "The Transactions" and
"Use of Proceeds." The data set forth in this table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the more detailed unaudited pro forma consolidated
balance sheet, including notes thereto, and the Combined Financial Statements.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION
THREE MONTHS ENDED MARCH TO
YEARS ENDED DECEMBER 31, 31, MARCH 31,
DOLLARS IN THOUSANDS 1991 1992 1993 1994 1995 1995 1996 1996
----------- ----------- ----------- --------- --------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
STATEMENT OF OPERATIONS
DATA:
Interest income $ 76 $ 55 $ 24 $ 6 $ 5 -- -- $ 167
Expenses:
Interest expense -- 183 76 107 190 $ 37 $ 414 970
Depreciation expense -- -- -- 2 5 -- 2 10
Salaries and wages -- 10 113 109 114 21 35 381
General and
administrative 86 24 74 181 208 48 53 723
----------- ----------- ----------- --------- --------- ----------- ----------- -----------
Total expenses 86 217 263 399 517 106 504 2,084
----------- ----------- ----------- --------- --------- ----------- ----------- -----------
Net loss $(10) $(162) $(239) $(393) $(512) $(106) $(504) $(1,917)
----------- ----------- ----------- --------- --------- ----------- ----------- -----------
----------- ----------- ----------- --------- --------- ----------- ----------- -----------
Pro forma net loss per
common share $ (.02) $ (.02)
--------- -----------
--------- -----------
--------------------------------------------------------------------------------------------------
INCEPTION
THREE MONTHS ENDED MARCH TO
YEARS ENDED DECEMBER 31, 31, MARCH 31,
DOLLARS IN THOUSANDS 1991 1992 1993 1994 1995 1995 1996 1996
----------- ----------- ----------- --------- --------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
CASH FLOW DATA:
Cash flows provided by (used
in) operating activities $ 460 $ (150) $ 67 $ (197) $ (1,681) $(1,173) $(1,754) $ (3,303)
Cash flows used in investing
activities (1,207) (3,185) (6,469) (8,178) (36,787) (1,433) (9,695) (65,473)
Cash flows provided by
financing activities 3,473 2,330 4,763 8,696 47,876 2,427 4,515 71,673
-------------------------------------------------------------------------------------
AT DECEMBER 31, AT MARCH 31, 1996
DOLLARS IN THOUSANDS 1991 1992 1993 1994 1995 ACTUAL PRO FORMA
----------- ----------- ----------- --------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA:
Working capital (deficit) $ 505 $ (211) $(2,334) $(3,504) $(32,900) $(43,098) $19,272
Oil and gas properties, at
cost 930 4,406 10,895 18,944 55,951 65,748 65,748
Total assets 3,700 6,179 11,034 19,427 67,669 73,287 87,941
Stockholders' equity 1,459 4,219 8,689 15,484 23,269 22,765 83,172
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the audited and
unaudited Combined Financial Statements of the Company and notes thereto and
other financial information included elsewhere in this Prospectus.
OVERVIEW
To date, the Company's exploration and development activities have not generated
revenues. As a result, the Company's historical results of operations and
period-to-period comparisons of such results and certain financial data may not
be meaningful or indicative of future results. In this regard, future results of
the Company will be materially dependent upon the success of the Company's
operations within Block B8/32. Due to the nature of the Company's business
activities and the general risks relating to exploratory and development
drilling for crude oil and natural gas, there can be no assurance as to the
success of these efforts.
The Company uses the full cost method of accounting for its investment in its
interest in oil and gas properties. Under the full cost method of accounting,
all costs of acquisition, exploration and development of oil and natural gas
reserves are capitalized into a "full cost pool" as incurred, and properties in
the pool are depleted and charged to operations using the unit-of-production
method based on the ratio of current production to total proved oil and natural
gas reserves. To the extent that such capitalized costs (net of depreciation,
depletion and amortization) exceed the present value (using a 10% discount rate)
of estimated future net cash flow from proved oil and gas reserves, after income
tax effects, such excess costs are charged to earnings. Once incurred, a
write-down of oil and gas properties is not reversible at a later date even if
crude oil or natural gas prices increase.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
The Company's net loss of $503,962 for the three months ended March 31, 1996
increased from the Company's net loss of $106,406 for the three months ended
March 31, 1995 due to increases in interest expense.
Interest expense of $414,098 for the three months ended March 31, 1996 increased
compared to $36,980 for the three months ended March 31, 1995. This increase is
due to the significant additions of debt incurred under loans from stockholders
and notes payable to a bank. Balances under such loan facilities were $47.4
million and $5.2 million at March 31, 1996 and March 31, 1995, respectively.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
The Company's net loss of $512,000 in 1995 increased compared to the Company's
net loss of $393,000 in 1994 due to increases in interest expense and general
and administrative expenses.
Interest expense of $190,000 for 1995 increased compared to $107,000 in 1994.
This increase is due to the significant additions of debt incurred under loans
from stockholders. Balances under such loan facilities were $8.5 million and
$1.5 million at December 31, 1995 and 1994, respectively.
General and administrative expenses of $208,000 for 1995 increased compared to
$181,000 in 1994. This increase is due to increased legal costs incurred for
general corporate purposes.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
The Company's net loss of $393,000 in 1994 increased compared to the Company's
net loss of $239,000 in 1993 due to increases in interest expense and general
and administrative expenses.
Interest expense of $107,000 for 1994 increased compared to $76,000 in 1993.
This increase is due to an increase in variable interest rates from 1993 to
1994.
General and administrative expenses of $181,000 for 1994 increased compared to
$74,000 in 1993. This increase is due to additional rent and additional legal
fees incurred for general corporate purposes.
21
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
During the period from the inception of the Company on September 21, 1990
through March 31, 1996, the Company invested approximately $65,000,000 primarily
in development and exploration activities conducted in Block B8/32 and the
acquisitions of interests in or rights to the Concession. For such period, the
Company has had negative operating cash flow. The Company's working capital
deficit of $43,100,000 at March 31, 1996 represents an increase of $10,200,000
from the working capital deficit of $32,900,000 at December 31, 1995. Since its
inception, the Company has financed its growth with a combination of bank and
shareholder loans and the sale of common stock.
In November 1994, Thai Romo entered into a loan agreement with a commercial
lender (the "Loan Facility Agreement") under which Thai Romo could borrow up to
$5,000,000 at any time during the period from November 1994 to the final
maturity date in April 1995. Through a series of amendments to the Loan Facility
Agreement, the credit line available to Thai Romo has been increased to
$47,000,000, and the current maturity date under the Loan Facility Agreement, as
amended, is June 28, 1996. Each Thai Romo shareholder has pledged its shares in
Thai Romo and its shareholder loan notes from Thai Romo to secure the
obligations of Thai Romo under the Loan Facility Agreement. Additionally, all
Thai Romo shareholders, as sponsors, have entered into a sponsor subordination
and support agreement with the lender pursuant to which all indebtedness of Thai
Romo to the sponsors is subordinated to Thai Romo's obligations under the Loan
Facility Agreement. The current interest rate under the Loan Facility Agreement,
as amended, is the LIBOR rate quoted by the lender, plus 4%. At December 31,
1995, and March 31, 1996, the amounts outstanding under the Loan Facility
Agreement were $21,000,000 and $33,900,000, respectively, and such amounts
accrued interest at an annual rate of 9.6825% and 9.6%, respectively. The
Company plans to use a portion of the proceeds from the Offerings to repay all
outstanding indebtedness under the Loan Facility Agreement, which was
$42,500,000 at May 31, 1996, and terminate such facility.
In September 1995, RMEC obtained a line of credit from the same commercial
lender to borrow up to $5,000,000 ("Line of Credit"). This amount was increased
in November 1995 to $15,000,000 with a maturity date, as amended, of June 30,
1996. Repayment of the Line of Credit has been guaranteed by Messrs. Rutherford
and Moran. The interest rate on amounts borrowed under the Line of Credit is, at
RMEC's option, determined with reference to the prime rate or LIBOR rate quoted
by the lender plus a margin that changes with the amount of the outstanding
unpaid balance. At December 31, 1995 and March 31, 1996 the amounts outstanding
under the Line of Credit were $13,400,000 and $5,000,000, respectively, and such
amounts were accruing interest at an annual rate of 9.6% and 8.75%,
respectively. The Company plans to use a portion of the proceeds from the
Offerings to repay all outstanding indebtedness under the Line of Credit, which
was $5,400,000 at May 31, 1996, and terminate such facility.
An affiliate of such commercial lender owns a 5% interest in Thai Romo and,
pursuant to the Share Exchanges and Note Exchanges, such affiliate will receive
1,034,913 shares of Common Stock. See "The Transactions" and "Certain Related
Party Transactions."
The Company is currently negotiating a $100,000,000 revolving credit facility
(the "Revolving Credit Facility") with a commercial lender for the purpose of
financing ongoing development of Block B8/32 as well as for general corporate
purposes. The proposed Revolving Credit Facility will be subject to borrowing
base limitations and will have a three year final maturity. Initial availability
under the Revolving Credit Facility will be $60,000,000. The commercial lender
intends to syndicate the credit with a group of financial institutions
acceptable to the Company.
The borrowing base, which principally relates to the value of the Company's oil
and natural gas reserve base, will be subject to semi-annual redeterminations
each May 1 and November 1. In addition to semi-annual redeterminations, the
Company and the lenders may each request one additional redetermination in each
12 month period. The lenders will have discretion in determining the reserve
value of the borrowing base. Decreases in oil and natural gas prices could
result in a reduction in the borrowing base, thereby reducing availability under
the Revolving Credit Facility, and, under certain circumstances, requiring the
Company to repay outstanding loans in excess of the reduced borrowing base. The
Company will be required to pay certain fees, including a commitment fee of .5%
per annum on the average daily balance of the unused borrowing base.
Under the terms of the Revolving Credit Facility, outstanding borrowings will
bear interest, at the Company's option, based on the base rate of the commercial
lender, or a reserve adjusted Eurodollar rate plus a margin of 1.75%. Interest
periods of 30, 60, 90 or 180 days may be elected by the Company on Eurodollar
loans. The Revolving Credit Facility will be guaranteed by TRH,
22
<PAGE>
RMEC and Thai Romo and secured by a pledge of the Company's shares in TRH and
RMEC and a pledge by TRH and RMEC of their respective Thai Romo shares and Thai
Romo promissory notes. Thai Romo may be required to provide additional
collateral.
Documentation of the Revolving Credit Facility will contain customary provisions
relating to lender yield protection, market disruption or unavailability of
Eurodollar funds, general and special indemnities, capital adequacy protection,
break funding protection, and similar customary provisions. The Revolving Credit
Facility will contain covenants restricting the activities of the Company,
including among others, restrictions on investments, disposition of assets,
indebtedness and the granting of liens, restrictions on dividends and
distributions and an agreement to remain within its current line of business.
Following commencement of production in the Tantawan Field, the Company will be
required to maintain an interest coverage ratio of not less than 3:1. Failure to
comply with such covenants and restrictions would constitute an event of default
under the Revolving Credit Facility.
Definitive agreements evidencing the Revolving Credit Facility have not been
entered into and, therefore, the terms and structure outlined above could change
and the Revolving Credit Facility, as described, may not be consummated.
To develop and explore Block B8/32, the Company anticipates capital expenditures
of approximately $60,000,000 for fiscal 1996, which, the Company believes, based
on current estimates, includes all capital expenditures required for the
commencement of production in 1997. Of such capital expenditures, approximately
$47,000,000 is budgeted for development of the Tantawan Field. For the remaining
seven months of 1996, the Company anticipates capital expenditures, general and
administrative expenses and other working capital requirements to total
approximately $45,000,000. The Company anticipates that it will finance such
capital expenditures, general and administrative expenses and other working
capital requirements, with bank borrowings under the Revolving Credit Facility
and the remainder of the net proceeds of the Offerings. See "Use of Proceeds."
ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," in March 1995. This
statement requires, among other things, that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. This statement also requires
that assets be grouped at the lowest level for which revenues can be measured
and evaluated for possible impairment. The statement is not applicable to the
oil and gas properties of companies that account for oil and gas properties
under the full cost method of accounting. The Company accounts for its oil and
gas properties under the full cost method and thus is not required to adopt
Statement No. 121 in accounting for impairments of its oil and gas properties.
Should the Company engage in activities other than exploration and production,
evaluation of revenue producing assets related to these activities would be
subject to the provisions of Statement No. 121.
On October 23, 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which establishes a fair value method for accounting for
stock-based compensation plans either through recognition or disclosure. The
Company adopted this standard in 1996 and will disclose the pro forma net
income/(loss) and earnings/(loss) per share amounts assuming the fair value
method was adopted on January 1, 1995 in its financial statements as of and for
the year ended December 31, 1996. The adoption of this standard will not impact
the Company's consolidated results of operations or financial position.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
Currently annual inflation in terms of the decrease in the general purchasing
power of the dollar is running much below the general annual inflation rates
experienced in the past. While the Company, like other companies, continues to
be affected by fluctuations in the purchasing power of the dollar, such effect
is not currently considered significant.
The Company does not currently hold significant amounts of cash, cash
equivalents, long-term financial instruments or investments denominated in
foreign currencies. Prior to or upon commencement of oil and natural gas
production, the Company may have such holdings. See "Business and
Properties--Marketing." Since the Thai Baht/U.S. dollar exchange rate has
historically been stable, the Company does not intend to mitigate the foreign
currency risks associated with such holdings through currency rate hedging
transactions such as currency swaps, options, futures or other derivative
financial instruments.
23
<PAGE>
CHANGING OIL PRICES
The Company is dependent on crude oil prices, which have historically been
volatile. The Company uses crude oil price swaps and other similar arrangements
to hedge against potential adverse effects of fluctuations in future prices for
the Company's future oil production. While the swaps are intended to reduce the
Company's exposure to declines in the market price of crude oil, they may limit
the Company's gain from increases in the market price. At March 31, 1996, the
Company had open swap agreements with an affiliate of its lender for the
Company's oil production of one million barrels (MMBbl) of aggregate oil volumes
for April through December 1997 at a weighted average price of $15.92 per Bbl
and 1.75 MMBbl of aggregate oil volumes for January through December 1998 at a
weighted average of $15.92 per Bbl, and has sold to such affiliate of the lender
a swap option for 1.25 MMBbl of aggregate oil volumes for January through
December 1999 at a price of $18.30 per Bbl. At March 31, 1996, the Company
estimates the cost of unwinding this position was $2,439,000 ($1,697,000 at May
30, 1996). See "Business and Properties--Marketing."
24
<PAGE>
BUSINESS AND PROPERTIES
GENERAL
The Company is an independent energy company engaged in the acquisition,
exploration, development and production of oil and gas properties in Southeast
Asia. Currently the Company's exploration and development activities are
entirely in the Gulf of Thailand and are conducted through its subsidiary, Thai
Romo.
The Company is one of four Concessionaires in Block B8/32 currently covering
approximately 1.3 million acres in the central portion of the Gulf of Thailand.
Thaipo Limited, a subsidiary of Pogo ("Thaipo"), Maersk Oil (Thailand) Ltd., a
subsidiary of Maersk ("Maersk Oil"), and Sophonpanich are currently the other
Concessionaires in the Block. The Company was instrumental in identifying the
Block as a viable prospect and organizing the Concessionaires to submit a joint
bid for the Block. The Company and two of the Concessionaires, Thaipo and
Sophonpanich, own all of the interests in the Tantawan Field, which is located
on the eastern border of the Block. The Company, as a non-operator, owns a
46.34% interest in the Tantawan Field and a 31.66% interest in the remainder of
the Block. The other Concessionaires own interests in the Tantawan Field and the
remainder of the Block equal to or smaller than those of the Company. As of
January 1, 1996, the Company had net proved undeveloped reserves of 246 Bcfe,
74% of which were in the southern portion of Tantawan Field. Appraisal wells
drilled by the Concessionaires in three established areas within the Block
(Tantawan, Benchamas and Pakakrong) have tested at prolific flow rates of
hydrocarbons and established the potential for significant additional reserves
in those areas. The Tantawan Concessionaires have entered into the GSA with PTT,
and production is expected to commence in January 1997.
BUSINESS STRATEGY
The Company's business strategy is to increase its reserve base and production
through exploration, development and acquisition primarily in Southeast Asia.
The Company focuses its exploration efforts in countries and areas that offer:
(i) large reserve potential, (ii) manageable geologic risk, (iii) proximity to
infrastructure, (iv) growing local market demand for petroleum products and (v)
favorable business climates.
The Company believes the characteristics of the Block fit well within the
Company's strategy of seeking properties with large reserve potential. Block
B8/32 is situated within the Pattani Basin, which has seen major hydrocarbon
discoveries over the past 24 years. The surface area of Block B8/32 currently
covers an area of approximately 1.3 million acres, subject to relinquishment of
unexplored acreage, unless extended before August 1, 1997. A comparison to the
U.S. Gulf of Mexico would result in an equivalent acreage position of
approximately 260 Federal Offshore Louisiana Blocks. Management believes Block
B8/32 contains significant unexplored areas that provide the Company with
additional exploration opportunities and potential reserve growth for the
foreseeable future. In addition, the Company believes that the close proximity
of the Block to infrastructure, its long-term natural gas marketing arrangements
already in place, the growing Thai demand for petroleum products, and the
favorable business climate of Thailand are all consistent with the Company's
strategy.
Management believes its role as one of the leaders of the Block B8/32 project,
its knowledge of the geology of the area, its important Thai relationships
developed over the past decade, its large ownership interest, and its close
working relationships with its co-Concessionaires will allow the Company to
continue to have considerable influence on the exploration and development
activities in the Block. In the future, the Company intends to capitalize on its
experience in Block B8/32 by identifying and prudently pursuing additional oil
and gas investment opportunities in the Gulf of Thailand. See "--Joint Operating
Agreement-- Area of Mutual Interest." The Company is also currently reviewing
exploratory prospects in other parts of Southeast Asia. See "Business and
Properties--History of the Company's Gulf of Thailand Block B8/32 Operations."
HISTORY OF THE COMPANY'S GULF OF THAILAND BLOCK B8/32 OPERATIONS
Patrick R. Rutherford has actively participated in the oil and gas exploration
and production business as an independent operator since 1959. In the 1980s, Mr.
Rutherford participated directly in exploration licenses or concessions located
in Morocco and Tunisia. In 1988, Mr. Rutherford and Mr. Moran formed a venture
to pursue exploration opportunities in the Gulf of Thailand. After
identification of Block B8/32 as a viable prospect, Pogo and Maersk joined the
Company to serve as co-Concessionaires, and thereafter, the parties submitted a
joint bid for Block B8/32 in October 1990.
25
<PAGE>
In August 1991, Thai Romo, Thaipo and Maersk Oil were awarded Petroleum
Concession No. 1/2534/36 for Block B8/32 in the central portion of the Gulf of
Thailand. Subsequent to the award, Sophonpanich became one of the
Concessionaires by acquiring an interest in the Concession as a co-venturer.
Maersk Oil was designated as Operator for operations in the Block pursuant to a
Joint Operating Agreement among the Concessionaires.
In March 1995, Thai Romo, Thaipo and Sophonpanich acquired Maersk's interest in
the Tantawan Field of Block B8/32. Thaipo was designated as Operator of the
Tantawan Field. The Ministry of Industry approved the transfer of the interest
and the designation of a separate operator for the Tantawan Field effective
March 1995. Thaipo, Thai Romo and Sophonpanich agreed that the Tantawan Field
would be operated pursuant to the terms of a separate Joint Operating Agreement
with provisions substantially similar to those of the original Joint Operating
Agreement. Maersk has informed its co-Concessionaires that it is reviewing other
companies' interest in acquiring Maersk Oil and has invited a selected number of
companies to submit bids. If Maersk elects to sell Maersk Oil, the other
Concessionaires would have a preferential right to acquire an interest in Maersk
Oil pursuant to the Joint Operating Agreement among the parties. See "--Joint
Operating Agreement (Remainder of Block B8/32)." In addition, if Maersk elects
to sell Maersk Oil, such sale could result in a change in the operator for the
remainder of Block B8/32 outside the Tantawan Field. Current interests in the
Tantawan Field and the remainder of Block B8/32 are as follows:
<TABLE>
<S> <C>
TANTAWAN FIELD
-----------------------
Thaipo Limited (Pogo)-Operator 46.34%
Thai Romo Limited (RMOC) 46.34%
The Sophonpanich Co., Limited 7.32%
REMAINDER OF BLOCK
B8/32
-----------------------
Maersk Oil (Thailand) Limited-Operator 31 2/3%
Thaipo Limited (Pogo) 31 2/3%
Thai Romo Limited (RMOC) 31 2/3%
The Sophonpanich Co., Limited 5%
</TABLE>
The designation of the area allowed for production at the Tantawan Field,
covering approximately 68,000 acres, was granted to Thaipo, as Operator on
behalf of the Tantawan Concessionaires, by the Thai Petroleum Committee and the
Ministry of Industry on August 23, 1995.
In accordance with the Thai Petroleum Act, the Concessionaires relinquished 50%
of the exploration acreage of the Block on August 1, 1995. Unless the Concession
is extended, the Concessionaires will be required to relinquish the remaining
exploration acreage on August 1, 1997. Relinquishment will exclude areas for
which production approvals have been applied for or granted. The Company will
acquire additional 3-D seismic data in July 1996, and after interpretation of
the data, the Company intends to drill additional prospects to minimize the
amount of acreage relinquished. The Company believes that the Concessionaires
will not lose any attractive exploration acreage as a result of the required
relinquishment. All financial obligations and work commitments for the
Concession, which in the aggregate exceeded $35 million, have been satisfied,
other than certain payments associated with production. See "--Current Fields
and Prospects" and "--Thai Concession Terms."
ENERGY DEMAND IN THAILAND
From 1991 to 1995, Thailand's real gross domestic product (GDP) increased at a
compound annual growth rate of approximately 8%. According to Thailand's
National Energy Policy Office (NEP), energy demand increased at a compound
annual growth rate of approximately 11% during the same five year period. Energy
growth in excess of GDP growth reflects the nature of Thailand's economy, one
characterized by increasing per capita energy consumption and increasing
industrialization. To meet the country's energy demand the government of
Thailand has actively encouraged the development of domestic energy sources.
Much of the annual increase in gas supply over the next five years will be
provided by new sources of gas coming on stream from the Gulf of Thailand.
REGIONAL GEOLOGY
Block B8/32 is located on the western side of the Pattani Basin, which is
believed to have developed as a result of the Permo-Triassic collision of the
continents of India and Asia. The collision developed a tectonic regime in
Thailand which formed a conjugate set of major strike-slip faults trending
northwest to southeast and northeast to southwest together with a set of north
to
26
<PAGE>
south trending normal faults. The regional strain field accompanying the
shearing had a major component of east-west extension which created the Pattani
Basin and its gas rich structures to the south (E.G., Erawan, Pailin and Satun).
Management believes the Tantawan and Benchamas fields are a northern
continuation of the same trend. The eastern boundary of Block B8/32 is located
near the axis of the Pattani Basin. The Basin extends north-northeast through
the eastern one-third of Block B8/32 and extends southward through Unocal's
extensive holdings. The basin is bounded to the west by the Ko Kra Ridge, a
dominant paleo high.
Regional structural dip towards the Pattani Basin center is interrupted by
north-south trending normal faults. These fault zones are related to basement
relief features. Oil and natural gas traps in Block B8/32 are typically related
to highly faulted graben systems, structural closure on tilted fault blocks and
anticlinal structures between east-west dipping faults and stratigraphic traps.
The main reservoir sands in Block B8/32 are fluvial channel sands, point bar
sands, alluvial fans and deltas associated with lacustrine depositional
environments.
CURRENT FIELDS AND PROSPECTS
Since 1992, the Company along with its co-Concessionaires have drilled 15
development wells and 21 exploratory wells in Block B8/32. Thirteen of the
development wells and 17 exploratory wells have been successful. Of the 30
successful wells drilled to date, drillstem tests ("DSTs") have been run on 12
wells. A summary of DST results and estimated date of first production is
presented below. DST results may not be indicative of potential future
production rates or the quantities ultimately produced and sold, if any.
<TABLE>
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
TOTAL
TOTAL CONCESSION SUCCESSFUL
SUCCESSFUL DST RATES WELLS DATE OF
WELLS TESTED --------------------- DRILLED ESTIMATED
THROUGH ZONES GAS THROUGH MAY INITIAL
MAY 31, 1996 TESTED (MMCFD) 31, 1996 PRODUCTION
- -------------------- --------- ---------- ----------- -------------
OIL AND
CONDENSATE
(MBPD)
---------
Tantawan 24 January 1997
1 5 6.3 25.8
2 6 1.7 70.3
3 5 8.7 40.7
4 3 1.4 32.0
5 4 1.5 24.5
7 3 1.5 45.3
8 2 .3 15.8
--------- --------- ----------
28 21.4 254.4
Benchamas 4 1998
1 5 4.9 45.3
3 4 7.5 33.2
4 3 5.1 24.8
--------- --------- ----------
12 17.5 103.3
Pakakrong 2 To be
determined
1 2 .7 25.5
2 3 1.6 .1
--------- --------- ----------
5 2.3 25.6
</TABLE>
The Company estimates that in 1996, it will invest a total of approximately
$60.0 million in connection with its drilling and development program, of which
approximately $47.0 million is budgeted for the development of the Tantawan
Field. The Company anticipates that it will finance such capital expenditures
with borrowings under the proposed Revolving Credit Facility and the proceeds of
the Offerings. The Company intends to use the cash flow generated initially from
the Tantawan Field and subsequently from the Company's interests in other Block
B8/32 properties, which it anticipates will be developed, together with funds
from other sources to further develop these and the other properties in its
development program. The actual expenditures on each project in the drilling and
development program may vary materially from the Company's estimates as a result
of the actual costs incurred and changes in the drilling and development
program, including the acceleration of the development of
27
<PAGE>
certain projects and prospects based on actual drilling results. Additional
costs, if any, are currently anticipated to be funded from cash provided by
future operations, working capital or funds from other sources. See "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
TANTAWAN FIELD. The Tantawan Field is located on the eastern border of Block
B8/32. The field is a complex faulted graben which extends for 21 miles north to
south, averages 5 miles east to west and lies on the western side of the Pattani
Basin axis. At this time only the southern 40% of the estimated total graben
structure has been fully mapped and as of January 1, 1996 has 181 Bcfe of proved
undeveloped reserves assigned to it. The Company believes that the producing
trend found in the southern portion of the Tantawan Field extends through the
North Tantawan prospect to cover the entire graben complex. As is typical of
many fields in the Gulf of Thailand, reserves are only considered proved when a
fault block is drilled. As a result, it is expected that proved reserves will
continue to increase as more wells are drilled.
Through May 31, 1996, 14 exploration and 15 development wells have been drilled
in the Tantawan Field, all but one of which encountered hydrocarbons. Of the 28
wells that encountered hydrocarbons, 24 are deemed capable of commercial flow
rates. All of these successful wells have been drilled in the southern portion
of the Tantawan Field, and have encountered an average of 170 feet of net pay.
The Tantawan-1 well was the first well drilled on the Block by the Company and
its co-Concessionaires. The well was spudded in September 1992 and reached a
total depth of 11,022 feet. Five DSTs were conducted which produced cumulative
rates of 6.3 Mbpd of crude oil and condensate and 25.8 MMcfd of natural gas. A
sixth DST was conducted on a nonproductive sand in order to obtain information
on water salinities. The Tantawan-1 discovery led to the acquisition in the
first quarter of 1993 of a 70 square mile 3-D seismic survey over the southern
portion of the Tantawan Field. In the fourth quarter of 1993, two appraisal
wells in the Tantawan Field were drilled and successfully tested. During 1994,
five additional appraisal wells were drilled in the Tantawan Field and an 85
mile 3-D seismic survey was acquired and processed over the North Tantawan
prospect. DSTs were conducted on seven Tantawan Field wells. Cumulatively, the
28 zones tested yielded 254.4 MMcfd of natural gas and 21.4 Mbpd of crude oil
and condensate. No assurance can be given that the wells will be able to sustain
production rates commensurate with the DST's. Fluid analyses indicate liquid
gravities ranging from 35 API to 40 API with the gas having an average heating
value of 1,065 Btu/scf and a CO(2) content of approximately 8%. A sixteenth
development well is currently being drilled, and an additional four development
wells and five appraisal wells are currently planned to be drilled in 1996.
Construction of offshore platforms and pipelines for the Tantawan Field is under
way. See "--Production Facilities."
BENCHAMAS FIELD. Outside of the Tantawan Field, the Benchamas field has
attracted the most exploration attention by the Concessionaires. The Benchamas
field is located in the north central portion of the Block approximately 35
miles northwest of Tantawan-1.
In the fourth quarter of 1993, a 104 square mile 3-D seismic survey was acquired
over the Benchamas field. Based on these data, the Benchamas-1 well was spudded
in April 1995 and drilled to a total depth of 10,155 feet. Five DSTs were
conducted yielding cumulative rates of 45.3 MMcfd of natural gas and 4.9 Mbpd of
oil and condensate. The Benchamas-2A well, a directional well, located
approximately 11 miles south of Benchamas-3, penetrated and logged two sands
with a total of 53 feet of hydrocarbons, which were not tested. The Benchamas-3
well, drilled in December 1995, was the second well on the Benchamas structure
and was located approximately 5 miles north of the Benchamas-1. Four DSTs were
conducted across some of the sands encountered yielding 33.2 MMcfd of natural
gas and 7.5 Mbpd of oil and condensate. The Benchamas-4 well, drilled in January
1996, was located more than 2 miles north of the Benchamas-3 and encountered
hydrocarbons in several sands. DSTs conducted on three of the sands yielded
cumulative flow rates of 24.8 MMcfd of natural gas and 5.1 Mbpd of oil and
condensate. No assurance can be given that the wells would be able to sustain
production rates commensurate with the DSTs.
To date, all wells drilled by the Concessionaires have been along the north to
south axis of the Benchamas field and have established reserves along its entire
length. The four successful wells have an average net pay of 225 feet.
Cumulatively the 12 zones tested yielded 103.3 MMcfd of natural gas and 17.5
Mbpd of oil and condensate. Fluid analyses indicate liquid gravity of 40 API
with the gas having an average heating value of 1,150 Btu/scf and a CO(2)
content of approximately 8%. As of January 1, 1996 proved reserves of 65 Bcfe
had been assigned to two of the four wells drilled.
PAKAKRONG PROSPECT. In late 1995, a 100 square mile 3-D seismic survey of the
Pakakrong prospect was acquired, processed and interpreted. The prospect is
centered 8.5 miles southwest of the Benchamas-1 well. Widespread seismic
anomalies that are associated with the same sequence that has proven productive
in Benchamas field are present in Pakakrong. Additionally, production tests in
the two Pakakrong wells drilled in early 1996 have established potential
commercial reservoirs at depths considerably shallower than found to date
elsewhere within the Block.
28
<PAGE>
DSTs conducted in Pakakrong-1 yielded cumulative flow rates of 25.5 MMcfd of
natural gas and 0.7 Mbpd of oil or condensate. Three DSTs were conducted in the
Pakakrong-2 well. Two of the tests conducted across intervals at 7,400 feet and
7,670 feet produced substantial quantities of CO(2), approximately 60% and 80%,
respectively. The third test, conducted at a depth of 4,200 feet yielded a flow
of 1.6 Mbpd. Based on seismic interpretation, it is believed that this zone may
be the same zone observed but not tested in the Pakakrong-1 well located one
mile northwest. No assurance can be given that the wells will be able to sustain
production rates commensurate with the DSTs. As of the date of this Prospectus,
no estimated reserves from this prospect have been included in the Company's
proved reserves.
OTHER EXPLORATION PROSPECTS. In addition to Tantawan, Benchamas and Pakakrong,
several other promising prospects and seismic structures have been identified,
although no proved reserves have been included in the Company's reserve summary.
All are either graben systems, buried hill, half-graben or a combination of two
of the above structural styles. All prospects and leads are elongated in a
north-south direction.
-NORTH TANTAWAN. This prospect is believed to be a continuation
of the structure identified in the southern portion of the
Tantawan Field. 3-D seismic has been acquired and is in process
of being interpreted in detail.
-NORTH BENCHAMAS. This prospect is believed to be a continuation
of the Benchamas field to the north. Its trap type is a
combination buried hill and graben system. A 120 square mile 3-D
seismic survey to further define this prospect will be acquired
in August 1996. It is anticipated that this survey will offer
additional drill sites north of the Benchamas-4 well.
-MALIWAN. This prospect is a keystone graben system south of the
Benchamas field that is believed to be approximately 15.5 miles
in length and average 3 miles in width. The east flank of the
system is also prospective with an easterly dipping upthrown
fault play. A 250 square mile 3-D seismic survey is scheduled to
be acquired immediately following the North Benchamas survey.
-PATTALUNG PROSPECT. This prospect is a half-graben system
similar to Pakakrong with a series of keystone grabens running
down the center and is believed to be 37 miles in length and up
to 5 miles wide. Pattalung-1, drilled by Unocal in 1981, drilled
the center of the keystone graben. Significant oil and gas shows
were found in the lower Miocene sands. Recent analysis of the
Pattalung-1 log indicates several intervals to be hydrocarbon
bearing.
-YUNGTHONG. Yungthong-1 was the first well drilled outside the
Tantawan Field area by the Concessionaires. This well, located 22
miles southeast of the Tantawan Field, was abandoned as non-
commercial after testing low rates of gas and condensate from
several zones. Further evaluation of the Yungthong area will be
conducted in the future.
In addition to the above prospects, further potential remains within Block
B8/32. The Company believes that (i) 2-D seismic indicates the presence of
several other graben systems which are not presently defined as "prospects" and
(ii) the discovery and testing of relatively shallow producible hydrocarbons at
Pakakrong supports the prospective nature of other shallow formations. The
Company intends to pursue such activities prior to the scheduled relinquishment
(which may be extended) of the remaining exploration acreage in the Concession
on August 1, 1997.
PRODUCTION FACILITIES
Under the development plan for the Tantawan Field, two platforms and production
facilities will be installed prior to first production, with installation of
additional platforms planned following first production. The oil and natural gas
will be separated on each platform and processed on a Floating Production,
Storage and Offloading vessel ("FPSO"), currently under construction and
scheduled for delivery in December 1996. Oil will be exported via tankers, and
gas will be discharged into a 33-mile spur pipeline currently under construction
by PTT and expected to be completed in July 1996. Development drilling commenced
in August 1995, and production is expected to commence in January 1997, subject
to various contingencies beyond the Company's control.
PLATFORMS. The first two production platforms will be four-pile, twelve slot
units designed for drilling with either a jack-up or tender assisted rig.
Wellhead fluids will be separated at each production platform into three
streams: high pressure gas,
29
<PAGE>
intermediate pressure gas and low pressure oil and water. As required, natural
gas will be drawn off the intermediate pressure system, compressed, and fed back
down the wells to provide gas lift to optimize oil recovery. Hydrocarbons will
be fed into flowlines which will run between each platform and a Pipeline End
Manifold (PLEM) located at the FPSO.
FPSO. The FPSO is being used to facilitate a fast track development of the
Tantawan Field and provide cost savings given the lack of an offshore oil
pipeline infrastructure. The FPSO used for the Tantawan development will be
under the management of an affiliate of Single Buoy Moorings Inc. ("SBM"), one
of the largest builders and operators of FPSOs. Another affiliate of SBM will
own the vessel and lease it under a bareboat charter to another affiliate,
Tantawan Production B.V., who will in turn lease it under a Bareboat Charter
Agreement (the "Charter") to Tantawan Services L.L.C. ("TS"), a company
currently owned by Thaipo, which may eventually be owned by the Tantawan
Concessionaires. The Company intends to acquire an interest in TS after
production commences. All FPSO costs (including the vessel, detailed design
engineering and all equipment purchased for the FPSO) will be borne directly by
SBM. The final cost of the installed and commissioned FPSO will be recovered by
SBM in the bareboat charter day rate over the term of the Charter. The initial
term of the Charter is for ten years, subject to extension, with an anticipated
commencement date in mid-December 1996. In addition, TS has a purchase option on
the FPSO throughout the term of the Charter. TS has also contracted with another
company, SBM Marine Services Thailand Ltd. ("FPSO Operator"), to operate the
FPSO on a reimbursable basis throughout the initial term of the Charter.
Performance of both the Charter and the agreement to operate the FPSO are
non-recourse to TS and the Company. However, TS's performance is secured by a
lien on any hydrocarbons stored on the FPSO and is guaranteed severally by each
of the Tantawan Concessionaires. The Company's guarantee is limited to its
percentage interest in the Tantawan Field (currently 46.34%).
The FPSO production facilities will include process facilities for separation
and treatment of the produced fluids, and compressors for gas. This equipment is
very similar to that utilized on conventional fixed platforms, except for
features that allow the equipment to function while subjected to the roll and
pitch of the FPSO. The production system will be capable of processing 150 MMcfd
(expandable to 300 MMcfd) of natural gas, 50 Mbpd of crude oil and condensate
and 25 Mbpd of produced water. Oil and condensate will be processed to an export
quality for storage on the FPSO and then offloaded to shuttle tankers. Natural
gas will be dehydrated and compressed for export via a 24 inch 33-mile spur
pipeline. Water will be cleaned to below 20 parts per million of oil in water
and discharged overboard.
The FPSO will provide sufficient storage for optimum offloading of oil to export
tankers, as well as provide spare capacity in the event of unscheduled delays in
tanker arrival. The storage capacity will be 1,000 MBbl, of which 700 MBbl will
comprise saleable crude, 200 MBbl will be required to store ballast water to
control hull stresses and 100 MBbl will be used to store oily water which does
not meet the discharge concentration criteria. Oil stored on the FPSO will be
offloaded periodically to export tankers using the tandem system where the
tankers are moored end to end. It is anticipated that the offtake tankers will
be provided by PTT.
The FPSO Operator will be responsible for the operation and maintenance of the
FPSO. Thaipo will provide a limited number of crew who will handle platform and
well operations. The crew, along with the FPSO Operator's personnel will be
housed on the FPSO. The terms and conditions of the agreement governing the
installation and operation of the FPSO will be set out in an Operating Agreement
between TS (as the Charterer) and the FPSO Operator.
BENCHAMAS PRODUCTION FACILITIES. A preliminary plan of development for the
Benchamas field contemplates the installation of satellite wellhead platforms, a
central processing facility platform with a daily capacity of 150 MMcf of
natural gas, 25 MBbl of oil and condensate and 25 MBbl of water and a living
quarters platform. Full wellstream production will flow through a gathering
system to the processing platform where the natural gas, oil and water will be
separated. The Company expects the Concessionaires will apply for approval to
develop the Benchamas field in late 1996 with production to commence in 1998.
The natural gas will be dehydrated, metered and compressed for delivery through
a 16 inch 32-mile pipeline which will tie directly into PTT's 33-mile spur
pipeline currently under construction. The crude oil and condensate will flow
through a 10 inch 32-mile pipeline to the import PLEM at the Tantawan FPSO for
additional processing, storage and sales. Any produced water will be treated to
meet minimum specifications and discharged.
PTT FACILITIES. PTT will supply those facilities required to transport the
sales gas from the export PLEM to PTT's main 36 inch diameter pipeline
connecting the offshore Erawan field with Rayong, Thailand. This will include
facilities necessary to receive gas at the export PLEM, the 24 inch 33-mile spur
pipeline, and any communication equipment installed by PTT on the FPSO. PTT has
announced that its estimated budget for its facilities is $40 million.
30
<PAGE>
MARKETING
GAS SALES AGREEMENT. Under the terms of the Concession, the government of
Thailand has first priority to purchase oil and natural gas produced from Block
B8/32. PTT is currently the sole purchaser of natural gas in Thailand and buys
all gas at the well-head from private producers. PTT also maintains a monopoly
over natural gas transmission and distribution in the country. The GSA was
signed on November 7, 1995, requiring PTT to purchase a yearly aggregate amount
from the Tantawan Concessionaires of at least 75 MMcfd gas for the first year of
production (expected to commence in January 1997) rising to at least 85 MMcfd in
the second year and thereafter determined by dividing the Field Reserves (as
defined in the GSA) by 6,000, which if such rate exceeds 125 MMcfd, such rates
are subject to further negotiation. The GSA terminates on the earlier of (i)
termination of the petroleum production period, (ii) the date when there are no
field reserves remaining, and (iii) 30 years from the contractual delivery date.
Under the GSA, which is a take or pay agreement, contracted deliveries of gas to
PTT are required to commence at the completion of a 72-hour production test or
on March 31, 1997. There is a run-in period from January 1, 1997 until March 31,
1997 during which time the parties to the GSA must use best endeavors to deliver
and take the contracted amount of natural gas. In the event that the required
reserves or production rates of natural gas at a specified quality level are not
delivered, then Thai Romo and the other Tantawan Concessionaires will be obliged
to contribute to PTT's capital costs incurred in the construction of the 24 inch
33-mile spur pipeline. Also, under the GSA, the Tantawan Concessionaires'
liability for failure to deliver the minimum contracted daily rate is limited to
PTT's right to take from subsequent deliveries an amount equal to the quantity
of natural gas not delivered at 75% of the contracted price. Based on prior DSTs
on wells within the Tantawan Field, the Company expects that it will be able to
meet the deliverability requirements for the GSA and that the production system
will be capable of handling such capacity. See "Risk Factors."
The natural gas price is based on formulae which provide adjustments to the base
price for natural gas on each April 1 and October 1. Adjustments will be made to
reflect changes in (i) the exchange rate, based on Baht/U.S. dollar buying and
selling rates of commercial banks published by the Bank of Thailand, (ii)
wholesale prices in Thailand, (iii) the U.S. producer price index for oil field
machinery and tools, and (iv) medium fuel oil prices. The currency of payment is
Baht. Fluctuations of greater than 5% in the Baht/U.S. dollar exchange rate are
taken into account when adjusting the prices in respect of the producer price
index for oil field machinery and tools and for changes to the medium fuel oil
price. The base price was estimated to be equivalent to approximately $2.00 per
Mcf at March 1, 1996.
OIL SALES. The Company expects that oil and condensate from Tantawan will be
purchased by PTT, which has the right of first refusal on any hydrocarbon
liquids produced domestically. The terms and conditions of a sales agreement are
under negotiation.
THAI CONCESSION TERMS
TERM. The Concession provides for an exploration period of six years ending July
31, 1997, which may be renewed upon agreement between the parties for an
additional three-year term. At the end of the initial exploration term on July
31, 1997, Thai petroleum law permits the government to grant, upon application
by the Concessionaires, an additional three-year exploration term on up to 50%
of the Concession acreage that has not been previously designated as a
production area or relinquished, subject to certain terms and conditions
including the agreement to undertake a work program and the payment of fees and
rentals to be negotiated.
Before the expiration of the exploration period, the Concessionaires may pay
surface reservations fees to retain acreage subject to forfeiture. Any fees
payable will be at the rate prescribed by Department of Mineral Resources on the
date of submission of the application for the surface reservation.
If production does not commence within four years of the designation of the
production area, the production period will be deemed expired. For the Tantawan
Field, production must commence by August 1999, unless an extension is granted
on the basis that the delay was not due to the fault of the Tantawan
Concessionaires. The petroleum production period for producing areas extends
twenty years from the date of termination of the exploration period plus a
10-year extension, subject to agreement on the terms thereof.
PRODUCTION BONUSES. Pursuant to the terms of the Concession, the Concessionaires
are required to make the following payments ("Production Bonuses") to the
Ministry of Finance: (i) $2 million upon the first production of petroleum from
the Block; (ii) $3 million when petroleum production from the Block reaches an
average of 50,000 barrels of crude oil equivalent per day in any one calendar
month; and (iii) $7.5 million when the petroleum production from the Concession
area reaches an average of 100,000 barrels of crude oil equivalent per day in
any calendar month.
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<PAGE>
SALE TO THAI GOVERNMENT AND PREFERENCE FOR LOCAL SERVICES. The Concessionaires
are required to give first priority to the Thai government to purchase the oil
and natural gas produced by the Concessionaires. See "--Marketing--Gas Sales
Agreement." The Concessionaires also are required to give preference to the use
of local contractors, materials and equipment available in Thailand with regard
to transport vehicles and other matters related to the petroleum operation and
must also employ and train Thai nationals at all operational levels.
ROYALTIES. The following table summarizes the monthly royalties required to be
paid based on barrels of oil equivalent produced within Block B8/32 (natural gas
is converted to an equivalent under the royalty using a ratio of 10 MMbtu of
natural gas to one barrel of oil):
<TABLE>
<S> <C>
PERCENT OF VALUE
OF PRODUCT SOLD
MONTHLY VOLUME OF PRODUCT (IN BARRELS) OR DISPOSED
- -------------------------------------------------------------------- -----------------
Not exceeding 60,000 5.00%
Portion exceeding 60,000 but not exceeding 150,000 6.25
Portion exceeding 150,000 but not exceeding 300,000 10.00
Portion exceeding 300,000 but not exceeding 600,000 12.50
Portion exceeding 600,000 15.00
</TABLE>
SPECIAL REMUNERATORY BENEFIT. The Concessionaires are required to pay a Special
Remuneratory Benefit (the "Benefit") under the Thai Petroleum Act. The Benefit
is calculated annually on a block-by-block basis. No Benefit is payable if the
block has no Annual Petroleum Profit (as defined to be hydrocarbon revenues net
of, among other things, royalties, Production Bonuses, capital expenses and
operating expenses). The Benefit, expressed as a percentage of Annual Petroleum
Profit, varies from zero to 75%, depending on the level of annual revenue per
meter drilled in the Block.
TERMINATION AND REVOCATION. The Concession terminates (i) upon the termination
of the petroleum production period; (ii) when the Effective Concession Area (as
defined in the Concession) ceases to exist by virtue of the provisions of the
Petroleum Act B.E.2514, which governs statutory percentage relinquishment, or
through the voluntary relinquishment made by the Concessionaires; (iii) upon
revocation of the Concession; or (iv) upon termination of the Concessionaires'
status as a juristic person (I.E., subject to the jurisdiction of Thai courts).
Under the Petroleum Act, the Concession may be revoked by the Ministry of
Industry if the Concessionaires (i) fail to furnish the Production Bonuses or
pay the royalties, the Benefits or income taxes; (ii) become bankrupt; or (iii)
fail to comply with good petroleum industry practice or to conduct petroleum
operations with due diligence or violate certain other provisions of the
Concession (including giving special priority to Thai nationals) or of the
Petroleum Act (such as restrictions on transfer). Also, all production, storage
and transportation equipment and facilities must be turned over to the Thai
government at the end of the production term.
JOINT AND SEVERAL LIABILITY. Under the terms of the Concession, each of the
Concessionaires is jointly and severally liable for the obligations of the
Concessionaires, including payment of income taxes, under the Concession.
JOINT OPERATING AGREEMENT (TANTAWAN)
As a result of Maersk's decision not to participate in the development of the
Tantawan Field, the Tantawan Concessionaires have agreed to enter into a
separate joint operating agreement to be effective as of March 3, 1995 with
regard to the operation of the Tantawan Field (the "JOA Tantawan").
OPERATOR AND OPERATING COMMITTEE. Thaipo was designated as Operator. The
Operator has the exclusive right and is obligated to conduct all operations on
behalf of the Tantawan Concessionaires relating to the Tantawan Field including
but not limited to the preparation and implementation of proposed work programs,
budgets and authorizations for expenditure, planning for obtaining for all
requisite services and materials, providing to each of the Tantawan
Concessionaires reports, data and information concerning the operation in the
Tantawan Field, subject to the supervision of the Operating Committee. The
Operating Committee consists of one representative of each Tantawan
Concessionaire with the Operator as the Chairman. Each party has a percentage
vote on the Operating Committee equal to its percentage interest. For
information on the percentage interest of each party, see "Business and
Properties--History of the Company's Gulf of Thailand Block B8/32 Operations."
All decisions of the Operating Committee require the affirmative votes of two or
more non-affiliated parties having an aggregate percentage interest of not less
than 51%. The approval of the Operating Committee is required with regard to the
general outline of all work programs, appraisal and development operations and
the budgets pertaining to operations in the Tantawan Field.
32
<PAGE>
INSURANCE AND LITIGATION. The Operator has the obligation to obtain and
maintain all required insurance in respect of the operation in the Tantawan
Field. Liability for losses, damages, injury or other claims from operations
under the JOA Tantawan is to be borne by the Tantawan Concessionaires in
proportion to their percentage interests in the operation except for gross
negligence or willful misconduct of a Tantawan Concessionaire, in which case
such party will be solely liable.
APPRAISAL AND DEVELOPMENT OPERATIONS. If all the Tantawan Concessionaires agree
to participate in drilling a proposed appraisal or development well, the
Operator is to drill the well as a joint operation. If less than all, but two or
more of the Tantawan Concessionaires having a combined percentage interest of
51% elect to participate in a proposed operation, the operation is to be
conducted as a non-consent operation in which case the participating party has
the option of either limiting its participation to its percentage interest or to
pay and bear its proportionate part of the non-participating party's interest.
NON-CONSENT OPERATIONS. Upon commencement of non-consent operations, each
non-participating party's percentage interest and leasehold operating rights in
the non-consent operations and title to the petroleum produced therefrom is to
be owned by and vested in each participating party in proportion to its
participating interest prior to reversion, after recoupment of costs by the
participating parties out of the non-participating party's share of the proceeds
under the Concession, to the non-participating party. The participating parties
may recoup up to 1200% or 800%, in the case of appraisal operations and
development operations, respectively, of the share of the costs of the
non-participating party had the non-participating party participated.
DEFAULT. Under the JOA Tantawan, if any party fails to pay in full its
percentage interest share of any payment of cash required to be made pursuant to
a cash call, the non-defaulting parties are responsible to pay a proportion of
the amount defaulted in the same proportion that its percentage interest bears
to the total percentage interests of the non-defaulting parties. Failure by any
non-defaulting party to pay its share constitutes default by that non-defaulting
party.
DISPOSAL AND WITHDRAWAL. The JOA Tantawan limits the sale or transfer of
interests in the Tantawan Field including the sale or transfer of 50% or more of
the voting stock of any party to any third party who is not an affiliate. Such
sale or transfer is deemed to be a disposal of such party's interest under the
Concession and the JOA Tantawan. A disposal may not reduce the level of a
party's interest to less than 10%. The parties to the JOA Tantawan have a
preferential right to acquire the disposing party's interest. The disposing
party remains liable to the other parties for all obligations attaching to the
disposed interest. A Tantawan Concessionaire may voluntarily withdraw from the
JOA Tantawan provided that the other Tantawan Concessionaires are offered to
purchase the withdrawing party's interest in the proportion of each party's
interest in the Tantawan Field and the interest is not subject to any
encumbrances. The withdrawing party remains liable for its percentage interest
share of all outstanding expenditures and liability of any work program and
budget approved by the Operating Committee.
JOINT OPERATING AGREEMENT (REMAINDER OF BLOCK B8/32)
The Company, Thaipo, Maersk Oil and Sophonpanich are parties to the Joint
Operating Agreement dated August 1, 1991 (the "JOA").
OPERATOR AND THE OPERATING COMMITTEE. Maersk Oil was appointed Operator for the
remainder of the Block. Terms and conditions under the JOA relating to the
Operator and the Operating Committee are substantially similar to those in the
JOA Tantawan, except all decisions of the Operating Committee require the
affirmative votes of two or more non-affiliated parties having an aggregate
percentage interest of not less than 60%. For information on percentage interest
of each party, see "Business and Properties--History of the Company's Gulf of
Thailand Block B8/32 Operations."
INSURANCE AND LITIGATION. Terms and conditions relating to insurance and
litigation under the JOA are substantially similar to those in the JOA Tantawan.
SOLE RISK OPERATIONS. Sole risk operations are defined in the JOA as those
operations proposed to the Operating Committee but not approved. These
operations may be carried out at the sole risk and expense of the sole risk
participants with non-participating parties relinquishing their interests in a
discovery or in the case of an appraisal well, a penalty equal to 600% of the
costs incurred by the sole risk participant from 50% of such non-participating
parties' share of production. In addition, the sole risk participants are
required to indemnify the non-sole risk participants, to the extent of their
respective percentage interest, against all claims brought by any third party in
connection with the sole risk operations.
DEFAULT. Terms and conditions relating to default under the JOA are
substantially similar to those in the JOA Tantawan.
DISPOSAL AND WITHDRAWAL. Terms and conditions relating to disposal and
withdrawal of interest in the remainder of the Block are substantially similar
to those in the JOA Tantawan. For information regarding a potential disposal by
Maersk of Maersk Oil, see "--History of the Company's Gulf of Thailand Block
B8/32 Operations."
33
<PAGE>
AREA OF MUTUAL INTEREST. An Area of Mutual Interest ("AMI") is established by
the JOA to cover the entire area over which the Thai government claims
jurisdiction to issue petroleum concessions except the Andaman Sea. If any party
of the JOA intends to apply or join in an application for a concession, or to
acquire any interest in a concession upon any area within the AMI, the other
parties to the JOA are entitled to participate therein.
SEVERAL LIABILITY. Under the JOA, the liability of the Concessionaires in the
conduct of the joint operations in the Block is several. Each party agrees to
indemnify each of the other parties, to the extent of its percentage interest,
for any claim or liability to any person not a party thereto arising from or in
connection with the JOA.
PROVED UNDEVELOPED RESERVES AND ESTIMATED NET CASH FLOWS
Presented below are estimates of the Company's proved undeveloped oil and
natural gas reserves and the Present Value of Proved Reserves (as defined in
"Certain Definitions") after giving effect to the Transactions. The reserve
estimates were prepared by Ryder Scott, independent petroleum engineers. For
additional information, see the Summary Reserve Report of Ryder Scott included
as Appendix A to this Prospectus. The estimates were prepared in accordance with
SEC regulations.
<TABLE>
<S> <C> <C> <C>
-------------------------------
DECEMBER 31,
1993 1994 1995
--------- --------- ---------
TOTAL NET PROVED UNDEVELOPED RESERVES
Oil and condensate (MBbls) 5,425 7,674 18,997
Natural gas (MMcf) 33,474 56,739 131,607
Natural gas equivalent (MMcfe) 66,024 102,783 245,589
PRESENT VALUE (DISCOUNTED AT 10%) OF ESTIMATED FUTURE NET CASH FLOWS,
BEFORE INCOME TAXES (IN THOUSANDS) $ 17,166 $ 52,112 $ 131,631
</TABLE>
There are numerous uncertainties inherent in estimating quantities of proved
undeveloped reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
producer, especially for the stage of development and complex and faulted nature
of Block B8/32. Reservoir engineering is a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in an exact
way, and the accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation and judgment.
Results of drilling, testing and production subsequent to the date of an
estimate may justify revision of the estimate. Accordingly, as further
information is acquired for Block B8/32, reserve estimates are likely to be
different from the quantities of oil and gas that are ultimately recovered. In
addition, the reserve data included in this Prospectus are based upon,
volumetric information rather than production as no production history from the
wells within the Block exists. See "Risk Factors."
RESERVE QUANTITIES. The preceding table sets forth historical estimates of the
Company's combined proved undeveloped reserves, after giving effect to the
Transactions. The Company has no proved developed reserves. Proved developed
reserves are reserves that can be expected to be recovered from existing wells
with existing equipment and operating methods. Proved undeveloped reserves are
proved reserves that are expected to be recovered from new wells drilled to
known reservoirs on undrilled acreage where the existence or recoverability of
reserves can be estimated with reasonable certainty, or from existing wells
where a relatively major expenditure is required for recompletion. The Company
has interest in certain tracts that may have substantial additional hydrocarbon
quantities which cannot be classified as proved. The Company has active
exploration and development drilling programs which may result in the
reclassification of significant additional quantities as proved reserves.
RESERVE VALUES. The preceding table sets forth estimated future net cash flows
from the production and sale of the Company's estimated proved undeveloped
reserves and the present value thereof (discounted at 10%). The estimated future
net cash flows are computed after giving effect to estimated future development
and production costs, based on year-end costs and assuming the continuation of
existing economic conditions. The calculation does not take into account the
effect of delay in commencement of production, various cash outlays, including
general and administrative costs and interest expense, and does not give effect
to estimated future income taxes. See "Note 8 of the Notes to Combined Financial
Statements." In addition, production facilities for the Tantawan Field are not
completed and no development plans for the Benchamas field have been submitted
to or approved by the Thai government.
The prices used in the information presented above were based on oil and natural
gas prices estimated that the Company would have received at the end of each
reported period without escalation. The prices as of December 31, 1995 were
$2.02 per Mcf of natural gas and $18.71 per barrel of crude oil, compared to
prices at December 31, 1994 and 1993 of $2.25 and $2.40, respectively, per Mcf
of natural gas and $18.00 and $13.00, respectively, per barrel of crude oil. In
preparing the 1995 estimates, Ryder Scott used prices that the Company estimates
that it would have received at December 31, 1995 had the Tantawan and Benchamas
fields been producing at such time.
34
<PAGE>
In computing the present value of the estimated future net cash flows, a
discount rate of 10% was used pursuant to SEC regulations to reflect the timing
of those net cash flows. Present value, regardless of the discount rate used, is
materially affected by assumptions about timing of future production, which may
prove to have been inaccurate. The preceding reserve value data represent
estimates only, which are subject to uncertainty given the current energy
markets.
Additional reserve information is included in "Note 8 of the Notes to Combined
Financial Statements" (the "Supplementary Information") accompanying the Notes
to the Company's Combined Financial Statements presented elsewhere in this
Prospectus. The estimates of future net cash flows from the Company's proved
undeveloped reserves set forth in the preceding table and elsewhere in this
Prospectus differ from the comparable quantities in the table of the
Standardized Measure of Discounted Future Net Cash Flows included in the
Supplementary Information since the Supplementary Information gives effect to
estimated future income taxes.
During 1995, no estimates by the Company of its total proved net oil and natural
gas reserves were filed with or included in reports to any Federal authority or
agency.
OIL AND NATURAL GAS ACTIVITIES
PRODUCTIVE WELLS. As of January 1, 1996, the Company owned interests in the
following wells capable of production pending completion and installation of
production facilities:
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
GROSS NET
--------- ---
Oil & Gas Wells 13 5.1
</TABLE>
DRILLING ACTIVITY. The following table sets forth the number of gross and net
productive and dry development wells and exploratory wells drilled by the
Company during the years indicated:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS GROSS EXPLORATORY NET DEVELOPMENT NET EXPLORATORY
DEVELOPMENT WELLS
WELLS WELLS WELLS
-------------------- -------------------- -------------------- --------------------
YEAR SUCCESSFUL DRY SUCCESSFUL DRY SUCCESFUL DRY SUCCESSFUL DRY
--------- --- --------- --- --------- --- --------- ---
1995 7 - 3 1 3.2 - .9 .5
1994 - - 4 1 - - 1.3 .3
1993 - - 2 2 - - .6 .6
</TABLE>
From January 1, 1996 to May 31, 1996, the Company drilled 8 gross (3.7 net)
development wells, 6 of which were successful, and 7 gross (2.8 net) exploration
wells, all of which were successful.
ACREAGE. The following table summarizes the Company's interest in developed and
undeveloped oil and natural gas acreage as of December 31, 1995:
<TABLE>
<CAPTION>
- -------------------------------------------
<S> <C> <C> <C>
DEVELOPED ACREAGE UNDEVELOPED ACREAGE
(1) (2)
GROSS NET GROSS NET
- --------- --- ---------- ---------
- - 1,351,639 438,115
</TABLE>
(1)"Developed acreage" consists of lease acres spaced or assignable to
production on which wells have been drilled or completed to a point that would
permit production of commercial quantities of oil and natural gas.
(2)None of the Company's net undeveloped acreage will need to be relinquished in
1996. See "Business and Properties--Current Fields and Prospects--Benchamas
Field."
TAX REGULATION
GENERAL
Anticipated profits derived from Thai Romo's operations will be subject to
taxation in both Thailand and the United States. In addition, the Share
Exchanges and the Note Exchanges will have certain tax consequences for the
Company and TRH. For purposes of the disclosure under this caption "--Tax
Regulation," the Share Exchanges and the Note Exchanges shall be deemed to
include the transfer of Thai Romo shares and notes (other than such securities
held by RMEC) from the Company to TRH in
35
<PAGE>
exchange for TRH stock. See "The Transactions." The taxation of Thai Romo's
profits and the tax consequences of the Share Exchanges and the Note Exchanges
will directly affect the Company, RMEC and TRH, but will not directly affect any
purchaser of shares of the Common Stock in the Offerings.
The discussion regarding certain Thailand tax consequences to Thai Romo, RMEC,
TRH and the Company set forth below is based on the advice of Baker & McKenzie,
special Thailand tax counsel to the Company, and the discussion regarding
certain United States federal income tax consequences to the Company, RMEC and
TRH set forth below is based on the advice of Fulbright & Jaworski L.L.P.,
United States tax counsel to the Company. No opinions of tax counsel have been
requested or received with respect to the Thailand and United States tax
consequences to Thai Romo, RMEC, TRH and the Company discussed below.
CERTAIN THAILAND TAX CONSEQUENCES
TAX CONSEQUENCES TO THAI ROMO. Under the Petroleum Income Tax Act B.E. 2514 and
(No.4) B.E. 2532, Thai Romo's net profits derived from the petroleum business
are subject to Thai income tax at the rate specified by the Royal Decree
Prescribing Petroleum Income Tax Rates B.E. 2514, which must not be lower than
50% and not be higher than 60% of such net profits. Under the Royal Decree, the
Thai income tax rate to be imposed on Thai Romo's anticipated net profits
derived from its petroleum business is 50%.
In computing Thai Romo's anticipated net profits from its petroleum business
that will be subject to Thai tax, any interest paid on loans by Thai Romo to any
lenders or shareholders, whether or not resident or doing business in Thailand,
is not deductible. Royalties to be paid by Thai Romo to the Ministry of Industry
that are required under the Concession are deductible in computing Thai Romo's
net profits from its petroleum business.
TAX CONSEQUENCES TO RMEC, TRH AND THE COMPANY. Interest on loans paid by Thai
Romo to lenders or shareholders who are not residents of, or doing business in,
Thailand generally is subject to Thai withholding tax at the rate of 15%. The
Notes received by the Company and then transferred to TRH in the Note Exchanges
and the Notes held by RMEC do not bear interest. Under Thailand tax law, no
interest should be imputed with respect to such Notes; therefore, no Thai
interest withholding tax should be imposed on Thai Romo's repayment of the Notes
to RMEC and TRH.
Dividends paid by Thai Romo to its shareholders out of its net profits from the
petroleum business should be exempt from Thailand dividend withholding tax.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY, RMEC AND
TRH
THE SHARE EXCHANGES AND NOTE EXCHANGES. The Share Exchanges and the Note
Exchanges should not result in the recognition of gain or loss to the Company,
RMEC or TRH. The Share Exchanges and the Note Exchanges should qualify under
Code Section 351 as transfers of property by the former shareholders of RMEC and
by the former shareholders and Noteholders of Thai Romo to the Company in
exchange for Common Stock in the Company, followed by the transfer of this
property (other than the stock of RMEC) by the Company to TRH in exchange for
common stock in TRH. Accordingly, the aggregate tax bases of the RMEC stock, the
Thai Romo stock and the Notes received by the Company would be the same as the
aggregate tax bases of the shares of such stock and the Notes in the hands of
the former RMEC shareholders and the former Noteholders and shareholders of Thai
Romo immediately prior to the Share Exchanges and the Note Exchanges, increased
by the amount of gain, if any, recognized by such former RMEC and Thai Romo
securityholders in the Share Exchanges and the Note Exchanges. Further, the
aggregate tax bases of the shares of Thai Romo stock and the Notes received by
TRH from the Company would be the same as the aggregate tax bases of these
shares and Notes in the hands of the Company immediately prior to the exchange
with TRH.
CLASSIFICATION OF THAI ROMO. For United States federal income tax purposes, the
shareholders of Thai Romo before the Share Exchanges and Note Exchanges have
treated Thai Romo as a partnership rather than a corporation. After the Share
Exchanges and Note Exchanges, the Company, RMEC and TRH intend to continue to
treat Thai Romo as a partnership for United States federal income tax purposes,
although such treatment will not be free from doubt. To continue to qualify as a
partnership for United States federal income tax purposes after the Share
Exchanges and Note Exchanges, Thai Romo must not possess the corporate
characteristics of continuity of life and free transferability of interests as a
result of provisions in the Articles of Association of Thai Romo that are
enforceable under Thai law. Therefore, before the Share Exchanges and Note
Exchanges, the Articles of Association of Thai Romo will be amended to provide
(i) no shareholder may transfer a share in Thai Romo to anyone
36
<PAGE>
who is not already a shareholder in Thai Romo. Notwithstanding the previous
sentence, a transfer of shares of Thai Romo to any person which results from or
forms part of the enforcement of any pledge of the shares of Thai Romo is
permitted and shall, upon receiving written notice from the relevant transferee
of shares, be registered by Thai Romo in its share register book, and (ii) the
first to occur of (a) the bankruptcy of any shareholder of Thai Romo, or (b)
RMEC or TRH ceasing for any reason to be a shareholder of Thai Romo, will cause
an automatic dissolution of Thai Romo.
In the event that RMEC or TRH ceased for any reason to be a shareholder of Thai
Romo, Baker & McKenzie, special Thai counsel to the Company, has advised that
Thai Romo would be automatically dissolved under Thai law without further
shareholder action. It is anticipated, however, that RMEC and TRH will enter
into a written agreement with a commercial lender in which they will agree not
to voluntarily cease to be a shareholder of Thai Romo without the advance
written consent of the lender. This separate agreement with such lender will
restrict the right of RMEC or TRH to unilaterally cause the automatic
dissolution of Thai Romo, but will not affect the power of RMEC or TRH under
Thai Romo's Articles of Association to unilaterally cause such a dissolution.
If Thai Romo is treated as a partnership, each of TRH, RMEC and the other
shareholders of Thai Romo will be treated as partners in Thai Romo. Each such
partner will be required to take into account its allocable share of the items
of income, gain, loss, deduction and credit of Thai Romo, determined under
United States tax accounting rules, in determining its United States federal
income tax liability, regardless of the amount of cash dividends, if any, paid
by Thai Romo with respect to its shares. Thai Romo's functional currency is
presently, and is anticipated to continue to be, the United States dollar.
Therefore, allocations of income, gain, loss, deduction and credit of Thai Romo
to its partners will be reported in United States dollars, and no significant
currency exchange gains or losses are expected to be recognized as a result of
such allocations. Foreign tax credits allocated to each of RMEC and TRH are
expected to partially offset the United States federal income tax liability of
RMEC and TRH attributable to the net income of Thai Romo. See "--Creditability
of Thai Petroleum Income Tax" and "--Alternative Minimum Tax," discussed below.
If Thai Romo were treated as a corporation for United States federal income tax
purposes, TRH and RMEC generally would not be required to take into income any
amounts with respect to Thai Romo until Thai Romo paid dividends or other items
of income to its shareholders. If as a result of amendments to Thai Romo's
Articles of Association that restrict the transfer of Thai Romo shares and
provide for RMEC and TRH withdrawal as a dissolution event, Thai Romo's
classification for United States federal income tax purposes changes from that
of a partnership to a corporation, such change in classification might be
treated as an outbound taxable transfer of partnership assets to a foreign
corporation. Although the outbound transfer might be taxable to the former
shareholders of Thai Romo who were shareholders when the change in
classification occurred, neither the Company, TRH nor RMEC should recognize any
significant gain or loss as the result of any such change in classification of
Thai Romo. If Thai Romo were treated as a corporation for United States federal
income tax purposes, the United States federal income tax liability of TRH and
RMEC arising from dividends, if any, paid by Thai Romo to its shareholders would
be expected to be partially offset by Code section 902 foreign tax credits
attributable to Thai taxes paid by Thai Romo. See "--Creditability of Thai
Petroleum Income Tax" and "--Alternative Minimum Tax," discussed below.
CREDITABILITY OF THAI PETROLEUM INCOME TAX. Various provisions of the United
States Internal Revenue Code, including sections 901(b), 901(e), 901(f), 904 and
907(a), and the regulations promulgated thereunder, reduce the amount of foreign
tax credit otherwise available to a domestic corporation that is deemed to pay
its pro rata share of foreign taxes paid by a partnership (i.e., Thai Romo) to a
foreign government on foreign mineral income. The regulations under section
901(b) may cause a reduction in creditable foreign tax below the United States
corporate tax rate, with the result that the reduced foreign tax credit will not
fully offset the United States tax liability imposed on the United States
corporation's foreign source mineral income. The regulations under section 901
treat any taxpayer who has, directly or indirectly through a controlled person,
a concession to extract foreign government-owned petroleum as having received a
specific economic benefit from the foreign government. Persons who have received
a specific economic benefit are defined by the regulations as "dual capacity
taxpayers."
The section 901 regulations generally treat a portion of any foreign levy paid
by a dual capacity taxpayer as payment in the nature of a royalty for the
economic benefit, rather than as a creditable foreign tax. The dual capacity
taxpayer is required to affirmatively demonstrate to the Internal Revenue
Service the portion of the foreign levy that qualifies as a creditable tax by
using one of various methods. Under the "safe harbor" method, the taxpayer is
permitted to make an irrevocable election for all taxable years to determine the
portion of the foreign levy that qualifies as a creditable tax by reference to
the general tax rate that applies in the foreign country to persons who are not
dual capacity taxpayers. The Company, on behalf of TRH and RMEC,
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presently intends to elect to use the safe harbor method to determine the amount
of Thai Petroleum Income Tax paid by Thai Romo that will qualify as a creditable
tax, but such intention may change if another method appears more favorable at
the time the election is required to be made.
The safe harbor method is intended to yield a qualifying tax credit amount that
is roughly equal to the amount of generally imposed income tax (i.e., the
general corporate income tax) in Thailand that would have been required to be
paid by Thai Romo if it had not been a dual capacity taxpayer and if the general
corporate income tax had allowed a deduction for the specific economic benefit
amount. The calculations required to determine the precise amount of Thai tax
that would be creditable under the safe harbor method may, in certain cases,
substitute gross income and deductions that would have been included and
deducted, respectively, under the Thai general corporate income tax for amounts
that in fact will be included and deducted under the Thai Petroleum Income Tax
Act based on the future operations of Thai Romo. Therefore, it is impossible to
accurately determine in advance what portion, if any, of the Thai Petroleum
Income Tax would be deemed to be non-creditable under the safe harbor method. It
is possible, however, that under the safe harbor method, the amount of Thai
Petroleum Income Tax treated as a creditable tax will be less than 35%, with the
result that TRH and RMEC will owe residual United States income taxes on their
pro rata shares of Thai Romo's net taxable income allocated to them, even though
Thai Romo would have paid Thai Petroleum Income Tax at the rate of 50%.
ALTERNATIVE MINIMUM TAXABLE INCOME. In addition to the provisions discussed
above, which generally limit the amount of foreign taxes that can be credited
against the United States tax liability of RMEC and TRH, special rules apply for
purposes of computing the alternative minimum tax. In general, the alternative
minimum tax foreign tax credit can only offset up to 90% of a corporation's
alternative minimum taxable income. Therefore, even if RMEC and TRH pay little
or no regular corporate tax, they probably will be subject to alternative
minimum tax at the rate of 20% on the 10% of their alternative minimum taxable
income that is not eligible for offset by the alternative minimum tax foreign
tax credit.
CONSOLIDATED FEDERAL INCOME TAX RETURNS BY THE COMPANY AND RMEC. After the
Share Exchanges, RMEC, TRH and the Company intend to file consolidated United
States federal income tax returns. Therefore, items of Thai Romo's income, gain,
loss, deduction and credit allocated to RMEC and TRH will be included in the
Company's consolidated federal income tax return. Dividends, if any, and
interest paid by RMEC and TRH to the Company generally will be eliminated in the
preparation of the Company's consolidated federal income tax returns.
EMPLOYEES
As of May 31, 1996, the Company had 13 full-time employees, none of whom is
represented by any labor union.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors is currently composed of three members and will
be expanded to seven members prior to the Offerings.
The following table sets forth the names, ages and titles of the Company's
directors and executive officers as of the time of the Offerings.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
John A. Moran (1)(2)(4) 64 Chairman of the Board
Patrick R. Rutherford 62 President, Chief Executive Officer and Director
(1)(2)(4)
Michael D. McCoy (1)(3) 43 Executive Vice President, Chief Operating Officer and Director
David F. Chavenson 43 Vice President and Chief Financial Officer
Gregory Nelson 49 Vice President, Exploration
Howard Gittis (1)(4)(5) 62 Director
Jere W. McKenny (2)(3)(5) 67 Director
Harry C. Lee (3)(4)(5) 64 Director
Chote Sophonpanich (2)(3)(5) 54 Director
</TABLE>
- ------------
(1)Member of the Executive Committee
(2)Member of the Nominating Committee
(3)Member of the Audit Committee of the Board of Directors
(4)Member of the Compensation Committee of the Board of Directors
(5)To be elected immediately prior to the closing of the Offerings
The Board of Directors will be elected by the stockholders of the Company at
annual stockholders' meetings. In addition, pursuant to the Company's Restated
Certificate of Incorporation, the Board has the exclusive right to fill
directorships resulting from vacancies or increases in the number of directors.
Cumulative voting will not apply to the election of directors.
Each executive officer has been elected to serve until his successor is duly
appointed or elected by the Board of Directors or his earlier removal or
resignation from office.
The following provides information with respect to the business experience of
the executive officers and existing and proposed directors of the Company.
JOHN A. MORAN has been Chairman of the Board of RMOC since its inception. He has
been President of RMEC since September 1993. Since April 1967, Mr. Moran has
been a Director and Officer of the Dyson-Kissner-Moran Corporation, a private
holding company engaged primarily in the manufacturing and distribution of
industrial and consumer products and a developer of commercial and industrial
real estate on the east coast of the United States ("DKM"). Since 1967 until his
retirement in 1992, Mr. Moran has been successively, Vice President, Executive
Vice President, President, Chairman of the Board and Chairman of the Executive
Committee of DKM. Prior to joining what was then the Dyson-Kissner Corporation,
Mr. Moran was a Vice President of Blyth & Co., Inc., investment bankers, in
their New York and Los Angeles offices. Mr. Moran is a Director of Bessemer
Securities Corporation, New York City and the Coleman Company of Golden,
Colorado. He holds a B.S. in Banking and Finance from the University of Utah and
an honorary L.L.B. from that institution. He is a member and former Chairman of
the National Advisory Council of the University of Utah, and a former Director
of the United Nations Association and trustee of the Brooklyn Museum. He is a
member of the Chief Executives Organization and The Foreign Policy Association.
PATRICK R. RUTHERFORD has been President and Chief Executive Officer of RMOC
since its inception. He has been Chairman of the Board of RMEC since its
incorporation. Since 1973, he has been Chairman of the Board and part owner of
Rutherford Oil Corporation (an oil and gas exploration and production company
that serves as operator of wells located in Texas and Louisiana and of producing
platforms in the Gulf of Mexico). He also served on the Board of Regents of West
Texas State University and was President of the Houston Speech and Hearing
Center. He has also served as a director of First Interstate Bank of Texas,
Texas Commerce Bancshares, OKC Corporation, Olix Company, The University of
Texas Health Science Center Development Board, the Geological Foundation of the
University of Houston, and he was one of the founding directors of Southwest
Airlines.
39
<PAGE>
MICHAEL D. MCCOY has been Executive Vice President and Chief Operating Officer
of RMOC since its inception. He has been Executive Vice President and Director
of RMEC since September 1990. Prior to joining the Company, Mr. McCoy served as
Manager of Land and Legal of Rutherford Oil Corporation. Mr. McCoy received his
B.A. degree from The University of Texas in 1974 and J.D. degree from South
Texas College of Law in 1977.
DAVID F. CHAVENSON has been Vice President and Chief Financial Officer of the
Company since April 1996. Mr. Chavenson was Treasurer of ORYX Energy Company, an
oil and gas exploration and production company (previously Sun Exploration and
Production Co.) ("ORYX"), from 1993 to April 1996. Prior to that, during his 18
years with ORYX, he served as Assistant Treasurer and Manager of Corporate
Finance, Manager of Financial Analysis and Senior Financial Specialist of ORYX.
Mr. Chavenson holds a B.A. in Economics from Dickinson College and received an
M.B.A. from Harvard Business School.
GREGORY NELSON has been Vice President, Exploration of RMOC since its inception.
From 1984 to 1992, Mr. Nelson was employed by Rutherford Oil Corporation as an
explorationist. From 1977 to 1984, Mr. Nelson was with Mobil Oil Corporation.
His duties at Mobil included exploration, with both geological and geophysical
responsibility, in the Gulf of Mexico and North Africa. His last position at
Mobil was Manager of Production Geology, North Texas and San Juan Basin, New
Mexico. He has a B.A. in Geology from Winona State College and pursued post
graduate studies in geology at The Ohio State University from 1974 to 1977.
HOWARD GITTIS will be elected, and has consented to serve, as a director of the
Company immediately prior to the closing of the Offerings. Mr. Gittis is the
Vice Chairman & Chief Administrative Officer of MacAndrews & Forbes Holdings,
Inc., a diversified holding company with interests in consumer products,
financial services, entertainment, and publishing. His other directorships
include Andrews Group Incorporated, Consolidated Cigar Corporation, First
Nationwide Holdings Inc., First Nationwide Bank, a Federal Savings Bank, Mafro
Consolidated Group Inc., Mafro Worldwide Corporation, New World Television Inc.,
Power Control Technologies Inc., Revlon, Inc., Revlon Consumer Products
Corporation, the Loral Corporation and Jones Apparel Group. Prior to joining
MacAndrews & Forbes in 1985, Mr. Gittis was a partner at the Philadelphia law
firm of Wolf, Block, Schorr and Soils-Cohen ("Wolf Block") where he had served
as Chairman of the Executive Committee. His tenure at Wolf Block lasted over 25
years and concentrated on general litigation, real estate, and corporate
acquisition and divestiture work. Mr. Gittis is a member of the Board of
Overseers of the University of Pennsylvania Law School, a Trustee of Temple
University and a member of the Board of Visitors of Temple University School of
Law. Mr. Gittis holds two degrees from the University of Pennsylvania, a B.S. in
Economics and an L.L.B. from the Law School.
JERE W. MCKENNY will be elected, and has consented to serve, as a director of
the Company immediately prior to the closing of the Offerings. Prior to his
retirement in 1993, Mr. McKenny was President and Chief Operating Officer for
Kerr-McGee Corporation ("Kerr-McGee") for nine years. He also served as
President, Vice Chairman of the Board, Vice President--Exploration and Vice
President--Oil and Gas Exploration of the company during his forty years'
employment with Kerr-McGee. Mr. McKenny is serving on the School of Geology and
Geophysics Advisory Board, College of Business Administration Board of Advisors
and College of Engineering Board of Visitors Advisory Board of the University of
Oklahoma and serving on the Executive Committee and Board of Directors of Allied
Arts Foundation. Mr. McKenny holds a B.S. and an M.S. in Geological Engineering
from the University of Oklahoma.
HARRY C. LEE will be elected, and has consented to serve, as a director of the
Company immediately prior to the closing of the Offerings. Mr. Lee is an energy
resources consultant in the area of oil and gas exploration and production.
Before his retirement in 1993, Mr. Lee was with Unocal Corporation ("Unocal")
for 34 years. During his tenure at Unocal, Mr. Lee served in various executive
and managerial functions at both parent and subsidiary levels of the company,
including Energy Resources Vice President--Operations for major international
and domestic business units from 1992 to 1993, President of Unocal International
Oil & Gas Division 1988 to 1992, and Vice President and General Manager of Union
Oil Company of Indonesia 1978 to 1982. Mr. Lee holds a B.S. in Geology and an
M.S. in Geology from University of Oklahoma.
CHOTE SOPHONPANICH will be elected, and has consented to serve, as a director of
the Company immediately prior to the closing of the Offerings. Mr. Sophonpanich
is Executive Chairman of Green Spot (Thailand) Co. Ltd. and Chairman of
Krungdhep Sophon Public Company Ltd., Eternal Petrochemicals Co. Ltd. and C.S.
Capital Ltd., all of which are companies organized under the laws of the Kingdom
of Thailand. He is serving as a non-executive director of the Bangkok Bank with
which he has been affiliated since 1966. Mr. Sophonpanich is also a director of
Chote Chalit Co. Ltd., Shangri-la Hotel Public Company Ltd., Siam Food Products
Public Company Ltd., The Sophonpanich Co. Ltd., a Concessionaire, Thoresen
Agency Public Company Ltd., Union Plastic Public Company Ltd., Union Textile
Industries Public Company Ltd., Wilson Insurance Ltd. in Thailand. He
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also is serving as a non-executive director of companies outside of Thailand,
such as Bangkok Investments Ltd. and its subsidiaries of Cayman Island, First
Overseas Bangkok Investments Pte. Ltd. of Singapore and Stelux Co. Ltd. of Hong
Kong. Mr. Sophonpanich graduated from the University of Sydney with a Bachelor's
degree in Economics.
COMMITTEES
Pursuant to the Company's Bylaws, the Board has established standing Audit,
Compensation, Executive and Nominating Committees. The Audit Committee
recommends to the Board the selection and discharge of the Company's independent
auditors, reviews the professional services performed by the auditors, the plan
and results of the auditing engagement and the amount of fees charged for audit
services performed by the auditors, and evaluates the Company's system of
internal accounting controls. The Compensation Committee recommends to the Board
the compensation to be paid to the Company's directors, executive officers and
key employees and administers the compensation plans for the Company's executive
officers. The Executive Committee acts on behalf of the Board between regularly
scheduled meetings of the Board. The Nominating Committee is responsible for
recommending to the Board the slate of director nominees to be voted on by the
stockholders of the Company.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive $15,000 per year for
serving on the Board of Directors, $1,500 for each board meeting attended and
$750 for each committee meeting attended.
EXECUTIVE COMPENSATION
The following table contains compensation data for the Chief Executive Officer
and the other executive officers of the Company whose total salary and bonus
exceeded $100,000 for the year ended December 31, 1995.
1995 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
--------------------------------------
<S> <C> <C> <C>
ANNUAL COMPENSATION
--------------------------------------
NAME AND PRINCIPAL OTHER ANNUAL
POSITION SALARY BONUS COMPENSATION(1)
---------- --------- ---------------
Patrick R. Rutherford -- -- --
Michael D. McCoy $ 154,000 $ 30,000 --
Gregory Nelson 87,350 20,000 --
</TABLE>
- ------------
(1)Excludes perquisites of less than the lesser of 10% of total annual
compensation or $50,000.
KEY EMPLOYEE STOCK PLAN
The Company has established an incentive stock option and restricted stock plan,
the Rutherford-Moran Oil Corporation 1996 Key Employee Stock Plan (the "1996
Plan"), pursuant to which options to purchase shares of Common Stock and awards
of restricted shares of Common Stock will be available for future grants.
The 1996 Plan is designed to provide certain full-time key employees, including
officers and employee-directors of the Company, with additional incentives to
promote the success of the Company's business and to enhance the Company's
ability to attract and retain the services of qualified persons. The 1996 Plan
will be administered by the Compensation Committee or such other committee of no
less than two persons (the "Committee") appointed by the Board of Directors.
Committee members may not be employees of the Company and must not have been
eligible to participate under the 1996 Plan for a period of at least one year
prior to being appointed to the Committee. Under the Plan, options to purchase
Common Stock and restricted stock awards up to an aggregate of 500,000 shares of
Common Stock may be granted by the Committee. The maximum number of shares
subject to options that may be issued to, and the maximum number of shares
subject to restricted stock awards that may be granted to, any employee during
any year is 75,000 and 50,000 shares, respectively. The exercise price of an
option granted pursuant to the 1996 Plan may not be less than the fair market
value of the Common Stock on the date of grant. In the case of a grant of an
option designated as an "Incentive Option" to an employee who owns ten percent
or more of the outstanding shares of Common Stock (a "10% Stockholder"), the
exercise price of each such option under the 1996 Plan may not be less than 110%
of the fair
41
<PAGE>
market value of the Common Stock on the date of the grant. No option may be
granted under the 1996 Plan with a duration of more than ten years. In the case
of a 10% Stockholder, no option designated as an "Incentive Option" may be
granted with a duration of more than five years. Options designated as
"Incentive Options" under the 1996 Plan may be treated as such only to the
extent that the aggregate fair market value of the stock with respect to which
options are exercisable for the first time by the option holder in any calendar
year, under the 1996 Plan or any other incentive stock option plan of the
Company, does not exceed $100,000 valued as of the date of grant. Under the 1996
Plan, the Committee may issue shares of restricted stock to employees for no
payment by the employee or for a payment below the fair market value on the date
of grant. The restricted stock is subject to certain restrictions described in
the 1996 Plan, with no restrictions continuing for more than ten years from the
date of the award. The 1996 Plan may be amended by the Board of Directors
without any requirement of stockholder approval, except as required by Rule
16b-3 under the Exchange Act ("Rule 16b-3") to obtain the benefits under such
Rule and the incentive option rules of the Internal Revenue Code of 1986. To
date, no options or restricted stock awards have been granted under the 1996
Plan. Contemporaneously with the Offerings, the Company intends to grant options
exercisable for 45,000, 23,250 and 18,750 shares of Common Stock to Messrs.
McCoy, Chavenson and Nelson, respectively, at the initial public offering price.
In addition, the Company intends to grant to Messrs. McCoy, Chavenson and Nelson
restricted stock awards in the amount of 20,000, 5,813 and 9,000 shares,
respectively. These executive officers will not be required to make any payment
for these restricted stock awards, which will vest over five years in 20%
increments. Restrictions on transfer and forfeiture provisions upon termination
of employment will apply to the restricted stock covered by these awards for a
period of up to five years, after which time the restrictions will lapse and all
of the stock will be owned by the employees free of further restrictions under
the 1996 Plan.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Company has established the Rutherford-Moran Oil Corporation 1996
Non-Employee Director Stock Option Plan (the "1996 Director Plan"), pursuant to
which options to purchase shares of Common Stock will be available for future
grant to non-employee directors. The 1996 Director Plan is designed to enhance
the Company's ability to attract and retain the services of qualified persons as
directors and to provide such directors with a direct proprietary interest in
the success of the Company. The 1996 Director Plan will be administered by the
Board of Directors of the Company. Under the 1996 Director Plan, an aggregate of
50,000 shares of Common Stock will be available for grant of options to purchase
Common Stock. The exercise price of an option granted pursuant to the 1996
Director Plan may not be less than the fair market value of the Common Stock on
the date of grant. No option may be granted under such Plan with a duration of
more than ten years. The 1996 Director Plan generally may be amended by the
Board of Directors without any requirement of stockholder approval except to the
extent required by Rule 16b-3 to qualify for the benefits of such Rule. To date,
no options have been granted under the 1996 Director Plan. Contemporaneously
with the Offerings, the Company intends to grant options to each non-employee
director to acquire 2,500 shares of Common Stock at an exercise price equal to
the per share price to the public for Common Stock to be acquired in the
Offerings as set forth on the cover page of this Prospectus. Thereafter, the
1996 Director Plan provides for the annual grant of an option to acquire 1,000
shares of Common Stock to each non-employee director serving on the Board of
Directors following each annual meeting of the stockholders.
401(K) PLAN
The Company intends to adopt a 401(k) Plan (the "401(k) Plan") under which
substantially all U.S. employees of the Company and its subsidiaries who have
completed at least six months of service are eligible to participate. The 401(k)
Plan will permit eligible employees to contribute up to 15 percent of their
annual compensation subject to a maximum dollar amount established in accordance
with Section 401(k) and other provisions of the Internal Revenue Code of 1986.
SEVERANCE ARRANGEMENT
As the Company's Chief Financial Officer, Mr. Chavenson is compensated at a base
salary of $155,000 per year and is eligible for incentive bonuses of up to 35%
of his annual base salary, subject to review and adjustment by the Board. In the
event Mr. Chavenson's employment with the Company is terminated without Cause
(as defined below), he is entitled to receive (i) payment of one year of his
base salary and bonus (if any), (ii) one year of medical, dental and life
insurance coverage, (iii) the right to vest immediately all stock options and
restricted stock under the 1996 Plan; (iv) relocation assistance, and (v)
outplacement benefits. "Cause" is defined as (i) any material failure by Mr.
Chavenson after written notice to perform his duties when such failure shall
have continued for 30 days after receipt of such notice, (ii) commission of
fraud by Mr. Chavenson
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against the Company, its affiliates or customers, or (iii) conviction of Mr.
Chavenson of a felony offense or a crime involving moral turpitude. In the event
Mr. Chavenson's employment with the Company is terminated following a Change of
Control (as defined in the 1996 Plan), he is entitled to (i) payment of two
years of base salary and bonus (if any), (ii) two years of medical, dental and
life insurance coverage, (iii) relocation assistance, and (iv) outplacement
benefits.
CERTAIN RELATED PARTY TRANSACTIONS
STOCKHOLDER LOANS TO RMEC AND TRANSACTIONS
During the period June 1, 1991 through March 31, 1996, the current shareholders
of RMEC advanced funds to RMEC in exchange for certain unsecured, demand
promissory notes (the "Promissory Notes"). The Promissory Notes relating to
advances made prior to 1995 accrue interest at a prime rate (the "Prime Rate")
while Promissory Notes relating to advances made during 1995 accrue interest at
the Prime Rate plus one percent. During the period June 1, 1991 through March
31, 1996, RMEC repaid principal and accrued interest on the Promissory Notes
held by Messrs. Rutherford and Moran totalling $2.5 million. At March 31, 1996,
the outstanding principal on the Promissory Notes owed to each of Messrs.
Rutherford and Moran and Sidney F. Jones, Jr., a director of RMEC, totalled
$4,254,226, $4,035,768 and $200,337, respectively.
Prior to the Offerings, RMEC will have acquired 32,608.5 shares in Thai Romo
along with the corresponding shareholders loans for such shares, which
represented a 3% interest in Thai Romo for approximately $3,000,000 pursuant to
a certain stockholders agreement among the stockholders of Thai Romo. Such
shares will be acquired from Red Oak Holdings, Inc., an affiliate of a
commercial lender of the Company. The purchase price for such shares will be
provided by loans of $1,500,000, $1,416,000 and $84,000 from Messrs. Rutherford,
Moran and Jones, respectively. The terms of the notes evidencing such loans will
be identical to the Promissory Notes.
All of the Promissory Notes described above, in an aggregate principal amount of
$11,500,000 plus accrued interest, will be paid out of the proceeds from the
Offerings. See "The Transactions," "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Security
Ownership of Certain Beneficial Owners and Management" and "Certain
Relationships" for a discussion of certain additional transactions and
agreements between the Company and Messrs. Rutherford and Moran.
MANAGEMENT SERVICES AGREEMENT
On July 7, 1995, Thai Romo signed a Management Services Agreement (the "MSA")
with RMEC. Under the MSA, RMEC is to provide managerial services in the oil and
gas business to Thai Romo, including general managerial services, financial
management, plans and projects advice and assistance, personnel management and
advice and assistance in interpreting and complying with government regulations
and legislation. As compensation for the services provided, RMEC is to receive
payment of all expenses incurred, including but not limited to travel expenses,
salaries, bonuses and overhead. The term of the MSA is one year and renewable
automatically for successive terms of one year unless terminated by either party
with or without cause. For the year ended December 31, 1995, Thai Romo paid RMEC
$187,508 under the MSA. Messrs. Rutherford and Moran owned 50% and 45%,
respectively, of the outstanding stock of RMEC during such period. For the three
months ended March 31, 1996, Thai Romo paid RMEC $92,142.
ARRANGEMENTS WITH RUTHERFORD OIL CORPORATION
Historically, Rutherford Oil Corporation ("Rutherford Oil"), which is controlled
by Patrick R. Rutherford, obtained certain oil and gas related and medical
insurance on behalf of the Company and performed certain payroll related
services for the Company. The Company has reimbursed Rutherford Oil for its out
of pocket expenses relating to such insurance and services, which aggregated
approximately $460,746, $366,304 and $730,536 during 1993, 1994 and 1995,
respectively. Since January 1, 1996, Rutherford Oil no longer obtained such
insurance or performed such services on behalf of the Company.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a Registration Rights Agreement between the Company and Messrs.
Rutherford, Moran, McCoy and Susan R. Rutherford, wife of Mr. Rutherford
(collectively, the "Registration Group"), the Registration Group has the right
to demand registration under the Securities Act of any or all of the shares of
the Common Stock they beneficially own. Such demand rights
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<PAGE>
are first exercisable 180 days after the date of this Prospectus, and must be
exercised for at least 5% of the Common Stock covered by the Registration Rights
Agreement. The Company may be required to effect up to five such demand
registrations, and the expenses of any such demand registration shall be borne
by the selling stockholders. The Company is not obligated to take any action to
register shares of Common Stock beneficially owned by the Registration Group (i)
during the period starting 30 days prior to the Company's estimated date of
filing of, and ending 90 days after the effective date of, any other
registration statement filed by the Company under the Securities Act; (ii) more
than once during any six-month period; and (iii) for up to 90 days after a
request from the Registration Group if an officer of the Company certifies that
the Board of Directors of the Company has determined that such registration
would interfere with a material transaction then being pursued by the Company.
In addition, except in certain circumstances and subject to certain limitations,
if the Company proposed to register any shares of Common Stock under the
Securities Act, the Registration Group will be entitled to require the Company
to include all or a portion of the shares of Common Stock it owns in such
registration. The expenses of any such "piggyback" registration, other than
underwriting discounts and commissions and transfer tax relating to Common Stock
to be sold by the Registration Group will be borne by the Company. In addition,
the Company has agreed to indemnify any underwriter and selling stockholder in
connection with any registration made pursuant to the Registration Rights
Agreement against certain liabilities, including liabilities under the
Securities Act.
CERTAIN RELATIONSHIPS
The Company and Messrs. Rutherford and Moran have in the past entered into
significant loans and other transactions and agreements incident to the
Company's businesses. Such transactions and agreements have related to, among
other things, the financing of acquisition, exploration and development
activities of the Company and the provisions of certain insurance procurement
and payroll services. The Company believes that such transactions with Messrs.
Rutherford and Moran and their affiliates were on terms at least as favorable to
the Company as could have been obtained from unaffiliated third parties.
Following the Offerings and the Transactions, it is the intention of Messrs.
Rutherford and Moran and the Company that the Company continue to operate as an
independent entity. However, it is possible that Mr. Rutherford or Mr. Moran or
their affiliates may enter into intercompany transactions from time to time in
the future which may involve conflicts of interest. In any event, the Company
intends that the terms of any such future transactions and agreements will be at
least as favorable to the Company as could be obtained from unaffiliated third
parties.
Following the closing of the Offerings, there will be no restrictions on the
ability of officers and directors of the Company to compete with the Company.
Although none of the officers or directors has any current intention to compete
with the Company, there can be no assurance that they will not compete with the
Company in the future. The Company's officers and directors, in their individual
capacity, are or may become officers, directors, controlling shareholders and/or
partners of other entities involved in business similar to that in which the
Company engages or which may in the future enter into transactions with the
Company. See "Management". Thus, there exists the potential for conflicts of
interests between the Company, on the one hand, and an officer, director and/or
controlling stockholder or an entity which any such person controls, on the
other hand. Mr. Rutherford has advised the Company that his affiliated company
that conducts oil and gas activity in the U.S., does not currently intend to
engage in the acquisition and development of, or exploration for, oil and gas
outside of the U.S.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of the closing of the Offerings, beneficial
ownership of shares of Common Stock by each of the Company's directors, the
Company's Chief Executive Officer, each of the Company's other executive
officers named in the 1995 Summary Compensation Table and all directors and
executive officers as a group.
<TABLE>
<CAPTION>
----------------------
<S> <C> <C>
BENEFICIAL OWNERSHIP
<CAPTION>
BENEFICIAL OWNER SHARES (1) PERCENT
----------- ---------
<S> <C> <C>
John A. Moran (2) 9,348,607 37.4%
Patrick R. Rutherford (3) 9,663,007 38.6
Michael D. McCoy (4) 199,485 *
Gregory Nelson 9,000 *
Howard Gittis (5) -- --
Jere W. McKenny (5) -- --
Harry C. Lee (5) -- --
Chote Sophonpanich (5) -- --
Executive officers and directors as a
group 19,225,912 76.9%
</TABLE>
- ------------
* Less than one percent.
(1) Assuming the U.S. Underwriter's over-allotment option is not exercised.
Share ownership includes awards of restricted stock pursuant to the 1996 Plan
based on an assumed initial public offering price of $21.00 per share. Ownership
of such shares will not vest until the end of the fifth year following the date
of grant; however, recipients will be entitled to vote and receive dividends, if
any, with respect to such shares commencing with the date of grant.
(2) Includes 3,671,204 shares owned directly by JAMTHAI, Inc. (a Delaware
corporation owned by Mr. Moran) and THAIJAM, L.P. (a Delaware limited
partnership of which JAMTHAI, Inc. is the general partner). The corporate
address of each of such entities is 5 Greenway Plaza, Suite 220, Houston, Texas
77046.
(3) Includes 3,645,161 shares owned directly by PRRTHAI, Inc. (a Delaware
corporation owned by Mr. Rutherford) and THAIPRR, L.P. (a Delaware limited
partnership of which PRRTHAI, Inc. is the general partner) but does not include
57,047 shares owned by SRRTHAI, Inc. (a Delaware corporation controlled by Mr.
Rutherford's spouse) for which Mr. Rutherford disclaims beneficial ownership.
The corporate address of each of such entities is 5 Greenway Plaza, Suite 220,
Houston, Texas 77046.
(4) Includes 179,485 shares owned directly by MDMTHAI, Inc., a Texas corporation
owned by Mr. McCoy.
(5) To be elected immediately prior to the closing of the Offerings.
45
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 40,000,000 shares of
Common Stock, $0.01 par value, and 10,000,000 shares of preferred stock, $0.01
par value per share. Upon consummation of the Offerings, 25,000,000 shares of
Common Stock will be issued and outstanding (25,600,000 shares if the U.S.
Underwriters, over-allotment option is exercised in full). A total of 550,000
shares of Common Stock will be reserved for grants of options and stock awards
under the 1996 Plan and 1996 Director Plan. No shares of Preferred Stock are
issued and outstanding.
COMMON STOCK
The holders of the Common Stock are entitled to one vote per share in the
election of directors and on all other matters on which stockholders are
entitled or permitted to vote. Such holders are not entitled to vote
cumulatively for the election of directors. Holders of a majority of the shares
of Common Stock entitled to vote in any election of directors may elect all of
the directors standing for election. After the Offerings, Messrs. Rutherford and
Moran will beneficially own approximately 76.0% of the issued and outstanding
Common Stock (or 74.3% if the U.S. Underwriters' over-allotment option is
exercised in full). Accordingly, if such shareholders vote together, they will
be able to elect all of the Company's directors and approve or, with respect to
matters requiring majority approval of the stockholders, influence, all other
matters requiring stockholder approval. Holders of Common Stock have no
redemption, conversion, preemptive or other subscription rights.
In the event of liquidation, dissolution or winding up of the Company, holders
of Common Stock are entitled to share ratably in all of the assets of the
Company remaining, if any, after satisfaction of the debts and liabilities of
the Company and the preferential rights of the holders of the preferred stock,
if any, then outstanding. The outstanding shares of Common Stock are, and the
shares of Common Stock offered hereby will be, upon payment therefor as
contemplated herein, validly issued, fully paid and nonassessable.
Holders of Common Stock are entitled to receive dividends if, as and when
declared by the Board of Directors of the Company out of funds legally available
therefor only after payment of, or provision for, full dividends (on a
cumulative basis, if applicable) on all outstanding shares of any series of
Preferred Stock and after the Company has made provision for any sinking funds
for any series of Preferred Stock. The Company's credit facility includes
financial covenants that may restrict the Company's ability to pay dividends on
its Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Capital Resources and Liquidity." The
Company does not anticipate paying cash dividends in the foreseeable future. See
"Dividend Policy."
PREFERRED STOCK
Preferred Stock may be issuable in one or more series from time to time at the
discretion of the Board of Directors. The Board of Directors is authorized to
fix the respective designations, relative rights, preferences, qualifications,
restrictions and limitation of each series. The Board of Directors of the
Company, without obtaining stockholder approval, may issue shares of the
Preferred Stock with voting rights or conversion rights that could affect the
voting power of the holders of Common Stock. Although the Company has no current
plans to issue any preferred stock to discourage any change of control, the
issuance of Preferred Stock could have the effect of an anti-takeover device,
which could be used by the Board of Directors without further action on the part
of the holders of Common Stock.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND LIMITATION OF DIRECTOR LIABILITY
The Restated Certificate of Incorporation contains provisions that eliminate the
personal liability of its directors for monetary damages resulting from breaches
of their fiduciary duty other than liability for breaches of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, any unlawful payment of a dividend or
unlawful stock purchase or redemption under Section 174 of the Delaware General
Corporation Law ("DGCL") or any transaction from which the director derived an
improper personal benefit. The limitation of liability under state law does not
apply to liability under the federal securities laws. The Restated Certificate
of Incorporation and the Bylaws of the Company contain provisions requiring the
indemnification of the Company's directors and officers to the fullest extent
permitted by the DGCL, including circumstances in which indemnification is
otherwise discretionary. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
46
<PAGE>
The Company will enter into indemnification agreements with each of the
directors of the Company. Pursuant to such agreements, the Company will agree to
indemnify and hold each such director harmless to the fullest extent permitted
by the DGCL, from any loss, damage or liability incurred in the course of its
respective service as a director of the Company. The Company will be required by
the indemnification agreement to advance litigation and related expenses to the
indemnified persons, subject to their undertaking to repay such amounts if it is
ultimately determined that they are not entitled to be indemnified by the
Company thereunder or otherwise. The amount paid by the Company is reducible by
the amount of insurance paid to or on behalf of such director with respect to
any event giving rise to indemnification. Each such director's right to
indemnification is to survive his respective death or termination as director
and is binding on any successor. The Company intends to obtain insurance
policies to protect officers and directors from certain liabilities, including
liabilities against which the Company cannot indemnify its directors and
officers.
ADVANCE NOTICE PROVISIONS FOR CERTAIN STOCKHOLDER ACTIONS
The Bylaws establish an advance notice procedure with regard to the nomination,
other than by or at the direction of the Board or a committee thereof, of
candidates for election as directors (the "Nomination Procedure") and with
regard to certain matters to be brought before an annual meeting of stockholders
of the Company (the "Business Procedure").
Under the Business Procedure, a stockholder seeking to have any business
conducted at an annual meeting must give prior written notice, in proper form,
to the Secretary of the Company. The requirements as to the form and timing of
that notice are specified in the Bylaws. If the Chairman or other officer
presiding at a meeting determines that other business was not properly brought
before such meeting in accordance with the Business Procedure, such business
will not be conducted at the meeting.
The Nomination Procedure requires that a stockholder give prior written notice,
in proper form, of a planned nomination for the Company Board to the Secretary
of the Company. The requirements as to the form and timing of that notice are
specified in the Bylaws. If the election inspectors determine that a person was
not nominated in accordance with the Nomination Procedure, such person will not
be eligible for election as a director.
Although the Company's Bylaws do not give the Board any power to approve or
disapprove stockholder nominations for the election of directors or of any other
business desired by stockholders to be conducted at an annual or any other
meeting, the Bylaws (i) may have the effect of precluding a nomination for the
election of directors or precluding the conduct of business at a particular
annual meeting if the proper procedures are not followed, or (ii) may discourage
or deter a third party from conducting a solicitation of proxies to elect its
own slate of directors or otherwise attempting to obtain control of the Company,
even if the conduct of such solicitation or such attempt might be beneficial to
the Company and its stockholders.
STATUTORY PROVISION
As a Delaware corporation, the Company is subject to Section 203 of the DGCL. In
general, Section 203 prevents an "interested stockholder" (defined generally as
a person owning 15% or more of a corporation's outstanding voting stock) from
engaging in a "Business Combination" (as defined in the DGCL) with a Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the corporation and by employee stock plans that do not provide employees
with the rights to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer); or (iii) following the
transaction in which such person became an interested stockholder, the business
combination is approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of two-thirds of the outstanding voting stock of the corporation not owned by
the interested stockholder. Under Section 203, the restrictions described above
also do not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.
The three-year restriction will not apply to Mr. Rutherford or Mr. Moran because
the Board of Directors of the Company approved their share acquisitions prior to
such acquisitions. See "The Transactions."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York.
47
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of the Offerings, officers, directors and existing
stockholders of the Company will own approximately 84% of the outstanding Common
Stock (82% if the U.S. Underwriters' over-allotment option is exercised in
full). Officers, directors and each of the existing stockholders, including the
Principal Stockholders, of the Company, have agreed pursuant to "lock-up"
agreements that they will not, without the prior written consent of J.P. Morgan
Securities Inc., offer, sell, contract to sell or grant any option to purchase
or otherwise dispose of any shares of Common Stock or any options exercisable
for Common Stock for a period of 180 days after the date of this Prospectus.
J.P. Morgan Securities Inc. may provide such written consent without notice to
the Company's stockholders or the Nasdaq National Market.
Upon completion of the Offerings, the Company will have 25,000,000 shares of
Common Stock outstanding (25,600,000 shares if the U.S. Underwriters'
over-allotment option is exercised in full). Of these shares, the 4,000,000
shares of Common Stock sold in the Offerings (4,600,000 shares if the U.S.
Underwriters' over-allotment option is exercised in full) will be freely
tradeable in the public market without restriction by persons other than
affiliates of the Company. The remaining 21,000,000 shares of the Common Stock
outstanding will be "restricted securities" within the meaning of Rule 144 under
the Securities Act. Consequently, such shares may not be resold unless they are
registered under the Securities Act or resold pursuant to an applicable
exemption from registration under the Securities Act, such as Rule 144.
The Company believes that all of the outstanding shares of Common Stock will be
immediately tradeable in accordance with the provisions of Rule 144 upon
expiration of the lock-up agreements described above. In general, under Rule 144
as currently in effect, a person (or persons whose shares are required to be
aggregated) who has been deemed to have beneficially owned, for at least two
years, shares of Common Stock that have not been registered under the Securities
Act or that were acquired from an "affiliate" of the Company, is entitled to
sell within any three-month period a number of shares of Common Stock that does
not exceed the greater of 1% of the number of then outstanding shares of Common
Stock (approximately 250,000 shares upon completion of the Offerings if the U.S.
Underwriters' over-allotment option is not exercised) and the average weekly
reported trading volume in the Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 also are subject to certain notice and
manner-of-sale requirements and to the availability of current public
information about the Company. A person (or persons whose shares are aggregated)
who is not an "affiliate" of the company during the three months prior to resale
and who has been deemed to have beneficially owned such shares for at least
three years is entitled to sell such shares under Rule 144 without regard to the
requirements discussed above. In addition, pursuant to the Registration Rights
Agreement, the Registration Group was granted rights entitling each of them,
under specified circumstances, to cause the Company to register for sale all or
part of their shares of Common Stock and to include such shares in any
registered public offering of Common Stock by the Company. See "Certain Related
Party Transactions--Registration Rights Agreement." The Company has granted
similar registration rights to Red Oak.
An aggregate of 550,000 shares of Common Stock are reserved for issuance to
employees, officers and directors of the Company pursuant to existing benefit
plans, of which 100,750 shares are anticipated to be subject to outstanding
stock options and 44,338 of which will be issued to employees of the Company
pursuant to restricted stock awards, upon the completion of the Offerings. See
"Management--Key Employee Stock Plan and Non-Employee Director Stock Option
Plan." The Company intends to file a registration statement on Form S-8 under
the Securities Act to register all of the shares of Common Stock then reserved
for future issuance under these plans. Shares acquired under such plans after
the effective date of the registration statement generally will be available for
resale by non-affiliates in the public market. Shares acquired by affiliates
under such plans may not be resold unless they are registered under the
Securities Act or resold pursuant to an applicable exemption from such
registration, such as Rule 144.
The Company has also agreed that it will not, without the prior written consent
of J.P. Morgan Securities Inc., offer for sale, sell or otherwise dispose of any
shares of Common Stock (other than shares of Common Stock issued pursuant to
employee benefit plans existing on the date hereof or pursuant to currently
outstanding options) or securities convertible into or exchangeable for Common
Stock or sell or grant options, rights or warrants with respect to any shares of
Common Stock (other than the grant of options or restricted stock pursuant to
benefit plans existing on the date hereof) for a period of 180 days after the
date of this Prospectus. J.P. Morgan Securities Inc. may provide such written
consent without notice to the Company's stockholders or the Nasdaq National
Market.
48
<PAGE>
Prior to the Offerings, there has been no public market for the Common Stock and
no prediction can be made as to the effect, if any, that sales of shares of
Common Stock or the availability of such shares for sale will have on the market
price of the Common Stock prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could adversely affect
prevailing market prices.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a summary of certain United States federal tax consequences of
the holding and disposition of shares of the Common Stock by Non-U.S. Holders,
as defined below. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed Treasury regulations promulgated
thereunder (the "Treasury Regulations"), judicial authority and current
administrative rulings and practice, all as in effect on the date hereof. All of
the foregoing are subject to change or reinterpretation and any such change or
reinterpretation, which could be retroactive in application, may affect the
validity of this discussion. NO OPINION OF TAX COUNSEL HAS BEEN REQUESTED OR
RECEIVED WITH RESPECT TO THE UNITED STATES TAX CONSEQUENCES SUMMARIZED BELOW. NO
RULINGS HAVE BEEN REQUESTED FROM THE UNITED STATES INTERNAL REVENUE SERVICE (THE
"INTERNAL REVENUE SERVICE") WITH RESPECT TO THESE MATTERS. Accordingly, no
assurance can be given as to the Internal Revenue Service's interpretation with
respect to these matters or that the conclusions discussed below would be
sustained by a court if challenged by the Internal Revenue Service.
For purposes of this summary, a "U.S. Holder" with respect to the Common Stock
is (i) an individual who is a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in the United States or under
the laws of the United States or of any state thereof, or (iii) an estate or
trust the income of which is includable in gross income for United States
federal income tax purposes regardless of its source; and a "Non-U.S. Holder" is
any person other than a U.S. Holder.
This summary deals only with Common Stock held by Non-U.S. Holders as capital
assets. Further, the United States federal tax consequences to any particular
Non-U.S. Holder may be affected by matters not discussed below. In addition,
applicable double taxation treaties may alter the tax consequences discussed
below. There also may be state, local or foreign income tax or estate and gift
tax considerations applicable to each Non-U.S. Holder with respect to the Common
Stock.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS
NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL THE RELEVANT TAX
CONSEQUENCES TO ANY PARTICULAR NON-U.S. HOLDER WHO HOLDS OR DISPOSES OF THE
COMMON STOCK. IT SHOULD NOT BE INTERPRETED AS LEGAL OR TAX ADVICE TO ANY SUCH
NON-U.S. HOLDER. EACH NON-U.S. HOLDER IS URGED TO CONSULT HIS OWN TAX ADVISOR AS
TO THE CONSEQUENCES TO HIM OF ACQUIRING, HOLDING AND DISPOSING OF SHARES OF
COMMON STOCK OF THE COMPANY UNDER UNITED STATES FEDERAL AND APPLICABLE STATE,
LOCAL AND FOREIGN TAX LAWS.
DIVIDENDS
Under sections 871(i)(2)(B) and 881(d) of the Code, a percentage of any dividend
paid to a Non-U.S. Holder by a domestic corporation meeting an 80% foreign
business requirement test is exempt from United States federal income tax. The
percentage is the amount by which the foreign source gross income of the
domestic corporation from the active conduct of a trade or business in a foreign
country for a three-year testing period bears to the total gross income of such
domestic corporation for the testing period. For the foreseeable future, it is
expected that all of the Company's business will be conducted outside the United
States, and substantially all of its gross income will constitute foreign source
income from the active conduct of one or more trades or businesses outside the
United States. Therefore, based on the current business strategy of the Company,
it is expected that, for the forseeable future, substantially all of the
dividends, if any, paid by the Company to Non-U.S. Holders would be exempt from
United States federal income tax. The legislative history of sections
871(i)(2)(B) and 881(d) indicates that only the portion of a dividend that is
subject to United States federal income tax will be subject to withholding tax
at the 30% or lower treaty rate. Therefore, the rule of Treasury Regulation
section 1.1441-3(b)(1) that requires withholding of tax on the gross amount of
any dividend, notwithstanding that all or a portion of such dividend is not
taxable under sections 871 or 881, should not apply. As a result, only the
portion of any dividend that is paid by the Company and that is subject to
United States federal income tax will be subject to 30% or lower treaty rate
withholding according to the provisions described below.
49
<PAGE>
If the Company ceases to meet the 80% foreign business requirement, except as
provided below with respect to the payment of dividends to certain partnerships,
dividends paid to a Non-U.S. Holder with respect to the Common Stock will be
subject to withholding of United States federal income tax at a 30% rate, or
such lower rate as may be specified by an applicable income tax treaty. Under
currently effective Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of the country in
determining the applicability of a treaty for those purposes. However, on April
15, 1996, the Internal Revenue Service issued proposed Treasury Regulations (the
"Proposed Regulations") that, if adopted in proposed form, would require a
Non-U.S. Holder to file certain forms to obtain the benefit of any applicable
tax treaty providing for a lower rate of withholding tax on dividends. These
Proposed Regulations would require a Non-U.S. Holder to file a beneficial owner
withholding certificate, e.g., a Form W-8, to obtain the lower treaty rate. The
Proposed Regulations would apply to dividends paid after December 31, 1997,
subject to certain transition rules.
Except as may be otherwise provided in an applicable income tax treaty, a
Non-U.S. Holder will be taxed at ordinary federal income tax rates (on a net
income basis) on dividends that are effectively connected with the conduct of a
trade or business of the Non-U.S. Holder within the United States, and will not
be subject to the withholding tax described above. Certain certification
requirements must be complied with to claim an exemption from withholding on
effectively connected dividends. If the Non-U.S. Holder is a foreign
corporation, it may also be subject to a United States branch profits tax at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty. A Non-U.S. Holder that is eligible for a reduced rate of United States
withholding tax pursuant to an income tax treaty may apply for a refund of any
excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service.
If the Company ceases to meet the 80% foreign business requirement and the
holder of the Common Stock is a partnership, a withholding rate in excess of 30%
generally applies, except as provided herein. The Company generally will not be
required to withhold on effectively connected dividends paid to a holder of the
Common Stock that is a domestic or foreign partnership engaged in a United
States trade or business; however, the partnership generally will be required to
withhold tax on any effectively connected dividend includable in the
distributive share of partnership income (the "Distributive Share") of a partner
who is a Non-U.S. Holder, whether or not distributed, at the highest applicable
rate of United States taxation (currently, 39.6% for a non-corporate partner and
35% for a corporate partner). A holder of the Common Stock that is a domestic
partnership will be required to withhold tax at the 30% withholding tax rate (or
applicable treaty rate) on any non-effectively connected dividend includable in
the Distributive Share of a partner who is a Non-U.S. Holder, whether or not
distributed. Different withholding requirements may apply to partnerships, the
interests of which are publicly traded, and those partnerships are accordingly
advised to consult their tax advisors. Moreover, under the Proposed Regulations,
special withholding rules would apply to dividends paid to foreign partnerships.
The Proposed Regulations, if adopted in their present form, would require the
Company to withhold at the rate of 31% on dividends paid to a foreign
partnership unless the partnership furnished the Company an "intermediary
withholding certificate" containing appropriate withholding certificates for
each partner in the foreign partnership, or the foreign partnership furnished
the Company other appropriate forms claiming exemption from or reduction in 31%
withholding. Holders of the Common Stock that are foreign partnerships are
advised to consult their tax advisors regarding the special withholding rules in
the Proposed Regulations.
DISPOSITION OF STOCK
Non-U.S. Holders generally will not be subject to United States federal income
tax in respect of gain recognized on a disposition of the Common Stock unless
(i) the gain is effectively connected with a trade or business conducted by the
Non-U.S. Holder within the United States (in which case the branch profits tax
described under "--Dividends" above may also apply if the holder is a foreign
corporation), (ii) in the case of a Non-U.S. Holder who is a non-resident alien
individual and holds the Common Stock as a capital asset, the holder is present
in the United States for 183 or more days in the taxable year of the disposition
and certain other conditions are met, (iii) the Non-U.S. Holder is subject to
tax pursuant to the provisions of the United States federal tax law applicable
to certain United States expatriates or (iv) the Company is or has been a
"United States real property holding corporation" for federal income tax
purposes and, if the Common Stock is considered "regularly traded" during the
year of the disposition of the Common Stock, the Non-U.S. Holder held directly
or indirectly at any time during the five-year period ending on the date of
disposition more than five percent of the Common Stock. Management of the
Company does not believe that the Company is currently a U.S. real property
holding corporation and does not anticipate that the Company will become a
United States real property holding corporation within the foreseeable future.
Non-U.S. Holders who would be subject to United States federal income taxes with
respect to gain recognized on a sale or other disposition of the Common Stock
should consult applicable treaties, which may provide different rules.
50
<PAGE>
FEDERAL ESTATE TAXES
Common Stock that is owned or treated as being owned at the time of death by a
Non-U.S. Holder who is a non-resident alien individual will be included in the
Non-U.S. Holder's gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
Generally, dividends paid to Non-U.S. Holders outside the United States that are
subject to the 30% or treaty-reduced rate of withholding tax or are exempt, in
whole or in part, from withholding because of the 80% foreign business
requirement test applied to the Company, will be exempt from the 31% backup
withholding tax. As a general matter, information reporting and backup
withholding will not apply to a payment by or through a foreign office of a
foreign broker of the proceeds of a sale of Common Stock effected outside the
United States. However, information reporting requirements (but not backup
withholding) will apply to a payment by or through a foreign office of a broker
of the proceeds of a sale of Common Stock effected outside the United States
where that broker (i) is a United States person, (ii) is a foreign person that
derives 50% or more of its gross income for certain periods from the conduct of
a trade or business in the United States or (iii) is a "controlled foreign
corporation" as defined in the Code (generally, a foreign corporation controlled
by United States shareholders), unless the broker has documentary evidence in
its records that the holder is a Non-U.S. Holder and certain conditions are met
or the holder otherwise establishes an exemption. Payment by a United States
office of a broker of the proceeds of a sale of Common Stock is subject to both
backup withholding and information reporting unless the holder certifies to the
payor in the manner required as to its non-United States status under penalties
of perjury or otherwise establishes an exemption.
Amounts withheld under the backup withholding rules do not constitute a separate
United States federal income tax. Rather, any amounts withheld under the backup
withholding rules will be allowed as a refund or credit against the holder's
United States federal income tax liability, if any, provided the required
information or appropriate claim for refund is filed with the Internal Revenue
Service.
51
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the
U.S. Underwriters named below, for whom J.P. Morgan Securities Inc., Morgan
Stanley & Co. Incorporated, PaineWebber Incorporated and Smith Barney Inc. are
acting as representatives (the "U.S. Representatives"), have severally agreed to
purchase, and the Company has agreed to sell to them, and the International
Managers named below, for whom J.P. Morgan Securities Ltd., Morgan Stanley & Co.
International Limited, PaineWebber International (U.K.) Ltd., and Smith Barney
Inc. are acting as representatives (the "International Representatives" and
together with the U.S. Representatives, the "Representatives"), have severally
agreed to purchase and the Company has agreed to sell to them, the respective
numbers of shares of Common Stock set forth opposite their names below. The U.S.
Underwriters and the International Managers are collectively referred to as the
"Underwriters." Under the terms and conditions of the Underwriting Agreement,
the Underwriters are obligated to take and pay for all such shares of Common
Stock, if any are taken. Under certain circumstances, the commitments of
nondefaulting Underwriters may be increased as set forth in the Underwriting
Agreement.
<TABLE>
<CAPTION>
U.S. UNDERWRITERS NUMBER OF SHARES
----------------
<S> <C>
J.P. Morgan Securities Inc..................................................................................
Morgan Stanley & Co. Incorporated...........................................................................
PaineWebber Incorporated....................................................................................
Smith Barney Inc............................................................................................
----------------
Subtotal 3,200,000
<CAPTION>
INTERNATIONAL MANAGERS NUMBER OF SHARES
----------------
<S> <C>
J.P. Morgan Securities Ltd..................................................................................
Morgan Stanley & Co. International Limited..................................................................
PaineWebber International (U.K.) Ltd........................................................................
Smith Barney Inc............................................................................................
----------------
Subtotal 800,000
----------------
TOTAL 4,000,000
----------------
----------------
</TABLE>
The U.S. Underwriters and the International Managers have entered into an
Agreement Between Syndicates (the "Agreement Between Syndicates") which provides
for the coordination of their activities. Pursuant to the Agreement Between
Syndicates, sales may be made between the U.S. Underwriters and the
International Managers of such number of shares as they may mutually agree. The
price of any shares so sold shall be the offering price, less such amount as may
be mutually agreed upon by the U.S. Representatives and the International
Representatives, but not exceeding the selling concession to dealers applicable
to such shares. To the extent there are sales between the U.S. Underwriters and
the International Managers pursuant to the Agreement Between Syndicates, the
number of shares initially available for sale by the U.S. Underwriters or by the
International Managers may be more or less than the amount appearing on the
cover page of this Prospectus with respect to the Offerings. Neither the U.S.
Underwriters nor the International Managers are obligated to purchase from the
other any unsold shares.
Pursuant to the Agreement Between Syndicates, each U.S. Underwriter has
represented and agreed that (i) it is not purchasing any Common Stock for the
account of anyone other than a United States or Canadian Person and (ii) it has
not offered or sold, and will not offer or sell, directly or indirectly, any
Common Stock or distribute any prospectus relating to the Offerings outside the
United States or Canada or to anyone other than a United States or Canadian
Person. Pursuant to the Agreement Between Syndicates, each International Manager
has represented and agreed that (i) it is not purchasing Common Stock for the
account of
52
<PAGE>
any United States or Canadian Person and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any Common Stock or distribute
any prospectus relating to the Offerings within the United States or Canada or
to any United States or Canadian Person. The foregoing limitations do not apply
to certain transactions specified in the Agreement Between Syndicates, including
stabilization transactions and transactions between the U.S. Underwriters and
the International Managers pursuant to the Agreement Between Syndicates. As used
herein, "United States or Canadian Person" means any individual who is a
national or a resident of the United States or Canada or any corporation,
pension, profit-sharing or other trust or other entity organized under the laws
of the United States or Canada or any political subdivision thereof (other than
a branch located outside the United States or Canada), and includes any United
States or Canadian branch of a person who is otherwise not a United States or
Canadian Person.
Pursuant to the Agreement Between Syndicates, each U.S. Underwriter has
represented that it has not offered or sold, and agreed not to offer or sell,
any Common Stock, directly or indirectly, in Canada in contravention of the
securities laws of Canada or any province or territory thereof and has
represented that any offer of Common Stock in Canada will be made only pursuant
to an exemption from the requirement to file a prospectus in the province or
territory of Canada in which such offer is made. Each U.S. Underwriter has
further agreed to send to any dealer who purchases from it any of the Common
Stock a notice stating in substance that, by purchasing such Common Stock, such
dealer represents and agrees that it has not offered or sold, and will not offer
or sell, directly or indirectly, any of such Common Stock in Canada or to, or
for the benefit of, any resident of Canada in contravention of the securities
laws of Canada or any province or territory thereof and that any offer of Common
Stock in Canada will be made only pursuant to an exemption from the requirement
to file a prospectus in the province or territory of Canada in which such offer
is made, and that such dealer will deliver to any other dealer to whom it sells
any of such Common Stock a notice containing substantially the same statement as
is contained in this sentence.
Pursuant to the Agreement Between Syndicates, each International Manager has
represented and agreed that (i) it has not offered or sold and, prior to the
date six months after the date of the issue of the Common Stock, will not offer
or sell any Common Stock in the United Kingdom, by means of any document, other
than to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Common Stock to any person who is of a kind
described in Article 11(3) of the Financial Services Act 1995 (Investment
Advertisements) (Exemptions) Order 1988 or is a person to whom the document may
otherwise lawfully be issued or passed on.
The Underwriters propose initially to offer the Common Stock directly to the
public at the price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the initial public
offering of the Common Stock, the public offering price and such concession may
be changed.
The Company has granted to the U.S. Underwriters an option, expiring at the
close of business on the 30th day after the date of this Prospectus, to purchase
up to 600,000 additional shares of Common Stock at the initial public offering
price, less the underwriting discount. The U.S. Underwriters may exercise such
option solely for the purpose of covering over-allotments, if any. If the U.S.
Underwriters exercise their option, each U.S. Underwriter will have a firm
commitment, subject to certain conditions, to purchase approximately the same
number of option shares as the number of shares of Common Stock to be purchased
by that U.S. Underwriter shown in the foregoing table bears to the total number
of shares of Common Stock initially offered by the U.S. Underwriters hereby.
The Company and the Principal Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.
The Company, its affiliates, each of its existing stockholders, including the
Principal Stockholders, and each of its officers and directors set forth under
the heading "Management," for themselves and their affiliates, have agreed with
the Underwriters not to offer, pledge to sell, file a registration statement
relating to, announce the intention to sell, sell, issue (in the case of the
Company), contract to sell, or otherwise dispose of any shares of Common Stock,
including any securities convertible into or exchangeable or exercisable for any
such shares, directly or indirectly, without the prior written consent of J.P.
Morgan Securities Inc. for a period of 180 days from the date of this Prospectus
other than, with respect to the Company, the shares issued in the
53
<PAGE>
Offerings or pursuant to the Transactions and shares or options therefor sold or
granted pursuant to employee benefit plans, resale of which shares or options
shall be restricted for a period of 180 days after the initial offering of the
shares. J.P. Morgan Securities Inc. may provide such written consent without
notice to the Company's stockholders or the Nasdaq National Market.
The Common Stock has been approved for quotation on the Nasdaq National Market
under the trading symbol "RMOC."
The Representatives have informed the Company that the Underwriters do not
expect sales to accounts over which the Underwriters exercise discretionary
authority to exceed 5% of the total number of shares of Common Stock offered by
them.
Purchasers of shares offered hereby may be required to pay stamp taxes and other
charges in accordance with the laws and practice of the country of purchase in
addition to the initial public offering price.
Prior to the Offerings, there has been no public market for the Common Stock.
The initial public offering price for the shares of Common Stock offered hereby
was determined by agreement among the Company and the Underwriters. Among the
factors considered in making such determination will be the state of the economy
in Thailand and the United States and history of and the prospects for the
industry in which the Company competes, current and historical oil and gas
prices, an assessment of the Company's management, the present operations of the
Company, the absence of current operating revenue and losses due to exploration
and development expenditure of the Company, the prospects for future growth in
revenues and earnings of the Company, the general condition of the securities
markets at the time of the Offerings and the prices of similar securities of
generally comparable companies.
There can be no assurance that an active trading market will develop for the
Common Stock or that the Common Stock will trade in the public market subsequent
to the Offerings at or above the initial public offering price.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock being offered hereby
will be passed upon for the Company by Fulbright & Jaworski L.L.P., Houston,
Texas, and for the Underwriters by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The balance sheet of RMOC as of April 25, 1996, the combined financial
statements of RMEC and Thai Romo Limited, a development stage company, as of
December 31, 1994 and 1995, and for each of the years in the three-year period
ended December 31, 1995 and the period from September 21, 1990 (date of
inception) to December 31, 1995, have been included in the Prospectus and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
Information relating to the estimated proved undeveloped reserves of oil and gas
and the related estimates of future net cash flows and present values thereof
for certain periods included herein and in the Notes to the Financial Statements
of the Company have been audited by Ryder Scott, independent petroleum
engineers, and are included herein and incorporated by reference herein in
reliance upon the authority of such firm as an expert in petroleum engineering.
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement under the Act with
respect to the Common Stock offered hereby. This Prospectus, which is part of
the Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto, certain items
of which are omitted in accordance with the rules and regulations of the SEC.
For further information with respect to the Company and the Common Stock,
reference is hereby made to the Registration Statement and such exhibits and
schedules filed as a part thereof, which may be inspected, without charge, at
the Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC
located at 7 World Trade Center, New York, New York 10048; and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of all or any portion of the Registration Statement may be obtained from
the Public Reference Section of the SEC, upon payment of prescribed fees.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved.
54
<PAGE>
CERTAIN DEFINITIONS
The following are abbreviations and definitions of terms commonly used in the
oil and gas industry and this Prospectus. Unless otherwise indicated in this
Prospectus, natural gas volumes are stated at the legal pressure base of the
state or area in which the reserves are located and at 60 DEG. Fahrenheit.
"Appraisal well" means a well that is designed to delineate the extent of
hydrocarbon accumulations and to define locations for platforms.
"API" means the standard measure of the gravity of a hydrocarbon liquid as
defined by the American Petroleum Institute.
"Bcf" means billion cubic feet.
"Bcfe" means Bcf equivalent.
"BTU" means the standard measure of the heating value of natural gas.
"CO(2)" means the standard abbreviation for the inert gas carbon dioxide.
"Development well" means a well that is drilled to exploit the hydrocarbon
accumulation defined by an appraisal well.
"Dry well" or "dry hole" is an exploratory, a development or appraisal well
found to be incapable of producing either oil or gas in sufficient
quantities to justify completion as an oil or gas well.
"DST" means a drillstem test, the results of which cannot be relied upon.
"Exploration well" means a well that is designed to initially test the validity
of a seismic interpretation and to confirm the presence of hydrocarbons.
"Graben" is a segment of the earth's crust that when observed from above is
generally longer than wide, and has been down thrown along faults relative
to rocks on either side.
"Gross acre" is an acre in which an interest is owned.
"Mbpd" means thousand barrels per day.
"MBbl" means thousand barrels.
"Mcf" means thousand cubic feet.
"Mcfe" means Mcf equivalent crude oil and condensate are converted to Mcfes
using the ratio of six Mcf of natural gas to one Bbl of crude oil or
condensate.
"MMBbl" means million barrels.
"MMcf" means million cubic feet.
"MMcfd" means million cubic feet per day.
"MMcfe" means MMcf equivalents.
"Net" oil and gas wells are obtained by multiplying "gross" oil and gas wells by
the Company's working interest in the applicable properties.
"Net acres" is the sum of the fractional working interests owned in gross acres.
"Net pay" means the thickness of a hydrocarbon bearing zone after being
corrected for the angle of the penetrating wellbore and the structural dip
of the zone itself.
"Present Value of Proved Reserves" means the present value (discounted at 10%)
of estimated future net cash flows (before income taxes) of proved oil and
natural gas reserves.
"SCF" means standard cubic feet.
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Pro Forma Financial Information of Rutherford-Moran Oil Corporation (a Development
Stage Company) F-2
Unaudited Pro Forma Consolidated Balance Sheet F-3
Notes to Unaudited Pro Forma Consolidated Balance Sheet F-4
Balance Sheet of Rutherford-Moran Oil Corporation
Independent Auditors' Report F-5
Balance Sheet as of April 25, 1996 F-6
Notes to Balance Sheet F-7
Combined Financial Statements of Rutherford-Moran Exploration Company and Thai Romo Limited (a
Development Stage Company)
Independent Auditors' Report F-9
Combined Balance Sheets as of December 31, 1994 and 1995 F-10
Combined Statements of Operations for Years Ended December 31, 1993, 1994, 1995 and Inception
to
December 31, 1995 F-11
Combined Statements of Stockholders'/Partners' Equity for Inception to December 31, 1992 and
the Years Ended
December 31, 1993, 1994 and 1995 F-12
Combined Statements of Cash Flows for the Years Ended December 31, 1993, 1994, 1995 and
Inception to
December 31, 1995 F-13
Notes to Combined Financial Statements F-14
Unaudited Condensed Combined Financial Statements of Rutherford-Moran Exploration Company and
Thai Romo Limited (a Development Stage Company)
Unaudited Condensed Combined Balance Sheets as of March 31, 1996 F-24
Unaudited Condensed Combined Statements of Operations for the three month periods ended March
31, 1995 and 1996 and Inception to March 31, 1996 F-25
Unaudited Condensed Combined Statements of Stockholders'/Partners' Equity for the year ended
December 31, 1995 and the three months ended March 31, 1996 F-26
Unaudited Condensed Combined Statements of Cash Flows for the three month periods ended March
31, 1995 and 1996 and Inception to March 31, 1996 F-27
Notes to Unaudited Condensed Combined Financial Statements F-28
</TABLE>
F-1
<PAGE>
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA FINANCIAL INFORMATION
MARCH 31, 1996
The following unaudited pro forma consolidated balance sheet as of March 31,
1996 gives effect to the consummation of an offering of 4,000,000 shares of
common stock (the Offering) of Rutherford-Moran Oil Corporation (RMOC) for
proceeds of $84,000,000, less costs of the Offering of $6,280,000, and the
exchange of the common stock of Rutherford-Moran Exploration Company (RMEC) and
partners' interest in Thai Romo Limited (Thai Romo) for stock in RMOC as
described on page 6 in the Registration Statement as if they had occurred on
March 31, 1996. The exercise of the U.S. Underwriters' over-allotment option is
not reflected in the pro forma consolidated financial information.
The unaudited pro forma consolidated balance sheet is provided for informational
purposes only. The unaudited pro forma consolidated balance sheet presented is
based upon the historical combined balance sheet of RMEC and Thai Romo, and
should be read in conjunction with their audited and unaudited combined
financial statements and the related notes thereto which are included elsewhere
in this prospectus.
The pro forma data are based on assumptions and include adjustments as explained
in the notes to the unaudited pro forma consolidated balance sheet and the
actual recording of the transactions could differ. The actual recording of the
transactions will be based on actual proceeds and actual Offering costs of the
common stock to be issued and historical tax bases which could differ from the
estimates used in the unaudited pro forma consolidated balance sheet. The
unaudited consolidated pro forma data are not necessarily indicative of the
financial results that would have occurred had the transactions been effective
as of the date referred to above and should not be viewed as indicative of
operations in future periods. In addition, future results may vary significantly
from the results reflected in such statement due to commencement of production,
price and cost changes, financial instruments, agreements and other factors.
F-2
<PAGE>
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
-----------------------------------------------------------
<S> <C> <C> <C> <C>
RUTHERFORD-MORAN
EXPLORATION
COMPANY AND
THAI ROMO RUTHERFORD-MORAN
RUTHERFORD-MORAN LIMITED OIL
OIL (HISTORICAL PRO FORMA CORPORATION
ASSETS CORPORATION COMBINED) ADJUSTMENTS PRO FORMA
-------------- -------------- ----------- --------------
Current assets:
Cash $50,000 $ 2,896,998 $ 14,646,184(1) $17,593,182
Deposits -- 34,985 -- 34,985
Value added tax refund due -- 1,089,720 -- 1,089,720
Advances to operator -- 2,708,873 -- 2,708,873
-------------- -------------- ----------- --------------
Total current assets 50,000 6,730,576 14,646,184 21,426,760
Oil and gas properties, at cost -- 65,748,012 -- 65,748,012
Office furniture and fixtures -- 82,789 -- 82,789
Accumulated depreciation -- (9,412) -- (9,412)
-------------- -------------- ----------- --------------
Total property, plant and equipment -- 65,821,389 -- 65,821,389
Deferred costs -- 735,338 (42,058 (2) 693,280
-------------- -------------- ----------- --------------
Total assets $50,000 $73,287,303 $ 14,604,126 $87,941,429
-------------- -------------- ----------- --------------
-------------- -------------- ----------- --------------
LIABILITIES AND STOCKHOLDERS'/PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities -- $ 1,130,969 -- $ 1,130,969
Loans from stockholders -- 8,490,331 $(8,490,331 (2) --
Notes payable to a bank -- 38,900,000 (38,900,000 (2) --
Due to operator -- 1,023,806 -- 1,023,806
Accrued interest on loans from stockholders -- 283,485 (283,485 (2) --
-------------- -------------- ----------- --------------
Total current liabilities -- 49,828,591 (47,673,816) 2,154,775
Deferred credits -- 693,280 -- 693,280
Deferred taxes -- -- 1,921,072(3) 1,921,072
Stockholders'/Partners' equity:
Partners' equity -- 11,640,267 (11,640,267 (4) --
Preferred stock -- Rutherford-Moran Oil
Corporation -- -- -- --
Common stock -- Rutherford-Moran Exploration
Company -- 1,250,000 (1,250,000 (7) --
Common stock -- Rutherford-Moran Oil
Corporation $ 10 -- 249,990(7) 250,000
Additional paid-in capital 49,990 11,519,684 (3,607,649 (3)
(12,400,000 (5)
(3,000,000 (6)
(11,519,684 (7)
101,879,961(7) 82,922,302
Deficit accumulated during the development
stage -- (1,644,519) (42,058 (2)
3,607,649(3)
(1,921,072 (3) --
-------------- -------------- ----------- --------------
Total stockholders'/partners' equity 50,000 22,765,432 60,356,870 83,172,302
-------------- -------------- ----------- --------------
Total liabilities and
stockholders'/partners' equity $50,000 $73,287,303 $ 14,604,126 $87,941,429
-------------- -------------- ----------- --------------
-------------- -------------- ----------- --------------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet.
F-3
<PAGE>
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(1) To record the net proceeds received by RMOC for the issuance of 4,000,000
shares of common stock as follows:
<TABLE>
<S> <C>
Gross proceeds from Offering $84,000,000
Less:
Redemption of approximately 56,000 shares of RMEC 12,400,000
Retirement of loans from stockholders of RMEC 8,490,331
Payment of accrued interest 283,485
Exercise of Call Option 3,000,000
Retirement of notes payable to bank by Thai Romo 38,900,000
Estimated costs of Offering 6,280,000
----------
$14,646,184
----------
----------
</TABLE>
(2) To record the retirement of $8,490,331 of loans from stockholders of RMEC,
payment of related accrued interest of $283,485, and retirement of
$38,900,000 of notes payable to bank and expense unamortized deferred loan
acquisition costs.
(3) To record the estimated deferred tax liability recognized by RMEC and
expensed to its operations and the reclassification of the deficit
accumulated during the development stage to additional paid-in capital as
required in instances when RMEC, an S Corporation, and Thai Romo, a tax
partnership, become subject to federal income taxes through RMOC. The
deferred tax liability relates primarily to the excess of book basis over
tax basis of oil and gas properties.
(4) To record the exchange of Red Oak Holdings, Inc. (Red Oak), Patrick R.
Rutherford and affiliates, John A. Moran and affiliates, Sidney F. Jones,
Jr., Susan R. Rutherford and affiliates and Michael McCoy and affiliates
partners' interest in Thai Romo for approximately 8,903,580 shares of Common
Stock of RMOC; including $9,263,925 of Partners' Equity that is considered
stockholder loans under Kingdom of Thailand corporate practices.
(5) To record the redemption by RMOC of approximately 56,000 shares of RMEC held
by Patrick R. Rutherford and John A. Moran.
(6) To record the exercise by RMEC of the call option on Red Oak's ownership
interest in 3% of Thai Romo (Call Option).
(7) To record the issuance of 4,000,000 shares of common stock of RMOC from the
Offering, net of costs of the Offering, the exchange of RMEC common stock
for approximately 12,051,082 shares of common stock of RMOC and the exchange
of Thai Romo partners' equity for common stock of RMOC, as follows:
<TABLE>
<S> <C>
Gross proceeds from Offering $84,000,000
Estimated costs of Offering (6,280,000)
Thai Romo Partners' Equity contributed 11,640,267
Common stock of RMEC contributed 1,250,000
Additional paid-in capital of RMEC contributed 11,519,684
Less:
Par value of 24,999,000 shares RMOC common stock (249,990)
-----------
$101,879,961
-----------
-----------
</TABLE>
F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Rutherford-Moran Oil Corporation:
We have audited the accompanying balance sheet of Rutherford-Moran Oil
Corporation as of April 25, 1996. This balance sheet is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Rutherford-Moran Oil Corporation as
of April 25, 1996 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
April 25, 1996
F-5
<PAGE>
RUTHERFORD-MORAN OIL CORPORATION
BALANCE SHEET
APRIL 25, 1996
<TABLE>
<S> <C>
ASSETS
Cash $ 50,000
---------
---------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized --
Common stock, $.01 par value, 40,000,000 shares authorized,
1,000 shares issued and outstanding $ 10
Additional paid-in capital 49,990
---------
Total Stockholders' Equity $ 50,000
---------
---------
</TABLE>
See accompanying notes to balance sheet.
F-6
<PAGE>
RUTHERFORD-MORAN OIL CORPORATION
NOTES TO BALANCE SHEET
APRIL 25, 1996
(1) ORGANIZATION AND BUSINESS PURPOSE
Rutherford-Moran Oil Corporation (RMOC) is a Delaware corporation formed on
March 28, 1996 for the purpose of acquiring the common stock of
Rutherford-Moran Exploration Company (RMEC) and partners' interests in Thai
Romo Limited (Thai Romo) (the Transactions). RMEC holds a 54.45% interest in
Thai Romo. RMEC is owned by Patrick R. Rutherford, John A. Moran, and Sidney
F. Jones, Jr. Thai Romo is one of the concessionaires under the Petroleum
Concession No. 1/2534/36 (the Concession) awarded by the Ministry of
Industry in the Kingdom of Thailand for the development and production of
oil and gas reserves in offshore Block B8/32 in the central portion of the
Gulf of Thailand. In addition to RMEC, the partners of Thai Romo are:
<TABLE>
<S> <C>
Patrick R. Rutherford and affiliates 17.39%
John A. Moran and affiliates 16.90%
Red Oak Holdings, Inc. and affiliates 8.00%
Sidney F. Jones, Jr. and affiliates 1.88%
Susan R. Rutherford and affiliates 0.69%
Michael McCoy and affiliates 0.69%
</TABLE>
In completing the Transactions, RMOC expects to (i) issue 20,999,000 shares
of common stock to the stockholders of RMEC and the partners of Thai Romo,
(ii) utilize $24.6 million to enable redemption of RMEC shares from, and
repayment of principal and interest on RMEC notes held by, Patrick R.
Rutherford and John A. Moran and (iii) initiate a public issuance of
4,000,000 shares of common stock (the Offering). To facilitate the
Transactions and the Offering RMOC has amended its certificate of
incorporation to increase its authorized common and preferred stocks to
40,000,000 and 10,000,000, respectively. The amended certificate of
incorporation will give the Board of Directors authority to determine the
powers, preferences, rights, qualifications, limitations, and restrictions
of the preferred stock.
(2) STOCKHOLDERS' EQUITY
RMOC has authorized 1,000 shares of common stock with a par value of $.01
per share. Holders of common stock are entitled to receive dividends, out of
funds legally available, when declared by the Board of Directors of RMOC.
All shares of common stock have equal voting rights on the basis of one vote
per share on all matters to be voted upon by stockholders. Cumulative voting
for the election of directors is not permitted. Shares of common stock have
no preemptive, conversion, sinking fund or redemption provisions and are not
liable for further call or assessment.
(3) KEY EMPLOYEE STOCK PLAN
RMOC has established an incentive stock option and restricted stock plan
(the 1996 Plan), pursuant to which options to purchase up to 500,000 shares
of common stock and awards of restricted shares of common stock will be
available for grants. The exercise price of an option granted pursuant to
the 1996 Plan may not be less than the fair market value of the common stock
at the date of the grant.
(4) NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
RMOC has established a non-employee director stock option plan (the 1996
Director Plan), pursuant to which options to purchase up to 50,000 shares of
common stock will be available for future grant to non-employee directors.
The exercise price of an option granted pursuant to the 1996 Director Plan
may not be less than the fair market value of the common stock at the date
of the grant.
F-7
<PAGE>
RUTHERFORD-MORAN OIL CORPORATION
NOTES TO BALANCE SHEET--(CONTINUED)
(5) 401(K) PLAN
RMOC intends to adopt a 401(k) Plan (the 401(k) Plan) under which
substantially all U.S. employees of RMOC and its subsidiaries who have
completed at least six months of service are eligible to participate. The
401(k) Plan will permit eligible employees to contribute up to 15 percent of
their annual compensation up to a maximum dollar amount established in
accordance with Section 401(k) and other provisions of the Internal Revenue
Code of 1986.
(6) SEVERANCE AGREEMENT
RMOC has a severance agreement with one of its officers that provides for
certain benefits in the event of dismissal without cause or in the event of
a change in control of RMOC.
(7) RELATED PARTY TRANSACTION
One of the directors to be elected to RMOC's Board of Directors is also a
director of a co-venturer in the Concession.
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Rutherford-Moran Exploration Company, and
The Partners
Thai Romo Limited
(A Development Stage Company):
We have audited the accompanying combined balance sheets of Rutherford-Moran
Exploration Company (formerly Rutherford/ Moran Oil Corporation) and Thai Romo
Limited, a development stage company, (the Company) as of December 31, 1994 and
1995, and the related combined statements of operations, stockholders'/partners'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1995 and the period from September 21, 1990 (date of inception) to
December 31, 1995. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of
Rutherford-Moran Exploration Company and Thai Romo Limited as of December 31,
1994 and 1995, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1995 and the period
from September 21, 1990 (date of inception) to December 31, 1995 in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
March 20, 1996
F-9
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
----------------------------------
<S> <C> <C> <C>
AS OF DECEMBER 31,
1994 1995
---------- ----------
PRO FORMA
1995
----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 423,653 $9,831,224 $9,831,224
Deposits 10,980 35,403 35,403
Value added tax refund receivable -- 630,834 630,834
Advances to operator 4,582 1,001,889 1,001,889
---------- ---------- ----------
Total current assets 439,215 11,499,350 11,499,350
Oil and gas properties, at cost (full cost method) 18,944,214 55,950,869 55,950,869
Office furniture and fixtures 46,166 58,285 58,285
Accumulated depreciation (2,308) (7,531) (7,531)
---------- ---------- ----------
Net property, plant and equipment 18,988,072 56,001,623 56,001,623
Deferred loan acquisition costs (net of accumulated
amortization of $231,318 at December 31, 1995) -- 168,231 168,231
---------- ---------- ----------
$19,427,287 $67,669,204 $67,669,204
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS'/PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 80,178 $ 369,400 $ 369,400
Loans from stockholders 1,497,506 8,490,331 8,490,331
Notes payable to a bank 1,400,000 34,384,989 34,384,989
Due to operator 860,551 976,694 976,694
Accrued interest on loans from stockholders 105,024 178,396 178,396
Accrued distributions to partners -- -- 15,400,000
---------- ---------- ----------
Total current liabilities 3,943,259 44,399,810 59,799,810
Stockholders'/Partners' equity:
Partners' equity 3,513,014 11,680,343 11,680,343
Common stock, 5,000,000 shares authorized; 1,250,000
shares issued and outstanding; $1 par value 1,250,000 1,250,000 1,250,000
Additional paid-in capital 11,519,684 11,519,684 (5,060,949)
Deficit accumulated during the development stage (798,670) (1,180,633) --
---------- ---------- ----------
Total stockholders'/partners' equity 15,484,028 23,269,394 7,869,394
Commitments and contingencies
---------- ---------- ----------
$19,427,287 $67,669,204 $67,669,204
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to combined financial statements.
F-10
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
--------------------------------------------
<S> <C> <C> <C> <C>
SEPTEMBER
21, 1990
(DATE OF
INCEPTION)
YEARS ENDED DECEMBER 31, TO DECEMBER
1993 1994 1995 31, 1995
--------- --------- --------- -----------
Interest income $ 24,540 $ 6,682 $ 4,717 $ 166,671
Expenses:
Interest expense 76,487 107,002 189,589 555,783
Depreciation expense -- 2,308 5,223 7,531
Salaries and wages 113,429 108,862 114,272 346,563
General and administrative 74,090 181,127 207,649 670,030
--------- --------- --------- -----------
Total expenses 264,006 399,299 516,733 1,579,907
--------- --------- --------- -----------
Net loss $(239,466) $(392,617) $(512,016) $(1,413,236)
--------- --------- --------- -----------
--------- --------- --------- -----------
Pro forma loss data (unaudited)
Net loss as reported $(512,016)
Pro forma adjustment for federal income tax benefit --
---------
Pro forma net loss $(512,016)
---------
---------
Pro forma net loss per common share $ (.02)
---------
---------
Pro forma weighted average of common shares outstanding 21,792,589
---------
---------
</TABLE>
See accompanying notes to combined financial statements.
F-11
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
COMBINED STATEMENTS OF STOCKHOLDERS'/PARTNERS' EQUITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DEFICIT
COMMON STOCK ACCUMULATED TOTAL
TOTAL ---------------------- ADDITIONAL DURING THE STOCKHOLDERS'/
PARTNERS' SHARES PAID-IN DEVELOPMENT PARTNERS'
EQUITY OUTSTANDING AMOUNT CAPITAL STAGE EQUITY
---------- ----------- --------- ---------- ---------- ----------
Balance at September 21, 1990
(date of inception) -- -- -- -- -- --
Capital contributions $2,736,221 1,250,000 $1,250,000 $2,422,869 -- $6,409,090
Capital distributions (2,008,000) -- -- -- -- (2,008,000)
Net loss (20,285) -- -- -- $ (248,852) (269,137)
---------- ----------- --------- ---------- ---------- ----------
Balance at December 31, 1992 707,936 1,250,000 1,250,000 2,422,869 (248,852) 4,131,953
Capital contributions 166,000 -- -- 4,719,000 -- 4,885,000
Capital distributions (197,200) -- -- -- -- (197,200)
Net loss (37,166) -- -- -- (202,300) (239,466)
---------- ----------- --------- ---------- ---------- ----------
Balance at December 31, 1993 639,570 1,250,000 1,250,000 7,141,869 (451,152) 8,580,287
Capital contributions 2,918,543 -- -- 4,377,815 -- 7,296,358
Net loss (45,099) -- -- -- (347,518) (392,617)
---------- ----------- --------- ---------- ---------- ----------
Balance at December 31, 1994 3,513,014 1,250,000 1,250,000 11,519,684 (798,670) 15,484,028
Capital contributions 8,297,382 -- -- -- -- 8,297,382
Net loss (130,053) -- -- -- (381,963) (512,016)
---------- ----------- --------- ---------- ---------- ----------
Balance at December 31, 1995 $11,680,343 1,250,000 $1,250,000 $11,519,684 $(1,180,633) $23,269,394
---------- ----------- --------- ---------- ---------- ----------
---------- ----------- --------- ---------- ---------- ----------
</TABLE>
See accompanying notes to combined financial statements.
F-12
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
------------------------------------------------
<S> <C> <C> <C> <C>
SEPTEMBER
21,
1990
(DATE OF
INCEPTION)
YEARS ENDED DECEMBER 31, TO DECEMBER
1993 1994 1995 31, 1995
---------- ---------- ----------- -----------
Cash flows from operating activities:
Net loss $ (239,466) $ (392,617) $ (512,016) $(1,413,236)
Adjustments to reconcile net loss to cash provided
by (used in) operating activities:
Depreciation and amortization -- 2,308 5,223 7,531
Increase in deposits (3,254) (174) (24,423) (35,403)
Increase in value added tax refund due -- -- (630,834) (630,834)
Increase in advances to operator -- (4,582) (997,307) (1,001,889)
Increase (decrease) in accounts payable and accrued
liabilities 35,430 (32,933) 362,594 547,796
Increase in due to operator 274,051 231,457 116,143 976,694
---------- ---------- ----------- -----------
Cash provided by (used in) operating activities 66,761 (196,541) (1,680,620) (1,549,341)
Cash flows from investing activities:
Investment in oil and gas properties (6,466,722) (8,158,813) (36,775,337) (55,719,551)
Other capital expenditures (2,664) (18,935) (12,119) (58,285)
---------- ---------- ----------- -----------
Cash used in investing activities (6,469,386) (8,177,748) (36,787,456) (55,777,836)
Cash flows from financing activities:
Capital contributions 4,885,000 7,296,358 7,897,833 26,488,281
Proceeds from loans from shareholders 224,908 -- 6,992,825 9,340,331
Payments on loans from shareholders (150,000) -- -- (850,000)
Capital distributions (197,200) -- -- (2,205,200)
Borrowings under bank notes -- 1,400,000 32,984,989 34,384,989
---------- ---------- ----------- -----------
Cash provided by financing activities 4,762,708 8,696,358 47,875,647 67,158,401
---------- ---------- ----------- -----------
Net increase (decrease) in cash (1,639,917) 322,069 9,407,571 9,831,224
Cash and cash equivalents, beginning of period 1,741,501 101,584 423,653 --
---------- ---------- ----------- -----------
Cash and cash equivalents, end of period $ 101,584 $ 423,653 $ 9,831,224 $ 9,831,224
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Supplemental disclosures of cash flow information --
cash paid during the period for interest $ 41,057 $ 220,113 $ 211,450 $ 472,620
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Supplemental disclosures of noncash investing and
financing activities:
Issuance of partnership interest in Thai Romo
Limited for loan acquisition costs -- -- $ 399,549 $ 399,549
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Capitalization of amortized loan acquisition
costs -- -- $ 231,318 $ 231,318
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
See accompanying notes to combined financial statements.
F-13
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF PRESENTATION
The stockholders of Rutherford/Moran Oil Corporation (Rutherford/Moran) and
the partners of Thai Romo Limited (Thai Romo) have announced their intention
to consummate the exchange of their interests for shares of common stock of
a newly formed entity, Rutherford-Moran Oil Corporation (RMOC), during the
second quarter of 1996. In April 1996, Rutherford/Moran changed its name to
Rutherford-Moran Exploration Company (RMEC). RMOC will serve as the parent
company of RMEC and Thai Romo.
RMOC intends to initiate a public issuance of 16% of its common stock (the
Offering) in conjunction with the consummation of the exchange of RMEC
common stock and Thai Romo interests for common stock of RMOC. It is
contemplated that in conjunction with the public issuance, RMEC will redeem
for $12.4 million, approximately 56,000 shares of its common stock from
Patrick R. Rutherford and John A. Moran, majority stockholders of RMEC (the
Redemption), exercise RMEC's call option (Call Option) on 3% of the
partners' interest of Thai Romo held by Red Oak Holdings, Inc. (Red Oak) and
repay all outstanding debt owed stockholders and banks.
The combined financial statements include the accounts of RMEC and Thai Romo
(combined as the Company). All material intercompany accounts and
transactions have been eliminated in the combination. The combined financial
statements are presented due to the commonality of the stockholders and
partners of RMEC and Thai Romo.
The Company's planned principal operations have commenced, but there has
been no revenue; therefore, the Company is considered a development stage
company.
ORGANIZATION
RMEC was formed on September 21, 1990 (date of inception), for the purpose
of holding an interest in an oil and gas concession in Thailand through Thai
Romo. RMEC paid all of the expenses of the concession on behalf of Thai Romo
through November 4, 1993.
Effective September 24, 1990, the stockholders of RMEC elected to have it
treated as an S Corporation under the Internal Revenue Code of 1986, as
amended. As such, RMEC does not incur federal income taxes at the corporate
level, and its taxable income or loss is passed through to its stockholders
based on their interests. In the event of an examination of RMEC's tax
return, the income tax liability of the stockholders could be changed if an
adjustment to taxable income or loss is sustained by the taxing authorities.
In June 1991, Thai Romo was organized as a foreign corporation under the
laws of the Kingdom of Thailand for the purpose of holding an interest in an
oil and gas concession (the Concession). In August 1991, Thai Romo, with two
other companies, was awarded a petroleum concession to explore for petroleum
from the Ministry of Industry of Thailand. In March 1995, Thai Romo with two
other companies was granted a designated production area within the
Concession from the Ministry of Industry (the Tantawan Field). The
Concession outside of the Tantawan Field is operated by Maersk Oil
(Thailand) Ltd. (Maersk Oil). The Tantawan Field is operated by Thaipo
Limited (Thaipo), a wholly-owned subsidiary of Pogo Producing Company. In
November 1993, Thai Romo amended its Articles of Association so that it will
be treated as a partnership for U.S. income tax purposes. As such, Thai Romo
is not subject to federal income taxes. Income and losses earned by Thai
Romo are passed through to the partners on the basis of their interest in
Thai Romo. In the event of an examination of Thai Romo's tax return, the
income tax liability of the partners could be changed if an adjustment to
taxable income or loss is sustained by the taxing authorities. The reported
amount of oil and gas properties exceeds the tax basis in Thailand by
$14,989,000 at December 31, 1995. Thai Romo has net operating losses of
$11,294,500 which can be used to offset taxes in Thailand.
F-14
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Under Kingdom of Thailand corporate practices, share capital in excess of
par is considered shareholder loans. For purposes of the financial
statements, capital in excess of par of approximately $9,944,000 is reported
as Partners' Equity.
In addition to RMEC's 60% interest, Patrick R. Rutherford, John A. Moran,
and Sidney F. Jones, Jr. (the Partners) held 20%, 18%, and 2% interests,
respectively, in Thai Romo at December 31, 1994.
On July 7, 1995, the Partners entered into a series of transactions to sell
or transfer interests in Thai Romo to other related parties and affiliated
companies. In a noncash transaction, RMEC transferred a 2% ownership
interest in Thai Romo to Red Oak, an affiliate of the Company's lender in
lieu of loan acquisition costs valued at $399,549. On December 22, 1995 Red
Oak acquired a 6% ownership interest in Thai Romo for $3,096,000. RMEC has
the right, on or before April 30, 1999, to exercise a Call Option on
approximately 3% of Thai Romo's ownership interest held by Red Oak. The Call
Option price is calculated based on a formula at the call date.
The ownership of Thai Romo at December 31, 1995 as a result of the above is
as follows:
<TABLE>
<S> <C> <C>
RMEC 54.45%
Patrick R. Rutherford and affiliates 17.39
John A. Moran and affiliates 16.90
Red Oak Holdings, Inc. 8.00
Sidney F. Jones, Jr. and affiliates 1.88
Susan R. Rutherford and affiliates 0.69
Michael McCoy and affiliates 0.69
----------
100.00%
----------
----------
</TABLE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
As required by the rules and regulations of the Securities and Exchange
Commission (SEC), the unaudited pro forma combined balance sheet reflects
the accrual of the payment for the Redemption and Call Option. The unaudited
pro forma presentation is required in instances when distributions to
owners, whether declared or not, are to be paid out of proceeds of an
offering rather than from the current year's earnings. The unaudited pro
forma combined balance sheet also reflects the reclassification of the
deficit accumulated during the development stage to additional paid-in
capital as required by the SEC in instances when an S Corporation or tax
partnership becomes subject to federal income taxes.
Pro forma net loss reflects federal income taxes that would have been
recorded had the Company been subject to such taxes. Due to net operating
losses for financial statement purposes, and the anticipation that utilizing
net operating loss carryforwards in future periods will not be realized due
to the effective rate of foreign taxes, the Company has not recognized a tax
benefit for pro forma purposes. Such amounts have been included in the
statement of operations pursuant to the rules and regulations of the SEC for
instances when an S Corporation or tax partnership becomes subject to
federal income taxes. Pro forma net loss per common share is presented
giving effect to the number of shares, 792,589, whose proceeds would be
necessary to complete the Redemption and exercise the Call Option based on
the anticipated offering price of $21 per common share, and after conversion
of stockholders' equity of RMEC and partners' equity of Thai Romo for
21,000,000 common shares for RMOC.
The unaudited pro forma balance sheet reflects the Redemption and Call
Option. It is not a complete pro forma presentation of RMOC's intention to
initiate a public issuance of 16% of its common stock.
CASH AND CASH EQUIVALENTS
Cash includes all currency and any liquid investments with an original
maturity of three months or less.
F-15
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
OIL AND GAS PROPERTIES
Thai Romo utilizes the full cost method to account for its investment in oil
and gas properties. Under this method of accounting, all costs of
acquisition, exploration and development of oil and gas reserves (including
such costs as leasehold acquisition costs, geological expenditures, dry hole
costs and tangible and intangible development costs and directly associated
internal costs) are capitalized into a "full cost pool" as incurred on a
country-by-country basis. Oil and gas properties, the estimated future
expenditures to develop proved reserves, and estimated future abandonment,
environmental and dismantlement costs are depleted and charged to operations
using the unit-of-production method based on the ratio of current production
to proved oil and gas reserves as estimated by engineering consultants. Thai
Romo's concession, a major development project, has had no production of the
reserves, and accordingly, no depreciation, depletion, or amortization of
oil and gas properties has been provided since the inception of Thai Romo.
Production is expected in 1997 at which time depletion will begin. Costs
directly associated with the acquisition and evaluation of unproved
properties are excluded from the amortization computation until it is
determined whether or not proved reserves can be assigned to the properties
or whether impairment has occurred. No costs were directly associated with
unproved properties as of or during 1994 and 1995. Dispositions of oil and
gas properties are recorded as adjustments to capitalized costs, with no
gain or loss recognized unless such adjustments would significantly alter
the relationship between capitalized costs and proved reserves of oil and
gas. To the extent that capitalized costs of oil and gas properties, net of
accumulated depreciation, depletion and amortization, exceed the discounted
future net revenues of proved oil and gas reserves on a country-by-country
basis, such excess capitalized costs would be charged to operations. No such
write-down in book value was required for the periods ending December 31,
1993, 1994 and 1995 or the period from September 21, 1990 (date of
inception) to December 31, 1995.
OFFICE FURNITURE AND FIXTURES
Office furniture and fixtures are stated at cost. Depreciation is calculated
using the straight-line method of depreciation over a useful life of 10
years.
REVENUE RECOGNITION
The Company anticipates entering into an agreement to sell crude oil
production to the Petroleum Authority of Thailand (PTT). Accordingly,
revenue will be recognized and inventory will be recorded at the contract
price upon production.
Natural gas revenues are recorded using the entitlement method, whereby any
production volumes received in excess of the Company's ownership percentage
in the property is recorded as a liability. If less than the Company's
entitlement is received, the underproduction is recorded as a receivable.
To date there has been no oil or gas production from the Concession.
GEOGRAPHICAL CONCENTRATION
The Concession is located in the Gulf of Thailand. Consequently,
substantially all of Thai Romo's assets are subject to regulation by the
government of Thailand. Political changes, such as increases in tax rates or
nationalization of strategic or other assets by the government of Thailand,
could adversely affect Thai Romo. It is reasonably possible that Thai Romo's
oil and gas producing operations could be delayed or disrupted.
USE OF ESTIMATES
Management of the Company have made a number of estimates and assumptions
relating to the reporting of assets and liabilities, the reporting of
quantities of proved oil and gas reserves, and the disclosure of contingent
assets and liabilities to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ
from those estimates.
F-16
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
VALUE ADDED TAX REFUND RECEIVABLE
Expenditures on concession joint operations are assessed a value added tax
by the government of Thailand. Because the concession operators have
obtained an exemption from value added taxes, all value added taxes are
refundable. Accordingly, a refund due is recorded when value added taxes are
paid by the operator.
(2) THE CONCESSION
Thai Romo is one of the concessionaires under the Petroleum Concession No.
1/2534/36 (the Concession) awarded by the Ministry of Industry of the
Kingdom of Thailand for the development and production of oil and gas
reserves in offshore Block B8/32 in the central portion of the Gulf of
Thailand. The Concession was awarded on August 1, 1991 to Thai Romo, Thaipo,
and Maersk Oil, a wholly-owned subsidiary of Maersk Oil and Gas. Subsequent
to the award, the Sophonpanich Co., Limited (Sophonpanich) elected to
participate in the Concession as a co-venturer. On March 3, 1995, Maersk Oil
sold its interest in the Tantawan Field of the Concession to Thai Romo,
Thaipo and Sophonpanich (the Tantawan Concessionaires). Following the
transfer of interest, Thaipo became operator of the Tantawan Field. At
December 31, 1995, Thai Romo held a 46.34% interest in the Tantawan Field
and a 31 2/3% interest in the remainder of the Concession.
The production approval in respect of the Tantawan Field, covering
approximately 68,000 acres, was granted to Thaipo as Operator on behalf of
the Concessionaires by the Petroleum Committee and the Ministry of Industry
on August 23, 1995. Under the Concession, the production period runs for 20
years from the end of the exploration period which may be renewed subject to
agreement of the parties at the time of extension to the terms of such
extension. In accordance with the Thai Petroleum Act, the Concessionaires
relinquished 50% of the exploration acreage of the block on August 1, 1995.
The Concessionaires will be required to relinquish the remaining exploration
acreage on August 1, 1997, unless extended. Relinquishment will exclude
areas for which production approvals have been granted.
The Concessionaires signed a Joint Operating Agreement (JOA) effective as of
August 1, 1991 which defines the parties' respective interests, rights and
obligations in respect of any exploration, development, maintenance and
operation of the Concession.
Pursuant to the terms of the Concession the Concessionaires are required to
make certain payments to the Ministry of Finance (Production Bonuses)
including the following: (i) $2 million upon the first production of
petroleum from the Concession; (ii) $3 million when petroleum production
from Block B8/32 reaches 50,000 barrels of crude oil equivalent per day as
an average of one calendar month; (iii) $7.5 million when the petroleum
production from the Concession reaches an average of 100,000 barrels of
crude oil equivalent per day in any calendar month.
The Concessionaires are required to give first priority to Thailand's
government to purchase the oil and natural gas produced by the
Concessionaires. The Concessionaires are also required to give preference to
the use of local contractors, materials and equipment available in Thailand
with regard to transport vehicles and other matters related to the petroleum
operation and must also employ and train Thai nationals at all operational
levels.
A gas sales agreement (GSA) with PTT was signed on November 7, 1995. Under
the GSA, which is a take or pay agreement, contracted deliveries of gas to
PTT are required to commence at the earlier of the completion of a 72-hour
production test or March 31, 1997. There is a run-in period from January 1,
1997 until March 31, 1997 during which time the parties to the GSA must use
best endeavors to deliver and take sales gas. In the event that the required
reserves on production rates are not delivered, then Thai Romo and the
Tantawan partners will be obliged to contribute to PTT's capital costs
incurred in the construction of a 24 inch 33-mile gas pipeline. The Tantawan
Concessionaires' liability for failure to deliver the minimum contracted
daily rate is limited to PTT's right to take from subsequent deliveries an
amount equal to the quantity of gas not delivered at 75% of the contracted
price.
F-17
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The gas price is based on a formula which is designed to provide linkage to
movements in oil prices and inflation. Payments by PTT will be in Baht,
however the gas price formula protects the seller from movements in Baht/US
dollar exchange rates. The base price was estimated to be equivalent to
$2.00/Mcf at March 1, 1996.
The Company expects that oil and condensate from Tantawan will be purchased
by PTT, which has the right of first refusal on any hydrocarbon liquids
produced domestically. The terms and conditions of a sales agreement are
under negotiation.
The following table summarizes the monthly royalties required to be paid to
the Ministry of Industry based on monthly barrels of oil equivalent produced
on the Concession (natural gas is converted to an equivalent under the
royalty using a ratio of 10 million btu of natural gas to one barrel of
oil):
<TABLE>
<CAPTION>
PERCENT OF VALUE
OF
PRODUCT SOLD OR
MONTHLY VOLUME OF PRODUCT (IN BARRELS) DISPOSED
- ------------------------------------------------------------------------------------ -----------------
<S> <C>
Not exceeding 60,000 5.00%
Portion exceeding 60,000 but not exceeding 150,000 6.25
Portion exceeding 150,000 but not exceeding 300,000 10.00
Portion exceeding 300,000 but not exceeding 600,000 12.50
Portion exceeding 600,000 15.00
</TABLE>
The Concessionaires are required to pay a Special Remuneratory Benefit (the
Benefit) under the Thai Petroleum Act. The Benefit is calculated annually on
a block-by-block basis. No Benefit is payable if the Block has no Annual
Petroleum Profit (as defined to be hydrocarbon revenues net of, among other
things, royalties, Production Bonuses, capital expenses and operating
expenses). The Benefit, expressed as a percentage of Annual Petroleum
Profit, varies from zero to 75%, depending on the level of annual revenue
per meters drilled in the exploration block.
The Concession terminates (i) upon the termination of the petroleum
production period; (ii) when the effective concession area ceases to exist
by virtue of the provisions of the Petroleum Act B.E.2514, statutory
percentage relinquishment or through voluntary relinquishment made by the
Concessionaires; (iii) upon revocation of the Concession; or (iv) upon
termination of the Concessionaires' status as a juristic person. Under the
Petroleum Act the Concession may be revoked by the Ministry of Industry if
the Concessionaires (i) fail to furnish the Production Bonuses or pay the
royalties, the Benefits or income taxes; (ii) become bankrupt; or (iii) fail
to comply with good petroleum industry practice or to conduct petroleum
operations with due diligence or violate certain other provisions of the
Concession (including giving special priority to Thai nationals) or of the
Petroleum Act (such as restrictions on transfers). Also, all production,
storage and transportation equipment and facilities must be turned over to
the Thai government at the end of the production term.
F-18
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(3) LOANS FROM STOCKHOLDERS
RMEC has loans from stockholders at December 31, 1994 and 1995 as follows:
<TABLE>
<CAPTION>
-------------------------------------------
<S> <C> <C> <C> <C>
PAYMENT INTEREST
STOCKHOLDER TERMS RATE 1994 1995
- -------------------------------------------- ---------- --------- --------- ---------
Patrick R. Rutherford On demand Prime $ 748,753 $4,254,226
John A. Moran On demand Prime 748,753 4,035,768
Sidney F. Jones, Jr. On demand Prime -- 200,337
--------- ---------
$1,497,506 $8,490,331
--------- ---------
--------- ---------
</TABLE>
Interest of $76,487, $107,002 and $189,589 was expensed by RMEC under the
above loans in 1993, 1994, and 1995, respectively, and $555,783 was expensed
for the period from September 21, 1990 (date of inception) to December 31,
1995.
(4) NOTES PAYABLE
In November 1994, Thai Romo signed a Loan Facility Agreement with a
commercial lender under which Thai Romo may borrow up to $5,000,000 at any
time during the period from November 1994 to the final maturity date in
April 1995. Pursuant to the provisions of a subordination and sponsor
support agreement, all the Partners, except for Mr. Jones, have agreed to be
liable for the Loan Facility in the event Thai Romo should dissolve under
the provisions of Article 43 of Thai Romo's Articles of Association. The
Loan Facility Agreement is secured by the stock of Thai Romo and certain of
the loans from stockholders. In December 1994, Thai Romo borrowed $1,400,000
under this Loan Facility Agreement. The annual interest rate on amounts
borrowed under the Loan Facility Agreement is the LIBOR rate plus 4%. During
July 1995, December 1995, and April 1996 Thai Romo amended the Loan Facility
Agreement to allow it to borrow up to $44,000,000 with a maturity date of
May 31, 1996 and to release the partners from liability under the
subordination and sponsor support agreement. At December 31, 1995 the amount
outstanding under the Loan Facility Agreement was $21,000,000.
In September 1995, RMEC obtained a Line of Credit from the same commercial
lender to borrow up to $5,000,000. This amount was increased in November
1995 to $15,000,000 with a maturity date of March 31, 1996. Borrowings under
such agreement are guaranteed by John A. Moran and Patrick R. Rutherford.
The annual interest rate on amounts borrowed under the Line of Credit is, at
RMEC's option:
<TABLE>
<CAPTION>
OUTSTANDING BALANCE ANNUAL INTEREST RATE
- --------------------------------------------------------------------- --------------------------------
<S> <C>
Up to $5 million Prime + 1/2% or LIBOR + 2 1/4%
Over $5 million and up to $10 million Prime + 3/4% or LIBOR + 2 1/2%
Over $10 million and up to $15 million Prime + 1% or LIBOR + 2 3/4%
</TABLE>
At December 31, 1995, the amount outstanding under this Line of Credit was
$13,384,989.
The Company is currently negotiating a credit facility with a commercial
lender for the purpose of financing current and future development costs,
pre-operational expenditures and associated financing costs in relation to
its interest in Block B8/32.
F-19
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(5) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents and value added tax refund
receivable approximates fair value because of the short maturity of these
instruments. The carrying amount of advances due to and due from operator
and accounts payable and accrued expenses approximates fair value because
they are generally paid or earned within sixty days. The carrying amount of
note payable to a bank and loans from stockholders approximates fair value
because they bear interest at variable market interest rates.
(6) LEASE COMMITMENTS
RMEC is subject to an office lease which expires in August 1999. The
commitment under this lease is as follows:
<TABLE>
<CAPTION>
YEAR
- ----------------------------------------------------------------------------------------------
<S> <C>
1996 $ 78,162
1997 78,162
1998 78,162
1999 52,108
Thereafter --
----------
$ 286,594
----------
----------
</TABLE>
Rental expense paid during 1993, 1994, and 1995 and the period from
September 21, 1990 (date of inception) to December 31, 1995 was $15,998,
$76,611, $67,186 and $187,826, respectively.
(7) RELATED PARTY TRANSACTIONS
Historically, Rutherford Oil Corporation (Rutherford Oil), which is
controlled by Patrick R. Rutherford, obtained certain oil and gas related
and medical insurance on behalf of the Company and performed certain payroll
related services for the Company. The Company has reimbursed Rutherford Oil
for its out of pocket expenses relating to such insurance and services,
which aggregated $460,746, $366,304, $730,536 and $1,589,853 during the
years ended December 31, 1993, 1994 and 1995 and the period from September
21, 1990 (date of inception) to December 31, 1995. Following the Offering,
it is anticipated that Rutherford Oil will no longer obtain such insurance
or perform such services on behalf of the Company.
(8) SUPPLEMENTAL OIL AND GAS INFORMATION - UNAUDITED
At December 31, 1995 the Concession accounted for 100% of the Company's
future net cash flows from proved reserves.
Included herein is information with respect to oil and gas acquisition,
exploration, development and production activities, which is based on
estimates of year-end oil and gas reserve quantities and estimates of future
development costs and production schedules. The prices used in the reserve
estimates are prices the Company estimated it would have received at the
respective date had the Tantawan and Benchamas fields had been producing at
such time. All of the Company's reserves are located in the Gulf of
Thailand. Reserve quantities and future production are based primarily upon
reserve reports prepared by the independent petroleum engineering firm of
Ryder Scott Company. These estimates are inherently imprecise and subject to
substantial revision.
Estimates of future net cash flows from proved reserves of oil and gas were
made in accordance with Statement of Financial Accounting Standards No. 69,
DISCLOSURES ABOUT OIL AND GAS PRODUCING ACTIVITIES. The estimates are based
on
F-20
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
prices the Company estimated it would have received at the respective date
had the Tantawan and Benchamas fields been producing at such time. Estimated
future cash inflows are reduced by estimated future development and
production costs based on year-end cost levels, assuming continuation of
existing economic conditions, and by estimated future revenue tax expense.
Tax expense is calculated by applying the existing U.S. and Thailand
statutory tax rates, including any known future changes. The results of
these disclosures should not be construed to represent the fair market value
of the Company's oil and gas properties. A market value determination would
include many additional factors including: (i) anticipated future increases
or decreases in oil and gas prices and production and development costs;
(ii) an allowance for return on investment; (iii) the value of additional
reserves not considered proved at the present, which may be recovered as a
result of further exploration and development activities; and (iv) other
business risks.
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
producer. Reservoir engineering is a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in an exact
way, and the accuracy of any reserve estimate is a function of the quality
of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date
of an estimate may justify revision of the estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
In computing the present value of the estimated future net cash flows, a
discount factor of 10% was used pursuant to SEC regulations to reflect the
timing of those net cash flows. Present value, regardless of the discount
rate used, is materially affected by assumptions about timing of future
production, which may prove to have been inaccurate. The following reserve
value data represent estimates only, which are subject to uncertainty given
the current energy markets.
CAPITALIZED COSTS OF OIL AND GAS PRODUCING ACTIVITIES
The following table sets forth the aggregate amounts of capitalized costs
relating to the Company's oil and gas producing activities and the aggregate
amount of related accumulated depletion, depreciation and amortization as of
<TABLE>
<CAPTION>
the dates indicated.
----------------------
<S> <C> <C>
DECEMBER 31,
1994 1995
---------- ----------
Productive and nonproductive properties being amortized $18,944,214 $55,950,869
Less accumulated depletion, depreciation and amortization -- --
---------- ----------
Net capitalized costs $18,944,214 $55,950,869
---------- ----------
---------- ----------
</TABLE>
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
The following table reflects the costs incurred in oil and gas property
acquisition, exploration and development activities during the periods
<TABLE>
<CAPTION>
indicated.
---------------------------------------------
<S> <C> <C> <C> <C>
SEPTEMBER
21, 1990
(DATE OF
INCEPTION)
YEARS ENDED DECEMBER 31, TO DECEMBER
1993 1994 1995 31, 1995
--------- --------- ---------- -----------
Property acquisition costs -- proved
properties -- -- $4,224,130 $4,224,130
Exploration costs $6,466,722 $8,158,813 26,600,412 45,544,626
Development cost -- -- 6,182,113 6,182,113
--------- --------- ---------- -----------
$6,466,722 $8,158,813 $37,006,655 5$5,950,869
--------- --------- ---------- -----------
--------- --------- ---------- -----------
</TABLE>
F-21
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the Company's interest in estimated total
proved oil and gas reserves for the years ended December 31, 1993, 1994 and
<TABLE>
<CAPTION>
1995.
--------------------
<S> <C> <C>
OIL GAS
(BBLS) (MMCF)
--------- ---------
QUANTITY OF OIL AND GAS RESERVES
- ------------------------------------------------------------------
Total proved reserves at December 31, 1992 2,576,907 10,668
New discoveries and extensions 2,847,906 22,806
--------- ---------
Total proved reserves at December 31, 1993 5,424,813 33,474
New discoveries and extensions 2,249,559 23,265
--------- ---------
Total proved reserves at December 31, 1994 7,674,372 56,739
New discoveries and extensions 7,634,009 43,376
Revisions of previous estimates 133,636 5,208
Purchases of reserves 3,554,975 26,284
--------- ---------
Total proved reserves at December 31, 1995 18,996,992 131,607
--------- ---------
--------- ---------
Proved developed reserves:
December 31, 1993 -- --
December 31, 1994 -- --
December 31, 1995 -- --
--------- ---------
--------- ---------
</TABLE>
Proved reserves are estimated quantities of natural gas, crude oil, and
condensate which geological and engineering data demonstrate, with
reasonable certainty, to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Proved
developed reserves are proved reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The following table reflects the Standardized Measure of Discounted Future
Net Cash Flows relating to the Company's interest in proved oil and gas
reserves as of December 31, 1993, 1994, and 1995:
<TABLE>
<CAPTION>
--------------------------------------
<S> <C> <C> <C>
DECEMBER 31,
<CAPTION>
1993 1994 1995
----------- ----------- ------------
<S> <C> <C> <C>
Future cash inflows $150,859,343 $265,802,176 $621,741,926
Future development costs (53,522,300) (94,154,910) (127,197,802)
Future production costs (52,807,823) (60,306,527) (207,352,390)
----------- ----------- ------------
Future net cash inflows before income taxes 44,529,220 111,340,739 287,191,734
Future income taxes (18,217,577) (48,947,252) (137,203,436)
----------- ----------- ------------
Future net cash flows 26,311,643 62,393,487 149,988,298
10% discount (13,134,116) (28,429,724) (74,669,364)
----------- ----------- ------------
Standardized measure of discounted future net
cash inflows $13,177,527 $33,963,763 $ 75,318,934
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-22
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Principal changes in the "Standardized Measure of Discounted Future Net Cash
Flows" attributable to the Company's proved oil and gas reserves for the
periods indicated are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------
<S> <C> <C> <C> <C>
SEPTEMBER
21, 1990
(DATE OF
INCEPTION)
YEARS ENDED DECEMBER 31, TO DECEMBER
1993 1994 1995 31 1995
---------- ----------- ----------- -----------
New discoveries and extensions $10,379,842 $17,235,012 $52,371,715 $94,194,865
Revisions of quantity estimates -- -- 6,027,461 6,027,461
Purchases of reserves in place -- -- 27,181,548 27,181,548
Net changes in sales and transfer
prices, net of production costs (6,640,282) 8,521,499 (2,712,479) (831,262)
Accretion of discount 1,420,830 1,716,648 5,211,215 8,348,693
Net change in income taxes 1,621,406 (14,159,434) (38,163,241) (56,311,625)
Change in production rates (timing)
and other (2,202,209) 7,472,511 (8,561,048) (3,290,746)
---------- ----------- ----------- -----------
Net change $ 4,579,587 $20,786,236 $41,355,171 $ 75,318,934
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
F-23
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
----------------------------------
<S> <C> <C> <C>
DECEMBER
31,
1995
----------
MARCH 31, MARCH 31,
1996 1996
---------- PRO FORMA
----------
(UNAUDITED)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $9,831,224 $2,896,998 $2,896,998
Deposits 35,403 34,985 34,985
Value added tax refund receivable 630,834 1,089,720 1,089,720
Advances to operator 1,001,889 2,708,873 2,708,873
---------- ---------- ----------
Total current assets 11,499,350 6,730,576 6,730,576
Oil and gas properties, at cost (full cost method) 55,950,869 65,748,012 65,748,012
Office furniture and fixtures 58,285 82,789 82,789
Accumulated depreciation (7,531) (9,412) (9,412)
---------- ---------- ----------
Total property, plant and equipment 56,001,623 65,821,389 65,821,389
Deferred costs (net of accumulated amortization of $231,318 and
$357,491 at December 31, 1995 and March 31, 1996, respectively 168,231 735,338 735,338
---------- ---------- ----------
$67,669,204 $73,287,303 $73,287,303
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS'/PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 369,400 $1,130,969 $1,130,969
Loans from stockholders 8,490,331 8,490,331 8,490,331
Notes payable to a bank 34,384,989 38,900,000 38,900,000
Due to operator 976,694 1,023,806 1,023,806
Accrued interest on loans from stockholders 178,396 283,485 283,485
Accrued distributions to partners -- -- 15,400,000
---------- ---------- ----------
Total current liabilities 44,399,810 49,828,591 65,228,591
Deferred credits -- 693,280 693,280
Stockholders'/Partners' equity:
Partners' equity 11,680,343 11,640,267 11,640,267
Common stock, 5,000,000 shares authorized; 1,250,000 shares
issued and outstanding; $1 par value 1,250,000 1,250,000 1,250,000
Additional paid-in capital 11,519,684 11,519,684 (5,524,835)
Deficit accumulated during the development stage (1,180,633) (1,644,519) --
---------- ---------- ----------
Total stockholders'/partners' equity 23,269,394 22,765,432 7,365,432
Commitments and contingencies
---------- ---------- ----------
$67,669,204 $73,287,303 $73,287,303
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
F-24
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
---------------------------------
<S> <C> <C> <C>
SEPTEMBER
21,
1990 (DATE
OF
INCEPTION)
THREE MONTHS ENDED TO
MARCH 31, MARCH 31,
1995 1996 1996
--------- --------- -----------
Interest income -- -- $ 166,671
Expenses:
Interest expense $ 36,980 $ 414,098 969,881
Depreciation expense -- 1,881 9,412
Salaries and wages 21,074 34,801 381,364
General and administrative 48,352 53,182 723,212
--------- --------- -----------
Total expenses 106,406 503,962 2,083,869
--------- --------- -----------
Net loss $(106,406) $(503,962) $(1,917,198)
--------- --------- -----------
--------- --------- -----------
Pro forma loss data (unaudited)
Net loss as reported $(503,962)
Pro forma adjustment for federal income tax benefit --
---------
Pro forma net loss $(503,962)
---------
---------
Pro forma net loss per common share $ (.02)
---------
---------
Pro forma weighted average of common shares outstanding 21,792,589
---------
---------
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
F-25
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED COMBINED STATEMENTS OF STOCKHOLDERS'/PARTNERS' EQUITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DEFICIT
COMMON STOCK ACCUMULATED TOTAL
TOTAL ---------------------- ADDITIONAL DURING THE STOCKHOLDERS'/
PARTNERS' SHARES PAID-IN DEVELOPMENT PARTNERS'
EQUITY OUTSTANDING AMOUNT CAPITAL STAGE EQUITY
---------- ----------- --------- ---------- ---------- ----------
Balance at December 31, 1994 $3,513,014 1,250,000 $1,250,000 $11,519,684 $ (798,670) $15,484,028
Capital contributions 8,297,382 -- -- -- -- 8,297,382
Net loss (130,053) -- -- -- (381,963) (512,016)
---------- ----------- --------- ---------- ---------- ----------
Balance at December 31, 1995 $11,680,343 1,250,000 $1,250,000 $11,519,684 $(1,180,633) $23,269,394
---------- ----------- --------- ---------- ---------- ----------
---------- ----------- --------- ---------- ---------- ----------
Net loss (unaudited) (40,076) -- -- -- (463,886) (503,962)
---------- ----------- --------- ---------- ---------- ----------
Balance at March 31, 1996
(unaudited) $11,640,267 1,250,000 $1,250,000 $11,519,684 $(1,644,519) $22,765,432
---------- ----------- --------- ---------- ---------- ----------
---------- ----------- --------- ---------- ---------- ----------
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
F-26
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-----------------------------------
<S> <C> <C> <C>
SEPTEMBER
21,
1990 (DATE
OF
INCEPTION)
THREE MONTHS TO
ENDED MARCH 31, MARCH 31,
1995 1996 1996
---------- ---------- -----------
Cash flows from operating activities:
Net loss $ (106,406) $ (503,962) $(1,917,198)
Adjustments to reconcile net loss to cash used in operating
activities:
Depreciation and amortization -- 1,881 9,412
(Decrease) increase in deposits (2,495) 418 (34,985)
Increase in value added tax refund receivable (149,641) (458,886) 1,089,720)
Increases in advances to operator (275,309) (1,706,984) (2,708,873)
Increase in accounts payable and accrued liabilities 221,826 866,658 1,414,454
Increase (decrease) in due to operator (860,551) 47,112 1,023,806
---------- ---------- -----------
Cash used in operating activities (1,172,576) (1,753,763) (3,303,104)
Cash flows from investing activities:
Investment in oil and gas properties (1,433,081) (9,670,970) (65,390,521)
Other capital expenditures -- (24,504) (82,789)
---------- ---------- -----------
Cash used in investing activities (1,433,081) (9,695,474) (65,473,310)
Cash flows from financing activities:
Capital contributions 130,720 -- 26,488,281
Proceeds from loans from shareholders 196,080 -- 9,340,331
Payments on loans from shareholders -- -- (850,000)
Capital contributions -- -- (2,205,200)
Borrowings under bank notes 2,100,000 13,550,000 47,934,989
Repayments of bank notes -- (9,034,989) (9,034,989)
---------- ---------- -----------
Cash provided by financing activities 2,426,800 4,515,011 71,673,412
---------- ---------- -----------
Net increase (decrease) in cash (178,857) (6,934,226) 2,896,998
Cash and cash equivalents, beginning of period 423,653 9,831,224 --
---------- ---------- -----------
Cash and cash equivalents, end of period $ 244,796 $2,896,998 $ 2,896,998
---------- ---------- -----------
---------- ---------- -----------
Supplemental disclosures of cash flow information -- cash paid
during the period for interest -- $ 284,177 $ 756,797
---------- ---------- -----------
---------- ---------- -----------
Supplemental disclosures of noncash investing and financing
activities:
Issuance of partnership interest in Thai Romo Limited for loan
acquisition costs -- -- $ 399,549
---------- ---------- -----------
---------- ---------- -----------
Capitalization of amortized loan acquisition costs -- $ 126,173 $ 357,491
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
F-27
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited combined financial statements include, in the
opinion of management, all adjustments of a normal recurring nature
necessary to present fairly the combined financial position of
Rutherford-Moran Exploration Company and Thai Romo Limited at March 31, 1996
and their results of operations and cash flows for the three months ended
March 31, 1995 and 1996. The financial statements should be read in
conjunction with the historical financial statements and notes to the
combined historical financial statements as of and for the year and period
ended December 31, 1995.
(2) PRINCIPLES OF PRESENTATION
The stockholders of Rutherford/Moran Oil Corporation (Rutherford/Moran) and
the partners of Thai Romo Limited (Thai Romo) have announced their intention
to consummate the exchange of their interests for shares of common stock of
a newly formed entity, Rutherford-Moran Oil Corporation (RMOC), during the
second quarter of 1996. In April 1996, Rutherford/Moran changed its name to
Rutherford-Moran Exploration Company (RMEC). RMOC will serve as the parent
company of RMEC and Thai Romo.
RMOC intends to initiate a public issuance of 16% of its common stock (the
Offering) in conjunction with the consummation of the exchange of RMEC
common stock and Thai Romo interests for common stock of RMOC. It is
contemplated that in conjunction with the public issuance, RMEC will redeem
for $12.4 million, approximately 56,000 shares of its common stock from
Patrick R. Rutherford and John A. Moran, majority stockholders of RMEC (the
Redemption), exercise RMEC's call option (Call Option) on 3% of the
partners' interest of Thai Romo held by Red Oak Holdings, Inc. (Red Oak) and
repay all outstanding debt owed stockholders and banks.
The combined financial statements include the accounts of RMEC and Thai Romo
(combined as the Company). All material intercompany accounts and
transactions have been eliminated in the combination. The combined financial
statements are presented due to the commonality of the stockholders and
partners of RMEC and Thai Romo.
The Company's planned principal operations have commenced, but there has
been no revenue; therefore, the Company is considered a development stage
company.
(3) ORGANIZATION
RMEC was formed on September 21, 1990 (date of inception) for the purpose of
holding an interest in an oil and gas concession (the Concession) in
Thailand through Thai Romo Limited (Thai Romo). RMEC paid all of the
expenses of the concession on behalf of Thai Romo through November 4, 1993.
Effective September 24, 1990, the stockholders of RMEC elected to have it
treated as an S Corporation under the Internal Revenue Code of 1986, as
amended. As such, RMEC does not incur federal income taxes at the corporate
level, and its taxable income or loss is passed through to its stockholders
based on their interests. In the event of an examination of RMEC's tax
return, the income tax liability of the stockholders could be changed if an
adjustment to taxable income or loss is sustained by the taxing authorities.
In June 1991, Thai Romo was organized as a foreign corporation under the
laws of the Kingdom of Thailand for the purpose of holding an interest in an
oil and gas concession. In August 1991, Thai Romo, with two other companies,
was awarded a petroleum concession to explore for petroleum from the
Ministry of Industry of Thailand. In March 1995, Thai Romo with two other
companies was granted a designated production area within the Concession
from the Ministry of Industry (the Tantawan Field). The Concession outside
of the Tantawan Field is operated by Maersk Oil (Thailand) Ltd.
F-28
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(Maersk Oil). The Tantawan Field is operated by Thaipo Limited (Thaipo), a
wholly-owned subsidiary of Pogo Producing Company. In November 1993, Thai
Romo amended its Articles of Association so that it will be treated as a
partnership for U.S. income tax purposes. As such, Thai Romo is not subject
to federal income taxes. Income and losses earned by Thai Romo are passed
through to the partners on the basis of their interest in Thai Romo. In the
event of an examination of Thai Romo's tax return, the income tax liability
of the partners could be changed if an adjustment to taxable income or loss
is sustained by the taxing authorities.
(4) UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
As required by the rules and regulations of the Securities and Exchange
Commission (SEC), the unaudited pro forma combined balance sheet reflects
the accrual of the payment for the Redemption and Call Option. The unaudited
pro forma presentation is required in instances when distributions to
owners, whether declared or not, are to be paid out of proceeds of an
offering rather than from the the current year's earnings. The unaudited pro
forma combined balance sheet also reflects the reclassification of the
deficit accumulated during the development stage to additional paid-in
capital as required by the SEC in instances when an S Corporation or tax
partnership becomes subject to federal income taxes.
Pro Forma net loss reflects federal income taxes that would have been
recorded had the Company been subject to such taxes. Due to net operating
losses for financial statement purposes, and the anticipation that utilizing
net operating loss carryforwards in future period will not be realized due
to the effective rate of foreign taxes, the Company has not recognized a tax
benefit for pro forma purposes. Such amounts have been included in the
statement of operations pursuant to the rules and regulations of the SEC for
instances when an S Corporation or tax partnership becomes subject to
federal income taxes. Pro Forma net loss per common share is presented
giving effect to the number of shares, 792,589 whose proceeds would be
necessary to complete the Redemption and exercise the Call Option based on
the anticipated offering price of $21 per common share, and after conversion
of stockholders' equity of RMEC and partners' equity of Thai Romo for
21,000,000 common shares for RMOC.
The unaudited pro forma balance sheet reflects the Redemption and Call
Option. It is not a complete pro forma presentation of RMOC's intention to
initiate a public issuance of 16% of its common stock.
(5) NOTES PAYABLE
The Company is currently negotiating a $100,000,000 revolving credit
facility (the "Revolving Credit Facility") with a commercial lender for the
purpose of financing ongoing development of Block B8/32 as well as for
general corporate purposes. The proposed Revolving Credit Facility will be
subject to borrowing base limitations and will have a three year final
maturity. Initial availability under the Revolving Credit Facility will be
$60,000,000. The commercial lender intends to syndicate the credit with a
group of financial institutions acceptable to the Company.
Under the terms of the Revolving Credit Facility, outstanding borrowings
will bear interest, at the Company's option, based on the base rate of the
commercial lender, or a reserve adjusted Eurodollar rate plus a margin of
1.75%. Interest periods of 30, 60, 90 or 180 days may be elected by the
Company on Eurodollar loans.
The Company will be required to pay certain fees, including a commitment fee
of .5% per annum on the average daily balance of the unused borrowing base.
Documentation of the Revolving Credit Facility will contain customary
provisions relating to lender yield protection, market disruption or
unavailability of Eurodollar funds, general and special indemnities, capital
adequacy protection, break funding protection, and similar customary
provisions. The Revolving Credit Facility will contain covenants restricting
the activities of the Company, including among others, restrictions on
investments, disposition of assets, indebtedness and the granting of
F-29
<PAGE>
RUTHERFORD-MORAN EXPLORATION COMPANY
(FORMERLY RUTHERFORD/MORAN OIL CORPORATION)
AND THAI ROMO LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS--(CONTINUED)
liens, restrictions on dividends and distributions and an agreement to
remain within its current line of business. Following commencement of
production in the Tantawan Field, the Company will be required to maintain
an interest coverage ratio of not less than 3:1. Failure to comply with such
covenants and restrictions would constitute an event of default under the
Revolving Credit Facility.
Definitive agreements evidencing the Revolving Credit Facility have not been
entered into and, therefore, the terms and structure outlined above could
change and the Revolving Credit Facility, as described, may not be
consummated.
(6) DERIVATIVE FINANCIAL INSTRUMENTS
During the first quarter of 1996, the Company began using derivative
financial instruments, crude oil price swaps, to hedge against potential
adverse effects of fluctuations in future prices for the Company's
production volumes. Gains and losses on derivative financial instruments
considered to be hedges generally are recorded when the related oil
production has been delivered or the financial instrument expires. While the
swaps are intended to reduce the Company's exposure to declines in the
market price of crude oil, they may limit the Company's gain from increases
in the market price.
At March 31, 1996, the Company had open swap agreements with an affilaite of
its lender for the Company's oil production of one million barrels (MMBbl)
of aggregate oil volumes for April through December 1997 at a weighted
average price of $15.92 per Bbl and 1.75 MMBbl of aggregate oil volumes for
January through December 1998 at a weighted average price of $15.92 per Bbl
and has sold to such affiliate of the lender a swap option for 1.25 MMBbl of
aggregate oil volumes for January through December 1999 at a price of $18.30
per Bbl. At March 31, 1996, the Company estimates the cost of unwinding this
position to be approximately $2,439,000.
F-30
<PAGE>
APPENDIX A
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
February 5, 1996
Rutherford-Moran Oil Corporation
5 Greenway Plaza, Suite 220
Houston, Texas 77046
Gentlemen:
At your request, we have prepared an estimate of the reserves, future production
and income attributable to certain leasehold and royalty interests of
Rutherford-Moran Oil Corporation (RMOC) as of January 1, 1996. The subject
properties are located offshore Thailand. The income data were estimated using
the Securities and Exchange Commission (SEC) guidelines for future cost and
price parameters.
The estimated reserves and future income amounts presented in this report are
related to hydrocarbon prices. December 1995 hydrocarbon prices were used in the
preparation of this report as required by SEC guidelines; however, actual future
prices may vary significantly from December 1995 prices. Therefore, volumes of
reserves actually recovered and amounts of income actually received may differ
significantly from the estimated quantities presented in this report. A summary
of the results of this study is shown below.
SEC PARAMETERS
Estimated Net Reserves and Income Data
Certain Leasehold and Royalty Interests of
RUTHERFORD-MORAN OIL CORPORATION
As of January 1, 1996
----------------------------------------------------
<TABLE>
<CAPTION>
PROVED
UNDEVELOPED
--------------
<S> <C>
NET REMAINING RESERVES
Oil/Condensate - Barrels 18,996,992
Gas - MMCF 131,607
INCOME DATA
Future Gross Revenue $ 621,741,926
Deductions 334,550,192
--------------
Future Net Income (FNI) $ 287,191,734
Discounted FNI @ 10% $ 131,630,559
</TABLE>
Liquid hydrocarbons are expressed in standard 42 gallon barrels. All gas volumes
are sales gas expressed in millions of cubic feet (MMCF) at the official
temperature and pressure bases of the areas in which the gas reserves are
located.
The deductions are comprised of the normal direct costs of operating the wells,
SRB tax, recompletion costs, development costs, and certain abandonment costs
net of salvage. The future net income is before the deduction of state and
federal income taxes and general administrative overhead, and has not been
adjusted for outstanding loans that may exist nor does it include any adjustment
for cash on hand or undistributed income. Liquid hydrocarbon reserves account
for approximately 57 percent and gas reserves account for the remaining 43
percent of total future gross revenue from proved reserves.
The discounted future net income shown above was calculated using a discount
rate of 10 percent per annum compounded semi-annually. The results shown above
are presented for your information and should not be construed as our estimate
of fair market value.
RESERVES INCLUDED IN THIS REPORT
The proved reserves presented in this report comply with the SEC's Regulation
S-X Part 210.4-10 Sec. (a) as clarified by subsequent Commission Staff
Accounting Bulletins, and are based on the following definitions and criteria:
A-1
<PAGE>
RUTHERFORD-MORAN OIL CORPORATION
February 5, 1996
Page 2
Proved reserves of crude oil, condensate, natural gas, and natural gas
liquids are estimated quantities that geological and engineering data
demonstrate with reasonable certainty to be recoverable in the future from
known reservoirs under existing conditions. Reservoirs are considered proved
if economic producibility is supported by actual production or formation
tests. In certain instances, proved reserves are assigned on the basis of a
combination of core analysis and electrical and other type logs which
indicate the reservoirs are analogous to reservoirs in the same field which
are producing or have demonstrated the ability to produce on a formation
test. The area of a reservoir considered proved includes (1) that portion
delineated by drilling and defined by fluid contacts, if any, and (2) the
adjoining portions not yet drilled that can be reasonably judged as
economically productive on the basis of available geological and engineering
data. In the absence of data on fluid contacts, the lowest known structural
occurrence of hydrocarbons controls the lower proved limit of the reservoir.
Proved reserves are estimates of hydrocarbons to be recovered from a given
date forward. They may be revised as hydrocarbons are produced and
additional data become available. Proved natural gas reserves are comprised
of non-associated, associated, and dissolved gas. An appropriate reduction
in gas reserves has been made for the expected removal of natural gas
liquids, for lease and plant fuel, and the exclusion of non-hydrocarbon
gases if they occur in significant quantities and are removed prior to sale.
Reserves that can be produced economically through the application of
improved recovery techniques are included in the proved classification when
these qualifications are met: (1) successful testing by a pilot project or
the operation of an installed program in the reservoir provides support the
the engineering analysis on which the project or program was based, and (2)
it is reasonably certain the project will proceed. Improved recovery
includes all methods for supplementing natural reservoir forces and energy,
or otherwise increasing ultimate recovery from a reservoir, including (1)
pressure maintenance, (2) cycling, and (3) secondary recovery in its
original sense. Improved recovery also includes the enhanced recovery
methods of thermal, chemical flooding, and the use of miscible and
immiscible displacement fluids. Estimates of proved reserves do not include
crude oil, natural gas, or natural gas liquids being held in underground
storage. Depending on the status of development, these proved reserves are
further subdivided into:
(i) "developed reserves" which are those proved reserves reasonably
expected to be recovered through existing wells with existing
equipment and operating methods, including (a) "developed producing
reserves" which are those proved developed reserves reasonably expected
to be produced from existing completion intervals now open for production
in existing wells, (b) "developed non-producing reserves" which are those
proved developed reserves which exist behind the casing of existing wells
which are reasonably expected to be produced through these wells in the
predictable future where the cost of making such hydrocarbons available
for production should be relatively small compared to the cost of a new
well; and
(ii)"undeveloped reserves" which are those proved reserves reasonably
expected to be recovered from new wells on undrilled acreage, from
existing wells where a relatively large expenditure is required, and from
acreage for which an application of fluid injection or other improved
recovery technique is contemplated where the technique has been proved
effective by actual tests in the area in the same reservoir. Reserves
from undrilled acreage are limited to those drilling units offsetting
productive units that are reasonably certain of production when drilled.
Proved reserves for other undrilled units are included only where it can
be demonstrated with reasonable certainty that there is continuity of
production from the existing productive formation.
ESTIMATES OF RESERVES
In general, the reserves included herein were estimated by the volumetric
method; however, other methods were used in certain cases where characteristics
of the data indicated such other methods were more appropriate in our opinion.
The reserves included in this report are estimates only and should not be
construed as being exact quantities. They may or may not be actually recovered,
and if recovered, the revenues therefrom and the actual costs related thereto
could be more or less than the estimated amounts. Moreover, estimates of
reserves may increase or decrease a result of future operations.
FUTURE PRODUCTION RATES
Test data and other related information were used to estimate the anticipated
initial production rates. Sales were estimated to commence at an anticipated
date furnished by RMOC. Locations which are not currently producing may start
producing earlier or later than anticipated in our estimates of their future
production rates.
A-2
<PAGE>
RUTHERFORD-MORAN OIL CORPORATION
February 5, 1996
Page 3
HYDROCARBON PRICES
RMOC furnished us with prices in effect at December 31, 1995 and these prices
were held constant. The gas price of $2.02 per MCF is the initial price under
RMOC's gas sales agreement. The liquid price of $18.71 per barrel is the
Singapore Tapis posting. In accordance with Securities and Exchange Commission
guidelines, changes in liquid and gas prices subsequent to December 31, 1995
were not taken into account in this report.
COSTS
Operating costs for the leases and wells in this report were supplied by RMOC
and include only those costs directly applicable to the leases or wells. When
applicable, the operating costs include a portion of general and administrative
costs including the Thailand office allocated directly to the leases and wells
under terms of operating agreements. Development costs were furnished to us by
RMOC and are based on authorizations for expenditure for the proposed work or
actual costs for similar projects. The current operating and development costs
were held constant throughout the life of the properties. The estimated net cost
of abandonment after salvage was included for these offshore properties where
abandonment costs net of salvage are significant. The estimates of the net
abandonment costs furnished by RMOC were accepted without independent
verification. No deduction was made for indirect costs such as general
administration and overhead expenses, loan repayments, interest expenses, and
exploration and development prepayments that are not charged directly to the
leases or wells.
GENERAL
While it may reasonably be anticipated that the future prices received for the
sale of production and the operating costs and other costs relating to such
production may also increase or decrease from existing levels, such changes
were, in accordance with rules adopted by the SEC, omitted from consideration in
making this evaluation.
The estimates of reserves presented herein were based upon a detailed study of
the properties in which RMOC owns an interest; however, we have not made any
field examination of the properties. No consideration was given in this report
to potential environmental liabilities which may exist nor were any costs
included for potential liability to restore and clean up damages, if any, caused
by past operating practices. RMOC has informed us that they have furnished us
all of the accounts, records, geological and engineering data, and reports and
other data required for this investigation. The ownership interests, prices, and
other factual data furnished by RMOC were accepted without independent
verification. The estimates presented in this report are based on data available
through December 1995.
Neither we nor any of our employees have any interest in the subject properties
and neither the employment to make this study nor the compensation is contingent
on our estimates of reserves and future income for the subject properties.
This report was prepared for the exclusive use of Rutherford-Moran Oil
Corporation. The data, work papers, and maps used in this report are available
for examination by authorized parties in our offices. Please contact us if we
can be of further service.
Very truly yours,
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
/s/ FRED P. RICHOUX, P.E.
Fred P. Richoux, P.E.
Group Vice President
FPR/sw
A-3
<PAGE>
[LOGO]
<PAGE>
[ALTERNATE FRONT COVER PAGE FOR INTERNATIONAL PROSPECTUS]
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 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.
<PAGE>
PROSPECTUS
Subject to Completion
Dated June 3, 1996
4,000,000 SHARES
[LOGO]
RUTHERFORD-MORAN OIL CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
All of the Common Stock offered hereby is being offered by Rutherford-Moran Oil
Corporation ("RMOC" or the "Company"). Of the 4,000,000 shares of Common Stock
offered, 800,000 shares are being offered initially outside the United States
and Canada by the International Managers (the "International Managers") and
3,200,000 shares are being offered initially inside the United States and Canada
in a concurrent offering by the U.S. Underwriters (the "U.S. Underwriters" and,
together with the International Managers, the "Underwriters"). See
"Underwriting." The Offerings are contingent upon consummation of certain share
exchanges and transactions. See "The Transactions." Following the Offerings,
Patrick R. Rutherford and John A. Moran (collectively the "Principal
Stockholders") will own directly or indirectly approximately 76.0% of the
outstanding shares of Common Stock (or 74.3% if the U.S. Underwriters'
over-allotment option is exercised in full).
Prior to the Offerings, there has been no public market for the Common Stock. It
is currently anticipated that the initial public offering price will be between
$20 and $22 per share. See "Underwriting" for information relating to the
factors considered in determining the initial public offering price.
The Common Stock has been approved for quotation on the Nasdaq National Market,
under the symbol "RMOC."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- ------------------------------------------------------------------------------------------------------
Total (3) $ $ $
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1)The Company and the Principal Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2)Before deducting expenses of the Offerings payable by the Company estimated
at $ .
(3)The Company has granted the U.S. Underwriters an option to purchase up to an
additional 600,000 shares of Common Stock, on the same terms as set forth above,
solely to cover over-allotments, if any. If such option is exercised in full,
the total Price to Public, Underwriting Discount, and Proceeds to Company will
be $ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock being offered by this Prospectus are being offered by
the International Managers, subject to prior sale, when, as and if delivered to
and accepted by the International Managers, and subject to approval of certain
legal matters by Andrews & Kurth L.L.P., counsel for the Underwriters. It is
expected that delivery of the shares of Common Stock will be made against
payment therefor on or about , 1996 at the offices of J.P. Morgan
Securities Inc., 60 Wall Street, New York, New York.
J.P. MORGAN SECURITIES LTD.
MORGAN STANLEY & CO.
INTERNATIONAL
PAINEWEBBER INTERNATIONAL
SMITH BARNEY INC.
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering are:
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 34,897
Accounting fees and expenses...................................... 75,000
NASD filing fee................................................... 10,620
Legal fees and expenses........................................... 125,000
NASDAQ listing fee................................................ 50,000
Printing costs.................................................... 125,000
Transfer agent and registrar's fees............................... 10,000
Miscellaneous..................................................... 9,483
---------
TOTAL......................................................... $ 440,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Certificate of Incorporation contains a provision that
eliminates the personal liability of a director to the Company and its
stockholders for monetary damages for breach of his fiduciary duty as a director
to the extent currently allowed under the Delaware General Corporation Law. If a
director were to breach such duty in performing his duties as a director,
neither the Company nor its stockholders could recover monetary damages from the
director, and the only course of action available to the Company's stockholders
would be equitable remedies, such as an action to enjoin or rescind a
transaction involving a breach of fiduciary duty. To the extent certain claims
against directors are limited to equitable remedies, the provision in the
Company's Restated Certificate of Incorporation may reduce the likelihood of
derivative litigation and may discourage stockholders or management from
initiating litigation against directors for breach of their fiduciary duty.
Additionally, equitable remedies may not be effective in many situations. If a
stockholder's only remedy is to enjoin the completion of the Board of Directors'
action, this remedy would be ineffective if the stockholder does not become
aware of a transaction or event until after it has been completed. In such a
situation, it is possible that the stockholders and the Company would have no
effective remedy against the directors. Under the Company's Restated Certificate
of Incorporation, liability for monetary damages remains for (i) any breach of
the duty of loyalty to the Company or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) payment of an improper dividend or improper repurchase of the
Company's stock under Section 174 of the Delaware General Corporation Law, or
(iv) any transaction from which the director derived an improper personal
benefit. The Company's Restated Certificate of Incorporation further provides
that in the event the Delaware General Corporation Law is amended to allow the
further elimination or limitation of the liability of directors, then the
liability of the Company's directors shall be limited or eliminated to the
fullest extent permitted by the amended Delaware General Corporation Law.
Under Section 54 of the Company's Bylaws as currently in effect, each person who
is or was a director or officer of the Company or a subsidiary of the Company,
or who serves or served any other enterprise or organization at the request of
the Company, shall be indemnified by the Company to the full extent permitted by
the Delaware General Corporation Law.
Under Delaware law, to the extent that a person is successful on the merits in
defense of a suit or proceeding brought against him by reason of the fact that
he is or was a director or officer of the Company, or serves or served any other
enterprise or organization at the request of the Company, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred in connection with such action.
Under Delaware law, to the extent an indemnified person is not successful in
defense of a third party civil suit or a criminal suit, or if such suit is
settled, such person shall be indemnified against both (i) expenses, including
attorneys' fees, and (ii) judgments, fines and amounts paid in settlement if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any criminal
action, had no reasonable cause to believe his conduct was unlawful, except that
if such person is adjudged to be liable in such a suit for negligence or
misconduct in the performance of his duty to the Company, he cannot be made
whole even for expenses unless the court determines that he is fully and
reasonably entitled to indemnity for such expenses.
II-1
<PAGE>
The Company intends to obtain insurance to protect officers and directors from
certain liabilities, including liabilities against which the Company cannot
indemnify its directors and officers.
The Company will enter into indemnification agreements with each of the
directors of the Company. Pursuant to such agreements, the Company will agree to
indemnify and hold each such director harmless to the fullest extent permitted
by law, from any loss, damage or liability incurred in the course of is
respective service as a director of the Company. The amount paid by the Company
is reducible by the amount of insurance paid to or on behalf of such director
with respect to any event giving rise to indemnification. Each such director's
right to indemnification is to survive his respective death or termination as
director.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Company was incorporated in the State of Delaware on March 8, 1996. On April
1, 1996, the Company issued 500 shares of its common stock, $.01 par value
("Common Stock"), to each of Patrick R. Rutherford and John A. Moran for cash
consideration of $50 per share. The Company was formed to acquire and own 100%
of the outstanding shares of common stock of Rutherford-Moran Exploration
Company ("RMEC") and all of the outstanding shares of common stock of Thai Romo
other than the Thai Romo shares held by RMEC and a nominal number of qualifying
Thai Romo shares. The acquisition of such shares will occur through a series of
share and note exchanges transactions (the "Share Exchanges") simultaneously
with the consummation of the Offerings. All of the shareholders of RMEC,
including Messrs. Rutherford and Moran who own 50% and 47.2% of RMEC's shares,
respectively, will exchange all of the outstanding shares of common stock of
RMEC for 12,051,082 shares of Common Stock. Concurrently with the RMEC share
exchange, all of the shareholders of Thai Romo (other than RMEC) will exchange
(i) all of their shares in common stock of Thai Romo and (ii) $9.3 million in
aggregate principal amount of notes issued by Thai Romo, for an aggregate of
8,903,580 shares of Common Stock, except that two affiliates of each of Messrs.
Rutherford and Moran and an affiliate of an executive officer of the Company
will each retain one qualifying share of Thai Romo to satisfy minimum
shareholder requirements under Thai law. Such unregistered exchanges of shares
of Common Stock were made in reliance upon the exemption contained in Section
4(2) of the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
**1.1 Underwriting Agreement by and among the Company and the Underwriters.
*3.1 Restated Certificate of Incorporation of the Company.
*3.2 Bylaws of the Company dated April 1, 1996.
***5.1 Opinion of Fulbright & Jaworski L.L.P.
*10.1 Ministry of Industry Petroleum Concession dated August 1, 1991, awarded to Thai
Romo, Thaipo and Maersk Oil.
*10.2 Ministry of Industry Supplementary Petroleum Concession (No. 1) to Petroleum
Concession No. 1/2534/36 dated March 6, 1992, awarded to Maersk Oil (Thailand) Ltd.
and Thaipo Limited and Thai Romo Limited.
*10.3 Ministry of Industry Supplementary Petroleum Concession (No. 2) to Petroleum
Concession No. 1/2534/36 dated September 4, 1995, awarded to Thaipo Limited and Thai
Romo Limited.
***10.4 Joint Operating Agreement to be effective as of March 3, 1995 among Thai Romo,
Thaipo and Sophonpanich.
*10.5 Joint Operating Agreement dated August 1, 1991 among Thai Romo, Thaipo, Maersk Oil
and Sophonpanich.
*10.6 Gas Sales Agreement dated November 7, 1995 between Petroleum of Authority of
Thailand, Thai Romo, Thaipo, and Sophonpanich.
*10.7 Management Services Agreement dated July 7, 1995 between Thai Romo and RMEC.
*10.8 Restated Loan Facility Agreement dated December 20, 1995, between Thai Romo and The
Chase Manhattan Bank, N.A., Bangkok Branch International Banking Facility, as
amended by the Letter Agreement dated April 24, 1996.
**10.9 Ninth Amendment Agreement dated May 28, 1996 among The Chase Manhattan Bank, N.A.,
Bangkok Branch, Thai Romo, RMEC and others.
*10.10 Bareboat Charter Agreement dated February 9, 1996 between Tantawan Production B.V.
and Tantawan Services, L.L.C.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
*10.11 Operating Agreement between SBM Marine Services Thailand Ltd. and Tantawan Services,
L.L.C. dated February 9, 1996.
*10.12 Guaranty and Indemnity Agreement dated February 9, 1996, by Thai Romo to Tantawan
Production B.V.
*10.13 Guaranty and Indemnity Agreement dated February 9, 1996, by Thai Romo to SBM Marine
Services Thailand Ltd.
**10.14 1996 Key Employee Stock Plan (and form of option and stock agreements).
**10.15 1996 Non-Employee Director Stock Option Plan (and form of option agreement).
*10.16 Letter Agreement dated March 28, 1996 with David Chavenson.
*10.17 $15,000,000 Promissory Note dated November 6, 1995 to The Chase Manhattan Bank, N.A.
*10.18 Form of Shareholder Demand Promissory Note.
***10.19 Section 351 Exchange Agreement among the Company and the exchanging stockholders
listed therein.
**10.20 Registration Rights Agreement.
**10.21 Form of Indemnification Agreement.
**21.1 Subsidiaries of the Company.
***23.1 Consent of Fulbright & Jaworski L.L.P. (to be included in Exhibit 5.1).
**23.2 Consent of KPMG Peat Marwick LLP.
*23.3 Consent of Ryder Scott.
*23.4 Consent of directors.
***23.5 Consent of Baker & McKenzie.
*24.1 Powers of Attorney (included in Part II of the original filing of this Registration
Statement).
**27.1 Financial Data Schedule.
</TABLE>
- ------------
*Previously filed as an Exhibit to this Registration Statement.
**Filed with this Amendment.
***To be filed by Amendment.
(b) Financial Statement Schedules
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
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 foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on May 31, 1996.
RUTHERFORD-MORAN OIL CORPORATION
By /s/ PATRICK R. RUTHERFORD
--------------------------------------
Patrick R. Rutherford
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ JOHN A. MORAN* Chairman of the Board May 31, 1996
--------------------------------------
John A. Moran
/s/ PATRICK R. RUTHERFORD President, Chief Executive Officer and Director May 31, 1996
-------------------------------------- (Principal Executive Officer)
Patrick R. Rutherford
/s/ MICHAEL D. MCCOY Executive Vice President, Chief Operating Officer May 31, 1996
-------------------------------------- and Director
Michael D. McCoy
/s/ DAVID F. CHAVENSON* Vice President and Chief Financial Officer May 31, 1996
-------------------------------------- (Principal Financial and Accounting Officer)
David F. Chavenson
*By: /s/ MICHAEL D. MCCOY
----------------------------------
Michael D. McCoy
(ATTORNEY-IN-FACT FOR PERSONS INDICATED)
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER PAGE
- ---------- ---
<C> <S> <C>
**1.1 Underwriting Agreement by and among the Company and the Underwriters.
*3.1 Restated Certificate of Incorporation of the Company.
*3.2 Bylaws of the Company dated April 1, 1996.
***5.1 Opinion of Fulbright & Jaworski L.L.P.
*10.1 Ministry of Industry Petroleum Concession dated August 1, 1991, awarded to Thai Romo, Thaipo and Maersk
Oil.
*10.2 Ministry of Industry Supplementary Petroleum Concession (No. 1) to Petroleum Concession No. 1/2534/36 dated
March 6, 1992, awarded to Maersk Oil (Thailand) Ltd. and Thaipo Limited and Thai Romo Limited.
*10.3 Ministry of Industry Supplementary Petroleum Concession (No. 2) to Petroleum Concession No. 1/2534/36 dated
September 4, 1995, awarded to Thaipo Limited and Thai Romo Limited.
***10.4 Joint Operating Agreement to be effective as of March 3, 1995 among Thai Romo, Thaipo and Sophonpanich.
*10.5 Joint Operating Agreement dated August 1, 1991 among Thai Romo, Thaipo, Maersk Oil and Sophonpanich.
*10.6 Gas Sales Agreement dated November 7, 1995 between Petroleum Authority of Thailand, Thai Romo, Thaipo, and
Sophonpanich.
*10.7 Management Services Agreement dated July 7, 1995 between Thai Romo and RMEC.
*10.8 Restated Loan Facility Agreement dated December 20, 1995, between Thai Romo and The Chase Manhattan Bank,
N.A., Bangkok Branch International Banking Facility, as amended by the Letter Agreement dated April 24,
1996.
**10.9 Ninth Amendment Agreement dated May 28, 1996 among The Chase Manhattan Bank, N.A., Bangkok Branch, Thai
Romo, RMEC and others.
*10.10 Bareboat Charter Agreement dated February 9, 1996 between Tantawan Production B.V. and Tantawan Services,
L.L.C.
*10.11 Operating Agreement between SBM Marine Services Thailand Ltd. and Tantawan Services, L.L.C. dated February
9, 1996.
*10.12 Guaranty and Indemnity Agreement dated February 9, 1996, by Thai Romo to Tantawan Production B.V.
*10.13 Guaranty and Indemnity Agreement dated February 9, 1996, by Thai Romo to SBM Marine Services Thailand Ltd.
**10.14 1996 Key Employee Stock Plan.
**10.15 1996 Non-Employee Director Stock Option Plan.
*10.16 Letter Agreement dated March 28, 1996 with David Chavenson.
*10.17 $15,000,000 Promissory Note dated November 6, 1995 to The Chase Manhattan Bank, N.A.
*10.18 Form of Shareholder Demand Promissory Note.
***10.19 Section 351 Exchange Agreement among the Company and the exchanging stockholders listed therein.
**10.20 Form of Registration Rights Agreement.
**10.21 Form of Indemnification Agreement.
**21.1 Subsidiaries of the Company.
***23.1 Consent of Fulbright & Jaworski L.L.P. (to be included in Exhibit 5.1).
**23.2 Consent of KPMG Peat Marwick LLP.
*23.3 Consent of Ryder Scott.
*23.4 Consent of directors.
***23.5 Consent of Baker & McKenzie.
*24.1 Powers of Attorney (included in Part II of the original filing of this Registration Statement).
**27.1 Financial Data Schedule.
</TABLE>
- ------------
*Previously filed as an Exhibit to this Registration Statement.
**Filed with this Amendment.
***To be filed by Amendment.
<PAGE>
RUTHERFORD-MORAN OIL CORPORATION
4,000,000 Shares of Common Stock
Underwriting Agreement
_________________ ,1996
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Smith Barney Inc.
As Representatives of the several
U.S. Underwriters listed in Schedule I hereto
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
J.P. Morgan Securities Ltd.
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
Smith Barney Inc.
As Representatives of the several
International Managers listed in Schedule II hereto
c/o J.P. Morgan Securities Ltd.
60 Victoria Embankment
London EC4Y OJP
Ladies and Gentlemen:
Rutherford-Moran Oil Corporation, a Delaware corporation ("RMOC"), proposes
to issue and sell to the several Underwriters (as defined below) an aggregate of
4,000,000 shares of common stock, par value $.01 per share (the "Underwritten
Shares") and, for the sole purpose of covering over-allotments in connection
with the sale of the Underwritten Shares, to issue and sell to the U.S.
Underwriters (as defined below), at the option of the U.S. Underwriters, up to
600,000 additional shares of its common stock, par value $.01 per share (the
"Option Shares"). The Underwritten Shares and the Option Shares are herein
referred to as the "Shares." The shares of common stock of RMOC to be
outstanding after giving effect to the sale of the Shares pursuant to this
Agreement are herein referred to as the "Common Stock."
It is understood that, subject to the conditions hereinafter stated,
3,200,000 Underwritten Shares (the "U.S. Underwritten Shares") will be sold to
the several U.S. underwriters named in SCHEDULE I hereto
<PAGE>
(the "U.S. Underwriters") in connection with the offering and sale of such
U.S. Underwritten Shares in the United States and Canada to United States and
Canadian Persons (as such terms are defined in the Agreement Between
Syndicates of even date herewith between the U.S. Underwriters and the
International Managers (as defined below)), and 800,000 Underwritten Shares
(the "International Shares") will be sold to the several international
managers named in SCHEDULE II hereto (the "International Managers") in
connection with the offering and sale of such International Shares outside
the United States and Canada to persons other than United States and Canadian
Persons. J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated,
PaineWebber Incorporated and Smith Barney Inc. shall act as representatives
(the "U.S. Representatives") of the several U.S. Underwriters, and J.P.
Morgan Securities Ltd., Morgan Stanley & Co. International Limited,
PaineWebber International (U.K.) Ltd. and Smith Barney Inc. shall act as
representatives (the "International Representatives") of the several
International Managers. The U.S. Underwriters and the International Managers
are hereinafter collectively referred to as the "Underwriters," and the U.S.
Representatives and International Representatives are hereinafter
collectively referred to as the "Representatives."
RMOC has prepared and filed with the Securities and Exchange Commission
(the "Commission") in accordance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Securities Act"), a registration statement relating to the
Shares. The registration statement contains two prospectuses to be used in
connection with the offering and sale of the Shares: the U.S. prospectus, to be
used in connection with the offering and sale of Shares in the United States and
Canada to United States and Canadian Persons, and the international prospectus,
to be used in connection with the offering and sale of Shares outside the United
States and Canada to persons other than United States and Canadian Persons. The
international prospectus is identical to the U.S. prospectus except for the
outside front cover page. The registration statement as amended at the time
when it shall become effective, including information (if any) deemed to be part
of the registration statement at the time of effectiveness pursuant to Rule 430A
under the Securities Act, is referred to in this Agreement as the "Registration
Statement," and the U.S. prospectus and the international prospectus in the
respective forms first used to confirm sales of Shares are collectively referred
to in this Agreement as the "Prospectus." If RMOC has filed an abbreviated
registration statement pursuant to Rule 462(b) under the Securities Act (the
"Rule 462 Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement.
It is also understood that RMOC has entered into an Exchange Agreement,
effective as of __________________________________ (the "Exchange Agreement"),
with each of the former stockholders of Rutherford-Moran Exploration Company
("RMEC"), a Texas corporation, and with each of the former shareholders, except
RMEC, of Thai Romo Limited ("Thai Romo"), a limited company existing under the
laws of Thailand (collectively, the "Exchanging Securityholders"), such
Exchanging Securityholders being listed on SCHEDULE III hereto. In accordance
with the Exchange Agreement, each Exchanging Securityholder will tender for
exchange to RMOC, and RMOC will issue to the Exchanging Securityholders in
exchange therefor, the number of shares of Common Stock set forth in Schedule A
to the Exchange Agreement in exchange for the number of shares of RMEC or
Thai Romo (the "Exchange Shares") and the principal amount of promissory notes
of Thai Romo evidencing shareholder loans (the "Thai Romo Notes" and, together
with the Exchange Shares, the "Exchange Securities") set forth in Schedule B to
the Exchange Agreement. Messrs. Rutherford and Moran are herein collectively
referred to herein as the "Principal Shareholders."
-2-
<PAGE>
For purposes of this Agreement, the term "Company" means RMOC and, unless
the context otherwise requires, includes its subsidiaries after giving effect to
the Transactions (each of which is listed on SCHEDULE IV hereto (the
"Subsidiaries")). All capitalized terms used and not defined herein shall have
the meanings assigned to them in the Prospectus.
1. RMOC agrees to issue and sell the Underwritten Shares to the several
Underwriters as hereinafter provided, and each Underwriter, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from RMOC the respective number of Underwritten Shares set forth opposite such
Underwriter's name in SCHEDULES I AND II hereto at a purchase price per share
(the "Purchase Price") of $_____________________________________ .
In addition, RMOC agrees to issue and sell the Option Shares to the
U.S. Underwriters as hereinafter provided, and the U.S. Underwriters on the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, shall have the option to purchase, severally and
not jointly, from RMOC up to an aggregate of 600,000 Option Shares at the
Purchase Price, for the sole purpose of covering over-allotments (if any) in the
sale of Underwritten Shares by the several Underwriters.
If any Option Shares are to be purchased, the number of Option Shares to be
purchased by each U.S. Underwriter shall be the number of Option Shares which
bears the same ratio to the aggregate number of Option Shares being purchased as
the number of U.S. Underwritten Shares set forth opposite the name of such U.S.
Underwriter in SCHEDULE I hereto (or such number increased as set forth in
Section 12 hereof) bears to the aggregate number of U.S. Underwritten Shares
being purchased from RMOC by the several U.S. Underwriters, subject, however, to
such adjustments to eliminate any fractional Shares as the Representatives in
their sole discretion shall make.
The U.S. Underwriters may exercise the option to purchase the Option Shares
at any time (but not more than once) on or before the thirtieth day following
the date of this Agreement, by written notice from the U.S. Representatives to
RMOC. Such notice shall set forth the aggregate number of Option Shares as to
which the option is being exercised and the date and time when the Option Shares
are to be delivered and paid for, which may be the same date and time as the
Closing Date (as hereinafter defined) but shall not be earlier than the Closing
Date nor later than the tenth full Business Day (as hereinafter defined) after
the date of such notice (unless such time and date are postponed in accordance
with the provisions of Section 12 hereof). Any such notice shall be given at
least two Business Days prior to the date and time of delivery specified
therein.
2. RMOC understands that the Underwriters intend (i) to make a public
offering of the Shares as soon after (A) the Registration Statement has become
effective and (B) the parties hereto have executed and delivered this Agreement,
as in the judgment of the Representatives is advisable and (ii) initially to
offer the Shares upon the terms set forth in the Prospectus. It is understood
that the International Managers propose to offer the International Shares for
sale as set forth in the international prospectus. Each of RMOC and each
International Manager agrees that it will not, directly or indirectly, purchase,
offer, sell or deliver any Shares or have in its possession or distribute or
publish the Prospectus or any other offering material in any country or
jurisdiction except under circumstances that will not violate any applicable
laws and regulations and that will not impose any obligations on the Company or
any material obligation on any U.S. Underwriter or International Manager.
-3-
<PAGE>
3. Payment for the Shares shall be made by wire transfer in
immediately available funds, in the case of the Underwritten Shares, on
_________________ 1996, or at such other time on the same or such other date,
not later than the fifth Business Day thereafter, as the Representatives and
the Company may agree upon in writing or, in the case of the Option Shares,
on the date and time specified by the Representatives in the written notice
of the Underwriters' election to purchase such Option Shares, such payments
to be made to the account specified, no later than noon the Business Day (as
defined below) prior to the Closing Date or the Additional Closing Date (each
as defined below), by the Company to the Representatives. The time and date
of such payment for the Underwritten Shares is referred to herein as the
"Closing Date," and the time and date for such payment for the Option Shares,
if other than the Closing Date, are herein referred to as the "Additional
Closing Date." As used herein, the term "Business Day" means any day other
than a day on which banks are permitted or required to be closed in New York
City.
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the Underwriters of the Shares duly paid by the Company. The certificates
for the Shares will be made available for inspection and packaging by the
Representatives at the office of J.P. Morgan Securities Inc. set forth above not
later than 1:00 p.m., New York City time, on the Business Day prior to the
Closing Date or the Additional Closing Date, as the case may be.
The Exchange Securities tendered by MDMTHAI, Inc., SRRTHAI, Inc., JAMTHAI,
Inc., PRRTHAI, Inc., SFJTHAI, Inc., THAIJAM, L.P., THAIPRR, L.P. and THAISFJ,
L.P. are subject to pledge agreements in favor of The Chase Manhattan Bank,
N.A., Bangkok Branch (the "Bank"), as described in Schedule B of the Exchange
Agreement, and pursuant thereto, the certificates evidencing said Exchange
Securities are held by the Bank. RMOC also has pledged to the Bank the Exchange
Securities to be received from the aforementioned Exchanging Securityholders;
therefore, said Exchange Securities, including new share certificates reflecting
the results of the exchange, shall remain in the custody of the Bank pursuant to
the Custodial Agreement and power of attorney, as in effect on the date hereof
(the "Custodial Agreement").
Certificates in transferrable form for the shares of RMEC to be
exchanged by John A. Moran, Patrick R. Rutherford and Sydney F. Jones and the
shares of Thai Romo to be exchanged by Red Oak Holdings, Inc., and the Thai
Romo Notes to be exchanged by Red Oak Holdings, Inc. pursuant to the Exchange
Agreement have been placed in custody with ______________________ (the
"Custodian") for delivery pursuant to the Custodial Agreement executed by
each of the Exchanging Securityholders appointing ____________________ and
________________________ as agents and attorneys-in-fact (the
"Attorneys-in-Fact").
4. Each of RMOC and RMEC represents and warrants to each Underwriter
that:
(a) no order preventing or suspending the use of any preliminary
prospectus filed as part of the Registration Statement has been issued by the
Commission, and the preliminary prospectus included as part of the Registration
Statement as of the time it became effective that omits information as permitted
by Rule 430A under the Securities Act, and the preliminary prospectus filed
pursuant to the Securities Act in the form circulated to prospective investors,
complied when so filed in all material respects with the Securities Act, and did
not contain an untrue statement of a material fact or omit to state
-4-
<PAGE>
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information relating to any Underwriter furnished to RMOC in
writing by such Underwriter through the Representatives expressly for use
therein;
(b) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been instituted or, to the knowledge of the Company, threatened by the
Commission; and the Registration Statement and Prospectus (as amended or
supplemented if RMOC shall have furnished any amendments or supplements thereto)
comply, or will comply, as the case may be, in all material respects with the
Securities Act and do not and will not, as of the applicable effective date as
to the Registration Statement and any amendment thereto and as of the date of
the Prospectus and any amendment or supplement thereto, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Prospectus, as amended or supplemented, if applicable, at the Closing Date
or Additional Closing Date, as the case may be, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; except that the foregoing representations and warranties
shall not apply to statements or omissions in the Registration Statement or the
Prospectus made in reliance upon and in conformity with information relating to
any Underwriter furnished to RMOC in writing by such Underwriter through the
Representatives expressly for use therein;
(c) the financial statements (except for the PRO FORMA financial
information), and the related notes thereto, included in the Registration
Statement and the Prospectus present fairly the combined financial position of
the Company as of the dates indicated and the results of its operations and
changes in its combined cash flows for the periods specified; said financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis, and the supporting schedules included
in the Registration Statement present fairly the information required to be
stated therein; and the PRO FORMA financial information, and the related notes
thereto, included in the Registration Statement and the Prospectus has been
prepared in accordance with the applicable requirements of the Securities Act
and is based upon good faith estimates and assumptions believed by the Company
to be reasonable and the adjustments used therein are appropriate to give PRO
FORMA effect to the transactions or circumstances referred to therein; such
PRO FORMA information has been prepared on a basis consistent with such
historical statements, except for the PRO FORMA adjustments specified therein,
and give effect to assumptions made on a reasonable basis and present fairly the
historical and proposed transactions contemplated by the Prospectus, the
Exchange Agreement and this Agreement; the other financial and statistical
information and data included in the Prospectus and in the Registration
Statement, historical and PRO FORMA, are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company;
(d) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any change
in the capital stock or long-term debt of RMOC or any of the Subsidiaries, or
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, business, prospects,
management, financial position, stockholders' equity or results of operations of
RMOC and the Subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus; and except as set forth or contemplated in the
Prospectus neither RMOC nor any of the Subsidiaries has entered into any
transaction or
-5-
<PAGE>
agreement (whether or not in the ordinary course of business) material to
RMOC and the Subsidiaries, taken as a whole; none of RMOC nor any of the
Subsidiaries, to the best of the Company's knowledge, has, or may reasonably
be expected to have, sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus;
(e) RMOC has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly 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, other than where
the failure to be so qualified or in good standing would not have a material
adverse effect on RMOC and the Subsidiaries, taken as a whole;
(f) each Subsidiary has been duly incorporated and is validly
existing as a corporation under the laws of its jurisdiction of incorporation,
with power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a material adverse
effect on RMOC and the Subsidiaries; all of the capital stock, shares and other
equity interests of each of the Subsidiaries will, at the effective time of the
Transactions, be owned by RMOC, directly or indirectly, free and clear of any
lien, encumbrance, equity or claim, except for the pledge of Shares of Thai Romo
described on Schedule B to the Exchange Agreement (the "Thai Romo Pledge") and
except as described on Schedule IV hereto; and all the outstanding shares of
capital stock of each Subsidiary have been duly authorized and validly issued,
are fully paid and non-assessable, and (except, in the case of Thai Romo, for
the Thai Romo Pledge) are free and clear of any lien, encumbrance, equity or
claim;
(g) this Agreement, the Exchange Agreement and the Custodial
Agreement have been duly authorized, executed and delivered by RMOC and RMEC;
(h) RMOC has an authorized capitalization as set forth in the
Prospectus, such authorized capitalization conforms as to legal matters to the
descriptions thereof set forth in the Prospectus, and all of the outstanding
shares of capital stock of RMOC and the Subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable and are not subject to any
pre-emptive or similar rights except for the rights of existing stockholders to
acquire a proportion of new shares issued by Thai Romo (the "Thai Romo Rights")
as provided in Chapter VII of its Articles of Association and in the Thai Romo
Stockholders Agreement dated July 7, 1995 (the "Thai Romo Stockholders
Agreement"), which rights are not exercisable in connection with any of the
transactions contemplated in the Prospectus, this Agreement, the Exchange
Agreement or the Custodial Agreement; and, except as described in the
Prospectus, there are no outstanding rights (including, without limitation, pre-
emptive rights), warrants or options to acquire, or instruments convertible into
or exchangeable for, any shares of capital stock or other equity interest in
RMOC or any of the Subsidiaries, or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any capital
stock of RMOC or any of the Subsidiaries, any such convertible or exchangeable
securities or any such rights, warrants or options, except for the Thai Romo
Rights;
-6-
<PAGE>
(i) the Shares to be issued and sold by RMOC hereunder have been duly
authorized, and, when issued and delivered to and paid for by the Underwriters
in accordance with the terms of this Agreement, will be duly issued and will be
fully paid and non-assessable and will conform to the descriptions thereof in
the Prospectus; the shares of Common Stock to be issued by RMOC in exchange for
the Exchange Securities under the Exchange Agreement (the "Nonregistered
Shares") have been duly authorized and, when issued and delivered in exchange
for the Exchange Securities in accordance with the Exchange Agreement, will be
fully paid and non-assessable and will conform to the descriptions thereof in
the Prospectus; and the issuance of the Shares and the Nonregistered Shares is
not subject to any preemptive or similar rights;
(j) neither RMOC nor any of the Subsidiaries is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under, its respective certificate of incorporation or bylaws, as amended
or, as to Thai Romo, its memorandum or articles of association (the "Memorandum
and Articles"), or any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which RMOC or any of the Subsidiaries is a
party or by which it or any of them or any of their respective properties is
bound, except for violations and defaults which individually and in the
aggregate are not material to RMOC and the Subsidiaries, taken as a whole; the
issuance and sale of the Shares and the performance by RMOC and RMEC of their
obligations under this Agreement and the consummation of the transactions
contemplated herein will not conflict with, violate or result in a breach of any
of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which RMOC or any of the Subsidiaries is a party or by which RMOC or any of the
Subsidiaries is bound or to which any of the property or assets of RMOC or any
of the Subsidiaries is subject, nor will any such action result in any violation
of the provisions of the certificate of incorporation or the bylaws, as amended,
of RMOC or any of the Subsidiaries, or, as to Thai Romo, its Memorandum or
Articles, or any applicable law or statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over RMOC, the
Subsidiaries or any of their respective properties; and no consent, approval,
authorization, order, license, registration or qualification of or with any such
court or governmental agency or body is required for the issuance and sale of
the Shares or the consummation by RMOC and RMEC of the transactions contemplated
by this Agreement, except such consents, approvals, authorizations, orders,
licenses, registrations or qualifications as have been obtained under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and as may be required under state securities or blue sky laws
in connection with the purchase and distribution of the Shares by the
Underwriters;
(k) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental investigations, actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting
RMOC or any of the Subsidiaries or any of their respective properties or to
which RMOC or any of the Subsidiaries is or may be a party or to which any
property of RMOC or any of the Subsidiaries is or may be the subject which, if
determined adversely to RMOC or any of the Subsidiaries, could individually or
in the aggregate have, or reasonably be expected to have, a material adverse
effect on the general affairs, business, prospects, management, financial
position, stockholders' equity or results of operations of RMOC and the
Subsidiaries, taken as a whole, and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by governmental authorities or
threatened by others; and there are no statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement that are not
described or filed as required;
-7-
<PAGE>
(l) except to the extent described in the Prospectus, the
petroleum concession to explore Block B8/32 in the Gulf of Thailand (the
"Concession"), the designation of the area allowed for the petroleum production
at the Tantawan Field exploration Block B8/32 (the "Designation"), and the Gas
Sales Agreement dated November 4, 1995 (the "Gas Sales Agreement") and other
arrangements held by the Company reflect in all material respects the rights of
the Company to explore, produce and market hydrocarbons from the acreage
described in the Prospectus, in each case free and clear of any lien, adverse
claim, security interest, equity or other encumbrance, except such as are
described or referred to in the Prospectus or such as do not materially affect
the value of, and do not interfere with the activities of the Company under the
Concession, the Designation, the Gas Sales Agreement and other arrangements, and
the care taken by the Company with respect to acquiring or otherwise procuring
such Concession, the Designation, the Gas Sales Agreement and the other
arrangements was consistent with standard industry practices for acquiring or
procuring acreage and related activities for the exploration, production and
sale of hydrocarbons; title investigations have been carried out by the Company
in accordance with the practice in the oil and gas industry; and any real
property and the property held under lease or concession or designation by the
Company are held by them under valid, existing and enforceable leases or
concessions or designations with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property by the
Company;
(m) no relationship, direct or indirect, exists between or among
RMOC or any of the Subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of RMOC or any of the Subsidiaries on the
other hand, which is required by the Securities Act (including, without
limitation, Item 404 of Regulation S-K of the Commission) to be described in the
Registration Statement and the Prospectus which is not so described;
(n) no person has the right to require RMOC to register any
securities for offering and sale under the Securities Act by reason of the
filing of the Registration Statement with the Commission, the issuance and sale
of the Shares or the consummation of the transactions contemplated by this
Agreement or the Exchange Agreement, except as described in the Prospectus;
(o) neither RMOC nor any Subsidiary is, or, after giving effect
to the offering and sale of the Shares, will be an "investment company" or
entity "controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act"), or a
"holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or analogous foreign laws and regulations;
(p) the Company has complied with all provisions of
Section 517.075 of the Florida Statutes (Chapter 92-198, Laws of Florida)
relating to doing business with the Government of Cuba or with any person or
affiliate located in Cuba;
(q) KPMG Peat Marwick LLP, who have certified certain financial
statements of RMOC, RMEC and the Subsidiaries, are independent public
accountants as required by the Securities Act and the Exchange Act;
(r) RMOC and each of the Subsidiaries has filed all federal, state,
local and foreign tax returns which have been required to be filed and have paid
all taxes shown thereon and all assessments received by them or any of them to
the extent that such taxes have become due and are not being contested
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<PAGE>
in good faith; and, except as disclosed in the Registration Statement and the
Prospectus, there is no tax deficiency which has been or might reasonably be
expected to be asserted or threatened against RMOC or the Subsidiaries;
(s) the Company has not taken nor will it take, directly or
indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock;
(t) RMOC and each of the Subsidiaries, directly or indirectly through
the operator of Block B8/32 (the "Block Operator") and the operator of the
Tantawan Field (the "Tantawan Operator"), maintains insurance covering its
properties, operations, personnel and businesses; in the Company's reasonable
judgment, such insurance provides coverage against such losses and risks as is
adequate in accordance with customary industry practice to protect the Company
and its businesses; neither RMOC nor any Subsidiary nor, to the Company's
knowledge, any such operator has received notice from any insurer or agent of
such insurer that substantial capital improvements or other expenditures will
have to be made in order to continue such insurance; all such insurance is
outstanding and duly in force on the date hereof and will be outstanding and
duly in force on the Closing Date and the Additional Closing Date, as the case
may be;
(u) the information underlying the estimates of the reserves of the
Company, which was supplied by the Company to Ryder Scott Company ("Ryder
Scott"), independent petroleum engineers, for purposes of auditing the reserve
reports and estimates of the Company included in the Prospectus at Appendix A
(the "Reserve Report"), including, without limitation, production, costs of
operation and development, current prices for production, agreements relating to
current and future operations, sales of production and special remunerating
benefits and abandonment costs was true and correct in all material respects on
the dates such estimates were made and such information was prepared and was
supplied in accordance with customary industry practices; Ryder Scott were, as
of the date of the Reserve Report, and are, as of the date hereof, independent
petroleum engineers with respect to the Company; the Company is not aware of any
facts or circumstances that would result in a materially adverse change in the
reserves, or the present value of future net cash flows therefrom, as described
in the Prospectus and as reflected in the Reserve Report; estimates of such
reserves and present values as described in the Prospectus and reflected in the
Reserve Reports comply in all material respects to the applicable requirements
of Regulation S-X and Industry Guide 2 under the Act;
(v) neither RMOC, the Subsidiaries nor the Principal Shareholders
has, directly or indirectly, paid or delivered any fee, commission or other sum
of money or item or property, however characterized, to any finder, agent,
governmental official or other party, in the United States or any other country,
which is in any manner related to the business or operations of the Company,
which the Company knows or has reason to believe to have been illegal under any
federal, state or local laws of the United States, Thailand or any other
country having jurisdiction;
(w) no forward-looking statement (as defined in Rule 175 under the
Act) contained in the Registration Statement has been made or reaffirmed without
a reasonable basis or has been disclosed other than in good faith;
(x) each of RMOC, the Subsidiaries and, to the best of the Company's
knowledge, the Tantawan Operator and the Block Operator owns, possesses or has
obtained all licenses, permits,
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certificates, consents, orders, approvals and other authorizations from, and
has made all declarations and filings with, all federal, state, local and
other governmental authorities (including foreign regulatory agencies), all
self-regulatory organizations and all courts and other tribunals, domestic or
foreign, necessary to own or lease, as the case may be, and to operate its
properties and to carry on its and the Concessionaires' business as conducted
as of the date hereof, and the Company has not received any notice of any
proceeding relating to revocation or modification of any such license,
permit, certificate, consent, order, approval or other authorization, except
as described in the Registration Statement and the Prospectus; and each of
the Company and, to the best of the Company's knowledge, the Block Operator
and the Tantawan Operator are in compliance with all laws and regulations
relating to the conduct of its business as conducted as of the date hereof;
(y) there are no existing or, to the best knowledge of the Company,
threatened labor disputes with the employees of the Company, the Block Operator
or the Tantawan Operator or any of their affiliates which are likely to have a
material adverse effect on RMOC and the Subsidiaries, taken as a whole;
(z) RMOC, the Subsidiaries and, to the best of the Company's
knowledge, the Block Operator and the Tantawan Operator (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants and all notice requirements with respect thereto (collectively,
"Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses, (iii) are in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on RMOC and the Subsidiaries, taken as a whole, and (iv) are not
reasonably likely to be required or obligated to pay costs and liabilities
associated with Environmental Laws that would, singly or in the aggregate, have
a material adverse effect on RMOC and the Subsidiaries, taken as a whole;
(aa) each of the Joint Operating Agreement dated as of June 27, 1991,
the Joint Operating Agreement to be effective as of March 3, 1995 (collectively,
the "Joint Operating Agreements"), the Thai Romo Stockholders Agreement, the Gas
Sales Agreement and the Concession has been duly and validly authorized by Thai
Romo, duly executed and delivered by Thai Romo and is a legally valid and
binding obligation of Thai Romo, enforceable against Thai Romo in accordance
with its terms, except (i) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights and remedies generally and (ii) as to general principles of equity,
regardless of whether enforcement is sought in a proceeding at law or in equity;
and both Thai Romo and, to the Company's knowledge, each other party to each of
the above-referenced Agreements, is in compliance in all material respects with
the terms thereof;
(bb) to the Company's knowledge, each Attorney-in-Fact is authorized,
on behalf of each of the Exchanging Securityholders, to execute the Exchange
Agreement and any other documents necessary or desirable in connection with the
exchange of the Exchange Securities by such Exchanging Securityholder under the
Exchange Agreement, to make delivery of the certificates for such Exchange
Securities, to receive the shares of Common Stock in exchange, to give receipts
for such certificates and proceeds, to pay therefrom any expenses to be borne by
the Company or the Exchanging Securityholders in
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<PAGE>
connection with the exchange of such Exchange Securities, to distribute the
shares of Common Stock and any proceeds in exchange to such Exchanging
Securityholder, and to take such other action as may be necessary or
desirable in connection with the Transactions contemplated by this Agreement
and the Exchange Agreement; and
(cc) except as set forth in the Prospectus, as of the date hereof and as of
the Closing Date and Additional Closing Date, as the case may be, (i) neither
the Company nor any Subsidiary has any obligations for the delivery of
hydrocarbons attributable to any of the Company's or any of its Subsidiaries'
properties in the future on account of prepayment, advance payment, take-or-pay
or similar obligations without then or thereafter being entitled to receive full
value therefor, and (ii) neither the Company nor any of its Subsidiaries is
bound by futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts which are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, including, without limitation,
hydrocarbons, currency and securities.
5. Each Principal Shareholder represents and warrants to each Underwriter
and to RMOC that:
(a) prior to giving effect to the Transactions, such Principal
Shareholder has valid and marketable title to the Exchange Securities to be
tendered for exchange by such Principal Shareholder, free and clear of any lien,
claim, security interest equity or other encumbrance, including, without
limitation, any restriction on transfer, except as otherwise described in the
Prospectus or on Schedule B to the Exchange Agreement;
(b) at all relevant times, such Principal Shareholder had and has
full legal right, power and authorization, and any approval required by law, to
sell, assign, transfer and deliver such Exchange Securities in the manner
provided in the Exchange Agreement and the Custodial Agreement, and the delivery
of and exchange of such Exchange Securities thereunder transfers valid and
marketable title to such Exchange Securities to RMOC, free and clear of any
lien, claim, security interest, equity or other encumbrance, except as otherwise
described in the Prospectus;
(c) each of this Agreement, the Exchange Agreement and the Custodial
Agreement has been duly authorized, executed and delivered by or on behalf of
such Principal Shareholder and is the valid and binding agreement of such
Principal Shareholder enforceable against such Principal Shareholder in
accordance with its terms, except that (i) the enforceability hereof or thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
(ii) the remedy of specific performance and other forms of equitable relief may
be subject to certain equitable defenses and to the discretion of the court
before which the proceedings may be brought and (iii) rights to indemnity and
contribution hereunder or thereunder may be limited by federal or state
securities laws or the public policy underlying such laws;
(d) neither the exchange of the Exchange Securities, the execution,
delivery or performance of this Agreement, the Exchange Agreement or the
Custodial Agreement by or on behalf of such Principal Shareholder nor the
consummation by or on behalf of such Principal Shareholder of the Transactions
contemplated hereby and thereby (i) requires any consent, approval,
authorization or other order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may be required for the registration of the Shares
under the Securities Act and the Exchange Act or compliance with state
securities or blue sky laws), or (ii)
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<PAGE>
conflicts or will conflict with or constitutes or will constitute a breach
of, or a default under, any agreement, indenture, lease or other instrument
to which such Principal Shareholder is a party or by which such Principal
Shareholder is or may be bound, or violates or will violate any statute, law,
regulation or filing or judgment, injunction, order or decree applicable to
such Principal Shareholder, or will result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of such Principal
Shareholder pursuant to the terms of any agreement or instrument to which
such Principal Shareholder is a party or by which such Principal Shareholder
may be bound or to which any of the property or assets of such Principal
Shareholder is subject;
(e) the information pertaining to such Principal Shareholder provided
to RMOC for inclusion under the captions "The Transactions," "Management,"
"Certain Related Party Transactions," "Certain Relationships" and "Security
Ownership of Management" in the Prospectus does not, and on the Closing Date and
the Additional Closing Date, as applicable, will not, contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(f) such Principal Shareholder, in consideration of the obligations
of the Underwriters and the mutual agreements hereunder, hereby (i) represents
and warrants to the Underwriters that the representations and warranties of such
Principal Shareholder set forth in the Exchange Agreement are true and correct
on the date hereof and on the Closing Date and the Additional Closing Date, as
applicable, (ii) represents and warrants that such Principal Shareholder has
duly executed and delivered the Exchange Agreement and the Custodial Agreement
and has taken all other actions required by such Principal Shareholder to effect
the Transactions, (iii) represents and warrants that Schedule B of the Exchange
Agreement accurately describes all of the securities of RMEC and Thai Romo owned
directly or indirectly by such Principal Shareholder and (iv) consents that the
Underwriters may rely, and acknowledges that the Underwriters have relied, on
the representations, warranties and agreements of such Principal Shareholder in
the Exchange Agreement and the Custodial Agreement as if set forth in full
herein;
(g) such Principal Shareholder has not taken, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock; and
(h) such Principal Shareholder does not have any knowledge that the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
6. RMOC covenants and agrees with each of the several Underwriters as
follows:
(a) to use its best efforts to cause the Registration Statement
to become effective at the earliest possible time and, if required, to file the
final Prospectus with the Commission within the time periods specified by Rule
424(b) and Rule 430A under the Securities Act and to furnish copies of the
Prospectus to the Underwriters in New York City prior to 10:00 a.m., New York
City time, on the Business Day next succeeding the date of this Agreement in
such quantities as the Representatives may reasonably request;
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<PAGE>
(b) to deliver, at the expense of RMOC, to the Representatives
five signed copies of the Registration Statement (as originally filed) and each
amendment thereto, in each case including exhibits, and to each other
Underwriter a conformed copy of the Registration Statement (as originally filed)
and each amendment thereto, in each case without exhibits and, during the period
mentioned in paragraph (e) below, to each of the Underwriters as many copies of
the Prospectus (including all amendments and supplements thereto) as the
Representatives may reasonably request;
(c) before filing any amendment or supplement to the
Registration Statement or the Prospectus, whether before or after the time the
Registration Statement becomes effective, to furnish to the Representatives a
copy of the proposed amendment or supplement for review and not to file any such
proposed amendment or supplement to which the Representatives reasonably object;
(d) to advise the Representatives promptly, and to confirm such
advice in writing (i) when the Registration Statement has become effective, (ii)
when any amendment to the Registration Statement has been filed or becomes
effective, (iii) when any supplement to the Prospectus or any amended Prospectus
has been filed and to furnish the Representatives with copies thereof, (iv) of
any request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for any additional information,
(v) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the Prospectus or the
initiation or threatening of any proceeding for that purpose, (vi) of the
occurrence of any event, within the period referenced in paragraph (e) below, as
a result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
and (vii) of the receipt by the Company of any notification with respect to any
suspension of the qualification of the Shares for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and to use its best efforts to prevent the issuance of any such stop
order, or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any order suspending any such qualification
of the Shares, or notification of any such order thereof and, if issued, to
obtain as soon as possible the withdrawal thereof;
(e) if, during such period of time after the first date of the
public offering of the Shares as in the opinion of counsel for the Underwriters
a prospectus relating to the Shares is required by law to be delivered in
connection with sales by the Underwriters or any dealer, any event shall occur
as a result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with law, forthwith to prepare and
furnish, at the expense of the Company, to the Underwriters and to the dealers
(whose names and addresses the Representatives will furnish to the Company) to
which Shares may have been sold by the Representatives on behalf of the
Underwriters and to any other dealers upon request, such amendments or
supplements to the Prospectus as may be necessary so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus will comply with law;
(f) to endeavor to qualify the Shares for offer and sale under
the securities or blue sky laws of such jurisdictions as the Representatives
shall reasonably request and to continue such qualification
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<PAGE>
in effect so long as reasonably required for distribution of the Shares;
PROVIDED that RMOC shall not be required to file a general consent to service
of process in any jurisdiction;
(g) to make generally available to its security holders and to
the Representatives as soon as practicable an earnings statement covering a
period of at least twelve months beginning with the first fiscal quarter of RMOC
occurring after the effective date of the Registration Statement, which shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of
the Commission promulgated thereunder;
(h) for two years following the Closing Date, to furnish to the
Representatives copies of all reports or other communications (financial or
other) furnished to holders of the Shares, and copies of any reports and
financial statements furnished to or filed with the Commission or any national
securities exchange;
(i) for a period of 180 days after the date of the initial
public offering of the Shares not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise without the prior
written consent of the Representatives, other than the Shares to be sold
hereunder, any shares of Common Stock of RMOC issued upon the exercise of
options granted under the employee and director stock plans described in the
Prospectus and exchanges pursuant to the Transactions;
(j) to use the net proceeds received by RMOC from the sale of
the Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
(k) to use its best efforts to have the Shares quoted on the
Nasdaq National Market;
(l) to file with the Commission such reports on Form SR as may
be required by Rule 463 under the Securities Act;
(m) whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
costs and expenses incident to the performance of its obligations hereunder,
including, without limiting the generality of the foregoing, all costs and
expenses (i) incident to the preparation, issuance, execution and delivery of
the Shares, (ii) incident to the preparation, printing and filing under the
Securities Act of the Registration Statement, the Prospectus and any preliminary
prospectus (including in each case all exhibits, amendments and supplements
thereto), (iii) incurred in connection with the registration or qualification of
the Shares under the blue sky or securities laws of such jurisdictions as the
Representatives may designate (including fees of counsel for the Underwriters
and its disbursements), (iv) in connection with the listing of the Shares on the
Nasdaq National Market (including fees and expenses of counsel to the Company),
(v) related to the filing with, and clearance of the offering by, the National
Association of Securities Dealers, Inc., (vi) in connection with the printing
(including word processing and duplication costs) and delivery of this
Agreement, the preliminary and supplemental blue sky memoranda and the
furnishing to the Underwriters
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<PAGE>
and dealers of copies of the Registration Statement and the Prospectus,
including mailing and shipping, as herein provided, (vii) any transportation
and any other expenses incurred by RMOC in connection with a "road show"
presentation to potential investors, (viii) the cost of preparing stock
certificates, (ix) the cost and charges of any transfer agent and any
registrar and (x) the fees and expenses of the Company's accountants,
engineers and counsel (including local, foreign and special counsel) to the
Company; and
(n) Prior to the Closing Date to furnish to you duly executed and
delivered "lock-up" agreements, in form and substance substantially as set forth
in Section 6(i) hereto, signed by each of its current officers and directors,
each of the Principal Shareholders and each of the Exchanging Securityholders;
and prior to or on the date of this Agreement to deliver an Exchange Agreement
duly executed by each Exchanging Securityholder into Custody pursuant to the
Custodial Agreement.
7. Each of the Principal Shareholders covenants and agrees with the
Underwriters as follows:
(a) to cooperate to the extent necessary to cause the Registration
Statement and any post-effective amendment thereto to become effective at the
earliest possible time;
(b) to pay or cause to be paid all United States federal and other
fees and taxes (including, without limitation, foreign stamp duty and transfer
fees and taxes), if any, on the transfer or exchange of such Exchange Securities
that are tendered for exchange by the Exchanging Securityholders and the shares
of Common Stock issued in exchange by RMOC;
(c) to do or to perform or cause to be done or performed all things
required to be done or performed by the Exchanging Shareholders prior to the
Closing Date or the Additional Closing Date, as the case may be, to satisfy all
conditions precedent to the delivery of the Exchange Securities pursuant to this
Agreement and the Exchange Agreement;
(d) in consideration of the obligations of the Underwriters and the
mutual agreements hereunder, (i) to use its best efforts to consummate all of
the Transactions contemplated by the Exchange Agreement and the Custodial
Agreement and to comply with all the terms and conditions of such agreements and
(ii) not to consent to the amendment of the Exchange Agreement or the Custodial
Agreement without the prior written consent of the Representatives;
(e) to have executed a "lock-up" agreement, Exchange Agreement and
Custodial Agreement as provided in Section 6(n) above and not to sell, contract
to sell or otherwise dispose of any Common Stock prior to the expiration of 180
days after the date of the Prospectus, without the prior written consent of J.P.
Morgan Securities Inc.;
(f) not to have taken, nor to take, directly or indirectly, any
action designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Shares; and
(g) to advise you promptly upon becoming aware, and if requested by
you, to confirm such advice in writing, of any change in the condition
(financial or other), business, prospects, properties, net worth or results of
operations of the Company or any of its affiliates, or of the happening of any
event that makes any statement made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration
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<PAGE>
Statement or the Prospectus (as then amended or supplemented) in order to
state a material fact required by the Securities Act or the regulations
thereunder to be stated therein or necessary in order to make the statements
therein not misleading, or of the necessity to amend or supplement the
Prospectus (as then amended or supplemented) to comply with the Securities
Act or any other law.
8. The several obligations of the Underwriters hereunder to purchase the
Shares on the Closing Date or the Additional Closing Date, as the case may be,
are subject to the performance by RMOC, RMEC and the Principal Shareholders of
their obligations hereunder and to the following additional conditions:
(a) the Registration Statement shall have become effective (or
if a post-effective amendment is required to be filed under the Securities Act,
such post-effective amendment shall have become effective) not later than 5:00
p.m., New York City time, on the date hereof; and no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
shall be in effect, and no proceedings for such purpose shall be pending before
or threatened by the Commission; the Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Securities Act and in
accordance with Section 6(a) hereof; and all requests for additional information
shall have been complied with to the satisfaction of the Representatives;
(b) the representations and warranties of each of RMOC, RMEC and
the Principal Shareholders contained herein are true and correct on and as of
the Closing Date or the Additional Closing Date, as the case may be, as if made
on and as of the Closing Date or the Additional Closing Date, as the case may
be, and each of RMOC, RMEC and the Principal Shareholders shall have complied
with all agreements and all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date or the Additional Closing Date, as the
case may be;
(c) since the respective dates as of which information is given
in the Prospectus there shall not have been any change in the capital stock or
long-term debt of RMOC or any of the Subsidiaries or any material adverse
change, or any development involving a prospective material adverse change, in
or affecting the general affairs, business, prospects, management, financial
position, stockholders' equity or results of operations of RMOC and the
Subsidiaries, taken as a whole, otherwise than as set forth or contemplated in
the Prospectus, the effect of which in the judgment of the Representatives makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares on the Closing Date or the Additional Closing Date, as
the case may be, on the terms and in the manner contemplated in the Prospectus;
(d) neither RMOC nor any of the Subsidiaries has sustained since the
date of the latest audited financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus;
(e) the Representatives shall have received on and as of the
Closing Date or the Additional Closing Date, as the case may be, a certificate
of an executive officer of RMOC with specific knowledge about the Company's
financial matters, satisfactory to the Representatives, to the effect set forth
in subsections (a) through (d) (with respect to the respective representations,
warranties, agreements
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and conditions of RMOC and RMEC) of this Section and to the further effect
that there has not occurred any material adverse change, or any development
involving a prospective material adverse change, in or affecting the general
affairs, business, prospects, management, financial position, stockholders'
equity or results of operations of RMOC and the Subsidiaries, taken as a
whole, from that set forth or contemplated in the Registration Statement;
(f) Fulbright & Jaworski L.L.P., counsel for the Company, shall
have furnished to the Representatives their written opinion, dated the Closing
Date or the Additional Closing Date, as the case may be, in form and substance
reasonably satisfactory to the Representatives, to the effect that:
(i) RMOC has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own its properties and conduct its business as
described in the Prospectus;
(ii) RMOC has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of the
State of Texas;
(iii) each of RMEC and Thai Romo Holdings, Inc. ("TRH") has
been duly incorporated and is validly existing as a corporation under the laws
of its jurisdiction of incorporation, with corporate power and authority to own
its properties and conduct its business as described in the Prospectus; TRH has
been duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of the State of Texas; all of the outstanding
shares of capital stock of RMEC and TRH have been duly and validly authorized
and are validly issued, fully paid and non-assessable, and, prior to giving
effect to the Transactions, as to TRH, were owned of record by RMOC, and, as to
RMEC, were owned of record by the Principal Shareholders and Mr. Sidney F.
Jones;
(iv) such counsel does not know of any statutes,
regulations, contracts or other documents that are required to be described in
the Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(v) each of RMOC and RMEC has the corporate power and authority
to enter into this Agreement, the Exchange Agreement and the Custodial
Agreement, and RMOC has the corporate power and authority to issue, sell and
deliver the Shares and the Nonregistered Shares;
(vi) this Agreement, the Exchange Agreement and the
Custodial Agreement have been duly authorized, executed and delivered by RMOC
and RMEC;
(vii) the authorized capital stock of RMOC conforms as to
legal matters in all material respects to the description thereof under the
caption "Description of Capital Stock" in the Prospectus;
(viii) the shares of capital stock of RMOC outstanding prior
to the issuance of the Shares have been duly authorized and are validly issued,
fully paid and non-assessable, free and clear of any liens or encumbrances
within the meaning of the Uniform Commercial Code;
(ix) the Shares and the Nonregistered Shares have been duly
authorized, and when the Shares have been delivered to and paid for by the
Underwriters in accordance with the terms of
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this Agreement and the Nonregistered Shares have been delivered to the
Exchanging Securityholders upon exchange of Exchange Securities in accordance
with the terms of the Exchange Agreement, the Shares and the Nonregistered
Shares will be validly issued, fully paid and non-assessable; and the
issuances of the Shares and the Nonregistered Shares are not subject to any
preemptive or similar rights pursuant to any statute, the certificate of
incorporation or the bylaws of RMOC;
(x) the statements in the Prospectus under the captions
"Business and Properties - Tax Regulation," "Certain United States Federal Tax
Considerations for Non-U.S. Holders of Common Stock," "Description of Capital
Stock" and "Shares Eligible for Future Sale" and in the Registration Statement
in Items 14 and 15, insofar as such statements constitute a summary of the terms
of the Common Stock, legal matters, documents or proceedings referred to
therein, fairly present the information required by the rules and regulations
under the Securities Act with respect to such terms, legal matters, documents or
proceedings;
(xi) the Registration Statement and the Prospectus and any
amendments and supplements thereto (other than the financial statements and
related schedules and the other financial and statistical, reserve or related
data and information therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Securities Act;
(xii) the issuance and sale of the Shares being delivered on
the Closing Date or the Additional Closing Date, as the case may be, and the
performance by each of RMOC and RMEC of its obligations under this Agreement and
the consummation of the transactions contemplated herein and under the Exchange
Agreement and the Custodial Agreement will not result in a breach of any of the
terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument filed as an
exhibit to the Registration Statement, nor will any such action result in any
violation of the provisions of the certificate of incorporation or the bylaws,
as amended, of RMOC, RMEC or TRH or any applicable law or statute or any order,
rule or regulation of any court or governmental agency that is known to such
counsel to be applicable to RMOC, RMEC or TRH;
(xiii) no consent, approval, authorization, registration or
qualification of, or filing with, any court or governmental agency is required
by statute, rule or regulation for the issuance and sale of the Shares or the
Nonregistered Shares or the consummation of the Transactions in the manner
described in the Registration Statement, the Exchange Agreement and the
Custodial Agreement, except such consents, approvals, authorizations,
registrations or qualifications as have been obtained under the Securities Act
and the Exchange Act (and except as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Shares by
the Underwriters, as to which such counsel need express no opinion);
(xiv) neither RMOC nor any of the Subsidiaries is, nor after
giving effect to the Transactions and the offering and sale of the Shares and
the Nonregistered Shares will be, an "investment company" or entity "controlled"
by an "investment company," as such terms are defined in the Investment Company
Act, nor a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended; and
(xv) to the knowledge of such counsel, no holder of securities of
RMOC or any of the Subsidiaries has rights to require the registration of such
securities as a result of the filing of the Registration Statement or in
connection with the offering of the Shares or the Transactions.
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Such counsel shall also state that such counsel has participated in
conferences with representatives of the Underwriters, officers and other
representatives of the Company and representatives of the independent
certified public accountants of the Company, at which conferences the
contents of the Prospectus and related matters were discussed and, although
such counsel is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Prospectus (except to the extent set forth in paragraph (x)), on the basis of
the foregoing (relying as to materiality to a large extent upon officers and
other representatives of the Company), no facts have come to such counsel's
attention that lead them to believe that the Registration Statement and the
prospectus included therein at the time the Registration Statement became
effective contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and that the Prospectus, as amended or
supplemented, if applicable, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (provided, that such counsel need make no comment with respect to
(i) the financial statements and schedules contained therein, including the
notes thereto, the auditors' report thereon and the related summary of
accounting policies, (ii) the reports of the independent petroleum engineers
(the "Engineers") and the related schedules contained therein prepared based
on information provided by the Engineers and (iii) the other financial and
engineering data included therein) and, further, that no facts have come to
such counsel's attention that lead them to believe that, other than as set
forth or contemplated in the Prospectus, there are any legal or governmental
investigations, actions, suits or proceedings pending or threatened against
or affecting RMOC or any of the Subsidiaries or any of their respective
properties or to which RMOC or any of the Subsidiaries is or may be a party
or to which any property of RMOC or any of the Subsidiaries is or may be the
subject which, if determined adversely to RMOC or any of the Subsidiaries,
could individually or in the aggregate have, or reasonably be expected to
have, a material adverse effect on the general affairs, business, prospects,
management, financial position, stockholders' equity or results of operations
of RMOC and the Subsidiaries, taken as a whole.
In rendering such opinions, such counsel may rely as to matters of fact, to
the extent such counsel deems proper, on certificates of appropriate officers of
RMOC and the Subsidiaries and certificates or other written statements of
officials of jurisdictions having custody of documents respecting the
incorporation, corporate existence or good standing of RMOC, RMEC and TRH.
The opinion of Fulbright & Jaworski L.L.P. described above shall be rendered
to the Underwriters at the request of RMOC and shall so state therein.
(g) the Representatives shall have received an opinion of Baker &
McKenzie, foreign counsel for the Company, dated the Closing Date or the
Additional Closing Date, as the case may be, in form and substance satisfactory
to the Representatives to the effect that:
(i) neither (a) the exchange (the "Exchange") of shares of capital
and the Thai Romo Notes for shares of Common Stock, (b) the execution, delivery
and performance of the Exchange Agreement and the Custodial Agreement with
respect to the Exchange, (c) the offering, issuance and sale of the Shares
pursuant to this Agreement nor (d) the consummation by the Company of the
transactions contemplated thereby (insofar as such Transactions involve matters
governed by Thai law and regulations or by the Memorandum and Articles)
(w) requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body,
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agency or official of Thailand or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
Memorandum and Articles, Stockholders Agreement or other governing documents
of Thai Romo, (x) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the Concession, the Designation,
the Joint Operating Agreements or the Gas Sales Agreement, (y) violates any
statute, law, rule, regulation, administrative interpretation or filing or
judgment, injunction, order or decree applicable to Thai Romo or any of its
properties or (z) will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of Thai Romo pursuant to
the terms of the Memorandum and Articles, the Stockholders Agreement, the
Concession, the Designation, the Joint Operating Agreements or the Gas Sales
Agreement;
(ii) Thai Romo has been duly organized and is validly existing as a
private limited company under the laws of Thailand, with corporate power and
authority to conduct its business under the Concession and the Designation; its
Memorandum and Articles, in the form attached to such opinion, have been duly
approved and adopted by Thai Romo by all formalities required under Thai law;
and, to such counsel's knowledge, all filings required pursuant to the
Memorandum and Articles have been made with the proper governmental authorities
of Thailand, and, to such counsel's knowledge, no such filings are required
under the laws of Thailand pursuant to the terms of the Concession, the
Designation, the Joint Operating Agreements or the Gas Sales Agreement;
(iii) the shares of capital of Thai Romo consist solely of
1,065,217 ordinary shares that have been duly authorized and validly issued, are
duly registered in the registry of shares of Thai Romo in the names and numbers
of shares set forth on an exhibit to such opinion, are fully paid and
nonassessable; none of such shares have been issued in violation of any rights
set forth in the Memorandum and Articles or the Stockholders Agreement; and, to
such counsel's knowledge, no action has been taken by Thai Romo to increase,
decrease or otherwise change its authorized capital or its authorized or issued
shares of capital;
(iv) the statements in the Prospectus under the captions entitled
"Business and Properties" (insofar as such statements constitute a summary of
Thai legal and regulatory provisions and proceedings and of the Memorandum and
Articles, the Concession, the Designation, the Joint Operating Agreements and
the Gas Sales Agreement) fairly present the applicable information with respect
to such legal and regulatory provisions and proceedings, the Memorandum and
Articles, the Stockholders Agreement, the Concession, the Designation, the Joint
Operating Agreements, the Gas Sales Agreement and the documents and proceedings
therein described and do not include any untrue statement or omission of a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(v) to the best of such counsel's knowledge, Thai Romo has not taken
any action or had any steps taken or legal proceedings started or threatened
against Thai Romo for its winding up or dissolution, nor has any event of
dissolution occurred under its Memorandum or Articles;
(vi) all dividends and other distributions declared and payable on the
ordinary shares of Thai Romo may under current Thai law, regulations and
official practices, the Memorandum and Articles, the Stockholders Agreement, the
Concession, the Designation, the Joint Operating Agreements and the other
governing documents of Thai Romo be paid to the shareholders of Thai Romo in
Thai Baht and may be converted into U.S. dollars or other currency that may be,
after proper approval is obtained from a commercial bank on behalf of the Bank
of Thailand, freely transferred out of Thailand without any other
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approval, any limitation as to currency or amount, any payment of taxes or
fees or any other restriction or payment of any kind;
(vii) to such counsel's knowledge, based on an inspection and
review of the corporate records, the registry of shares of Thai Romo, the
Concession, the Joint Operating Agreements, the Memorandum and Articles and the
Stockholders Agreement none of the shares of capital of Thai Romo is subject to
any lien or encumbrance under Thai law or will be subject to any such lien or
encumbrance (except for the pledge described on Schedule B to the Exchange
Agreement) upon consummation of the transactions contemplated by this Agreement,
the Exchange Agreement and the Custodial Agreement;
(viii) to the best of such counsel's knowledge, based on an
inspection of the Memorandum and Articles, the corporate records and the
registry of shares of Thai Romo, there are no rights existing under Thai law
that would entitle any person to purchase or otherwise to acquire any shares or
other ownership interest in the capital of Thai Romo, other than the Thai Romo
Rights, which rights are not exercisable in connection with any of the
transactions contemplated in the Prospectus, this Agreement, the Exchange
Agreement or the Custodial Agreement;
(ix) to the best of such counsel's knowledge, as of the date hereof,
there is no pending or threatened action, suit or proceeding before any court or
any governmental agency or body or any arbitrator in Thailand involving
Thai Romo or its affiliates, the Concession, the Designation, the Joint
Operating Agreements or any of the property or assets of Thai Romo or its
affiliates;
(x) dividends payable by Thai Romo from its petroleum business under
the Petroleum Income Tax Act No. 4 to its Thai corporate shareholders or foreign
corporate shareholders, including RMOC, RMEC and TRH, may be made free and
clear of and without deduction for or on account of any taxes, imposts,
withholdings or deductions of any kind imposed, assessed or levied by Thailand
or any authority thereof or therein; payments of interest and other payments in
the nature of interest made by Thai Romo to a lender being a foreign company not
doing business in Thailand are subject to Thai withholding tax at a rate of 15
percent, subject to any applicable bilateral tax treaty between Thailand and the
country of the recipient thereof;
(xi) under the laws of Thailand, none of the shareholders of Thai Romo
will be deemed to be resident, domiciled or carrying on any business activity in
Thailand or subject to any taxes, imposts or duties as a result only of its
status as a shareholder or its receipt of dividends paid out of petroleum
busines under the Petroleum Income Tax Act No. 4 with respect to the shares of
Thai Romo or as a result of the transactions contemplated by this Agreement,
the Exchange Agreement or the Custodial Agreement, other than stamp duty of 0.1
percent on the transfer of Thai Romo shares if the share transfer documents have
been signed in Thailand or signed outside of Thailand but brought into Thailand,
provided that the exchange of the shares of Thai Romo under the Exchange
Agreement is effected entirely outside of Thailand and between non-residents of
Thailand;
(xii) each of the Concession and the Designation is, to the best
of such counsel's knowledge, in full force and effect and there are no
discrepancies in the English translation of the official Thai Concession and the
letter of Designation;
(xiii) under the terms of the Concession and according to
applicable Thai statutes, regulations, decrees, orders and official practices,
Thai Romo, the Block Operator, the Tantawan Operator
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and Sophonpanich are deemed to constitute the Concessionaire (the
"Concessionaire") pursuant to the Concession and are deemed to have the
status of a separate, independent and autonomous, juristic person for all
purposes related to the Concession;
(xiv) dividends or distributions, either in cash or any other
form, paid on the shares of Thai Romo are not subject to any Thai withholding or
other tax;
(xv) the choice of New York law as the proper law of the Underwriting
Agreement and the choice of Texas law as the proper law of the Exchange
Agreement and the Custodial Agreement is enforceable under the Thai Conflict of
Laws Act;
(xvi) Thai Romo may be sued in its own name in the courts of
Thailand, and under the laws of Thailand would not be entitled to claim for
itself or its revenues or assets any immunity from suit, court jurisdiction,
attachment in aid of execution of a judgment or prior to judgment, set off,
execution of a judgment or any other legal process with respect to its
obligations under the Concession or the Joint Operating Agreements;
(xvii) upon the transfer by the Exchanging Securityholders of the
Thai Romo Notes pursuant to the Exchange Agreement (assuming due execution and
delivery of the Exchange Agreement by the parties thereto), Thai Romo will be
released under Thai law from all of its obligations to such Exchanging
Securityholders related to such Thai Romo Notes;
(xviii) the parties signatory to the Exchange Agreement and the
Custodial Agreement constitute all of the parties required to cause the Exchange
to be legal, valid and binding under Thai law in accordance with the terms of
the Exchange Agreement and the Custodial Agreement (assuming the due execution
and delivery thereof by the parties thereto); the provisions of the Exchange
Agreement and the Custodial Agreement are in proper form under Thai law to
legally transfer to RMOC all of the shares of capital of Thai Romo held by the
Exchanging Securityholders free and clear of any lien or encumbrance (except as
described in Schedule B to the Exchange Agreement) and to effect the other
transactions set forth in the Exchange Agreement and the Custodial Agreement
(assuming the due execution and delivery thereof); the provisions of the
Exchange Agreement and the Custodial Agreement are legally sufficient under Thai
law to terminate all rights of the Exchanging Securityholders as securityholders
of Thai Romo and to vest in RMOC good and marketable title, free and clear of
any lien or encumbrance (except as described in Schedule B to the Exchange
Agreement), to all of the shares of capital of Thai Romo, except for five shares
of capital of Thai Romo that will be owned by five of the Exchanging
Securityholders designated by RMOC; such ownership of the shares of capital of
Thai Romo by RMOC and such Exchanging Securityholders does not violate any
provision of Thai law, the Concession, the Designation, the Joint Operating
Agreements, the Memorandum or Articles or the Thai Romo Stockholders Agreement
and satisfies all legal requirements applicable to Thai Romo as a private
limited company validly existing under Thai law; the Exchanging Securityholders
will not have any rights (assuming the due execution and delivery of the
Exchange Agreement) to receive any dividends or distributions or any payments
with respect to any reserves of Thai Romo other than as described in the
Prospectus; and no taxes, fees or payments are required to be paid by the
Company under Thai law in connection with the transactions contemplated by the
Exchange Agreement and the Custodial Agreement except as provided for therein;
and
(xix) to such counsel's knowledge, Thai Romo owns, possesses or
has obtained all licenses, permits, certificates, consents, orders, approvals
and other authorizations from, and has made all
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declarations and filings with, all governmental authorities (including
regulatory agencies), all self-regulatory organizations and all courts and
other tribunals necessary to own or lease, as the case may be, and to operate
its properties and to carry on its business as conducted as of the date
hereof, and Thai Romo has not received any actual notice of any proceeding
relating to revocation or modification of any such license, permit,
certificate, consent, order, approval or other authorization, except as
described in the Registration Statement and the Prospectus; and Thai Romo
and, to the best of the counsel's knowledge, the Block Operator and the
Tantawan Operator are in compliance with all laws and regulations relating to
the conduct of its business as conducted as of the date of the Prospectus.
Based upon such counsel's representation of Thai Romo and its
affiliates and such counsel's knowledge of Thai law and official practices, such
counsel has no reason to believe that Thai Romo has conducted or is conducting
its business or operations otherwise than in accordance with the Memorandum and
Articles, the Concession, the Designation and the Joint Operating Agreements, or
that any waivers, agreements or understandings exist with respect to the matters
contemplated therein except as set forth therein.
Such counsel may state that such opinion is limited in all respects to
the laws of Thailand and that such opinion is rendered for the benefit of the
Underwriters at the request of Thai Romo and may be relied upon by the
Underwriters in connection with the Exchange, the offering of the Shares and the
other transactions referenced in such opinion.
(h) on or prior to the Closing Date or Additional Closing Date, as the
case may be, the Representatives shall have received such certificates from the
chief operating officer and the chief financial officer of RMOC and such
opinions, from counsel reasonably satisfactory to the Representatives, as the
Representatives may reasonably request with respect to the following matters:
(i) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental investigations, actions, suits or proceedings
pending or threatened against or affecting RMOC or any of the Subsidiaries or
any of their respective properties or to which RMOC or any of the Subsidiaries
is or may be a party or to which any property of RMOC or any of the Subsidiaries
is or may be the subject which, if determined adversely to RMOC or any of the
Subsidiaries, could individually or in the aggregate have, or reasonably be
expected to have, a material adverse effect on the general affairs, business,
prospects, management, financial position, stockholders' equity or results of
operations of RMOC and the Subsidiaries, taken as a whole;
(ii) neither RMOC, RMEC, TRH nor Thai Romo is, or with the giving
of notice or lapse of time or both would be, in violation of or in default
under, its certificate of incorporation or bylaws (or, as to Thai Romo, its
Memorandum and Articles), as amended, or any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which RMOC, RMEC, TRH or Thai
Romo is a party or by which it or any of them or any of their respective
properties is bound, except for violations and defaults which individually and
in the aggregate are not material to RMOC and the Subsidiaries, taken as a
whole; the issuance and sale of the Shares being delivered on the Closing Date
or the Additional Closing Date, as the case may be, and the performance by each
of RMOC and RMEC of its obligations under this Agreement and the consummation of
the transactions contemplated herein and under the Exchange Agreement and the
Custodial Agreement will not result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which
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RMOC, RMEC, TRH or Thai Romo is a party or by which RMOC, RMEC, TRH or Thai
Romo is bound or to which any of the property or assets of RMOC, RMEC or TRH
is subject;
(iii) prior to giving effect to the Transactions, all of the
shares of capital stock of RMEC were owned of record by the Principal
Shareholders and Mr. Sidney F. Jones, and all of the shares of capital stock of
TRH were owned of record by RMOC, in each case, free and clear of any liens or
encumbrances within the meaning of the Uniform Commercial Code; and all of the
outstanding shares of capital stock of RMEC and TRH, after giving effect to the
Transactions, will be owned directly by RMOC, free and clear of any liens or
encumbrances within the meaning of the Uniform Commercial Code;
(iv) each of the Principal Shareholders has full legal right,
power and authorization, and any consent or approval required by law, any court
or any governmental agency or body, to sell, assign, transfer and deliver good
and marketable title to the Exchange Securities, in the numbers and amounts
shown on Schedule B to the Exchange Agreement, free and clear of any liens or
encumbrances, other than the pledges described on Schedule B to the Exchange
Agreement; and
(v) the delivery of certificates for the Exchange Securities by the
Principal Shareholders pursuant to the Exchange Agreement and the Custodial
Agreement, in the numbers and amounts shown on Schedule B to the Exchange
Agreement, will pass good and valid title to such Exchange Securities to RMOC
free and clear of any liens or encumbrances, other than the pledges described on
Schedule B to the Exchange Agreement.
(i) on the effective date of the Registration Statement and the effective
date of the most recently filed post-effective amendment to the Registration
Statement and also on the Closing Date or Additional Closing Date, as the case
may be, KPMG Peat Marwick LLP shall have furnished to you letters, dated the
respective dates of delivery thereof, in form and substance reasonably
satisfactory to you, containing statements and information of the type
customarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus;
(j) the Representatives shall have received on and as of the Closing Date
or Additional Closing Date, as the case may be, an opinion of Andrews & Kurth
L.L.P., counsel to the Underwriters, with respect to the due authorization and
valid issuance of the Shares, the Registration Statement, the Prospectus and
other related matters as the Representatives may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(k) on or prior to the Closing Date or Additional Closing Date, as the
case may be, RMOC, RMEC and each of the Principal Shareholders shall have
furnished to the Representatives such further certificates and documents as the
Representatives shall reasonably request;
(l) the "lock-up" agreements, each substantially as set forth in Section
6(i) herein, between you and certain stockholders, officers and directors of the
Company relating to sales and certain other dispositions of shares of Common
Stock or certain other securities, delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date or the Additional
Closing Date, as the case may be;
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(m) all the representations and warranties of the Principal Shareholders
contained in this Agreement shall be true and correct, on and as of the date
hereof and on and as of the Closing Date as if made on and as of the Closing
Date, and you shall have received a certificate, dated the Closing Date and
signed by or on behalf of the Principal Shareholders to the effect set forth in
this Section 8(m) and in Section 8(l) hereof; the Transactions shall have been
consummated and the Exchange Agreement and the Custodial Agreement shall be in
full force and effect as executed and delivered as of the date hereof, without
any change or modification by operation of law or otherwise;
(n) the Exchanging Securityholders shall not have failed at or prior to
the date hereof or the Closing Date to have performed or complied with any of
their agreements contained in the Exchange Agreement or the Custodial Agreement
and required to be performed or complied with by them at or prior to the date
hereof or the Closing Date; at the Closing, RMOC shall have furnished "lock-up"
letters in substantially in form and substance set out in Section 6(i) and to
the reasonable satisfaction to the Representatives, duly executed from the
persons referred to in Section 6(n);
(o) neither RMOC nor any Subsidiary shall have, directly or indirectly,
paid or delivered any fee, commission or other sum of money or item or property,
however, characterized, to any finder, agent, government official or other party
in the United States, Thailand or any other country, which is in any matter
related to the business or operations of the Company, which the Company knows or
has reason to believe to have been illegal under any federal, state or local
laws of the United States, Thailand or any other country having jurisdiction;
(p) RMOC will provide a bring-down letter from Ryder Scott on the Closing
Date and the Additional Closing Date, as the case may be;
(q) the Stockholders Agreement of Thai Romo shall have been terminated as
of the Closing Date; and
(r) as of the Closing Date and the Additional Closing Date, as the case
may be, either (i) the lending commitment letter dated _____________________
from __________________ shall be in full force and effect on the terms set
forth therein or (ii) definitive agreements shall have been executed and
delivered with respect to such lending commitment, on the terms set forth in
the lending commitment letter described in clause (i).
9. RMOC and each Principal Shareholder agree to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
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 and
liabilities (including, without limitation, the legal fees and other expenses
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (as
amended or supplemented if RMOC shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by 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 or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Underwriter furnished to RMOC in
writing by such Underwriter through the Representatives expressly for use
therein, and provided that such indemnity with respect to any preliminary
prospectus shall not inure to the benefit of the Underwriter (or any person
controlling the Underwriter) from whom the person asserting any such loss,
claim, damage or liability
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purchased the Shares which are the subject thereof if such person did not
receive a copy of the Prospectus (or the Prospectus as amended and
supplemented) at or prior to the confirmation of the sale of such Shares to
such person in any case where such delivery is required by the Securities Act
and the untrue statement or omission of a material fact contained in such
preliminary prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented), provided that RMOC shall have delivered the
Prospectus, as amended or supplemented, to the Underwriters on a timely basis
to permit such delivery. Notwithstanding anything in this Agreement to the
contrary, each of the Principal Shareholders' aggregate liability, which
liability shall be several and not joint, under this Agreement, including
under this Section 9, shall be limited to an amount equal to the gross
(before deducting expenses) cash proceeds of $_______ and $_______,
respectively, (an aggregate of $24.6 million) received by Messrs. Rutherford
and Moran from the Transactions (as described in the Prospectus) pursuant to
this Agreement, the Exchange Agreement and the other agreements related to
the Transactions and shall be subject to the procedures set forth in this
Section 9.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless RMOC, its directors and officers who sign the Registration Statement,
each person who controls RMOC within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act and the Principal Shareholders to the
same extent as the foregoing indemnity from RMOC and the Principal Shareholders
to each Underwriter, but only with reference to information relating to such
Underwriter furnished to RMOC in writing by such Underwriter through the
Representatives expressly for use in the Registration Statement, the Prospectus,
any amendment or supplement thereto, or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential materially differing interests between
them. It is understood that the Indemnifying Person shall not, in connection
with any proceeding or related proceeding in the same jurisdiction, be liable
for the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Indemnified Persons, and that all such fees and expenses
shall be reimbursed as they are incurred. Any such separate firm for the
Underwriters and such control persons of Underwriters shall be designated in
writing by J.P. Morgan Securities Inc. and any such separate firm for RMOC, its
directors, its officers who sign the Registration Statement and such control
persons of RMOC shall be designated in writing by RMOC. The Indemnifying Person
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify any
Indemnified Person to the extent set forth herein from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for fees and expenses of
counsel as contemplated
-26-
<PAGE>
by the second and third sentences of this paragraph, the Indemnifying Person
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than
30 days after receipt by such Indemnifying Person of the aforesaid request
and (ii) such Indemnifying Person shall not have reimbursed the Indemnified
Person in accordance with such request (except as to any amounts contested in
writing in good faith by such Indemnifying Person) prior to the date of such
settlement. No Indemnifying Person shall, without the prior written consent
of the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter
of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 9 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraph, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by RMOC
and the Principal Shareholders on the one hand and the Underwriters on the other
hand from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of RMOC and the Principal Shareholders on the
one hand and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by RMOC and the Principal Shareholders on the one hand and the Underwriters on
the other shall be deemed to be in the same respective proportions as the net
proceeds from the offering (before deducting expenses) received by RMOC and the
Principal Shareholders and the total underwriting discounts and the commissions
received by the Underwriters, in each case as set forth in the table on the
cover of the Prospectus, bear to the aggregate public offering price of the
Shares. The relative fault of RMOC and the Principal Shareholders on the one
hand and the Underwriters on the other 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 RMOC or the Principal Shareholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
RMOC, the Principal Shareholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by PRO RATA allocation (even if the Underwriters were treated as one
entity for such purposes) or by any other method of allocation that does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Person as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 9, in no event shall
(i) an Underwriter be required to contribute any amount in excess of the amount
by which (x) the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds (y) the amount of
any damages that such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission and
(ii) a Principal Shareholder be required to contribute any amount in excess of
the amount by which (x) the gross (before deducting expenses) cash proceeds
received by the Principal Shareholder from the Transactions (as described in the
Prospectus) pursuant to this Agreement, the
-27-
<PAGE>
Exchange Agreement and the other agreements related to the Transactions
exceeds (y) the aggregate amount the Principal Shareholder has otherwise been
required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several in proportion to the respective number
of Shares set forth opposite their names in Schedules I and II hereto, and
not joint.
The remedies provided for in this Section 9 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
The indemnity and contribution agreements contained in this Section 9 and
the representations and warranties of RMOC, RMEC and the Principal Shareholders
set forth in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter or
by or on behalf of RMOC or RMEC, their officers or directors, any other person
controlling RMOC or RMEC, any Principal Shareholder or any Exchanging
Securityholder and (iii) acceptance of and payment for any of the Shares.
10. Notwithstanding anything herein contained, this Agreement (or the
obligations of the several Underwriters with respect to the Option Shares) may
be terminated in the absolute discretion of the Representatives, by notice given
to RMOC, if after the execution and delivery of this Agreement and prior to the
Closing Date (or, in the case of the Option Shares, prior to the Additional
Closing Date) (i) trading generally shall have been suspended or materially
limited on or by, as the case may be, any of the New York Stock Exchange or the
American Stock Exchange, the National Association of Securities Dealers, Inc.,
the Nasdaq National Market or The London Stock Exchange, (ii) trading of any
securities of or guaranteed by RMOC shall have been suspended on any exchange or
in any over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York or London, by either federal, New York State or United
Kingdom authorities shall have been declared, or (iv) there shall have occurred
any outbreak or escalation of hostilities or any change in financial markets or
any calamity or crisis that, in the judgment of the Representatives, is material
and adverse and which, in the judgment of the Representatives, makes it
impracticable to market the Shares being delivered at the Closing Date or the
Additional Closing Date, as the case may be, on the terms and in the manner
contemplated in the Prospectus.
11. This Agreement shall become effective upon the later of (x) execution
and delivery hereof by the parties hereto and (y) release of notification of the
effectiveness of the Registration Statement (or, if applicable, any post-
effective amendment) by the Commission.
If on the Closing Date or the Additional Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares
which it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Shares to be purchased on such date, the other Underwriters
shall be obligated severally in the proportions that the number of Shares set
forth opposite their respective names in Schedules I and II bears to the
aggregate number of Underwritten Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as the Representatives
may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; PROVIDED
that in no event
-28-
<PAGE>
shall the number of Shares that any Underwriter has agreed to purchase
pursuant to Section 1 be increased pursuant to this Section 11 by an amount
in excess of one-ninth of such number of Shares without the written consent
of such Underwriter. If on the Closing Date or the Additional Closing Date,
as the case may be, any Underwriter or Underwriters shall fail or refuse to
purchase Shares which it or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares to be
purchased on such date, and arrangements satisfactory to the Representatives
and RMOC for the purchase of such Shares are not made within 36 hours after
such default, this Agreement (or the obligations of the several U.S.
Underwriters to purchase the Option Shares, as the case may be) shall
terminate without liability on the part of any non-defaulting Underwriter or
RMOC. In any such case either you or RMOC shall have the right to postpone
the Closing Date (or, in the case of the Option Shares, the Additional
Closing Date), but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus
or in any other documents or arrangements may be effected. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
12. If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of RMOC or the Principal
Shareholders to comply with the terms or to fulfill any of the conditions of
this Agreement, or if for any reason RMOC, RMEC or the Principal Shareholders
shall be unable to perform its obligations under this Agreement or any condition
of the Underwriters' obligations cannot be fulfilled (other than solely as a
result of a breach by the Underwriters of this Agreement), RMOC and RMEC agree
to reimburse the Underwriters or such Underwriters as have so terminated this
Agreement with respect to themselves, severally, for all out-of-pocket expenses
(including the fees and expenses of its counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
13. This Agreement shall inure to the benefit of and be binding upon RMOC,
the Underwriters, each affiliate of any Underwriter which assists such
Underwriter in the distribution of the Shares, any controlling persons referred
to herein and the Principal Shareholders, and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No purchaser of Shares from any Underwriter shall
be deemed to be a successor by reason merely of such purchase.
14. Any action by the Underwriters hereunder may be taken by the
Representatives jointly or by J.P. Morgan Securities Inc. alone on behalf of
the Underwriters, and any such action taken by the Representatives jointly or
by J.P. Morgan Securities Inc. alone shall be binding upon the Underwriters.
All notices and other communications hereunder shall be in writing and shall
be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be given to the
Representatives, c/o J.P. Morgan Securities Inc., 60 Wall Street, New York,
New York 10260 (telefax: ________________); Attention: Syndicate Department.
Notices to RMOC or RMEC shall be given to it at 5 Greenway Plaza, Suite 220,
Houston, Texas 77046, (telefax: 713-621-7072); Attention: _________________.
Notices to Patrick R. Rutherford shall be given to him at _____________.
Notices to John A. Moran shall be given to him at ________________.
15. This Agreement may be signed in counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.
-29-
<PAGE>
16. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITHE
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAWS PROVISIONS THEREOF.
-30-
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
Rutherford-Moran Oil Corporation
By:____________________________________
President and Chief Executive Officer
Rutherford-Moran Exploration Company
By:____________________________________
President and Chief Executive Officer
Principal Shareholder
By:____________________________________
Patrick R. Rutherford
Solely for the purposes of Sections 5, 7-9 and 13-16
Principal Shareholder
By:____________________________________
John A. Moran
Solely for the purposes of Sections 5, 7-9 and 13-16
-31-
<PAGE>
Accepted: ____________________________ , 1996
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Smith Barney Inc.
Acting severally on behalf
of themselves and the
several U.S. Underwriters listed
in Schedule I hereto.
By: J.P. Morgan Securities Inc.
By: ________________________________________
Title:
J.P. Morgan Securities Ltd.
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
Smith Barney Inc.
Acting severally on behalf
of themselves and the
several International Managers
listed in Schedule II hereto.
By: J.P. Morgan Securities Ltd.
By: ________________________________________
Title:
-32-
<PAGE>
SCHEDULE I
Number of
U.S. Underwritten Shares
Underwriter To Be Purchased
- ----------- ------------------------
J.P. Morgan Securities Inc . . . . . . . . . . . .
Morgan Stanley & Co. Incorporated . . . . . . . . .
PaineWebber Incorporated . . . . . . . . . . . . .
Smith Barney Inc. . . . . . . . . . . . . . . . . .
Total
-33-
<PAGE>
SCHEDULE II
Number of International
Underwritten Shares
Underwriter To Be Purchased
- ----------- ------------------------
J.P. Morgan Securities Ltd. . . . . . . . . . . . .
Morgan Stanley & Co. International Limited . . . .
PaineWebber International (U.K.) Ltd. . . . . . . .
Smith Barney Inc. . . . . . . . . . . . . . . . . .
Total
-34-
<PAGE>
SCHEDULE III
Exchanging Securityholders
--------------------------
Stockholders of RMEC
- --------------------
Patrick R. Rutherford
John A. Moran
Sydney F. Jones
Shareholders of Thai Romo
- -------------------------
THAIPRR, L.P.
PRRTHAI, Inc.
THAI JAM, L.P.
JAMTHAI, Inc.
THAISFJ, L.P.
SFJTHAI, Inc.
MDMTHAI, Inc.
SRRTHAI, Inc.
Red Oak Holdings, Inc.
-35-
<PAGE>
SCHEDULE IV
Subsidiaries of RMOC Following the Transactions
-----------------------------------------------
Rutherford-Moran Exploration Company, a Texas Corporation
Thai Romo Limited, a limited company organized under the laws of the Kingdom
of Thailand
Thai Romo Holdings, Inc., a Delaware corporation
Record ownership of five shares of Thai Romo is held by third parties solely
to satisfy Thai law.
-36-
<PAGE>
NINTH AMENDMENT AGREEMENT
From: The Chase Manhattan Bank,
N.A.
Bangkok Branch
International Banking
Facility (the "BANK")
20 North Sathorn Road
Silcom, Bangrak, Bangkok
Thailand
To: Thai Romo Limited (the
"BORROWER")
92/50-51 Sathorn Thani II
Building
18th Floor, North Sathorn
Road
Kwaeng Silom, Khet Bangrak
Bangkok, Thailand
To: Rutherford Moran Oil Patrick R. Rutherford
Corporation 3466 Ella Lee Lane
5 Greenway Plaza Houston, Texas 77027
Suite 220 United States of America
Houston, Texas 77046
United States of America
John A. Moran Sidney F. Jones, Jr.
1424 South Ocean Blvd. P.O. Box 2102
Palm Beach, Florida 33480 Houston, Texas 77252
United States of America United States of America
PRRTHAI, INC. Red Oak Holdings, Inc.
THAIPRR, L.P. c/o Chase Manhattan
JAMTHAI, INC. Overseas Banking
THAIJAM, L.P. Corporation
SFJTHAI, INC. 802 Delaware Avenue
THAISFJ, L.P. Thirteenth Floor
MDMTHAI, INC. Wilmington, Delaware 19801
SRRTHAI, INC. United States of America
5 Greenway Plaza ("RED OAK")
Suite 220
Houston, Texas 77046
United States of America
(together, the "SPONSORS")
To: Rutherford Moran Oil Red Oak Holdings, Inc.
Corporation c/o Chase Manhattan
PRRTHAI, INC. Overseas Banking
THAIPRR, L.P. Corporation
JAMTHAI, INC. 802 Delaware Avenue
THAIJAM, L.P. Thirteenth Floor
SFJTHAI, INC. Wilmington, Delaware 19801
THAISFJ, L.P. United States of America
MDMTHAI, INC.
SRRTHAI, INC.
(all of which are at the
address stated above)
(together the "SHARE PLEDGORS" and, in a separate capacity, the "LOAN NOTE
PLEDGORS")
<PAGE>
Gentlemen:
PART I -- LOAN AGREEMENT
1. We refer to the Loan Agreement dated 28th November, 1994 between the
Borrower and the Bank as amended by letter agreements dated 7th April,
1995, 31st May, 1995, 14th June, 1995, 30th June, 1995, the two letter
agreements dated 7th July, 1995 and the letter agreements dated
20th December, 1995 and 22nd April, 1995 respectively from us to, and
agreed by, you (as so amended the "LOAN AGREEMENT").
2. Subject to the condition precedent of the Bank's receipt (or the Bank's
waiver of receipt) of all the documents set out in Annex I (Conditions
Precedent) to this Letter, in form and substance satisfactory to the Bank,
the Bank and the Borrower agree to amend the Loan Agreement with effect on
and from such date (the "EFFECTIVE DATE") as the Bank and the Borrower
shall agree in writing to be the Effective Date for the purpose of this
Letter following the Bank's notifying the Borrower in writing that such
condition precedent has been satisfied or waived so that it shall be and be
deemed to be, with effect from the Effective Date, amended in the following
manner:
(a) in Clause 1 (Definitions) the definitions of the term:
(i) "FINAL MATURITY DATE" shall be deleted and the following shall be
inserted in its place:
""FINAL MATURITY DATE" means 30th June, 1996;"; and
(ii) "COMMITMENT" shall be deleted and the following shall be inserted
in its place:
""COMMITMENT" means $47,000,000 to the extent not cancelled,
reduced or terminated hereunder."
(b) in Clause 1 (Definitions) the following shall be inserted in
alphabetical order:
""NINTH AMENDMENT AGREEMENT" means the letter dated on or about
22nd May, 1996 from the Bank to, and accepted by, the Borrower, the
Sponsors and the Pledgors;";
(c) in Clause 1 (Definitions) the reference definitions in the penultimate
paragraph before Clause 2 (Facility), the words "and/or" prior to the
reference to "the Eighth Amendment Agreement shall be replaced by a
"," and the words "and/or the Ninth Amendment Agreement" shall be
inserted prior to "(as the case may be)"; and
(d) in Clause 3.2(iii) the amount in the third line thereof after the
words "amount of" shall be deleted and "$7,000,000" shall be inserted
in its place.
3. The Bank may waive receipt of the documents referred to in Annex I
(conditions Precedent) at the sole discretion of the Bank and on such terms
as the Bank shall see fit.
4. Prior to the Effective Date, but subject always to paragraph 5 below, the
Borrower may continue to draw Loans under the Loan Agreement in its
unamended form provided that such Loans, together with existing outstanding
Loans, shall not exceed an aggregate amount of US$44,000,000.
5. If the condition precedent referred to in paragraph 2 above has not been
satisfied (or waived by the Bank) on or before 29th May, 1996:
(a) the Loan Agreement shall not be amended as provided for in paragraph 2
above; and
-2-
<PAGE>
(b) the Borrower shall repay all the outstanding Loans on 31st May, 1996
in accordance with the Loan Agreement (as unamended).
6. By its countersignature hereto, the Borrower represents and warrants to the
Bank in the terms of Clause 14 (Representations and Warranties) of the Loan
Agreement (as though the amendments referred to in paragraph 2 of this
Letter were effective immediately) and Clause 11 (Representations and
Warranties of the Borrower) of the Subordination and Sponsor Support
Agreement, mutatis mutandis, save that references to "this Agreement",
"herein" and like expressions shall be construed as references to each of:
(a) this Letter; and
(b) the Loan Agreement as amended by this Letter.
7. Clause 18.2 (Expenses) of the Loan Agreement shall apply to this Letter,
mutatis mutandis, and the Borrower will reimburse the Bank, promptly on
demand, for all charges and reasonable expenses incurred by the Bank in
connection with the negotiation, preparation and execution of this Letter.
8. The following Clauses in the Loan Agreement shall apply (as though the
amendments referred to in paragraph 2 of this Letter were effective
immediately), mutatis mutandis, to Part I and, insofar as it applies to the
Borrower, Part IV of this Letter as though references therein to "this
Agreement", the "Finance Documents", "herein" and like expressions were
references to this Letter:
Clause 8.3 (Default Interest)
Clause 10 (Payments)
Clause 11 (Taxes)
Clause 18.3 (Stamp Duties)
Clause 18.5 (Assignment)
Clause 18.6 (Set-Off)
Clause 18.7 (Currency Indemnity)
Clause 18.8 (Waivers, Remedies Cumulative)
Clause 19 (Notices)
Clause 20.2 (Forum).
9. The Sponsors, the Share Pledgors and the Loan Note Pledgors (in their
capacity as such) shall have no rights or liabilities under this Part I.
PART II -- SUBORDINATION AND SPONSOR SUPPORT AGREEMENT
10. We refer to the Subordination and Sponsor Support Agreement dated
28th November, 1994 between the Borrower, the Bank and the Sponsors as
amended by letter agreements dated 7th April, 1995, 7th July, 1995 and
20th December, 1995 and 22nd April, 1996 from us to, and agreed by you (as
so amended the "SUBORDINATION AND SPONSOR SUPPORT AGREEMENT").
11. The Borrower, the Bank and the Sponsors agree to amend further the
Subordination and Sponsor Support Agreement, with immediate effect, so
that:
(a) in Clause 1.1 (Terms Defined) the definition of the term "SENIOR
CREDIT AGREEMENT" shall be deleted and the following shall be inserted
in its place:
""SENIOR CREDIT AGREEMENT" means the Loan Agreement dated
28th November, 1994 between the Borrower and the Bank as amended by
letter agreements dated 7th April, 1995, 31st May, 1995, 14th June,
1995, 30th June, 1995, the two letter agreements dated 7th July, 1995,
the letter agreement dated 20th December, 1995, the letter agreement
-3-
<PAGE>
dated 22nd April, 1996 and the letter agreement dated on or about
28th May, 1996 respectively from the Bank to, and agreed by, the
Borrower.";
12. The Sponsors, by their counter-signatures hereto, consent to the amendments
made to the Loan Agreement by Part I of this Letter and confirm that the
Subordination and Sponsor Support Agreement (as amended hereby) shall
continue to have full force and effect with reference to the Loan Agreement
(as so amended).
13. By their countersignatures hereto, the Sponsors represent and warrant to
the Bank in the terms of Clause 12 (Representations and Warranties of the
Sponsors) of the Subordination and Sponsor Support Agreement (as though the
amendments referred to in paragraph 11 of this Letter were effective
immediately), mutatis mutandis, save that references to "this Agreement",
"herein" and like expressions shall be construed as references to each of:
(a) this Letter; and
(b) the Subordination and Sponsor Support Agreement (as amended hereby).
14. The following Clauses of the Subordination and Sponsor Support Agreement
(as though the amendments referred to in paragraph 11 of this Letter were
effective immediately) shall apply, mutatis mutandis, to Part II and,
insofar as it applies to the Sponsors or the Subordination and Sponsor
Support Agreement, Part V of this Letter as though references therein to
"this Agreement" and "herein" and like expressions were references to this
Letter (or, in the case of Clause 21.1 (Rights of the Borrower), to this
Part II only of this Letter):
Clause 21 (General)
Clause 22 (Sponsor's obligations joint and several)
Clause 23 (Notices)
Clause 24 (Jurisdiction).
15. The Share Pledgors and the Loan Note Pledgors (in their capacity as such)
shall have no rights or liabilities under this Part II.
PART III -- SHARE PLEDGE AGREEMENT AND SHAREHOLDERS' CONSENT
16. We refer to:
(a) the Share Pledge Agreement dated 13th July, 1995 between the Share
Pledgors and the Bank as pledgee (the "SHARE PLEDGE AGREEMENT"); and
(b) the Shareholders' Consent letter dated 13th July, 1995 from the Share
Pledgors to the Bank in connection with the Loan Agreement and the
Subordination and Sponsor Support Agreement (the "SHAREHOLDERS'
CONSENT").
17. The Share Pledgors, by their counter-signatures hereto, consent to the
amendments made to the Loan Agreement by Part 1 of this Letter and confirm
that the Share Pledge Agreement and the Shareholders' Consent, each as
amended pursuant to Clause 17 above, shall continue to have full force and
effect with reference to the Loan Agreement (as so amended).
18. The Borrower, the Sponsors and the Loan Note Pledgors (in their capacity as
such) shall have no rights or liabilities under this Part III.
-4-
<PAGE>
PART IV -- PLEDGE OF SHAREHOLDER LOAN NOTES AGREEMENT
19. We refer to:
(a) the Pledge of Shareholder Loan Notes Agreement (the "MASTER PLEDGE
AGREEMENT") dated 13th July, 1995 between the Bank and the Loan Note
Pledgors; and
(b) the individual loan note pledges (the "INDIVIDUAL PLEDGES") dated
13th July, 1995 entered into by each Loan Note Pledgor in connection
with the Master Pledge Agreement.
20. The Loan Note Pledgors, by their counter-signature hereto, confirm that the
Master Pledge Agreement and the Individual Pledges shall continue to have
full force and effect with reference to the Loan Agreement (as so amended).
21. The Borrower, the Sponsors and the Share Pledgors (in their capacity as
such) shall have no rights or liabilities under this Part IV.
PART V -- GENERAL
22. Terms defined in the Loan Agreement (as though the amendments referred to
in paragraph 2 of this Letter were effective immediately) shall, when used
in this Letter, bear the same meaning in this Letter as in the Loan
Agreement.
23. This Letter shall be governed by and construed in accordance with the Laws
of England apart from paragraphs 17 and 20 which shall be governed by and
construed in accordance with the laws of Thailand.
Yours faithfully,
Dated: May 29, 1996
/s/ Tim Chapman
- -------------------------------
For and on behalf of
The Chase Manhattan Bank, N.A.
Bangkok Branch
Bangkok International Banking
Facility
BORROWER
We hereby agree to the above.
Dated: May 28, 1996
/s/ Michael D. McCoy
- -------------------------------
For and on behalf of
Thai Romo Limited
-5-
<PAGE>
SPONSORS
We hereby agree to the above.
Dated: May 28, 1996
/s/ Pat Rutherford /s/ Patrick Rutherford
- ----------------------------------- -------------------------------------
For and on behalf of Patrick R. Rutherford
Rutherford Moran Oil
Corporation
/s/ John A. Moran /s/ Sidney F. Jones, Jr.
- ----------------------------------- -------------------------------------
John A. Moran Sidney F. Jones, Jr.
/s/ Pat Rutherford /s/ Pat Rutherford
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
PRRTHAI, INC. THAIPRR, L.P.
/s/ John A. Moran /s/ John A. Moran
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
JAMTHAI, INC. THAIJAM, L.P.
/s/ Sidney F. Jones, Jr. /s/ Sidney F. Jones, Jr.
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
SFJTHAI, INC. THAISFJ, L.P.
/s/ Michael D. McCoy
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
MDMTHAI, INC. SRRTHAI, L.P.
- -----------------------------------
For and on behalf of
RED OAK HOLDINGS, INC.
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<PAGE>
SHARE PLEDGORS
We hereby agree to the above.
Dated: May 28, 1996
/s/ Pat Rutherford
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
Rutherford Moran Oil Red Oak Holdings, Inc.
Corporation
/s/ Pat Rutherford /s/ Pat Rutherford
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
PRRTHAI, INC. THAIPRR, L.P.
/s/ John A. Moran /s/ John A. Moran
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
JAMTHAI, INC. THAIJAM, L.P.
/s/ Sidney F. Jones, Jr. /s/ Sidney F. Jones, Jr.
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
SFJTHAI, INC. THAISFJ, L.P.
/s/ Michael D. McCoy
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
MDMTHAI, INC. SRRTHAI, INC.
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<PAGE>
LOAN NOTE PLEDGORS
We hereby agree to the above.
Dated: May 28, 1996
/s/ Pat Rutherford
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
Rutherford Moran Oil Red Oak Holdings, Inc.
Corporation
/s/ Pat Rutherford /s/ Pat Rutherford
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
PRRTHAI, INC. THAIPRR, L.P.
/s/ John A. Moran /s/ John A. Moran
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
JAMTHAI, INC. THAIJAM, L.P.
/s/ Sidney F. Jones, Jr. /s/ Sidney F. Jones, Jr.
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
SFJTHAI, INC. THAISFJ, L.P.
/s/ Michael D. McCoy /s/ Susan R. Rutherford
- ----------------------------------- -------------------------------------
For and on behalf of For and on behalf of
MDMTHAI, INC. SRRTHAI, L.P.
-8-
<PAGE>
ANNEX I
CONDITIONS PRECEDENT
1. A copy of the constitutional documents currently in force of the Borrower
if amended since they were delivered to the Bank in connection with the
Loan Agreement or, if not amended, a certificate to that effect from an
officer of the Borrower.
2. A copy of all corporate authorisations and resolutions required for the
execution, delivery and performance of this Letter by the Borrower and
authorising a specified person or persons to execute this Letter on behalf
of the Borrower.
3. A copy of the constitutional documents currently in force of each Share
Pledgor if amended since they were delivered to the Bank in connection with
the Sixth Amendment Agreement or, if not amended, a certificate to that
effect from an officer of the relevant company.
4. A copy of all corporate authorisations and resolutions required for the
execution, delivery, and performance of this Letter by each (corporate)
Sponsor, each Share Pledgor and each Loan Note Pledgor and authorising a
specified person or persons to execute this Letter on behalf of the
respective party.
5. A copy of all other resolutions, authorisations, approvals, consents,
licences, exemptions, filings and registrations necessary or desirable in
connection with the execution, delivery, performance, validity and
enforceability of the Documents (and the Finance Documents as amended
thereby).
6. A copy of the Joint Operating Agreement if amended since it was last
delivered to the Bank in connection with the Loan Agreement or, if not
amended, a certificate to that effect from an officer of the Borrower.
7. A copy of the Concession Agreement if amended since it was last delivered
to the Bank in connection with the Loan Agreement or, if not amended, a
certificate to that effect from an officer of the Borrower.
8. A copy of all documents of title pursuant to which the Borrower acquired a
14.67480 per cent interest in the Tantawan Area from Maersk Oil (Thailand)
Ltd if amended since they were last delivered to the Bank in connection
with the First Amendment Agreement or, if not amended, a certificate to
that effect from an officer of the Borrower and a copy of all other Maersk
Transfer Documents.
9. A copy of the Management Services Agreement if amended since it was last
delivered to the Bank in connection with the Loan Agreement, or if not
amended, a certificate to that effect from an officer of the Borrower.
10. This Letter duly countersigned by each of the Borrower, the Sponsors, the
Share Pledgors and the Loan Note Pledgors.
Each copy document specified above shall be certified by a duly authorised
officer of the Borrower as being correct, complete and in full force and effect
as at a date no earlier than the date of this Letter. Where a duly authorised
officer of the Borrower is required to give certificates in respect of any of
the above items, the Bank will accept one global certificate in lieu of
individual certificates.
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<PAGE>
SCHEDULE
A. LOAN AGREEMENT
1. Borrower: Thai Romo Limited
2. Facility Amount: US $47,000,000
3. Loan Agreement Date: 28th November, 1994 (the date of the Loan Agreement
as amended by):
(a) Letter Agreements dated 7th April, 1995,
31st May, 1995, 14th June, 1995, 30th June,
1995 and 7th July, 1995 between the Bank, the
Borrower, the Sponsors, amongst others;
(b) amendment agreements dated 29th December,
1995, 22nd April, 1996 and on or about
29th May, 1996 between, amongst others, the
Borrower, the Bank and the Participant;
B. PARTICIPATION
1. Participated Facility: $47,000,000
2. Participated Amount: $22,000,000 (payable in Baht as provided for
herein)
3. Participant's Percentage:
(a) in the event that the total amount of Loans
disbursed and outstanding on a given date (taking
account of Loans to be disbursed on any Drawdown
Date (as defined in Clause 2.3) (the "DISBURSED
LOANS")) is less than or equal to $44,000,000,
fifty per cent (50%); or otherwise
(b) 22,000,000/y %
where y equals the Disbursed Loans, but provided that Participant's
participation in the Disbursed Loans shall not exceed $22,000,000.
4. Commencement Date: 29th December, 1995
5. Advances outstanding under the Participated Facility on the Commencement
Date:
Description Applicable Payment Clause
$21,000,000 2.1
6. Participant's Margin for Interest:4%
7. Fees to which the Participation Agreement applies:
0.25% of $22,000,000, such amount having been paid shortly after the
Commencement Date
C. ACCOUNTS
1. Bank's Account(s): The Chase Manhattan Bank, N.A., New York account
The Chase Manhattan Bank, N.A., Bangkok Branch
Account No. 001-0-954006
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<PAGE>
2. Participant's Account(s):
Participant's Baht Account: Account No. 658-0-11553-0 with The Chase
Manhattan Bank, N.A., Bangkok Branch
-11-
<PAGE>
RUTHERFORD--MORAN OIL CORPORATION
1996 KEY EMPLOYEE STOCK PLAN
<PAGE>
RUTHERFORD--MORAN OIL CORPORATION
1996 KEY EMPLOYEE STOCK PLAN
TABLE OF CONTENTS
Section
ARTICLE I - PLAN
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Effective Date of Plan. . . . . . . . . . . . . . . . . . . . . . . . . 1.2
ARTICLE II - DEFINITIONS
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Disinterested Person. . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
Employee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8
Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
Incentive Option. . . . . . . . . . . . . . . . . . . . . . . . . . . .2.10
Nonqualified Option . . . . . . . . . . . . . . . . . . . . . . . . . .2.11
Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.12
Option Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . .2.13
Outside Director. . . . . . . . . . . . . . . . . . . . . . . . . . . .2.14
Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.15
Restricted Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . .2.16
Restricted Stock Agreement. . . . . . . . . . . . . . . . . . . . . . .2.17
Restricted Stock Purchase Price . . . . . . . . . . . . . . . . . . . .2.18
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.19
Stock Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.20
Voting Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.21
10% Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.22
ARTICLE III - ELIGIBILITY
ARTICLE IV - GENERAL PROVISIONS RELATING TO OPTIONS AND STOCK AWARDS
Authority to Grant Options and Stock Awards . . . . . . . . . . . . . . 4.1
Dedicated Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Non-Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3
Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
Changes in the Company's Capital Structure. . . . . . . . . . . . . . . 4.5
Election Under Section 83(b) of the Code. . . . . . . . . . . . . . . . 4.6
-i-
<PAGE>
ARTICLE V - OPTIONS
Type of Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Option Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
Duration of Options . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Amount Exercisable. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5
Exercise on Termination of Employment . . . . . . . . . . . . . . . . . 5.6
Substitution Options. . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
No Rights as Stockholder. . . . . . . . . . . . . . . . . . . . . . . . 5.8
ARTICLE VI - STOCK AWARDS
Stock Awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2
Stock Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3
Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
Lapse of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
Restriction Period. . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6
ARTICLE VII - ADMINISTRATION
ARTICLE VIII - AMENDMENT OR TERMINATION OF PLAN
ARTICLE IX - MISCELLANEOUS
No Establishment of a Trust Fund. . . . . . . . . . . . . . . . . . . . 9.1
No Employment Obligation. . . . . . . . . . . . . . . . . . . . . . . . 9.2
Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3
Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4
Written Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5
Indemnification of the Committee and the
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 9.6
Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.7
Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8
Other Compensation Plans. . . . . . . . . . . . . . . . . . . . . . . . 9.9
Other Options or Awards . . . . . . . . . . . . . . . . . . . . . . . .9.10
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.11
-ii-
<PAGE>
ARTICLE I
PLAN
1.1 PURPOSE. This Plan is a plan for key employees (including
officers and employee directors) of the Company and its Affiliates and is
intended to advance the best interests of the Company, its Affiliates, and its
stockholders by providing those persons who have substantial responsibility for
the management and growth of the Company and its Affiliates with additional
incentives and an opportunity to obtain or increase their proprietary interest
in the Company, thereby encouraging them to continue in the employ of the
Company or any of its Affiliates.
1.2 EFFECTIVE DATE OF PLAN. The Plan is effective May 24, 1996, if
within one year of that date it shall have been approved by at least a majority
vote of stockholders voting in person or by proxy at a duly held stockholders'
meeting, or if the provisions of the corporate charter, by-laws or applicable
state law prescribes a greater degree of stockholder approval for this action,
the approval by the holders of that percentage, at a duly held meeting of
stockholders. No Incentive Option, Nonqualified Option, or Stock Award shall be
granted pursuant to the Plan after May 23, 2006.
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning
set out in these definitions throughout this Plan, unless the context in which
any such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action or transaction, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain. The term
"subsidiary corporation" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
action or transaction, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
2.2 "BOARD OF DIRECTORS" means the board of directors of the Company.
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<PAGE>
2.3 "CHANGE OF CONTROL" means the occurrence of one or more of the
following events:
(a) Any "person" (other than the Company or a subsidiary thereof
or any employee benefit plan thereof or any entity which is owned 50%
or more by John A. Moran and/or Patrick R. Rutherford), including a
"syndicate" or "group" as those terms are used in Section 13(d) of the
Securities Exchange Act of 1934 (the"Exchange Act"), is or becomes the
"beneficial owner" (as that term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company's
then outstanding Voting Stock;
(b) The Company is merged or consolidated or combined in any
other manner with another corporation or entity and immediately after
giving effect to the merger or consolidation either (i) less than 80%
of the outstanding Voting Stock of the surviving or resulting entity
are then beneficially owned in the aggregate by (x) the stockholders
of the Company immediately prior to such merger or consolidation, or
(y) if a record date has been set to determine the stockholders of the
Company entitled to vote on such merger or consolidation, the
stockholders of the Company as of such record date, or (ii) the Board
of Directors, or similar governing body, of the surviving or resulting
entity does not have as a majority of its members the persons
specified in clause (c)(a) and (b) below;
(c) If at any time the following do not constitute a majority of
the Board of Directors of the Company (or any successor entity
referred to in clause (b) above):
a. persons who are directors of the Company on
July 1, 1996; and
b. persons who, prior to their election as directors of
the Company (or successor entity if applicable) were nominated,
recommended or endorsed by a formal resolution of the Board of
Directors of the Company;
(d) If at any time during a calendar year a majority of the
directors of the Company are not persons who were directors at the
beginning of the calendar year;
(e) the Company transfers (whether by sale, lease, exchange or
otherwise) substantially all of its assets to another corporation
which is a less than 80%-owned, direct or indirect, subsidiary of the
Company; or
(f) the Company shall adopt or undertake any plan of liquidation
or dissolution.
-2-
<PAGE>
2.4 "CODE" means the Internal Revenue Code of 1986, as amended.
2.5 "COMMITTEE" means the Compensation Committee of the Board of
Directors or such other committee designated by the Board of Directors. The
Committee shall be comprised solely of at least two members who are both
Disinterested Persons and Outside Directors.
2.6 "COMPANY" means Rutherford--Moran Oil Corporation.
2.7 "DISINTERESTED PERSON" means a "disinterested person" as that
term is defined in Rule 16b-3 under the Securities Exchange Act of 1934.
2.8 "EMPLOYEE" means a person employed by the Company or any
Affiliate to whom an Option or a Stock Award is granted.
2.9 "FAIR MARKET VALUE" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date on the
principal securities exchange on which the Stock is listed; or (b) if the Stock
is not listed on a securities exchange, the average of the high and low sale
prices of the Stock on that date as reported on the NASDAQ National Market
System; or (c) if the Stock is not listed on the NASDAQ National Market System,
the average of the high and low bid quotations for the Stock on that date as
reported by the National Quotation Bureau Incorporated; or (d) if none of the
foregoing is applicable, an amount at the election of the Committee equal to
(x), the average between the closing bid and ask prices per share of stock on
the last preceding date on which those prices were reported or (y) that amount
as determined by the Committee.
2.10 "INCENTIVE OPTION" means an option granted under this Plan which
is designated as an "Incentive Option" and satisfies the requirements of
Section 422 of the Code.
2.11 "NONQUALIFIED OPTION" means an option granted under this Plan
other than an Incentive Option.
2.12 "OPTION" means both an Incentive Option and a Nonqualified Option
granted under this Plan to purchase shares of Stock.
2.13 "OPTION AGREEMENT" means the written agreement which sets out the
terms of an Option.
2.14 "OUTSIDE DIRECTOR" means a member of the Board of Directors
serving on the Committee who satisfies Section 162(m) of the Code.
2.15 "PLAN" means the Rutherford--Moran Oil Corporation 1996 Key
Employee Stock Plan, as set out in this document and as it may be amended from
time to time.
2.16 "RESTRICTED STOCK" means stock awarded or purchased under a
Restricted Stock Agreement entered into pursuant to this Plan, together with
(i) all
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<PAGE>
rights, warranties or similar items attached or accruing thereto or
represented by the certificate representing the stock and (ii) any stock or
securities into which or for which the stock is thereafter converted or
exchanged. The terms and conditions of the Restricted Stock Agreement shall
be determined by the Committee consistent with the terms of the Plan.
2.17 "RESTRICTED STOCK AGREEMENT" means an agreement between the
Company or any Affiliate and the Employee pursuant to which the Employee
receives a Stock Award subject to Article VI.
2.18 "RESTRICTED STOCK PURCHASE PRICE" means the purchase price, if
any, per share of Restricted Stock subject to an Award. The Restricted Stock
Purchase Price shall be determined by the Committee. It may be greater than or
less than the Fair Market Value of the Stock on the date of the Stock Award.
2.19 "STOCK" means the common stock of the Company, $.01 par value or,
in the event that the outstanding shares of common stock are later changed into
or exchanged for a different class of stock or securities of the Company or
another corporation, that other stock or security.
2.20 "STOCK AWARD" means an award of Restricted Stock.
2.21 "VOTING STOCK" means shares of capital stock of the Company the
holders of which are entitled to vote for the election of directors of the
Company, but excluding shares entitled to so vote only upon the occurrence of a
contingency unless that contingency shall have occurred.
2.22 "10% STOCKHOLDER" means an individual who, at the time the Option
is granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any Affiliate. An individual
shall be considered as owning the stock owned, directly or indirectly, by or for
his brothers and sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants; and stock owned, directly or indirectly, by
or for a corporation, partnership, estate, or trust, shall be considered as
being owned proportionately by or for its stockholders, partners, or
beneficiaries.
ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Incentive Options,
Nonqualified Options, and Stock Awards shall be those key employees of the
Company or any of its Affiliates as the Committee shall determine from time to
time. However, no member of the Committee shall be eligible to receive any
Option, or Stock Award or to receive stock, stock options, or stock appreciation
rights under any other plan of the Company or any of its Affiliates, if to do so
would cause the individual not to be a Disinterested Person or Outside Director.
The Board of Directors may designate one or more individuals who shall not be
eligible to receive any Option or Stock Award under this Plan or under other
similar plans of the Company.
-4-
<PAGE>
ARTICLE IV
GENERAL PROVISIONS RELATING TO OPTIONS AND STOCK AWARDS
4.1 AUTHORITY TO GRANT OPTIONS AND STOCK AWARDS. The Committee may
grant to those key Employees of the Company or any of its Affiliates as it shall
from time to time determine, Options or Stock Awards under the terms and
conditions of this Plan. Subject only to any applicable limitations set out in
this Plan, the number of shares of Stock to be covered by any Option or Stock
Award to be granted to an Employee shall be as determined by the Committee.
4.2 DEDICATED SHARES. The total number of shares of Stock with
respect to which Options and Stock Awards may be granted under the Plan shall be
500,000 shares. The shares may be treasury shares or authorized but unissued
shares. The maximum number of shares subject to Options which may be issued to
any Employee under the Plan during each year is 75,000 shares. The maximum
number of shares subject to Stock Awards which may be granted to any Employee
under the Plan during each year is 50,000 shares. The number of shares stated
in this Section 4.2 shall be subject to adjustment in accordance with the
provisions of Section 4.5.
In the event that any outstanding Option or Stock Award shall expire
or terminate for any reason or any Option or Stock Award is surrendered, the
shares of Stock allocable to the unexercised portion of that Option or Stock
Award may again be subject to an Option or Stock Award under the Plan.
4.3 NON-TRANSFERABILITY. Options shall not be transferable by the
Employee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during the Employee's lifetime, only by him.
Restricted Stock shall be purchased by and/or become vested under a Restricted
Stock Agreement during the Employee's lifetime, only by him. Any attempt to
transfer a Stock Award other than under the terms of the Plan and the Restricted
Stock Agreement shall terminate the Stock Award and all rights of the Employee
to that Restricted Stock.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell
or issue any Stock under any Option or Stock Award if issuing that Stock would
constitute or result in a violation by the Employee or the Company of any
provision of any law, statute, or regulation of any governmental authority.
Specifically, in connection with any applicable statute or regulation relating
to the registration of securities, upon exercise of any Option or pursuant to
any Stock Award, the Company shall not be required to issue any Stock unless the
Committee has received evidence satisfactory to it to the effect that the holder
of that Option or Stock Award will not transfer the Stock except in accordance
with applicable law, including receipt of an opinion of counsel satisfactory to
the Company to the effect that any proposed transfer complies with applicable
law. The determination by the Committee on this matter shall be final, binding
and conclusive. The Company may, but shall in no event be obligated to, register
any Stock covered by this Plan pursuant to applicable securities laws of any
country or any political subdivision. In the event the Stock issuable on
exercise of an Option or pursuant to a Stock Award is not registered, the
Company may imprint on
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<PAGE>
the certificate evidencing the Stock any legend that counsel for the Company
considers necessary or advisable to comply with applicable law. The Company
shall not be obligated to take any other affirmative action in order to cause
the exercise of an Option or vesting under a Stock Award, or the issuance of
shares under either of them, to comply with any law or regulation of any
governmental authority.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options or Stock Awards shall not affect in any way the right or
power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Stock or its rights, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares
or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options under this Plan shall be appropriately adjusted in such a manner as to
entitle an Employee to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class of shares he
would have received had he exercised his Option in full immediately prior to the
event requiring the adjustment; and (b) the number and class of shares of Stock
then reserved to be issued under the Plan shall be adjusted by substituting for
the total number and class of shares of Stock then reserved, that number and
class of shares of Stock that would have been received by the owner of an equal
number of outstanding shares of each class of Stock as the result of the event
requiring the adjustment.
If the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or if the Company is liquidated or
sells or otherwise disposes of substantially all its assets while unexercised
Options remain outstanding under this Plan, (a) subject to the provisions of
clause (c) below, after the effective date of the merger, consolidation,
liquidation, sale or other disposition, as the case may be, each holder of an
outstanding Option shall be entitled, upon exercise of the Option, to receive,
in lieu of shares of Stock, the number and class or classes of shares of stock
or other securities or property to which the holder would have been entitled if,
immediately prior to the merger, consolidation, liquidation, sale or other
disposition, the holder had been the holder of record of a number of shares of
Stock equal to the number of shares as to which the Option shall be so
exercised; (b) the Board of Directors may waive any limitations set out in or
imposed under this Plan so that all Options, from and after a date prior to the
effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, specified by the Board of Directors, shall be
exercisable in full; and (c) all outstanding Options may be canceled by the
Board of Directors as of the effective date of any merger, consolidation,
liquidation, sale or other disposition, if (i) notice of cancellation shall be
given to each holder of an Option and (ii) each holder of an Option shall have
the right to exercise
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that Option in full (without regard to any limitations set out in or imposed
under this Plan or the Option Agreement granting that Option) during a period
set by the Board of Directors preceding the effective date of the merger,
consolidation, liquidation, sale or other disposition and, if in the event
all outstanding Options may not be exercised in full under applicable
securities laws without registration of the shares of Stock issuable on
exercise of the Options, the Board of Directors may limit the exercise of the
Options to the number of shares of Stock, if any, as may be issued without
registration. The method of choosing which Options may be exercised, and the
number of shares of Stock for which Options may be exercised, shall be solely
within the discretion of the Board of Directors.
After a merger of one or more corporations into the Company or after a
consolidation of the Company and one or more corporations in which the Company
shall be the surviving corporation, each Employee shall be entitled to have his
Restricted Stock appropriately adjusted based on the manner the Stock was
adjusted under the terms of the agreement of merger or consolidation.
The issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options
or Stock Awards.
4.6 ELECTION UNDER SECTION 83(B) OF THE CODE. No Employee shall
exercise the election permitted under Section 83(b) of the Code without written
approval of the Committee. Any Employee doing so shall forfeit all Options
and/or Stock Awards issued to him under this Plan.
ARTICLE V
OPTIONS
5.1 TYPE OF OPTION. The Committee shall specify whether a given
option shall constitute an Incentive Option or a Nonqualified Option.
5.2 OPTION PRICE. The price at which Stock may be purchased under an
Incentive Option shall not be less than the greater of: (a) 100% of the Fair
Market Value of the shares of Stock on the date the Option is granted or (b) the
aggregate par value of the shares of Stock on the date the Option is granted.
The Committee in its discretion may provide that the price at which shares of
Stock may be purchased under an Incentive Option shall be more than 100% of Fair
Market Value. In the case of any 10% Stockholder, the price at which shares of
Stock may be purchased under an Incentive Option shall not be less than 110% of
the Fair Market Value of the Stock on the date the Incentive Option is granted.
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The price at which shares of Stock may be purchased under a
Nonqualified Option shall not be less than the greater of: (a) 100% of the Fair
Market Value of the shares of Stock on the date the Option is granted or (b) the
aggregate par value of the shares of Stock on the date the Option is granted.
The Committee in its discretion may provide that the price at which shares of
Stock may be purchased under a Nonqualified Option shall be more than 100% of
Fair Market Value.
5.3 DURATION OF OPTIONS. No Option shall be exercisable after the
expiration of 10 years from the date the Option is granted. In the case of a
10% Stockholder, no Incentive Option shall be exercisable after the expiration
of five years from the date the Incentive Option is granted.
5.4 AMOUNT EXERCISABLE. Each Option may be exercised from time to
time, in whole or in part, in the manner and subject to the conditions the
Committee, in its sole discretion, may provide in the Option Agreement, as long
as the Option is valid and outstanding, provided that no Option may be
exercisable within six (6) months of the date of grant. Notwithstanding any
other provisions of this Plan, in the event of a Change of Control, each Option
shall become immediately exercisable in full.
INCENTIVE OPTION. To the extent that the aggregate Fair Market
Value (determined as of the time an Incentive Option is granted) of the Stock
with respect to which Incentive Options first become exercisable by the Optionee
during any calendar year (under this Plan and any other incentive stock option
plan(s) of the Company or any Affiliate) exceeds $100,000, the Incentive Options
shall be treated as Nonqualified Options. In making this determination,
Incentive Options shall be taken into account in the order in which they were
granted.
5.5 EXERCISE OF OPTIONS. Each option shall be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Stock with respect to which the Option is to be exercised, together with:
(a) cash, certified check, bank draft, or postal or express money order payable
to the order of the Company for an amount equal to the option price of the
shares, (b) Stock at its Fair Market Value on the date of exercise, and/or
(c) any other form of payment which is acceptable to the Committee, and
specifying the address to which the certificates for the shares are to be
mailed. As promptly as practicable after receipt of written notification and
payment, the Company shall deliver to the Employee certificates for the number
of shares with respect to which the Option has been exercised, issued in the
Employee's name. If shares of Stock are used in payment, the aggregate Fair
Market Value of the shares of Stock tendered must be equal to or less than the
aggregate exercise price of the shares being purchased upon exercise of the
Option, and any difference must be paid by cash, certified check, bank draft, or
postal or express money order payable to the order of the Company. Delivery of
the shares shall be deemed effected for all purposes when a stock transfer agent
of the Company shall have deposited the certificates in the United States mail,
addressed to the Employee, at the address specified by the Employee.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Employee, the Employee shall deliver to the Company certificates registered
in the name of the Employee representing a number of shares of Stock legally and
beneficially owned by the Employee, free of all liens, claims, and encumbrances
of every kind,
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accompanied by stock powers duly endorsed in blank by the record holder of
the shares represented by the certificates (with signature guaranteed by a
commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange). The delivery of certificates upon
the exercise of Options is subject to the condition that the person
exercising the Option provide the Company with the information the Company
might reasonably request pertaining to exercise, sale or other disposition.
5.6 EXERCISE ON TERMINATION OF EMPLOYMENT. Unless it is expressly
provided otherwise in the Option Agreement, Options shall terminate one day less
than three months after severance of employment of the Employee from the Company
and all Affiliates for any reason, with or without cause, other than death,
retirement under the then established rules of the Company, or severance for
disability. Whether authorized leave of absence or absence on military or
government service shall constitute severance of the employment of the Employee
shall be determined by the Committee at that time.
In determining the employment relationship between the Company and the
Employee, employment by any Affiliate shall be considered employment by the
Company, as shall employment by a corporation issuing or assuming a stock option
in a transaction to which Section 424(a) of the Code applies, or by a parent
corporation or subsidiary corporation of the corporation issuing or assuming a
stock option (and for this purpose, the phrase "corporation issuing or assuming
a stock option" shall be substituted for the word "Company" in the definitions
of parent corporation and subsidiary corporation in Section 2.1, and the
parent-subsidiary relationship shall be determined at the time of the corporate
action described in Section 424(a) of the Code).
DEATH. If, before the expiration of an Option, the Employee, whether
in the employ of the Company or after he has retired or was severed for
disability, dies, the Option shall continue until the earlier of the Option's
expiration date or one year following the date of his death, unless it is
expressly provided otherwise in the Option Agreement. After the death of the
Employee, his executors, administrators or any persons to whom his Option may be
transferred by will or by the laws of descent and distribution shall have the
right, at any time prior to the Option's expiration or termination, whichever is
earlier, to exercise it, to the extent to which he was entitled to exercise it
immediately prior to his death, unless it is expressly provided otherwise in the
Option Agreement.
RETIREMENT. Unless it is expressly provided otherwise in the Option
Agreement, if before the expiration of an Incentive Option, the Employee shall
be retired in good standing from the employ of the Company under the then
established rules of the Company, the Incentive Option shall terminate on the
earlier of the Option's expiration date or one day less than one year after his
retirement, provided, if an Incentive Option is not exercised within specified
time limits prescribed by the Code, it shall become a Nonqualified Option by
operation of law.
Unless it is expressly provided otherwise in the Option Agreement,
if before the expiration of a Nonqualified Option, the Employee shall be
retired in good standing from the employ of the Company under the then
established rules of the
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Company, the Nonqualified Option shall terminate on the earlier of the
Nonqualified Option's expiration date or one day less than one year after his
retirement. The Employee shall have the right prior to the termination of
the Nonqualified Option to exercise the Nonqualified Option, to the extent to
which he was entitled to exercise it immediately prior to his retirement,
unless it is expressly provided otherwise in the Option Agreement.
DISABILITY. If, before the expiration of an Option, the Employee
shall be severed from the employ of the Company for disability, the Option shall
terminate on the earlier of the Option's expiration date or one day less than
one year after the date he was severed because of disability, unless it is
expressly provided otherwise in the Option Agreement. In the event that the
Employee shall be severed from the employ of the Company for disability, the
Employee shall have the right prior to the termination of the Option to exercise
the Option, to the extent to which he was entitled to exercise it immediately
prior to his retirement or severance of employment for disability, unless it is
expressly provided otherwise in the Option Agreement.
5.7 SUBSTITUTION OPTIONS. Options may be granted under this Plan
from time to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the Company
or any Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and
conditions of the substitute Options granted may vary from the terms and
conditions set out in this Plan to the extent the Committee, at the time of
grant, may deem appropriate to conform, in whole or in part, to the provisions
of the stock options in substitution for which they are granted.
5.8 NO RIGHTS AS STOCKHOLDER. No Employee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.
ARTICLE VI
STOCK AWARDS
6.1 STOCK AWARDS. The Committee may issue shares of Stock to an
eligible employee subject to the terms of a Restricted Stock Agreement. The
Restricted Stock may be issued for no payment by the Employee or for a payment
below the Fair Market Value on the date of grant. Restricted Stock shall be
subject to restrictions as to sale, transfer, alienation, pledge or other
encumbrance and generally will be subject to vesting over a period of time
specified in the Restricted Stock Agreement. The Committee shall determine the
period of vesting, the number of shares, the price, if any, of Stock included in
a Stock Award, and the other terms and provisions which are included in a
Restricted Stock Agreement. Notwithstanding any other provisions of this Plan,
in the event of a Change of Control, each Stock Award shall become immediately
vested.
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6.2 RESTRICTIONS. Restricted Stock shall be subject to the following
terms and conditions as determined by the Committee, including without
limitation any or all of the following:
(a) a prohibition against the sale, transfer,
alienation, pledge or other encumbrance of the shares of
Restricted Stock, such prohibition to lapse (i) at such time
or times as the Committee shall determine (whether in annual
or more frequent installments, at the time of the death,
disability or retirement of the holder of such shares, or
otherwise);
(b) a requirement that the holder of shares of
Restricted Stock forfeit, or in the case of shares sold to
an Employee, resell back to the Company at his cost, all or
a part of such shares in the event of termination of the
holder's employment during any period in which the shares
remain subject to restrictions;
(c) a prohibition against employment of the holder of
Restricted Stock by any competitor of the Company or its
Affiliates, or against such holder's dissemination of any
secret or confidential information belonging to the Company
or an Affiliate;
(d) unless stated otherwise in the Restricted Stock
Agreement, (i) if restrictions remain at the time of
severance of employment with the Company and all Affiliates,
other than for reason of disability or death, the Restricted
Stock shall be forfeited; and (ii) if severance of
employment is by reason of disability or death, the
restrictions on the shares shall lapse and the Employee or
his heirs or estate shall be 100% vested in the shares
subject to the Restricted Stock Agreement.
6.3 STOCK CERTIFICATE. Shares of Restricted Stock shall be
registered in the name of the Employee receiving the Stock Award and deposited,
together with a stock power endorsed in blank, with the Company. Each such
certificate shall bear a legend in substantially the following form:
The transferability of this certificate and the shares of
Stock represented by it is restricted by and subject to the
terms and conditions (including conditions of forfeiture)
contained in the Rutherford--Moran Oil Corporation 1996 Key
Employee Stock Plan, and an agreement entered into between
the registered owner and the Company. A copy of the Plan
and agreement is on file in the office of the Secretary of
the Company.
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6.4 RIGHTS AS STOCKHOLDER. Subject to the terms and conditions of
the Plan, each Employee receiving a certificate for Restricted Stock shall have
all the rights of a stockholder with respect to the shares of Stock included in
the Stock Award during any period in which such shares are subject to forfeiture
and restrictions on transfer, including without limitation, the right to vote
such shares. Dividends paid with respect to shares of Restricted Stock in cash
or property other than stock in the Company or rights to acquire stock in the
Company shall be paid to the Employee currently. Dividends paid in stock in the
Company or rights to acquire stock in the Company shall be added to and become a
part of the Restricted Stock.
6.5 LAPSE OF RESTRICTIONS. At the end of the time period during
which any shares of Restricted Stock are subject to forfeiture and restrictions
on sale, transfer, alienation, pledge, or other encumbrance, such shares shall
vest and will be delivered in a certificate, free of all restrictions, to the
Employee or to the Employee's legal representative, beneficiary or heir;
provided the certificate shall bear such legend, if any, as the Committee
determines is reasonably required by applicable law. By accepting a Stock Award
and executing a Restricted Stock Agreement, the Employee agrees to remit when
due any federal and state income and employment taxes required to be withheld.
6.6 RESTRICTION PERIOD. No Stock Award may provide for restrictions
continuing beyond 10 years from the date of the Stock Award.
ARTICLE VII
ADMINISTRATION
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan, Options or Stock Awards shall be
subject to the determination of the Committee. A majority of the members of the
Committee shall constitute a quorum. All determinations of the Committee shall
be made by a majority of its members. Any decision or determination reduced to
writing and signed by a majority of the members shall be as effective as if it
had been made by a majority vote at a meeting properly called and held. This
Plan shall be administered in such a manner as to permit the Options granted
under it which are designated to be Incentive Options to qualify as Incentive
Options. In carrying out its authority under this Plan, the Committee shall
have full and final authority and discretion, including but not limited to the
following rights, powers and authorities, to:
(a) determine the Employees to whom and the time or
times at which Options or Stock Awards will be made,
(b) determine the number of shares and the purchase
price of Stock covered in each Option or Stock Award,
subject to the terms of the Plan,
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(c) determine the terms, provisions and conditions of
each Option and Stock Award, which need not be identical,
(d) accelerate the time at which any outstanding
Option may be exercised,
(e) define the effect, if any, on an Option or Stock
Award of the death, disability, retirement, or termination
of employment of the Employee,
(f) prescribe, amend and rescind rules and regulations
relating to administration of the Plan, and
(g) make all other determinations and take all other
actions deemed necessary, appropriate, or advisable for the
proper administration of this Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of this Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parties.
ARTICLE VIII
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend
this Plan at any time, in its sole and absolute discretion; provided, however,
that to the extent required to qualify this Plan under Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended, no
amendment that would (a) materially increase the number of shares of Stock that
may be issued under this Plan, (b) materially modify the requirements as to
eligibility for participation in this Plan, or (c) otherwise materially increase
the benefits accruing to participants under this Plan, shall be made without the
approval of the Company's stockholders; provided further, however, that to the
extent required to maintain the status of any Incentive Option under the Code,
no amendment that would (a) change the aggregate number of shares of Stock which
may be issued under Incentive Options, (b) change the class of employees
eligible to receive Incentive Options, or (c) decrease the Option price for
Incentive Options below the Fair Market Value of the Stock at the time it is
granted, shall be made without the approval of the Company's stockholders.
Subject to the preceding sentence, the Board shall have the power to make any
changes in the Plan and in the regulations and administrative provisions under
it or in any outstanding Incentive Option as in the opinion of counsel for the
Company may be necessary or appropriate from time to time to enable any
Incentive Option granted under this Plan to continue to qualify as an incentive
stock option or such other stock option as may be defined under the Code so as
to receive preferential federal income tax treatment.
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ARTICLE IX
MISCELLANEOUS
9.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside
nor shall a trust fund of any kind be established to secure the rights of any
Employee under this Plan. All Employees shall at all times rely solely upon the
general credit of the Company for the payment of any benefit which becomes
payable under this Plan.
9.2 NO EMPLOYMENT OBLIGATION. The granting of any Option or Stock
Award shall not constitute an employment contract, express or implied, nor
impose upon the Company or any Affiliate any obligation to employ or continue to
employ any Employee. The right of the Company or any Affiliate to terminate the
employment of any person shall not be diminished or affected by reason of the
fact that an Option or Stock Award has been granted to him.
9.3 FORFEITURE. Notwithstanding any other provisions of this Plan,
if the Committee finds by a majority vote after full consideration of the facts
that the Employee, before or after termination of his employment with the
Company or an Affiliate for any reason (a) committed or engaged in fraud,
embezzlement, theft, commission of a felony, or proven dishonesty in the course
of his employment by the Company or an Affiliate, which conduct damaged the
Company or Affiliate, or disclosed trade secrets of the Company or an Affiliate,
or (b) participated, engaged in or had a material, financial or other interest,
whether as an employee, officer, director, consultant, contractor, stockholder,
owner, or otherwise, in any commercial endeavor which is in direct competition
with the business of the Company or an Affiliate without the written consent of
the Company or Affiliate, the Employee shall forfeit all outstanding Options and
all outstanding Restricted Stock, and including all exercised Options and other
situations pursuant to which the Company has not yet delivered a stock
certificate. Clause (b) shall not be deemed to have been violated solely by
reason of the Employee's ownership of stock or securities of any publicly owned
corporation, if that ownership does not result in effective control of the
corporation.
The decision of the Committee as to the cause of the Employee's
discharge, the damage done to the Company or an Affiliate, and the extent of the
Employee's competitive activity shall be final. No decision of the Committee,
however, shall affect the finality of the discharge of the Employee by the
Company or an Affiliate in any manner.
9.4 TAX WITHHOLDING. The Company or any Affiliate shall be entitled
to deduct from other compensation payable to each Employee any sums required by
federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option or lapse of restrictions on Restricted Stock. In the
alternative, the Company may require the Employee (or other person exercising
the Option or receiving the Restricted Stock) to pay the sum directly to the
employer corporation. If the Employee (or other person exercising the Option or
receiving the Restricted Stock) is required to pay the sum directly, payment in
cash or by check of such sums for taxes shall be delivered within 10 days after
the date of exercise or lapse of restrictions. The Company
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<PAGE>
shall have no obligation upon exercise of any Option or lapse of restrictions
on Restricted Stock until payment has been received, unless withholding (or
offset against a cash payment) as of or prior to the date of exercise or
lapse of restrictions is sufficient to cover all sums due with respect to
that exercise. The Company and its Affiliates shall not be obligated to
advise an Employee of the existence of the tax or the amount which the
employer corporation will be required to withhold.
9.5 WRITTEN AGREEMENT. Each Option and Stock Award shall be embodied
in a written Option Agreement or Restricted Stock Agreement which shall be
subject to the terms and conditions of this Plan and shall be signed by the
Employee and by a member of the Committee on behalf of the Committee and the
Company or an executive officer of the Company other than the Employee on behalf
of the Company. The Option Agreement or Restricted Stock Agreement may contain
any other provisions that the Committee in its discretion shall deem advisable
which are not inconsistent with the terms of this Plan.
9.6 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS.
With respect to administration of this Plan, the Company shall indemnify each
present and future member of the Committee and the Board of Directors against,
and each member of the Committee and the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including attorney's fees, the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of the
Committee and/or the Board of Directors at the time of incurring the expenses --
including, without limitation, matters as to which he shall be finally adjudged
in any action, suit or proceeding to have been found to have been negligent in
the performance of his duty as a member of the Committee or the Board of
Directors. However, this indemnity shall not include any expenses incurred by
any member of the Committee and/or the Board of Directors in respect of matters
as to which he shall be finally adjudged in any action, suit or proceeding to
have been guilty of gross negligence or willful misconduct in the performance of
his duty as a member of the Committee and the Board of Directors. In addition,
no right of indemnification under this Plan shall be available to or enforceable
by any member of the Committee and the Board of Directors unless, within 60 days
after institution of any action, suit or proceeding, he shall have offered the
Company, in writing, the opportunity to handle and defend same at its own
expense. This right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each member of the Committee and the Board of
Directors and shall be in addition to all other rights to which a member of the
Committee and the Board of Directors may be entitled as a matter of law,
contract, or otherwise.
9.7 GENDER. If the context requires, words of one gender when used
in this Plan shall include the others and words used in the singular or plural
shall include the other.
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9.8 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.
9.9 OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, incentive or other compensation or benefit plans
in effect for the Company or any Affiliate, nor shall the Plan preclude the
Company from establishing any other forms of incentive or other compensation for
employees of the Company or any Affiliate.
9.10 OTHER OPTIONS OR AWARDS. The grant of an Option or Stock Award
shall not confer upon the Employee the right to receive any future or other
Options or Stock Awards under this Plan, whether or not Options or Stock Awards
may be granted to similarly situated Employees, or the right to receive future
Options or Stock Awards upon the same terms or conditions as previously granted.
9.11 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
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RUTHERFORD--MORAN OIL CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
<PAGE>
RUTHERFORD--MORAN OIL CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
TABLE OF CONTENTS
Page
1. Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Effective Date of Plan . . . . . . . . . . . . . . . . . . . . . . 1
3. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Dedicated Shares . . . . . . . . . . . . . . . . . . . . . . . . . 1
5. Grant of Options . . . . . . . . . . . . . . . . . . . . . . . . . 1
6. Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
7. Option Grant Size and Grant Dates. . . . . . . . . . . . . . . . . 2
8. Option Price; Fair Market Value. . . . . . . . . . . . . . . . . . 2
9. Duration of Options. . . . . . . . . . . . . . . . . . . . . . . . 2
10. Amount Exercisable . . . . . . . . . . . . . . . . . . . . . . . . 2
11. Exercise of Options. . . . . . . . . . . . . . . . . . . . . . . . 2
12. Non-Transferability of Options . . . . . . . . . . . . . . . . . . 3
13. Termination of Directorship of Optionee. . . . . . . . . . . . . . 3
14. Requirements of Law. . . . . . . . . . . . . . . . . . . . . . . . 3
15. No Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . 4
16. No Obligation to Retain Optionee . . . . . . . . . . . . . . . . . 4
17. Changes in the Company's Capital Structure . . . . . . . . . . . . 4
18. Termination and Amendment of Plan. . . . . . . . . . . . . . . . . 5
19. Written Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 6
20. Indemnification of Board . . . . . . . . . . . . . . . . . . . . . 6
21. Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
22. Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
23. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
24. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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RUTHERFORD--MORAN OIL CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
1. PURPOSE. The 1996 Non-Employee Director Stock Plan (the "Plan") of
Rutherford--Moran Oil Corporation (the "Company") is for the benefit of members
of the Board of Directors of the Company who, at the time of their service, are
not employees of the Company or any of its affiliates, by providing them an
opportunity to become owners of the Common Stock, $.01 par value, of the Company
(the "Stock"), thereby advancing the best interests of the Company by increasing
their proprietary interest in the success of the Company and encouraging them to
continue in their present capacity.
2. EFFECTIVE DATE OF PLAN. The Plan is effective May 24, 1996, if within
one year of that date it shall have been approved by the holders of at least a
majority of the outstanding shares of voting stock of the Company voting in
person or by proxy at a duly held shareholders' meeting, or if the provisions of
the corporate charter, bylaws or applicable state law prescribes a greater
degree of shareholder approval for this action, the approval by the holders of
that percentage, at a duly held meeting of shareholders, or in either case by a
consent in lieu of a meeting if permitted by the corporate charter, bylaws and
applicable law.
3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors
of the Company (the "Board"). Subject to the terms of the Plan, the Board shall
have the power to construe the provisions of the Plan, Options, and Stock issued
hereunder, to determine all questions arising hereunder, and to adopt and amend
such rules and regulations for administering the Plan as the Board deems
desirable.
4. DEDICATED SHARES. The total number of shares of Stock with respect to
which Initial Grants and Annual Grants (collectively, the "Options") may be
granted under this Plan shall not exceed, in the aggregate, 50,000 shares;
provided, that the class and aggregate number of shares of Stock which may be
granted hereunder shall be subject to adjustment in accordance with the
provisions of Paragraph 17. The shares of Stock may be treasury shares or
authorized but unissued shares of Stock. In the event that any outstanding
Option shall expire or is terminated or canceled for any reason, the shares of
Stock allocable to the unexercised portion of that Option may again be subject
to an Option or Options under the Plan.
5. GRANT OF OPTIONS. All Options granted under the Plan shall be
Nonqualified Options which are not intended to satisfy the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended. No options shall
be granted under the Plan subsequent to May 23, 2006.
6. ELIGIBILITY. The individuals who shall be eligible to receive Options
under the Plan shall be each member of the Board who is not an employee of the
Company or any affiliate of the Company ("Eligible Director").
<PAGE>
7. OPTION GRANT SIZE AND GRANT DATES.
INITIAL GRANTS -- Contemporaneously with the public offering, each Eligible
Director shall be granted an Option to purchase 2,500 shares of Stock.
ANNUAL GRANTS -- On the day following each Annual Meeting after the Initial
Grants, each Eligible Director who has served as a director for the immediately
preceding six months and who is continuing to serve as a director, shall receive
a grant of an Option to purchase 1,000 shares of Stock (an "Annual Grant").
If the General Counsel of the Company determines, in his sole discretion,
that the Company is in possession of material, nonpublic information about the
Company or any of its subsidiaries, he may suspend granting of the Initial Grant
and Annual Grant to each Eligible Director until the second trading day after
public dissemination of that information, and the determination by the General
Counsel that issuance of the Options is then appropriate.
8. OPTION PRICE; FAIR MARKET VALUE. The price at which shares of Stock
may be purchased by each Eligible Director (the "Optionee") pursuant to his
Initial Grant and each Annual Grant, respectively, shall be 100% of the "Fair
Market Value" of the shares of Stock on the date of grant of the Initial Grant
and each Annual Grant, as applicable.
For all purposes of this Plan, the "Fair Market Value" of the Stock as of
any date means (a) the average of the high and low sale prices of the Stock on
that date on the principal securities exchange on which the Stock is listed; or
(b) if the Stock is not listed on a securities exchange, the average of the high
and low sale prices of the Stock on that date as reported on the NASDAQ National
Market System; or (c) if the Stock is not listed on the NASDAQ National Market
System, the average of the high and low bid quotations for the Stock on that
date as reported by the National Quotation Bureau Incorporated; (d) for any
Options issued prior to the initial public offering of the Stock, the initial
public offering price; or (e) if none of the foregoing is applicable, the
average between the closing bid and ask prices per share of stock on the last
preceding date on which those prices were reported or that amount as determined
by the Board.
9. DURATION OF OPTIONS. The term of each Option shall be ten years from
the date of grant. No Option shall be exercisable after the expiration of ten
years from the date the Option is granted.
10. AMOUNT EXERCISABLE. Each Option hereunder shall be exercisable in
full after the first anniversary of the grant of the Option.
11. EXERCISE OF OPTIONS. Options shall be exercised by the delivery of
written notice to the Company setting forth the number of shares with respect to
which the Option is to be exercised, together with: (a) cash, certified check,
bank draft, or postal or express money order payable to the order of the Company
for an amount equal to the option price of the shares or (b) Stock at its Fair
Market Value on the date of exercise; and specifying the address to which the
certificates for the shares are to be mailed. As promptly as practicable after
receipt of written notification and payment,
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<PAGE>
the Company shall deliver to the Eligible Director certificates for the
number of shares with respect to which the Option has been exercised, issued
in the Eligible Director's name. If shares of Stock are used in payment, the
Fair Market Value of the shares of Stock tendered must be less than the
option price of the shares being purchased, and the difference must be paid
by check. Delivery shall be deemed effected for all purposes when a stock
transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to the Eligible Director, at the address
specified by the Eligible Director.
Whenever an Option is exercised by exchanging shares of Stock owned by the
Optionee, the Optionee shall deliver to the Company certificates registered in
the name of the Optionee representing a number of shares of Stock legally and
beneficially owned by the Optionee, free of all liens, claims, and encumbrances
of every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates, (with signature guaranteed
by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange). The delivery of certificates upon the
exercise of Options is subject to the condition that the person exercising the
Option provide the Company with the information the Company might reasonably
request pertaining to exercise, sale or other disposition.
12. NON-TRANSFERABILITY OF OPTIONS. Options shall not be transferable by
the Optionee other than by will or under the laws of descent and distribution,
and shall be exercisable, during the Optionee's lifetime, only by him.
13. TERMINATION OF DIRECTORSHIP OF OPTIONEE. If, before the date of
expiration of the Option, the Optionee shall cease to be a director of the
Company, the Option shall terminate on the earlier of the date of expiration or
one year after the date of ceasing to serve as a director. In this event, the
Optionee shall have the right, prior to the termination of the Option, to
exercise the Option if he was entitled to exercise the Option immediately prior
to ceasing to serve as a director; however, in the event that the Optionee has
ceased to serve as a director on or after attaining the age of seventy (70)
years, the Optionee shall be entitled to exercise all or any part of such Option
without regard to any limitations imposed pursuant to Paragraph 10, provided
that in no event shall the Option be exercisable within six months after the
date of grant.
Upon the death of the Optionee while serving as a director, his executors,
administrators, or any person or persons to whom his Option may be transferred
by will or by the laws of descent and distribution, shall have the right, at any
time prior to the earlier of the date of expiration of the Option or one year
following the date of his death, to exercise the Option, in whole or in part
without regard to any limitations imposed pursuant to Paragraph 10, provided
that in no event shall the Option be exercisable within six months after the
date of grant.
14. REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Stock under any Option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise
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<PAGE>
of any Option, the Company shall not be required to issue any Stock unless
the Company has received evidence satisfactory to it to the effect that the
holder of that Option will not transfer the Stock except in accordance with
applicable law, including receipt of an opinion of counsel satisfactory to
the Company to the effect that any proposed transfer complies with applicable
law. The determination by the Company on this matter shall be final, binding
and conclusive. The Company may, but shall in no event be obligated to,
register any Stock covered by this Plan pursuant to applicable securities
laws of any country or any political subdivision. In the event the Stock
issuable on exercise of an Option is not registered, the Company may imprint
on the certificate evidencing the Stock any legend that counsel for the
Company considers necessary or advisable to comply with applicable law. The
Company shall not be obligated to take any other affirmative action in order
to cause the exercise of an Option, or the issuance of shares under it, to
comply with any law or regulation of any governmental authority.
15. NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to Stock covered by any Option until the date a stock
certificate is issued for the Stock, and, except as otherwise provided in
Paragraph 17 hereof, no adjustment for dividends, or otherwise, shall be made if
the record date thereof is prior to the date of issuance of such certificate.
16. NO OBLIGATION TO RETAIN OPTIONEE. The granting of any Option shall
not impose upon the Company or its stockholders any obligation to retain or
continue to retain any Optionee or nominate any Optionee for election to
continue in his capacity as a director of the Company. The right of the
Company, the Board of Directors, and the Stockholders to terminate the service
of any Optionee as a director shall not be diminished or affected by reason of
the fact that one or more Options have been or would be granted to him.
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or its rights, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Stock outstanding, without receiving
compensation for it in money, services or property, then (a) the number, class,
and per share price of shares of Stock subject to outstanding Options under this
Plan shall be appropriately adjusted in such a manner as to entitle an Optionee
to receive upon exercise of an Option, for the same aggregate cash
consideration, the equivalent total number and class of shares he would have
received had he exercised his Option in full immediately prior to the event
requiring the adjustment; and (b) the number and class of shares of Stock with
respect to which Options may be granted under the Plan shall be adjusted
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<PAGE>
by substituting for the total number and class of shares of Stock then
available for grant, that number and class of shares of Stock that would have
been received by the owner of an equal number of outstanding shares of each
class of Stock as the result of the event requiring the adjustment.
If the Company is merged or consolidated with another corporation or if the
Company is liquidated or sells or otherwise disposes of substantially all its
assets while unexercised Options remain outstanding under the Plan, then unless
the provisions of clause (a) below are applicable pursuant to operation of law
or the documents effecting the transaction, the provisions of clause (b) shall
apply:
(a) after the effective date of the merger, consolidation,
liquidation, sale or other disposition, as the case may be, each holder of
an outstanding Option shall be entitled, upon exercise of the Option, to
receive, in lieu of shares of Stock, the number and class or classes of
shares of stock or other securities or property to which the holder would
have been entitled if, immediately prior to the merger, consolidation,
liquidation, sale or other disposition, the holder had been the holder of
record of a number of shares of Stock equal to the number of shares as to
which the Option shall be so exercised; or
(b) if the provisions of clause (a) above are not applicable, all
outstanding Options shall be automatically canceled as of the effective
date of any merger, consolidation, liquidation, sale or other disposition,
and reasonable notice of cancellation shall be given to each holder of an
Option and each holder of an Option shall have the right to exercise that
Option in full (without regard to any limitations set out in or imposed
under the Plan) during the period from the date of such notice until five
days prior to the effective date of the merger, consolidation, liquidation,
sale or other disposition and, if in the event all outstanding Options may
not be exercised in full under applicable securities laws without
registration of the shares of Stock issuable on exercise of the Options,
the exercise of the Options shall be limited to the number of shares of
Stock, if any, as may be issued without registration.
The issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe for them, or upon conversion of shares or obligations of
the Company convertible into shares or other securities, shall not affect, and
no adjustment by reason of it shall be made with respect to, the number, class,
or price of shares of Stock then subject to outstanding Options.
18. TERMINATION AND AMENDMENT OF PLAN. The Board of Directors of the
Company may amend, terminate or suspend the Plan at any time, in its sole and
absolute discretion; provided, however, to the extent required to qualify the
Plan under Rule 16b-3 promulgated under Section 16 of the Securities Exchange
Act of 1934, as amended, no amendment shall be made more than once every six
months that would change the amount, price or timing of the Initial and Annual
Grants, other than to comport with changes in the Internal Revenue Code of 1986,
as amended, the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder;
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<PAGE>
and provided, further, to the extent required to qualify the Plan under Rule
16b-3, no amendment that would (a) materially increase the number of shares
of the Stock that may be issued under the Plan, (b) materially modify the
requirements as to eligibility for participation in the Plan, or (c)
otherwise materially increase the benefits accruing to participants under the
Plan, shall be made without the approval of the Company's stockholders.
19. WRITTEN AGREEMENT. Each Option granted hereunder shall be embodied in
a written agreement, which shall be subject to the terms and conditions of this
Plan and shall be signed by the Optionee and by the Chairman of the Board, the
Vice Chairman, the President or any Vice President of the Company for and in the
name and on behalf of the Company.
20. INDEMNIFICATION OF BOARD. With respect to administration of the Plan,
the Company shall indemnify each present and future member of the Board of
Directors against, and each member of the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including the amount of judgments and the amount of approved settlements made
with a view to the curtailment of costs of litigation, other than amounts paid
to the Company itself) reasonably incurred by him in connection with or arising
out of any action, suit, or proceeding in which he may be involved by reason of
his being or having been a member of the Board of Directors, whether or not he
continues to be a member of the Board of Directors at the time of incurring the
expenses. However, this indemnity shall not include any expenses incurred by
any member of the Board of Directors (a) in respect of matters as to which he
shall be finally adjudged in any action, suit or proceeding to have been guilty
of gross negligence or willful misconduct in the performance of his duty as a
member of the Board of Directors, or (b) in respect of any matter in which any
settlement is effected, to an amount in excess of the amount approved by the
Company on the advice of its legal counsel. In addition, no right of
indemnification under this Plan shall be available to or enforceable by any
member of the Board of Directors unless, within 60 days after institution of any
action, suit or proceeding, he shall have offered the Company, in writing, the
opportunity to handle and defend same at its own expense. This right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Board of Directors and shall be in addition
to all other rights to which a member of the Board of Directors may be entitled
as a matter of law, contract, or otherwise.
21. FORFEITURES. Notwithstanding any other provision of this Plan, if,
before or after termination of the Optionee's capacity as a director of the
Company, there is an adjudication by a court of competent jurisdiction that the
Optionee committed fraud, embezzlement, theft, commission of felony, or proven
dishonesty in the course of his advisory relationship to the Company and its
affiliates which conduct materially damaged the Company or its affiliates, or
disclosed trade secrets of the Company or its affiliates, then any outstanding
options which have not been exercised by Optionee shall be forfeited. In order
to provide the Company with an opportunity to enforce this Section, an Option
may not be exercised if a lawsuit alleging that an action described in the
preceding sentence has taken place until a final resolution of the lawsuit
favorable to the Optionee.
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<PAGE>
22. GENDER. If the context requires, words of one gender when used in
this Plan shall include the others and words used in the singular or plural
shall include the other.
23. HEADINGS. Headings are included for convenience of reference only and
do not constitute part of the Plan and shall not be used in construing the terms
of the Plan.
24. GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
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<PAGE>
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") made as of the
_____ day of _______________, 1996, among Rutherford--Moran Oil Corporation,
a Delaware corporation (the "Issuer") and Patrick R. Rutherford, John A.
Moran, Michael D. McCoy, and Susan R. Rutherford (collectively, the
"Stockholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Stockholders are the beneficial owners of shares of the
capital stock of Thai Romo Limited, a company organized under the laws of the
Kingdom of Thailand ("Thai Romo");
WHEREAS, pursuant to that certain 351 Exchange Agreement (the "Exchange
Agreement") among the Issuer, The Chase Manhattan Bank N.A., Bangkok Branch,
Rutherford--Moran Exploration Company, a Texas corporation ("RMEC"), Thai Romo,
Thai Romo Holdings, a Delaware corporation, and the shareholders listed on
Schedule B thereto, and as more fully set forth in the Exchange Agreement, the
Thai Romo shareholders (other than RMEC) will exchange certain of their shares
and certain notes held by them for common stock of the Issuer (collectively, the
"Transactions");
WHEREAS, following consummation of the Transactions, the Issuer will issue
and sell up to 4,600,000 shares of common stock through an initial public
offering, and upon consummation of the Transactions, the Stockholders will own
the shares of common stock set forth on SCHEDULE A hereto;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
(a) include the singular as well as the plural, (b) include the
masculine as well as the feminine and neutral and (c) have the meanings
given to them in this Article I, unless defined elsewhere in this Agreement.
"Business Day" means any day except Saturdays, Sundays and days on which
the offices of the Commission are not open for business;
"Commission" means the Securities and Exchange Commission of the United
States of America or any other federal agency at the time administering the
Securities Act;
<PAGE>
"Common Stock" means (a) all shares now or hereafter authorized and
designated as the common stock of the Issuer, including (without limitation) the
Issuer's presently authorized common stock, $.01 par value per share, and
(b) any securities issued or issuable with respect to any such securities by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, or the reorganization or otherwise upon
any required adjustments, and securities of any other class with which such
securities may hereafter have been exchanged or reclassified;
A "Disadvantageous Condition" shall exist for purposes of this Agreement
if the Issuer shall furnish to the Requesting Holders a certified resolution of
the Issuer's Board of Directors stating that in the good faith judgment of such
Board of Directors it would (because of the existence of, or in anticipation of,
any acquisition or financing activity, or the inability for reasons beyond the
Issuer's control to provide any required financial statements, or any other
event or condition of similar significance to the Issuer) interfere with a
material transaction being pursued by the Issuer or would be significantly
disadvantageous to the Issuer or to its stockholders for a registration
statement to be maintained effective, or to be filed and become effective;
"Exchange Act" means the Securities Exchange Act of 1934, 15 U.S.C. 78a et
seq., as amended, and the regulations promulgated from time to time thereunder;
"Governmental Entity" means the United States of America, Canada, any
state, province, territory and any subdivision thereof, any court,
administrative or regulatory agency, commission, department or body or other
governmental authority or instrumentality, the Commission, or any entity or
person exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government;
"Party" means any of the Issuer or the Stockholders, and "Parties" shall
mean all of such Persons, collectively;
"Person" means any natural person or entity of any kind, including (without
limitation) corporations, partnerships, limited liability companies,
Governmental Entities and any other entity organized or formed under the law of
any jurisdiction;
"Registrable Securities" means the Common Stock beneficially owned,
directly and indirectly, by the Stockholders immediately after consummation of
the Transactions as set forth on SCHEDULE A hereto. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (a) 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 and new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Issuer and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force, (b) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act and new certificates for such securities not bearing a
legend restricting
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<PAGE>
further transfer shall have been delivered by the Issuer and subsequent
disposition of them shall not require registration or qualification of them
under the Securities Act or any similar state law then in force, (c) they
shall have been otherwise transferred to a non-Affiliate (as defined in the
Exchange Act) of the Stockholders and new certificates for such securities
not bearing a legend restricting further transfer shall have been delivered
by the Issuer and subsequent disposition of them shall not require
registration or qualification of them under the Securities Act or any similar
state law then in force, or (d) such securities shall have ceased to be
outstanding;
"Registration Expenses" means all expenses incident to the Issuer's
performance of or compliance with Article IV, including (without limitation) all
registration, filing and National Association of Securities Dealers, Inc. fees,
filing fees relating to quotation on the Nasdaq National Market, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Issuer and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, but
excluding underwriting discounts and commissions and transfer taxes, if any,
relating solely to the Registrable Securities being registered, PROVIDED that in
any case where Registration Expenses are not to be borne by the Issuer, such
expenses shall not include salaries of Issuer personnel or general overhead
expenses of the Issuer, auditing fees, premiums or other expenses relating to
liability insurance required by underwriters of the Issuer or other expenses for
the preparation of financial statements or other data normally prepared by the
Issuer in the ordinary course of its business or that the Issuer would have
incurred in any event; and
"Securities Act" means the Securities Act of 1933, 15 U.S.C. 77a et seq.,
as amended, and the regulations promulgated from time to time thereunder.
ARTICLE II
DEMAND REGISTRATIONS
2.1 REGISTRATION OF REGISTRABLE SECURITIES ON REQUEST.
(a) REQUEST. Upon the written request of one
or more of the Stockholders that the Issuer effect the
registration under the Securities Act of all or part of such
holders' Registrable Securities (which request shall specify
the intended method of disposition thereof), the Issuer shall
promptly give written notice of any requested registration to
the other Stockholders and, subject to Section 2.1(b) hereof,
shall use all reasonable efforts to effect, as expeditiously
as possible, the registration under the Securities Act of:
(i) the Registrable Securities that the
Issuer has been so requested to register by such requesting
holders (which request shall specify the intended method of
disposition of such securities);
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<PAGE>
(ii) the Registerable Securities owned by
the other Stockholders that such Stockholders request in
writing to be registered, which request shall have been
received by the Issuer within 15 days after receipt of written
notice from the Issuer (such other Stockholders together with
such requesting holders are collectively referred to herein as
the "Requesting Holders"); and
(iii) subject to Section 2.2 hereof,
any other securities that the Issuer has been requested to
register by the holders thereof by written request given to
the Issuer within 15 days after written notice given by the
Issuer is received,
all to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of the Registrable
Securities.
(b) CERTAIN LIMITATIONS. Notwithstanding Section
2.1(a) hereof, the Issuer shall not be obligated to file and cause
to become effective any registration statement pertaining to
Registrable Securities (i) unless the aggregate number of
Registrable Securities requested by the Requesting Holders to be
registered is at least equivalent to 5% of all Registrable
Securities as of the date hereof; (ii) at any time during the
existence of a Disadvantageous Condition; (iii) if such filing
would occur within 180 days of the date of the final prospectus
relating to the Issuer's initial public offering; (iv) if such
filing would occur during the period starting 30 days prior to the
Issuer's estimated date of filing of, and ending 90 days after the
effective date of, any other registration statement filed by the
Issuer under the Securities Act; or (iv) if such request is within
six months of a previous request pursuant to this Article II. In
addition, the Stockholders in the aggregate may make only five
requests pursuant to this Article II.
2.2 REGISTRATION OF OTHER SECURITIES. Whenever the Issuer shall
effect a registration pursuant to this Article II upon the request of the
Requesting Holders, securities other than those of the Requesting Holders'
covered by the request shall be included in such registration only to the
extent that any managing underwriter of such offering shall have advised the
Issuer and each Requesting Holder that the inclusion of such other securities
would not adversely affect such offering, and if such managing underwriter
shall have advised that the inclusion of such other securities would
adversely affect such offering then Section 2.7 hereof shall apply.
2.3 REGISTRATION STATEMENT FORM. Registrations under this Article
II shall be on such appropriate registration form of the Commission (a) as
shall be selected by the Issuer and (b) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or methods
of disposition specified in the request for such registration. The Issuer
agrees to include in any such registration statement all information that the
Requesting Holders registered shall reasonably request and all information
which is required by applicable law, rule or regulation.
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<PAGE>
2.4 EXPENSES. The Requesting Holders and any other holder of
securities included in such registration pursuant to Section 2.2 hereof shall
pay all Registration Expenses in connection with all registrations that are
requested pursuant to this Article II and become effective pursuant to this
Article II.
2.5 EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Article II shall not be deemed to have been affected unless
a registration statement relating thereto (a) has become effective under the
Securities Act and any of the Registrable Securities included in such
registration have actually been sold thereunder or (b) has remained effective
for a period of at least 90 days (or such shorter period in which all
Registrable Securities included in such registration have actually been sold
thereunder), PROVIDED that the Issuer may discontinue any effective
registration statement requested pursuant to this Article II if and so long
as a Disadvantageous Condition shall exist, and, in such event, such
registration statement shall be at the sole expense of the Issuer and shall
not be included as one of the five registrations that may be requested
pursuant to this Article II hereof, and PROVIDED FURTHER that if after any
registration statement requested pursuant to this Article II becomes
effective (a) such registration statement is interfered with by any stop
order, injunction or other order or requirement of the Commission or other
Governmental Entity solely due to the actions or omissions to act of the
Issuer and (b) less than 75% of the Registrable Securities included in such
registration have been sold thereunder, such registration statement shall be
at the sole expense of the Issuer and shall not be included as one of the
five registrations that may be requested pursuant to this Article II.
2.6 UNDERWRITERS. If any registration effected pursuant to this
Article II shall be an underwritten public offering, the managing underwriter
or underwriters thereof and the price, terms and provisions of the offering
shall be determined by the holders of more than 50% of the Registrable
Securities requested to be included in such registration.
2.7 APPORTIONMENT IN REGISTRATIONS REQUESTED. If a registration
requested pursuant to this Article II is an underwritten offering and the
managing underwriter shall advise the Issuer in writing (with a copy to each
Requesting Holder) that, in its opinion, the number of securities requested
to be included in such registration exceeds the number that can be sold in
such offering within a price range acceptable to the Requesting Holders of
more than 50% of the Registrable Securities requested to be included in such
registration or would in any other manner adversely affect such offering, the
Issuer shall include in such registration all of the Registrable Securities
requested by the Requesting Holders to be registered and shall
proportionately reduce the number of securities to be included in the
offering by other holders of securities and, to the extent that the
recommended number of securities to be included in the offering is less than
the total number of Registrable Securities requested to be included by the
Requesting Holders in such registration, the number of Registrable Securities
to be so included shall be reduced on a pro rata basis among all Requesting
Holders whose Registrable Securities are requested to be included in such
registration such that each holder whose Registrable Securities requrested to
be included shall be entitled to include such number of Registrable
Securities determined by multiplying the number of Registrable Securities
requested to be included by such holder by a fraction the
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numerator of which is the number of Registrable Securities that such
managing underwriter has advised may be included in such registration and the
denominator of which is the total number of Registrable Securities requested
to be included in such registration.
ARTICLE III
PIGGYBACK REGISTRATIONS
3.1 RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Issuer at
any time proposes to register any of the Common Stock under the Securities
Act (other than a registration on Form S-4, Form S-8 or any successor or
similar form, or in connection with a tender offer, merger or other
acquisition), for sale for its own account in an underwritten offering, it
shall each such time give prompt written notice to each Stockholder of its
intention to do so and of such Stockholders' rights under this Article III.
Upon the written request of any Stockholder made within 10 days after the
date of receipt of such notice, the Issuer shall use all reasonable efforts
to effect the registration under the Securities Act of all Registrable
Securities that the Issuer has been so requested to register by the holders
thereof, to the extent requisite to permit the disposition of such
Registrable Securities so to be registered, PROVIDED that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Issuer shall determine for any reason not to
register or to delay registration of such securities, the Issuer may, at its
election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (a) in the case of a determination not
to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation
to pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of such Stockholders to request that such registration
be effected as a registration under Article II, and (b) in the case of a
determination to delay registering, shall be permitted to delay registering
any Registrable Securities for the same period as the delay in registering
such other securities. No registration effected under this Article III shall
relieve the Issuer of its obligation to effect any registration upon request
under Article II. The Issuer shall pay all Registration Expenses in
connection with each registration of Registrable Securities requested
pursuant to this Article III.
3.2 APPORTIONMENT IN INCIDENTAL REGISTRATIONS. If the managing
underwriter of an underwritten offering pursuant to this Article III shall
inform the Issuer and the holders of the Registrable Securities requesting
such registration by letter of its opinion that the number of securities
requested to be included in such registration exceeds the number that can be
sold in (or during the time of) such offering or that the inclusion would
adversely affect the marketing of the securities to be sold by the Issuer
therein, then the Issuer may include all securities proposed by the Issuer to
be sold for its own account and may decrease the number of Registrable
Securities and other securities of the Issuer so proposed to be sold and so
requested to be included in such registration (pro rata on the basis of the
percentage of the aggregate number of such Registrable Securities and such
other securities for which registration was requested) to the extent
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necessary to reduce the number of securities to be included in the
registration to the level recommended by the managing underwriter.
ARTICLE IV
REGISTRATION PROCEDURES
4.1 PROCEDURES. If and whenever the Issuer is required
to use its reasonable efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in
Articles II and III, the Issuer shall as expeditiously as possible:
(a) prepare and as soon thereafter as is reasonably
practicable file with the Commission the requisite registration
statement to effect such registration and thereafter use reasonable
efforts to cause such registration statement to become effective,
PROVIDED that the Issuer may discontinue any registration of its
securities that are not Registrable Securities (and, under the
circumstances specified in Section 3.1 hereof, its securities that
are Registrable Securities) at any time prior to the effective date
of the registration statement relating thereto;
(b) prepare and file with the Commission 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 and to comply with the provisions
of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time
as all of such securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement or 90 days after
the effective date of the registration statement, whichever is
shorter;
(c) furnish without charge to each seller of Registrable
Securities covered by such registration statement such number of
conformed copies of such registration statement and of each such
amendment and supplement thereto, such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 or Rule 430A under the Securities
Act, conforming with the requirements of the Securities Act and
such other documents as such seller may reasonably request;
(d) use reasonable efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws
of such jurisdictions in the United States as each seller thereof
shall reasonably request, keep such registration or qualification
in effect for so long as such registration statement remains in
effect and take any other action that may be reasonably necessary
or advisable to enable such seller to consummate the disposition in
such jurisdictions of the securities owned by such seller,
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except that the Issuer shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
Section 4.1(d) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction;
(e) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller, except as provided in
Section 4.1(e)(ii) below, (and the underwriters, if any) of
(i) an opinion of counsel for the Issuer,
dated the effective date of such registration statement
(and, if such registration includes an underwritten
public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form,
scope and substance to such seller and, if such
registration includes an underwritten public offering, to
such underwriter, and
(ii) a "comfort" letter, dated the effective
date of such registration statement (and, if such
registration includes an underwritten public offering,
dated the date of the closing under the underwriting
agreement), signed by the independent public accountants
who have certified the Issuer's financial statements
included in such registration statement, addressed to
each seller, to the extent the same can be reasonably
obtained, and addressed to the underwriters, if any,
covering substantially the same matters with respect to
such registration statement (and the prospectus included
therein) and with respect to events subsequent to the
date of such financial statements, as are customarily
covered in accountants' letters delivered to the
underwriters in underwritten public offerings of
securities and such other financial, tabular and
statistical matters as are typically covered in such a
"comfort" letter or as such seller or such holder (or the
underwriters, if any) may reasonably request, PROVIDED
that a letter covering such matters as are typically
covered in "comfort" letters satisfactory to the
underwriters (if such registration includes an
underwritten public offering) shall satisfy the
requirements of this Section 4.1(e)(ii);
(f) notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration
statement, as then in effect includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein
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not misleading in the light of the circumstances under which they
were made, and at the request of any such seller or holder promptly
prepare and furnish to such seller or holder a reasonable number of
copies of a supplement to or an amendment of such prospectus, and
use reasonable efforts to cause any such amendment, if a
post-effective amendment, to be declared effective, as may be
necessary so that, as thereafter delivered to the purchasers of
such securities, such prospectus, as amended or supplemented, shall
not include 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 in the light of the
circumstances under which they were made; and
(g) otherwise use reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
12 months, but not more than 18 months, beginning with the first
full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
4.2 SELLER'S INFORMATION. The Issuer may require each proposed
seller of Registrable Securities as to which any registration is being
effected to promptly furnish the Issuer, as a condition precedent to
including such holder's Registrable Securities in any registration, such
information regarding such seller and the intended method of distribution
of such securities by such seller as the Issuer may from time to time
reasonably request in writing.
4.3 DISCONTINUANCE OF SELLER'S DISPOSITION. Each holder of
Registrable Securities agrees that upon receipt of any notice from the
Issuer of the happening of any event of the kind described in Section
4.1(f) hereof, such holder shall forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until such holder's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 4.1(f) hereof and, if so directed by the Issuer,
shall deliver to the Issuer (at the Issuer's expense) all copies, other
than permanent file copies, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice, and in any such event, the period of time specified
in Section 4.1(b) hereof for which the Issuer is required to keep such
registration statement effective shall be extended by the number of days
elapsing from the date of the notice given by the Issuer of the occurrence
of an event referred to in Section 4.1(f) hereof to and including the date
of receipt by such holder of the copies of the supplemented or amended
prospectus.
4.4 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Issuer shall give the holders of Registrable
Securities, their underwriters, if any, and their respective counsel, a
reasonable period of time prior to the filing thereof to review and comment upon
such registration statement, each
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prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and shall give each of them such
opportunities to discuss the business of the Issuer with its officers and
the independent public accountants who have certified its financial
statements as shall be necessary, and shall furnish such information as any
of them may request, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
4.5 NOMINEES FOR BENEFICIAL OWNERS. If any Registrable
Securities are held of record by a nominee for a Stockholder as the
beneficial owner thereof, the Stockholder may upon the giving of written
notice to the Issuer, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by him
pursuant to this Agreement or any determination of any number or percentage
of shares of Registrable Securities held by the Stockholders contemplated
by this Agreement. Without limiting the foregoing, the Stockholders and
the Issuer understand that a Stockholder may choose to hold his shares of
the Common Stock in one or more corporations or entities controlled by him.
For the purposes of this Agreement, such shares held by such corporations
or entities shall be deemed to be beneficially owned by such Stockholder.
The Issuer may require assurances reasonably satisfactory to it of such
owner's beneficial ownership of such Registrable Securities.
ARTICLE V
UNDERWRITTEN OFFERINGS
5.1 REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any offering pursuant to a registration requested under
Article II, the Issuer shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Issuer, to holders of more than
50% of the Registrable Securities included in such registration and to the
underwriters and to contain such representations and warranties by the
Issuer and such other terms as are generally prevailing in agreements of
this type, including (without limitation) indemnities to the effect and to
the extent provided in Article VII below. The holders of the Registrable
Securities shall cooperate with the Issuer in the negotiation of the
underwriting agreement and shall give consideration to the reasonable
requests of the Issuer regarding the form thereof, PROVIDED that nothing
herein contained shall diminish the foregoing obligations of the Issuer.
The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable
Securities.
5.2 INCIDENTAL UNDERWRITTEN OFFERINGS. If the Issuer at any
time proposes to register any of the Common Stock under the Securities Act
as contemplated by Article III and such securities are to be distributed by
or through one or more underwriters, the Issuer shall, if requested by any
holder of Registrable Securities, as provided in Article III and subject to
the provisions of Articles III and IV, arrange for
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such underwriters to include all the Registrable Securities to be offered
and sold by such holder among the securities to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by
such underwriters shall be parties to the underwriting agreement between
the Issuer and such underwriters and may, at their option, require that any
or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities.
ARTICLE VI
TERMINATION
The Issuer's obligations under this Agreement shall terminate with
respect to a Stockholder at such time such Stockholder no longer holds
Registrable Securities.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE ISSUER. In the event of any
registration of any securities of the Issuer under the Securities Act
pursuant to this Agreement, the Issuer shall, to the fullest extent
permitted by law, indemnify and hold harmless the seller of any Registrable
Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the
offering or sale of such securities and such other Person, if any, who
controls, is controlled by or is under common control with such seller or
any such underwriter within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director or officer or
underwriter or controlling Person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such securities were registered, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or
any amendment or supplement thereto, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Issuer shall reimburse
such seller and each such director, officer, underwriter and controlling
Person for any reasonable legal or any other expenses incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding, PROVIDED that the Issuer shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement
in reliance upon and in conformity with written information furnished to
the Issuer through an instrument duly executed by such seller for use in
the preparation thereof and, PROVIDED FURTHER, that the Issuer
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shall not be liable to any Person who participates as an underwriter, in
the offering or sale of Registrable Securities or any other Person, if any,
who controls such underwriter within the meaning of the Securities Act or
the Exchange Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus or in such amendment or supplement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, underwriter or controlling Person and shall survive the transfer
of such securities by such seller.
7.2 INDEMNIFICATION BY THE SELLERS. Each Person selling
Registerable Securities pursuant to a registration statement of the Issuer
shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 7.1) each other seller, the Issuer, each
director of the Issuer, each officer of the Issuer and each other Person,
if any, who controls, is controlled by or is under common control with the
Issuer within the meaning of the Securities Act or the Exchange Act, with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment
or supplement thereto, if such statement or alleged statement or omission
or alleged omission was made in reliance upon and in conformity with
written information furnished to the Issuer through an instrument duly
executed by such seller for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the Issuer
or any such director, officer or controlling Person and shall survive the
transfer of such securities by such seller. No Person selling Registrable
Securities shall be liable hereunder for any amount in excess of the
product obtained by multiplying (a) the purchase price per Registrable
Security so sold by such Person (after reduction for sales commissions,
underwriting discounts and the like by (b) the number of Registrable
Securities so sold by such Person.
7.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified Party of notice of the assertion of any claim in respect of
which indemnification would be required pursuant to this Article VII or the
commencement of any action or proceeding involving a claim referred to in
Sections 7.1 and 7.2, such indemnified Party shall, if a claim in respect
thereof is to be made against an indemnifying Party, give written notice to
the latter of such assertion or the commencement of such action; PROVIDED
that the failure of any indemnified Party to give notice as provided herein
shall not relieve the indemnifying Party of its obligations under this
Article VII, except to the extent that the indemnifying Party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified Party, unless in such indemnified Party's
reasonable judgment a conflict of interest between such indemnified Party
and indemnifying Parties may exist in respect of such claim, the
indemnifying Party shall be entitled to participate in and to assume the
defense thereof, jointly with
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any other indemnifying Party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified Party, and
after notice from the indemnifying Party to such indemnified Party of its
election so to assume the defense thereof (if the indemnifying party is
entitled to assume such defense) (a) the indemnifying Party shall not be
liable to such indemnified Party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof
(other than reasonable costs of investigation and of assistance or
participation requested by the indemnifying party) unless in such
indemnified Party's reasonable judgment a conflict of interest between such
indemnified and indemnifying Parties arises in respect of such claim after
the assumption of the defense thereof, and (b) the indemnifying Party shall
not be subject to any liability for any settlement made without its
consent. No indemnifying Party shall, without the consent of the
indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified Party of a release
from all liability in respect to such claim or litigation.
7.4 INDEMNIFICATION PAYMENTS. The indemnification required
by this Article VII shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred
subject to an undertaking of the indemnified Party to repay or refund any
amounts to which it is not entitled under the provisions hereof.
ARTICLE VIII
RESOLUTION OF DISPUTES; JURISDICTION; VENUE
8.1 RESOLUTION OF DISPUTES BETWEEN THE PARTIES.
(a) NEGOTIATION. The Parties shall attempt in good
faith to resolve any dispute arising out of or relating to this
Agreement promptly by negotiations between individuals who have
authority to settle the controversy. Any Party may give the other
Party written notice of any dispute not resolved in the normal
course of business. Within five days after the effective date of
such notice, the Parties shall agree upon a mutually acceptable
time and place to meet and shall meet at such time and place, and
thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. The
first of such meetings shall take place within 7 days of the
effective date of the disputing Party's notice. If the matter has
not been resolved within 60 days of the disputing Party's notice,
or if the Parties fail to agree on a time and place for an initial
meeting within five days of such notice, either Party may initiate
mediation of the controversy or claim as provided hereinafter. If
a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator shall be given at least three Business Days'
notice of such intention and may also be accompanied by an
attorney. All negotiations pursuant to this Section 8.1 shall be
treated as compromise and settlement negotiations for the purposes
of federal and state rules of evidence and procedure.
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(b) MEDIATION. If the dispute has not been resolved by
negotiation as provided herein, the Parties may endeavor to settle
the dispute by mediation under the then current AAA Model Procedure
for Mediation of Business Disputes. The neutral third party shall
be selected by the Parties from the CPR Panels of Neutrals. If the
Parties encounter difficulty in agreeing upon a neutral, they shall
seek the assistance of CPR in the selection process.
(c) ARBITRATION. Any dispute arising out of or relating
to this Agreement or the breach, termination or validity hereof or
thereof, which has not been resolved by non-binding procedures as
provided in Sections 8.1(a) or 8.1(b) hereof within 30 days of the
initiation of either or both of such procedures, shall be finally
settled by arbitration conducted expeditiously in accordance with
the CPR Rules for Non-Administered Arbitration of Business
Disputes, PROVIDED that if one Party has requested the other to
participate in a non-binding procedure and the other has failed to
participate, the requesting Party may initiate arbitration before
the expiration of such period. The arbitration shall be conducted
by three independent and impartial arbitrators. Each Party shall
appoint one arbitrator and a third arbitrator not appointed by the
Parties shall be appointed from the CPR Panels of Neutrals. The
arbitration shall be governed by the United States Arbitration Act
and any judgment upon the award decided upon by the arbitrators may
be entered by any court having jurisdiction thereof. The
arbitrators are not empowered to award damages in excess of
compensatory damages and each Party hereby irrevocably waives any
damages in excess of compensatory damages. Each Party hereby
acknowledges that compensatory damages include (without limitation)
any benefit or right of indemnification given by another Party to
the other under this Agreement. Any arbitration conducted pursuant
to this Section 8.1(c) shall be held at a mutually acceptable
location in Houston, Texas, the United States of America.
8.2 CONSENT TO JURISDICTION AND VENUE. Each of the Parties
hereby (a) irrevocably submits to the exclusive jurisdiction of the United
States Federal District Court for the Southern District of Texas, sitting
in Harris County, Texas, the United States of America, for the purposes of
any suit, action or proceeding arising out of or relating to this
Agreement, (b) waives, and agrees not to assert in any such suit, action or
proceeding, any claim that (i) it is not personally subject to the
jurisdiction of such court or of any other court to which proceedings in
such court may be appealed, (ii) such suit, action or proceeding is brought
in an inconvenient forum or (iii) the venue of such suit, action or
proceeding is improper and (c) expressly waives any requirement for the
posting of a bond by the Party bringing such suit, action or proceeding.
Each of the Parties consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such Party at the address
in effect under Section 9.1 hereof, and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
Nothing in this Section 8.2 shall affect or limit any right to serve
process in any other manner permitted by law.
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ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. Any notice, request, response, instruction or other
document to be given hereunder by any Party to any other Party shall be in
writing and delivered personally, via telecopy (with receipt confirmed), by
recognized international courier service (with receipt confirmed) or by
registered or certified United States mail, postage prepaid, as follows:
(a) if to the Issuer, to:
Rutherford--Moran Oil Corporation
5 Greenway Plaza, Suite 220
Houston, Texas 77046
Attention: President
Telecopy Number: (713) 521-7072
with copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
United States of America
Attention: Christopher E. H. Dack
Telecopy Number: (713) 651-5246;
(b) if to Stockholders, to the addresses listed on EXHIBIT B hereto
or at such other addresses for a Party as shall be specified by like
notice. Any notice that is delivered personally in the manner provided
herein shall be deemed to have been duly given to the Party to whom it is
directed upon actual receipt by such Party (or its agent for notices
hereunder). Any notice that is addressed and mailed in the manner herein
provided shall be conclusively presumed to have been duly given to the
Party to which it is addressed at the close of business, local time of the
recipient, on the tenth day after the day it is so placed in the mail. Any
notice that is sent by telecopy shall be deemed to have been duly given to
the Party to which it is addressed upon telephonic confirmation of the same
as provided herein. A copy of any notices delivered by telecopy shall
promptly be mailed in the manner herein provided to the Party to which such
notice was given.
9.2 NO THIRD-PERSON BENEFICIARIES. This Agreement is intended
solely for the benefit of the Parties and their respective successors and
permitted assigns. Nothing in this Agreement shall be construed to create
any duty to, or standard of care with reference to, or liability of a Party
to, any Person not a Party.
9.3 ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the Parties and their respective
heirs, executors,
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successors and permitted assigns. No Stockholder may assign his rights
under this Agreement without the prior written consent of the Issuer.
9.4 AMENDMENTS AND WAIVERS. This Agreement may be amended and
the Issuer may take any action herein prohibited or omit to perform any act
herein required to be performed by it, only if the Issuer shall have
obtained the written consent to such amendment, action or omission to act,
of the holder or holders of an aggregate of at least 50% of the Registrable
Securities. Each holder of any Registrable Securities shall be bound by
any consent given by a previous holder of such Registrable Securities,
whether or not such Registrable Securities shall have been marked to
indicate such consent. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other
provisions hereof (whether or not similar) or the same provision hereof at
a later time. No failure by a Party to insist upon the strict performance
of any term, covenant or condition of this Agreement, or to exercise any
right or remedy upon breach of any provision, and no acceptance of payment
or performance during the continuation of any such breach, shall constitute
a waiver of any term, covenant or condition herein or a waiver of any
subsequent breach or default in the performance of any term, covenant or
condition herein.
9.5 HEADINGS. The headings of the Articles and Sections of this
Agreement are included for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof or
thereof. Unless otherwise specified, all references in this Agreement to
Articles, Sections, paragraphs or clauses are deemed references to the
corresponding Articles, Sections, paragraphs or clauses in this Agreement.
9.6 SEVERABILITY OF PROVISIONS. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any Party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the Parties shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the Parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the sole
understanding of the Parties with respect to the matters provided for
herein and supersedes any previous agreements and understandings between
the Parties with respect to the subject matter hereof.
9.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument.
-16-
<PAGE>
9.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF TEXAS (regardless of laws that might otherwise govern under
applicable principles of conflicts of laws).
-17-
<PAGE>
IN WITNESS WHEREOF, the Parties have hereunto executed this Agreement
as of the date first set forth in the introduction to this Agreement.
RUTHERFORD--MORAN OIL CORPORATION
By ___________________________________________
Name: ________________________________________
Title: _______________________________________
______________________________________________
John A. Moran
______________________________________________
Patrick R. Rutherford
______________________________________________
Michael D. McCoy
______________________________________________
Susan R. Rutherford
<PAGE>
EXHIBIT A
OWNERSHIP OF REGISTRABLE SECURITIES
NAME/NOMINEE IN
NAME OF WHICH REGISTRABLE AMOUNT HELD BY
BENEFICIAL OWNER SECURITIES HELD NOMINEE
John A. Moran John A. Moran
JAMTHAI, Inc.
THAIJAM, L.P.
Patrick R. Patrick R.
Rutherford Rutherford
PRRTHAI, Inc.
THAIPRR, Inc.
Michael D. McCoy MDMTHAI, Inc.
Susan R. Rutherford SRRTHAI, Inc.
<PAGE>
EXHIBIT B
STOCKHOLDERS' ADDRESSES FOR NOTICE
John A. Moran
1424 South Ocean Boulevard
Palm Beach, Florida 33480
Patrick R. Rutherford
3466 Ella Lee Lane
Houston, Texas 77027
Michael D. McCoy
8489 Burkhart Drive
Houston, Texas 77055
Susan R. Rutherford
3466 Ella Lee Lane
Houston, Texas 77027
<PAGE>
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made and entered into on this ____ day of
_______________, 1996, by and between Rutherford--Moran Oil Corporation, a
Delaware corporation ("RMOC" or the "Company"), and name~, as a director of RMOC
(the "Director");
WHEREAS, the Director is a member of the Board of Directors and in such
capacity is performing or will perform a valuable service for the Company;
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware empowers a corporation organized in Delaware to indemnify persons who
serve as directors, officers, employees or agents of the corporation or persons
who serve at the request of the corporation as directors, officers, employees or
agents of another corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise;
WHEREAS, the Company desires to have the Director serve or continue to
serve as a director of the Company, free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of his being a
director of the Company or by reason of his decisions or actions on its behalf;
and
WHEREAS, the Director is willing to serve, or to continue to serve, or to
take on additional service for the Company on the condition that he be
indemnified as provided for in this Indemnification Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce the
Director to continue to serve RMOC and its stockholders, the parties hereto
agree as follows:
1. INDEMNIFICATION.
(a) RMOC shall indemnify the Director if he is or was a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of RMOC) by reason
of the fact that the Director is or was a director, officer, employee, or
agent of RMOC or its subsidiaries, or is or was serving at the request of
RMOC as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against all
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by the Director in connection
with such action, suit or proceeding if the Director acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of RMOC, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption that the Director
did not act
<PAGE>
in good faith and in a manner that he reasonably believed to be
in or not opposed to the best interests of RMOC, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) RMOC shall indemnify the Director if he is or was a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of RMOC to procure a judgment in its
favor by reason of the fact that the Director is or was a director,
officer, employee or agent of RMOC or its subsidiaries, or is or was
serving at the request of RMOC as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against all expenses (including attorneys' fees) actually and reasonably
incurred by the Director in connection with the defense or settlement of
such action or suit if the Director acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of RMOC,
except that no indemnification shall be made in respect of any claim, issue
or matter as to which the Director shall have been adjudged to be liable to
RMOC unless and only to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, but in view of all
the circumstances of the case, the Director is fairly and reasonably
entitled to indemnity for such expenses as the Delaware Court of Chancery
or such other court shall deem proper.
(c) RMOC shall indemnify the Director to the extent that the Director
has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this
Section 1, or in the defense of any claim, issue or matter therein, against
all expenses (including attorneys' fees) actually and reasonably incurred
by the Director in connection therewith. For purposes of this
Section 1(c), the phrase "successful on the merits or otherwise" shall
include, but not be limited to, any favorable judgment, decision,
declaration, finding or ruling (whether based upon the merits of the case
or on a procedural matter such as the expiration of the statute of
limitations, lack of standing or latches) in favor of the Director in the
defense of any action, suit or proceeding referred to in paragraphs (a) and
(b) of this Section 1 or in the defense of any claim, issue or matter
therein, and shall also include any settlement of such action, suit or
proceeding, if in the opinion of counsel to RMOC such settlement is in the
best interests of RMOC.
(d) Any indemnification of the Director under paragraphs (a) and (b)
of this Section 1 (unless ordered by a court) shall be made by RMOC only as
authorized in the specific case upon a determination that indemnification
of the Director is proper under the circumstances because he has met the
applicable standard of conduct or circumstances set forth in paragraphs (a)
or (b) of this Section 1. Such determination shall be made by an
independent legal counsel ("Special Counsel") retained by RMOC for the
purpose of making such determination. The Special Counsel shall be
retained by RMOC within ten days from the receipt by RMOC of a written
notice of claim by the Director for indemnification and must be reasonably
satisfactory to the Director requesting
-2-
<PAGE>
indemnification. RMOC shall be solely responsible for all fees and
expenses of the Special Counsel.
(e) Expenses (including attorney's fees) incurred by the Director in
defending a civil or criminal action, suit or proceeding referred to in
paragraphs (a) and (b) of this Section 1 shall be paid by RMOC in advance
of the final disposition of such action, suit, or proceeding in the manner
provided for in paragraph (d) of this Section 1; provided, however, that as
a condition to such payment the Director shall undertake to repay such
amount unless it shall ultimately be determined that he is entitled to be
indemnified by RMOC as authorized by this Indemnification Agreement.
2. NO CHANGE IN BYLAW INDEMNIFICATION. RMOC shall cause to be
implemented and continued in effect for the benefit of the Director the
indemnification provided for its directors under Section 54 of the Bylaws of
RMOC, as filed with the Securities and Exchange Commission on April 26, 1996,
and in effect on the date hereof, with such changes as may be necessary to
comply with the Delaware General Corporation Law. In the event any Director
shall request any indemnification from RMOC pursuant to such Bylaws, RMOC shall
indemnify the Director in the manner set forth in and to the fullest extent
permitted by such Bylaws and the Delaware General Corporation Law.
3. DURATION OF AGREEMENT; SUBROGATION.
(a) This Indemnification Agreement shall continue until and terminate
upon the later of: (i) ten years after the date that the Director shall
have ceased to serve as a director of the Company; or (ii) the final
termination of any action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding arising prior to the end of such ten year period, whether civil,
criminal, administrative or investigative, that is pending, threatened or
completed, or that arises on or after the date of this Indemnification
Agreement (regardless of (a) when the Director's act or failure to act
occurred or (b) whether such proceeding is internal or external to the
Company) in respect of which the Director is granted rights of
indemnification or advancement of expenses hereunder. This Indemnification
Agreement shall be binding upon the Company and its successors and assigns
and shall inure to the benefit of the Director and his heirs, executors and
administrators.
(b) In the event of any payment under this Indemnification Agreement,
the Company shall be subrogated to the extent of such payment to all of the
right of recovery of the Director, who shall execute all papers required
and take all action necessary to secure such rights, including execution of
such documents as are necessary to enable the Company to bring suit to
enforce such rights.
(c) The Company shall not be liable under this Indemnification
Agreement to make any payment of amounts otherwise indemnifiable hereunder
if and to the extent that
-3-
<PAGE>
the Director has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
4. SUCCESSORS; BINDING AGREEMENT. RMOC shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of RMOC, by agreement in form
and substance reasonably satisfactory to the Director, to assume and expressly
agree to perform this Indemnification Agreement in the same manner and to the
same extent that RMOC would be required to perform it if no such succession
had taken place. Failure of RMOC to obtain such agreement prior to
effectiveness of any succession shall be a breach of this Indemnification
Agreement and shall entitle the Director to monetary damages from RMOC in an
amount necessary to provide the Director with the protections he would be
entitled to hereunder. As used in this Indemnification Agreement, "RMOC"
includes any successor to the business or assets of RMOC as defined above that
executes and delivers the agreement provided for in this Section 4 or that
otherwise becomes bound by all the terms and provisions of this Indemnification
Agreement by operation of law.
5. NOTICE. For the purposes of this Indemnification Agreement, notices
and all other communications required by this Indemnification Agreement shall be
in writing and shall be deemed to have been duly given when delivered or mailed,
postage prepaid, to the respective addresses set forth beneath the signatures
attached to this Indemnification Agreement (provided that all notices to RMOC
shall be directed to the attention of the President of RMOC) or to such other
address or addresses as either party hereto may have furnished to the other.
6. INDEMNITY NOT EXCLUSIVE. This Indemnification Agreement shall be in
addition to any rights which the Director may be entitled to under any law or
other agreement, bylaw provision, vote of stockholders or disinterested
directors or otherwise, and shall enure to the benefit of the heirs, executors
and administrators of the Director.
7. CHOICE OF LAW. The validity, interpretation, construction and
performance of this Indemnification Agreement shall be governed by the laws of
the State of Delaware, without regard to the principles of conflicts of law.
8. VALIDITY. If any provision of this Indemnification Agreement is found
by the Delaware Court of Chancery or other court of competent jurisdiction to be
contrary to public policy or law, such provision shall be construed to be
consistent with such public policy or law to the extent possible, and the
invalidity or unenforceability of any provision of this Indemnification
Agreement shall not affect the validity and enforceability of any other
provision of this Indemnification Agreement, which shall remain in full force
and effect.
9. COUNTERPARTS. This Indemnification Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
-4-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Indemnification Agreement as of the date and year first set forth above.
Rutherford--Moran Oil Corporation
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
Address:
5 Greenway Plaza, Suite 220
Houston, Texas 77046
Director:
_________________________________________
Name:name~
Address:
_________________________________________
_________________________________________
-5-
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
Following consummation of the Transactions (as such term is defined in the
Registration Statement on Form S-1 of which this Exhibit 21.1 is a part) the
Company will have the following subsidiaries:
NAME JURISDICTION
---- ------------
Rutherford-Moran Exploration Texas
Company
Thai Romo Limited Thailand
Thai Romo Holdings, Inc. Delaware
<PAGE>
EXHIBIT 23.2
The Board of Directors
Rutherford-Moran Oil Corporation, and
Rutherford-Moran Exploration Company, and
Thai Romo Limited:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Houston, Texas
May 31, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF RUTHERFORD-MORGAN OIL CORPORATION AS OF APRIL 25, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-25-1996
<PERIOD-END> APR-25-1996
<CASH> 50,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 50,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 49,990
<TOTAL-LIABILITY-AND-EQUITY> 50,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
