<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 19, 1997
REGISTRATION NO. 333-41015
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RUTHERFORD-MORAN OIL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1311 76-0499690
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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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)
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DAVID F. CHAVENSON
RUTHERFORD-MORAN OIL CORPORATION
5 GREENWAY PLAZA
HOUSTON, TEXAS 77046
(713) 622-5555
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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With a Copy to:
ALAN J. BOGDANOW
HUGHES & LUCE, L.L.P.
1717 MAIN STREET, SUITE 2800
DALLAS, TEXAS 75201
(214) 939-5500
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
(EACH OF THE FOLLOWING SUBSIDIARIES OF RUTHERFORD-MORAN OIL CORPORATION, AND
EACH OTHER SUBSIDIARY THAT IS OR BECOMES A GUARANTOR OF THE SECURITIES
REGISTERED HEREBY, IS HEREBY DEEMED TO BE A REGISTRANT).
<TABLE>
<CAPTION>
PRIMARY
STANDARD
STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
NAME INCORPORATION NUMBER NUMBER
---- ------------------- -------------- ---------------
<S> <C> <C> <C>
Thai Romo Limited......................... Kingdom of Thailand 1311 76-0435668
Thai Romo Holdings, Inc................... Delaware 1311 76-0511017
Rutherford-Moran Exploration Company...... Delaware 1311 76-0321674
</TABLE>
<PAGE> 3
RUTHERFORD-MORAN OIL CORPORATION
Cross Reference Sheet Pursuant to Rule 404(a) and Item 501 of Regulation
S-K, showing the location in the prospectus of the information required to be
included therein in accordance with Part I of Form S-4.
<TABLE>
<CAPTION>
FORM S-4 LOCATION OR HEADING
ITEM NUMBER AND CAPTION IN THE PROSPECTUS
----------------------- -------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.............. Forepart of Registration Statement; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................. Inside Front and Outside Back Cover Pages of
Prospectus
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............... Forepart of Prospectus; Prospectus Summary;
Risk Factors; Selected Financial Data
4. Terms of the Transaction...................... Prospectus Summary; The Exchange Offer;
Description of The Notes; Certain Federal
Income Tax Considerations; Risk Factors
5. Pro Forma Financial Information............... Selected Financial Data
6. Material Contracts with Company Being
Acquired.................................... *
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters................................ *
8. Interests of Named Experts and Counsel........ *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................. *
10. Information with Respect to S-3 Registrants... *
11. Incorporation of Certain Information by
Reference................................... *
12. Information with Respect to S-2 or S-3
Registrants................................. *
13. Incorporation of Certain Information by
Reference................................... *
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants................. Prospectus Summary; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business and Properties
15. Information with Respect to S-3 Companies..... *
16. Information with Respect to S-2 or S-3
Companies................................... *
17. Information with Respect to Companies Other
Than S-3 or S-2 Companies................... *
18. Information if Proxies, Consents or
Authorizations are to be Solicited.......... *
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in
an
Exchange Offer.............................. *
</TABLE>
- ---------------
* Item is omitted because the answer is negative or the item is inapplicable.
<PAGE> 4
OFFER TO EXCHANGE
10 3/4% SENIOR SUBORDINATED NOTES DUE 2004
FOR ANY AND ALL OUTSTANDING 10 3/4% SENIOR SUBORDINATED NOTES DUE 2004
OF
RUTHERFORD-MORAN OIL CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JANUARY , 1998, UNLESS EXTENDED
Rutherford-Moran Oil Corporation (the "Company" or the "Registrant") hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together constitute
the "Exchange Offer"), to exchange an aggregate principal amount of up to $120
million of 10 3/4% Senior Subordinated Notes due 2004 of the Company (the "New
Notes") for a like aggregate principal amount of the issued and outstanding
10 3/4% Senior Subordinated Notes due 2004 (the "Old Notes," and collectively
with the New Notes, the "Notes") from the registered holders thereof (the
"Holders"). Interest on the Notes is payable semi-annually commencing April 1,
1998 with a final maturity date of October 1, 2004. As of the date of this
Prospectus, $120,000,000 aggregate principal amount of the Old Notes is
outstanding. The terms of the New Notes and the Old Notes are identical in all
material respects, except for certain transfer restrictions relating to the Old
Notes.
The Exchange Offer is being made to satisfy certain obligations of the
Registrant under the Registration Rights Agreement, dated as of September 29,
1997, among the Registrant, the Subsidiary Guarantors (as defined and, together
with the Company, the "Registrants") and the Initial Purchasers (as defined)
(the "Registration Rights Agreement"). Upon consummation of the Exchange Offer,
holders of Old Notes that were not prohibited from participating in the Exchange
Offer and did not tender their Old Notes will not have any registration rights
under the Registration Rights Agreement with respect to such nontendered Old
Notes and, accordingly, such Old Notes will continue to be subject to the
restrictions on transfer contained in the legend on the Old Notes.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
that the New Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by any holder
of such New Notes (other than any such holder that is an "affiliate" of the
Registrant within the meaning of Rule 405 under the Securities Act of 1933, as
amended (the "Securities Act")) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such
(cover continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
---------------------
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.
---------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 19, 1997
<PAGE> 5
(cover page continued)
holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes and neither the holder nor any other person is
engaging in or intends to engage in a distribution of the New Notes. Any holder
who tenders in the Exchange Offer for the purpose of participating in a
distribution of New Notes cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of the New Notes received in exchange for the Old
Notes acquired by the broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that it will make this
Prospectus and any amendment or supplement to this Prospectus available to any
broker-dealer for use in connection with any such resale for a period of 90 days
after the Exchange Date or, if earlier, until all participating broker-dealers
have so resold. See "Plan of Distribution."
The New Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture (as defined). For a more complete
description of the terms of the New Notes, see "Description of The Notes."
The Old Notes were originally issued and sold on September 29, 1997 in an
offering of $120,000,000 aggregate principal amount of Old Notes (the
"Offering"). The Offering was exempt from registration under the Securities Act
under the exemptions provided by Rule 144A and Regulation S under the Securities
Act. Accordingly, the Old Notes may not be reoffered, resold or otherwise
pledged, hypothecated or transferred in the United States unless so registered
or unless an exemption from the registration requirements of the Securities Act
and applicable state securities laws is available.
Interest on the Notes will be payable semi-annually on April 1 and October
1 of each year, commencing April 1, 1998. The Notes will be redeemable at the
option of the Company, in whole or in part, at any time on or after October 1,
2001, at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, from the date of redemption. In addition, the Company, at its
option, may redeem at any time prior to October 1, 2000, in the aggregate up to
35% of the original principal amount of the Notes at a redemption price equal to
110 3/4% of the aggregate principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption, with the Net Proceeds (as defined)
of one or more Equity Offerings (as defined); provided, that after any such
redemption, at least 65% of the original aggregate principal amount of the Notes
remains outstanding. Upon the occurrence of a Change of Control (as defined) (i)
the Company will have the option, at any time prior to October 1, 2001, to
redeem the Notes, in whole but not in part, at a redemption price equal to 100%
of the principal amount thereof plus the Applicable Premium (as defined) and
accrued and unpaid interest, if any, to the date of redemption, and (ii) if the
Company does not redeem the Notes pursuant to clause (i) above or if such Change
of Control occurs on or after October 1, 2001, each holder of the Notes may
require the Company to repurchase such holder's Notes at a purchase price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase.
The Notes and the Subsidiary Guaranties (as defined) will be subordinated
in right of payment to all existing and any future Senior Indebtedness (as
defined) and will rank pari passu in right of payment with all future senior
subordinated indebtedness and senior to all subordinated indebtedness of the
Company and the Subsidiary Guarantors, as applicable. The Notes will be jointly
and severally guaranteed on an unsecured senior subordinated basis
(collectively, the "Subsidiary Guaranties"), by each direct and indirect
Restricted Subsidiary (as defined) of the Company. Old Notes may be tendered
only in denominations of $1,000 principal amount and integral multiples thereof.
At December 4, 1997, the
2
<PAGE> 6
Notes and the Subsidiary Guaranties were subordinated to approximately $70
million of Senior Indebtedness of the Company and the Subsidiary Guarantors (not
including approximately $80 million of additional borrowing capacity under the
Revolving Credit Facility which, if borrowed, would have been Senior
Indebtedness). The Indenture (as defined) permits the Company and its
subsidiaries to incur additional indebtedness, including secured and unsecured
Senior Indebtedness, subject to certain limitations. See "Description of the
Notes".
The Registrant has not entered into any arrangement or understanding with
any person to distribute the New Notes to be received in the Exchange Offer, and
to the best of the Registrant's information and belief, each person
participating in the Exchange Offer is acquiring the New Notes in its ordinary
course of business and has no arrangement or understanding with any person to
participate in the distribution of the New Notes to be received in the Exchange
Offer.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The Exchange Offer will expire
at 5:00 p.m., New York City time, on January , 1998, unless extended (as it
may be so extended, the "Expiration Date"), provided that the Exchange Offer
shall not be extended beyond 30 business days from the date of this Prospectus.
The date of acceptance for exchange of the Old Notes for the New Notes (the
"Exchange Date") will be the first business day following the Expiration Date.
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date; otherwise such tenders are irrevocable.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. In the event
the Company terminates the Exchange Offer and does not accept for exchange any
Old Notes, the Company will promptly return the Old Notes to the holders
thereof. See "The Exchange Offer".
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes. The
Initial Purchasers (as defined) have advised the Company that they currently
intend to make a market in the New Notes. The Initial Purchasers are not
obligated to do so, however, and any market-making with respect to the New Notes
may be discontinued at any time without notice. Accordingly, no assurance can be
given that an active public or other market will develop for the New Notes or as
to the liquidity of or the trading market for the New Notes. The Company does
not intend to apply for listing of the New Notes on any securities exchange or
in any automated quotation system.
3
<PAGE> 7
AVAILABLE INFORMATION
The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-4 under the Securities Act with respect to the
Exchange Offer. 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. For further information with respect to
the Company and the Exchange Offer, reference is made to such Registration
Statement and the exhibits and schedules filed as part thereof. The Registration
Statement and the exhibits and schedules thereto filed with the Commission may
be inspected without charge at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
will also be available for inspection and copying at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048, and the Citicorp 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 Commission upon payment of
certain prescribed fees. Electronic registration statements made through the
Electronic Data Gathering, Analysis, and Retrieval system are publicly available
through the Commission's Web site (http://www.sec.gov), which is maintained by
the Commission and which contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith, files reports, proxy statements and other
information with the Commission. The Company's Common Stock is traded on the
Nasdaq National Market under the symbol RMOC. The Company's reports, proxy
statements and other information concerning the Company can be inspected and
copied at the offices of the Nasdaq National Market, 1735 K Street N.W.,
Washington, D.C. 20006.
The Company has agreed that, if at any time while the Old Notes are
'restricted securities' within the meaning of the Securities Act and the Company
is not subject to the reporting requirements of the Exchange Act, the Company
will furnish to holders of the Old Notes and to prospective purchasers
designated by such holders the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in
connection with resales of the Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE REGISTRANT ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES LAWS OF SUCH JURISDICTION.
4
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Certain oil
and gas related terms are defined under "Certain Definitions." 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.
THE COMPANY
The Company is a United States independent exploration and production
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 conducted entirely in the Gulf of Thailand
through its subsidiary, Thai Romo Limited ("Thai Romo"), and its affiliate,
B8/32 Partners, Limited ("B8/32 Partners"), each of which are companies existing
under the laws of Thailand. The Company, through Thai Romo and B8/32 Partners,
owns a 46.34% interest in Block B8/32 (sometimes referred to as the "Block" or
the "Concession"), which currently covers approximately 750,000 acres in the
central portion of the Gulf of Thailand. Subsidiaries or affiliates of Pogo
Producing Company ("Pogo"), the operator of the Concession, and Palang Sophon
Limited ("Palang"), the Company's local partner which is an affiliate of the
Sophonpanich Group (a major Thai holding company with interests in the banking,
hotel, real estate, petrochemical and other industries), are the other
concessionaires (together with the Company, the "Concessionaires") in the Block.
The Company also reviews from time to time additional exploration opportunities
in other areas of Southeast Asia.
The Company has experienced a rapid growth in proven reserves since
drilling its first well in 1992. Through June 30, 1997, 52 of 62 wells drilled
in the Block have been successful and are capable of commercial production. The
successful drilling program has resulted in the discovery and subsequent
development of the Tantawan and Benchamas Fields. As of July 1, 1997, the
Company had net proven reserves of 327 Bcfe, 50% of which were in the Tantawan
Field and 50% of which were in the Benchamas Field. This estimate only includes
proven reserves with respect to 2 of the 12 successful wells drilled in the
first half of 1997. In addition, the Company has made additional discoveries in
the Pakakrong and Maliwan areas which have the potential for significant
additional proven reserves. Production from the Tantawan Field commenced in
February 1997 and through June 30, 1997 has averaged 79 MMcf and 5,050 Bbls per
day (36.6 MMcf and 2,340 Bbls per day net to the Company's working interest).
Production from the Benchamas Field is expected to commence in the third quarter
of 1999.
The Concessionaires have entered into a 30-year take-or-pay Gas Sales
Agreement (the "GSA") with the Petroleum Authority of Thailand ("PTT") to sell
natural gas from the Tantawan Field. PTT is an agency of the Kingdom of
Thailand, which has "Baa3" and "BBB" long-term sovereign debt ratings from
Moody's Investors Services, Inc. and Standard & Poor's Ratings Service,
respectively. The GSA was amended in November 1997 to incorporate production
from the Benchamas Field.
In early July 1997, the Company had its first oil lifting from the Tantawan
Field and sold 278,000 barrels of oil pursuant to a Memorandum of Understanding
("MOU") with PTT. In October 1997, the Company and the other Concessionaires
received permission from the Thai Department of Mineral Resources to export
crude oil produced from the Block and sold its second oil lifting for U.S.
dollars to a third party purchaser for export. The Company expects that the
Concessionaires will continue to sell their crude oil for U.S. dollars to a
number of purchasers at market prices. In November 1997, PTT notified the
Company that the MOU was terminated.
The Company believes that the Block is a unique exploration and development
opportunity because of its potential for very substantial oil and gas reserves,
its close proximity to existing production and transportation infrastructure,
the Company's existing long-term take-or-pay natural gas sales agreement, and
Thailand's growing energy demand and favorable business climate.
5
<PAGE> 9
BUSINESS STRATEGY
The Company's business strategy is to increase reserves, production,
earnings and cash flow through exploration, development and acquisition of
assets primarily concentrated in Southeast Asia. The Company implements this
strategy by (i) conducting an active exploration and development drilling
program, (ii) utilizing advanced geophysical technology and in-house expertise,
(iii) developing strong local government and partner working relationships, (iv)
maintaining a sound financial structure, including strict controls on overhead
and operating costs, and (v) focusing on attractive geological regions.
Active Exploration and Development Drilling Program. The Company's
operating strategy incorporates an aggressive program of exploration and
development drilling. RMOC's 1997 capital budget of $108 million included
approximately $36 million to drill 11 development wells (5.1 wells net to RMOC)
in the Tantawan Field and approximately 21 exploration wells (9.7 wells net to
RMOC) across all areas within the Block. The Company's 1998 capital budget is
estimated to be in the range of $110 million to $120 million, of which
approximately 70% is budgeted for production facilities, primarily for the
Benchamas Field. The Company currently produces oil and gas in the Tantawan
Field from two producing platforms into a floating production, storage and
offloading vessel ("FPSO"), and expects to produce from two additional platforms
by the end of 1997. Since the commencement of drilling operations in the Block
in 1992 through June 30, 1997, the Concessionaires have drilled 52 commercial
wells (21.5 net to RMOC), resulting in a success rate of approximately 84%. The
Company also believes that it has an extensive inventory of attractive
exploration prospects.
Advanced Technology and In-house Technical Expertise. The Company believes
that its drilling success has significantly benefited from the technical
expertise of its geophysical and geologic staff and their effective analysis and
interpretation of advanced 3-D seismic information. RMOC's staff conducts
extensive in-house 3-D seismic analysis in order to identify prospects and
optimize exploration and development drilling locations in the Block. To date,
the Company has acquired 3-D seismic surveys covering approximately 860 square
miles in the Block. The Company's efforts also utilize advanced drilling and
completion techniques in order to increase the ultimate recovery of oil and gas
and reduce costs.
Local Government and Partner Relationships. The Company believes that the
strong relationships it has developed with the Thai government, Palang (its
local Thai partner) and Pogo, the operator of the Concession, are key advantages
in implementing the other components of its strategy. RMOC expects to emphasize
similar local government and partner relationships in any new potential areas of
operations.
Financial Strategy. The Company's financial strategy focuses on maintaining
a sound capital structure and controlling overhead and operating costs,
resulting in efficiencies which increase margins and reduce finding and
development costs. The Company's financial management initiatives include its
June 1996 initial public offering which raised $97 million in net proceeds used
to repay the Company's indebtedness, and the issuance of the Old Notes, which
extended the Company's debt maturities, diversified its capital base and
improved the Company's ability to exploit additional opportunities in the Block.
RMOC's management team also has an approximate 75% equity ownership position in
the Company, thus creating a significant incentive for success.
Attractive Geological Regions. RMOC obtained its position in the Block
after identifying Thailand as an attractive area for oil and gas operations. The
characteristics the Company considers when evaluating potentially attractive
opportunities include: (i) large reserve potential, (ii) manageable geologic
risk, (iii) proximity to existing infrastructure, (iv) growing local demand for
petroleum products, and (v) favorable overall government and business climate.
See "Business and Properties."
6
<PAGE> 10
OIL AND GAS 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 and Maliwan areas. On May 24, 1997, the Concessionaires
received approval for a three-year extension of the exploration period for the
Block until July 31, 2000.
Tantawan Field. Through June 30, 1997, the Company has participated in
drilling a total of 18 exploration wells and 23 development wells in the
Tantawan Field, all but one of which have encountered hydrocarbons. Of the 40
wells that encountered hydrocarbons, 36 are deemed capable of commercial flow
rates. All of these successful wells have been drilled in roughly the southern
third of the Tantawan Field, and have encountered an average of 170 feet of net
hydrocarbon pay. Production commenced in February 1997, and through June 30,
1997, has averaged 79 MMcf and 5,050 Bbls per day (36.6 MMcf and 2,340 Bbls net
to the Company's working interest). As of July 1, 1997, net proven reserves for
the Tantawan Field were 162 Bcfe.
Benchamas Field. Through June 30, 1997, the Company has participated in
drilling a total of 13 exploration wells in the Benchamas Field, all of which
were hydrocarbon bearing and 12 of which were considered to be commercially
viable. The wells encountered an average of 225 feet of net hydrocarbon pay. As
of July 1, 1997, net proven reserves for the Benchamas Field were 165 Bcfe.
Additional delineation drilling is currently underway in this Field. The Company
expects to conduct an active program of development drilling in the Benchamas
Field in 1998.
In January 1997, the Concessionaires submitted to the Thai government a
plan of development and applied for approval to produce oil and gas from the
Benchamas Field and part of the Pakakrong area. In June 1997, the Company
received from the Ministry of Industry a production license covering
approximately 101,000 acres in these areas. The Company believes this is the
largest production license area ever awarded in the Gulf of Thailand. The
initial development plan for the Benchamas Field includes the installation of
three wellhead platforms and a central processing facility with a daily capacity
of 150 Mmcf of natural gas, 25 Mbbls of oil and condensate and 25 Mbbls of
water. The natural gas will flow into an existing 36-inch pipeline owned by PTT.
The oil and condensate will flow from the central processing platform to a
floating storage and offloading vessel ("FSO") to be moored in the field.
Pakakrong Area. Through June 30, 1997, the Company has participated in
drilling two wells in the Pakakrong area located southwest of the Benchamas
Field, both of which have encountered hydrocarbons. These wells have found an
average of 79 feet of net hydrocarbon pay. The Pakakrong discovery is
significant in that hydrocarbons were encountered and tested at depths
considerably shallower than those found to date by the Concessionaires elsewhere
in the Block. Additional delineation drilling is needed before proven reserves
at Pakakrong can be estimated. The Company expects that Pakakrong production
will flow to the Benchamas central processing facility.
Maliwan Area. Through June 30, 1997, two successful exploration wells have
been drilled in the Maliwan area, located between the Tantawan and Benchamas
Fields. The first well encountered 110 feet of net hydrocarbon pay and the
second encountered 297 feet of net hydrocarbon pay. Additional exploration and
delineation drilling, as well as a complete geological and geophysical
assessment, will be required before proven reserves can be evaluated and
development plans formulated. In November 1997, the Concessionaires received
from the Ministry of Industry a production license covering approximately 91,000
acres in the Maliwan area. The Company also expects to have an active program of
exploratory drilling in the Maliwan area in 1998.
7
<PAGE> 11
Recent Developments. Since July 1, 1997 and through September 30, 1997, the
Company has participated in drilling 8 additional exploration wells, all but one
of which were considered to be commercially viable. Five of the successful
exploration wells were drilled in the Benchamas Field. The first well
encountered 218 feet of net hydrocarbon pay. The second well encountered 71 feet
of net hydrocarbon pay. The third well encountered 268 feet of net hydrocarbon
pay and the fourth well encountered 125 feet of net hydrocarbon pay. The fifth
well was the first well drilled utilizing "slimhole" drilling and completion
technology which the Company believes will greatly reduce its drilling costs.
The fifth well encountered 165 feet of net hydrocarbon pay. Two of the
successful wells were drilled in the Maliwan area. The first well encountered 69
feet of net hydrocarbon pay and the second well encountered 185 feet of net
hydrocarbon pay. The one well considered not to be commercially viable was
drilled in the northern portion of the Tantawan Field.
Other Activities. In the future, the Company intends to evaluate other
prospects in the Block, including the Pattalung and Yungthong areas, as well as
capitalize on the expertise developed through its experience in the Block by
identifying and pursuing additional oil and gas exploration, development and
acquisition opportunities in the Gulf of Thailand and other areas in Southeast
Asia.
OVERVIEW OF THE GULF OF THAILAND AND BLOCK B8/32
The Kingdom of Thailand has significant oil and gas production and
reserves, centered primarily in the Gulf of Thailand. According to the Thai
Department of Mineral Resources, at December 31, 1996, Thailand's remaining
proven, probable and possible reserves were estimated at approximately 25 Tcfe
and 1996 production averaged 1.65 Bcfe per day.
Block B8/32 is an offshore acreage position situated within the Pattani
Basin of the Gulf of Thailand, which has seen 10 major field discoveries over
the past 24 years. Water depths in the Block range from 200 to 250 feet, which
is similar to the shallow waters in the Gulf of Mexico.
The surface area of Block B8/32 currently covers an area of approximately
750,000 acres, which, in comparison to the U.S. Gulf of Mexico, equates to an
acreage position of approximately 150 Federal Offshore Louisiana Blocks. By Thai
law, the Concessionaires were required to relinquish approximately 590,000 acres
on August 1, 1997, which represented approximately 45% of the 1.3 million acres
not then subject to a production license or for which a production license
application was not then pending. The Company believes that the Concessionaires
did not lose any attractive exploration acreage in the Block as a result of the
relinquishment. Management believes the remaining 750,000 acres in the Block
contain significant unexplored areas which will provide the Company with
additional exploration opportunities and potential reserve growth.
The Company originally owned a 31.67% interest in the Block. In March 1995,
RMOC purchased its proportionate share of the interest of Maersk Oil (Thailand),
Limited ("MOTL"), a wholly-owned subsidiary of Maersk Olie og Gas AS of
Copenhagen, Denmark, in the Tantawan Field. This $5.9 million transaction
increased the Company's interest in the Tantawan Field from 31.67% to 46.34%.
On December 19, 1996, RMOC exercised its preferential right to purchase
46.34% of the outstanding shares of MOTL for $28.6 million, which included
approximately $1.6 million in satisfaction of outstanding debt (the "MOTL
Acquisition"). The remaining 53.66% of MOTL stock was purchased by Pogo and
Palang. Following the purchase, which closed on March 3, 1997, MOTL changed its
name to B8/32 Partners, Limited. Through this acquisition, RMOC effectively
increased its interest in the remainder of the Block outside the Tantawan Field
to 46.34% and increased its proven reserves as of January 1, 1997 by
approximately 50 Bcfe.
8
<PAGE> 12
RUTHERFORD-MORAN OIL CORPORATION
CORPORATE ORGANIZATION
CHART
* Captive insurance company.
9
<PAGE> 13
THE INITIAL OFFERING
On September 29, 1997, the Company issued $120 million principal amount of
Old Notes. The Old Notes were sold pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. Credit Suisse First Boston Corporation,
Bear, Stearns & Co. Inc., Chase Securities Inc. and NationsBanc Capital Markets,
Inc. (collectively the "Initial Purchasers"), as a condition to their purchase
of the Old Notes, required that the Company agree to commence the Exchange Offer
following the offering of the Old Notes. The New Notes will evidence the same
class of debt as the Old Notes and will be issued pursuant to, and entitled to
the benefits of, the Indenture.
THE EXCHANGE OFFER
Securities Offered......... Up to $120,000,000 aggregate principal amount of
10 3/4% Senior Subordinated Notes due 2004 of the
Company (the "New Notes," and collectively with the
Old Notes, the "Notes"). The terms of the New Notes
and the Old Notes are identical in all material
respects, except for certain transfer restrictions
relating to the Old Notes that will not apply to
the New Notes. See "Description of the Notes."
The Exchange Offer......... The New Notes are being offered in exchange for a
like aggregate principal amount of Old Notes. The
issuance of the New Notes is intended to satisfy
obligations of the Company contained in the
Registration Rights Agreement, dated September 29,
1997, among the Company, the Subsidiary Guarantors
(as defined) and the Initial Purchasers (the
"Registration Rights Agreement"). See "The Exchange
Offer" for a description of the procedures for
tendering Old Notes.
Tenders, Expiration Date;
Withdrawal............... The Exchange Offer will expire at 5:00 p.m., New
York City time, on January , 1998, or such later
date and time to which it is extended, provided
that the Exchange Offer will not be extended beyond
30 business days from the date of this Prospectus.
Tenders of Old Notes pursuant to the Exchange Offer
may be withdrawn and retendered at any time prior
to the Expiration Date. Any Old Notes not accepted
for exchange for any reason will be returned
without expense to the tendering holder as promptly
as practicable after the expiration or termination
of the Exchange Offer.
Interest on the Notes...... The New Notes will have interest payable
semi-annually on April 1 and October 1 of each
year, commencing April 1, 1998. Holders of New
Notes of record on March 15, 1998 will receive
interest on April 1, 1998 from the date of issuance
of the New Notes, plus an amount equal to the
accrued interest on the Old Notes from the date of
issuance of the Old Notes, September 29, 1997, to
the date of exchange thereof. Consequently,
assuming the Exchange Offer is consummated prior to
the record date in respect of the April 1, 1998
interest payment for the Old Notes, holders who
exchange their Old Notes for New Notes will receive
the same interest payment on April 1, 1998 that
they would have received had they not accepted the
Exchange Offer. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of
the New Notes. See "The Exchange Offer -- Interest
on the Exchange Notes."
10
<PAGE> 14
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, prior to
the Expiration Date (as defined) together with the
Old Notes to be exchanged and any other required
documentation to the Exchange Agent at the address
set forth herein and therein or comply with the
guaranteed delivery procedures described below. See
"The Exchange Offer -- Procedures for Tendering."
Special Procedures for
Beneficial Holders....... Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender on the
beneficial holder's behalf. If such beneficial
holder wishes to tender directly, such beneficial
holder must, prior to completing and executing the
Letter of Transmittal and delivering the Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or
obtain a properly completed bond power from the
registered holder. The transfer of record ownership
may take considerable time. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes and
a properly completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, or who cannot complete the
procedure for book-entry transfer of Old Notes to
the Exchange Agent's account with DTC prior to the
Expiration Date, may tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
Federal Income Tax
Considerations........... The Exchange Offer will not result in any income,
gain or loss to the Holders or the Company for
federal income tax purposes. See "Certain Federal
Income Tax Considerations."
Use of Proceeds............ There will be no proceeds to the Company from the
exchange of New Notes for the Old Notes pursuant to
the Exchange Offer.
Exchange Agent............. Bank of Montreal Trust Company, the Trustee under
the Indenture, is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer.
Shelf Registration
Statement.................. Under certain circumstances described in the
Registration Rights Agreement, certain holders of
Notes (including holders who are not permitted to
participate in the Exchange Offer or who may not
freely resell New Notes received in the Exchange
Offer) may require the Company and the Subsidiary
Guarantors to file, and use their best efforts to
cause to become effective, a shelf registration
statement under the Securities Act, which would
cover resales of Notes by such
11
<PAGE> 15
holders (the "Shelf Registration Statement"). See
"The Exchange Offer" and "Registration Rights").
Conditions to the Exchange
Offer.................... The Exchange Offer is not conditioned on any
minimum principal amount of Old Notes being
tendered for exchange. The Exchange Offer is
subject to certain other customary conditions, each
of which may be waived by the Company. See "The
Exchange Offer -- Conditions".
CONSEQUENCES OF EXCHANGING OR FAILURE TO EXCHANGE OLD NOTES
PURSUANT TO THE EXCHANGE OFFER
Generally, holders of Old Notes (other than any holder who is an
"affiliate" of the Registrant within the meaning of Rule 405 under the
Securities Act) that exchange their Old Notes for New Notes pursuant to the
Exchange Offer may offer their New Notes for resale, resell their New Notes, and
otherwise transfer their New Notes without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided such New Notes
are acquired in the ordinary course of the holders' business, such holders have
no arrangement with any person to participate in a distribution of such New
Notes, and neither the holder nor any other person is engaging in or intends to
engage in a distribution of the New Notes. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes where such Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of its New Notes. See "Plan of Distribution." To
comply with the securities laws of certain jurisdictions, it may be necessary to
qualify for sale or register the New Notes prior to offering or selling such New
Notes. The Company is required, under the Registration Rights Agreement, to
register the New Notes in any jurisdiction requested by the holders, subject to
certain limitations. Upon consummation of the Exchange Offer, holders that were
not prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Rights
Agreement with respect to such nontendered Old Notes, and accordingly, such Old
Notes will continue to be subject to the restrictions on transfer contained in
the legend on the Old Notes. In general, Old Notes may not be offered or sold,
unless registered under the Securities Act and applicable state securities laws.
See "The Exchange Offer -- Consequences of Failure to Exchange."
12
<PAGE> 16
SUMMARY DESCRIPTION OF THE NOTES
Securities................. $120 million aggregate principal amount of 10 3/4%
Senior Subordinated Notes due 2004.
Maturity Date.............. October 1, 2004.
Interest Escrow............ The Indenture dated September 29, 1997 (the
"Indenture") among the Company, the Subsidiary
Guarantors and Bank of Montreal Trust Company, as
Trustee (the "Trustee") provides that the Company
will purchase and pledge to the Trustee the Pledged
Securities in such amounts as will be sufficient,
upon receipt of scheduled interest and principal
payments thereon, to provide for payment in full
when due of the first four scheduled interest
payments on the Notes.
Interest Payment Dates..... April 1 and October 1 of each year, commencing
April 1, 1998.
Optional Redemption........ At any time on or after October 1, 2001, the Notes
will be redeemable at the option of the Company, in
whole or in part, at the redemption prices set
forth herein plus accrued and unpaid interest, if
any, to the date of redemption. The Notes will not
be redeemable at the option of the Company prior to
October 1, 2001, except (i) that until October 1,
2000, the Company may redeem up to 35% of the
original aggregate principal amount of the Notes
with the net proceeds of one or more Equity
Offerings at a redemption price equal to 110 3/4%
of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption;
provided that, after any such redemption, at least
65% of the original aggregate principal amount of
the Notes remains outstanding and (ii) upon a
Change of Control, as described below. See
"Description of the Notes -- Optional Redemption."
Change of Control.......... Upon a Change of Control, (i) the Company will have
the option, at any time prior to October 1, 2001,
to redeem the Notes, in whole but not in part, at a
redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium and
accrued and unpaid interest, if any, to the date of
redemption, and (ii) if the Company does not redeem
the Notes pursuant to clause (i) above or if such
Change of Control occurs on or after October 1,
2001, each Holder of the Notes may require the
Company to repurchase such Holder's Notes at a
purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued
and unpaid interest, if any, to the date of
repurchase. See "Risk Factors -- "Limitation on
Purchase of Notes Upon a Change of Control" and
"Description of the Notes -- Optional Redemption"
and "-- Change of Control."
Subsidiary Guarantees...... The Notes will be jointly and severally guaranteed
on an unsecured senior subordinated basis
(collectively, the "Subsidiary Guaranties"), by
each direct and indirect Restricted Subsidiary (as
defined) existing on the closing date of the
Exchange Offer (the "Closing Date") or formed or
acquired thereafter (collectively the "Subsidiary
Guarantors"). The Subsidiary Guarantors' liability
under the Subsidiary Guaranties will be limited as
described herein and the Subsidiary Guaranties will
be automatically released in connection with
certain
13
<PAGE> 17
asset sales and dispositions. See "Description of
the Notes -- Guaranties."
Ranking.................... The Notes and the Subsidiary Guarantees will be
general, unsecured obligations of the Company and
the Subsidiary Guarantors, as applicable. The Notes
and the Subsidiary Guaranties will be subordinated
in right of payment to all existing and any future
Senior Indebtedness and will rank pari passu in
right of payment with all future senior
subordinated indebtedness and senior to all
subordinated indebtedness of the Company and the
Subsidiary Guarantors, as applicable. Certain of
the Company's subsidiaries (including Thai Romo)
are parties to the Revolving Credit Facility and
all obligations under the Revolving Credit Facility
are secured by a lien on the capital stock of
certain of the subsidiaries (including Thai Romo).
As of December 4, 1997, the aggregate principal
amount of Senior Indebtedness of the Company and
the Subsidiary Guarantors was approximately $70
million (not including approximately $80 million of
additional borrowing capacity under the Revolving
Credit Facility which, if borrowed, would have been
Senior Indebtedness). The Indenture governing the
Notes permits the Company and its subsidiaries
(including the Subsidiary Guarantors) to incur
additional indebtedness, including secured and
unsecured Senior Indebtedness, subject to certain
limitations. See "Description of the
Notes -- Ranking and Subordination."
Certain Covenants.......... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries (i) to pay
dividends and make other Restricted Payments (as
defined) or investments, (ii) to incur additional
indebtedness, (iii) to enter into transactions with
Affiliates (as defined), (iv) to merge or
consolidate with any other entity, (v) to transfer
all or substantially all of their assets, and (vi)
to create certain liens. All of these limitations
are subject to a number of important
qualifications. See "Description of the
Notes -- Certain Covenants."
Exchange Offer;
Registration Rights........ Pursuant to the Registration Rights Agreement the
Company and the Subsidiary Guarantors have agreed
to file a registration statement (the "Exchange
Offer Registration Statement"). The Registration
Statement of which this Prospectus is a part
constitutes the Exchange Offer Registration
Statement referred to therein. If applicable law or
interpretations of the Commission's staff do not
permit the Company and the Subsidiary Guarantors to
effect the Exchange Offer, or if certain holders of
Notes are not permitted to participate in, or do
not receive the benefit of, the Exchange Offer, the
Company and the Subsidiary Guarantors will use
their best efforts to cause to become effective a
shelf registration statement with respect to the
resale of the Notes and to keep such shelf
registration effective for two years or such
shorter period ending when all of the Notes have
been sold under such shelf registration statement.
The Notes are subject to the payment of additional
interest under certain circumstances if the Company
is not in compliance with its obligations under the
Registration Rights Agreement. See "Description of
the Notes -- Exchange Offer; Registration Rights."
14
<PAGE> 18
Use of Proceeds............ The Company will not receive any proceeds from the
Exchange Offer. The Net Proceeds of the Offering
were used to repay $93 million of outstanding
indebtedness under the Company's Revolving Credit
Facility and a short-term facility ("Credit
Agreement") from one of its lenders under its
Revolving Credit Facility. The remaining proceeds
were used to purchase a portfolio of U.S.
Government Obligations (as defined) of
approximately $24.3 million (the "Pledged
Securities"), the scheduled interest and principal
payments on which are in an amount sufficient to
provide for payment in full when due of the first
four scheduled interest payments on the Notes.
RISK FACTORS
Prospective participants in the Exchange Offer should carefully consider
all of the information set forth in this Prospectus and, in particular, should
evaluate the specific factors set forth under "Risk Factors."
15
<PAGE> 19
SUMMARY OIL AND GAS RESERVE AND OPERATING DATA
The following table includes information with respect to the Company's
proven oil (including condensate and crude oil) and gas reserves as estimated by
Ryder Scott Company, independent petroleum engineers ("Ryder Scott"). In
preparing such estimates as of January 1, 1997, Ryder Scott used $24.56 per Bbl
of oil and $2.09 per Mcf of gas, the prices that the Company estimated that it
would have received at January 1, 1997 had the Tantawan and Benchamas Fields
been producing at such time.
In preparing the July 1, 1997 reserve estimate, Ryder Scott effected a
roll-forward from the January 1, 1997 proven reserve estimates by adjusting for
the MOTL Acquisition and by adding proven reserves with respect to two
additional wells drilled early in 1997. This July 1, 1997 estimate did not
consider the other 10 successful wells drilled during the first half of 1997 by
the Concessionaires. In preparing the July 1, 1997 estimates, at the Company's
request, Ryder Scott used $15.92 per Bbl of oil for volumes produced in 1997 and
1998 to reflect the crude oil price swaps then in effect. Beginning in 1999, an
oil price of $18.72 per Bbl of oil was used. The gas price of $2.13 per Mcf of
gas was calculated in accordance with the terms of the Company's GSA with PTT
and giving effect to the July 2, 1997 devaluation of the Baht (and the resulting
closing exchange rate for the Baht on such date). The roll-forward reflects
production volumes which Ryder Scott estimated at January 1, 1997 for the first
half of 1997. In preparing the July 1, 1997 roll-forward, the Company provided
Ryder Scott with updated estimates for operating expenses and capital
expenditures.
For additional information relating to the Company's reserves, see "Risk
Factors -- Uncertainties in Estimating Reserves and Future Net Cash Flows,"
"Business and Properties -- Reserves," and Notes to Consolidated Financial
Statements.
<TABLE>
<CAPTION>
JANUARY 1, JULY 1,
-------------------------------- --------
1995 1996 1997 1997
-------- ---------- -------- --------
<S> <C> <C> <C> <C>
TOTAL NET PROVEN RESERVES
Oil and condensate (Mbbls)...................... 7,674 18,997 21,332 26,700
Natural gas (MMcf).............................. 56,739 131,607 144,998 166,861
Natural gas equivalent (MMcfe).................. 102,783 245,589 272,990 327,061
PRESENT VALUE (DISCOUNTED AT 10%) OF ESTIMATED
FUTURE NET CASH FLOW, BEFORE INCOME TAXES (IN
THOUSANDS)(A)................................... $ 52,112 $131,631 $174,195 $190,978
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
MARCH 31, 1997 JUNE 30, 1997 SEPTEMBER 30, 1997
-------------- ------------- ------------------
<S> <C> <C> <C>
PRODUCTION DATA (NET TO THE COMPANY'S WORKING
INTEREST)
Natural Gas
MMcf per day............................... 26.49 41.79 42.87
Price per Mcf(b)........................... $ 1.73 $ 2.18 $ 1.88
Oil and Condensate
Bbls per day............................... 1,678 2,663 2,565
Price per Bbl(c)........................... $ -- $15.92 $15.92
</TABLE>
- ---------------
(a) The January 1, 1997 Present Value of Proved Reserves was adjusted downward
from the value calculated by Ryder Scott for financial reporting purposes to
reflect the price impact of crude oil hedging.
(b) The gas price received for the quarter ended March 31, 1997, was impacted by
the receipt of 75% of the contract price for gas purchased by PTT from
startup until March 15, 1997, when the Concessionaires passed the production
run-in test.
(c) The Company's net realized oil price per Bbl reflects the impact of oil
pricing hedge contracts in effect.
16
<PAGE> 20
SUMMARY FINANCIAL DATA
The summary financial data set forth below for the Company have been
derived from the Company's audited and unaudited financial statements and notes
thereto contained elsewhere herein. All data with respect to 1997 reflects the
effects of the Company's purchase of a 46.34% interest in MOTL on March 3, 1997.
The financial data should be read in conjunction with the more detailed
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- -------------------------
1994 1995 1996 1996 1997
------ ------ -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............................. $ 6 $ 5 $ 170 $ 158 $25,946
----- ----- ------- ------- -------
Expenses:
Operating expense..................... -- -- -- -- 17,100
Interest expense...................... 107 190 806 643 4,620
Depreciation, depletion and
amortization........................ 2 5 29 20 13,232
General and administrative............ 290 322 2,268 1,045 3,993
Net gain on futures contracts......... -- -- -- -- (275)
Foreign currency exchange loss, net... -- -- -- -- 1,850
----- ----- ------- ------- -------
Total expenses................... 399 517 3,103 1,708 40,520
----- ----- ------- ------- -------
Loss before taxes.......................... (393) (512) (2,933) (1,550) (14,574)
Income tax benefit (expense)............... -- -- (1,391) (1,769) 5,584
----- ----- ------- ------- -------
Net loss................................. $(393) $(512) $(4,324) $(3,319) $(8,990)
===== ===== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
------------------ ----------------
1995 1996 1997
------- -------- ----------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD):
Oil and gas properties, at cost...................... $55,951 $123,300 $217,699
Total assets......................................... 67,669 129,825 258,046
Long-term debt, including current maturities......... 34,385 22,842 149,996
Stockholders' equity................................. 23,269 100,625 91,866
</TABLE>
17
<PAGE> 21
RISK FACTORS
An investment in the New Notes offered hereby involves a high degree of
risk. Prospective participants in the Exchange Offer should carefully consider
all of the information provided in this Prospectus in connection with the
Exchange Offer. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results in the forward-looking statements. Factors that
might cause such differences include but are not limited to, the risk factors
set out below.
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 through a combination of equity infusions by its
principal stockholders (primarily Messrs. Rutherford and Moran), bank and
stockholder loans, and the sale of common stock. The Company expects to make
approximately $125 million in capital expenditures in 1997, of which $28.6
million was used for the MOTL Acquisition and the balance of which is being
expended primarily to develop the Tantawan and Benchamas Fields. The Company
currently expects capital expenditures for 1998 to be in the range of $110
million to $120 million, of which approximately 70% is budgeted for production
facilities primarily for the Benchamas Field. Over the next 24 months, the
Company expects to expend approximately $114 million to fabricate production
facilities at Benchamas Field. The Benchamas expenditures account for a
substantial portion of the above estimates for 1997 and 1998. The Company also
expects to expend additional monies over the next several years to support
additional exploration and development activities in the Block. The Company has
been funding and expects to continue to fund these activities during the
remainder of 1997 with net cash flow from operations and additional bank
borrowings under the Revolving Credit Facility, which was amended in December
1997 to allow for additional borrowings. For a description of the amendments
made to the Revolving Credit Facility, see "Management's Discussion and Analysis
of Financial Condition and Results of Operation -- Liquidity and Capital
Resources" and "Description of Revolving Credit Facility." However, in order to
continue to fund those activities subsequent to the first half of 1998 at the
current or higher levels, the Company will have to raise substantial additional
funds through some combination of the following: increasing the borrowing base
under the Revolving Credit Facility as well as an increase in the total amount
of the Facility, arranging additional debt, equity or other financing, and
obtaining other additional sources of funds. If production revenues are less
than anticipated or reserves decline, or, if its expected levels of capital
expenditures increase materially, the Company may have limited ability to obtain
the capital necessary to undertake or complete future drilling programs. There
can be no assurance that increased bank lines, debt, equity or other financing
or other sources of funds will be available or that, if available, will be on
terms acceptable to the Company or sufficient to meet these or other corporate
requirements. See "-- Effects of Leverage; Existing Indebtedness," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," and "Business and
Properties -- Current Fields and Prospects."
SUBSTANTIAL INDEBTEDNESS; LEVERAGE AND DEBT SERVICE
As of September 30, 1997, the Company's total long-term debt was
approximately $150 million as compared to stockholder's equity of approximately
$91.9 million. Between September 30, 1997 and December 4, 1997 the Company
borrowed an additional $40 million under the Revolving Credit Facility, and
expects to continue to incur substantial indebtedness under its Revolving Credit
Facility and be required to arrange additional financing to fund its continuing
exploration and development activities. See "-- Substantial Capital
Requirements", "Capitalization" and "Use of Proceeds." The Company's plans to
increase its leverage will have important consequences to holders of the Notes,
including the following: (i) the level of indebtedness may pose substantial
risks to holders of the Notes, including the possibility that the Company might
not generate sufficient cash flow to pay the principal of and interest on the
Notes; (ii) the Company's ability to obtain additional financing in the future
for working capital,
18
<PAGE> 22
capital expenditures, acquisitions or general corporate purposes may be
impaired; (iii) a portion of the Company's cash flow from operations must be
dedicated to the payment of the principal of and interest on its existing and
future indebtedness; (iv) certain of the Company's future borrowings, including
those under the Revolving Credit Facility, may be at variable rates of interest,
which would make the Company vulnerable to increases in interest rates; (v) the
terms of certain of the Company's current and future indebtedness may permit its
creditors to accelerate payments upon certain events of default or a change of
control of the Company; and (vi) the Company may have reduced capacity and less
flexibility to satisfy its obligations (including the Notes), in the event the
Company's revenues do not increase as anticipated. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The Revolving Credit Facility and the Indenture impose financial and other
restrictions on the Company and its subsidiaries, including limitations on the
incurrence of additional indebtedness and limitations on the sales of assets.
The Revolving Credit Facility also requires the Company to (i) make principal
payments from the proceeds of certain asset sales and in the event that the
Company's outstanding debt exceeds the Borrowing Base (as defined therein), and
(ii) maintain an EBITDA to interest coverage ratio for fiscal quarters ending on
and after March 31, 1998 as follows: 1.5:1 for each quarter ending on or before
September 30, 1998 and 2.5:1 thereafter, such rates to be calculated excluding
interest payable from the interest escrow for the Notes. As of September 30,
1997, the Company was not in compliance with the covenant requiring the Company
to maintain an EBITDA to interest coverage ratio of 1.5:1 for the quarter ending
September 30, 1997. Such non-compliance, however, was waived by the Company's
lenders. There can be no assurance that these requirements or other material
requirements of the Revolving Credit Facility will be met in the future. If they
are not, the lenders under the Revolving Credit Facility would be entitled to
declare the indebtedness thereunder immediately due and payable. Additionally,
in the event of such an acceleration of indebtedness by the lenders under the
Revolving Credit Facility, a default would be deemed to occur under the terms of
the Notes. See "Description of Revolving Credit Facility" and "Description of
the Notes -- Defaults."
In addition, the Revolving Credit Facility and the Indenture contain
certain restrictive covenants that may limit the ability of the Company to
engage in certain transactions. See "Description of the Notes -- Certain
Covenants."
PRIMARY CUSTOMER
All natural gas produced from the Tantawan and Benchamas Fields is to be
sold to PTT. The Concessionaires have entered into a long-term gas sales
agreement with PTT, which maintains a monopoly over gas transmission and
distribution in Thailand. Failure of PTT or the Concessionaires to comply with
the terms of the gas sales agreement would have a material adverse effect on the
Company.
In November 1996, the Concessionaires signed the MOU for the sale to PTT of
the crude oil production from the Tantawan Field. In early July, 1997, the
Company had its first oil lifting from the Tantawan Field and sold 278,000
barrels of oil pursuant to the MOU. In October, the Company and the other
Concessionaires received permission from the Thai Department of Mineral
Resources to export crude oil produced from the Block and sold its second oil
lifting for U.S. dollars to a third party purchaser for export. The Company
expects that the Concessionaires will continue to sell their crude oil for U.S.
dollars to a number of purchasers at market prices. In November 1997, PTT
notified the Company that the MOU was terminated. See "Business and
Properties -- Marketing and Contracts."
THAI ECONOMY
The economy of Thailand has recently been subject to a number of
significant events, including the July 2, 1997 announcement by the Kingdom of
Thailand that the value of the Baht would be subject to market forces, the
subsequent decline in the value of the Baht and the closing of a number of
financial institutions. Various countries and the International Monetary Fund
have pledged approximately US $16 billion to stabilize Thailand's economy in
return for Thailand's agreement to strengthen its banking
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and financial system, control inflation, increase the VAT tax, reduce the
current account deficit and maintain fiscal discipline. The Company can not
predict whether these funds or the other measures undertaken by the Kingdom of
Thailand will be successful or sufficient to reestablish conditions for
sustained economic growth or whether these adverse events or any slowdown in
certain sectors of the Thai economy will lead to a lessening of the growth rate
for Thai energy demand.
CONCENTRATION OF OPERATIONS; PROPERTIES UNDER DEVELOPMENT
All of the Company's reserves are located within the Block. Development of
the Block is not completed and production therefrom has only recently commenced.
Currently, the Company's sole source of operating revenue is the sale of
production from wells in the Tantawan Field in the Block. This concentration of
operations increases the Company's exposure to any regional events generally, or
any events affecting Thailand or its economy in particular, that may increase
costs, reduce availability of equipment or supplies, restrict drilling
activities, reduce demand, increase supply or limit or delay production. See
"Business and Properties -- Current Fields and Prospects."
LIMITED OPERATING HISTORY; LACK OF PROFITABLE OPERATIONS
The Company has a short operating history, having commenced production in
the first quarter of 1997 and, therefore, there is a limited historical
operating information about the Company on which to base an evaluation of the
Company's performance. To date, the Company's exploration and development
activities have not generated substantial revenues, causing the Company to incur
losses as it has expended funds to start up its operations. In addition, the
Company expects that it will continue to incur losses through at least 1998. The
Company's ability to generate income or positive cash flow will depend upon the
success of its exploration and development drilling program. There can be no
assurance that any future wells drilled by the Company will be productive or
that the Company will recover all or any portion of its investment. 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 proven reserves calculated in
accordance with applicable Commission requirements. See "-- Substantial Capital
Requirements", "-- Reserve Exploration, Development and Production Risks" 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 proven,
undeveloped reserves and in projecting future rates of production and the timing
of development expenditures. Reservoir engineering, pricing, and operating and
regulatory constraints each add to the uncertainty of reserve estimates. Reserve
assessment is a subjective process of estimating the recovery from underground
accumulations of hydrocarbons that cannot be precisely measured. 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, judgments based on the data, and
assumptions regarding oil and gas prices. Accordingly, as further information is
obtained for Block B8/32, reserve estimates are likely to differ, perhaps
materially, from the quantity of hydrocarbons that are ultimately recovered. The
reserve data included in this Prospectus are based upon volumetric information
as no substantial 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 significant downward adjustment could
adversely affect the Company's financial condition, future prospects and ability
to service debt. See "Business and Properties -- Reserves."
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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 Commission, the estimated discounted future
net cash flows from proven reserves are generally based on prices and costs as
of the date of the estimate; however, actual future volumes, 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, and thus their present
value, also will be affected by the amount and timing of production and
production expenses, supply and demand for oil and gas, curtailments or
increases in oil and gas consumption, actual amounts paid pursuant to the
Concession agreement including royalties and special remuneratory benefits
("SRBs"), which benefits may vary from zero to 75% of Annual Petroleum Profits
(hydrocarbon revenues, net of royalties, production bonuses, capital
expenditures and operating expenses) and changes in governmental regulations and
taxation. Assuming the Concessionaires continue to conduct substantial drilling
activity in the Block, the Company does not anticipate paying any SRBs for the
foreseeable future. See "Business and Properties -- Thai Concession Terms." In
addition, the Commission requires the Company to use a 10% discount rate to
calculate discounted future net cash flows for reporting purposes. This rate
does not necessarily reflect interest rates in effect from time to time or the
risks associated with the Company and the oil and gas industry in general.
RESERVE EXPLORATION, DEVELOPMENT AND PRODUCTION RISKS
The Company's operations in the Block involve risks normally incident to
the exploration for and production of oil and gas, 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, delays in or
lack of reasonable availability of drilling and production equipment and
services, 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 offshore operations, such as capsizing, sinking,
collision and damage from severe weather conditions. The occurrence of a
significant event against which the Company is not fully insured could have a
material adverse effect on the Company's financial position and results of
operations. 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
such costs. In addition, drilling hazards or environmental damage could greatly
increase operating costs, and various field operating conditions may adversely
affect the Company's production from successful wells. These conditions include
delays in obtaining regulatory approvals, shut-ins of connected wells due to
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.
If the Concessionaires do not deliver the natural gas production at a
specified quantity and quality levels, the Company and the other Tantawan
Concessionaires are obligated to contribute to PTT's capital costs incurred in
the construction of a 33-mile spur pipeline from the Tantawan Field to the main
PTT trunk line. 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. See "Business and
Properties -- Marketing and Contracts."
DEPENDENCE ON THIRD-PARTY OPERATOR
A subsidiary of Pogo operates the oil and gas properties in the Block, and
independent contractors are responsible for the operation of the FPSO and
certain other activities required for the exploration, development and
exploitation of the Block. Therefore, the Company has limited control over the
manner in which operations are conducted and the safety and environmental
standards used in connection
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therewith. The operator could refuse to initiate exploration or development
projects, in which case the Company would be required to propose such activities
and may be required to proceed with such activities without receiving any
funding from the operator. The operator is also a Concessionaire and as such is
responsible for 46.34% of the costs of the exploration and development
activities in the Block. If the operator (or the other Concessionaire) were not
able to finance its share of the exploration and development costs, the Company
and the other Concessionaire would either have to fund such costs or find an
additional co-venturer. Further, the operator may initiate exploration or
development projects on a slower or faster schedule than that preferred by the
Company. In addition, the failure of any subcontractor to perform its
obligations would have a material adverse effect on the development of or
production from the Block. Any of these events could have a significant effect
on the Company's anticipated exploration and development activities. Pursuant to
the operating agreements governing operations in the Block, however, the Company
maintains significant influence or control over the nature and timing of
exploration and development activities due to its large ownership interest.
Management believes that its ownership interest and its close working
relationship with the other Concessionaires will continue to allow RMOC to
influence the Block's exploration and development activities. See "Business and
Properties -- Operating Agreements."
RELIANCE ON DEVELOPMENT OF ADDITIONAL RESERVES
The Company's financial condition, results of operation and future growth
and the carrying value of its proven reserves depend substantially on its
ability to acquire or find and successfully develop additional oil and gas
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 generally decline as
production continues. See "-- Reserve Exploration, Development and Production
Risks."
SUBORDINATION OF THE NOTES AND THE SUBSIDIARY GUARANTIES
The New Notes will be, and the Old Notes are subordinated in right of
payment to all present and future Senior Indebtedness of the Company, including
the principal, premium (if any) and interest with respect to the Revolving
Credit Facility. The New Notes will rank pari passu with all future senior
subordinated indebtedness of the Company and will rank senior to all future
Subordinated Indebtedness (as defined) of the Company. In addition, the
Subsidiary Guaranties will be subordinated in right of payment to all future
Senior Indebtedness of the Subsidiary Guarantors, will rank pari passu with all
existing and future senior subordinated indebtedness of the Subsidiary
Guarantors and will rank senior to all future Subordinated Indebtedness of the
Subsidiary Guarantors. As of December 4, 1997, the Company and the Subsidiary
Guarantors had approximately $70 million of Senior Indebtedness outstanding (not
including $80 million of additional borrowing capacity under the Revolving
Credit Facility which, if borrowed, would have been Senior Indebtedness).
Consequently, in the event of a bankruptcy, liquidation, dissolution,
reorganization or similar proceeding with respect to the Company, assets of the
Company and the Subsidiary Guarantors will be available to pay obligations of
the Notes only after all Senior Indebtedness of the Company and the Subsidiary
Guarantors has been paid in full. There can be no assurance that there will be
sufficient assets to pay amounts due on all or any of the Notes. The holders of
any indebtedness of the Company's subsidiaries other than the Subsidiary
Guarantors will be entitled to payment thereof from the assets of such
subsidiaries prior to the holders of any general, unsecured obligations of the
Company, including the Notes. See "Description of the Notes -- Ranking and
Subordination" and "Guaranties."
The Notes are also unsecured and will be subordinated to any secured
indebtedness of the Company. As of the date of this Prospectus, the indebtedness
outstanding under the Revolving Credit Facility is secured by liens on the stock
of certain subsidiaries of the Company. Any Senior Indebtedness of the Company
or any Subsidiary Guarantor may be secured by all or a portion of the assets of
the Company or such Subsidiary Guarantor, as appropriate. The ability of the
Company to comply with
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the provisions of the Revolving Credit Facility or any such other Senior
Indebtedness may be affected by events beyond the Company's control. The breach
of any such provisions could result in a default under any other Senior
Indebtedness, in which case, depending on the actions taken by the lenders
thereunder, or their successors or assignees, such lenders could elect to
declare all amounts borrowed under any such other Senior Indebtedness, together
with accrued interest, to be due and payable, and the Company and the Subsidiary
Guarantors could be prohibited from making payments of interest and principal on
the Notes until the default is cured or all Senior Indebtedness is paid or
satisfied in full. In addition, such lenders could proceed against the
collateral, which constitutes a significant portion of the Company's assets. See
"Description of Other Indebtedness" and "Description of the Notes -- Ranking and
Subordination."
FRAUDULENT CONVEYANCE; ENFORCEABILITY OF SUBSIDIARY GUARANTY BY THAI CORPORATION
The Subsidiary Guaranties may be subject to review under relevant Federal
and State fraudulent conveyance and similar statutes in a bankruptcy or
reorganization case or a lawsuit brought by or on behalf of creditors of the
Subsidiary Guarantors. To the extent that a court were to find that at the time
a Subsidiary Guarantor entered into a Subsidiary Guaranty either (i) the
Subsidiary Guarantee was incurred by a Subsidiary Guarantor with the intent to
hinder, delay or defraud any present or future creditor or that a Subsidiary
Guarantor contemplated insolvency with a design to favor one or more creditors
to the exclusion in whole or in part of others or (ii) the Subsidiary Guarantor
did not receive fair consideration or reasonably equivalent value for issuing
the Subsidiary Guarantee and, at the time it issued the Subsidiary Guaranty, the
Subsidiary Guarantor (x) was insolvent or rendered insolvent by reason of the
issuance of the Subsidiary Guaranty, (y) was engaged or about to engage in a
business or transaction for which the remaining assets of the Subsidiary
Guarantor constituted unreasonably small capital or (z) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured, the court could avoid or subordinate the Subsidiary Guaranty in favor
of the Subsidiary Guarantor's other debts or liabilities or take other action
detrimental to the holders of the Notes. The Subsidiary Guaranties could also be
subject to the claim that, the Subsidiary Guaranties were incurred for the
benefit of the Company (and only indirectly for the benefit of the Subsidiary
Guarantors) and that the obligations of the Subsidiary Guarantors thereunder
were incurred for less than reasonably equivalent value or fair consideration.
To the extent a Subsidiary Guaranty is avoided as a result of fraudulent
conveyance or held unenforceable for any other reason, the holders of the Notes
would cease to have any claim in respect of such Subsidiary Guarantor and would
be creditors solely of the Company and the remaining Subsidiary Guarantors, if
any. See "Description of Revolving Credit Facility" and "Description of the
Notes."
All of the Company's oil and gas assets are held by Thai Romo and B8/32
Partners, both of which are Thai corporations. Thai Romo is a Subsidiary
Guarantor and pursuant to the Indenture consented to submission to the
jurisdiction of the laws of New York. There is no basis under the laws of
Thailand for a Thai corporation to submit to the jurisdiction of a court of any
authority outside Thailand. Accordingly, the validity and binding effect in
Thailand of this submission by a Subsidiary Guarantor to the jurisdiction of a
foreign court and of the waivers to objections to such a forum is uncertain. Any
judgment or order obtained from a foreign court would not be enforced as such by
the Courts of Thailand, but such judgment or order may in the discretion of the
Courts of Thailand be admitted as evidence of an obligation in new proceedings
instituted in the Courts of Thailand, which would judge the issue on the
evidence before it.
If a proceeding is undertaken in the Courts of Thailand for the enforcement
of the Subsidiary Guaranty of Thai Romo, which is expressed to be governed by
the laws of New York, the choice of New York law as the governing law thereof
will, in respect of the essential elements or effects thereof, be recognized and
applied to the extent only to which such law: (1) is proven to the satisfaction
of the Courts of Thailand (which satisfaction is within the discretion of the
Courts); and (2) is not considered contrary to the public order or good morals
of the people of Thailand. The scope of the public order or
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good morals of the people of Thailand has not been established in any Supreme
Court of Thailand judgment and is uncertain.
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 and Benchamas Fields is subject
to the GSA with PTT with prices subject to semi-annual adjustment (or more
frequent adjustments under certain circumstances) based on movements in, among
other things, inflation, oil prices and the Thai Baht/U.S. Dollar exchange rate.
The price received by the Company for its oil 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 gas or oil could have an adverse effect on the carrying value of the
Company's proven reserves and the Company's revenues, profitability, cash flow
and borrowing base availability under the Revolving Credit Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
In order to manage its exposure to price risks in the marketing of its oil
production, the Company has entered into crude oil swaps and may enter into
other oil 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 a sudden, unexpected
event materially decreases oil prices. Such contracts may also restrict the
ability of the Company to benefit from unexpected increases in oil prices. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
INTERNATIONAL OPERATIONS AND CURRENCY EXCHANGE RATES
The Company expects that sales outside the United States will account for
virtually all of its revenue. Certain risks are inherent in international
operations, such as currency exchange controls, unexpected changes in regulatory
requirements, unique local 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, the Company is paid for its gas sales in Baht, the Thai
currency. The Baht has been linked for many years to the value of a basket of
currencies, primarily the U.S. Dollar. On July 2, 1997, the Thai government
announced that the value of the Baht would thereafter be determined by market
forces. Since the announcement, the value of the Baht against the U.S. Dollar
has substantially declined. The price the Company receives under its gas sales
agreement has an adjustment applicable over the full contract term for changes
in the exchange rate between the Baht and the U.S. Dollar, although the timing
of such adjustment may lag actual fluctuations in the exchange rate and the
amount may not be sufficient to offset all of such a currency movement.
Accordingly, decreases in the value of the Baht versus the U.S. Dollar could
have an adverse effect on the Company's financial condition or on the results of
its operations, particularly in light of the limited ability to hedge the
long-term exchange rate risk currently implicit in the gas sales agreement. See
"Business and Properties -- Marketing."
GOVERNMENT REGULATION AND ENVIRONMENTAL RISKS
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 a material adverse effect on its capital
expenditures, results of operations or competitive position, and does not
anticipate that any material expenditures will
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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, fluctuations between the Baht and
the U.S. Dollar, 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 United States. 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.
The Concession agreement 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, including without limitation the bankruptcy of any of the
Concessionaires, in the revocation of the Concession agreement. Termination or
revocation of the Concession agreement for any reason would have a material
adverse effect on the Company. 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 have substantially greater financial and human resources
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.
DEPENDENCE ON 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.
TAXES
Thai Romo will be required to pay Thai Petroleum Income Tax (currently 50%
of Thai taxable income), as well as royalties and SRBs 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 may owe residual United States federal income taxes on its pro rata
share of Thai Romo's net taxable income allocated to the Company. Moreover, the
Company may 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 may not fully offset the
Company's alternative minimum tax.
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See "Business and Properties -- Tax Regulation -- Certain United States Federal
Income Tax Consequences to the Company."
LIMITATION ON PURCHASE OF NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, (i) the Company will have the option, at any time
prior to October 1, 2001, to redeem the Notes, in whole but not in part, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium and accrued and unpaid interest, if any, to the date of
redemption and (ii) if the Company does not redeem the Notes pursuant to clause
(i) above, the Holders of the Notes may require the Company to redeem the Notes
at a price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption. The Revolving Credit
Facility prohibits the repurchase of the Notes without the consent of the
lenders having 75% of the commitments under the Revolving Credit Facility. In
addition, certain of the events that constitute a Change of Control hereunder
would constitute a default under the Revolving Credit Facility, which would
prohibit the purchase of the Notes by the Company unless and until such time as
the Company's indebtedness under the Revolving Credit Facility is repaid in
full. There can be no assurance that the Company and the Subsidiary Guarantors
would have sufficient financial resources available to satisfy all of its or
their obligations under the Revolving Credit Facility and the Notes in the event
of a Change of Control. The Company's failure to purchase the Notes would result
in a default under the Indenture and under the Revolving Credit Facility, each
of which could have adverse consequences for the Company and the holders of the
Notes. See "Description of Revolving Credit Facility" and "Description of the
Notes -- Change of Control." The definition of "Change of Control" in the
Indenture includes a sale, lease, conveyance or transfer of "all or
substantially all" of the assets of the Company and certain of its Restricted
Subsidiaries taken as a whole to a person or group of persons. There is little
case law interpreting the phrase "all or substantially all" in the context of an
indenture. Because there is no precise established definition of this phrase,
the ability of a holder of the Notes to require the Company to repurchase such
Notes as a result of a sale, lease, conveyance or transfer of all or
substantially all of the Company's assets to a person or group of persons may be
uncertain.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, holders of Old Notes that were not
prohibited from participating in the Exchange Offer and did not tender their Old
Notes will not have any registration rights under the Registration Rights
Agreement with respect to such nontendered Old Notes and, accordingly, such Old
Notes will continue to be subject to the restrictions on transfer contained in
the legend on the Old Notes. In general, the Old Notes may not be offered or
sold, unless registered under the Securities Act and applicable state securities
laws, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Company does not
intend to register the Old Notes under the Securities Act. Based on no-action
letters issued by the staff of the Commission to third parties, the Company
believes that the New Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by any
holder of such New Notes (other than any such holder that is an "affiliate" of
the Registrant within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business, such holder has no arrangement or understanding with
any person to participate in the distribution of such New Notes, and neither the
holder nor any other person is engaging in or intends to engage in a
distribution of the New Notes. Any holder who tenders in the Exchange Offer for
the purpose of participating in a distribution of New Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a
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broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of the New Notes received in exchange for the Old Notes acquired by
the broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that it will make this Prospectus and any
amendment or supplement to the Prospectus available to any broker-dealer for use
in connection with any such resale for a period of 90 days after the Exchange
Date or, if earlier, until all participating broker-dealers have so resold. See
"Plan of Distribution." The New Notes may not be offered or sold unless they
have been registered or qualified for sale under applicable state securities
laws or an exemption from registration or qualification is available and is
complied with. The Registrant is required, under the Registration Rights
Agreement, to register the New Notes in any jurisdiction requested by the
holders, subject to certain limitations.
LACK OF PUBLIC MARKET
There is currently no active trading market for the New Notes. If the New
Notes are traded after their initial issuance, they may trade at a discount from
their initial offering price, depending upon prevailing interest rates, the
market for similar securities and other factors, including general economic
conditions and the financial condition of the Company. The Company does not
intend to apply for a listing or quotation of the New Notes on any securities
exchange or stock market. The Initial Purchasers have informed the Company that
they currently intend to make a market in the New Notes. However, the Initial
Purchasers are not obligated to do so, and any such market making may be
discontinued at any time without notice. No assurance can be given as to the
liquidity of the trading market for the New Notes. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
See "Plan of Distribution."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On September 29, 1997, the Company issued $120,000,000 aggregate principal
amount of Old Notes to the Initial Purchasers. The issuance was not registered
under the Securities Act in reliance upon the exemptions under Rule 144A and
Regulation S under the Securities Act. In connection with the issuance and sale
of the Old Notes, the Company entered into the Registration Rights Agreement
that requires the Registrant to cause the Old Notes to be registered under the
Securities Act or to file with the Commission a registration statement under the
Securities Act with respect to an issue of new notes of the Registrant identical
in all material respects to the Old Notes, to use its best efforts to cause such
registration statement to become effective under the Securities Act and, upon
the effectiveness of that registration statement, to offer to the holders of the
Old Notes the opportunity to exchange their Old Notes for an equal principal
amount of New Notes, which will be issued without a restrictive legend and may
be reoffered and resold by the holder without restrictions or limitations under
the Securities Act. A copy of the Registration Rights Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
The Exchange Offer is being made pursuant to the Registration Rights Agreement
to satisfy the Registrant's obligations under the Registration Rights Agreement.
Based on no action letters issued by the staff of the Commission to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold, and otherwise
transferred by any holder of such New Notes (other than any such holder that is
an "affiliate" of the Registrant within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, such holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes, and neither the holder nor any other person is engaging in or intends to
engage in a distribution of the New Notes. Any holder who tenders in the
Exchange Offer for the purpose of participating in a distribution of the New
Notes cannot rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of the New Notes received in exchange for the Old Notes acquired by
the broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that it will make this Prospectus and any
amendment or supplement to this Prospectus available to any broker-dealer for
use in connection with any such resale for a period of 90 days after the
Exchange Date or, if earlier, until all participating broker-dealers have so
resold. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Registrant will accept any and all Old Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date (as defined). The Registrant will issue a principal amount of
New Notes in exchange for a like aggregate principal amount of outstanding Old
Notes tendered and accepted in the Exchange Offer. Holders may tender some or
all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in denominations of $1000 principal amount and integral multiples
thereof. The date of acceptance for exchange of the Old Notes for the New Notes
(the "Exchange Date") will be the first business day following the Expiration
Date.
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The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions relating to the Old Notes,
which will not apply to the New Notes. See "Description of the Notes." The New
Notes will evidence the same debt as the Old Notes. The New Notes will be issued
under and entitled to the benefits of the Indenture pursuant to which the Old
Notes were issued.
As of the date of this Prospectus, $120,000,000 aggregate principal amount
of the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of Old Notes.
The Registrant intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission under the
Exchange Act. Old Notes that are not tendered and were not prohibited from being
tendered for exchange in the Exchange Offer will remain outstanding and continue
to accrue interest and to be subject to transfer restrictions, but will not be
entitled to any rights or benefits under the Registration Rights Agreement.
Upon satisfaction or waiver of all the conditions to the Exchange Offer, on
the Exchange Date the Registrant will accept all Old Notes properly tendered and
not withdrawn and will issue New Notes in exchange therefor. For purposes of the
Exchange Offer, the Company will be deemed to have accepted properly tendered
Old Notes for exchange when, as, and if the Company had given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering holders for the purposes of receiving the New Notes from the
Registrant.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal, and all other required documents; provided, however, that
the Registrant reserves the absolute right to waive any defects or
irregularities in the tender or conditions of the Exchange Offer. If any
tendered Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Notes or substitute Old Notes evidencing the unaccepted
portion, as appropriate, will be returned without expense to the tendering
holder as promptly as practicable after the expiration or termination of the
Exchange Offer.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Registrant will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date," means 5:00 p.m., New York City time, on January
, 1998, unless the Registrant, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" will mean the latest date and
time to which the Exchange Offer is extended; provided that the Exchange Offer
will not be extended beyond 30 business days after the date of this Prospectus.
In order to extend the Expiration Date, the Registrant will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
registered holders an announcement of the extension, prior to 9:00 a.m., New
York City time, on the next business day after the then Expiration Date.
The Registrant reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer, or to terminate the
Exchange Offer if any of the conditions set forth below under "Conditions" has
not been satisfied, by giving oral or written notice of such delay, extension,
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer. Any such delay in acceptance or extension, termination, or amendment will
be followed as promptly as practicable by oral or written notice. If the
Exchange Offer is amended in a manner determined by the Registrant to
29
<PAGE> 33
constitute a material change, the Registrant will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of Old Notes
of such amendment.
Without limiting the manner in which the Registrant may choose to make a
public announcement of any delay, extension, amendment, or termination of the
Exchange Offer, the Registrant will have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
INTEREST ON THE NEW NOTES
New Notes will bear interest at the rate of 10 3/4% per annum, payable
semi-annually on April 1 and October 1 of each year, commencing April 1, 1998.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Registrant will
not be required to exchange any New Notes for any Old Notes, and may terminate
or amend the Exchange Offer before the acceptance of any Old Notes for exchange,
if the Exchange Offer shall not be permissible under applicable law or
Commission policy.
PROCEDURES FOR TENDERING
The tender of Old Notes by a holder as set forth below and the acceptance
thereof by the Registrant will constitute an agreement between such holder and
the Registrant in accordance with the terms and subject to the conditions set
forth in this Prospectus and in the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must (i) complete, sign, and date the
Letter of Transmittal or a facsimile, have the signatures on the Letter of
Transmittal guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes (unless such tender is being effected pursuant to the procedure
for book-entry transfer described below) and any other required documents, to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date, or (ii) comply with the guaranteed delivery procedures described below.
Delivery of all documents must be made to the Exchange Agent at its address set
forth in this Prospectus.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE REGISTRANT. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and that wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering of
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
that has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case
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<PAGE> 34
may be, are required to be guaranteed, such guarantee must be by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed in the Letter of Transmittal, such Old
Notes must be endorsed or accompanied by a properly completed bond power, signed
by such registered holder as such registered holder's name appears on such Old
Notes, with the signature guaranteed by an Eligible Institution. If the Letter
of Transmittal or any Old Notes or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Registrant,
evidence satisfactory to the Registrant of their authority to so act must be
submitted with the Letter of Transmittal.
Any financial institution that is a participant in the book-entry transfer
facility for the Old Notes may make book-entry delivery of Old Notes by causing
The Depository Trust Company ("DTC") to transfer such Old Notes into the
Exchange Agent's account with respect to the Old Notes in accordance with DTC's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at DTC, an
appropriate Letter of Transmittal with any required signature guarantee and all
other required documents must in each case be, or be deemed to be, transmitted
to and received and confirmed by the Exchange Agent at its address set forth
below on or prior to the Expiration Date, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes, and withdrawal of tendered Old Notes
will be determined by the Registrant in its sole discretion, which determination
will be final and binding. The Registrant reserves the absolute right to reject
any and all Old Notes not properly tendered or any Old Notes the Registrant's
acceptance of which would, in the opinion of counsel for the Registrant, be
unlawful. The Registrant also reserves the right to waive any defects,
irregularities, or conditions of tender as to particular Old Notes. The
Registrant's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Registrant determines. Although the Registrant intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Registrant, the Exchange Agent, nor any other person will incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Registrant reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date or, as set forth below under "Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions, or otherwise.
The terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder will also represent to the Registrant that (i)
the New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is the holder; (ii) neither the holder nor any such person has
an arrangement or understanding with any person to participate in the
distribution of such New Notes; and (iii) neither the holder nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities Act, of
the Registrant, or that if it is an "affiliate," it will comply with the
registration and prospective delivery requirements of the Securities Act to the
extent applicable. In addition, in connection with any resales of New Notes, any
broker-dealer who acquired Old Notes for its own account as a result of
market-making activities or other trading activities must acknowledge that it
will
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<PAGE> 35
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. The staff of the Commission has
taken the position in no-action letters issued to third parties including
Shearman & Sterling, SEC No-Action Letter (available July 2, 1993), that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the New Notes (other than a resale of an unsold allotment from
the original sale of the Old Notes) with this Prospectus, as it may be amended
or supplemented from time to time. Under the Registration Rights Agreement, the
Company is required to allow participating broker-dealers to use this
Prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of such New Notes. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders that wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) that cannot deliver their Old Notes, the Letter of
Transmittal, or any other required documents to the Exchange Agent prior to the
Expiration Date, or (iii) that cannot complete the procedures for book-entry
transfer of Old Notes to the Exchange Agent's account with DTC prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) on or prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail, or hand
delivery) setting forth the name and address of the holder, the certificate
number(s) of such Old Notes (if possible), and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five business trading days after the Expiration
Date, (i) the Letter of Transmittal (or facsimile) together with the
certificate(s) representing the Old Notes and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution
with the Exchange Agent, or (ii) that book-entry transfer of such Old Notes
into the Exchange Agent's account at DTC will be effected and confirmation
of such book-entry transfer will be delivered to the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile), as well as the certificate(s) representing all tendered Old
Notes in proper form for transfer and all other documents required by the
Letter of Transmittal, or confirmation of book-entry transfer of the Old
Notes into the Exchange Agent's account at DTC, are received by the
Exchange Agent within five business trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer:
The holder tendering Old Notes exchanges, assigns, and transfers the
Old Notes to the Registrant and irrevocably constitutes and appoints the
Exchange Agent as the holder's agent and attorney-in-fact to cause the Old
Notes to be assigned, transferred, and exchanged. The holder represents and
warrants to the Registrant and the Exchange Agent that (i) it has full
power and authority to tender, exchange, assign, and transfer the Old Notes
and to acquire the New Notes in exchange for the Old Notes; (ii) when the
Old Notes are accepted for exchange, the Registrant will acquire good and
unencumbered title to the Old Notes, free and clear of all liens,
restrictions, charges, and encumbrances and not subject to any adverse
claim; (iii) it will, upon request, execute and deliver any additional
documents deemed by the Registrant to be necessary or desirable to complete
the exchange, assignment, and transfer of tendered Old Notes; and (iv)
acceptance of any tendered Old Notes by the Registrant and the issuance of
New Notes in exchange therefor will constitute performance in full by the
Registrant of its obligations under the Registration Rights
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<PAGE> 36
Agreement, and the Registrant will have no further obligations or
liabilities thereunder to such holders. All authority conferred by the
holder will survive the death or incapacity of the holder and every
obligation of the holder will be binding upon the heirs, legal
representatives, successors, assigns, executors, and administrators of the
holder.
Each holder will also certify that it (i) is not an "affiliate" of the
Registrant within the meaning of Rule 405 under the Securities Act or that,
if it is an "affiliate," it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable; (ii) is acquiring the New Notes in the ordinary course of its
business; and (iii) has no arrangement with any person or intent to
participate in, and is not participating in, the distribution of the New
Notes.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this Prospectus, tenders of Old Notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
facsimile transmission, or letter indicating notice of withdrawal must be
received by the Exchange Agent at its address set forth in this Prospectus prior
to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having tendered the Old Notes
to be withdrawn (the "Depositor"); (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes); (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Notes register
the transfer of such Old Notes into the name of the person withdrawing the
tender; and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawn Old Notes or otherwise comply with DTC's procedures. All
questions as to the validity, form, and eligibility (including time of receipt)
of such notices will be determined by the Registrant, whose determination will
be final and binding on all parties. Any Old Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes that have been tendered, but not accepted for
payment, will be returned to the holder without cost to such holder as soon as
practicable after withdrawal, rejection of tender, or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described above under "Procedures for Tendering" at any time
prior to the Expiration Date.
UNTENDERED OLD NOTES
Holders of Old Notes whose Old Notes are not tendered or are tendered but
not accepted in the Exchange Offer will continue to hold such Old Notes and will
be entitled to all the rights and preferences and subject to the limitations
applicable to the Old Notes under the Indenture. Following consummation of the
Exchange Offer, the holders of Old Notes will continue to be subject to the
existing restrictions upon transfer, and the Registrant will have no further
obligations to such holders, other than the Initial Purchasers, to provide for
the registration under the Securities Act of the Old Notes held by them. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected.
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EXCHANGE AGENT
Bank of Montreal Trust Company, the Trustee under the Indenture, has been
appointed as Exchange Agent of the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail, By Facsimile:
by hand or by Overnight Courier Bank of Montreal Trust Company
Bank of Montreal Trust Company Attention: Corporate Trust Department
88 Pine Street, 19th Floor (212) 701-7698
New York, NY 10005 Confirm by Telephone:
Attention: Corporate Trust Department (212) 701-7650
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be paid by the Registrant. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone, or in person by officers, regular
employees, or agents of the Registrant and its affiliates.
The Registrant has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Registrant, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses and will pay the
reasonable fees and expenses of holders in delivering their Old Notes to the
Exchange Agent.
The cash expenses of the Registrant to be incurred in connection with the
Registrant's performance and completion of the Exchange Offer will be paid by
the Registrant. Such expenses include fees and expenses of the Exchange Agent
and Trustee, accounting and legal fees and printing costs, among others.
The Registrant will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, holders of Old Notes that were not
prohibited from participating in the Exchange Offer and did not tender their Old
Notes will not have any registration rights under the Registration Rights
Agreement with respect to such nontendered Old Notes and, accordingly, such Old
Notes will continue to be subject to the restrictions on transfer contained in
the legend on the Old Notes. In general, the Old Notes may not be offered or
sold unless registered under the Securities Act and applicable state securities
laws, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Registrant does not
intend to register the Old Notes under the Securities Act. Based on no-actions
letters issued by the
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<PAGE> 38
staff of the Commission to third parties the Company believes that the New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold, and otherwise transferred by any holder of such New Notes
(other than any such holder that is an "affiliate" of the Registrant within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business, such holder has no arrangement or understanding with any person to
participate in the distribution of such New Notes and neither the holder nor any
other person is engaging in or intends to engage in a distribution of the New
Notes. Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of New Notes cannot rely on such interpretation
by the staff of the Commission and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." The New Notes may
not be offered or sold unless they have been registered or qualified for sale
under applicable state securities laws or an exemption from registration or
qualification is available and is complied with. The Registrant is required,
under the Registration Rights Agreement, to register the New Notes in any such
jurisdiction requested by the holders, subject to certain limitations.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on
whether to participate in the Exchange Offer.
Upon consummation of the Exchange Offer, holders of the Old Notes that were
not prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Rights
Agreement with respect to such nontendered Old Notes and, accordingly, such Old
Notes will continue to be subject to the restrictions on transfer contained in
the legend on the Old Notes. However, in the event the Company fails to
consummate the Exchange Offer or a holder of Old Notes notifies the Company in
accordance with the Registration Rights Agreement that it will be unable to
participate in the Exchange Offer due to circumstances delineated in the
Registration Rights Agreement, then the holder of the Old Notes will have
certain rights to have such Old Notes registered under the Securities Act
pursuant to the Registration Rights Agreement and subject to conditions
contained in the Registration Rights Agreement.
The Registrant has not entered into any arrangement or understanding with
any person to distribute the New Notes to be received in the Exchange Offer, and
to the best of the Registrant's information and belief, each person
participating in the Exchange Offer is acquiring the New Notes in its ordinary
course of business and has no arrangement or understanding with any person to
participate in the distribution of the New Notes to be received in the Exchange
Offer. In this regard, the Registrant will make each person participating in the
Exchange Offer aware (through this Prospectus or otherwise) that if the Exchange
Offer is being registered for the purpose of secondary resale, any holder using
the Exchange Offer to participate in a distribution of New Notes to be acquired
in the registered Exchange Offer (i) may not rely on the staff position
enunciated in Morgan Stanley and Co. Inc. (avail. June 5, 1991) and Exxon
Capital Holding Corp. (avail. May 13, 1988) or similar letters and (ii) must
comply with registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
as reflected in the Registrant's accounting records on the Exchange Date.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Registrant. The expenses of the Exchange Offer will be expensed over the term of
the New Notes.
35
<PAGE> 39
USE OF PROCEEDS
There will be no proceeds to the Company from the Exchange Offer.
CAPITALIZATION
The following table sets forth at September 30, 1997 the historical
capitalization of the Company. This table should be read in conjunction with
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources," and the
more detailed financial statements and notes thereto included elsewhere in this
Prospectus. There is no anticipated effect on capitalization because of the
Exchange Offer.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
-----------------------
ACTUAL
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Long-Term Debt:
Revolving Credit Facility................................. $ 29,996
10 3/4% Senior Subordinated Notes Due 2004................ 120,000
--------
Total long-term debt.............................. $149,996
--------
Stockholders' Equity:
Preferred Stock, 10,000,000 shares authorized, no shares
issued and outstanding; $0.01 par value................ $ --
Common Stock, 40,000,000 shares authorized, 25,615,000
issued and outstanding, $0.01 par value................ 256
Additional paid-in capital................................ 103,302
Accumulated deficit....................................... (10,706)
Deferred compensation..................................... (986)
--------
Total stockholders' equity........................ $ 91,866
--------
Total capitalization.............................. $241,862
========
</TABLE>
36
<PAGE> 40
SELECTED FINANCIAL DATA
The financial data as of and for the years ended December 31, 1992 through
1996, and as of and for the nine month periods ended September 30, 1996 and
1997, were derived from audited and unaudited consolidated financial statements
of the Company and its predecessors. Information for interim periods include in
the opinion of management all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth therein and
are not necessarily indicative of results for an entire year. The data set forth
in this table should be read in connection with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the more detailed
financial statements and related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
----------- ------- ------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Oil and gas revenue.................... $ -- $ -- $ -- $ -- $ -- $ -- $ 25,784
Interest income........................ 55 24 6 5 170 158 162
------- ------- ------- ------- ------- ------- --------
Total revenues......................... 55 24 6 5 170 158 25,946
------- ------- ------- ------- ------- ------- --------
Costs and expenses:
Operating expense.................... -- -- -- -- -- -- 17,100
General and administrative........... 121 187 290 322 2,268 1,045 3,993
Depreciation, depletion and
amortization....................... -- -- 2 5 29 20 13,232
Interest expense..................... 183 76 107 190 806 643 4,620
Net gain on future contracts......... -- -- -- -- -- -- (275)
Foreign currency exchange loss,
net................................ -- -- -- -- -- -- 1,850
------- ------- ------- ------- ------- ------- --------
Total expenses......................... 304 263 399 517 3,103 1,708 40,520
------- ------- ------- ------- ------- ------- --------
Loss before taxes...................... (249) (239) (393) (512) (2,933) (1,550) (14,574)
Income tax benefit (expense)........... -- -- -- -- (1,391) (1,769) 5,584
------- ------- ------- ------- ------- ------- --------
Net loss............................... $ (249) $ (239) $ (393) $ (512) $(4,324) $(3,319) $ (8,990)
======= ======= ======= ======= ======= ======= ========
Loss per share of common stock....... $ (0.01) $ (0.01) $ (0.02) $ (0.02) $ (0.18) $ (0.14) $ (0.35)
======= ======= ======= ======= ======= ======= ========
Weighted average shares
outstanding(a)....................... 21,000 21,000 21,000 21,000 23,411 22,957 25,612
Ratio of earnings to fixed
charges(b)........................... -- -- -- -- -- -- --
======= ======= ======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
-------------------------------------------------------- ----------------
1992 1993 1994 1995 1996 1997
----------- ----------- ------- ------- -------- ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD):
Oil and gas properties, at cost.......... $4,406 $10,895 $18,944 $55,951 $123,300 $217,699
Total assets............................. 6,179 11,034 19,427 67,669 129,825 258,046
Long-term debt, including current
maturities............................. -- -- 1,400 34,385 22,842 149,996
Stockholders' equity (a)................. 4,132 8,689 15,484 23,269 100,625 91,866
</TABLE>
- ---------------
(a) RMOC became a public entity in June 1996. See Notes to Consolidated
Financial Statements -- Note 2 -- Significant Accounting Policies.
(b) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of net earnings before income taxes and fixed charges (exclusive of
capitalized interest). Fixed charges consist of interest expense (which
includes amounts capitalized and the amortization of debt discount) and that
portion of rental cost that is equivalent to interest (estimated to be
one-third of rental cost). Earnings were insufficient to cover fixed charges
by $249,000, $239,000, $393,000, $1,936,000 and $4,561,000 during the years
ended December 31, 1992, 1993, 1994, 1995 and 1996, respectively, and by
$3,178,000 and $15,307,000 during the nine months ended September 30, 1996
and 1997, respectively.
37
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion is intended to assist in understanding the
Company's financial position and results of operations for each year in the
three-year period ended December 31, 1996, and for the nine-month periods ended
September 30, 1996 and 1997. The Consolidated Financial Statements and the notes
thereto should be referred to in conjunction with this discussion.
OVERVIEW
RMOC was formed when the shareholders of Rutherford Moran Exploration
Company ("RMEC") and the partners in Thai Romo exchanged their interests in the
respective entities for common shares of RMOC (the "Exchange"). As a result of
the Exchange, RMEC and Thai Romo became wholly-owned subsidiaries of the
Company. Thai Romo Holdings, Inc. ("TRH"), a wholly-owned subsidiary of the
Company, was formed in the Exchange and now directly owns the Thai Romo
interests received by the Company in the Exchange and a 46.34% interest in B8/32
Partners. RMEC was formed on September 21, 1990 for the purpose of holding an
interest in the Concession. Thai Romo is a second tier subsidiary owned by RMEC
(57%) and TRH (43%).
From September 24, 1990 until June 18, 1996, RMEC was treated as an S
Corporation under the Internal Revenue Code of 1986, as amended (the "Code"). As
such, RMEC did not incur federal income taxes at the corporate level during such
period and its taxable income or loss was passed through to its stockholders
based on their interests. Similarly, Thai Romo was treated as a partnership for
U.S. income tax purposes and Thai Romo was not subject to federal income taxes
from November 1993 to June 17, 1996. During this time, income and losses earned
by Thai Romo were passed through to the partners on the basis of their interest
in Thai Romo.
Following the Exchange, the Company completed an initial public offering
(the "IPO") of its common stock, $.01 par value (the "Common Stock"), raising
net proceeds, after deducting underwriting commissions and discounts and
offering expenses, of approximately $97 million, which was utilized to repay
outstanding debt to the Company's principal stockholders, repay bank debt and
fund capital expenditures.
As of December 31, 1996, the Company's exploration and development
activities had not generated revenues. As a result, the Company's audited
historical results of operations included herein have been presented as a
development stage company 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.
Initial sales from the Tantawan Field began on February 1, 1997 and the
Company ceased being a development stage company. Natural gas and crude oil
revenues are now recorded using the entitlements method. If production volumes
received exceed the Company's ownership percentage in the property, such excess
is recorded as a liability. If production volumes are less than the Company's
entitlement, the underproduction is recorded as a receivable.
On March 3, 1997, TRH acquired 46.34% of B8/32 Partners and results for the
nine months ending September 30, 1997 include 46.34% of B8/32 Partners
operations from March 3, 1997.
The Company uses the full cost method of accounting for its investment 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 proven oil and natural gas reserves.
38
<PAGE> 42
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997, Compared with Nine Months Ended
September 30, 1996
The Company's net loss of $9.0 million or $0.35 per share for the nine
months ended September 30, 1997, increased from the Company's net loss of $3.3
million or $0.14 per share for the nine months ended September 30, 1996. The
increase in net loss is primarily due to interest expense caused by higher debt
levels, a foreign exchange loss, higher salaries and wages and administrative
expenses offset by the recognition of a tax benefit and revenues associated with
the commencement of production, net of related costs.
The Company's total revenues for the nine months ended September 30, 1997,
were $26.0 million as compared to $158,000 for the nine months ended September
30, 1997. Oil and gas revenues were $25.8 million and interest income was
$162,000 for the nine months ended September 30, 1997. See "Foreign Currency
Fluctuations." Production volumes for the nine months ended September 30, 1997,
before royalties, were 586,904 barrels of oil and 9,436,471 Mcf of gas, compared
to no production volumes previously.
Operating expenses incurred for the nine months ended September 30, 1997,
were $17.1 million as compared to no operating expenses previously.
Depreciation, depletion and amortization expense recorded for the nine
months ended September 30, 1997, was $13.2 million as compared to $20,000 for
the nine months ended September 30, 1996. This increase is due to the
commencement of production during February 1997.
Interest expense of $4.6 million for the nine months ended September 30,
1997, increased from $643,000 for the nine months ended September 30, 1996. This
increase is due to an increase in borrowings and the amortization of deferred
financing costs. Outstanding debt at September 30, 1997, was $150 million as
compared to $2 million at September 30, 1996. During the nine months ended
September 30, 1997 and 1996, $733,000 and $1.6 million, respectively, of
interest expense was capitalized to unproven properties.
Salaries and wages of $837,000 and other general administrative expenses
were $3.2 million for the nine months ended September 30, 1997, compared to
$273,000 and $772,000, respectively, for the nine months ended September 30,
1996. This increase is primarily due to the capitalization of a greater portion
of salaries and wages and costs in 1996 compared to 1997. Additionally, there
was an increase in personnel during the third and fourth quarters of 1996
resulting in higher administrative costs for 1997 compared to 1996.
Year Ended December 31, 1996, Compared with Year Ended December 31, 1995
The Company's net loss of $4.3 million for the twelve months ended December
31, 1996 increased from a net loss of $512,000 for the twelve months ended
December 31, 1995 due primarily to increases in deferred income taxes caused by
a one time non-cash charge of $1.9 million, increases in general and
administrative expenses and less significantly due to increases in interest
expense, and salaries and wages, offset partially by an increase in interest
income.
Because RMEC and Thai Romo became part of the Company's consolidated
federal tax return following the Exchange, RMEC and Thai Romo recorded an income
tax expense and a corresponding deferred tax liability of $1.9 million for the
difference between the book basis and tax basis of oil and gas properties on
June 17, 1996. This charge was offset by a tax benefit of $530,000 recorded in
the third and fourth quarters related to the Company's losses.
Interest income of $170,000 for the twelve months ended December 31, 1996,
increased from $5,000 for the twelve months ended December 31, 1995. This
increase is due to the increase in available cash from the proceeds of the IPO.
39
<PAGE> 43
Interest expense of $806,000 for the twelve months ended December 31, 1996,
increased from $190,000 for the twelve months ended December 31, 1995. This
increase was caused by increases in outstanding debt and in the amortization of
deferred financing costs.
Salaries and wages of $535,000 and other general and administrative
expenses of $1.7 million, for the twelve months ended December 31, 1996,
increased from to $114,000 and $208,000, respectively, for the twelve months
ended December 31, 1995. These increases are primarily due to the capitalization
of a greater portion of salaries and wages and direct costs related to oil and
gas property development in 1995 compared to 1996 and, to a lesser extent, an
increase in compensation expense.
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.
Noncapitalized interest expense of $190,000 for 1995 increased compared to
$107,000 in 1994. This increase is due to the significant incurrence of debt
under loans from banks and stockholders. Balances under such loan facilities
were $42.9 million and $2.9 million at December 31, 1995 and 1994, respectively.
General and administrative expenses (excluding salaries and wages) of
$208,000 for 1995 increased from $181,000 in 1994. This increase was 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 from a 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 from $76,000 in 1993. This
increase was due to an increase in variable interest rates from 1993 to 1994.
General and administrative expenses (excluding salaries and wages) of
$181,000 for 1994 increased from $74,000 in 1993. This increase was due to
additional rent and additional legal fees incurred for general corporate
purposes.
LIQUIDITY AND CAPITAL RESOURCES
From the Company's inception on September 21, 1990 through December 31,
1996, the Company invested approximately $123 million primarily in development
and exploration activities conducted in Block B8/32 and the acquisition of
interests in or rights to the Concession. During this period, the Company had
negative operating cash flow. Since its inception, the Company has financed its
growth through a combination of equity infusions by its principal stockholders
(primarily Messrs. Rutherford and Moran), bank and stockholder loans, the sale
of common stock and, most recently the issuance of the Old Notes.
In June 1996, the Company completed the IPO which resulted in RMOC raising
net proceeds of approximately $97 million. The proceeds were used to repay
outstanding debt to the Company's principal stockholders, repay bank debt, and
fund capital expenditures.
On September 20, 1996, the Company entered into a $150 million Revolving
Credit Facility (the "Revolving Credit Facility") with a group of commercial
lenders. The Revolving Credit Facility matures on September 30, 1999 and
contains a borrowing base limitation, which was $120 million at June 30, 1997
and was reset at $60,000,000 upon the completion of the Offering. The Revolving
Credit Facility is secured by the stock of certain subsidiaries of the Company
and TRH's 46.34% stock interest in B8/32 Partners.
40
<PAGE> 44
At September 30, 1997, $30 million was outstanding under the Revolving
Credit Facility at annual interest rates ranging from 7.375% to 7.4375%. See
"Description of Revolving Credit Facility." As of September 30, 1997, the
Company was not in compliance with the covenant requiring the Company to
maintain an EBITDA to interest coverage ratio of 1.5:1 for the quarter ending
September 30, 1997, however such non-compliance was waived by its lenders.
RMOC financed the MOTL Acquisition primarily by borrowing $20 million under
an additional credit agreement with one of the lenders under the Revolving
Credit Facility. The Company financed the remainder of the MOTL Acquisition
through its Revolving Credit Facility. The Company repaid the amount due under
the additional credit agreement with increased borrowings under the Revolving
Credit Facility following a redetermination of the borrowing base and such
additional credit agreement was terminated.
In anticipation of the Offering, the Company borrowed $5 million under a
credit agreement from one of the lenders under its Revolving Credit Facility.
The credit agreement bore interest at the Base Rate plus 3/4% and was repaid
upon the closing of the Offering.
On September 29, 1997, the Company issued $120 million of the Old Notes.
The net proceeds from this offering were used to repay $93 million of
outstanding debt under the revolving Credit Facility and the Credit Agreement
and to purchase a portfolio of U.S. Government obligations of approximately $24
million, which is sufficient to provide for payment in full when due, the first
four scheduled interest payments on the Notes. Since the completion of the
Offering, the Company has been funding its operations from internally generated
cash flow and additional borrowings under its Revolving Credit Facility.
In December 1997, the Company and two of its lenders amended the Revolving
Credit Facility, which provides for a fixed borrowing base of $150 million until
September 30, 1998 (or on the completion of certain new financings or other
specified events, if earlier). The amended Facility provides that the Company
pays interest at rates based on a margin of 1.75% over LIBOR if the aggregate
outstanding principal amount of loans is less than or equal to the threshold
amount, which was set at $60 million on December 3, 1997, a margin of 2.75% over
LIBOR if the outstandings are greater than the threshold amount on or prior to
June 30, 1998, and a margin of 3.50% over LIBOR if the outstandings are greater
than the threshold amount after June 30, 1998. Alternatively, the Company may
pay a margin over the prime rate of 0.25% 1% and 1.75% respectively, for similar
levels of borrowings. The Company is also assessed a commitment fee equal to
0.5% per annum on the average daily balance of the unused borrowing base. As of
September 30, 1998 and semi-annually thereafter, the borrowing base will be
redetermined by the lenders on customary industry terms based upon the Company's
then current reserve base. Bank borrowings in excess of the threshold amount, if
any, will have to be repaid upon such redetermination. At December 4, 1997, $70
million was outstanding under the Revolving Credit Facility. The Revolving
Credit Facility is also subject to certain covenants, including limitations on
additional indebtedness, limitations on payment of dividends and an interest
coverage ratio.
To explore and develop Block B8/32, the Company anticipates capital
expenditures of approximately $125 million for all of 1997, which includes
approximately $28.6 million for the MOTL Acquisition. Approximately $46 million
is being spent for development of the Tantawan Field and $36 million is being
spent in the Benchamas Field. In addition to such capital expenditures, the
Company expects to incur additional cash expenses, including interest, and
working capital requirements of approximately $27 million. The Company currently
expects capital expenditures for 1998 to be in the range of $110 million to $120
million, of which approximately 70% is budgeted for production facilities
primarily in the Benchamas Field.
During the remainder of 1997 and the first half of 1998, the Company
expects to fund its obligations primarily through net cash flow from operations
and additional borrowings under the Revolving Credit Facility. To continue the
current expected level of capital expenditures, the Company believes it will
have to obtain substantial additional sources of funds, the cost of some of
which may be higher than the Company's current cost of funds. The Company
believes it can raise adequate funds at an acceptable
41
<PAGE> 45
cost to permit it to meet its capital commitments. See "Risk
Factors -- Substantial Capital Requirements".
FOREIGN CURRENCY FLUCTUATIONS
The Company does not currently hold significant amounts of cash, cash
equivalents, long-term financial instruments or investments denominated in
foreign currencies. However, all of its gas revenues are denominated in Thai
Baht. For many years, the Thai Baht/U.S. dollar exchange rate has been stable,
as the Baht was linked to a basket of currencies, primarily the U.S. Dollar. On
July 2, 1997 the Thai government decided to allow the value of the Baht to be
determined by market forces. Since the announcement, the value of the Thai Baht
has declined against the U.S. Dollar by approximately 50%. The Company's Gas
Sales Agreement contains an adjustment factor which should insulate the Company
from much of the impact of the declining value of the Baht. The Company believes
that these reductions in US dollar realizations since July 2, 1997 should be
substantially recouped over time based upon other adjustment factors in the Gas
Sales Agreement. The Company will consider instruments intended to mitigate the
foreign currency risks associated with such revenues through currency rate
hedging transactions such as options, futures or other derivative financial
instruments. The Revolving Credit Facility imposes certain limitations on such
transactions. See "Risk Factors -- International Operations and Currency
Exchange Rates."
CHANGING OIL PRICES
The Company is dependent on crude oil prices, which have historically been
volatile. The Company has used 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 December 31, 1996, crude oil price swap agreements were in place for the
Company's oil production of 1.0 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. At December 31, 1996 and October 3, 1997, the Company
estimated the cost of unwinding this position to be $8.5 million and $8.0
million, respectively. Coincident with the crude oil price swaps, the Company
has sold to the affiliate of a 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. The
Company has accounted for the swap option separately as it does not qualify as a
hedge. Changes in value of the swap option are recorded in the statement of
operations. At December 31, 1996 and September 30, 1997, the Company estimates
the cost of this position to be $1.4 million and $1.2 million, respectively, and
has recorded such amount as a liability on its balance sheet.
NEW ACCOUNTING PRONOUNCEMENTS
Effective December 1997, the Company will be required to adopt Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS
128 introduces the concept of basic earnings per share, which represents net
income divided by the weighted average common shares outstanding without the
dilutive effects of common stock equivalents (options, warrants, etc.). Diluted
earnings per share, giving effect for common stock equivalents, will be reported
when SFAS 128 is adopted in the fourth quarter of 1997. The impact of adopting
SFAS 128 is anticipated to be immaterial.
Effective December 1997, the Company will be required to adopt the
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure" ("SFAS 129"). SFAS 129 requires that all entities
disclose in summary form within the financial statement the pertinent rights and
privileges of the various securities outstanding. An entity is to disclose
within the financial statement the number of shares issued upon conversion,
exercise, or satisfaction of required conditions during at least the most recent
annual fiscal period and any subsequent interim period presented. Other
42
<PAGE> 46
special provisions apply to preferred and redeemable stock. The Company's
adoption of SFAS 129 in the fourth quarter of 1997 is not expected to have a
material impact on reported results.
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which establishes standards for reporting and display of
comprehensive income and its components. The components of comprehensive income
refer to revenues, expenses, gains and losses that are excluded from net income
under current accounting standards, including foreign currency translation
items, minimum pension liability adjustments and unrealized gains and losses on
certain investments in debt and equity securities. SFAS 130 requires that all
items that are recognized under accounting standards as components of
comprehensive income be reported in a financial statement displayed in equal
prominence with the other financial statements; the total of other comprehensive
income for a period is required to be transferred to a component of equity that
is separately displayed in a statement of financial position at the end of an
accounting period. SFAS 130 is effective for both interim and annual periods
beginning after December 15, 1997, at which time the Company will adopt the
provisions. The Company does not expect SFAS 130 to have a material impact on
reported results.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for the way public enterprises are
to report information about operating segments in annual financial statements
and requires the reporting of selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS 131 is effective for periods beginning after December 15, 1997,
at which time the Company will adopt the provisions. The Company does not expect
SFAS 131 to have a material effect on its reported results.
43
<PAGE> 47
BUSINESS AND PROPERTIES
GENERAL
The Company is a United States independent exploration and production
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 conducted entirely in the Gulf of Thailand
through its subsidiary, Thai Romo, and its affiliate, B8/32 Partners. The
Company also reviews from time to time additional exploration opportunities in
other areas of Southeast Asia.
As of July 1, 1997, the Company had net proven reserves of 327 Bcfe, 50% of
which were in the Tantawan Field and 50% of which were in the Benchamas Field.
This estimate only includes proven reserves with respect to 2 of the 12
successful wells drilled in the first half of 1997. In addition, appraisal wells
drilled by the Concessionaires in three of the four established areas within the
Block (Tantawan, Benchamas and Pakakrong) have tested at commercial flow rates
of hydrocarbons. These wells, along with the wells in the Maliwan area, have
encountered an average of 204 feet of net hydrocarbon pay. Together, they have
established the potential for significant additional proven reserves in these
four areas in the Block. Pursuant to the GSA, the Concessionaires have agreed to
sell natural gas from the Tantawan Field to PTT. The Company expects that this
agreement will be amended to incorporate production from the Benchamas Field. On
November 14, 1996, the Concessionaires signed the MOU with PTT to sell crude oil
production from the Tantawan Field. In early July, the Company had its first oil
lifting from the Tantawan Field and sold 278,000 barrels of oil pursuant to the
MOU. In October 1997, the Company and the other Concessionaires received
permission from the Thai Department of Mineral Resources to export crude oil
produced from the Block and sold its second oil lifting for U.S. dollars to a
third party purchaser for export. The Company expects that the Concessionaires
will continue to sell their crude oil for U.S. dollars to a number of purchasers
at market prices. In November 1997, PTT notified the Company that the MOU was
terminated. Crude oil and natural gas production in the Tantawan Field commenced
in February 1997 while production is anticipated to commence from the Benchamas
Field in 1999. See "--Marketing and Contracts."
Current interests in the Block are as follows:
<TABLE>
<CAPTION>
BLOCK
B8/32(1)
----------
<S> <C>
RMOC (through Thai Romo Limited/Thai Romo Holdings, Inc.)... 46.34%
Pogo Producing Company (through Thaipo Limited)............. 46.34%
Palang Sophon, Limited...................................... 7.32%
</TABLE>
- ---------------
(1) Ownership interests include ownership through each entity's proportionate
ownership in B8/32 Partners.
The Company's principal executive offices are located at 5 Greenway Plaza,
Suite 220, Houston, Texas 77046 and the Company's telephone number is (713)
622-5555.
HISTORY OF BLOCK B8/32
In 1988, Mr. Rutherford and Mr. Moran formed a venture to pursue
exploration opportunities in the Gulf of Thailand. In August 1991, Thai Romo,
Thaipo and MOTL were awarded Petroleum Concession No. I /2534/36 for Block B8/32
in the central portion of the Gulf of Thailand. Subsequent to the award,
Sophonpanich Co. Limited ("Sophonpanich"), Palang's predecessor, became one of
the Concessionaires by acquiring an interest in the Concession as a co-venturer.
MOTL was designated as the Block's operator pursuant to a Joint Operating
Agreement among the Concessionaires (the "JOA"). See "-- Operating Agreements."
The Company completed its IPO and consummated the Exchange in June 1996. As
a result of the Exchange, the Company became the parent of RMEC and TRH, which
collectively own all of the
44
<PAGE> 48
outstanding interests, except for certain nominal interests, in Thai Romo and
46.34% of B8/32 Partners. The prior owners of Thai Romo and RMEC received shares
of Common Stock in the Exchange.
The Company, Pogo, Palang and B8/32 Partners are the current
Concessionaires. The Company originally owned a 31.67% interest in the Block. In
March 1995, Thai Romo, Thaipo and Sophonpanich acquired MOTL's interest in the
Tantawan Field of Block B8/32. Thaipo was designated as operator of the Tantawan
Field. The Ministry of Industry of Thailand 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 (the "Tantawan JOA") with provisions substantially similar
to those of the original JOA.
On December 19, 1996, RMOC exercised its preferential right to purchase
46.34% of the outstanding shares of MOTL. Prior to such time, MOTL owned 31.67%
interest in all areas of the Block except the Tantawan Field. Pogo and Palang
purchased the remaining 53.66% of MOTL stock. In March 1997, Thaipo was
designated to replace MOTL as operator for the remainder of the Block.
In accordance with the Thai Petroleum Act, the Concessionaires relinquished
50% of the exploration acreage of the Block on August 1, 1995. The Concession
agreement provided for a six-year exploration period ending on July 31, 1997,
which would have required relinquishment of the remaining exploration acreage.
However, in May 1997, the Concessionaires received an extension of the
exploration period to July 31, 2000. In light of this extension and the fact
that three production licenses have been approved or applied for, the
Concessionaires were only required to relinquish approximately 590,000 acres of
the then remaining exploration acreage on August 1, 1997. The Company believes
that the Concessionaires did not lose any attractive exploration acreage as a
result of the required relinquishment. The retained exploration acreage can be
retained after July 31, 2000 by payment of annual lease rentals.
On August 23, 1995, the Thai Petroleum Committee of the Department of
Mineral Resources and the Ministry of Industry designated the Tantawan Field for
production. The Tantawan Field covers approximately 68,000 acres in the Block.
In January 1997, the Concessionaires made formal application for a production
license covering the Benchamas Field and a portion of the Pakakrong area, which
application was approved in June 1997 by the Thai Ministry of Industry. In
November 1997, the Concessionaires received from the Ministry of Industry a
production license covering approximately 91,000 acres in the Maliwan area.
ENERGY DEMAND IN THAILAND
From 1992 to 1996, Thailand's real gross domestic product ("GDP") increased
at an average annual growth rate of approximately 8.1%, and increased 6.7% in
1996. According to Thailand's National Energy Policy Office, energy demand
increased at a compound annual growth rate of approximately 11% from 1992 to
1996. Energy growth in excess of GDP growth reflects the nature of Thailand's
economy, which is characterized by increasing per capita energy consumption and
increasing industrialization. To meet the country's energy demand and reduce its
dependence on imported oil, Thailand's Deputy Prime Minister and Minister of
Industry recently outlined a program for the development of new sources of
natural gas. The new program gives the highest priority to the expansion of
domestic offshore natural gas supplies, ahead of the secondary priority of
enhancing imports from neighboring Asian countries. Much of the annual increase
in domestic Thai oil and gas supply over the next five years is expected to be
provided by new sources of oil and gas from the Gulf of Thailand. See "Risk
Factors -- Thai Economy."
CURRENT FIELDS AND PROSPECTS
The Company has identified a number of exploration and development
opportunities within Block B8/32, which include Tantawan, Benchamas, Pakakrong,
Maliwan and North Benchamas.
45
<PAGE> 49
Tantawan
Through June 30, 1997, the Company has participated in drilling a total of
23 development and 18 exploration wells in the Tantawan Field, of which all but
one have encountered hydrocarbons. Of the 40 wells that encountered
hydrocarbons, 36 are deemed capable of commercial flow rates. All of these
successful wells were drilled in roughly the southern third of the Tantawan
Field and have encountered an average of 170 feet of net hydrocarbon pay.
In August 1996, the Concessionaires set the "A" and "B" 12-slot production
platforms and mobilized two drilling rigs to tie-back and complete a total of 18
wells. To facilitate moving the natural gas and crude oil to market, the
operator participated in a long term lease for an oceangoing tanker, the T/T
Bayern. The vessel, recommissioned as the Tantawan Explorer, was delivered in
December 1996, and is currently the only FPSO vessel in the Gulf of Thailand.
Production from the Tantawan Field commenced in February 1997 and through June
30, 1997 has averaged 79 MMcf and 5,050 Bbls per day (36.6 MMcf and 2,340 Bbls
per day net to the Company's working interest).
During 1996, Thai Romo and its partners began construction of the 9-slot
"C" platform, which arrived on-site in the second quarter of 1997. Production
began in August 1997 from 9 wells. In October 1996, the Concessionaires signed a
contract for the construction of a second 9-slot "D" platform, which was
installed in August, 1997.
Benchamas
As of June 30, 1997, the Company had participated in drilling 13
exploration wells, all of which were hydrocarbon bearing and 12 of which were
considered to be commercially viable. The wells encountered an average of 225
feet of net hydrocarbon pay. The Company also expects to conduct an active
program of development drilling in the Benchamas Field in 1998.
In June 1997, the Concessionaires' formal application to Thailand's
Department of Mineral Resources for a production license to produce from the
Benchamas Field and a portion of the Pakakrong area was approved. This plan of
development contemplates the installation of satellite platforms, a central
processing facility platform and an FSO. It is anticipated that production from
the Benchamas Field will be sold under similar terms to those applicable to the
Tantawan Field.
Pakakrong
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. 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. The
production license application which has been approved includes the Pakakrong
area.
Production tests conducted in Pakakrong-1 at a depth of 4,900 feet yielded
cumulative flow rates of 25.5 MMcfd of natural gas and 0.7 Mbpd of oil and
condensate. Production tests in the Pakakrong-2 well were conducted at a depth
of 4,200 feet and 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.
Maliwan
Through June 30, 1997, two successful exploration wells have been drilled
in the Maliwan area, located between the Tantawan and Benchamas Fields. The
first well encountered 110 feet of net hydrocarbon pay and the second
encountered 297 feet of net hydrocarbon pay. Additional exploration and
delineation drilling, as well as a complete geological and geophysical
assessment, will be required before proven reserves can be determined and
development plans formulated. In November 1997, the Concessionaires received
from the Ministry of Industry a production license covering approximately
46
<PAGE> 50
91,000 acres in the Maliwan area. The Company expects to have an active program
of exploratory drilling in the Maliwan area in 1998.
North Benchamas
A 120 square-mile 3-D survey of the North Benchamas prospect was conducted
during the fourth quarter of 1996. Through June 30, 1997, the Concessionaires
have drilled three exploration wells in the North Benchamas area of the Block
which is located north of the Benchamas Field. Two of the three wells
encountered a total of 88 feet of net hydrocarbon pay, which, although
non-commercial, demonstrated the northern extension of hydrocarbons on the
Block. The third exploration well encountered a significant amount of reservoir
quality sands which were non-hydrocarbon bearing and was plugged and abandoned.
The Company plans to reevaluate the North Benchamas area after further
examination and refinement of the seismic data.
RESERVES
The table below summarizes the Company's net proven oil (including
condensate and crude oil) and natural gas reserves and net present value (NPV)
discounted at 10% by field as of July 1, 1997, as estimated by Ryder Scott,
inclusive of the impact of the crude oil hedges in place:
<TABLE>
<CAPTION>
NPV
NATURAL BEFORE % OF
OIL GAS TOTAL INCOME TAX TOTAL
FIELD (MBBL) (MMCF) (MMCFE) ($ IN 000'S) NPV
----- ------ ----------- ------- ------------ -----
<S> <C> <C> <C> <C> <C>
Tantawan....................................... 10,727 97,751 162,112 $122,794 64%
Benchamas...................................... 15,973 69,110 164,949 68,184 36
------ ------- ------- -------- ---
Total................................ 26,700 166,861 327,061 $190,978 100%
====== ======= ======= ======== ===
</TABLE>
The following table sets forth estimates of the net proven oil (including
condensate and crude oil) and natural gas reserves of the Company at July 1,
1997, as determined by Ryder Scott:
<TABLE>
<CAPTION>
OIL (MBBL) NATURAL GAS (MMCF) NATURAL GAS EQUIVALENTS (MMCFE)
-------------------------------- --------------------------------- ---------------------------------
DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL
--------- ----------- ------ --------- ----------- ------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tantawan............. 4,897 5,830 10,727 41,943 55,808 97,751 71,325 90,787 162,112
Benchamas............ -- 15,973 15,973 -- 69,110 69,110 -- 164,949 164,949
----- ------ ------ ------ ------- ------- ------ ------- -------
Total............ 4,897 21,803 26,700 41,943 124,918 166,861 71,325 255,736 327,061
===== ====== ====== ====== ======= ======= ====== ======= =======
</TABLE>
The Company has not filed any different estimates of its July 1, 1997
reserves with any federal agency.
The reserve data set forth in this Prospectus represents only estimates.
Reserve engineering is a subjective process of estimating underground
accumulations of crude oil and natural gas that cannot be measured in an exact
manner. The accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation and adjustment.
As a result, estimates of different engineers often vary. In addition, results
of drilling, testing and production subsequent to the date of an estimate may
justify revision of such estimates. Accordingly, reserve estimates often differ
from the quantities of crude oil and natural gas that are ultimately recovered.
Estimates of economically recoverable crude oil and natural gas reserves and of
future net revenues are based upon a number of variables and assumptions, all of
which may vary considerably from actual results. The reliability of such
estimates is highly dependent upon the accuracy of the assumptions upon which
they were based.
In preparing the July 1, 1997 reserve estimate, Ryder Scott effected a
roll-forward from the January 1, 1997 proven reserve estimates by adjusting for
the MOTL Acquisition and by adding proven reserves with respect to only two
additional wells drilled early in 1997. In preparing the July 1, 1997 estimates,
Ryder Scott used $15.92 per Bbl of oil for volumes produced in 1997 and 1998 to
reflect the
47
<PAGE> 51
crude oil price swaps then in effect. Beginning in 1999, an oil price of $18.72
per Bbl of oil was used. The gas price of $2.13 per Mcf of gas was calculated by
the terms of the Company's GSA with PTT. The roll-forward also reflects
production volumes and operating expenses which Ryder Scott estimated at January
1, 1997 for the first half of 1997. In preparing the July 1, 1997 roll-forward,
the Company also provided Ryder Scott with an updated estimate for capital
expenditures expected for the second half of 1997 as well as for 1998 and 1999.
The following table sets forth, at July 1, 1997, the discounted net present
value attributable to the Company's estimated net proven reserves at that date,
as estimated by Ryder Scott and adjusted for the impact on pricing of the crude
oil hedges in place:
<TABLE>
<CAPTION>
TANTAWAN BENCHAMAS TOTAL
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Future cash flows.............................. $ 402,575 $ 445,881 $ 848,456
--------- --------- ---------
Future production costs........................ 160,578 66,044 226,622
Future development costs....................... 49,061 150,429 199,490
--------- --------- ---------
Total future costs............................. 209,639 216,473 426,112
--------- --------- ---------
Future net cash inflows........................ 192,936 229,408 422,344
Discount at 10% per annum...................... (70,142) (161,224) (231,366)
--------- --------- ---------
Present value of estimated future net cash
flows, before income taxes................... $ 122,794 $ 68,184 $ 190,978
========= ========= =========
</TABLE>
In computing this data, assumptions and estimates have been utilized, and
no assurance can be given that such assumptions and estimates will be indicative
of future economic conditions. The future net cash inflows are determined by
using estimated quantities of proven reserves and the periods in which they are
expected to be developed and produced based on July 1, 1997 economic conditions.
The estimated future production is priced at prices the Company estimated it
would have received at July 1, 1997, including the impact of crude oil hedges in
place, except where fixed and determinable price escalations or oil hedges are
provided by contract. The resulting estimated future gross revenues are reduced
by estimated future costs to develop and produce the proven reserves based on
July 1, 1997 cost levels, but not for debt service and general and
administrative expenses.
ACREAGE AND PRODUCTIVE WELLS
Acreage
The following table sets forth the Company's developed and undeveloped
acreage position at June 30, 1997:
<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED
ACREAGE ACREAGE(1) TOTAL(1)
-------------- -------------- --------------
GROSS NET GROSS NET GROSS NET
------ ---- ------ ---- ------ ----
(IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Gulf of Thailand...................... 68 31 1,249 579 1,317 610
</TABLE>
- ---------------
(1) A portion of this acreage was relinquished as of August 1, 1997. See
"-- Overview of Gulf of Thailand and Block B8/32."
Productive Wells
At June 30, 1997, the Company owned interests in the following wells
capable of production pending completion and installation of production
facilities:
<TABLE>
<CAPTION>
GROSS NET
----- ----
<S> <C> <C>
Oil and Gas Wells........................................... 52 21.5
</TABLE>
48
<PAGE> 52
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>
GROSS GROSS NET NET
DEVELOPMENT EXPLORATORY DEVELOPMENT EXPLORATORY
WELLS WELLS WELLS WELLS
---------------- ---------------- ---------------- ----------------
YEAR SUCCESSFUL DRY SUCCESSFUL DRY SUCCESSFUL DRY SUCCESSFUL DRY
---- ---------- --- ---------- --- ---------- --- ---------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 (through June
30)................... 5 -- 8 4 2.3 -- 3.7 1.9
1996.................... 9 2 13 -- 4.2 0.9 5.0 --
1995.................... 7 -- 3 1 3.2 -- 0.9 0.5
1994.................... -- -- 4 1 -- -- 1.3 0.3
1993.................... -- -- 2 2 -- -- 0.6 0.6
1992.................... -- -- 1 -- -- -- 0.3 --
-- --
------ ------ ------ --- ------- ---
Total................. 21 2 31 8 9.7 0.9 11.8 3.3
-- --
------ ------ ------ --- ------- ---
-- --
------ ------ ------ --- ------- ---
</TABLE>
PRODUCTION FACILITIES
Under the first phase of the development plan for the Tantawan Field, two
platforms and production facilities were installed prior to first production,
with planned installation of two additional platforms during the remainder of
1997. The oil and natural gas is separated on each platform and processed on the
FPSO, which was delivered in December 1996. Oil is exported via tankers, and gas
is discharged into a 33-mile spur pipeline owned by PTT. Production of oil and
gas commenced in February 1997.
Platforms. The first two production platforms are four-pile, twelve slot
units designed for drilling with either a jack-up or tender assisted rig.
Wellhead fluids are separated at each production platform into three streams:
high pressure gas, intermediate pressure gas and low pressure oil and water. As
required, natural gas is drawn off the intermediate pressure system, compressed,
and fed back down the wells to provide gas lift to optimize oil recovery.
Hydrocarbons are fed into flowlines, which run between each platform and a
Pipeline End Manifold ("PLEM") located at the FPSO.
Floating Production, Storage and Offloading Vessel. The FPSO was 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 is 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, Tantawan Production B.V., leases the FPSO under a
Bareboat Charter Agreement (the "Charter") to Tantawan Services L.L.C. ("TS"), a
subsidiary of Thaipo. SBM paid all FPSO costs (including the vessel, detailed
design engineering and all equipment purchased for the FPSO) and recovers them
through the bareboat charter day rate over the term of the Charter. The initial
term of the Charter, which commenced in February 1997, is for 10 years, subject
to extension. 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"), an affiliate of SBM, 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 include process facilities for separation
and treatment of fluids and compressors for gas. This equipment is very similar
to that utilized on conventional fixed platforms, except that the equipment can
function while subjected to the roll and pitch of the FPSO. The production
system is capable of processing 150 MMcfd (expandable to 300 MMcfd) of natural
gas, 50 Mbpd of crude oil and condensate and 25 Mbpd of water. Oil and
condensate is processed to an export quality for storage on the FPSO and then
offloaded to shuttle tankers. Natural gas is dehydrated and compressed for
export via an existing 24-inch 33-mile spur pipeline. Water is treated to below
20 parts per
49
<PAGE> 53
million of oil in water and discharged overboard. The Company believes the FPSO
has sufficient production capacity to accommodate anticipated production from
the Tantawan field.
The FPSO provides sufficient storage for optimum offloading of oil to
export tankers and contains spare capacity in the event of unscheduled delays in
tanker arrival. The FPSO can store 1,000 Mbbl, including 700 Mbbl of saleable
crude. The FPSO must store 200 Mbbl of ballast water to control hull stresses
and 100 Mbbl of capacity will be used to store oily water that does not meet the
discharge concentration criteria. Oil stored on the FPSO is offloaded
periodically to export tankers using the tandem system, in which the tankers are
moored end to end. PTT provides the offtake tankers.
The FPSO Operator operates and maintains the FPSO. Thaipo provides a
limited number of crew members to manage platform and well operations. The crew
members, along with the FPSO Operator's personnel, are housed on the FPSO.
Benchamas/Pakakrong Production Facilities. The first phase development plan
for the Benchamas/Pakakrong field will include the installation of three
satellite wellhead platforms, a central processing facility with a daily
capacity of 150 MMcf of natural gas, 25 Mbbls of oil and condensate and 25 Mbbls
of water and a living quarters structure. Full wellstream production will flow
through a gathering system to the central processing facility where the natural
gas, oil and water will be separated. The natural gas will be dehydrated,
metered and compressed for delivery through a 16-inch 32 mile pipeline which
will tie directly into the existing spur pipeline from the Tantawan Explorer.
The produced oil and condensate will be stored on a floating storage and
offloading vessel ("FSO") to be moored in the field. Oil in the FSO will be
offloaded periodically to export tankers. This development plan will have to be
financed by the Concessionaires. It is currently estimated that the first phase
development facilities and equipment will cost $245 million ($113.5 million net
to the Company). See "Risk Factors -- Substantial Capital Requirements" and
"Risk Factors -- Dependence on Third-Party Operator."
MARKETING AND CONTRACTS
Gas Sales Agreement. Under the terms of the 30-year Concession agreement,
the Kingdom of Thailand or a state organization as stipulated by the Kingdom 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
purchases all gas at the well-head from private producers. PTT also maintains a
monopoly over natural gas transmission and distribution in the country. PTT is
an agency of the Kingdom of Thailand, which has "Baa3" and "BBB" sovereign debt
ratings from Moody's Investors Services, Inc. and Standard & Poor's Ratings
Service, respectively.
The GSA includes a minimum daily contract quantity or volume ("DCQ") which
PTT is required to take, or pay for if not taken, of 75 MMcfd of natural gas
during the first year of production (which commenced in February 1997), with the
DCQ rising to 85 MMcfd during the second year (which commences in October 1997).
Thereafter, the DCQ is determined by dividing the Field Reserves (as defined in
the GSA) by 6,000. However, if the DCQ exceeds 125 MMcfd, the quantity is
subject to further negotiation. If the Concessionaires fail to deliver the
minimum daily quantities under the GSA, PTT's sole recourse is to receive the
amount of the shortfall from a subsequent delivery at 75% of the contract price
at the time of the shortfall. In addition, if the Field Reserves should drop
below 31 Bcf the Concessionaires shall be obligated to pay PTT a proportionate
amount of the capital costs of the pipelines installed by PTT for the Tantawan
Field. The GSA terminates on the earlier of (i) termination of the petroleum
production period, or (ii) the date no Field Reserves remain. The
Concessionaires began delivering gas to PTT under the GSA on February 1, 1997.
The Concessionaires successfully completed the production test required under
the GSA during March 1997.
The natural gas price is based on formulae which provide adjustments to the
base price, and also establish a ceiling and a floor price, for natural gas on
each April 1 and October 1. Adjustments will reflect changes in (i) wholesale
prices in Thailand, (ii) the U.S. producer price index for oil field machinery
and tools, (iii) medium fuel oil prices, and (iv) Thai Baht/U.S. Dollar
fluctuations. The
50
<PAGE> 54
Concessionaires receive payment in Thai Baht. The realized price was estimated
to be equivalent to approximately $2.19 per Mcf at April 1, 1997 and
approximately $1.82 per Mcf at October 1, 1997.
In November 1997, the Gas Sales Agreement was amended to include production
from the Benchamas Field, to include B8/32 Partners Ltd. as a Concessionaire, to
set a minimum DCQ of 125 Mmcfd, and to set the level the DCQ must reach before
the quantity is subject to further negotiation from 125 MMcfd to 300 MMcfd.
Oil Sales. In early July, the Company had its first oil lifting from the
Tantawan Field and sold 278,000 barrels of oil pursuant to the MOU. In October
1997, the Company and the other Concessionaires received permission from the
Thai Department of Mineral Resources to export crude oil produced from the Block
and sold its second oil lifting for U.S. dollars to a third party purchaser for
export. The Company expects that the Concessionaires will continue to sell their
crude oil for U.S. dollars to a number of purchasers at market prices. In
November 1997, PTT notified the Company that the MOU is being terminated.
THAI CONCESSION TERMS
Term. The Concession agreement provides for an exploration period of 6
years ending July 31, 1997, which may be renewed for an additional 3-year term
upon agreement between the parties. 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. In May 1997, the Concessionaires received an extension
of the exploration period for the Block, which will end on July 31, 2000.
Before the expiration of the exploration period, the Concessionaires may
pay surface reservation fees to retain acreage subject to forfeiture. The
Department of Mineral Resources sets the reservation fees on the date that the
Concessionaires submit 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 expire. The petroleum production
period for producing areas is a 20-year period beginning on the last day of the
exploration period, which 20-year period may be extended for 10 years upon
agreement on the terms of the extension.
Production Bonuses. Pursuant to the terms of the Concession agreement, the
Concessionaires are required to make the following payments ("Production
Bonuses") to the Ministry of Finance: (i) $2.0 million upon the first production
of petroleum from the Block; (ii) $3.0 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. The Company paid to the Ministry of
Finance in January 1997 the sum of $927,000 representing the Company's 46.34%
share of the first Production Bonus.
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<PAGE> 55
Royalties. The following table summarizes the monthly royalties required to
be paid to the Thai government 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>
<CAPTION>
PERCENT OF VALUE
OF PRODUCT SOLD
MONTHLY VOLUME OF PRODUCT (IN EQUIVALENT BARRELS) OR 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>
Special Remuneratory Benefit. The Concessionaires must also pay an SRB,
which is calculated annually on a concession-wide basis as a percentage of
Annual Petroleum Profit (hydrocarbon revenues net of, among other things,
royalties, Production Bonuses, capital expenses and operating expenses). No
Benefit is payable if the block has no Annual Petroleum Profit. The Benefit
varies from zero to 75% of Annual Petroleum Profit, depending on the level of
annual revenue per meter drilled in the Block. The July 1, 1997 reserve
roll-forward prepared by Ryder Scott was prepared in light of Commission
guidelines and, as such, makes provision for the payment of SRB's. However, in
light of the anticipated drilling activity in the Block, the Company does not
anticipate paying any SRB's for the foreseeable future.
Termination and Revocation. The Concession agreement 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 agreement; or (iv) upon
termination of the Concessionaires' status as a juristic person (i.e., subject
to the jurisdiction of Thai courts). Under the Thai Petroleum Act, the Ministry
of Industry may revoke the Concession agreement if the Concessionaires (i) fail
to pay the Production Bonuses, 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 agreement (including giving special priority to
Thai nationals) or the Thai Petroleum Act (such as restrictions on transfer). In
addition, 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 agreement,
each of the Concessionaires is jointly and severally liable for the obligations
of the Concessionaires, including payment of income taxes, under the Concession.
TAX REGULATION
General
Anticipated profits derived from Thai Romo's operations will be subject to
taxation in both Thailand and the United States. 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
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%.
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<PAGE> 56
In computing Thai Romo's 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 under
the Concession agreement are deductible in computing Thai Romo's net profits
from its petroleum business.
Dividends paid by Thai Romo and B8/32 Partners to TRH and RMEC (in the case
of Thai Romo) 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
Classification of Thai Romo. For United States federal income tax purposes,
Thai Romo will be 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 Taxable Income,"
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
may not fully offset the United States tax liability imposed on the United
States corporations' 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, 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
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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 may 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 may 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.
OPERATING AGREEMENTS
Tantawan. As a result of MOTL's decision not to participate in the
development of the Tantawan Field, the Tantawan Concessionaires entered into the
Tantawan JOA as of March 3, 1995, which governs operations in the Tantawan
Field. Thaipo was designated as operator of the field under 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 -- General". All decisions of the Operating Committee
require the affirmative vote of two or more non-affiliated parties having an
aggregate percentage interest of at least 51%. The operator has the exclusive
right to conduct and must conduct all operations on behalf of the
Concessionaires that relate to the Tantawan Field, including but not limited to
preparing and implementing proposed work programs, budgets and authorizations
for expenditure, planning for services and materials procurement, maintaining
insurance, and reporting to each of the Concessionaires data and information
concerning the operation in the Tantawan Field. See "Risk Factors -- Dependence
on Third-Party Operator." However, the Operating Committee must approve the
general outline of all work programs, appraisal and development operations,
certain expenditures, and operating budgets for the Tantawan Field.
The Tantawan JOA limits the sale or transfer of interests in the Tantawan
Field, including the sale or transfer of 50% or more of a party's voting stock
to a nonaffiliate. Subject to certain exceptions, a Concessionaire may not
reduce its interest below 10%, grant to an unaffiliated party an interest of
less than 10% or divide its percentage interest among two or more third parties.
However, a Concessionaire may withdraw from the Tantawan JOA if its interests
are unencumbered. Upon any such withdrawal or other proposed transfer, the
remaining Concessionaires have a preferential right to acquire the disposing
Concessionaire's interest in proportion to their percentage interests. A
withdrawing Concessionaire would remain liable to the other Concessionaires for
its share of all outstanding expenditures and liabilities related to work
programs approved by the Operating Committee.
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 hydrocarbons 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. 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.
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The Concessionaires have several liability in conducting the field's joint
operations. Each Concessionaire agrees to indemnify, to the extent of its
percentage interest, each of the other Concessionaires for any claim or
liability to third parties arising from or in connection with the Tantawan JOA.
Remainder of Block B8/32. Thai Romo, Thaipo, MOTL and Palang are parties to
the JOA dated August 1, 1991, for which MOTL acted as operator for the Block.
Terms and conditions under the JOA are substantially similar to those in the
Tantawan JOA, except that all decisions of the Operating Committee require the
affirmative vote of two or more non-affiliated parties having an aggregate
percentage interest of at least 51%. In March 1997, the Concessionaires
purchased MOTL and Thaipo replaced MOTL as the operator.
EMPLOYEES
At June 30, 1997, the Company employed approximately 14 people (excluding
Messrs. Rutherford and Moran who do not receive a salary or benefits from the
Company) in its Houston, Texas location whose functions are associated with
management, engineering, geology, finance and administration. The Company has no
collective bargaining arrangement with employees and believes its relations with
its employees are good.
OFFICES
The Company leases its Houston office under a lease covering approximately
9,473 square feet, expiring in February 2002. The monthly rent and expenses are
approximately $10,000.
MANAGEMENT
The following table sets forth information regarding the current directors
and officers of the Company:
<TABLE>
<CAPTION>
NAME AGE(1) POSITION
---- ------ --------
<S> <C> <C>
John A. Moran........... 65 Chairman of the Board
Patrick R. Rutherford... 62 President, Chief Executive Officer and Director
Michael D. McCoy........ 45 Executive Vice President, Chief Operating Officer
and Director
Howard Gittis........... 62 Director
Jere W. McKenny......... 68 Director
Harry C. Lee............ 64 Director
Chote Sophonpanich...... 54 Director
David F. Chavenson...... 45 Vice President, Finance and Chief Financial
Officer and Corporate Secretary
Gregory Nelson.......... 50 Vice President, Exploration
Thomas E. Rankin........ 62 Vice President, Operations
</TABLE>
- ---------------
(1) As of June 30, 1997.
JOHN A. MORAN has been Chairman of the Board of the Company since its
inception. Since 1993, he has been President of RMEC, which became a
wholly-owned subsidiary of the Company in June 1996. From April 1967 until his
retirement in 1992, Mr. Moran was a Director and Officer of the
Dyson-Kissner-Moran Corporation ("DKM"), a private holding company engaged
primarily in the manufacture and distribution of industrial and consumer
products and a developer of commercial and industrial real estate on the east
coast of the United States. During that time, Mr. Moran was 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.
(an investment banking firm) in its New York and Los Angeles offices. Mr. Moran
is a Director of Bessemer Securities Corporation, New York City and The Coleman
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Company of Golden, Colorado. He holds a B.S. in Banking and Finance and an
honorary L.L.B. from the University of Utah. 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 the
Company since its inception. He has been Chairman of the Board of RMEC since its
inception. 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, Louisiana and 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 also has 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
one of the founding directors of Southwest Airlines.
MICHAEL D. MCCOY has been Executive Vice President and Chief Operating
Officer of the Company since its inception. He has been Executive Vice President
of RMEC since September 1990. Prior to joining the Company, Mr. McCoy served as
Manager of Land and Legal for 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.
HOWARD GITTIS was elected to serve as a director of the Company immediately
prior to commencement of the Company's initial public offering on June 20, 1996.
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 Holdings
Inc., First Nationwide Holdings, Inc., First Nationwide (Parent) Holdings, Inc.,
California Federal Bank, a Federal Savings Bank, Mafro Consolidated Group, Inc.,
Pneumo Abex Corporation, Power Control Technologies Inc., Revlon, Inc., Revlon
Worldwide Corporation, Loral Space & Communications Ltd. 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 Solis-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 was elected to serve as a director of the Company
immediately prior to commencement of the Company's initial public offering on
June 20, 1996. Prior to his retirement in 1993, Mr. McKenny was President and
Chief Operating Officer of 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 during his forty years
of employment with Kerr-McGee. Mr. McKenny currently serves 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 on the Executive Committee and Board of Directors of
the Allied Arts Foundation. Mr. McKenny holds a B.S. and an M.S. in Geological
Engineering from the University of Oklahoma.
HARRY C. LEE was elected to serve as a director of the Company immediately
prior to commencement of the Company's initial public offering on June 20, 1996.
Mr. Lee is an energy resources consultant in the area of oil and gas exploration
and production. Prior to 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, including Energy Resources Vice President -- Operations for major
international and domestic business units from 1992 to 1993, President of Unocal
International Oil & Gas Division from 1988 to 1992, and Vice President and
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General Manager of Union Oil Company of Indonesia from 1978 to 1982. Mr. Lee
holds a B.S. in Geology and an M.S. in Geology from the University of Oklahoma.
CHOTE SOPHONPANICH was elected to serve as a director of the Company
immediately prior to commencement of the Company's initial public offering on
June 20, 1996. 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 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., Palang (one of the
Concessionaires), Thoresen Agency Public Company Ltd., Union Plastic Public
Company Ltd., Union Textile Industries Public Company Ltd. and Wilson Insurance
Ltd. in Thailand. He also is serving as a non-executive director of companies
outside of Thailand, such as Bangkok Investments Ltd. of Cayman Islands, 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.
DAVID F. CHAVENSON has been Vice President, Finance 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. Mr. Chavenson holds a B.A. in Economics from Dickinson College and
received an M.B.A. from the Harvard Business School. He is also a C.P.A.
GREGORY NELSON has been Vice President, Exploration of the Company 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 Miami University from 1974 to 1977.
THOMAS E. RANKIN has been Vice President, Operations of the Company since
May, 1997. Mr. Rankin has forty years of diversified executive responsibilities
in logistics, drilling and production operations worldwide with major
multinational energy companies. He was president of his own international
engineering consulting firm from 1995 to 1997. Mr. Rankin was Worldwide Drilling
Manager (Exploration) for Amoco Production Company upon his retirement in 1995
after holding numerous international engineering and managerial positions during
his 28 years with Amoco. He spent nine years with Marathon Oil Company in
various domestic engineering assignments prior to joining Amoco. Mr. Rankin has
a B.S. in Petroleum Engineering from The University of Texas.
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DESCRIPTION OF REVOLVING CREDIT FACILITY
The following summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the credit agreement, a copy of which
is on file with the Commission. See "Available Information."
In September 1996, the Company entered into a $150 million Revolving Credit
Facility with a group of commercial lenders (the "Lenders"), with The Chase
Manhattan Bank ("Chase") as administrative agent. The Revolving Credit Facility
has a maturity date of September 30, 1999. Loans under the Revolving Credit
Facility are secured by the stock of the Company's subsidiaries and of B8/32
Partners. In December 1997, the Company and two of the Lenders entered into an
amended Revolving Credit Facility.
Interest and Fees
Under the terms of the Revolving Credit Facility, outstanding borrowings
bear interest at 1.75% over LIBOR if the aggregate outstanding principal amount
of loans is less than or equal to the threshold amount which was set at $60
million on December 3, 1997, a margin of 2.75% over LIBOR if the outstandings
are greater than the threshold amount on or prior to June 30, 1998, and a margin
of 3.50% over LIBOR if the outstandings are greater than the threshold amount
after June 30, 1998. Alternatively, the Company may pay a margin over the prime
rate of 0.25%, 1% and 1.75%, respectively, for similar levels of borrowings. A
commitment fee equal to 0.5% per annum on the average daily balance of the
unused borrowing base is payable quarterly.
Borrowing Base
The Revolving Credit Facility provides for semi-annual borrowing base
redeterminations by the Lenders, which may increase or reduce the amount of
credit available at any time. The borrowing base limitation as of July 1, 1997
was $120 million. The borrowing base limitation was reset to $60 million upon
the completion of the Offering and was reset on December 3, 1997 to $150
million. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations"
Covenants
The Revolving Credit Facility contains customary affirmative and negative
covenants with respect to, among other things, providing financial statements,
notice of any litigation, insurance, liens, indebtedness, investments,
restricted payments, affiliate transactions, repurchase or redemption of the
Notes and certain contracts. The Revolving Credit Facility also requires the
Company to maintain an interest coverage ratio for quarterly periods ending on
or after March 31, 1998 as follows: 1.5:1 for each quarter ending on or before
September 30, 1998 and 2.5:1 thereafter, such rate to be calculated excluding
interest payable from the interest escrow for the Notes. As of September 30,
1997, the Company was not in compliance with the covenant requiring the Company
to maintain an EBIDTA to interest coverage ratio of 1.5:1 for the quarter ending
September 30, 1997. Such non-compliance, however, was waived by the Lenders.
Events of Default
The Revolving Credit Facility contains customary events of default,
including, among other things, and subject to applicable grace periods, payment
defaults, material misrepresentations, covenant defaults, certain bankruptcy
events, judgment defaults, reductions of ownership interest in any Company
subsidiaries and certain adverse actions by the Thai government.
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DESCRIPTION OF THE NOTES
GENERAL
The New Notes, like the Old Notes, are to be issued under the Indenture, a
copy of which is available upon request to the Company. The following summary of
certain provisions of the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the Indenture, including the definitions of certain terms therein and those
terms made a part thereof by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
shall be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
Terms of the Notes
The Notes will be unsecured senior subordinated obligations of the Company,
limited to $120 million aggregate principal amount, and will mature on October
1, 2004.
The Notes will bear interest at the rate of 10 3/4% per annum from
September 29, 1997 or from the most recent date to which interest has been paid
or provided for, payable semiannually to Holders of record at the close of
business on the March 15 or September 15 immediately preceding the interest
payment date on April 1 and October 1 of each year, commencing April 1, 1998.
Interest is paid on a 360-day year, 12 thirty-day month basis.
The interest rate on the Notes is subject to increase in certain
circumstances if the Company and the Subsidiary Guarantors do not file a
registration statement relating to the Exchange Offer or if the registration
statement is not declared effective on a timely basis or if certain other
conditions are not satisfied, all as described under " -- Exchange Offer;
Registration Rights."
Optional Redemption
Except as set forth in the following paragraphs, the Notes will not be
redeemable at the option of the Company prior to October 1, 2001. Thereafter,
the Notes will be redeemable, at the Company's option, in whole or in part, at
any time or from time to time, upon not less than 30 nor more than 60 days,
prior notice mailed by first-class mail to each Holder's registered address, at
the following redemption prices (expressed in percentages of principal amount),
plus accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on October 1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2001........................................................ 105.375%
2002........................................................ 102.6875%
2003 and thereafter......................................... 100%
</TABLE>
In addition, at any time and from time to time prior to October 1, 2000,
the Company may redeem in the aggregate up to 35% of the original principal
amount of the Notes with the proceeds of one or more Equity Offerings, at a
redemption price (expressed as a percentage of principal amount) of 110 3/4%
plus accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date); provided, however, that at least 65% of the original
aggregate principal amount of the Notes must remain outstanding after each such
redemption.
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In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
At any time prior to October 1, 2001, the Notes may also be redeemed as a
whole at the option of the Company upon the occurrence of a Change of Control,
upon not less than 30 nor more than 60 days prior notice (but in no event more
than 90 days after the occurrence of such Change of Control), at a redemption
price equal to 100% of the principal amount thereof plus the Applicable Premium,
and accrued and unpaid interest, if any, to the date of redemption (the
"Redemption Date") (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
Security
The Indenture provides that on the Issue Date, the Company must purchase
and pledge to the Trustee as security for the benefit of the Holders the Pledged
Securities in such amount as will be sufficient upon receipt of scheduled
interest and principal payments of such securities to provide for payment in
full of the first four scheduled interest payments due on the Notes. The Company
used approximately $24.3 million of the net proceeds of the Offering to acquire
the Pledged Securities.
The Pledged Securities will be pledged by the Company to the Trustee for
the benefit of the Holders pursuant to the Indenture and will be held by the
Trustee in the Pledge Account. Pursuant to the Indenture, immediately prior to
an Interest Payment Date, the Company may either deposit with the Trustee from
funds otherwise available to the Company cash sufficient to pay the interest
scheduled to be paid on such date or the Company may direct the Trustee to
release from the Pledge Account proceeds sufficient to pay interest then due on
the Notes. In the event the Company exercises the former option, the Company may
direct the Trustee to release a like amount of proceeds from the Pledge Account.
A failure to pay interest on the Notes in a timely manner through the first four
scheduled interest payment dates will constitute an immediate Event of Default
under the Indenture, with no grace or cure period. The Pledged Securities and
Pledge Account will also secure the repayment of the principal amount and
premium, if any, on the Notes.
Under the Indenture, once the Company makes the first four scheduled
interest payments on the Notes, all of the remaining Pledged Securities, if any,
will be released from the Pledge Account and thereafter the Notes will be
unsecured.
Exchange Offer; Registration Rights
The Company and the Subsidiary Guarantors have agreed pursuant to the
Registration Rights Agreement that the Company and the Subsidiary Guarantors
would, at their cost, (i) within 60 days after the date of original issuance of
the Notes, file the Exchange Offer Registration Statement with the Commission
with respect to the New Notes having terms substantially identical in all
material respects to the Old Notes (except that the New Notes will not contain
terms with respect to transfer restrictions) and (ii) use their reasonable best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act within 180 days after the date of original
issuance of the Old Notes. The Registration Statement of which this Prospectus
is a part constitutes the Exchange Offer Registration Statement. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company and the
Subsidiary Guarantors agreed that they would offer the New Notes in exchange for
surrender of the Old Notes. The Company agreed to keep the Exchange Offer open
for not less than 30 days (or longer if required by applicable law) after the
date of this Prospectus. For each Old Note surrendered to the Company pursuant
to the Exchange Offer, the holder of such Note will receive a New
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Note having a principal amount equal to that of the surrendered Old Note.
Interest on each New Note will accrue from the last interest payment date to
which interest was paid on the Note surrendered in exchange therefor or, if no
interest has been paid on such Note, from September 29, 1997. Under existing
Commission interpretations, the New Notes would be freely transferable by
holders other than affiliates of the Company after the Exchange Offer without
further registration under the Securities Act if the holder of the New Notes
represents that it is acquiring the New Notes in the ordinary course of its
business, that it has no arrangement or understanding with any person to
participate in the distribution of the New Notes and that it is not an affiliate
of the Company, as such terms are interpreted by the Commission; provided,
however, that broker-dealers ("Participating Broker-Dealers") receiving New
Notes in the Exchange Offer will have a prospectus delivery requirement with
respect to resales of such New Notes. The Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to New Notes (other than a resale of an unsold allotment from the
original sale of the Notes) with this Prospectus. Under the Registration Rights
Agreement, the Company is required to allow Participating Broker-Dealers and
other persons, if any, with similar prospectus delivery requirements to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of such New Notes.
A Holder of Notes (other than certain specified holders) who wishes to
exchange such Notes for New Notes in the Exchange Offer will be required to
represent that any New Notes to be received by it will be acquired in the
ordinary course of its business and that at the time of the commencement of the
Exchange Offer it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the New Notes and that it is not an "affiliate" of the Company, as defined in
Rule 405 of the Securities Act, or if it is an affiliate, that it will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company and the Subsidiary Guarantors to effect such an
Exchange Offer, or if for any other reason the Exchange Offer is not consummated
within 180 days of the original issuance of the Notes, or if the Initial
Purchasers so request with respect to Notes not eligible to be exchanged for New
Notes in the Exchange Offer, or if any holder of Old Notes is not eligible to
participate in the Exchange Offer or does not receive freely tradable New Notes
in the Exchange Offer, the Company and the Subsidiary Guarantors will, at their
cost, (a) as promptly as practicable, file a shelf registration statement (the
"Shelf Registration Statement") covering resales of the Notes, (b) use their
reasonable best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act and (c) keep the Shelf Registration Statement
effective until the earlier of (i) the time when the Notes covered by the Shelf
Registration Statement can be sold pursuant to Rule 144 without any limitations
under clauses (c), (e), (f) and (h) of Rule 144 and (ii) two years from the
Issue Date. The Company will, in the event a Shelf Registration Statement is
filed, among other things, provide to each holder for whom such Shelf
Registration Statement was filed copies of the prospectus which is a part of the
Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Notes or the New Notes, as
the case may be. A holder selling such Notes or New Notes pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations). In addition, each holder
of the Notes or New Notes to be registered under the Shelf Registration
Statement will be required to deliver certain information to be used in
connection with the Shelf Registration statement and to provide comments on the
Shelf Registration Statement within the time period set forth in the
Registration Rights Agreement in order to have such holder's Old Notes or New
Notes, as the case may be, included in the Shelf Registration Statement.
If (i) on or prior to 60 days after the Issue Date, neither the Exchange
Offer Registration Statement nor the Shelf Registration Statement has been filed
with the Commission; (ii) on or prior to 180 days
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after the original issuance of the Notes, neither the Exchange Offer is
consummated nor the Shelf Registration Statement is declared effective; or (iii)
after either the Exchange Offer Registration Statement or the Shelf Registration
Statement is declared effective, such Registration Statement thereafter ceases
to be effective or usable (subject to certain exceptions) in connection with
resales of Old Notes or New Notes in accordance with and during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (i) through (iii), a "Registration Default"), additional interest will
accrue on the Notes and the New Notes, in each case at the rate of 0.50% per
annum from and including the date on which any such Registration Default shall
occur until the earlier of (i) the date on which such Registration Default has
been cured or (ii) the date on which all the Notes otherwise become freely
transferable by holders other than affiliates of the Company without further
registration under the Securities Act, calculated on the principal amount of the
Notes or New Notes. Such interest is payable in addition to any other interest
payable from time to time with respect to the Old Notes and the New Notes.
If the Company effects the Exchange Offer, it will be entitled to close the
Exchange Offer 30 days after the commencement thereof provided that it has
accepted all Notes theretofore validly tendered in accordance with the terms of
the Exchange Offer.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
Guaranties
The obligations of the Company pursuant to the Notes, including the
repurchase obligation resulting from a Change of Control, will be
unconditionally guaranteed, jointly and severally, on an unsecured, senior
subordinated basis by each of the Subsidiary Guarantors. The Company is a
holding company that will derive substantially all its operating income and cash
flow from its subsidiaries, the common stock of certain of which is pledged to
secure all indebtedness of the Company outstanding under the Revolving Credit
Facility. The obligations of each Subsidiary Guarantor are limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including, without limitation, any
guarantees under the Revolving Credit Facility) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guaranty or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation. Each
Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a Person other than the Company or another
Subsidiary Guarantor (whether or not affiliated with the Guarantor). Upon the
sale or disposition (by merger or otherwise) of a Subsidiary Guarantor (or all
or substantially all of its assets) to a Person (whether or not an Affiliate of
the Subsidiary Guarantor) which is not a Subsidiary of the Company, which sale
or disposition is otherwise in compliance with the Indenture (including the
covenant described under "-- Certain Covenants -- Limitation on Sales of Assets
and Subsidiary Stock"), such Subsidiary Guarantor shall be deemed released from
all its obligations under the Indenture and its Subsidiary Guaranty and such
Subsidiary Guaranty shall terminate; provided, however, that any such
termination shall occur only to the extent that all obligations of such
Subsidiary Guarantor under the Revolving Credit Facility and all of its
Guaranties of, and under all of its pledges of assets or other security
interests which secure, any other Indebtedness of the Company shall also
terminate upon such release, sale or transfer.
The obligations of each Subsidiary Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities (including, but not limited to, Guarantor Senior
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Indebtedness) of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guaranty or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty not constituting a fraudulent conveyance or fraudulent
transfer under federal, state or Thai law. Each Subsidiary Guarantor that makes
a payment or distribution under a Subsidiary Guaranty shall be entitled to a
contribution from each other Subsidiary Guarantor in a pro rata amount based on
the Adjusted Net Assets (as defined in the Indenture) of each Subsidiary
Guarantor.
The provisions under the Indenture relating to the Guaranties may be waived
or modified with the written consent of the holders of a majority in principal
amount of the Notes then outstanding.
Ranking and Subordination
The indebtedness evidenced by the Notes will be senior subordinated,
unsecured obligations of the Company. The payment of the principal of, premium
(if any), and interest on the Notes and the payment of any Subsidiary Guaranty
is subordinated in right of payment, as set forth in the Indenture, to the
payment when due of all Senior Indebtedness of the Company or all Subsidiary
Guarantor Senior Indebtedness of the relevant Subsidiary Guarantor, as the case
may be, whether outstanding on the Issue Date or thereafter incurred, including
the obligations of the Company and the Subsidiary Guarantors under the Revolving
Credit Facility. As of December 4, 1997, the amount of Senior Indebtedness of
the Company was approximately $70 million, represented by amounts outstanding
under the Revolving Credit Facility. Although the Indenture contains limitations
on the amount of additional Indebtedness that the Company may Incur, under
certain circumstances the amount of such Indebtedness could be substantial and,
in any case, such Indebtedness may be Senior Indebtedness. See "-- Certain
Covenants -- Limitation on Indebtedness" below.
All the operations of the Company are conducted through its subsidiaries.
Claims of creditors of such subsidiaries, including trade creditors, secured
creditors and creditors holding indebtedness and guarantees issued by such
subsidiaries, and claims of preferred stockholders (if any) of such subsidiaries
generally will have priority with respect to the assets and earnings of such
subsidiaries over the claims of creditors of the Company, including holders of
the Notes, even though such obligations will not constitute Senior Indebtedness.
The Notes and each Subsidiary Guaranty, therefore, will be effectively
subordinated to creditors (including trade creditors) and preferred stockholders
(if any) of the subsidiaries of the Company (other than the Subsidiary
Guarantors). At September 30, 1997, the total liabilities of the Company's
subsidiaries (excluding intercompany debt and amounts outstanding under the
Revolving Credit Facility and the Notes) were approximately $8 million,
including trade payables. Although the Indenture limits the incurrence of
Indebtedness and preferred stock of certain of the Company's subsidiaries, such
limitation is subject to a number of significant qualifications. Moreover, the
Indenture does not impose any limitation on the incurrence by such subsidiaries
of liabilities that are not considered Indebtedness or Preferred Stock under the
Indenture. See "-- Certain Covenants -- Limitation on Indebtedness and Preferred
Stock of Subsidiaries."
Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior
Indebtedness or Subsidiary Guarantor Senior Indebtedness, as the case may be,
will rank senior to the Notes and the relevant Subsidiary Guaranty in accordance
with the provisions of the Indenture. The Notes and each Subsidiary Guaranty
will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company and Subsidiary Guarantor Senior Subordinated
Indebtedness of the relevant Subsidiary Guarantor, as the case may be. The
Company has agreed in the Indenture that it will not Incur, directly or
indirectly, any Indebtedness that is subordinate or junior in ranking in any
respect to Senior Indebtedness unless such Indebtedness is Senior Subordinated
Indebtedness or is contractually subordinated in right of payment to Senior
Subordinated Indebtedness. In addition, no Subsidiary Guarantor shall Incur any
Indebtedness if such Indebtedness is subordinate or junior in ranking in any
respect to any Subsidiary Guarantor Senior Indebtedness of such Subsidiary
Guarantor unless such Indebtedness is Subsidiary Guarantor Senior Subordinated
Indebtedness of such Subsidiary Guarantor
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or is contractually subordinated in right of payment to Subsidiary Guarantor
Senior Subordinated Indebtedness of such Subsidiary Guarantor. Unsecured
Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness
merely because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (i) any Designated Senior Indebtedness is not
paid when due or (ii) any other default on Designated Senior Indebtedness occurs
and the maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms unless, in either case, the default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full. However, the Company may pay the Notes
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of the Designated Senior
Indebtedness with respect to which either of the events set forth in clause (i)
or (ii) of the immediately preceding sentence has occurred and is continuing.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the second preceding sentence) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions described in the first sentence of this
paragraph), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, the Company may resume payments on the Notes after the end
of such Payment Blockage Period. The Notes shall not be subject to more than one
Payment Blockage Period in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness will
be entitled to receive payment in full of such Senior Indebtedness before the
Holders are entitled to receive any payment, and until the Senior Indebtedness
is paid in full, any payment or distribution to which Holders would be entitled
but for the subordination provisions of the Indenture will be made to holders of
such Senior Indebtedness as their interests may appear. If a distribution is
made to Holders that, due to the subordination provisions, should not have been
made to them, such Holders are required to hold it in trust for the holders of
Senior Indebtedness and pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of Designated Senior
Indebtedness or the Representative of such holders of the acceleration. The
Company may not pay the Notes until five Business Days after such holders or the
Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
The obligations of a Subsidiary Guarantor under its Subsidiary Guaranty are
senior subordinated obligations. As such, the rights of holders of the Notes to
receive payment by a Subsidiary Guarantor pursuant to its Subsidiary Guaranty
will be subordinated in right of payment to the rights of holders of Subsidiary
Guarantor Senior Indebtedness of such Subsidiary Guarantor. The terms of the
subordination provisions described above with respect to the Company's
obligations under the Notes apply
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equally to a Subsidiary Guarantor and the obligations of such Subsidiary
Guarantor under its Subsidiary Guaranty.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company or a Subsidiary Guarantor who
are holders of Senior Indebtedness of the Company or of Subsidiary Guarantor
Senior Indebtedness of a Subsidiary Guarantor, as the case may be, may recover
more, ratably, than the holders of the Notes, and creditors of the Company who
are not holders of Senior Indebtedness or of Senior Subordinated Indebtedness
(including the Notes) may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the holders of the Notes.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "Defeasance."
Change of Control
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date):
(i) Any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the "beneficial owner" (as defined in Rules 13d3 and 13d-5 of the Exchange
Act provided that such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 40% of the total voting power
of the Voting Stock of the Company; provided, however, that the Permitted
Holders beneficially own (as defined above), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock
of the Company than such other person and do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors (for the purposes of this clause (i),
such other person shall be deemed to beneficially own any Voting Stock of a
specified corporation held by a parent corporation, if such other person is
the beneficial owner (as defined in this clause (i)), directly or
indirectly, of more than 40% of the voting power of the Voting Stock of
such parent corporation and the Permitted Holders beneficially own (as
defined above), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for elect on a majority of the board of
directors of such parent corporation);
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a vote of 66 2/3% of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company to another
Person (other than a Person that is controlled by the Permitted Holders),
and, in the case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of the Voting Stock of
the Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after
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such transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving corporation.
Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all of the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
Holder with a copy to the Trustee stating: (1) that a Change of Control has
occurred and that such Holder has the right to require the Company to purchase
such Holder's Notes at a purchase price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (subject to the right of holders of record on the relevant record
date to receive accrued and unpaid interest on the relevant interest payment
date); (2) the circumstances and relevant facts regarding such Change of Control
(including information with respect to pro forma historical income, cash flow
and capitalization after giving effect to such Change of Control); (3) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (4) the instructions determined by the
Company, consistent with the covenant described hereunder, that a Holder must
follow in order to have its Notes purchased.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer at the same
purchase price, at the same times and otherwise in substantial compliance with
the requirements applicable to a Change of Control offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to Incur additional Indebtedness are contained in the
covenants described under "-- Certain Covenants -- Limitation on Indebtedness"
and "-- Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries." Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the Notes then outstanding. Except
for the limitations contained in such covenants, however, the Indenture will not
contain any covenants or provisions that may afford holders of the Notes
protection in the event of a highly leveraged transaction.
The Revolving Credit Facility will limit the ability of the Company to
repurchase the Notes. In the event a Change of Control occurs at a time when the
Company is prohibited from purchasing Notes, the Company could seek the consent
of its lenders to the purchase of Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company will remain prohibited from
purchasing Notes. In such case, the Company's failure to purchase tendered Notes
would constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Revolving Credit Facility. In such circumstances,
the subordination provisions in the Indenture would likely restrict payment to
the Holders of Notes.
Future indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a
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Change of Control. Moreover, the exercise by the holders of their right to
require the Company to repurchase the Notes could cause a default under such
indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the holders of Notes following the occurrence of a Change
of Control may be limited by the Company's then existing financial resources.
There can be no assurance that sufficient funds will be available when necessary
to make any required repurchases. The provisions under the Indenture relative to
the Company's obligation to make an offer to repurchase the Notes as a result of
a Change of Control may be waived or modified with the written consent of the
holders of a majority in principal amount of the Notes.
Certain Definitions
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) usable in an Oil and Gas Business; (ii) the
Capital Stock of a Person that becomes a Restricted Subsidiary as a result of
the acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Restricted Subsidiary; provided, however, that any
such Restricted Subsidiary described in clauses (ii) or (iii) above is primarily
engaged in an Oil and Gas Business.
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (a) the sum of (i) discounted future net revenues
from proved oil and gas reserves of the Company and its Restricted Subsidiaries
calculated in accordance with Commission guidelines before any state or federal
income taxes, as estimated by a nationally recognized firm of independent
petroleum engineers in a reserve report prepared as of the end of the Company's
most recently completed fiscal year, as increased by, as of the date of
determination, the estimated discounted future net revenues from (A) estimated
proved oil and gas reserves acquired since the date of such year-end reserve
report, and (B) estimated oil and gas reserves attributable to upward revisions
of estimates of proved oil and gas reserves since the date of such year-end
reserve report due to exploration, development or exploitation activities, in
each case calculated in accordance with Commission guidelines (utilizing the
prices utilized in such year-end reserve report), and decreased by, as of the
date of determination, the estimated discounted future net revenues from (C)
estimated proved oil and gas reserves produced or disposed of since the date of
such year-end reserve report and (D) estimated oil and gas reserves attributable
to downward revisions of estimates of proved oil and gas reserves since the date
of such year-end reserve report due to changes in geological conditions or other
factors which would, in accordance with standard industry practice, cause such
revisions, in each case calculated in accordance with Commission guidelines
(utilizing the prices utilized in such year-end reserve report); provided, that
in the case of each of the determinations made pursuant to clauses (A) through
(D), such increases and decreases shall be as estimated by the Company's
petroleum engineers, except that in the event there is a Material Change as a
result of such acquisitions, dispositions or revisions, then the discounted
future net revenues utilized for purposes of this clause (a)(i) shall be
confirmed in writing by a nationally recognized firm of independent petroleum
engineers, (ii) the capitalized costs that are attributable to oil and gas
properties of the Company and its Restricted Subsidiaries to which no proved oil
and gas reserves are attributable, based on the Company's books and records as
of a date no earlier than the date of the Company's latest annual or quarterly
financial statements, (iii) the Net Working Capital on a date no earlier than
the date of the Company's latest annual or quarterly financial statements and
(iv) the greater of (A) the net book value on a date no earlier than the date of
the Company's latest annual or quarterly financial statements or (B) the
appraised value, as estimated by independent appraisers, of other tangible
assets (including, without duplication, Investments in unconsolidated Restricted
Subsidiaries) of the Company and its Restricted Subsidiaries, as of the date no
earlier than the date of the Company's latest audited financial statements,
minus (b) the sum of (i) minority interests (other than a minority interest in a
Subsidiary that is a business trust or similar entity formed for the primary
purpose of issuing preferred securities the proceeds of which are loaned to the
Company or a Restricted Subsidiary), (ii) any net gas balancing liabilities of
the Company and its Restricted Subsidiaries reflected in the Company's latest
audited financial statements, (iii) to the extent
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included in (a)(i) above, the discounted future net revenues, calculated in
accordance with Commission guidelines (utilizing the prices utilized in the
Company's year-end reserve report), attributable to reserves which are required
to be delivered to third parties to fully satisfy the obligations of the Company
and its Restricted Subsidiaries with respect to Volumetric Production Payments
on the schedules specified with respect thereto and (iv) to the extent included
in (a)(i) above, the discounted future net revenues, calculated in accordance
with Commission guidelines, attributable to reserves subject to
Dollar-Denominated Production Payments which, based on the estimates of
production and price assumptions included in determining the discounted future
net revenues specified in (a)(1) above, would be necessary to fully satisfy the
payment obligations of the Company and its Restricted Subsidiaries with respect
to Dollar-Denominated Production Payments on the schedules specified with
respect thereto. For purposes of this definition and any related defined term
used herein, the calculations above will include giving effect to the Company
and its Restricted Subsidiaries' percentage interests in B8/32 Partners in
accordance with GAAP. If the Company changes its method of accounting from the
full cost method to the successful efforts method or a similar method of
accounting, "Adjusted Consolidated Net Tangible Assets" will continue to be
calculated as if the Company were still using the full cost method of
accounting.
"Affiliate" means, as to any Person, any Subsidiary of such Person and any
other Person which, directly or indirectly, controls or is controlled by or
under direct or indirect common control with such specified Person. For the
purposes of this definition, "control," when used with respect to any Person
means the possession of the power to direct or cause the direction of management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Notwithstanding the foregoing, no individual shall be an Affiliate of any Person
solely by reason of his or her being a director, officer or employee of such
Person. For purposes of the provisions described under "-- Certain
Covenants -- Limitation on Restricted Payments," "-- Certain
Covenants -- Limitation on Affiliate Transactions" and "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only,
"Affiliate" shall also mean any beneficial owner of Capital Stock representing
10% or more of the total voting power of the Voting Stock (on a fully diluted
basis) of the Company or of rights or warrants to purchase such Capital Stock
(whether or not currently exercisable) and any Person who would be an Affiliate
of any such beneficial owner pursuant to the first sentence hereof.
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at October 1, 2001 (such redemption price being described under "-- Optional
Redemption") plus (2) all required interest payments due on such Note through
October 1, 2001, computed using a discount rate equal to the Treasury Rate plus
100 basis points, over (B) the principal amount of such Note.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors, qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of the Company or any Restricted Subsidiary or (iii) any
other assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (w) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a
Wholly Owned Subsidiary, (x) for purposes of the covenant described under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock"
only, a disposition that constitutes a Restricted Payment permitted by the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments," (y) disposition of assets with a fair market value of less than
$250,000 and (z) the relinquishment of unexplored acreage in accordance with the
Concession agreement). For purposes of this definition, the term "Asset Disposi-
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tion" shall not include (i) any trade or exchange of interest(s), either
directly or through the acquisition of the Capital Stock of a Person, in Block
B8/32 owned by the Company or any Restricted Subsidiary for any other
interest(s) in Block B8/32 owned by any other Owner of Block B8/32 or (ii) any
trade or exchange of properties and assets used in the Oil and Gas Business
(other than as described in clause (i)) or shares of Capital Stock in any Person
in the Oil and Gas Business owned by the Company or any Restricted Subsidiary
for properties and assets used in the Oil and Gas Business or shares of Capital
Stock in any Person owned or held by another Person, in each case for any
transfer of properties or assets in a single transaction or series of related
transactions having a fair market value of less than $50 million (each, an
"Asset Swap"), provided, that (A) the fair market value of the properties,
assets, shares or ownership interests in Block B8/32, as the case may be, traded
or exchanged by the Company or such Restricted Subsidiary (including any cash or
cash equivalents, not to exceed 20% of such fair market value, to be delivered
by the Company or such Restricted Subsidiary) is reasonably equivalent to the
fair market value of the properties, assets and shares of Capital Stock or
ownership interests in Block B8/32, as the case may be (together with any cash
or cash equivalents, not to exceed 20% of such fair market value), to be
received by the Company or such Restricted Subsidiary as determined in good
faith by the Board of Directors of the Company as certified by a certified
resolution delivered to the Trustee if such fair market value is equal to or in
excess of $5 million, provided, that if such resolution indicates that such fair
market value is equal to or in excess of $20 million such resolution shall be
accompanied by a written appraisal by a nationally recognized investment banking
firm or appraisal firm, in each case specializing or having a specialty in oil
and gas properties, and (B) such exchange is approved by a majority of the
Disinterested Directors of the Company.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Banks" has the meaning specified in the Revolving Credit Facility.
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter Incurred, payable by the Company under or in respect of
the Revolving Credit Facility and any related notes, collateral documents,
letters of credit and guarantees, including principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company or any of its
Subsidiaries whether or not a claim for post filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees and
all other amounts payable thereunder or in respect thereof.
"B8/32 Joint Operating Agreement" means, collectively, (i) the Joint
Operating Agreement dated as of August 1, 1990 between Maersk, Thai Romo,
Thaipo, and Sophonpanich, (ii) the Transfer Agreement dated March 2, 1995
between Maersk, Thai Romo, Thaipo, and Sophonpanich, whereby Maersk agrees to
convey its interest and operatorship in respect of the Tantawan Area of Block
B8/32 to Thaipo and (iii) the Agreement of Operatorship and Conveyance of
Interest dated as of March 3, 1995 between Maersk and Thaipo, in each case as
the same may be modified, supplemented and in effect from time to time.
"B8/32 Partners" shall mean B8/32 Partners Ltd. (formerly known as Maersk
Oil (Thailand) Ltd.), a limited liability company organized under the laws of
the Kingdom of Thailand.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
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"Business Day" means any day on which commercial banks are not authorized
or required to close in New York City.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Captive Insurance Company" means any Wholly Owned Subsidiary of the
Company that provides insurance or reinsurance to the Company and its Restricted
Subsidiaries.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Hedging Agreement" shall mean, for any Person, an agreement or
arrangement between such Person and one or more financial institutions or other
entities providing for the transfer or mitigation of risks of fluctuations in
the prices of hydrocarbons, either generally or under specific circumstances.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which financial statements are available
prior to the date of such determination to (ii) Consolidated Interest Expense
for such four fiscal quarters; provided, however, that (1) if the Company or any
Restricted Subsidiary has Incurred any Indebtedness since the beginning of such
period that remains outstanding or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (2) if the Company or any Restricted
Subsidiary has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of such period or if any Indebtedness is to be
repaid, repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the date
of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if the Company or such Restricted Subsidiary has
not earned the interest income actually earned during such period in respect of
cash or Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness, (3) if since the beginning of such period
the Company or any Restricted Subsidiary shall have made any Asset Disposition,
the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (4) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an
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Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction requiring a calculation to be
made hereunder, which constitutes all or substantially all of an operating unit
of a business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period and (5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition and
any related defined terms used herein, the calculations above will include
giving effect to the Company and its Restricted Subsidiaries' percentage
interests in B8/32 Partners in accordance with GAAP. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness during such period).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries as
determined in accordance with GAAP, plus, to the extent not included in such
total interest expense, and to the extent incurred by the Company or its
Restricted Subsidiaries, without duplication, (i) interest expense attributable
to capital leases and the interest expense attributable to leases constituting
part of a Sale/Leaseback Transaction, (ii) amortization of debt discount and
debt issuance cost, (iii) capitalized interest, (iv) non-cash interest expenses,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs associated
with Interest Rate Agreements (including amortization of fees), (vii) Preferred
Stock dividends in respect of all Preferred Stock held by Persons other than the
Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection
with Investments in discontinued operations, (ix) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is Guaranteed
by (or secured by the assets of) the Company or any Restricted Subsidiary and
(x) the cash contributions to any employee stock ownership plan or similar trust
to the extent such contributions are used by such plan or trust to pay interest
or fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries as determined in accordance with GAAP;
provided, however, that there shall not be included in such Consolidated Net
Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Company's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
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(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject
to the exclusion contained in clause (iv) below, the Company's equity in
the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such period to
the Company or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid
to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of the Company, its consolidated Subsidiaries or
any other Person (including pursuant to any sale-and-leaseback arrangement)
which is not sold or otherwise disposed of in the ordinary course of
business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person;
(v) any write-downs of non-current assets;
(vi) extraordinary gains or losses; and
(vii) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described
under "Certain Covenants -- Limitation on Restricted Payments" only, there shall
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers are actually used to increase the amount of Restricted Payments
permitted under such covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of Incurrence,
has an aggregate principal amount outstanding of, or under which, at the date of
Incurrence, the holders thereof are committed to lend up to, at least $25
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver its resolution under the Indenture, a member of the Board of Directors
who does not have any material direct or indirect financial interest (other than
an interest arising solely from the beneficial ownership of Capital Stock of the
Company) in or with respect to such transaction or series of transactions.
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"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in part, in
each case on or prior to the first anniversary of the Stated Maturity of the
Notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control," provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions described under "-- Change of Control" and
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock."
"Dollar-Denominated Production Payments" means production payment
obligations of the Company or any Subsidiary Guarantor which are payable from a
specified share of proceeds received from production from specific Properties,
together with all undertakings and obligations in connection therewith.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company and its consolidated Restricted Subsidiaries and (b) the aggregate
depreciation, depletion, amortization, impairment and other non-cash expenses or
charges of the Company and its consolidated Restricted Subsidiaries reducing
Consolidated Net Income for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such non-cash expense or charge to the
extent that it represents an accrual of or reserve for cash expenditures in any
future period), in each case for such period decreased (to the extent included
in determining Consolidated Net Income) by the sum of (i) the amount of deferred
revenues that are amortized during such period and are attributable to reserves
that are subject to Volumetric Production Payments and (ii) amounts recorded in
accordance with GAAP as repayments of principal and interest pursuant to
Dollar-Denominated Production Payments during such period. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization and non-cash charges of, a Restricted Subsidiary
shall be added to Consolidated Net Income to compute EBITDA only to the extent
(and in the same proportion) that the net income of such Restricted Subsidiary
was included in calculating Consolidated Net Income and only if a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Restricted Subsidiary without prior approval (that has not been
obtained), pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to such Restricted Subsidiary or its stockholders.
"Equity Offering" means an underwritten primary public offering of common
stock of the Company pursuant to an effective registration statement under the
Securities Act.
"Event of Default" has the meaning set forth below under "-- Defaults."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants (the "AICPA"), (ii)
statements and pronouncements of the Financial Accounting Standards Board of the
AICPA, (iii) such other statements by such other entity as approved by a
significant segment of the accounting profession and (iv) the rules and
regulations of the Commission governing the inclusion of financial statements
(including pro forma financial statements) in periodic reports required to be
filed pursuant to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written statements from
the accounting staff of the Commission.
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"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement, Currency Agreement or Commodity Hedging
Agreement entered into in the ordinary course of business and not for
speculation, including without limitation, swaps, options, forward sales and
futures contracts entered into in connection with interest rates, currencies and
energy related commodities.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence, when used
as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable,
excluding trade accounts payable and other current liabilities incurred in
the ordinary course of business;
(ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person) to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or
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liable, directly or indirectly, as obligor, guarantor or otherwise,
including by means of any Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured;
(viii) all Production Payments granted by such Person but solely to
the extent of any warranties or guarantees of production or payment by such
Person with respect to such Production Payment; and
(ix) to the extent not otherwise included in this definition, Hedging
Obligations of such Person granted by such Person.
Notwithstanding clauses (i) through (ix) above, the term "Indebtedness"
shall not include any of the foregoing which are subject to irrevocable legal
defeasance in accordance with the terms thereof. When used with respect to Thai
Romo or any other Restricted Subsidiary that owns an interest in any field or
area but which is not the operator of such hydrocarbon interest, "Indebtedness"
shall include Thai Romo's or such other Restricted Subsidiary's obligations to
reimburse the operator under the Operating Agreement or the Joint Operating
Agreement, or similar agreement in the case of such other Restricted Subsidiary,
for Thai Romo's or such other Restricted Subsidiary's pro rata share of payments
made by such operator in respect of Indebtedness incurred by such operator in
connection with transactions under such agreements.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers or extensions of trade credit not in excess of
90 days in the ordinary course of business that are recorded as accounts
receivable on the balance sheet of the lender) or other extensions of credit
(including by way of Guarantee or similar arrangement) or capital contribution
to (by means of any transfer of cash or other property to others or any payment
for property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the definition of "Unrestricted Subsidiary," the
definition of "Restricted Payment" and the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments," (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of the Company at
the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary equal to an amount (if positive)
equal to (x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Joint Operating Agreements" means the B8/32 Joint Operating Agreement and
the Tantawan Joint Operating Agreement.
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"Lien" means, with respect to any Property, any assignment in trust,
mortgage, lien, pledge, charge, fiduciary or security assignment, security
interest or encumbrance of any kind in respect of such Property (including,
without limitation, any Production Payment, advance, payment or similar
arrangement with respect to minerals in place). For purposes of the foregoing, a
Person shall be deemed to own subject to a Lien any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
(other than an operating lease) relating to such Property.
"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than 25% during a fiscal quarter
in the estimated discounted future net cash flows from proved oil and gas
reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (a)(i) of the definition of Adjusted Consolidated Net
Tangible Assets; provided, however, that the following will be excluded from the
calculation of Material Change: (i) any acquisitions during the quarter of oil
and gas reserves that have been estimated by a nationally recognized firm of
independent petroleum engineers and on which a report or reports exist and (ii)
any disposition of properties held at the beginning of such quarter that have
been disposed of as provided in the covenant described under the caption
"Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock."
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form), in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all payments made
on any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law, be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Restricted Subsidiaries as a result of such Asset Disposition and
(iv) the deduction of appropriate amounts provided by the seller as a reserve,
in accordance with GAAP, against any liabilities associated with the property or
other assets disposed in such Asset Disposition and retained by the Company or
any Restricted Subsidiary after such Asset Disposition; provided, that any
amounts remaining after any adjustment, realization or liquidation of such
reserve shall constitute Net Available Cash.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Net Working Capital" means (a) all current assets of the Company and its
Restricted Subsidiaries, minus (b) all current liabilities of the Company and
its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in financial statements of the Company
prepared in accordance with GAAP.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or a Restricted Subsidiary incurred in connection
with the acquisition by the Company or a Restricted Subsidiary of any property
or assets and as to which (a) the holders of such Indebtedness agree that they
will look solely to the property or assets so acquired and securing such
Indebtedness for payment on or in respect of such Indebtedness and (b) no
default with respect to such Indebtedness of the Company or a Restricted
Subsidiary, will entitle (after notice or passage of time or both) any holder
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of any other Indebtedness of the Company or a Restricted Subsidiary to declare a
default under such other Indebtedness or cause the payment of such other
Indebtedness to be accelerated or payable prior to its stated maturity.
"Officer's Certificate" means a certificate signed by the Chairman, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company.
"Oil and Gas Business" means (a) the acquisition, exploration,
exploitation, development, operation and disposition of interests in oil, gas
and other hydrocarbon properties, (b) the gathering, marketing, treating,
processing, refining, storage, selling and transporting of any production from
such interests or properties, (c) any business relating to or arising from
exploration for or exploitation, development, production, treatment, processing,
refining storage, transportation or marketing of oil, gas and other minerals and
products produced in association therewith, and (d) any activity necessary,
appropriate, complementary or incidental to the activities described in the
foregoing clauses (a) through (c) of this definition.
"Operating Agreement" shall mean the Operating Agreement between SBM Marine
Services Thailand Ltd. and Tantawan Services, LLC, dated February 9, 1996,
relating to the operation of the "TANTAWAN EXPLORER," as the same may be
modified, supplemented and in effect from time to time.
"Opinion of Counsel" means a written opinion of legal counsel for the
Company (or any Subsidiary Guarantor, if applicable) including an employee of
the Company (or any Subsidiary Guarantor, if applicable), who is reasonably
acceptable to the Trustee.
"Owners of Block B8/32" means, as of any date of determination, any Person
that directly owns an interest in the Concession.
"Permitted Holders" means (i) John A. Moran, Patrick R. Rutherford, their
respective spouses, issue or any spouse of their issue, (ii) any Person
controlled directly or indirectly by any one or more of the Persons referred to
in clause (i), (iii) any trust, all of the beneficiaries of which are any one or
more of the persons referred to in clause (i), or (iv) any bona fide legal
representative of any of the individuals in clause (i) duly appointed as a
result of the death or legal incapacity of such individual.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, a Restricted Subsidiary or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is an Oil and
Gas Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is an Oil and Gas
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any Restricted Subsidiary if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; provided, however, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances; (v) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vi) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; (viii)
Hedging Obligations; (ix) entry into operating agreements, joint ventures,
partnership agreements, concession agreements, working interests, royalty
interests, mineral leases, processing agreements, farm-out agreements, contracts
for the sale, transportation or exchange of oil and natural gas, unitization
agreements, pooling arrangements, area of mutual interest agreements or other
similar or customary agreements, transactions, properties, interest or
arrangements, and Investments and expenditures in connection therewith or
pursuant thereto, in each case made or entered into in the ordinary course of
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the Company's or its Restricted Subsidiaries' Oil and Gas Business; (x) B8/32
Partners in an amount up to 46.35% of the share capital of B8/32 Partners; (xi)
the Capital Stock or Indebtedness of a Captive Insurance Company in an amount
sufficient for such Captive Insurance Company to maintain sufficient capital to
provide insurance or reinsurance coverage to the Company or its Restricted
Subsidiaries in amounts which are customary for the Oil and Gas Business
conducted by the Company and its Restricted Subsidiaries; and (xii) any Person
to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to the
covenant described under "-- Certain Covenants -- Limitation on Sales of Assets
and Subsidiary Stock."
"Person" means any individual, corporation, company, voluntary association,
partnership, limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof.
"Pledge Account" means an account established with the Trustee pursuant to
the terms of the Indenture for the deposit of the Pledged Securities to be
purchased by the Company with a portion of the net proceeds from the sale of the
Notes.
"Pledged Securities" means the U.S. government securities to be purchased
by the Company and held in the Pledge Account in accordance with the Indenture.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"Principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Production Payment" means, collectively, Dollar-Denominated Production
Payments and Volumetric Production Payments.
"Property" means any property of any kind whatsoever, whether real,
personal or mixed and whether tangible or intangible, including any right or
interest therein or thereto.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Registrar" means Bank of Montreal Trust Company.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
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indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) the making of any
Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Revolving Credit Facility" means (i) the Credit Agreement dated as of
September 20, 1996, among the Company, RMEC, TRH, Thai Romo, the other
Subsidiary Guarantors party thereto, the Lenders party thereto and Chase, as
administrative agent, as the same may be amended, modified, supplemented and in
effect from time to time (the "Credit Agreement") and (ii) any renewal,
extension, refunding, restructuring, replacement or refinancing thereof (whether
with the original Administrative Agent and lenders or another administrative
agent or agent or other lenders and whether provided under the original Credit
Agreement or any other agreement).
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"Secured Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor secured by a Lien.
"Senior Indebtedness" means (i) Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter Incurred, and (ii) accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
the Company is responsible or liable unless, in the case of (i) and (ii), in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinate in right of
payment to the Notes; provided, however, that Senior Indebtedness shall not
include (1) any obligation of the Company to any Subsidiary, (2) any liability
for Federal, state, local or other taxes owed or owing by the Company (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of the Company (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect to
any other Indebtedness or other obligation of the Company or (5) that portion of
any Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture (but, as to any such Indebtedness, no such violation shall be deemed
to exist for purposes of this clause (5) if the holder(s) of such Indebtedness
or their representative or the Company shall have furnished to the Trustee an
opinion of counsel unqualified in all material respects of independent legal
counsel, addressed to the Trustee (which legal counsel may, as to matters of
fact, including financial covenant compliance calculations, rely upon a
certificate of the Company) to the effect that the Incurrence of such
Indebtedness does not violate the provisions of the Indenture; provided that the
foregoing exclusions shall not affect the priorities of any Indebtedness
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arising solely by operation of law in any bankruptcy, insolvency, receivership,
liquidation, reorganization, assignment for the benefit of creditors or other
similar event, case or proceeding.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Subsidiary Guarantor" means each Subsidiary of the Company in existence on
the Issue Date and each Subsidiary (other than Unrestricted Subsidiaries)
created or acquired by the Company after the Issue Date.
"Subsidiary Guarantor Senior Indebtedness" means, with respect to any
Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
issued, any Guarantee of the Bank Indebtedness by such Subsidiary Guarantor, all
other Guarantees by such Subsidiary Guarantor of Senior Indebtedness of the
Company and all Indebtedness of such Subsidiary Guarantor, including interest
and fees thereon, unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that the obligations
of such Subsidiary Guarantor in respect of such Indebtedness are not superior in
right of payment to the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty; provided, however, that Subsidiary Guarantor Senior
Indebtedness shall not include (1) any obligations of such Subsidiary Guarantor
to the Company or any other Subsidiary of the Company, (2) any liability for
Federal, state, local or other taxes owed or owing by such Subsidiary Guarantor,
(3) any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities) or (4) any Indebtedness, Guarantee or obligation of
such Subsidiary Guarantor that is expressly subordinate or junior in right of
payment to any other Indebtedness, Guarantee or obligation of such Subsidiary
Guarantor, including any Subsidiary Guarantor Senior Subordinated Indebtedness
and Subsidiary Guarantor Subordinated Obligations of such Subsidiary Guarantor.
"Subsidiary Guarantor Senior Subordinated Indebtedness" means with respect
to a Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under
the Subsidiary Guaranty and any other Indebtedness of such Subsidiary Guarantor
that specifically provides that such Indebtedness is to rank pari passu in right
of payment with the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty and is not subordinated by its terms in right of payment to
any Indebtedness or other obligation of such Subsidiary Guarantor which is not
Subsidiary Guarantor Senior Indebtedness of such Subsidiary Guarantor.
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"Subsidiary Guarantor Subordinated Obligation" means, with respect to a
Subsidiary Guarantor, any indebtedness of such Subsidiary Guarantor (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the obligations of such Subsidiary Guarantor under
the Subsidiary Guaranty pursuant to a written agreement.
"Subsidiary Guaranty" means the Guarantee of the Notes by a Subsidiary
Guarantor.
"Tantawan Joint Operating Agreement" means the Joint Operating Agreement
dated as of March 3, 1995 among Thaipo, Thai Romo and Sophonpanich.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50 million
(or the foreign currency equivalent thereof) and has, or whose parent
holding company has, outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money market fund sponsored by a registered broker
dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and
(v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to October 1, 2001; provided, however, that if
the period from the Redemption Date to October 1 , 2001 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of the United States Treasury securities for which such yields
are given, except that if the period from the Redemption Date to October 1, 2001
is less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any
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Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided, however, that
either (A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) if such Subsidiary has assets greater than $1,000, such designation would
be permitted under the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments". The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the
covenant described under "-- Certain Covenants -- Limitation on Indebtedness"
and (y) no Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the resolution of the Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Volumetric Production Payments" means production payment obligations of
the Company or any Subsidiary Guarantor or any of its Subsidiaries which are
payable from a specified share of production from specific Properties, together
with all undertakings and obligations in connection therewith.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries provided, that, if such Restricted
Subsidiary is required by the applicable laws of a foreign jurisdiction to be
partially owned by the government of such foreign jurisdiction or individual or
corporate citizens of such foreign jurisdiction, such Restricted Subsidiary
shall be deemed a Wholly Owned Subsidiary so long as the Company or another
Restricted Subsidiary owns the remaining Capital Stock or ownership interest in
such Restricted Subsidiary and, by contract or otherwise, controls the
management and business of such Restricted Subsidiary and derives the economic
benefits of ownership of such restricted Subsidiary to substantially the same
extent as if such Restricted Subsidiary were a wholly owned Subsidiary.
Certain Covenants
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company shall not and shall not permit
any of its Restricted Subsidiaries to Incur, directly or indirectly, any
Indebtedness unless, on the date of such Incurrence and after giving effect
thereto, (i) the Consolidated Coverage Ratio exceeds 1.75 to 1.00 for any period
ending prior to or including the first anniversary of the Closing Date, 2.00 to
1.00 for any period thereafter ending prior to or including the second
anniversary of the Closing Date, and 2.50 to 1.00 for any period thereafter and
(ii) no Default or Event of Default would occur or be continuing.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred pursuant to the Revolving Credit Facility
(including, without limitation, any renewal, extension, refunding,
restructuring, replacement or refinancing thereof referred to in clause
(ii) of the definition thereof); provided that the aggregate principal
amount of all Indebtedness Incurred pursuant to this clause (1) does not
exceed an amount equal to the sum of (x)
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$150 million and (y) 20% of Adjusted Consolidated Net Tangible Assets
determined as of the date of the most recent quarterly consolidated
financial statements of the Company and its Restricted Subsidiaries, less
the amount of Net Available Cash applied to reduce Senior Indebtedness or
Indebtedness pursuant to the covenant of the Indenture described under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary
Stock";
(2) Indebtedness represented by Capitalized Lease Obligations,
mortgage financings or purchase money obligations, in each case Incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property used in an Oil and Gas Business
or Incurred to Refinance any such purchase price or cost of construction or
improvement, in each case Incurred no later than 365 days after the date of
such acquisition or the date of completion of such construction or
improvement; provided, however, that the principal amount of any
Indebtedness Incurred pursuant to this clause (2) shall not exceed
$50,000,000 at any time;
(3) Indebtedness (other than Indebtedness described in clauses (1) and
(2)) in a principal amount which, when taken together with the principal
amount of all other Indebtedness Incurred pursuant to this clause (3) and
then outstanding, will not exceed $20 million (it being understood that any
Indebtedness Incurred under this clause (3) shall cease to be deemed
Incurred or outstanding for purposes of this clause (3) (but shall be
deemed to be Incurred for purposes of paragraph (a))) from and after the
first date on which the Company or its Restricted Subsidiaries could have
Incurred such Indebtedness under the foregoing clause (1) without reliance
upon this clause (3);
(4) Indebtedness owed to and held by a Wholly Owned Subsidiary;
provided, however, that any subsequent issuance or transfer of any Capital
Stock which results in any such Wholly Owned Subsidiary ceasing to be a
wholly Owned Subsidiary or any subsequent transfer of such Indebtedness
(other than to another Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the Company;
(5) the Notes;
(6) Indebtedness in respect of bid, performance or surety bonds issued
or other reimbursement obligations for the account of the Company or any
Restricted Subsidiary in the ordinary course of business, including letters
of credit supporting such bid, performance, surety bonds or other
reimbursement obligations (in each case other than an obligation for money
borrowed);
(7) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (4), (5) or (6) of this covenant);
(8) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (5) or (7) or this clause
(8); and
(9) Hedging Obligations consisting of (x) Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company
pursuant to the Indenture and (y) Commodity Hedging Agreements and Currency
Agreements entered into for the purpose of hedging fluctuations in
commodity prices or currency rates, respectively, and not for speculation.
(c) Notwithstanding the foregoing paragraph (a), any Restricted Subsidiary
may Incur, directly or indirectly:
(1) Indebtedness or Preferred Stock issued to and held by the Company
or a Wholly Owned Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock which results in any such Wholly
Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of such Indebtedness or Preferred Stock (other than to the Company
or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute
the issuance of such Indebtedness or Preferred Stock by the issuer thereof;
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(2) Indebtedness or Preferred Stock of a Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary was acquired
by the Company (other than Indebtedness or Preferred Stock Incurred in
connection with, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Company); provided, however, that on the date of such
acquisition and after giving effect thereto, the Company would have been
able to Incur at least $1.00 of additional Indebtedness pursuant to
paragraph (a) or (b) above;
(3) Indebtedness or Preferred Stock outstanding on the Issue Date
(other than Indebtedness described in clause (1) or (2) of this paragraph);
and
(4) Refinancing Indebtedness Incurred in respect of Indebtedness or
Preferred Stock referred to in clause (2) or (3) of this paragraph or this
clause (4); provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness or Preferred
Stock of a Subsidiary described in clause (2), such Refinancing
Indebtedness shall be Incurred only by such Subsidiary.
(d) Notwithstanding the foregoing paragraph (a) Thai Romo or any Restricted
Subsidiary that owns an interest in any field or area but is not the operator of
such hydrocarbon interest may incur Indebtedness consisting of obligations to
reimburse the operator under the Operating Agreement or similar agreement in the
case of such other Restricted Subsidiaries or the Joint Operating Agreement for
Thai Romo's or such other Restricted Subsidiary's pro rata share of payments
made by such operator in respect of Indebtedness incurred by such operator in
connection with transactions under such agreements.
(e) Notwithstanding the foregoing, neither the Company nor any Restricted
Subsidiary shall Incur any Indebtedness under paragraph (b) above if the
proceeds thereof are used, directly or indirectly, to Refinance any Subordinated
Obligations of the Company unless such Indebtedness shall be subordinated to the
Notes to at least the same extent as such Subordinated Obligations. No
Subsidiary Guarantor shall Incur any Indebtedness under paragraph (b) above if
the proceeds thereof are used, directly or indirectly, to Refinance any
Subsidiary Guarantor Subordinated Obligation of such Subsidiary Guarantor unless
such Indebtedness shall be subordinated to the obligations of such Subsidiary
Guarantor under the Subsidiary Guaranty to at least the same extent as such
Subsidiary Guarantor Subordinated Obligation.
(f) In addition, the Company shall not Incur any Secured Indebtedness which
is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Notes equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien;
provided that the Company may grant a lien on a specified account or investments
which contain or consist solely of a portion of the proceeds received in
connection with the issuance of Indebtedness (and investment earnings thereon)
if the amounts on deposit in such account or such investments are to be used
solely to make payments of principal or interest on such Indebtedness. No
Subsidiary Guarantor shall Incur any Secured Indebtedness which is not
Subsidiary Guarantor Senior Indebtedness unless contemporaneously therewith
effective provision is made to secure such Subsidiary Guarantor's obligations
under the Subsidiary Guaranty equally and ratably with such Secured Indebtedness
for so long as such Secured Indebtedness is secured by a Lien.
(g) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described above, the Company, in its sole discretion,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses and (ii) an
item of Indebtedness may be divided and classified in more than one of the types
of Indebtedness described above.
Limitation on Layering. The Company shall not Incur any Indebtedness if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness
or is contractually subordinated in right of payment to Senior Subor-
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dinated Indebtedness. No Subsidiary Guarantor shall Incur any Indebtedness if
such Indebtedness is contractually subordinate or junior in ranking in any
respect to any Guarantor Senior Indebtedness of such Subsidiary Guarantor unless
such Indebtedness is Subsidiary Guarantor Senior Subordinated Indebtedness of
such Subsidiary Guarantor or is contractually subordinated in right of payment
to Subsidiary Guarantor Senior Subordinated Indebtedness of such Subsidiary
Guarantor.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Company is not able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date would exceed the
sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Notes are
originally issued to the end of the most recent fiscal quarter ending prior
to the date of such Restricted Payment for which financial statements are
available (or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale to an employee
stock ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness
of the Company convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash, or the
fair value of any other property, distributed by the Company upon such
conversion or exchange);
(D) an amount equal to the sum of (i) the net reduction in Investments
in Unrestricted Subsidiaries resulting from dividends, repayments of loans
or advances or other transfers of assets, in each case to the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the
portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of an Unrestricted Subsidiary at
the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, however, that the foregoing sum shall not exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary; and
(E) $15,000,000.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment out of the proceeds of the substantially
concurrent sale of, or any acquisition of any Capital Stock of the
Company made by exchange for, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Company or an employee stock ownership plan or to a
trust established by the Company or any of its Subsidiaries for the
benefit of their employees); provided, however, that (A) such Restricted
Payment shall be excluded in the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale shall be excluded
from the calculation of amounts under clause (3)(B) of paragraph (a)
above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the
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substantially concurrent sale of, Capital Stock of the Company or
Indebtedness of the Company which is permitted to be Incurred pursuant
to the covenant described under "-- Limitation on Indebtedness";
provided, however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that at the time of payment of
such dividend, no other Default shall have occurred and be continuing
(or result therefrom); provided further, however, that such dividend
shall be included in the calculation of the amount of Restricted
Payments; or
(iv) the repurchase or other acquisition of shares of, or options
to purchase shares of, common stock of the Company or any of its
Subsidiaries from employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved by the
Board of Directors under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases and
other acquisitions shall not exceed $1 million in any calendar year;
provided further, however, that such repurchases and other acquisitions
shall be excluded in the calculation of the amount of Restricted
Payments.
If the Company or any Restricted Subsidiary makes a Restricted Payment
which, at the time of the making of such Restricted Payment, would in the good
faith determination of the Company be permitted under the requirements of the
Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Net
Income for any period.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date, including the Revolving Credit
Facility;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on
such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this covenant or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or
(ii) of this covenant or this clause (iii); provided, however, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such refinancing agreement or amendment are no less
favorable to the Holders than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in such predecessor agreements;
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(iv) any such encumbrance or restriction consisting of customary non
assignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease or the property leased
thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreement or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages;
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and
(vii) encumbrances or restrictions arising or existing by reason of
applicable law.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at least
equal to the fair market value (including as to the value of all non-cash
consideration), as determined in good faith by the Board of Directors, of the
shares and assets subject to such Asset Disposition, (ii) at least 80% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash, cash equivalents or forgiveness of debt and (iii) an amount
equal to 100% of the Net Available Cash from such Asset Disposition is applied
by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to
the extent the Company elects (or is required by the terms of any Indebtedness),
to prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other
than any Disqualified Stock) of a Wholly Owned Subsidiary (in each case other
than Indebtedness owed to the Company or an Affiliate of the Company) within one
year from the later of the date of such Asset Disposition or the receipt of such
Net Available Cash; (B) second, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A), to the extent
the Company elects, to acquire Additional Assets within one year from the later
of the date of such Asset Disposition or the receipt of such Net Available Cash;
and (C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer to the
holders of the Notes (and to holders of other Senior Subordinated Indebtedness
designated by the Company to purchase Notes (and such other Senior Subordinated
Indebtedness) pursuant to and subject to the conditions in the Indenture, in
each case within one year from the later of the receipt of such Net Available
Cash and the date the offer described in clause (b) below is consummated;
provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A) or (C) above, the Company or such
Restricted Subsidiary shall permanently retire such Indebtedness and shall cause
the related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased except in the case
of clause (A) to the extent the proceeds are applied to reduce borrowings under
a working capital facility. Notwithstanding the foregoing provisions of this
paragraph, the Company and the Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance with this paragraph except to the
extent that the aggregate Net Available Cash from all Asset Dispositions which
are not applied in accordance with this paragraph exceeds $10 million (provided
such amount shall be carried forward for purposes of determining whether such an
offer is required with respect to Net Available Cash from any subsequent Asset
Disposition). Pending application of Net Available Cash pursuant to this
covenant, such Net Available Cash shall be invested in Permitted Investments.
For the purposes of this covenant, the following will be deemed to be cash
or cash equivalents: (x) the assumption by the transferee of Senior Indebtedness
of the Company or Indebtedness of any Restricted Subsidiary of the Company and
the release of the Company or such Restricted Subsidiary from all liability on
such Senior Indebtedness or Indebtedness in connection with such Asset
Disposition (in which case the Company shall, without further action, be deemed
to have applied such assumed Indebtedness in accordance with clause (A) of the
preceding paragraph) and (y) securities received by
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the Company or any Restricted Subsidiary of the Company from the transferee that
are promptly converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of the
Notes (and other Senior Subordinated Indebtedness) pursuant to clause
(a)(iii)(C) above, the Company will be required to purchase Notes tendered
pursuant to an offer by the Company for the Notes (and other Senior Subordinated
Indebtedness) at a purchase price of 100% of their principal (without premium)
plus accrued but unpaid interest (or, in respect of such other Senior
Subordinated Indebtedness, such lesser price, if any, as may be provided for by
the terms of such Senior Subordinated Indebtedness) in the procedures (including
prorating in the event of oversubscription) set forth in the Indenture.
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, on or after the date hereof directly or
indirectly enter into or permit to exist any transaction or series of related
transactions (including the purchase, sale, lease or exchange of any property,
or the rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction") unless terms thereof (1) are no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained at the
time of such transaction in arm's-length dealings with a Person who is not such
an Affiliate or in the event no comparable transaction with an unrelated third
party who is not an Affiliate is available, on terms that are fair to the
Company or such Restricted Subsidiary from a financial point of view, (2) if
such Affiliate Transaction involves an amount in excess of $1 million, (i) are
set forth in writing and (ii) have been approved by a majority of the members of
the Board of Directors having no personal stake in such Affiliate Transaction
and (3) if such Affiliate Transaction involves an amount in excess of $5
million, have been determined by a nationally recognized investment banking firm
to be fair, from a financial standpoint, to the Company and its Restricted
Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "-- Limitation on Restricted Payments," (ii) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iii) the grant of stock
option or similar rights to employees and directors of the Company pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business in accordance with customary practices in the
Oil and Gas Business, but in any event not to exceed $1 million in the aggregate
outstanding at any one time, (v) the payment of reasonable fees to directors of
the Company and its Restricted Subsidiaries who are not employees of the Company
or its Restricted Subsidiaries, (vi) any Affiliate Transaction between the
Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries,
(vii) the issuance or sale of any Capital Stock (other than Disqualified Stock)
of the Company, (viii) indemnification agreements with, and the payment of fees
and indemnities to, director, officers and employees of the Company and its
Restricted Subsidiaries, in each case on customary terms, (ix) transactions
pursuant to agreements as in existence on the Issue Date and (x) any employment,
noncompetition or confidentiality agreements entered into by the Company or any
of its Restricted Subsidiaries with its employees in the ordinary course of
business.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary and
(ii) if, immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries own any
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Capital Stock of such Restricted Subsidiary or after giving effect to such
issuance, sale or other disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any Investment in such Person remaining
after giving effect thereto would have been permitted to be made under the
covenant described under the covenant described under "-- Limitation on
Restricted Payments" if made on the date of such issuance, sale or other
disposition.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person, unless: (i)
the resulting, surviving or transferee Person (the "Successor Company") shall be
a Person organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor Company (if not
the Company) shall expressly assume, by an indenture supplemental thereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing, (iii) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "-- Limitation on Indebtedness," (iv) immediately after giving
effect to such transaction, the Successor Company shall have Consolidated Net
Worth in an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (v) the Company shall have
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidate, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (ii) and (iii), (1) any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company and (2) the Company may merge
with an Affiliate incorporated solely for the purpose of reincorporating the
Company in another jurisdiction to realize tax or other benefits.
Commission Reports. The Company will file with the Trustee and provide to
the holders of the Notes, within 15 days after it files them with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company files with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. In the event
that the Company is not required to file such reports with the Commission
pursuant to the Exchange Act, the Company will nevertheless deliver such
Exchange Act Information to the Holders of the Notes within 15 days after it
would have been required to file it with the Commission.
Restrictions with Respect to B8/32 Partners. Neither the Company nor any of
its Restricted Subsidiaries will vote any shares or other equity interests in
B8/32 Partners owned or controlled by it in favor of, or otherwise consent to,
any action by or on behalf of B8/32 Partners which action would not be permitted
to be undertaken by a Restricted Subsidiary pursuant to the terms of the
Indenture.
Future Guarantors. The Company shall cause each Restricted Subsidiary
(including each Restricted Subsidiary created or acquired following the Issue
Date) to Guarantee the Notes pursuant to a Subsidiary Guaranty on the terms and
conditions set forth in the Indenture.
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Defaults
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days whether or not
such payment is prohibited by the provisions described under "Ranking and
Subordination" above, (ii) a default in the payment of principal of any Note
when due at its Stated Maturity, upon optional redemption, upon required
repurchase, upon declaration or otherwise, (iii) the failure by the Company to
comply with its obligations under "-- Certain Covenants -- Merger and
Consolidation" above, (iv) the failure by the Company to comply for 30 days
after notice with any of its obligations in the covenants described above under
"Change of Control" (other than a failure to purchase Notes) or under
"-- Certain Covenants" under "-- Limitation on Indebtedness," "-- Limitation on
Restricted Payment," "-- Limitation on Restrictions on Distributions from
Restricted Subsidiaries," "-- Limitation on Sales of Assets and Subsidiary
Stock" (other than a failure to purchase Notes), "-- Limitation on Affiliate
Transactions," "-- Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries" or "-- Commission Reports," (v) the failure by the
Company to comply for 60 days after notice with its other agreements contained
in the Indenture, (vi) Indebtedness of the Company or any Significant Subsidiary
is not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total amount of
such Indebtedness unpaid or accelerated exceeds $10 million (the "cross
acceleration provision"), (vii) certain events of bankruptcy, insolvency or
reorganization of the Company or a Significant Subsidiary (the "bankruptcy
provisions"), (viii) any judgment or decree for the payment of money in excess
of $10 million is entered against the Company or a Significant Subsidiary,
remains outstanding for a period of 60 days following such judgment and is not
discharged, waived or stayed within 10 days after notice (the "judgment default
provision"), (ix) any Subsidiary Guaranty by a Significant Subsidiary ceases to
be in full force and effect (except as contemplated by the terms of the
Indenture) or any Subsidiary Guarantor that is a Significant Subsidiary denies
or disaffirms its obligations under the Indenture or its Subsidiary Guaranty,
and such default continues for 10 days or (x) the Indenture shall cease to be in
full force and effect or enforceable in accordance with its terms other than in
accordance with its terms. However, a default under clauses (iv), (v) and (viii)
will not constitute an Event of Default until the Trustee or the holders of 25%
in principal amount of the outstanding Notes notify the Company of the default
and the Company does not cure such default within the time specified after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences. Subject to the provisions of the Indenture relating to the duties
of the Trustee, in case an Event of Default occurs and is continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the holders of the
Notes unless such holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no holder
of a Note may pursue any remedy with respect to the Indenture or the Notes
unless (i) such holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) holders of at least 25% in principal amount of the
outstanding Notes have requested the Trustee to pursue the remedy, (iii) such
holders have offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee has not complied with such request
within 60 days after the receipt thereof and the offer of security or indemnity
and (v) the holders of a majority in principal amount of the outstanding Notes
have not given the Trustee a direction inconsistent with such request within
such 60-day period. Subject to certain restrictions, the holders of a majority
in principal amount of the outstanding Notes are given the right to direct the
time, method and place of
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conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
the Trustee determines is unduly prejudicial to the rights of any other holder
of a Note or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the holders of the Notes.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
holder of an outstanding Note affected thereby, no amendment may, among other
things, (i) reduce the amount of Notes whose holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "-- Optional
Redemption" above, (v) make any Note payable in money other than that stated in
the Note, (vi) impair the right of any holder of the Notes to receive payment of
principal of an interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's Notes, (vii) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions,
(viii) modify or amend any provision of the Indenture relating to Subsidiary
Guarantors in a manner adverse to the Holders or (ix) release any of the Pledged
Securities from the Lien of the Indenture.
Without the consent of any holder of the Notes, the Company and Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of the obligations of the
Company under the Indenture, to provide for uncertificated Notes in addition to
or in place of certificated Notes (provided that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Notes are described in Section 163(f)(2)(B)
of the Code), to add further Guarantees with respect to the Notes, to further
secure the Notes, to add to the covenants of the Company for the benefit of the
holders of the Notes or to surrender any right or power conferred upon the
Company, to make any change that does not adversely affect the rights of any
holder of the Notes or to comply with any requirement of the Commission in
connection with the qualification of the Indenture under the Trust Indenture
Act. However, no amendment may be made to the subordination provisions of the
Indenture that adversely affects the rights of any holder of Senior Indebtedness
then outstanding unless the holders of such Senior Indebtedness (or their
Representative) consent to such change.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such
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notes to all holders of the Notes, or any defect therein, will not impair or
affect the validity of the amendment.
Transfer
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfer and
exchanges.
Defeasance
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "-- Change of
Control" and under the covenants described under "-- Certain Covenants" (other
than the covenant described under "-- Merger and Consolidation"), the operation
of the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"-- Defaults" above and the limitations contained in clauses (iii) and (iv)
under "-- Certain Covenants -- Merger and Consolidation" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "-- Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) under "-- Certain
Covenants -- Merger and Consolidation" above. If the Company exercises its legal
defeasance option or its covenant defeasance option, each Subsidiary Guarantor
will be released from its obligations under its Subsidiary Guaranty.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
Concerning the Trustee
Bank of Montreal Trust Company is the Trustee under the Indenture and has
been appointed by the Company as Registrar and paying agent with regard to the
Notes. The Bank of Montreal, an affiliate of the Trustee, is a lender under the
Revolving Credit Facility. Such bank may also act as a depository of funds for,
or make loans to and perform other services for, the Company in the ordinary
course of business in the future.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no
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obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense and then only to the extent required by the terms of the Indenture.
Governing Law
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
BOOK-ENTRY, DELIVERY AND FORM
General
The New Notes will be issued in the form of one or more fully registered
Notes in global form (the "New Global Note," and together with the global notes
representing the "Old Notes," the "Global Notes"). Upon issuance of the Global
Notes, DTC or its nominee will credit, on its book-entry registration and
transfer system, the number of Notes represented by such Global Notes to the
accounts of institutions that have accounts with DTC or its nominee
("participants"). Ownership of beneficial interests in the Global Notes will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interest in such Global Notes will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee (with respect to participants' interests) for such Global
Notes, or by participants or persons that hold interests through participants
(with respect to beneficial interests of persons other than participants). The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
laws may impair the ability to transfer or pledge beneficial interests in the
Global Notes.
So long as DTC, or its nominee, is the registered holder of any Global
Notes, DTC or such nominee, as the case may be, will be considered the sole
legal owner and holder of such Notes represented by such Global Notes for all
purposes under the Indenture and the Notes. Except as set forth below, owners of
beneficial interests in Global Notes will not be entitled to have such Global
Notes or any Notes represented thereby registered in their names, will not
receive or be entitled to receive physical delivery or certificated Notes in
exchange therefor and will not be considered to be the owners or holders of such
Global Notes or any Notes represented thereby for any purpose under the Notes or
the Indenture. The Company and the Subsidiary Guarantors understand that under
existing industry practice, in the event an owner of a beneficial interest in a
Global Note desires to take any action that DTC, as the holder of such Global
Note, is entitled to take, DTC would authorize the participants to take such
action, and that the participants would authorize beneficial owners owning
through such participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Any payment of principal or interest due on the Notes on any interest
payment date or at maturity will be made available by the Company to the Trustee
by such date. As soon as possible thereafter, the Trustee will make such
payments to DTC or its nominee, as the case may be, as the registered owner of
the Global Notes representing such Notes in accordance with existing
arrangements between the Trustee and the depositary.
The Company and the Subsidiary Guarantors expect that DTC or its nominee,
upon receipt of any payment of principal or interest in respect of the Global
Notes will credit immediately the accounts of the related participants with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Notes as shown on the records of DTC. The
Company and the Subsidiary Guarantors also expect that payments by participants
to owners of beneficial interests in the Global Notes held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
participants.
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None of the Company, the Subsidiary Guarantors, the Trustee, or any payment
agent for the Global Notes will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in any of the Global Notes or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests or for
other aspects of the relationship between the depositary and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Notes owning through such participants.
Because of time zone differences, the securities account of a Euroclear
System ("Euroclear") or Cedel Bank, Societe anonyme ("Cedel") participant
purchasing an interest in a Global Note from a DTC participant will be credited,
and any such crediting will be reported to the relevant Euroclear or Cedel
participant, during the securities settlement processing day (which must be a
business day for Euroclear or Cedel, as applicable) immediately following the
DTC settlement date. Cash received in Euroclear or Cedel as a result of sales of
interests in a Global Note by or through a Euroclear or Cedel participant to a
DTC participant will be received with value on the DTC settlement date but will
be available in the relevant Euroclear or Cedel cash account only as of the
business day following settlement in DTC.
As long as the Notes are represented by a Global Note, DTC's nominee will
be the holder of such Notes and therefore will be the only entity that can
exercise a right to repayment or repurchase of such Notes. See "Description of
the Notes -- Change of Control" and "-- Certain Covenants -- Limitation on Sales
of Assets and Subsidiary Stock." Notice by participants or by owners of
beneficial interests in a Global Note held through such participants of the
exercise of the option to elect repayment of beneficial interests in Notes
represented by a Global Note must be transmitted to DTC in accordance with its
procedures on a form required by DTC and provided to participants. In order to
ensure that DTC's nominee will timely exercise a right to repayment with respect
to a particular Note, the beneficial owner of such Note must instruct the broker
or other participant to exercise a right to repayment. Different firms have
cut-off times for accepting instructions from their customers and, accordingly,
each beneficial owner should consult the broker or other participant through
which it holds an interest in a Note in order to ascertain the cut-off time by
which such an instruction must be given in order for timely notice to be
delivered to DTC. Neither the Company nor any Subsidiary Guarantor will be
liable for any delay in delivery of notices of the exercise of the option to
elect repayment.
Unless and until exchanged in whole or in part for Notes in definitive form
in accordance with the terms of the Notes, the Global Notes may not be
transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC or by DTC of any such nominee to a successor of
DTC or a nominee of each successor.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Trustee, the Company, or
the Subsidiary Guarantors will have any responsibility for the performance by
DTC or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations. The Company, the
Subsidiary Guarantors and the Trustee may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes.
CERTIFICATED NOTES
Global Notes shall be exchangeable for corresponding Notes in certificated
fully registered form ("Certificated Notes") registered in the name of persons
other than DTC or its nominee only if (A) DTC (i) notifies the Company that it
is unwilling or unable to continue as depositary for any of the Global Notes or
(ii) at any time ceases to be a clearing agency registered under the Exchange
Act, (B) there shall have occurred and be continuing an Event of Default (as
defined in the Indenture) with respect to the applicable Notes or (C) the
Company executes and delivers to the Trustee, an order that the Global Notes
shall be so exchangeable. Any Certificated Notes will be issued only in fully
registered form, and shall be issued without coupons in denominations of $1,000
and integral multiples thereof. Any Certifi
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cated Notes so issued will be registered in such names and in such denominations
as DTC shall request.
THE CLEARING SYSTEM
DTC has advised the Company and the Subsidiary Guarantors as follows: DTC
is a limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities of institutions that have accounts with its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of participants, thereby eliminating the need for
physical movement of securities certificates. DTC's participants include
securities brokers and dealers (which may include the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of the Old Notes for the New Notes by
holders acquiring the Notes on original issue for cash, but does not purport to
be a complete analysis of all potential tax effects. The discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings, and pronouncements and
judicial or administrative actions. Any such change may be applied retroactively
in a manner that could adversely affect a holder of the Notes.
In the opinion of Hughes & Luce, L.L.P., based on the assumptions and
subject to the qualifications set forth below, the following discussion
accurately describes the material federal income tax consequences of the
purchase, ownership, and disposition of the Notes by holders who acquire the New
Notes on original issue as "capital assets" within the meaning of section 1221
of the Code. The following discussion is based on the assumption that the
treatment of the Notes as indebtedness for federal income tax purposes will be
respected. The discussion is not binding on the IRS or the courts. The Company
has not sought and will not seek any rulings from the IRS with respect to the
positions of the Company discussed below. There can be no assurance that the IRS
will not take a different position concerning the tax consequences of the
purchase, ownership, or disposition of the Notes or that any such position would
not be sustained.
The tax treatment of a holder of a Note may vary depending on its
particular situation or status. Certain holders including S corporations,
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, taxpayers subject to alternative minimum tax and persons who are
not (i) citizens or residents of the United States, (ii) corporations,
partnerships or other entities created or organized under the laws of the United
States or of any political subdivision thereof or (iii) estates or trusts the
income of which is subject to United States federal income taxation regardless
of its source, may be subject to special rules not discussed below. In addition,
the description does not consider the effect of any applicable foreign, state,
local, or other tax laws or estate or gift tax considerations.
EXCHANGE
The exchange of the New Notes for Old Notes should not constitute a
recognition event for federal income tax purposes. Consequently, no gain or loss
should be recognized by holders upon receipt of the New Notes. For purposes of
determining gain or loss upon the subsequent exchange of New Notes, a holder's
basis in the New Notes will be the same as a holder's basis in the Old Notes
exchanged therefor. Holders should be considered to have held the New Notes from
the time of their original acquisition of the Old Notes.
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PAYMENTS OF INTEREST
Interest on a Note generally will be taxable to a holder as ordinary
interest income at the time it accrues or is received in accordance with the
holder's method of accounting for federal income tax purposes. Such interest
will be foreign source income provided the Company derives more than a certain
percentage of its gross income from foreign sources, which the Company expects
to be the case.
DISPOSITION OF NOTES
Upon the sale, retirement (including redemption), or other taxable
disposition of all or part of a Note, a holder will recognize gain or loss equal
to the difference between the amount realized on such sale, retirement, or other
disposition and the holder's adjusted tax basis in the Note or part of the Note.
Any gain recognized will be U.S. source income if the holder is a U.S. resident
and any loss recognized may be foreign source loss if interest is treated as
foreign source income. Any recognized gain or loss will be capital gain or loss,
except to the extent of any accrued market discount (see "-- Market Discount"
below), and such capital gain or loss will be long-term if the holding period
for the Note is more than one year at the time of sale, retirement or other
disposition. For these purposes, the amount realized does not include any amount
received for accrued interest on a Note that is taxable as interest to the Note
holder when the interest payment is received. A holder's adjusted tax basis in a
Note acquired by purchase will equal the cost of such Note to the holder,
increased by the amount of any accrued interest and market discount included in
taxable income by the holder with respect to such Note and reduced by any
amortized section 171 premium (see "Amortizable Bond Premium" below) and any
prior payments on the Note received by the holder. The redemption of only part
of a Note will require the allocation of the entire Note's adjusted tax basis
between the redeemed part and the part retained by the holder in order to
determine gain or loss.
MARKET DISCOUNT
A secondary market purchaser of a Note at a discount from the principal
amount acquires such Note with a "market discount." However, the market discount
will be considered to be zero if such market discount is minimal under section
1278(a)(2)(C) of the Code. Market discount will be minimal with respect to a
Note if it is less than the product of (A) 1/4 of 1% of the stated redemption
price of the Note at maturity multiplied by (B) the number of complete years to
maturity after the date of purchase. Under section 1276 of the Code, the
purchaser of a Note with more than a minimal amount of market discount generally
will be required to treat any gain on the sale, exchange, redemption, or other
disposition of all or part of the Note as ordinary income to the extent of
accrued (but not previously taxable) market discount. Market discount generally
will accrue ratably during the period from the date of purchase to the maturity
date of the Note, unless the holder irrevocably elects pursuant to section
1276(b)(2) of the Code to accrue such market discount on the basis of a constant
interest rate.
Under section 1277 of the Code, a holder who has acquired a Note at a
market discount generally will be required to defer any interest deductions
attributable to any indebtedness incurred or continued to purchase or carry the
Note, to the extent such deductions exceed an allocable portion of market
discount. Any such deferred interest expense generally will be allowable as a
deduction not later than the year in which the related market discount income is
recognized. As an alternative to the inclusion of market discount in income upon
disposition of a Note, a holder may pursuant to section 1278(b) of the Code make
an election (which may be revoked only with the IRS's consent) to include market
discount in income as it accrues on all market discount instruments acquired by
the holder during or after the taxable year for which the election is made. In
that case, the preceding deferral rule for interest expense will not apply.
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AMORTIZABLE BOND PREMIUM
A secondary market purchaser of a Note at a premium (the "Section 171
Premium") over the stated principal amount of the Note (plus accrued interest)
generally may elect to amortize such premium from the purchase date to the
maturity date, under a constant yield method that reflects semiannual
compounding. Except as may be otherwise provided in Treasury Regulations yet to
be issued, amortized Section 171 Premium will be treated as an offset to
interest income on a Note and not as a separate deduction. This interest offset
would be available only if an election under section 171 of the Code is made or
is in effect. This election would apply to all debt instruments held or
subsequently acquired by the electing holder on or after the first day of the
first taxable year to which the election applies and may not be revoked without
the consent of the IRS.
Section 171 Premium on a Note that is subject to optional redemption before
maturity at a price exceeding the Note's principal amount generally must be
amortized as if the optional redemption price and the last redemption date at
that price were the Notes principal amount and maturity date, if doing so would
decrease the amount of premium amortizable through the redemption date. In cases
where the premium must be amortized on the basis of an optional redemption price
and date, the Note (if not redeemed) will be treated as maturing on the last
redemption date for that redemption price and having been reissued on that date
for that price.
BACKUP WITHHOLDING
The backup withholding rules require a payor to deduct and withhold a tax
if (a) the payee fails to furnish a taxpayer identification ("TIN") to the
payor, (b) the IRS notifies that payor that the TIN furnished by the payee is
incorrect, (c) the payee has failed to properly report the receipt of
"reportable payments" and the IRS has notified the payor that withholding is
required, or (d) there has been a failure of the payee to certify under the
penalty of perjury that a payee is not subject to withholding under section 3406
of the Code. As a result, if any one of the events discussed above occurs, the
Company, its paying agent or other withholding agent will be required to
withhold a tax equal to 31% of any "reportable payment" made in connection with
the Notes. A "reportable payment" includes, among other things, interest
actually paid and amounts paid through brokers in retirement of securities. Any
amounts withheld from payment to a holder under the backup withholding rules
will be allowed as a refund or credit against such holder's federal income tax,
provided that the required information is furnished to the IRS. Certain holders
(including, among others, corporations and certain tax exempt organizations) are
not subject to the backup withholding and information reporting requirements.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS DOES
NOT CONSIDER THE FACTS AND CIRCUMSTANCES OF ANY PARTICULAR PROSPECTIVE
PURCHASER'S SITUATION OR STATUS. THE SUMMARY IS BASED ON THE PROVISIONS OF THE
CODE, REGULATIONS, RULINGS, AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH
ARE SUBJECT TO CHANGE, POSSIBLY ON A RETROACTIVE BASIS. EACH PURCHASER OF NOTES
SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO IT,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS,
OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF THE NOTES.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that the Company prepare and file a
prospectus with the securities' regulatory authorities in each province where
trades of Notes are effected. Accordingly, any resale of the Notes in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be made
in accordance with available statutory
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exemptions or pursuant to a discretionary exemption granted by the applicable
Canadian securities regulatory authority. Purchasers are advised to seek legal
advice prior to any resale of the Notes.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Notes in Canada who receives a purchase confirmation will
be deemed to represent to the Company and the dealer from whom such purchase
confirmation is received that (i) such purchaser is entitled under applicable
provincial securities laws to purchase such Notes without the benefit of a
prospectus qualified under such securities laws, (ii) where required by law,
that such purchaser is purchasing as principal and not as agent, and (iii) such
purchaser has reviewed the text above under "Resale Restrictions".
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
Company or such persons. All or a substantial portion of the assets of the
Company, each Subsidiary Guarantor and such persons may be located outside of
Canada, and as a result, it may not be possible to satisfy a judgment against
the Company, any Subsidiary Guarantor or such persons in Canada or to enforce a
judgment obtained in Canadian courts against the Company, any Subsidiary
Guarantor or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of the Notes to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any of
the Notes acquired by such purchaser pursuant to this offering. Such report must
be in the form attached to British Columbia Securities Commission Blanket Order
BOR #95/17, a copy of which may be obtained from the Company. Only one such
report must be filed in respect of the Notes acquired on the same date and under
the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of the Notes should consult their own legal and tax
advisors with respect to the tax consequence of an investment in the Notes in
their particular circumstances and with respect to the eligibility of the Notes
for investment by the purchaser under relevant Canadian legislation.
LEGAL MATTERS
The validity of the New Notes has been passed upon for the Company by
Hughes & Luce, L.L.P., Dallas, Texas.
EXPERTS
The consolidated balance sheet of Rutherford-Moran Oil Corporation as of
December 31, 1996, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the periods June 18, 1996
through December 31, 1996, and September 21, 1990 (date of inception)
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through December 31, 1996, and the consolidated balance sheet of the Company's
predecessors as of December 31, 1995, and the related predecessors' consolidated
statements of operations, changes in partners' equity and cash flows for the
period January 1, 1996 through June 17, 1996 and for the years ended December
31, 1995 and 1994, have been included herein and in the Registration Statement
in reliance upon the report 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.
The estimates of proven oil and natural gas reserves and related future net
revenues and the present value thereof as of July 1, 1997 included in this
Prospectus have been derived from the reserve report of Ryder Scott Company,
independent petroleum engineers. All of such information has been so included
herein in reliance upon the authority of such firm as experts in such matters.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This Prospectus includes certain statements that may constitute
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995). Words such as "anticipate", "estimate", "project" and
similar expressions are intended to identify such forward-looking statements.
Forward-looking statements may be included in this Prospectus in, among other
places, under "Prospectus Summary", "Risk Factors", "Use of Proceeds", "Business
and Properties" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations". Such forward-looking statements may include, but are
not limited to, statements concerning estimates of current and future results of
operations, earnings, reserves, the timing and commencement of wells and the
production therefrom, production estimates based upon drill stem tests and other
test data, future capacity under its credit arrangements, and future capital
expenditures and liquidity requirements.
Such forward-looking statements are subject to certain risks, uncertainties
and assumptions, including without limitation those discussed under "Risk
Factors" and those identified below. Should one or more of these risks or
uncertainties materialize, or should any of the underlying assumptions prove
incorrect, actual results of current and future operations may vary materially
from those anticipated, estimated or projected. Prospective investors are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their dates. The Company assumes no obligation to update any
such forward-looking statements.
Among the factors that have a direct bearing on the Company's results of
operations and the oil and gas exploration industry in which it operates are:
uncertainties inherent in estimating reserves and future cash flows; changes in
the price of oil and natural gas; the ability of the Company to develop its oil
and gas reserves; the availability of capital resources; the reliance upon
estimates of proved reserves; the limited production and exploration histories
in Block B8/32; the status of the Company's existing and future contractual
relationships with the Government of Thailand, including the Concession
agreement, and the GSA; risks associated with having the Government of Thailand
as the sole purchaser of the Company's gas production, including, political
instability and economic downturns in the Thailand economy and a reduction in
demand for oil and natural gas in Thailand; foreign currency fluctuation risks;
the presence of competitors with greater financial resources and capacity;
difficulties, and risks associated with, delivering the Company's production,
including inherent risks associated with offshore oil and gas exploration and
development operations and risks associated with offshore marine operations such
as capsizing, sinking, grounding, collision and damage from severe weather
conditions; the Company's successful execution of internal operating plans; and
regulatory uncertainties in Thailand.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes acquired
as a result of market-making activities or other trading activities. The Company
has agreed that it will make this Prospectus and any amendment or supplement to
this Prospectus available to any broker-dealer for use in connection with any
such resale for a period of 90 days after the Expiration Date or until all
participating broker-dealers have so resold.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concession from any such
broker-dealer and/or the purchasers of any New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker-dealer that participates in a distribution of New
Notes may be deemed to be an "underwriter" within the meaning of the Securities
Act, and any profit on any resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the Holders of the
Notes) other than commissions or concessions of any brokers or dealers and will
indemnify the Holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, and to
the best of the Company's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in its ordinary course of business
and has no arrangement or understanding with any person to participate in the
distribution of the New Notes to be received in the Exchange Offer.
100
<PAGE> 104
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 Fahrenheit.
"Appraisal well" means a well that is designed to delineate the extent of
hydrocarbon accumulations and to define locations for platforms.
"Bbl" means one stock tank barrel, or 42 US gallons liquid volume.
"Bcf" means billion cubic feet.
"Bcfe" means Bcf equivalent.
"Btu" means the standard measure of the heating value of natural gas.
"Development well" means a well that is drilled to exploit the hydrocarbon
accumulation defined by an appraisal well.
"Dry well" or "dry hole" means 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 and gas well.
"Exploration well" means a well that is designed to initially test the
validity of a seismic interpretation and to confirm the presence of
hydrocarbons.
"Gross acre" means an acre in which an interest is owned.
"Mbbl" means thousand barrels.
"Mbpd" means thousand barrels per day.
"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.
"MMbtu" means million Btus.
"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" means 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 proven oil and
natural gas reserves.
101
<PAGE> 105
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Statements of Operations, for the periods June
18, 1996 through December 31, 1996 (Company), and January
1, 1996 through June 17, 1996 and for the years ended
December 31, 1995 and 1994 (Predecessors) and Inception to
December 31, 1996......................................... F-3
Consolidated Balance Sheets, December 31, 1996 (Company),
and 1995 (Predecessors)................................... F-4
Consolidated Statements of Changes in Stockholders' and
Predecessors' Equity, for the periods June 18, 1996
through December 31, 1996 (Company), and January 1, 1996
through June 17, 1996 and for the years ended December 31,
1995 and 1994 and Inception to December 31, 1993
(Predecessors)............................................ F-5
Consolidated Statements of Cash Flows, for the periods June
18, 1996 through December 31, 1996 (Company), and January
1, 1996 through June 17, 1996 and for the years ended
December 31, 1995 and 1994 (Predecessors) and Inception to
December 31, 1996......................................... F-6
Notes to Consolidated Financial Statements.................. F-7
Condensed Consolidated Balance Sheets as of September 30,
1997 (Unaudited) and December 31, 1996.................... F-18
Unaudited Condensed Consolidated Statements of Operations
for the nine months ended September 30, 1997 and the
period June 18, 1996 through September 30, 1996 (Company)
and the period January 1, 1996 through June 17, 1996
(Predecessors)............................................ F-19
Unaudited Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997 and the
period June 18, 1996 through September 30, 1996 (Company)
and the period January 1, 1996 through June 17, 1996
(Predecessors)............................................ F-20
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-21
</TABLE>
F-1
<PAGE> 106
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Rutherford-Moran Oil Corporation
We have audited the accompanying consolidated balance sheet of Rutherford-Moran
Oil Corporation as of December 31, 1996 and the related consolidated statements
of operations, changes in stockholders' equity and cash flows for the periods
June 18, 1996 through December 31, 1996 and September 21, 1990 (date of
inception) through December 31, 1996, and the consolidated balance sheet of the
Company's Predecessors as of December 31, 1995 and the related Predecessors'
consolidated statements of operations, changes in partners' equity and cash
flows for the period January 1, 1996 through June 17, 1996 and for the years
ended December 31, 1995 and 1994. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Rutherford-Moran Oil Corporation and its Predecessors as of December 31, 1996
and 1995, respectively, and the results of its operations and its cash flows and
those of its Predecessors for the periods June 18, 1996 through December 31,
1996 and January 1, 1996 through June 17, 1996, for the years ended December 31,
1995 and 1994, and the period September 21, 1990 (date of inception) through
December 31, 1996, respectively, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
March 25, 1997
Houston, Texas
F-2
<PAGE> 107
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 21,
JUNE 18, JANUARY 1, 1990 (DATE OF
THROUGH THROUGH YEAR ENDED DECEMBER 31, INCEPTION) TO
DECEMBER 31, JUNE 17, ------------------------------- DECEMBER 31,
1996 1996 1995 1994 1996
------------ -------------- -------------- -------------- ---------------
(COMPANY) (PREDECESSORS) (PREDECESSORS) (PREDECESSORS)
<S> <C> <C> <C> <C> <C>
Interest Income................ $ 170 $ -- $ 5 $ 6 $ 337
Expenses:
Interest expense............. 411 395 190 107 1,362
Depreciation expense......... 25 4 5 2 37
Salaries and wages........... 427 108 114 109 882
General and administrative... 1,553 180 208 181 2,403
------- ------- ------- ------- -------
Total expenses............... 2,416 687 517 399 4,684
------- ------- ------- ------- -------
Loss before taxes..... (2,246) (687) (512) (393) (4,347)
Income tax expense (benefit)... (530) 1,921 -- -- 1,391
------- ------- ------- ------- -------
Net loss....................... $(1,716) $(2,608) $ (512) $ (393) $(5,738)
======= ======= ======= ======= =======
Net loss per common share...... $ (0.07) $ (0.12) $ (0.02) $ (0.02) $ (0.27)
======= ======= ======= ======= =======
Weighted average number of
common shares outstanding.... 25,514 21,000 21,000 21,000 21,384
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 108
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
--------- --------------
(COMPANY) (PREDECESSORS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 444 $ 9,831
Value added tax refund receivable......................... 2,806 631
Joint interest receivables................................ 150 1,002
Prepaid expenses and other................................ 17 35
-------- -------
Total current assets.............................. 3,417 11,499
Property and equipment, at cost:
Oil and gas (full cost method)............................ 123,300 55,951
Office furniture and fixtures............................. 197 58
Accumulated depreciation, depletion and amortization...... (37) (7)
-------- -------
123,460 56,002
Other assets:
Loan acquisition costs.................................... 2,089 399
Accumulated amortization.................................. (541) (231)
-------- -------
Loan acquisition costs, net of amortization............ 1,548 168
Deferred costs............................................ 1,400 --
-------- -------
Total assets...................................... $129,825 $67,669
======== =======
LIABILITIES & STOCKHOLDERS' AND PREDECESSORS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 852 $ 370
Loans from stockholders................................... -- 8,490
Note payable to bank...................................... -- 34,385
Joint interest payable.................................... 2,715 977
Accrued interest on loans from stockholders............... -- 178
-------- -------
Total current liabilities......................... 3,567 44,400
Note payable to bank........................................ 22,842 --
Deferred taxes.............................................. 1,391 --
Premium on written option................................... 1,400 --
Stockholders' and Predecessors' equity:
Predecessors' equity...................................... -- 24,450
Preferred stock, $0.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding........... -- --
Common stock, $0.01 par value, 40,000,000 shares
authorized, 25,607,000 shares issued and outstanding at
December 31, 1996...................................... 256 --
Additional paid-in capital................................ 103,143 --
Deficit accumulated during the development stage.......... (1,716) (1,181)
Deferred compensation..................................... (1,058) --
-------- -------
Total stockholders' and predecessors' equity...... 100,625 23,269
-------- -------
Commitments and contingencies............................... -- --
-------- -------
Total liabilities and stockholders' and
predecessors' equity........................... $129,825 $67,669
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 109
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' AND PREDECESSORS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
DEFICIT TOTAL
COMMON STOCK ACCUMULATED STOCKHOLDERS'
-------------------- ADDITIONAL DURING THE AND
PREDECESSORS' SHARES PAID-IN DEVELOPMENT UNEARNED PREDECESSORS'
EQUITY OUTSTANDING AMOUNT CAPITAL STAGE COMPENSATION EQUITY
------------- ----------- ------ ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 21, 1990
(Date of Inception)........... $ -- -- $ -- $ -- $ -- $ -- $ --
Capital contributions........... 11,294 -- -- -- -- -- 11,294
Capital distributions........... (2,205) -- -- -- -- -- (2,205)
Net loss........................ (58) -- -- -- (451) -- (509)
-------- ---------- ---- -------- ------- ------- --------
Balance at December 31, 1993.... 9,031 -- -- -- (451) -- 8,580
Capital contributions........... 7,296 -- -- -- -- -- 7,296
Net loss........................ (44) -- -- -- (348) -- (392)
-------- ---------- ---- -------- ------- ------- --------
Balance at December 31, 1994.... 16,283 -- -- -- (799) -- 15,484
Capital contributions........... 8,297 -- -- -- -- -- 8,297
Net loss........................ (130) -- -- -- (382) -- (512)
-------- ---------- ---- -------- ------- ------- --------
Balance at December 31, 1995.... 24,450 -- -- -- (1,181) -- 23,269
Net loss from January 1, 1996 to
June 17, 1996................. -- -- -- -- (2,608) -- (2,608)
Transfer of interests and
issuance of common stock in
initial public offering....... (24,450) 24,955,662 250 104,620 3,789 -- 84,209
Redemption of Rutherford-Moran
Exploration Company stock by
majority shareholders......... -- -- -- (12,360) -- -- (12,360)
Exercise of call option on Thai
Romo Limited stock............ -- -- -- (3,130) -- -- (3,130)
Issuance of common stock for
initial public offering over-
allotment..................... -- 600,000 6 12,828 -- -- 12,834
Grant of restricted stock
awards........................ -- 51,338 -- 1,185 -- (1,185) --
Amortization of restricted stock
awards........................ -- -- -- -- -- 127 127
Net loss from June 18, 1996 to
December 31, 1996............. -- -- -- -- (1,716) -- (1,716)
-------- ---------- ---- -------- ------- ------- --------
Balance at December 31, 1996.... $ -- 25,607,000 $256 $103,143 $(1,716) $(1,058) $100,625
======== ========== ==== ======== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 110
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 21,
JUNE 18, JANUARY 1, YEAR ENDED 1990 (DATE OF
THROUGH THROUGH ------------------------------- INCEPTION) TO
DECEMBER 31, JUNE 17, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1995 1994 1996
------------- -------------- -------------- -------------- -------------
(COMPANY) (PREDECESSORS) (PREDECESSORS) (PREDECESSORS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss..................................... $ (1,716) $ (2,608) $ (512) $ (393) $ (5,737)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and amortization.............. 25 4 5 2 37
Amortization of deferred financing costs... 141 -- -- -- 141
Amortization of unearned compensation...... 127 -- -- -- 127
Deferred income taxes...................... (530) 1,921 -- -- 1,391
Changes in assets and liabilities:
Accounts receivable...................... (764) (559) (1,628) (5) (2,956)
Accounts payable......................... (4,116) 6,336 479 198 3,745
Other current assets and liabilities..... 13 (172) (25) 2 (195)
-------- -------- -------- ------- ---------
Cash provided by (used in) operating
activities........................... (6,820) 4,922 (1,681) (196) (3,447)
-------- -------- -------- ------- ---------
Cash flows from investing activities:
Investment in oil and gas properties......... (36,804) (30,377) (36,776) (8,159) (122,901)
Other capital expenditures................... (101) (38) (12) (19) (197)
-------- -------- -------- ------- ---------
Cash used in investing activities...... (36,905) (30,415) (36,788) (8,178) (123,098)
-------- -------- -------- ------- ---------
Cash flows financing activities:
Deferred financing costs..................... (1,689) -- -- -- (1,689)
Exercise of call option on Thai Romo Limited
stock...................................... (3,130) -- -- -- (3,130)
Capital contributions........................ -- -- 7,898 7,296 26,488
Proceeds from initial public offering........ 97,043 -- -- -- 97,043
Redemption of Rutherford-Moran Exploration
Company stock by majority stockholders..... (12,360) -- -- -- (12,360)
Proceeds from loans from stockholders........ -- 15,654 6,993 -- 24,994
Payments on loans from stockholders.......... (24,144) -- -- -- (24,994)
Capital distributions........................ -- -- -- -- (2,205)
Borrowings under bank notes.................. 22,842 29,164 32,985 1,400 86,391
Repayments of bank notes..................... (49,664) (13,885) -- -- (63,549)
-------- -------- -------- ------- ---------
Cash provided by financing
activities........................... 28,898 30,933 47,876 8,696 126,989
-------- -------- -------- ------- ---------
Net increase (decrease) in cash and
cash equivalents..................... (14,827) 5,440 9,407 322 444
Cash and cash equivalents, beginning of
period....................................... 15,271 9,831 424 102 --
-------- -------- -------- ------- ---------
Cash and cash equivalents, end of period....... $ 444 $ 15,271 $ 9,831 $ 424 $ 444
======== ======== ======== ======= =========
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest..... $ 1,139 $ 767 $ 211 $ 220 $ 1,279
======== ======== ======== ======= =========
Cash paid during the period for income tax... $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======= =========
Supplemental disclosure of noncash investing
and financing activities:
Issuance of partnership interest in Thai Romo
Limited for loan acquisition costs......... $ -- $ -- $ 400 $ -- $ 400
======== ======== ======== ======= =========
Capitalization of amortized loan acquisition
costs...................................... $ -- $ 168 $ 231 $ -- $ 399
======== ======== ======== ======= =========
Interests in Thai Romo Limited and
Rutherford-Moran Exploration Company
contributed for common
stock...................................... $ -- $ 24,450 $ -- $ -- $ 24,450
======== ======== ======== ======= =========
Predecessor retained earnings reclassified to
additional paid-in capital................. $ 3,789 $ -- $ -- $ -- $ 3,789
======== ======== ======== ======= =========
Premium deferred and premium on written
option..................................... $ 843 $ 557 $ -- $ -- $ 1,400
======== ======== ======== ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 111
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION
The accompanying consolidated financial statements of Rutherford-Moran Oil
Corporation ("RMOC" or "Company"), a Delaware corporation, have been prepared
pursuant to the rules and regulation of the Securities and Exchange Commission
("SEC").
The Company is an independent energy company engaged in the acquisition,
exploration, development and production of oil and gas properties in Southeast
Asia. As of December 31, 1996, the Company's exploration activities are entirely
in the Gulf of Thailand and are conducted through its subsidiary, Thai Romo,
Limited ("Thai Romo").
The financial statements reflect all adjustments that, in the opinion of
management, are necessary for a fair presentation.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
In April 1996, Rutherford/Moran Oil Corporation changed its name to
Rutherford-Moran Exploration Company ("RMEC"). 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 its subsidiary, Thai Romo, which was
organized as a foreign corporation under the laws of the Kingdom of Thailand.
Thai Romo was formed as a wholly owned subsidiary of RMEC. 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, a wholly owned subsidiary of Pogo
Producing Company, and Maersk Oil (Thailand), Limited ("MOTL"), a wholly-owned
subsidiary of Maersk Olie og Gas As. Subsequent to the award, the Sophonpanich
Co., Limited ("Sophonpanich") elected to participate in the Concession as a
co-venturer. Thaipo has been the operator of the Tantawan Field within the
Concession, and until March 1997 the remainder of the Concession was operated by
Maersk Oil (Thailand) Ltd. Subsequent to March 1997, Thaipo operated the
remainder of the concession, as the shares of Maersk Oil (Thailand) Limited were
sold to the concessionaires. Effective June 17, 1996, the stockholders of RMEC
and the partners of Thai Romo exchanged their interests for shares of common
stock of a newly formed entity, RMOC. RMOC is the parent company of RMEC and
Thai Romo Holdings, Inc. RMEC and Thai Romo Holdings, Inc. collectively own the
outstanding shares of Thai Romo. During June 1996, RMOC sold 16% of its common
stock in an initial public offering (the "Offering") in conjunction with the
consummation of the exchange of RMEC common stock and Thai Romo interests for
common stock of RMOC. In conjunction with the Offering, RMEC redeemed 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"),
exercised RMEC's call option on 3% of the partners' interest in Thai Romo held
by Red Oak Holdings, Inc. for $3.1 million and repaid outstanding debt of $62
million owed stockholders and banks. On June 18, 1996, the stockholders' equity
accounts were adjusted to reflect the deficit accumulated during the development
stage to additional paid-in capital upon RMEC and Thai Romo becoming subject to
federal income taxes. During July 1996, an additional 2.4% of RMOC's common
stock was sold when the underwriters exercised their over-allotment option.
The consolidated financial statements for the period from June 18, 1996 to
December 31, 1996 include the accounts of RMOC and its wholly owned
subsidiaries, RMEC, Thai Romo and Thai Romo Holdings, Inc. All material
intercompany accounts and transactions have been eliminated in consolidation.
F-7
<PAGE> 112
The financial statements for each of the years in the two-year period ended
December 31, 1995, and the period from January 1, 1996 to June 17, 1996 include
the accounts of RMEC, Thai Romo and Thai Romo Holdings, Inc. (the
"Predecessors") (combined). 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 revenue from
production did not begin until February 1997. As a result, the Company is
considered a development stage company.
CASH AND CASH EQUIVALENTS
The Company considers all currency and any liquid investments with a
maturity of three months or less to be cash equivalents.
OIL AND GAS PROPERTIES
The Company and its subsidiaries follow the full cost method of accounting
for its investment in oil and gas properties. Under this method of accounting,
all costs of acquisition, exploration and development of oil and gas reserves
(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.
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. The Concession, a major development
project, has had no production of reserves, and accordingly, no depreciation,
depletion, or amortization of oil and gas properties has been provided since
inception. Production began in February 1997 at which time depletion will begin.
Disposition 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 depletion and amortization, exceed the
tax-effected discounted future net revenues of proved oil and gas reserves, such
excess capitalized costs would be charged to operations. No such write-down in
book value was required during the years ending December 31, 1994, 1995, and
1996.
OTHER PROPERTY AND EQUIPMENT
Other property consists primarily of furniture, office equipment, leasehold
improvements and computers. The majority of these assets are depreciated on a
straight-line basis with useful lives of seven years.
HEDGING
During the first quarter of 1996, the Company entered into crude oil price
swaps with an affiliate of one of its lenders. While the swaps serve as hedges
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 December 31, 1996, the crude oil price swap agreements incorporated one
million barrels ("MMbbl") of oil volumes from April through December 1997 at a
weighted average price of $15.92 per Bbl and 1.75 MMbbl of oil volumes from
January through December 1998 at a weighted average price of $15.92 per Bbl. At
December 31, 1996, the Company estimates the cost of liquidating this position
to be approximately $8.5 million.
Also, the Company sold to an affiliate of one of its bank lenders an option
to purchase 1.25 MMbbl of aggregate oil volumes from January through December
1999 at a price of $18.30 per Bbl. The Company has accounted for the swap option
separately as it does not qualify as a hedge. At December 31, 1996, the Company
estimates the fair market value of this position to be $1.4 million and has
recorded the amount as a liability on the consolidated balance sheet.
F-8
<PAGE> 113
REVENUE RECOGNITION
The Company recognizes revenues at the time of transfer to the purchasers;
however, crude oil inventory is recorded at the cost of production and related
depletion upon transfer to the floating production, storage and offloading
vessel.
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 the Company.
USE OF ESTIMATES
Management of the Company has 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.
VALUE ADDED TAX REFUND RECEIVABLE
Expenditures on certain 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.
STOCK-BASED COMPENSATION
During 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123").
SFAS No. 123 allows a company to adopt a fair value based method of accounting
for a stock-based employee compensation plan or to continue to use the intrinsic
value based method of accounting prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25"). The
Company has chosen to continue to account for stock-based compensation under APB
No. 25. Under this method, the Company has not recorded any compensation expense
related to stock options granted. The disclosures required by SFAS No. 123,
however, have been included in Note 8.
NOTE 3 INCOME TAXES
Deferred taxes are accounted for under the asset and liability method of
accounting for income taxes. Under this method deferred income taxes are
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax basis of existing assets
and liabilities. The effect on deferred taxes of a change in tax rates is
recognized in income in the period the change occurs.
The Predecessors were a limited partnership and an S Corporation under the
Internal Revenue Code of 1986, as amended. As such, they did not incur federal
income taxes; the taxable income or loss was passed through to the partners or
stockholders. As a result of the initial public offering in June 1996, the
Company became a taxable entity and recorded a one-time charge of $1,921,000,
representing the difference between the financial statement and income tax basis
of its foreign oil and gas properties. Income tax expense for the period June
18, 1996, through December 31, 1996, was a benefit of $530,000, which represents
a deferred foreign income tax benefit.
F-9
<PAGE> 114
Total income tax benefit for the period June 18, 1996, through December 31,
1996, differs from the amount computed by applying the Federal income tax rate
to the loss before income taxes. The reasons for this difference follows
(amounts in thousands):
<TABLE>
<S> <C>
Expected federal income tax benefit......................... $ 764
Foreign income tax rate difference.......................... 359
Nondeductible general and administrative costs for foreign
income tax purposes....................................... (388)
Nondeductible interest for foreign income tax purposes...... (205)
-----
$ 530
=====
</TABLE>
The tax effects of temporary differences related to property and equipment
resulted in the deferred income tax liability at December 31, 1996.
NOTE 4 ACQUISITIONS
On December 19, 1996, Rutherford-Moran Oil Corporation, through its wholly
owned subsidiary, Thai Romo, exercised its preferential right to purchase 46.34%
of the outstanding shares of Maersk Oil (Thailand), Limited ("MOTL"), a wholly
owned subsidiary of Maersk Olie og Gas As of Copenhagen, Denmark ("Maersk").
MOTL is a former co-concessionaire in Block B8/32 located offshore Thailand
owning a 31.67% interest. The purchase was consummated on March 3, 1997, with
Thai Romo Holdings, Inc., a wholly owned subsidiary of the Company and Thai
Romo's nominee under the Share Sales Agreement with Maersk, purchasing the
shares for $28,617,000, which included $1,554,000 in satisfaction of outstanding
debt. After the closing, MOTL is in the process of being renamed B8/32 Partners.
The purchase price was established in a Share Sale Agreement dated November
2, 1996, between Maersk and BG Egypt S.A. Pursuant to the Joint Operating
Agreement among the co-concessionaires, Thai Romo and the remaining
co-concessionaires jointly had a preferential right to purchase the stock of
MOTL on the terms and conditions agreed between Maersk and BG Egypt S.A.
The remaining 53.66% of MOTL's stock was purchased by Pogo Producing
Company, and by Palang Sophon Limited of Bangkok, Thailand. Thaipo Limited, a
subsidiary of Pogo Producing Company, and Palang Sophon Limited and MOTL were
co-concessionaires with Thai Romo Limited prior to the sale of MOTL. As a
result, RMOC's interest in the entire Block B8/32 has now effectively increased
from 31.67% to 46.34%.
The Company financed the purchase of MOTL by utilizing $20,000,000 from a
new credit facility entered into with The Chase Manhattan Bank ("Chase") which
term expires on June 30, 1997. The remainder of the payment was financed with
borrowings under the Company's existing revolving credit facility with Chase and
other lenders. The credit facility contains terms which are substantially
identical to those in the Company's Revolving Credit Facility. The Company
expects to repay the new credit facility with proceeds from the redetermined
borrowing base in its Revolving Credit Facility.
NOTE 5 DEBT
CREDIT FACILITY
On September 20, 1996, the Company entered into a $150,000,000 Revolving
Credit Facility with a group of commercial lenders. The Revolving Credit
Facility has a final maturity of September 30, 1999 and a borrowing base
limitation at December 31, 1996, of $60,000,000. The Revolving Credit Facility
is secured by the stock of certain subsidiaries of the Company.
Under the terms of the Revolving Credit Facility, outstanding borrowings
will bear interest at the Base Rate (defined as the greater of the Federal Funds
Rate plus .5% or the agent bank's prime rate) plus .25% or the Eurodollar Rate
(defined as an average of the London Interbank Offered Rate (LIBOR) of two
banks) plus 1.75%, at the Company's option. Interest is payable quarterly. The
Company is also
F-10
<PAGE> 115
assessed a commitment fee equal to .5% per annum on the average daily balance of
the unused borrowing base. The Revolving Credit Facility provides for
semi-annual borrowing base redeterminations as well as certain covenants,
including restrictions on additional indebtedness, payment of dividends and an
interest coverage ratio.
At December 31, 1996, $22,842,000 was outstanding under the Credit Facility
at interest rates ranging from 7.125% to 7.4375% per annum. Such facility is
payable in 1999.
NOTES PAYABLE
In November 1994, Thai Romo executed a Loan Facility Agreement with a
commercial lender 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. 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 was 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 June 28, 1996. 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 June 28, 1996. The annual interest rates on
amounts borrowed under the Line of Credit ranged from prime plus 1/2% to prime
plus 1% and from LIBOR plus 2 1/4% to LIBOR plus 2 3/4%, at the Company's
option. At December 31, 1995, the amount outstanding under the Line of Credit
was $13,385,000.
All debt pertaining to the Loan Facility Agreement and the Line of Credit
was retired on June 28, 1996, with proceeds from the initial public offering.
LOANS FROM STOCKHOLDERS
RMEC had loans from stockholders at December 31, 1995 as follows (amounts
in thousands):
<TABLE>
<CAPTION>
PAYMENT INTEREST
STOCKHOLDER TERMS RATE 1995
----------- --------- -------- ------
<S> <C> <C> <C>
Patrick R. Rutherford................................ On demand Prime $4,254
John A. Moran........................................ On demand Prime 4,036
Sidney F. Jones, Jr.................................. On demand Prime 200
------
$8,490
======
</TABLE>
The loans from stockholders were retired on June 28, 1996 with proceeds
from the initial public offering.
Interest of $368,000, $190,000 and $107,000 was expensed by RMEC under the
above loans during January 1, 1996 through June 17, 1996 and the years ended
December 31, 1995 and 1994, respectively, and $924,000 was expensed during the
period September 21, 1990 (date of inception), to June 17, 1996.
NOTE 6 CAPITAL STOCK
COMMON AND PREFERRED STOCK
The Certificate of Incorporation of the Company authorizes the issuance of
up to 40,000,000 shares of common stock and 10,000,000 shares of preferred
stock, the terms, preferences, rights and restrictions of which will be
established by the Board of Directors of the Company. All shares of common stock
have equal voting rights of one vote per share on all matters to be voted upon
by stockholders. Cumulative voting for the election of directors is not
permitted.
F-11
<PAGE> 116
On June 17, 1996, the Company sold 4,000,000 shares of its common stock in
an initial public offering at $23 per share. During July 1996, the Company sold
an additional 600,000 shares at $23 per share when the underwriters exercised
their over-allotment option.
NOTE 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
$133,000, $731,000, $366,000 and $1,723,000 during period January 1, 1996 to
June 17, 1996 and the years ended December 31, 1995 and 1994 and the period from
September 21, 1990 (date of inception) to December 31, 1996. Subsequent to June
1996 Rutherford Oil has no longer obtained such insurance or performs any such
services on behalf of the Company.
NOTE 8 EMPLOYEE BENEFIT PLANS
KEY EMPLOYEE STOCK PLAN
During 1996, the Company established its 1996 Key Employee Stock Plan (the
"Stock Plan"). Under the Stock Plan, an aggregate of 500,000 shares will be
available for the granting of either stock options or restricted stock awards.
The Compensation Committee of the Board of Directors administers this plan.
Stock options issued under the Stock Plan may not exceed a term of more
than ten years and the stock option price may not be less than the fair market
value of the shares at the time the option is granted. The options are
exercisable ratably over a five year period. At December 31, 1996, a total of
105,750 stock options were granted under the Stock Plan, none of which are
currently exercisable. The exercise price of all options granted is $23.
The Compensation Committee may award 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. Issuance of the stock may be subject to certain
restrictions, but in no case can the conditions continue for more than ten years
from the date of the award. As the shares vest, each employee receiving such
restricted stock has all of the rights of a stockholder, including without
limitation, the right to vote such shares. At December 31, 1996, restricted
stock awards for 51,338 shares had been granted, at no cost to the employees.
Deferred compensation is recorded at the date of the restricted stock award and
is amortized into compensation expense over the vesting period. At December 31,
1996, deferred compensation of $1,185,000 was recorded and related compensation
expense of $127,000 was recognized during the period June 18, 1996 to December
31, 1996. Substantially all restricted stock awards outstanding at December 31,
1996, vest ratably over a five year period.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
During 1996, the Company established its 1996 Non-Employee Director Stock
Option Plan (the "Director Plan"). Under the Director Plan, an aggregate of
50,000 shares of common stock will be available for the granting of stock
options. The exercise price of a stock option granted pursuant to the Director
Plan may not be less than the fair market value of the common stock on the date
of grant and the stock option term may not exceed ten years. Stock options
granted under the Director Plan are exercisable in full after the first
anniversary of grant. The Director Plan provides for an initial grant of stock
options to each non-employee director to purchase 2,500 shares of common stock
contemporaneously with the initial public offering and the annual grant of stock
options to acquire 1,000 shares of stock to each non-employee director serving
on the board of directors following each annual meeting of the stockholders. As
of December 31, 1996, non-employee directors have been granted stock options to
acquire 10,000 shares of common stock, none of which are exercisable. The
exercise price of all options granted to date is $23.
F-12
<PAGE> 117
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations in accounting for
its Stock Plan and Director Plan. Accordingly, no compensation has been
recognized for stock-based compensation other than for restricted stock awards.
Had compensation cost for the stock options issued under the Stock Plan and
Director Plan been determined based upon the fair value at the grant date for
awards under these plans consistent with the methodology prescribed under the
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the Company's net loss and net loss per share would have been
increased by approximately $1,812,000, or $0.07 per share. The fair value of the
stock options granted during the twelve-month period ended December 31, 1996, is
estimated as $16.32 on the date of grant using the Black-Scholes option pricing
model with the following assumptions: dividend yield of 0%, volatility of 23%,
risk-free interest rate of 6.42%, assumed forfeiture rate of 0%, and an expected
life of 9.5 years.
At December 31, 1996, 342,912 and 40,000 shares of common stock were
reserved for issuance pursuant to the Stock Plan and the Director Plan,
respectively. The remaining weighted average life of the 115,750 options
outstanding at December 31, 1996, is 9.5 years.
NOTE 9 COMMITMENTS AND CONTINGENCIES
GUARANTY AND INDEMNITY AGREEMENT
On February 9, 1996, Thai Romo Limited entered into a Guaranty and
Indemnity Agreement associated with a Bareboat Charter agreement between
Tantawan Services, LLC, as charterer, and Tantawan Production B.V., as lessor,
for the leasing and operation of a Floating Production Storage and Offloading
system (FPSO) known as the Tantawan Explorer. The initial duration of the
Bareboat Charter Agreement is 10 years commencing upon delivery of crude oil to
the FPSO. The hire rate under the Bareboat Charter is $55,000 per day. Thai Romo
has guaranteed payment of 46.3% of these costs or approximately $25,448 per day.
The guaranty terminates upon the expiration of the Bareboat Charter Agreement,
notwithstanding the lawful termination or cancellation of the Bareboat Charter
Agreement. Should the initial term of the agreement be extended or the FPSO
purchased, Thai Romo would remain obligated for 46.3% of any subsequent
obligations incurred by Tantawan Services.
LEASE COMMITMENTS
RMEC is subject to an office lease which expires in February 2002. The
commitment under this lease is as follows (amounts in thousands):
<TABLE>
<CAPTION>
YEAR
- ------------------------------------------------------------
<S> <C>
1997........................................................ $117
1998........................................................ 118
1999........................................................ 126
2000........................................................ 142
Thereafter.................................................. 166
----
$669
====
</TABLE>
Rental expense paid during the periods June 18, 1996 to December 31, 1996
and January 1, 1996 to June 17, 1996 and the years ended December 31, 1995 and
1994 and the period from September 21, 1990 (date of inception), to December 31,
1996, was $45,000, $52,000, $67,000, $77,000 and $285,000, respectively.
NOTE 10 LITIGATION
As of December 31, 1996, the Company is not aware of any current or
potential legal proceeding.
F-13
<PAGE> 118
NOTE 11 SINGLE CUSTOMER
All oil and natural gas produced from the Tantawan Field will 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.
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 conclusion of a 72-hour production test, which
was completed in March 1997. The natural gas price is based on a formula which
provides adjustments to the base price for natural gas on each April 1 and
October 1. Adjustments will be made to reflect changes in (i) wholesale prices
in Thailand, (ii) the U.S. producer price index for oil field machinery and
tools, and (iii) medium fuel oil prices. Adjustment factors for oil field
machinery and medium fuel oil prices may be subsequently adjusted for Thai
Baht/U.S. Dollar fluctuations, since payments from PTT will be in Thai Baht. The
base price was estimated to be equivalent to $2.12 per thousand cubic feet (Mcf)
at January 1, 1997.
The oil and condensate 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 pursuant to a Memorandum
of Understanding signed on November 14, 1996. If PTT does not wish to purchase
this oil, then the Company believes that it can sell the oil to a variety of
purchasers.
NOTE 12 SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
At December 31, 1996, and 1995 the Concession accounted for 100% of the
Company's future net cash flow 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 been producing at such time, except where
fixed and determinable price escalations or oil hedges are provided by contract.
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.
All reserve estimates presented herein were prepared by Ryder Scott
Company, independent petroleum engineers. The Company cautions that there are
many uncertainties inherent in estimating proved reserve quantities, and in
projecting future production rates and the timing of future development
expenditures, including many factors beyond the control of the producer.
Accordingly, these estimates are subject to change as additional information
becomes available. 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.
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
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
F-14
<PAGE> 119
would include many additional factors including: (i) anticipated future
increases and 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.
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 depreciation and amortization as of the dates
indicated (amounts in thousands).
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- -------
<S> <C> <C>
Productive and nonproductive properties being amortized..... $123,300 $55,951
Less accumulated depreciation and amortization.............. -- --
-------- -------
Net capitalized costs....................................... $123,300 $55,951
======== =======
</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 indicated
(amounts in thousands).
<TABLE>
<CAPTION>
SEPTEMBER 1990
(DATE OF
YEAR ENDED DECEMBER 31, INCEPTION) TO
-------------------------- DECEMBER 31,
1996 1995 1994 1996
------- ------- ------ --------------
<S> <C> <C> <C> <C>
Property acquisition costs -- proved
properties............................ $ -- $ 4,224 $ -- $ 4,224
Exploration costs....................... 7,460 26,601 8,159 53,004
Development cost........................ 59,890 6,182 -- 66,072
------- ------- ------ --------
$67,350 $37,007 $8,159 $123,300
======= ======= ====== ========
</TABLE>
F-15
<PAGE> 120
The following table sets forth the Company's interest in estimated total
proved oil and gas reserves for the years ended December 31, 1996, 1995, and
1994:
<TABLE>
<CAPTION>
OIL GAS
(BBLS) (MMCF)
--------- ------
<S> <C> <C>
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
Purchase of reserves........................................ 3,554,975 26,284
--------- ------
Total proved reserves at December 31, 1995.................. 18,996,992 131,607
New discoveries and extensions.............................. 6,209,030 46,447
Revisions of previous estimates............................. (3,874,242) (33,056)
--------- ------
Total proved reserves at December 31, 1996.................. 21,331,780 144,998
========= ======
Proved developed reserves:
December 31, 1994......................................... -- --
December 31, 1995......................................... -- --
December 31, 1996......................................... 5,191,993 45,998
========= ======
</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. Total reserves do not include reserves
acquired in the MOTL purchase on March 3, 1997.
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, 1996, 1995 and 1994 (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Future cash inflows.............................. $ 811,239 $ 621,742 $265,802
Future development costs......................... (184,753) (127,198) (94,155)
Future production costs.......................... (245,398) (207,352) (60,306)
--------- --------- --------
Future net cash inflows before income taxes...... 381,088 287,192 111,341
Future income taxes.............................. (134,276) (137,204) (48,948)
--------- --------- --------
Future net cash flows............................ 246,812 149,988 62,393
10% discount..................................... (103,446) (74,669) (28,429)
--------- --------- --------
Standardized measure of discounted future net
cash inflows................................... $ 143,366 $ 75,319 $ 33,964
========= ========= ========
</TABLE>
F-16
<PAGE> 121
Principal changes in the "Standardized Measure of Discounted Futures Net
Cash Flows" attributable to the Company's proved oil and gas reserves for the
periods indicated are as follows (amounts in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 21,
1990
(DATE OF
YEAR ENDED DECEMBER 31, INCEPTION) TO
------------------------------ DECEMBER 31,
1996 1995 1994 1996
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
New discoveries and extensions....... $101,776 $ 52,372 $ 17,235 $195,971
Revisions of quantity estimates...... (51,043) 6,027 -- (45,016)
Purchases of reserves in place....... -- 27,182 -- 27,182
Net changes in sales and transfer
prices, net of production costs.... 5,647 (2,712) 8,521 4,816
Accretion of discount................ 13,163 5,211 1,717 21,512
Net Change in income taxes........... 2,405 (38,163) (14,159) (53,907)
Change in production rates (timing)
and other.......................... (3,901) (8,561) 7,472 (7,192)
-------- -------- -------- --------
Net Change........................... $ 68,047 $ 41,356 $ 20,786 $143,366
======== ======== ======== ========
</TABLE>
NOTE 13 FINANCIAL INSTRUMENTS
Determination of Fair Values of Financial Instruments
Fair value for cash and cash equivalents, short-term investments,
receivables and payables at December 31, 1996, and December 31, 1995,
approximates carrying value.
The carrying amount of cash equivalents and value added tax refund
receivable approximates fair value because of the short maturity of these
instruments. The carrying amount of joint interest receivables and payables 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 bank and loans from stockholders approximates fair value because the interest
rate is reset at periodic intervals. See Note 2 for discussion of the fair value
of hedging and swap options.
F-17
<PAGE> 122
RUTHERFORD-MORAN OIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 3,415 $ 444
Accounts receivable....................................... 2,658 --
Inventory................................................. 7,581 --
Value added tax refund receivable......................... 5,829 2,806
Joint interest receivables................................ 3,456 150
Other..................................................... 369 17
-------- --------
Total current assets.............................. 23,308 3,417
Property and equipment, at cost:
Oil and gas properties (full cost method)................. 217,699 123,300
Office furniture and fixtures............................. 376 197
Accumulated depreciation, depletion and amortization...... (13,269) (37)
-------- --------
Net property and equipment........................ 204,806 123,460
Other assets:
Deferred financing costs, net............................... 4,278 1,548
Restricted cash............................................. 24,300 --
Deferred charges............................................ 1,354 1,400
-------- --------
Total assets...................................... $258,046 $129,825
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 4,944 $ 852
Joint interest payable.................................... 6,320 2,715
-------- --------
Total current liabilities......................... 11,264 3,567
Note payable to bank........................................ 29,996 22,842
10 3/4 senior subordinated notes............................ 120,000 --
Deferred income taxes....................................... 3,682 1,391
Premium on written option................................... 1,238 1,400
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding...........
Common stock, $0.01 par value, 40,000,000 shares
authorized, 25,612,440 and 25,607,000 shares issued and
outstanding at September 30, 1997 and December 31,
1996, respectively..................................... 256 256
Additional paid-in capital................................ 103,302 103,143
Accumulated deficit....................................... (10,706) (1,716)
Deferred compensation..................................... (986) (1,058)
-------- --------
Total stockholders' equity........................ 91,866 100,625
-------- --------
Total liabilities and stockholders' equity................ $258,046 $129,825
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-18
<PAGE> 123
RUTHERFORD-MORAN OIL CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
NINE MONTHS JUNE 18 JANUARY 1
ENDED THROUGH THROUGH
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 JUNE 17, 1996
------------------ ------------------ ---------------
(COMPANY) (COMPANY) (PREDECESSORS)
<S> <C> <C> <C>
Revenues:
Oil and Gas Revenue.................. $ 25,784 $ -- $ --
Interest Income...................... 162 158 --
----------- ----------- -----------
Total Revenues............... 25,946 158 --
----------- ----------- -----------
Expenses:
Operating expense.................... 17,100 -- --
Interest expense..................... 4,620 248 395
Depreciation, depletion and
amortization...................... 13,232 16 4
Salaries and wages................... 837 165 108
General and administrative........... 3,156 592 180
Net gain on futures contracts........ (275) -- --
Foreign currency exchange loss,
net............................... 1,850 -- --
----------- ----------- -----------
Total Expenses............... 40,520 1,021 687
----------- ----------- -----------
Loss before income taxes..... (14,574) (863) (687)
Income tax (benefit) expense........... (5,584) (152) 1,921
----------- ----------- -----------
Net loss..................... $ (8,990) $ (711) $ (2,608)
=========== =========== ===========
Net loss per share........... $ (0.35) $ (0.03) $ (0.12)
=========== =========== ===========
Weighted average number of common
shares outstanding................... 25,612,440 25,438,462 21,000,000
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-19
<PAGE> 124
RUTHERFORD-MORAN OIL CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS JUNE 18 JANUARY 1
ENDED THROUGH THROUGH
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 JUNE 17, 1996
------------------ ------------------ ---------------
(COMPANY) (COMPANY) (PREDECESSORS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................... $ (8,990) $ (711) $ (2,608)
Adjustments to reconcile net loss to cash
flows provided by (used in) operating
activities:
Depreciation, depletion and
amortization.......................... 13,886 245 4
Net gain on futures contracts........... (275) -- --
Deferred income taxes................... (5,584) (152) 1,921
Foreign currency exchange loss, net..... 1,850 -- --
Changes in working capital.............. (12,738) (7,104) 5,605
-------- -------- --------
Cash flows provided by (used in) operating
activities................................. (11,851) (7,722) 4,922
-------- -------- --------
Cash flows from investing activities:
Investment in oil and gas properties....... (57,112) (14,835) (30,377)
Investment in Maersk, net of cash
acquired................................ (29,414) -- --
Other capital expenditures................. (179) (98) (38)
-------- -------- --------
Cash flows used in investing
activities............................ (86,705) (14,933) (30,415)
-------- -------- --------
Cash flows from financing activities:
Deferred financing costs................... (187) (1,689) --
Exercise of call option on Thai Romo
Limited stock........................... -- (3,130) --
Proceeds from initial public offering...... -- 97,103 --
Redemption of Rutherford-Moran Exploration
Company stock by majority
stockholders............................ -- (12,360) --
Proceeds from shareholder loans............ -- -- 15,654
Payments on shareholder loans.............. -- (24,144) --
10 3/4% senior subordinated notes.......... 120,000 -- --
Bond offering costs........................ (2,965) -- --
Restricted cash............................ (24,300) -- --
Borrowings under bank notes................ 106,330 2,000 29,164
Repayment of bank notes.................... (99,176) (49,664) (13,885)
-------- -------- --------
Cash flows provided by financing
activities............................ 99,702 8,116 30,933
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents........................... 1,146 (14,539) 5,440
Effect of exchange rate changes on
cash.................................. 1,825 -- --
Cash and cash equivalents, beginning of
period..................................... 444 15,271 9,831
-------- -------- --------
Cash and cash equivalents, end of period..... $ 3,415 $ 732 $ 15,271
======== ======== ========
Supplemental disclosures of interest paid in
cash....................................... $ 1,031 $ 56 $ 767
======== ======== ========
Supplemental disclosures of noncash investing
and financing activities:
Capitalization of amortized loan
acquisition costs....................... $ -- $ -- $ 168
======== ======== ========
Interests in Thai Romo Limited and
Rutherford-Moran Exploration Company
contributed for common stock............ $ -- $ -- $ 24,682
======== ======== ========
Predecessor retained earnings reclassified
to additional paid-in capital........... $ -- $ 4,021 $ --
======== ======== ========
Premium deferred and premium on written
options................................. $ 338 $ 443 $ 557
======== ======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-20
<PAGE> 125
RUTHERFORD-MORAN OIL CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements include all
adjustments necessary to present fairly the consolidated financial position of
Rutherford-Moran Oil Corporation ("RMOC" or the "Company") at September 30, 1997
and December 31, 1996, and its results of operations and cash flows for the nine
months ended September 30, 1997 and 1996. The financial statements herein should
be read in conjunction with the consolidated financial statements and notes to
the consolidated financial statements as of and for the year ended December 31,
1996, as included in the Company's annual report on Form 10-K.
In the opinion of management, the unaudited condensed consolidated
financial statements as of September 30, 1997 and for the nine months ended
September 30, 1997, and the periods June 18, 1996 through September 30, 1996 and
January 1, 1996 through June 17, 1996 include all material adjustments, which
consist only of normal recurring adjustments necessary for a fair presentation,
and are not necessarily indicative of an entire year.
In order to prepare these financial statements in conformity with generally
accepted accounting principles, management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and liabilities,
the disclosure of contingent assets and liabilities and reserve information
(which affects the depletion calculation as well as the computation of the
ceiling limitation). Actual results could differ from those estimates.
(2) ORGANIZATION
Rutherford-Moran Exploration Company ("RMEC") was formed on September 21,
1990, for the purpose of holding an interest in an oil and gas 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 a Subchapter S Corporation under the Internal Revenue Code of 1986,
as amended. As such, RMEC did not incur federal income taxes at the corporate
level prior to June 18, 1996, and its taxable income or loss was passed through
to its stockholders based on their interests.
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 Petroleum Concession 1/2534/36 (the "Concession"), offshore Block B8/32
in the Gulf of Thailand from the Ministry of Industry in Thailand to explore for
petroleum. A subsidiary of Pogo Producing Company is the operator of the
Concession. In November 1993, Thai Romo amended its Articles of Association so
that it would be treated as a partnership for U.S. income tax purposes. As such,
Thai Romo was not subject to federal income taxes from November 1993 to June 17,
1996. Income and losses earned by Thai Romo were passed through to the partners
on the basis of their interest in Thai Romo.
As RMEC and Thai Romo are now part of the Company's consolidated tax
return, RMEC and Thai Romo recorded a deferred tax liability and expense of
$1,921,000 on June 17, 1996 representing the difference between the book basis
and tax basis of its foreign oil and gas properties.
(3) PRINCIPLES OF PRESENTATION
In April 1996, Rutherford/Moran Oil Corporation changed its name to RMEC.
Effective June 17, 1996, the stockholders of RMEC and the partners of Thai Romo
exchanged their interests for shares of
F-21
<PAGE> 126
RUTHERFORD-MORAN OIL CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
common stock of the newly formed entity, RMOC. RMOC is the parent company of
RMEC and Thai Romo Holdings, Inc. ("TRH"). RMEC and TRH collectively own the
outstanding shares of Thai Romo. During June 1996, RMOC sold 16% of its common
stock in an initial public offering (the "Offering") in conjunction with the
consummation of the exchange of RMEC common stock and Thai Romo interests for
common stock of RMOC. In conjunction with the Offering, RMEC redeemed 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"),
exercised RMEC's call option on 3% of the partners' interest in Thai Romo held
by Red Oak Holdings, Inc. for $3.1 million and repaid outstanding debt of $62
million owed stockholders and banks. On June 18, 1996, the stockholders' equity
accounts were adjusted to reflect the deficit accumulated during the development
stage to additional paid-in capital upon RMEC and Thai Romo becoming subject to
federal income taxes. During July 1996, an additional 2.4% of RMOC's common
stock was sold when the underwriters exercised their over-allotment option.
The consolidated financial statements for 1997 include the accounts of
RMOC, its wholly owned subsidiaries and its proportionate ownership of B8/32
Partners, Limited ("B8/32 Partners"), in which RMOC owns 46.34% of the
outstanding voting shares. All material intercompany accounts and transactions
have been eliminated in the consolidation.
The financial statements for the the period January 1, 1996 through June
17, 1996, include the accounts of RMEC and Thai Romo (combined). 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.
During the period from September 21, 1990, through December 31, 1996, the
Company was considered a development stage company and its sole activity was the
development of Block B8/32 in the Gulf of Thailand. Production from the Tantawan
Field commenced in February 1997, at which time the Company was no longer
considered a development stage company.
(4) OIL AND GAS PROPERTY ACQUISITION
On December 19, 1996, the Company, through its wholly owned subsidiary,
Thai Romo, exercised its preferential right to purchase 46.34% of the
outstanding shares of Maersk Oil (Thailand) Limited ("MOTL"), a wholly owned
subsidiary of Maersk Olie og Gas AS of Copenhagen, Denmark ("Maersk"). MOTL is a
former co-concessionaire in Block B8/32 owning a 31.67% interest. The purchase
was consummated on March 3, 1997, with TRH, a wholly owned subsidiary of the
Company and Thai Romo's nominee under the Share Sales Agreement with Maersk,
purchasing the shares for $28.6 million, which included $1.6 million in
satisfaction of outstanding debt. After the closing, MOTL was renamed B8/32
Partners.
The remaining 53.66% of MOTL's stock was purchased by Thaipo Limited
("Thaipo"), a subsidiary of Pogo Producing Company ("Pogo"), and by Palang
Sophon Limited ("Palang") of Bangkok, Thailand. Thaipo, Palang and MOTL were
co-concessionaires with Thai Romo prior to the sale of MOTL. As a result of the
purchase, RMOC now effectively owns a uniform interest of 46.34% in the entire
Block.
The $28.6 million purchase price of the acquisition has been capitalized
using the purchase method of accounting and has been allocated between proven
properties and unproven properties. Production from the properties acquired is
anticipated to commence in early 1999 when the initial development plan at
Benchamas Field is scheduled to be completed. Finalization of the purchase price
allocation is pending the receipt of certain requested information from the
seller, fair value appraisals, and analysis of reserves estimates by the
Company.
F-22
<PAGE> 127
RUTHERFORD-MORAN OIL CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company financed the purchase of MOTL by utilizing borrowings under its
Revolving Credit Facility ("Revolving Credit Facility") and $20 million from a
new Credit Agreement entered into with The Chase Manhattan Bank ("Chase"), which
was repaid on May 2, 1997.
(5) DEBT
CREDIT FACILITY
On September 20, 1996, the Company entered into a $150 million Revolving
Credit Facility with a group of commercial lenders. The Revolving Credit
Facility has a final maturity of September 30, 1999, and had an initial
borrowing base limitation of $60 million. On April 29, 1997 the borrowing base
limitation was redetermined to $120 million. Subsequent to the issuance of the
Company's 10.75% Senior Subordinated Notes ("Notes") in September 1997, the
borrowing base was reset to $60 million. The Revolving Credit Facility is
secured by the stock of certain subsidiaries of the Company.
Under the terms of the Revolving Credit Facility, outstanding borrowings as
of September 30, 1997 bore interest at the Base Rate (defined as the greater of
the Federal Funds Rate plus .5% or the agent bank's prime rate) plus .25% or the
Eurodollar Rate (defined as an average of the London Interbank Offered Rate
("LIBOR") of two banks) plus 1.75%, at the Company's option. Interest is payable
quarterly. The Company is also assessed a commitment fee equal to .5% per annum
on the average daily balance of the unused borrowing base.
On September 8, 1997, the Company entered into a credit agreement with The
Chase Manhattan Bank for an additional borrowing of $5 million. The credit
agreement contains covenants substantially identical to those in the Revolving
Credit Facility. The credit agreement was repaid on September 29, 1997 with
proceeds from the Notes.
The Revolving Credit Facility provides for semi-annual borrowing base
redeterminations as well as certain restrictions, including limitations on
additional indebtedness, payment of dividends and maintenance of an interest
coverage ratio. As of September 30, 1997, the Company was not in compliance with
one of its financial covenants; however, such noncompliance has been waived by
its lenders.
At September 30, 1997, $30 million was outstanding under the Revolving
Credit Facility at interest rates ranging from 7.375% to 7.4375%.
NOTES
On September 29, 1997, the Company issued $120 million of Notes due 2004 at
an annual interest rate of 10.75%. The proceeds were used to repay $93 million
of outstanding indebtedness under the Revolving Credit Facility and the $5
million credit agreement and to purchase $24.3 million of securities which were
escrowed to pay interest on the Notes. The Notes contain customary covenants,
including limitations on the incurrence of additional indebtedness, restricted
payments and the establishment of certain liens.
(6) CRUDE OIL HEDGING ACTIVITIES
During the first quarter of 1996, the Company entered into crude oil price
swaps with an affiliate of one of its lenders. 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. The crude oil
price swaps qualify as hedges; and as long as they correlate with production
based on engineering estimates, any gains and losses will be recorded when the
related oil production has been delivered. Gains and losses on closed crude oil
price swap agreements will be deferred and amortized
F-23
<PAGE> 128
RUTHERFORD-MORAN OIL CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
over the original term of the agreement. Should the crude oil price swaps cease
to be recognized as a hedge, subsequent changes in value will be recorded in the
statement of operations. At September 30, 1997, the crude oil price swap
agreements incorporated one million barrels ("MMbbl") of oil volumes from April
through December 1997 at a weighted average price of $15.92 per Bbl and 1.75
MMbbl of oil volumes from January through December 1998 at a weighted average
price of $15.92 per Bbl. On April 1, 1997, the swaps went into effect and
require quarterly settlement between the Company and an affiliate of one of its
lenders. During the period July 1 through September 30, 1997, Brent crude oil
prices averaged $18.61 per barrel, resulting in a reduction in oil and gas
revenues of $895,000. The related deferred charge of $1.8 million is being
amortized against oil and gas revenues as the hedged volumes expire, resulting
in amortization of $434,000 being recorded during the nine months ended
September 30, 1997.
Based on current production estimates, the Company anticipates producing
approximately 900,000 barrels of oil during 1997; therefore, approximately
100,000 barrels of the crude oil price swap agreement for 1997 is considered
under current accounting literature to be speculative and a loss of $2,500 and
$275,000 has been recorded in the statement of operations during the three and
nine months, respectively, ended September 30, 1997 to reflect the fair market
value of the speculative position at September 30, 1997.
At the same time, the Company sold to an affiliate of one of its lenders an
option to purchase 1.25 MMbbl of aggregate oil volumes from January through
December 1999 at a price of $18.30 per Bbl. The Company has accounted for the
swap option separately as it does not qualify as a hedge. At September 30, 1997,
the Company estimates the liability associated with this position to be $1.2
million. During the period April 1 through September 30, 1997, the liability was
decreased by $550,000 to reflect the decreased cost the Company would incur if
it chose to settle the swap option. The decrease has been recognized in the
statement of operations.
The cost of the swap and the swap option at October 3, 1997, are $8 million
and $1.4 million, respectively.
(7) REVENUE RECOGNITION
The Company recognizes revenues at the time of transfer to the purchaser;
however, crude oil inventory is recorded at the cost of production and related
depletion upon transfer to the floating production, storage and off-loading
vessel.
(8) FOREIGN TRANSLATION GAIN/LOSS
The Company follows SFAS 52, "Foreign Currency Translation", which requires
that business transactions and foreign operations recorded in a foreign currency
be restated in U.S. dollars, which is the Company's functional currency.
Revenues and expenses are translated at an average exchange rate for the month.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency are
included in the results of operations as incurred. During the nine months ended
September 30, 1997, currency translations resulted in a loss of $1.9 million.
(9) OIL AND GAS PROPERTY AND EQUIPMENT
The Company and its subsidiaries follow the full cost method of accounting
for its investment in oil and gas properties. Under this method of accounting,
all costs of acquisition, exploration and development of oil and natural gas
reserves are capitalized into a "full cost pool" as incurred. Properties in the
F-24
<PAGE> 129
RUTHERFORD-MORAN OIL CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
pool are depleted and charged to operations utilizing the unit-of-production
method based on the ratio of current production to total proved oil and natural
gas reserves.
Interest in connection with expenditures on major exploration projects is
capitalized. During the nine months ended September 30, 1997, $733,000, of
interest was capitalized. During the nine months ended September 30, 1996, $1.6
million of interest was capitalized.
F-25
<PAGE> 130
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE OR EXCHANGE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 4
Prospectus Summary..................... 5
Risk Factors........................... 18
The Exchange Offer..................... 28
Use of Proceeds........................ 36
Capitalization......................... 36
Selected Financial Data................ 37
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 38
Business and Properties................ 44
Management............................. 55
Description of Revolving Credit
Facility............................. 58
Description of the Notes............... 59
Certain Federal Income Tax
Consequences......................... 95
Notice to Canadian Residents........... 97
Legal Matters.......................... 98
Experts................................ 98
Special Note Regarding Forward-Looking
Statements........................... 99
Plan of Distribution................... 100
Certain Definitions.................... 101
Index to Financial Statements.......... F-1
Independent Auditors' Report........... F-2
</TABLE>
---------------------
UNTIL MARCH , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN SELLING NEW NOTES
RECEIVED IN EXCHANGE FOR ORIGINAL NOTES HELD FOR THEIR OWN ACCOUNT. SEE "PLAN OF
DISTRIBUTION."
======================================================
======================================================
$120,000,000
RUTHERFORD-MORAN
OIL CORPORATION
10 3/4% Senior Subordinated
Notes due 2004
------------
PROSPECTUS
------------
December 19, 1997
======================================================
<PAGE> 131
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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 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 of 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) expense, 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 interest 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.
The Company has obtained insurance to protect officers and directors form
certain liabilities, including liabilities against which the Company cannot
indemnify its directors and officers.
The Company has entered into indemnification agreements with each of the
directors of the Company. Pursuant to such agreements, the Company has agreed to
indemnify and hold each such
II-1
<PAGE> 132
director harmless to the fullest extent permitted by law, from any loss, damage
or liability incurred in the course of his 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 survives
his respective death or termination as director.
ITEM 21. EXHIBITS
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1** -- Restated Certificate of Incorporation of Rutherford-Moran
Oil Corporation
3.2** -- Bylaws of Rutherford-Moran Oil Corporation dated April 1,
1996
3.3* -- Certificate of Incorporation of Rutherford-Moran
Exploration Company
3.4* -- Bylaws of Rutherford-Moran Exploration Company
3.5* -- Certificate of Incorporation of Thai Romo Holdings, Inc.
3.6* -- Bylaws of Thai Romo Holdings, Inc.
3.7* -- Articles of Association of Thai Romo Limited
4.1*** -- Indenture, dated as of September 29, 1997, between the
Registrant and Bank of Montreal Trust Company
4.2*** -- Form of Note (contained in Exhibit 1 to Rule
144A/Regulation S Appendix of the Indenture filed as
Exhibit 4.1 hereto).
4.3*** -- Registration Rights Agreement, dated as of September 29,
1997, between the Registrant and the Initial Purchasers
5.1* -- Opinion of Hughes & Luce, 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 effective as of March 3, 1995
among Thai Romo Limited, Thaipo Limited and The
Sophonpanich Co., Ltd.
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* -- First Amendment to the Gas Sales Agreement dated November
12, 1997 between Petroleum Authority of Thailand, B8/32
Partners Limited, Thaipo Limited, Thai Romo Limited and
Palang Sophon Limited
10.8** -- Bareboat Charter Agreement dated February 9, 1996 between
Tantawan Production B.V. and Tantawan Services, L.L.C.
10.9** -- Operating Agreement between SBM Marine Services Thailand
Ltd. and Tantawan Services, L.L.C. dated February 9,
1996.
</TABLE>
II-2
<PAGE> 133
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.10** -- Guaranty and Indemnity Agreement dated February 9, 1996,
by Thai Romo to Tantawan Production B.V.
10.11** -- Guaranty and Indemnity Agreement dated February 9, 1996,
by Thai Romo to SBM Marine Services Thailand Ltd.
10.12** -- 1996 Key Employee Stock Plan (and form of option and
stock agreements).
10.13** -- 1996 Non-Employee Director Stock Option Plan (and form of
option agreement)
10.14** -- $150,000,000 Revolving Credit Agreement dated as of
September 20, 1996 with The Chase Manhattan Bank as
Lender and Agent.
10.15**** -- Amended and Restated Revolving Credit Facility dated as
of December 3, 1997 with The Chase Manhattan Bank as
Lender and Agent.
12.1* -- Computation of Deficit of Loss to Fixed Charges.
21.1* -- Subsidiaries of the Registrant.
23.1* -- Consent of Hughes & Luce, L.L.P. (contained in its
opinion filed as Exhibit 5.1 hereto).
23.2**** -- Consent of KPMG Peat Marwick LLP
23.3* -- Consent of Ryder Scott Company
24.1* -- Power of Attorney (appearing on Signature Page).
25.1* -- Form T-1 Statement of Eligibility of Trustee.
99.1* -- Form of Letter of Transmittal and Notice of Guaranteed
Delivery.
</TABLE>
- ---------------
* Previously filed.
** Incorporated by reference from the Company's Registration Statement on Form
S-1, as amended (File No. 333-4122).
*** Incorporated by reference from the Company's Form 10-Q (File No.
002-20849).
**** Filed herewith.
(b) Financial Statement Schedules.
None
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants 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 Securities Act
of 1933 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 of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the Prospectus pursuant to Item 4, 10(b),
11, or 13 of the Form S-4, within one business day of receipt of such request,
and to send the incorporated documents by first-class mail or other
II-3
<PAGE> 134
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
Registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) ((S)230.424(b) of this
chapter), if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrants
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE> 135
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 the 19th day of December, 1997.
RUTHERFORD-MORAN OIL CORPORATION
By: /s/ DAVID F. CHAVENSON
----------------------------------
David F. Chavenson
Vice President and Chief Financial
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <C>
* Chairman of the Board December 19, 1997
- -----------------------------------------------------
John A. Moran
* President, Chief Executive Officer December 19, 1997
- ----------------------------------------------------- and Director (principal executive
Patrick R. Rutherford officer)
* Executive Vice President, Chief December 19, 1997
- ----------------------------------------------------- Operating Officer and Director
Michael D. McCoy
* Director December 19, 1997
- -----------------------------------------------------
Howard Gittis
* Director December 19, 1997
- -----------------------------------------------------
Jere W. McKenny
* Director December 19, 1997
- -----------------------------------------------------
Harry C. Lee
* Director December 19, 1997
- -----------------------------------------------------
Chote Sophonpanich
* Vice President and Chief Financial December 19, 1997
- ----------------------------------------------------- Officer (principal financial
David F. Chavenson officer and principal accounting
officer)
*By: /s/ DAVID F. CHAVENSON December 19, 1997
-------------------------------------------------
David F. Chavenson
Attorney-in-fact
</TABLE>
II-5
<PAGE> 136
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 the 19th day of December, 1997.
RUTHERFORD-MORAN EXPLORATION
COMPANY
By: /s/ DAVID F. CHAVENSON
----------------------------------
David F. Chavenson
Treasurer and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <C>
* Chairman of the Board December 19, 1997
- -----------------------------------------------------
John A. Moran
* President and Director (principal December 19, 1997
- ----------------------------------------------------- executive officer)
Patrick R. Rutherford
* Vice President and Secretary and December 19, 1997
- ----------------------------------------------------- Director
Michael D. McCoy
* Treasurer and Director (principal December 19, 1997
- ----------------------------------------------------- financial officer and principal
David F. Chavenson accounting officer)
*By: /s/ DAVID F. CHAVENSON December 19, 1997
------------------------------------------------
David F. Chavenson
Attorney-in-fact
</TABLE>
II-6
<PAGE> 137
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 the 19th day of December, 1997.
THAI ROMO HOLDINGS, INC.
By: /s/ DAVID F. CHAVENSON
----------------------------------
David F. Chavenson
Treasurer and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
* Chairman of the Board December 19, 1997
- -----------------------------------------------------
John A. Moran
* President and Director (principal December 19, 1997
- ----------------------------------------------------- executive officer)
Patrick R. Rutherford
* Vice President and Secretary and December 19, 1997
- ----------------------------------------------------- Director
Michael D. McCoy
* Treasurer and Director (principal December 19, 1997
- ----------------------------------------------------- financial officer and principal
David F. Chavenson accounting officer)
*By: /s/ DAVID F. CHAVENSON December 19, 1997
------------------------------------------------
David F. Chavenson
Attorney-in-fact
</TABLE>
II-7
<PAGE> 138
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 the 19th day of December, 1997.
THAI ROMO LIMITED
By: /s/ DAVID F. CHAVENSON
----------------------------------
David F. Chavenson
Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <C>
* Director December 19, 1997
- ----------------------------------------------------- (principal executive
Patrick R. Rutherford officer)
* Director December 19, 1997
- -----------------------------------------------------
John A. Moran
* Director December 19, 1997
- ----------------------------------------------------- principal financial officer
David F. Chavenson and principal accounting
officer)
* Director December 19, 1997
- -----------------------------------------------------
Michael D. McCoy
*By: /s/ DAVID F. CHAVENSON December 19, 1997
------------------------------------------------
David F. Chavenson
Attorney-in-fact
</TABLE>
II-8
<PAGE> 139
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1** -- Restated Certificate of Incorporation of Rutherford-Moran
Oil Corporation
3.2** -- Bylaws of Rutherford-Moran Oil Corporation dated April 1,
1996
3.3* -- Certificate of Incorporation of Rutherford-Moran
Exploration Company
3.4* -- Bylaws of Rutherford-Moran Exploration Company
3.5* -- Certificate of Incorporation of Thai Romo Holdings, Inc.
3.6* -- Bylaws of Thai Romo Holdings, Inc.
3.7* -- Articles of Association of Thai Romo Limited
4.1*** -- Indenture, dated as of September 29, 1997, between the
Registrant and Bank of Montreal Trust Company
4.2*** -- Form of Note (contained in Exhibit 1 to Rule
144A/Regulation S Appendix of the Indenture filed as
Exhibit 4.1 hereto).
4.3*** -- Registration Rights Agreement, dated as of September 29,
1997, between the Registrant and the Initial Purchasers
5.1* -- Opinion of Hughes & Luce, 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 effective as of March 3, 1995
among Thai Romo Limited, Thaipo Limited and The
Sophonpanich Co., Ltd.
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* -- First Amendment to the Gas Sales Agreement dated November
12, 1997 between Petroleum Authority of Thailand, B8/32
Partners Limited, Thaipo Limited, Thai Romo Limited and
Palang Sophon Limited
10.8** -- Bareboat Charter Agreement dated February 9, 1996 between
Tantawan Production B.V. and Tantawan Services, L.L.C.
10.9** -- Operating Agreement between SBM Marine Services Thailand
Ltd. and Tanatawan Services, L.L.C. dated February 9,
1996.
10.10** -- Guaranty and Indemnity Agreement dated February 9, 1996,
by Thai Romo to Tantawan Production B.V.
10.11** -- Guaranty and Indemnity Agreement dated February 9, 1996,
by Thai Romo to SBM Marine Services Thailand Ltd.
10.12** -- 1996 Key Employee Stock Plan (and form of option and
stock agreements).
10.13** -- 1996 Non-Employee Director Stock Option Plan (and form of
option agreement).
</TABLE>
<PAGE> 140
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.14** -- $150,000,000 Revolving Credit Agreement dated as of
September 20, 1996 with The Chase Manhattan Bank as
Lender and Agent.
10.15**** -- Amended and Restated Revolving Credit Facility dated as
of December 3, 1997 with The Chase Manhattan Bank as
Lender and Agent.
12.1* -- Computation of Deficit of Loss to Fixed Charges.
21.1* -- Subsidiaries of the Registrant.
23.1* -- Consent of Hughes & Luce, L.L.P. (contained in its
opinion filed as Exhibit 5.1 hereto).
23.2**** -- Consent of KPMG Peat Marwick LLP
23.3* -- Consent of Ryder Scott Company
24.1* -- Power of Attorney (appearing on Signature Page).
25.1* -- Form T-1 Statement of Eligibility of Trustee.
99.1* -- Form of Letter of Transmittal and Notice of Guaranteed
Delivery.
</TABLE>
- ---------------
* Previously filed.
** Incorporated by reference from the Company's Registration Statement on Form
S-1, as amended (File No. 333-4122).
*** Incorporated by reference from the Company's Form 10-Q (File No.
002-20849).
**** Filed herewith.
<PAGE> 1
EXHIBIT 10.15
EXECUTION COPY
RUTHERFORD--MORAN OIL CORPORATION,
as Borrower
AND
RUTHERFORD--MORAN EXPLORATION COMPANY,
THAI ROMO HOLDINGS, INC.,
THAI ROMO LIMITED
AND
OTHER SUBSIDIARY GUARANTORS,
as Guarantors
_____________________________
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 3, 1997
______________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . 19
1.03 Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.04 Borrowing Base and Threshold Amount Determinations and
Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.05 Copies of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2. Commitments, Loans, Notes and Prepayments . . . . . . . . . . . . . . . . . . . . 22
2.01 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.02 Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.03 Changes of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.04 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.05 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.06 Several Obligations; Remedies Independent . . . . . . . . . . . . . . . . . . . 23
2.07 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.08 Optional Prepayments and Conversions or Continuations of Loans . . . . . . . . . 24
2.09 Mandatory Prepayments and Reductions of Commitments . . . . . . . . . . . . . . 24
2.10 Engineering and Administration Fee . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3. Payments of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . 26
3.01 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.02 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4. Payments; Pro Rata Treatment; Computations; Etc. . . . . . . . . . . . . . . . . 27
4.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.03 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.05 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.06 Non-Receipt of Funds by the Administrative Agent . . . . . . . . . . . . . . . . 29
4.07 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.01 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.02 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.04 Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.05 Broken Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.06 U.S. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.07 Replacement of Certain Lenders . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.01 The Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.02 Obligations Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.03 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.04 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.05 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.06 Continuing Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.07 Thai Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.08 Rights of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.09 General Limitation on Guarantee Obligations . . . . . . . . . . . . . . . . . . 42
Section 7. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.01 Conditions to Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.02 Further Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.03 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.05 Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.07 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.10 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.11 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . 48
8.12 Material Agreements and Liens . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.14 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.15 Subsidiaries, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.16 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.17 True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.18 Project Agreements; Completion . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.19 Special Purpose Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.20 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.21 SBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.22 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 9. Covenants of the Obligors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.01 Financial Statements Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.02 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.03 Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.04 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.05 Prohibition of Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . 56
9.06 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.07 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.08 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.09 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.10 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.11 Maintenance of Corporate Separateness . . . . . . . . . . . . . . . . . . . . . 62
9.12 Lines of Business; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.13 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.14 Certain Obligations Respecting Subsidiaries . . . . . . . . . . . . . . . . . . 63
9.15 Limitation on Sale and Leaseback Transactions and Production Payments . . . . . 63
9.16 Project Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.17 Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.18 Defaults Under Gas Sales and Certain Actions of Thai Government Authorities. . . 64
9.19 Additional Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . 64
9.20 Special Covenants with Respect to B8/32 Partners . . . . . . . . . . . . . . . . 65
9.21 Modifications and Payments of Senior Subordinated Notes . . . . . . . . . . . . 65
Section 10. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11. The Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.01 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . 68
11.02 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . 70
11.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.04 Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.05 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.06 Non-Reliance on Administrative Agent and Other Lenders . . . . . . . . . . . . 71
11.07 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.08 Resignation or Removal of Administrative Agent . . . . . . . . . . . . . . . . 72
11.09 Consents under Other Basic Documents . . . . . . . . . . . . . . . . . . . . . 72
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
12.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.06 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . 75
12.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
12.08 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
12.10 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . 77
12.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
12.12 Treatment of Certain Information; Confidentiality . . . . . . . . . . . . . . . 78
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
12.13 Appointment of the Borrower as Agent . . . . . . . . . . . . . . . . . . . . . 79
12.14 Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 79
12.15 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
SCHEDULE I - Material Agreement and Liens
SCHEDULE II - Compliance with Laws
SCHEDULE III - Subsidiaries and Investments
SCHEDULE IV - Litigation
SCHEDULE V - Taxes
SCHEDULE VI - Capitalization
SCHEDULE VII - Project Agreements
SCHEDULE VIII - Exceptions to Statements in Registration Statement
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of Borrower Pledge Agreement
EXHIBIT B-2 - Form of Thai Pledge Agreement
EXHIBIT C-1 - Form of Opinion of Special Counsel to the Obligors
EXHIBIT C-2 - Form of Opinion of Special Thai Counsel
to the Obligors
EXHIBIT D - Form of Opinion of Special New York Counsel
to Chase
EXHIBIT E - Form of Confidentiality Agreement
EXHIBIT F - Form of Assignment and Acceptance
EXHIBIT G - Form of Process Agent Acceptance
EXHIBIT H - Form of Process Agent Power of Attorney for
Thai Romo
EXHIBIT I - Form of Affiliate Subordination Agreement
(iv)
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 3,
1997, between: RUTHERFORD--MORAN OIL CORPORATION, a corporation duly organized
and validly existing under the laws of the State of Delaware (the "Borrower");
RUTHERFORD--MORAN EXPLORATION COMPANY, a corporation duly organized and validly
existing under the laws of the State of Delaware ("RMEC"); THAI ROMO HOLDINGS,
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware ("TRH"); THAI ROMO LIMITED, a limited liability company
organized under the laws of the Kingdom of Thailand ("Thai Romo"); each of the
Subsidiaries of the Borrower that becomes a guarantor pursuant to Section 9.19
hereof, (RMEC, TRH, Thai Romo and each other such Subsidiary of the Borrower
that becomes a guarantor pursuant to Section 9.19 hereof, the "Subsidiary
Guarantors"); each of the lenders that is a signatory hereto identified under
the caption "LENDERS" on the signature pages hereto or that, pursuant to
Section 12.06(b) hereof, shall become a "Lender" hereunder (individually, a
"Lender" and, collectively, the "Lenders"); and THE CHASE MANHATTAN BANK, a New
York State banking corporation, as administrative agent for the Lenders (in
such capacity, together with any successors in such capacity, the
"Administrative Agent").
The Borrower, the Subsidiary Guarantors, certain Lenders (the
"Existing Lenders") and the Administrative Agent are parties to a Credit
Agreement dated as of September 20, 1996, as amended and modified by (i)
Amendment No. 1 and Waiver thereto, dated as of February 21, 1997, (ii)
Amendment No. 2 and Waiver thereto, dated as of March 31, 1997, (iii) Amendment
No. 3 thereto, dated as of August 29, 1997 (the "Existing Credit Agreement")
and (iv) Amendment No. 4 and Waiver dated as of November 10, 1997. The
Borrower has requested that the Lenders and the Administrative Agent agree to
amend and restate the Existing Credit Agreement, and the Lenders and the
Administrative Agent are willing to amend and restate the Existing Credit
Agreement, all on the terms and conditions herein set forth.
Accordingly, the parties hereto agree to amend and restate the
Existing Credit Agreement so that, as amended and restated, it reads in its
entirety as provided herein.
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 1.01
or in other provisions of this Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"Affiliate" means, as to any Person, any Subsidiary of such
Person and any other Person which, directly or indirectly, controls, is
controlled by or is under common control with such Person. For the purposes of
this definition, "control" means the possession of the power to direct or cause
the direction of management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. Notwithstanding the
foregoing, (i) no individual shall be an Affiliate of any Person solely by
reason of his or
Credit Agreement
<PAGE> 7
- 2 -
her being a director, officer or employee of such Person and (ii) none of the
Borrower and the Wholly Owned Subsidiaries of the Borrower shall be Affiliates
of each other.
"Affiliate Subordinated Indebtedness" shall mean Indebtedness
of any Subsidiary Guarantor to the Borrower or to any other Subsidiary
Guarantor for borrowed money the obligations of such Subsidiary Guarantor in
respect of which are subordinated to the obligations of such Subsidiary
Guarantor hereunder pursuant to an Affiliate Subordination Agreement (or on
other terms of subordination, and pursuant to documentation, reasonably
satisfactory to the Majority Lenders).
"Affiliate Subordination Agreement" shall mean one or more
subordination agreement(s) among the Borrower, any of the Subsidiary Guarantors
and the Administrative Agent in substantially the form of Exhibit I hereto.
"Applicable Lending Office" shall mean, for each Lender and
for each Type of Loan, the "Lending Office" of such Lender (or of an affiliate
of such Lender) designated for such Type of Loan on the signature pages hereof
or such other office of such Lender (or of an affiliate of such Lender) as such
Lender may from time to time specify to the Administrative Agent and the
Borrower as the office by which its Loans of such Type are to be made and
maintained.
"Applicable Margin" shall mean, with respect to each Type of
Loan during each Utilization Level Period set forth in the schedule below, the
percentage per annum set forth opposite such period under such Type of Loan in
such schedule:
Applicable Margin (% p.a.)
--------------------------
<TABLE>
<CAPTION>
Utilization Base Rate
Level Period Loans Eurodollar Loans
------------ --------- ----------------
<S> <C> <C>
Utilization
Level 1 Period 0.25% 1.75%
Utilization
Level 2 Period 1.00% 2.75%
Utilization
Level 3 Period 1.75% 3.50%
</TABLE>
provided that, during any period that a Deficiency shall exist, the "Applicable
Margin" as set forth above shall be increased by an additional 2% per annum.
Credit Agreement
<PAGE> 8
- 3 -
"B8/32 Partners" shall mean B8/32 Partners Ltd., a limited
liability company organized under the laws of the Kingdom of Thailand.
"Baht" shall mean lawful money of the Kingdom of Thailand.
"Bankruptcy Code" shall mean the U.S. Federal Bankruptcy Code
of 1978, as amended from time to time.
"Bareboat Charter" shall mean the Bareboat Charter dated as of
February 9, 1996, between Tantawan Production B.V. and Tantawan Services, LLC
in connection with the charter of the "TANTAWAN EXPLORER" for use in the
Tantawan Field in the Gulf of Thailand.
"Base Rate" shall mean, for any day, a rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b)
the Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.
"Basic Documents" shall mean, collectively, this Agreement,
the Notes, the Pledge Agreements and the Warrant Agreement.
"Borrower Pledge Agreement" shall mean the Pledge Agreement
substantially in the form of Exhibit B-1 hereto executed by the Borrower in
favor of the Administrative Agent, as the same may be modified and supplemented
and in effect from time to time.
"Borrowing Base" shall have the meaning assigned to such term
in Section 1.04(b)(iii) hereof.
"Borrowing Base Deficiency" shall mean, with respect to any
Redetermination Date, the amount (if any) by which the aggregate principal
amount of the Loans outstanding as of such Redetermination Date exceeds the
Borrowing Base as redetermined as of such Redetermination Date.
"Business Day" shall mean any day (a) on which commercial
banks are not authorized or required to close in New York City and (b) if such
day relates to a borrowing of, a payment or prepayment of principal of or
interest on, a Conversion of or into, or an Interest Period for, a Eurodollar
Loan or a notice by the Borrower with respect to any such borrowing, payment,
prepayment, Conversion or Interest Period, that is also a day on which dealings
in Dollar deposits are carried out in the London interbank market.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for
Credit Agreement
<PAGE> 9
- 4 -
as a capital lease on a balance sheet of such Person under GAAP, and, for
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
"Casualty Event" shall mean, with respect to any Property of
any Person, any loss of or damage to, or any condemnation or other taking of,
such Property for which such Person or any of its Subsidiaries receives,
anticipates recovering or has filed a claim for Casualty Proceeds.
"Casualty Proceeds" shall mean the proceeds of any insurance,
condemnation award or other compensation paid or payable to the Borrower or any
Subsidiary Guarantor or any of their respective Subsidiaries by an insurer or
Government Authority in respect of any Casualty Event.
"Change of Control" shall mean that (i) Patrick Rutherford or
John Moran, (ii) their Affiliates, (iii) any trust or corporation, all of the
beneficiaries or shareholders, as the case may be, of which are any one or more
of the persons referred to in clause (i) or their immediate family members, or
(iv) any bona fide legal representative of any of the individuals in clause (i)
duly appointed as a result of the death or legal incapacity of such individual,
shall cease to own collectively, directly or indirectly, more than 51% (on a
fully-diluted basis) of the aggregate voting shares of capital stock of all
classes of the Borrower or shall cease to have the ability to appoint or
remove, directly or indirectly (including voting rights obtained from other
shareholders), the majority of the members of the board of directors of the
Borrower.
"Chase" shall mean The Chase Manhattan Bank or any successor.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as
amended from time to time.
"Commitment" shall mean, as to each Lender, the obligation of
such Lender to make a Loan pursuant to Section 2.01 hereof in a principal
amount at any one time outstanding up to but not exceeding the amount set
opposite such Lender's name on the signature pages hereof under the caption
"Commitment". The original aggregate principal amount of the Commitments is
$150,000,000.
"Commitment Percentage" shall mean, with respect to any
Lender, the ratio of the amount of the Commitment of such Lender to the
aggregate of the Commitments of all the Lenders.
"Commitment Termination Date" shall mean the Scheduled
Commitment Termination Date or such earlier date as shall be determined in
accordance with Sections 2.03 and 2.09 hereof.
Credit Agreement
<PAGE> 10
- 5 -
"Concession Agreement" shall mean, collectively, (i) Petroleum
Concession No. 1/2534/36 dated as of August 1, 1991, whereby the Ministry of
Industry of the Kingdom of Thailand awarded to Maersk, Thaipo, and Thai Romo
the concession to develop hydrocarbon producing properties in Block B8/32 in
the Gulf of Thailand; (ii) Supplementary Petroleum Concession No. 1 to
Petroleum Concession No. 1/2534/36 dated as of March 6, 1992, whereby
Sophonpanich entered into Petroleum Concession No. 1/2534/36; and (iii)
Supplementary Petroleum Concession No. 2 to Petroleum Concession No. 1/2534/36
dated as of September 4, 1995, whereby Maersk transferred all of its interest
in the Tantawan Field to Thaipo and whereby Thaipo, Thai Romo and Sophonpanich
readjusted their respective interests in the Tantawan Field.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.08 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a
conversion pursuant to Section 2.08 hereof of one Type of Loans into another
Type of Loans, which may be accompanied by the transfer by a Lender (at its
sole discretion) of a Loan from one Applicable Lending Office to another.
"Deficiency" shall mean, on any date, the amount (if any) by
which the aggregate principal amount of the Loans as of such date exceeds the
Borrowing Base as in effect on such date.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Determination Date" shall mean May 1 and November 1 of each
year commencing May 1, 1998; provided that if such date is not a Business Day,
the Determination Date shall be the immediately succeeding Business Day.
"Determination Period" shall mean, (a) with respect to any
Reserve Evaluation Report delivered by the Independent Petroleum Engineer, the
calendar year for which such report was prepared and (b) with respect to any
Reserve Evaluation Report prepared by any Obligor, the period from January 1 to
June 30 of the calendar year for which such report was prepared.
"Disposition" shall mean any sale, assignment, transfer, lease
or other conveyance or disposition of any Property which is given any value in
determining the Borrowing Base (whether now owned or hereafter acquired) by any
Obligor or any of its Subsidiaries to any other Person excluding (i) obsolete
or worn-out Property, tools or equipment no longer used or useful in its
business, (ii) any inventory or other Property (including, without limitation,
accounts receivable) sold or disposed of in the ordinary course of business and
ordinary business terms, (iii) any hydrocarbons produced, processed or sold in
the ordinary course of business and (iv) dispositions of Properties the subject
of Casualty Events.
Credit Agreement
<PAGE> 11
- 6 -
"Dollar-Denominated Production Payments" shall mean production
payment obligations of the Borrower or any Subsidiary Guarantor which are
payable from a specified share of proceeds received from production from
specific Properties, together with all undertakings and obligations in
connection therewith.
"Dollars" and "$" shall mean lawful money of the United States
of America.
"Equity Issuance" shall mean (a) any issuance or sale by the
Borrower or any of its Subsidiaries after the date hereof of (i) any of its
capital stock, (ii) any warrants or options exercisable in respect of its
capital stock or (other than any warrants or options issued to directors,
officers, consultants or employees of the Borrower or any of its Subsidiaries
pursuant to employee benefit plans established in the ordinary course of
business and any capital stock of the Borrower issued upon the exercise of such
warrants or options) or (iii) any other security or instrument representing an
equity interest (or the right to obtain any equity interest) in the Borrower or
any of its Subsidiaries or (b) the receipt by the Borrower or any of its
Subsidiaries after the date hereof of any capital contribution (whether or not
evidenced by any equity security issued by the recipient of such contribution)
or (c) any Public Equity Offering; provided that an Equity Issuance shall not
include (w) any such issuance or sale by any Subsidiary of the Borrower to the
Borrower or any Subsidiary of the Borrower, (x) any capital contribution by the
Borrower or any Subsidiary of the Borrower to any Subsidiary of the Borrower,
(y) any issuance of convertible subordinated debt that constitutes Subordinated
Indebtedness issued in accordance with Section 9.07(n) hereof or (z) any
issuance of equity securities upon the exercise of any conversion right with
respect to such convertible subordinated debt.
"Equity Rights" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or
business that is a member of any group of organizations (i) described in
Section 414(b) or (c) of the Code of which any of the Borrower and its
Subsidiaries is a member and (ii) solely for purposes of potential liability
under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the
lien created under Section 302(f) of ERISA and Section 412(n) of the Code,
described in Section 414(m) or (o) of the Code of which any of the Borrower and
its Subsidiaries is a member.
"Escrow Agreement" shall mean the agreement between SBM,
Thaipo, Thai Romo, Sophonpanich and any other parties thereto relating to the
flow of funds from the operation of the
Credit Agreement
<PAGE> 12
- 7 -
Project and detailing the reimbursement procedure referenced in Article 8.1 in
the Operating Agreement for the payment of amounts owed to SBM.
"Eurodollar Loans" shall mean Loans that bear interest at
rates based on rates referred to in the definition of "Eurodollar Rate" in this
Section 1.01.
"Eurodollar Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period therefor, the arithmetic mean, as determined by
the Administrative Agent, of the rates per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) quoted by the respective Reference
Lenders at approximately 11:00 a.m. London time (or as soon thereafter as
practicable) on the date two Business Days prior to the first day of such
Interest Period for the offering by the respective Reference Lenders to leading
banks in the London interbank market of Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the principal
amount of the Eurodollar Loan to be made by the respective Reference Lenders
for such Interest Period. If any Reference Lender is not participating in any
Eurodollar Loans during any Interest Period therefor, the Eurodollar Rate for
such Loans for such Interest Period shall be determined by reference to the
amount of such Loans that such Reference Lender would have made or had
outstanding had it been participating in such Loan during such Interest Period.
"Event of Default" shall have the meaning assigned to such
term in Section 10 hereof.
"Existing Agreement Closing Date" shall mean September 20,
1996.
"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent.
"GAAP" shall mean accounting principles generally accepted in
the United States as such principles shall be in effect at the time of the
computation or determination or as of the date of the relevant financial
statements, as the case may be (the "Relevant Date").
"Gas Sales Agreement" shall mean the Gas Sales Agreement dated
as of November 7, 1995 among the Petroleum Authority of Thailand, as gas
purchaser, and Thaipo, Thai Romo, and Sophonpanich, as gas sellers, as amended
by the First Amendment to Gas Sales Agreement dated as of November 12, 1997.
Credit Agreement
<PAGE> 13
- 8 -
"Government Authority" shall mean any federal, state,
provincial, municipal, local or territorial government or governmental
subdivision, department, court, commission, board, bureau, agency, regulatory
authority, instrumentality, judicial, taxing or administrative body, domestic
or foreign, including, without limitation, in the case of the Kingdom of
Thailand, any ministry or state enterprise of the Kingdom of Thailand and any
officer or official of any of the foregoing.
"Guarantee" shall mean a guarantee, an endorsement, a
contingent agreement to purchase or to furnish funds for the payment or
maintenance of, or otherwise to be or become contingently liable under or with
respect to, the Indebtedness, other obligations, net worth, or working capital
of any Person or any production or revenues generated by (or any capital or
other expenditures incurred in connection with the acquisition and exploitation
of, or the exploration for or development or production of) any Hydrocarbon
Properties, or a guarantee of the payment of dividends or other distributions
upon the stock or equity interests of any Person, or an agreement to purchase,
sell or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, a guarantee in favor of a bank or other
financial institution in order to cause such bank or financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as a verb
shall have a correlative meaning.
"Hedging Agreement" shall mean, for any Person, an agreement
or arrangement between such Person and one or more financial institutions or
other entities providing for the transfer or mitigation of risks of
fluctuations in (x) the prices of hydrocarbons, either generally or under
specific circumstances or (y) currency exchange rates between U.S. dollars and
Thai baht either generally or under specific circumstances.
"Hydrocarbon Properties" shall mean, without duplication, the
Borrower's and Subsidiary Guarantors' interests in hydrocarbon reserves.
"Indebtedness" shall mean, for any Person (without
duplication): (a) obligations created, issued or incurred by such Person for
borrowed money (whether by loan, the issuance and sale of debt securities or
the sale of Property to another Person subject to an understanding or
agreement, contingent or otherwise, to purchase or repurchase the same or
similar Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than
trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days after the date of receipt of the
invoice therefor; (c) obligations of others secured by a Lien on the Property
of such Person, whether or not the respective obligations so secured has been
assumed by such Person; (d) obligations of such Person in respect of letters of
credit, surety bonds or similar instruments issued or accepted by banks, surety
companies and other financial institutions for account of such Person and
issued in respect of
Credit Agreement
<PAGE> 14
- 9 -
liabilities of such Person of the type described in other clauses of this
definition; (e) Capital Lease Obligations of such Person other than any thereof
for which Thai Romo is liable and which is incurred in connection with
transactions under the Operating Agreement or the Joint Operating Agreement;
(f) obligations of such Person in respect of obligations of the types specified
in other clauses of this definition as a partner or joint venturer of any
partnership or joint venture (other than in respect of obligations incurred in
the ordinary course of business); (g) obligations of such Person in respect of
Interest Rate Protection Agreements or Hedging Agreements; and (h) Indebtedness
of others Guaranteed by such Person, provided that the term "Indebtedness"
shall not include any of the foregoing which are subject to irrevocable legal
defeasance in accordance with the terms thereof. When used with respect to
Thai Romo, "Indebtedness" shall include Thai Romo's obligations to reimburse
the operator under the Operating Agreement or The Joint Operating Agreement for
Thai Romo's pro rata share of payments made by such operator in respect of
Indebtedness incurred by such operator in connection with transactions under
such agreements.
"Independent Petroleum Engineer" shall mean Ryder Scott &
Associates or any firm of independent petroleum engineers selected by the
Borrower and acceptable to the Administrative Agent.
"Initial Reserve Evaluation Report" shall mean a report
prepared by Ryder Scott & Associates dated February 5, 1996 and affirmed as of
June 26, 1996, with respect to Proved Reserves, future cash flows, capital
expenditures, and net profits after the payment of the Thai special
renumeratory benefit, Thai corporate and other taxes and expenses as of January
1, 1996.
"Interest Coverage Ratio" shall mean, as at any date, the
ratio of (a) Operating Cash Flow for the four complete fiscal quarters of the
Borrower and its Subsidiaries ending on or most recently ended prior to such
date (but in no event shall this ratio be calculated prior to the fiscal
quarter of the Borrower ending March, 31 1998), in each case taken as a single
accounting period, to (b) Interest Expense for such period.
"Interest Expense" shall mean, for any period, interest
expense of the Borrower and its Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP), including, without
limitation: (a) all interest in respect of Indebtedness (including, without
limitation, the interest component of any payments in respect of Capital Lease
Obligations) accrued (whether or not actually paid during such period) or
capitalized during such period plus (b) the net amount payable (or minus the
net amount receivable) under Interest Rate Protection Agreements during such
period (whether or not actually paid or received during such period); provided
that any interest paid or accrued on the Senior Subordinated Notes during such
period shall be excluded from the calculation of Interest Expenses if (x) such
payments are made from the proceeds of cash or Investments subject to the Lien
permitted pursuant to Section 9.06(w) hereof or (y) in the case of accrued
interest, sufficient funds are subject to the Lien permitted pursuant by
Section 9.06(w) hereof to pay such accrued interest.
Credit Agreement
<PAGE> 15
- 10 -
"Interest Period" shall mean, with respect to any Eurodollar
Loan, each period commencing on the date such Eurodollar Loan is made or
Converted from a Base Rate Loan or the last day of the next preceding Interest
Period for such Loan and ending on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, as the Borrower may
select as provided in Section 4.05 hereof, except that each Interest Period
that commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period
would otherwise end after the Commitment Termination Date, such Interest Period
shall end on the Commitment Termination Date; (ii) each Interest Period that
would otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and (iii)
notwithstanding clause (i) above, no Interest Period shall have a duration of
less than one month and, if the Interest Period for any Eurodollar Loan would
otherwise be a shorter period, such Loan shall not be available hereunder for
such period.
"Interest Rate Protection Agreement" shall mean, for any
Person, an interest rate swap, cap or collar agreement or similar arrangement
between such Person and one or more financial institutions providing for the
transfer or mitigation of interest risks either generally or under specific
contingencies.
"Investment" in any Person shall mean any investment, whether
by means of share purchase, loan, advance, extension of credit, capital
contribution or otherwise, in or to such Person, the Guarantee of any
Indebtedness of such Person or the subordination of any claim against such
Person to other Indebtedness of such Person; except that "Investment" shall not
include investments in inventory or trade receivables made or arising in the
ordinary course of business for the sale of goods or services; provided that
when used with respect to Thai Romo, "Investments" shall include any payments
made by Thai Romo to the operator under the Operating Agreement in satisfaction
of Thai Romo's obligations to reimburse such operator for its pro rata share of
Investments made by such operator in connection with transactions under such
agreement.
"Joint Operating Agreement " shall mean, collectively, (i) the
Joint Operating Agreement dated as of August 1, 1991 between Maersk, Thai Romo,
Thaipo, and Sophonpanich, (ii) the Transfer Agreement dated March 2, 1995
between Maersk, Thai Romo, Thaipo, and Sophonpanich, whereby Maersk agrees to
convey its interest and operatorship in respect of the Tantawan Area of Block
B8/32 to Thaipo and (iii) the Agreement of Operatorship and Conveyance of
Interest dated as of March 3, 1995 between Maersk and Thaipo.
"Law" shall mean any present or future federal, state, local
or other constitution, charter, act, statute, law, ordinance, code, rule,
regulation, order, judgment of a court or standards contained in any
applicable permit or approval, or any other legislative, judicial or
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administrative action of any Governmental Authority, including without
limitation, those relating to (1) the protection of human health, safety or the
environment or (2) to regulation of emissions, discharges, releases or
threatened releases to the environment.
"Legal Requirements" shall mean all laws, rules or regulations
of any Government Authority or any order, writ, injunction or decree of any
court or governmental or regulatory authority or agency.
"Lien" shall mean, with respect to any Property, any
assignment in trust, mortgage, lien, pledge, charge, fiduciary or security
assignment, security interest or encumbrance of any kind in respect of such
Property (including, without limitation, any Production Payment, advance,
payment or similar arrangement with respect to minerals in place). For
purposes of the foregoing, a Person shall be deemed to own subject to a Lien
any Property that it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement (other than an operating lease) relating to such Property.
"Loans" shall mean the loans provided for in Section 2.01
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Maersk" shall mean Maersk Oil (Thailand) Limited, a company
organized under the laws of the Kingdom of Thailand.
"Majority Lenders" shall mean Lenders having at least 66 2/3%
of the aggregate amount of the Commitments or, if the Commitments shall have
terminated, Lenders holding at least 66 2/3% of the aggregate unpaid principal
amount of the Loans.
"Margin Stock" shall mean "margin stock" within the meaning of
Regulation U and Y.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the financial condition of the Borrower and its Subsidiaries taken as a
whole, or (b) the ability of any of the Obligors to perform any of its payment
obligations or any of its other material obligations under any of the Basic
Documents to which it is a party.
"Multiemployer Plan" shall mean a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have been made by the
Borrower or any of its Subsidiaries or any ERISA Affiliate and that is covered
by Title IV of ERISA.
"Net Available Proceeds" shall mean:
(a) in the case of any Disposition by any Obligor, the amount
of Net Cash Payments received in connection with such Disposition;
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(b) in the case of any Casualty Event, the aggregate amount
of the Casualty Proceeds received by an Obligor in respect of such
Casualty Event net of (i) reasonable expenses incurred by such Obligor
in connection therewith and (ii) contractually required repayments of
Indebtedness to the extent secured by a Lien on the Property the
subject of such Casualty Event and any income and transfer taxes
payable by such Obligor or the Borrower in respect of such Casualty
Event; and
(c) in the case of any Equity Issuance or the incurrence of
any Subordinated Indebtedness, the aggregate amount of cash received
by the Borrower and the Subsidiary Guarantors in respect of such
Equity Issuance or the incurrence of such Subordinated Indebtedness,
as the case may be, net of commissions, discounts and other
transaction costs incurred by the Borrower and the Subsidiary
Guarantors in connection therewith.
"Net Cash Payments" shall mean, with respect to any
Disposition, the aggregate amount of all cash payments, and the fair market
value of any non-cash consideration, received by an Obligor directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
Payments shall be net of (i) the amount of any legal, title and recording tax
expenses, commissions and other fees and expenses paid by such Obligor in
connection with such Disposition and (ii) any Federal, state and local income
or other taxes estimated (including, without limitation, any foreign taxes) to
be payable by such Obligor, as the case may be, as a result of such Disposition
(but only to the extent that amounts equal to such estimated taxes are in fact
paid to the relevant Governmental Authority not later than the date such taxes
are required to be paid to such relevant Government Authority) and (b) Net Cash
Payments shall be net of any repayments by such Obligor of Indebtedness to the
extent that (i) such Indebtedness is secured by a Lien on the Property that is
the subject of such Disposition and (ii) such Indebtedness is to be repaid as a
condition to the Disposition of such Property.
"Non-Recourse Debt" shall mean any Indebtedness of the
Borrower or any Subsidiary of the Borrower in respect of which the sole
recourse of the holder or holders thereof (except to the extent approved by the
Majority Lenders) is to specified Properties of the Borrower or one of its
Subsidiaries and the revenues generated thereby or to a Subsidiary of the
Borrower whose only assets (except to the extent approved by the Majority
Lenders) consist of such specified Properties and the revenues generated
thereby and the terms and conditions of which (including, without limitation,
the amortization and other payment provisions of which and the interest and
other compensation payable in respect of which, the non-recourse provisions of
which and the other terms of which including, without limitation, covenants and
events of default), and the documentation for which, are acceptable to the
Majority Lenders; provided that the existence in any document executed by the
Borrower or such Subsidiary in connection with such Non-Recourse Debt (the
"Subject Debt") of a provision which provides for recourse to the Properties or
assets of the Borrower or such Subsidiary generally by reason of gross
negligence or willful misconduct of the Borrower or such Subsidiary, will not
cause the Subject Debt to be excluded from the definition of "Non-Recourse
Debt" prior to the time that a claim is made against the Borrower or such
Subsidiary, as the case may be, alleging the gross negligence or willful
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misconduct of the Borrower or such Subsidiary, as the case may be (it being
understood that immediately upon any such claim being made against the Borrower
or such Subsidiary the amount of such claim shall cease to be Non-Recourse
Debt).
"Notes" shall mean the promissory notes provided for by
Section 2.07 hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Obligors" shall mean, collectively, the Borrower and the
Subsidiary Guarantors.
"Operating Agreement" shall mean the Operating Agreement
between SBM Marine Services Thailand Ltd. and Tantawan Services, LLC, dated
February 9, 1996, relating to the operation of the "TANTAWAN EXPLORER".
"Operating Cash Flow" shall mean, for any period, the sum, for
the Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) net operating
income (calculated before taxes, Interest Expense, extraordinary and unusual
items and income or loss attributable to equity in Affiliates) for such period
plus (b) depreciation, depletion, amortization and other non-cash expenses (to
the extent deducted in determining net operating income) for such period.
"Original Notes" shall mean the promissory notes, dated as of
the Existing Agreement Closing Date, executed by the Borrower in favor of the
Existing Lenders.
"Payment Default" shall mean any failure of the Borrower to
pay any principal of or interest on the Loans when due.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean: (a) direct obligations of
the United States of America, or of any agency thereof, or obligations
guaranteed as to principal and interest by the United States of America, or of
any agency thereof, in each case maturing not more than 180 days from the date
of acquisition thereof; (b) marketable general obligations issued by any state
of the United States of America maturing within 180 days from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings generally obtainable from either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.; (c) Dollar denominated domestic and
Eurodollar certificates of deposit, time or demand deposits or bankers'
acceptances and maturing within 180 days from the date of acquisition issued or
guaranteed by, or placed with, and money market deposit accounts issued or
offered by: (i) any Lender, (ii) any other commercial bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia (or the holding company of which such bank is a subsidiary) that
maintains a rating of "A" or better by Standard & Poor's Ratings Group or
Moody's Investors
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Services, Inc., and (iii) any branch located in the United States of America of
a commercial bank organized under the laws of the United Kingdom, Canada or
Japan (or the holding company of which such commercial bank is a subsidiary)
that maintains a rating of "A" or better by Standard & Poor's Ratings Group or
Moody's Investors Services, Inc.; (d) commercial paper rated A-1 or better or
P-1 or better by Standard & Poor's Ratings Group or Moody's Investors Services,
Inc., respectively; (e) investments arising under the Basic Documents; and (f)
fully collateralized repurchase agreements with a term of not more than 30 days
for underlying securities of the types described in clauses (a) and (b) of this
definition, entered into with any institution meeting the qualifications
specified in subclauses (i) through (iii) of clause (c) of this definition.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust, unincorporated
organization or government (or any agency, instrumentality or political
subdivision thereof).
"Plan" shall mean an employee benefit or other plan
established or maintained by the Borrower or any ERISA Affiliate and that is
covered by Title IV of ERISA, other than a Multiemployer Plan.
"Pledge Agreements" shall mean the Borrower Pledge Agreement
and the Thai Pledge Agreements.
"Post-Default Rate" shall mean, in respect of (a) any
principal of any Loan that is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid
in full equal to 2% plus the Base Rate as in effect from time to time plus the
Applicable Margin for Base Rate Loans (provided that, if the amount so in
default is principal of a Eurodollar Loan and the due date thereof is a day
other than the last day of the current Interest Period therefor, the
"Post-Default Rate" for such principal shall be, for the period from and
including such due date to but excluding the last day of such Interest Period,
2% plus the interest rate for such Loan as provided in Section 3.02(b) hereof)
and (b) interest on any Loan that is not paid when due (whether at stated
maturity, by acceleration or otherwise), a rate per annum during the period
from and including the due date to but excluding the date on which such amount
is paid in full equal to 2% plus the Base Rate as in effect from time to time
plus the Applicable Margin for Base Rate Loans.
"Present Value of Reserves" shall mean, as of any date,
estimated net cash flow expressed in Dollars (after development expenses and
production taxes) in respect of Proved Reserves attributable to Hydrocarbon
Properties calculated in accordance with risk factors and product pricing
models for hydrocarbon properties in effect at the time such estimate is made
and discounted to present value at a discount rate for Proved Reserves
acceptable, in each case, to the Required Lenders.
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"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime commercial lending
rate.
"Principal Office" shall mean the principal office of The
Chase Manhattan Bank, located on the date hereof at 270 Park Avenue, New York,
New York 10017.
"Production Payments" shall mean Dollar-Denominated Production
Payments and Volumetric Production Payments.
"Project" shall mean the ongoing development activities in the
Tantawan area of Block B8/32 in the Gulf of Thailand pursuant to the Project
Agreements.
"Project Agreements" shall mean, collectively, the agreements
set forth on Schedule VII hereto.
"Property" shall mean any property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible, including
any right or interest therein or thereto.
"Proved Reserves", for any Person, shall mean reserves (to the
extent of the net interest of such Person) comprised of quantities of
hydrocarbons which geologic and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under
existing economic and operating conditions.
"PTT" shall mean The Petroleum Authority of Thailand.
"Public Equity Offering" shall mean an underwritten primary
public offering of the common stock of the Borrower, pursuant to an effective
registration statement filed with the Securities and Exchange Commission in
accordance with the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Qualifying Shares" shall mean the shares of Thai Romo stock
held by PRRTHAI, Inc., THAIPRR, L.P., JAMTHAI, Inc., THAIJAM, L.P. and MDMTHAI,
Inc., representing an aggregate of five ordinary shares.
"Quarterly Dates" shall mean the last Business Day of March,
June, September and December in each year, the first of which shall be
September 30, 1996.
"Redetermination" shall mean a redetermination of the
Borrowing Base provided for by Section 1.04 hereof.
"Redetermination Date" shall have the meaning assigned to such
term in Section 1.04(b)(ii) hereof.
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"Redetermination Event" shall mean the occurrence of any of
the following after the date of this Agreement:
(a) the giving by the Administrative Agent or the Required
Lenders of a notice to the Borrower indicating that the Threshold
Amount will be redetermined pursuant to Section 1.04 hereof, provided
that not more than one such notice may be given prior to any
Redetermination Date;
(b) the giving by the Borrower of a notice to the
Administrative Agent and the Lenders requesting that the Threshold
Amount be determined pursuant to Section 1.04 hereof, provided that
not more than one such notice may be given by the Borrower prior to
any Redetermination Date;
(c) the occurrence, prior to September 30, 1998, of any
Equity Issuance;
(d) the incurrence, prior to September 30, 1998, of any
Subordinated Indebtedness permitted to be incurred pursuant to Section
9.07(n) hereof (excluding any Indebtedness issued in exchange for the
Senior Subordinated Notes pursuant to the exchange offer contemplated
in the Registration Statement); and
(e) any Disposition (including, for purposes hereof,
dispositions of Properties the subject of Casualty Events), prior to
September 30, 1998.
"Reference Lenders" shall mean Chase and NationsBank of Texas,
N.A.
"Registration Statement" shall mean the Registration Statement
on Form S-4 filed by the Borrower and the Subsidiary Guarantors with the
Securities and Exchange Commission (Registration Number 333-41015), as amended
and in effect from time to time.
"Regulation A", "Regulation D", "Regulation U", "Regulation X,
and "Regulation Y" shall mean, respectively, Regulations A, D, U, X and Y of
the Board of Governors of the Federal Reserve System (or any successor), as the
same may be modified and supplemented and in effect from time to time.
"Regulatory Change" shall mean, with respect to any Lender,
any change after the date hereof in U.S. Federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to
a class of banks including such Lender of or under any U.S. Federal, state or
foreign law or regulations (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
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"Relevant Date" shall have the meaning assigned to such term
in the definition of "GAAP" in this Section 1.01.
"Report Delivery Date" shall mean each of March 15 and
September 15 in each year, commencing March 15, 1997; provided that if any such
day is not a Business Day, the Report Delivery Date shall be the immediately
succeeding Business Day.
"Required Lenders" shall mean Lenders having at least 75% of
the aggregate amount of the Commitments or, if the Commitments shall have
terminated, Lenders holding at least 75% of the aggregate unpaid principal
amount of the Loans.
"Reserve Evaluation Report" shall mean the Initial Reserve
Evaluation Report and each subsequent unsuperseded report that is prepared on a
basis reasonably consistent with the Initial Reserve Evaluation Report and is
otherwise reasonably satisfactory in form and substance to the Required
Lenders; provided that each such Reserve Evaluation Report, with respect to the
Hydrocarbon Properties in which Thai Romo has an interest, shall include, among
other items, a delineation of the net cash flow to Thai Romo after payment of
the Kingdom of Thailand special remuneratory benefit, Thai corporate taxes and
other Taxes owing in or to the Kingdom of Thailand.
"Restricted Payments" shall mean dividends (in cash, Property
or obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Borrower or of any warrants, options or other rights to
acquire the same (or to make any payments to any other Person, such as "phantom
stock" payments, where the amount thereof is calculated with reference to the
fair market or equity value of the Borrower or any of its Subsidiaries), but
excluding (a) dividends payable solely in shares of common stock of the
Borrower, and (b) payments of interest and principal on Affiliate Subordinated
Indebtedness to the extent permitted by the provisions thereof.
"Sales Agreement" shall mean any contract or agreement for the
sale by Thai Romo of crude oil or other hydrocarbon products.
"SBM" shall mean, collectively, SBM Bahamas Limited, a
Bahamian corporation, SBM Marine Services Thailand Ltd., a Thai corporation,
and Tantawan Production B.V., a Netherlands corporation.
"Scheduled Commitment Termination Date" shall mean September
30, 1999.
"Senior Officer" shall mean, when used with respect to an
Obligor, the president, the principal executive officer, the principal
operating officer or the principal financial officer of such Obligor.
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"Senior Subordinated Notes" shall mean the Borrower's 10.75%
Senior Subordinated Notes due 2004 in an aggregate principal amount not to
exceed $120,000,000, including any Indebtedness issued in exchange for the
Senior Subordinated Notes pursuant to the exchange offer contemplated in the
Registration Statement.
"Share Sale Agreement" shall mean the Share Sale Agreement
dated January 13, 1997 between Maersk Olie OG Gas AS and Thai Romo.
"Sophonpanich" shall mean Palong Sophon Limited, a limited
liability company organized under the laws of the Kingdom of Thailand, as
successor in interest to Sophonpanich Co., Limited.
"Subordinated Indebtedness" shall mean Indebtedness of the
Borrower or any of its Subsidiaries, excluding Affiliated Subordinated
Indebtedness and the Senior Subordinated Notes, in form and substance, and in
amounts, and containing provisions, including subordination provisions,
satisfactory to the Required Lenders.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
is at the time directly or indirectly owned or controlled by such Person or one
or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
"Tantawan Joint Operating Agreement" shall mean the Joint
Operating Agreement effective as of March 3, 1995 between Thaipo, Thai Romo and
Sophonpanich.
"Taxes" shall mean all taxes, levies, imposts, stamp taxes,
duties, charges to tax, fees, deductions, withholdings, or charges, which are
imposed, levied, collected, withheld or assessed by any Government Authority as
of the date of this Agreement or at any time in the future together with
interest thereon and penalties with respect thereto, if any, including, without
limitation, production and severance taxes and "Tax" and "Taxation" shall be
construed accordingly.
"Thai Pledge Agreements" shall mean the Pledge Agreements
substantially in the form of Exhibit B-2 hereto executed by RMEC and TRH,
respectively, in favor of the Lenders represented by the Administrative Agent
under a power of attorney, as each shall be modified and supplemented and in
effect from time to time.
"Thaipo" shall mean Thaipo Limited, a limited liability
company organized under the laws of the Kingdom of Thailand.
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"Thai-Tex" shall mean Thai-Tex Insurance Company, a captive
insurance company organized under the laws of the State of Hawaii, and a Wholly
Owned Subsidiary of the Borrower.
"Threshold Amount" shall mean, on any date, the amount most
recently determined to be the "Threshold Amount" in accordance with Section
1.04 hereof.
"Type" shall have the meaning assigned to such term in Section
1.03 hereof.
"Utilization Level Period" shall mean a Utilization Level 1
Period, a Utilization Level 2 Period or a Utilization Level 3 Period.
"Utilization Level 1 Period" shall mean each period during
which the aggregate principal amount of Loans outstanding hereunder is less
than or equal to 100% of the Threshold Amount at such time.
"Utilization Level 2 Period" shall mean each period on or
prior to June 30, 1998 during which the aggregate principal amount of Loans
outstanding hereunder is greater than 100% of the Threshold Amount at such
time.
"Utilization Level 3 Period" shall mean each period after June
30, 1998 during which the aggregate principal amount of Loans outstanding
hereunder is greater than 100% of the Threshold Amount at such time.
"Volumetric Production Payments" shall mean production payment
obligations of the Borrower or any Subsidiary Guarantor or any of its
Subsidiaries which are payable from a specified share of production from
specific Properties, together with all undertakings and obligations in
connection therewith.
"Warrant Agreement" shall mean the Warrant Agreement dated the
date of this Agreement between the Borrower and the Lenders, as the same may be
modified and supplemented and in effect from time to time.
"Wholly Owned Subsidiary" shall mean, with respect to any
Person, any corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are directly or indirectly owned or
controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters and all
financial statements to be delivered
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pursuant to this Agreement shall be made and prepared in accordance with GAAP
and all accounting or financial terms shall have the meanings ascribed to such
terms by GAAP.
(b) None of the Obligors will change the last day of its
fiscal year from December 31 of each year, or the last days of the first three
fiscal quarters in each of its fiscal years from March 31, June 30 and
September 30 of each year, respectively.
1.03 Types of Loans. Loans hereunder are distinguished by
"Type". The "Type" of a Loan refers to whether such Loan is a Base Rate Loan
or a Eurodollar Loan, each of which constitutes a Type.
1.04 Borrowing Base and Threshold Amount Determinations and
Computations.
(a) Initial Amounts. The Borrowing Base in effect on the
date of this Agreement is hereby determined to be $150,000,000, and the
Threshold Amount in effect on the date of this Agreement is hereby determined
to be $60,000,000. The Borrowing Base and the Threshold Amount shall remain at
the respective amounts determined pursuant to the first sentence of this
Section 1.04(a) until the date on which (x) the Administrative Agent shall next
establish the Borrowing Base and/or Threshold Amount, as the case may be, as
provided in Section 1.04(b) hereof or Section 1.04(c) hereof or (y) the
Borrowing Base and/or Threshold Amount is reduced pursuant to Section 2.09
hereof.
(b) Scheduled Redeterminations.
(i) As promptly as practicable following the receipt
of the Reserve Evaluation Report on each Report Delivery Date, the
Administrative Agent (in consultation with the Lenders) shall (A)
redetermine the Borrowing Base (if after September 30, 1998) and the
Threshold Amount on the basis of such Reserve Evaluation Report in the
manner provided in clause (ii) of this Section 1.04(b), (B) notify the
Lenders of such redetermination and (C) if such redetermination is
approved by each of the Lenders, notify the Borrower and the Lenders
of the Borrowing Base and the Threshold Amount as so redetermined,
provided that the Administrative Agent shall notify the Borrower on or
prior to each Determination Date as to whether or not the Lenders have
redetermined the Borrowing Base and/or Threshold Amount. Such
redetermined Borrowing Base and the Threshold Amount shall become
effective on the Determination Date immediately following the Report
Delivery Date for such Reserve Evaluation Report (or such later date
as notified by the Administration Agent to the Borrower and the
Lenders) and shall remain effective until again redetermined pursuant
to this Section 1.04. Each date on which a redetermination of the
Borrowing Base or the Threshold Amount becomes effective as provided
in the preceding sentence is herein called a "Redetermination Date".
(ii) Each redetermination by the Administrative
Agent of the Borrowing Base and the Threshold Amount (and the Lenders'
approval thereof) shall be made on the
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basis of parameters which may include the Present Value of Reserves
attributable to Hydrocarbon Properties as set forth in the related
Reserve Evaluation Report, as adjusted by the Administrative Agent
with the approval of the Lenders, in its and their reasonable
discretion, using the rates, factors, values, estimates, assumptions
and computations set forth in such Reserve Evaluation Report and any
other relevant information or factors (such adjustments being herein
called "Borrowing Base Assumptions").
(iii) As used herein, "Borrowing Base" shall mean
the amount specified in Section 1.04(a) hereof as redetermined from
time to time as provided in clauses (i) and (ii) of this Section
1.04(b), each such redetermination to become effective as provided in
said clause (i).
(c) Unscheduled Redeterminations. Not later than the date 45
days after any Redetermination Event, the Administrative Agent may (and (i) if
requested by (x) Banque Paribas (at any time that Banque Paribas' Commitment
equals or exceeds $35,000,000) or (y) the Required Lenders as provided in
paragraph (a) of the definition of such term in Section 1.01 hereof, (ii) if
such Redetermination Event is an event referred to in paragraph (b) of the
definition of such term in Section 1.01 hereof or (iii) if such Redetermination
Event is an event referred to in paragraphs (c), (d), or (e) of such term in
Section 1.01 hereof and the Borrower so requests, shall), by notice to the
Borrower and the Lenders, redetermine the Borrowing Base and the Threshold
Amount (in the case of paragraphs (b) and (e) of the definition of
Redetermination Event) in accordance with the provisions of Section 1.04(b)(ii)
hereof with the approval of the Lenders. In determining the Borrowing Base and
the Threshold Amount pursuant to this Section 1.04(c), the Administrative Agent
shall (with the approval of the Lenders) be entitled to give effect to the
occurrence of any events or circumstances giving rise to or constituting the
relevant Redetermination Event. Any determination of the Borrowing Base and
Threshold Amount following a Redetermination Event referred to in paragraph (e)
of the definition of such term in Section 1.01 hereof shall be made by the
Administrative Agent and the Lenders in their sole discretion based on such
factors as they deem relevant using the criteria generally employed by the
Administrative Agent and each such Lender, respectively, on the date of
determination with respect to borrowers similar to the Borrower. The effective
date of the redetermined Borrowing Base and Threshold Amount (if applicable)
shall be established in accordance with Section 1.04(b) hereof, provided that
no Reserve Evaluation Report shall be required for a determination of the
Borrowing Base following a Redetermination Event referred to in paragraph (c),
(d) and (e) of the definition of such term in Section 1.01 hereof.
Notwithstanding anything herein to the contrary, upon the occurrence of any of
the events specified in clauses (c), (d) and (e) of the definition of
Redetermination Event, if the Borrower has not requested a redetermination of
the Borrower Base and Threshold Amount, as provided for above, the Borrowing
Base and Threshold Amount shall automatically be reduced only by 100% (but not
below zero) of the Net Available Proceeds received as a result of such
Redetermination Event.
(d) Determinations Etc.. All determinations and
redeterminations and adjustments of the Borrowing Base, Threshold Amount or any
Borrowing Base Assumption by the
Credit Agreement
<PAGE> 27
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Administrative Agent or the Required Lenders provided for in this Section 1.04
or in the definition of "Present Value of Reserves" in Section 1.01 hereof,
including any approvals or disapprovals of a determination or redetermination
of the Borrowing Base, Threshold Amount or any Borrowing Base Assumption or any
adjustment thereof shall be made on a reasonable basis, in good faith, in a
manner reasonably consistent with the basis on which the initial Threshold
Amount was determined and in accordance with then current standards and
practices of the Administrative Agent or the Lenders, as applicable, for
similar oil and gas credits with respect to borrowers similar to the Borrower.
1.05 Copies of Documents. Whenever this Agreement provides
that the Administrative Agent will distribute to the Lenders documents provided
by any of the Obligors, such Obligor shall furnish to the Administrative Agent
a copy of such document for each Lender.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans.
(a) Loans. Each Lender severally agrees, on the terms and
conditions of this Agreement, to make one or more loans to the Borrower in
Dollars during the period from and including the date hereof to but not
including the Commitment Termination Date in an aggregate principal amount up
to but not exceeding the lesser of (x) the Commitment of such Lender as in
effect from time to time and (y) an amount equal to such Lender's Commitment
Percentage multiplied by the Borrowing Base determined (if after September 30,
1998 or if so requested by the Borrower pursuant to Section 1.04(c) hereof)
pursuant to the immediately preceding Reserve Evaluation Report; provided that
the Borrower may not borrow Loans under this Agreement at any time while a
Deficiency exists. Subject to the terms and conditions of this Agreement,
during such period the Borrower may borrow, repay and reborrow the amount of
the Commitments by means of Base Rate Loans and Eurodollar Loans and may
Convert Loans of one Type into Loans of another Type (as provided in Section
2.08 hereof) or Continue Loans of one Type as Loans of the same Type (as
provided in Section 2.08 hereof).
(b) Limit on Eurodollar Loans. No more than five separate
Interest Periods in respect of Eurodollar Loans from each Lender may be
outstanding at any one time.
2.02 Borrowings. The Borrower shall give the Administrative
Agent notice of each borrowing hereunder as provided in Section 4.05 hereof.
Not later than 1:00 p.m. New York time on the date specified for each borrowing
hereunder, each Lender shall make available the amount of the Loan or Loans to
be made by it on such date to the Administrative Agent, at an account in New
York, New York specified by the Administrative Agent, in immediately available
funds, for account of the Borrower. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower by depositing the same, in
immediately available funds, in a single account of the Borrower designated by
the Borrower.
Credit Agreement
<PAGE> 28
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2.03 Changes of Commitments.
(a) The aggregate amount of the Commitments shall be
automatically reduced to zero on the Commitment Termination Date.
(b) The Borrower shall have the right at any time or from
time to time (i) so long as no Loans are outstanding, to terminate the
Commitments and (ii) to reduce the aggregate unused amount of the Commitments;
provided that (x) the Borrower shall give notice of each such termination or
reduction as provided in Section 4.05 hereof and (y) each partial reduction
shall be in an aggregate amount at least equal to $5,000,000 or in integral
multiples of $1,000,000 in excess thereof.
(c) The Commitments once terminated or reduced may not be
reinstated.
2.04 Commitment Fee. The Borrower shall pay to the
Administrative Agent for account of each Lender a commitment fee on the daily
average unused amount of the difference, if any, between (x) each Lender's
outstanding Loans and (y) an amount equal to such Lender's Commitment
Percentage multiplied by the lesser of (i) the aggregate of the Commitments and
(ii) the Borrowing Base determined pursuant to the immediately preceding
Reserve Evaluation Report, in each case, for the period from and including the
date hereof to but not including the earlier of the date such Lender's
Commitment is terminated and the Commitment Termination Date, at a rate per
annum equal to 1/2 of 1%. Accrued commitment fee shall be payable on each
Quarterly Date (provided that the Administrative Agent shall have provided to
the Borrower a written invoice, and provided further that failure of the
Administrative Agent to deliver such invoice shall not relieve the Borrower of
the obligation to pay such commitment fee) and on the earlier of the date the
relevant Commitments are terminated and the Commitment Termination Date.
2.05 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
2.06 Several Obligations; Remedies Independent. The failure
of any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but neither any Lender nor the Administrative Agent shall be responsible
for the failure of any other Lender to make a Loan to be made by such other
Lender, and (except as otherwise provided in Section 4.06 hereof) no Lender
shall have any obligation to the Administrative Agent or any other Lender for
the failure by such Lender to make any Loan required to be made by such Lender.
The amounts payable by the Borrower at any time hereunder and under the Notes
to each Lender shall be a separate and independent debt and each Lender shall
be entitled to protect and enforce its rights arising out of this Agreement and
the Notes, and, to the extent permitted by law, it shall not be necessary for
any other Lender or the Administrative Agent to consent to, or be joined as an
additional party in, any proceedings for such purposes.
Credit Agreement
<PAGE> 29
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2.07 Notes.
(a) The Loan made by each Lender shall be evidenced by a
single promissory note of the Borrower substantially in the form of Exhibit A
hereto, dated the date hereof, payable to such Lender in a principal amount
equal to the amount of its Commitment as originally in effect and otherwise
duly completed.
(b) The date, amount, Type, interest rate and duration of
each Interest Period (if applicable) of or for each Loan made by each Lender to
the Borrower, and each payment made on account of the principal thereof, shall
be recorded by such Lender on its books and, prior to any transfer of the Note
held by it, endorsed by such Lender on the schedule attached to such Note or
any continuation thereof; provided that the failure of such Lender to make any
such recordation or endorsement shall not affect the obligations of the
Borrower to make a payment when due of any amount owing hereunder or under such
Note in respect of the Loans.
(c) No Lender shall be entitled to have its Note substituted
or exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Lender's Loan and Note pursuant to Section 12.06 hereof or a
required assignment of all of such Lender's Loans as contemplated by Section
5.07 hereof (and, (x) if requested by any Lender or in connection with any such
required assignment, the Borrower agrees to so exchange any Note and (y)
promptly following delivery to any Lender of replacement Note(s), such Lender
(if such Lender is an assigning Lender) agrees to deliver to the Borrower such
Lender's existing Note marked canceled).
2.08 Optional Prepayments and Conversions or Continuations of
Loans. Subject to Section 4.04 hereof, the Borrower shall have the right to
prepay Loans, or to Convert Loans of one Type into Loans of another Type or
Continue Loans of one Type as Loans of the same Type, at any time or from time
to time, provided that: (a) the Borrower shall give the Administrative Agent
notice of each such prepayment, Conversion or Continuation as provided in
Section 4.05 hereof (and, upon the date specified in any such notice of
prepayment, the amount to be prepaid shall become due and payable hereunder);
and (b) Eurodollar Loans may be prepaid or Converted only on the last day of an
Interest Period for such Loans. Notwithstanding the foregoing, and without
limiting the rights and remedies of the Lenders under Section 10 hereof, in the
event that any Event of Default shall have occurred and be continuing, the
Administrative Agent may (and at the request of the Majority Lenders shall)
suspend the right of the Borrower to Convert any Loan into a Eurodollar Loan,
or to Continue any Loan as a Eurodollar Loan, in which event all Eurodollar
Loans shall be Converted (on the last day(s) of the respective Interest Periods
therefor) into Base Rate Loans.
2.09 Mandatory Prepayments and Reductions of Commitments.
(a) Borrowing Base. In the event that, after giving effect
to any Redetermination, the Borrowing Base as redetermined is less than the
aggregate principal amount of the Loans
Credit Agreement
<PAGE> 30
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outstanding on the related Redetermination Date, the Borrower shall prepay an
amount of the Loans or, if after September 30, 1998, other Indebtedness
specified in Sections 9.07 (b) (but only to the extent owed to Persons that are
not Affiliates of the Borrower), (i), (j) and (m) hereof equal to the
Deficiency in equal monthly installments prior to the next Borrowing Base
redetermination, commencing on the Business Day following the date on which the
Administrative Agent notifies the Borrower of the effectiveness of such
Redetermination with the remaining such installments to be paid on the
corresponding day in each of the remaining succeeding months (or, if any such
day is not a Business Day, on the next succeeding Business Day), provided that
if the Borrowing Base has decreased by reason of an event specified in clauses
(c), (d) or (e) of the definition of Redetermination Event, such prepayment
shall be made on such earlier date or dates as the Required Lenders (through
the Administrative Agent) may specify to the Borrower.
(b) Threshold Amount. If, at any time after September 30,
1998, the aggregate principal amount of the Loans shall exceed the Threshold
Amount at such time, the Borrower shall immediately prepay Loans in an amount
equal to such excess. Notwithstanding any provision of this Agreement to the
contrary, on any date after September 30, 1998, any reference in this Agreement
or any of the other Basic Documents to the "Threshold Amount" shall be deemed
to be a reference to the "Borrowing Base."
(c) Casualty Events. Within 30 days following the occurrence
of any Casualty Event affecting any Property (the "Affected Property") of any
Obligor that is expected to result in the receipt by such Obligor of Net
Available Proceeds in excess of $5,000,000, such Obligor shall deliver to the
Lenders a statement, certified by the chief financial officer of such Obligor
and in form and detail satisfactory to the Administrative Agent, of the amount
of the Net Available Proceeds in excess of $5,000,000 of any insurance,
condemnation award or other compensation resulting from such Casualty Event.
Such statement shall indicate whether the affected Obligor intends to (i)
repair or replace the Affected Property, (ii) reinvest such Net Available
Proceeds in Property of comparable value and substantially similar in respect
of type, cash-flow profile and location, if applicable, or (iii) prepay the
Loans in an amount equal to 100% of such Net Available Proceeds. If such
Borrower has indicated that it intends to repair or replace the Affected
Property or reinvest the Net Available Proceeds relating thereto in Property of
comparable value (which Property is satisfactory to the Majority Lenders), such
Borrower shall either (i) commence such repair or replacement not later than
the later of (x) 30 days following the receipt of the proceeds of any
insurance, condemnation award or compensation in respect of such Casualty Event
and (y) the receipt of all governmental approvals required for the commencement
of such repair or replacement or (ii) reinvest such proceeds not later than the
later of (p) 90 days after the receipt thereof or (q) the receipt of all
governmental approvals required for such reinvestment, as the case may be. If
such Obligor has indicated that it does not intend to effect such repair,
replacement or reinvestment, then promptly upon receipt of such funds, the
Borrower shall prepay, subject to receipt of all government approvals, if any,
required for such prepayment, the Loans, the Borrowing Base and Threshold
Amount shall be subject to automatic reduction, in an aggregate amount, if any,
equal to the percentage of the Net Available Proceeds of such Casualty Event
attributable to Property which is then given value in determining the Borrowing
Credit Agreement
<PAGE> 31
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Base or Threshold Amount and not theretofore applied to the repair or
replacement of such Property, such prepayment to be effected in each case in
the manner specified in paragraph (c) of this Section 2.09.
(d) Change of Control. Unless each Lender shall have
consented to the occurrence of a Change of Control, concurrently with the
occurrence of the event giving rise to such Change of Control the Borrower
shall prepay the Loans in full, and the Commitments shall be automatically
reduced to zero.
(e) Application. Prepayments and reductions of Borrowing
Base and/or the Threshold Amount, as applicable, described in the above clauses
of this Section 2.09 and Section 1.04 shall be effected as follows: the
Borrowing Base and/or the Threshold Amount, as applicable, shall be
automatically reduced by an amount equal to the amount specified in such
clauses (and to the extent that, after giving effect to such reduction, the
aggregate principal amount of the Loans would exceed the Borrowing Base and/or
the Threshold Amount, the Borrower shall prepay the Loans in an amount equal to
the Deficiency in accordance with Sections 2.09(a), (b), (c) and (d)).
2.10 Engineering and Administration Fee. The Borrower shall
pay to the Administrative Agent, for the Lenders' accounts, a fee in accordance
with the Fee Letter dated as of December 2, 1997 between the Borrower and
Chase.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans. The Borrower hereby promises to pay
to the Administrative Agent for account of each Lender the entire outstanding
principal amount of such Lender's Loans, and each Loan shall mature, on the
Commitment Termination Date. In addition, if following any reduction in the
Commitments the aggregate principal amount of the Loans shall exceed the
Commitments, the Borrower shall pay Loans in an aggregate amount equal to such
excess.
3.02 Interest. the Borrower hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid
principal amount of each Loan made by such Lender for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan,
the Base Rate (as in effect from time to time) plus the Applicable
Margin; and
(b) during such periods as such Loan is a Eurodollar
Loan, for each Interest Period therefor, the Eurodollar Rate for such
Loan for such Interest Period plus the Applicable Margin.
Credit Agreement
<PAGE> 32
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Notwithstanding the foregoing, the Borrower hereby promises to pay to the
Administrative Agent for account of the Administrative Agent or any Lender
interest at the applicable Post-Default Rate on the following:
(i) on any principal of any Loan held by such Lender that
shall not be paid in full when due (whether at stated maturity, by
acceleration or otherwise) for the period from and including the due
date thereof to but excluding the date the same is paid in full; and
(ii) on any interest on any Loan that shall not be paid in
full when due for the period from the due date thereof to but
excluding the date the same is paid in full.
Accrued interest on each Loan shall be payable (i) in the case
of a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor (or, in the
case of any Eurodollar Loan that has an Interest Period of longer than three
months, on the date three months following the commencement of such Interest
Period and on the last day of such Interest Period) and (iii) in the case of
any Loan, upon the payment or prepayment thereof or the Conversion of such Loan
to a Loan of another Type (but only on the principal amount so paid, prepaid or
Converted), except that interest payable at the Post-Default Rate shall be
payable from time to time on demand. Promptly after the determination of any
interest rate provided for herein or any change therein, the Administrative
Agent shall give notice thereof to the Lenders to which such interest is
payable and to the Borrower.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Borrower
under this Agreement and the Notes, shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the
Administrative Agent at an account in New York, New York specified by the
Administrative Agent, not later than 1:00 p.m. New York time on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day).
(b) The Borrower shall, at the time of making each payment
under this Agreement or any Note for account of any Lender, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the Loans or other amounts payable by the Borrower hereunder to which such
payment is to be applied (except that, unless such payment is specified by the
Borrower to be a payment or prepayment of principal required to be made under
Section 3.01 or 2.09 hereof or a payment of interest required to be made under
Section 3.02 hereof, if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to
Credit Agreement
<PAGE> 33
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the Lenders for application in such manner as it or the Majority Lenders,
subject to Section 4.02 hereof, may determine to be appropriate).
(c) Each payment received by the Administrative Agent under
this Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(d) If the due date of any payment under this Agreement or
any Note would otherwise fall on a day that is not a Business Day, such date
shall be extended to the next succeeding Business Day, and interest shall be
payable for any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein: (a) each borrowing from the Lenders under Section 2.01 hereof
shall be made from the Lenders, each payment of commitment fees under Section
2.04 hereof shall be made for the account of the Lenders and each termination
or reduction of the amount of the Commitments under Section 2.03 hereof shall
be applied to the respective Commitments of the Lenders, pro rata according to
the amounts of their respective Commitments; (b) except as otherwise provided
in Section 5.04 hereof, Eurodollar Loans having the same Interest Period shall
be allocated pro rata among the Lenders according to the amounts of their
respective Commitments (in the case of the making of Loans) or their respective
Loans (in the case of Conversions and Continuations of Loans); (c) each payment
or prepayment of principal of Loans by the Borrower shall be made for account
of the Lenders pro rata in accordance with the respective unpaid principal
amounts of the Loans held by them, provided that if immediately prior to giving
effect to any such payment in respect of any Loans the outstanding principal
amount of the Loans shall not be held by the Lenders pro rata in accordance
with their respective Commitments in effect at the time such Loans were made
(whether by reason of a failure of a Lender to make a Loan hereunder or
otherwise), then such payment shall be applied to the Loans in such manner as
shall result, as nearly as is practicable, in the outstanding principal amount
of the Loans being held by the Lenders pro rata in accordance with their
respective Commitments; and (d) each payment of interest on Loans by the
Borrower shall be made for account of the Lenders pro rata in accordance with
the amounts of interest on such Loans then due and payable to the respective
Lenders.
4.03 Computations. Interest on Eurodollar Loans and
commitment fee shall be computed on the basis of a year of 360 days and actual
days elapsed (including the first day but excluding the last day) occurring in
the period for which payable and interest on Base Rate Loans shall be computed
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable. Notwithstanding the foregoing, for each day that the
Base Rate is calculated by reference to the Federal Funds Rate, interest on
Base Rate Loans shall be computed on the basis of a year of 360 days and actual
days elapsed.
Credit Agreement
<PAGE> 34
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4.04 Minimum Amounts. Except for prepayments required
pursuant to Section 2.09 hereof, each borrowing, Conversion and partial
prepayment of principal of Loans shall be in an aggregate amount at least equal
to $1,000,000 (borrowings, Conversions or prepayments of or into Loans of
different Types or, in the case of Eurodollar Loans, having different Interest
Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period), provided that the aggregate principal amount of Eurodollar
Loans having the same Interest Period shall be in an amount at least equal to
$1,000,000 and, if any Eurodollar Loans would otherwise be in a lesser
principal amount for any period, such Loans shall be Base Rate Loans during
such period.
4.05 Certain Notices. Notices by the Borrower to the
Administrative Agent of borrowings, Conversions, Continuations and optional
prepayments of Loans, of Types of Loans and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by the
Administrative Agent not later than 12:00 noon New York time on the number of
Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Termination or reduction of
Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or optional prepayment shall specify the Loans to be
borrowed, Converted, Continued or prepaid and the amount (subject to Section
4.04 hereof) and Type of each Loan to be borrowed, Converted, Continued or
prepaid and the date of borrowing, Conversion, Continuation or optional
prepayment (which shall be a Business Day). Each such notice of the duration
of an Interest Period shall specify the Loans to which such Interest Period is
to relate. The Administrative Agent shall promptly notify the Lenders of the
contents of each such notice. In the event that the Borrower fails to select
the Type of Loan, or the duration of any Interest Period for any Eurodollar
Loan, within the time period and otherwise as provided in this Section 4.05,
such Loan (if outstanding as
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<PAGE> 35
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a Eurodollar Loan) will be automatically Converted into a Base Rate Loan on the
last day of the then current Interest Period for such Loan or (if outstanding
as a Base Rate Loan) will remain as, or (if not then outstanding) will be made
as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent.
Unless the Administrative Agent shall have been notified by a Lender or the
Borrower (the "Payor") prior to the date on which the Payor is to make payment
to the Administrative Agent or (in the case of a Lender) the proceeds of a Loan
to be made by such Lender hereunder or (in the case of the Borrower) a payment
to the Administrative Agent for account of one or more of the Lenders hereunder
(such payment being herein called the "Required Payment"), which notice shall
be effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date (the "Advance Date") such amount was so made
available by the Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to the Federal Funds Rate for
such day and, if such recipient(s) shall fail promptly to make such payment,
the Administrative Agent shall be entitled to recover such amount, on demand,
from the Payor, together with interest as aforesaid, provided that if neither
the recipient(s) nor the Payor shall return the Required Payment to the
Administrative Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each be
obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to
be made by the Borrower to the Lenders, the Borrower and the
recipient(s) shall each be obligated retroactively to the Advance Date
to pay interest in respect of the Required Payment at the Post-Default
Rate (without duplication of the obligation of the Borrower under
Section 3.02 hereof to pay interest on the Required Payment at the
Post-Default Rate), it being understood that the return by the
recipient(s) of the Required Payment to the Administrative Agent shall
not limit such obligation of the Borrower under said Section 3.02 to
the extent required thereunder to pay interest at the Post-Default
Rate in respect of the Required Payment; and
(ii) if the Required Payment shall represent proceeds of a
Loan to be made by the Lenders to the Borrower, the Payor and the
Borrower shall each be obligated retroactively to the Advance Date to
pay interest in respect of the Required Payment pursuant to whichever
of the rates specified in Section 3.02 hereof is applicable to the
Type of such Loan, it being understood that the return by the Borrower
of the Required Payment to the Agent shall not limit any claim the
Borrower may have against the Payor in respect of such Required
Payment.
Credit Agreement
<PAGE> 36
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4.07 Sharing of Payments, Etc.
(a) Each Obligor agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option (to the fullest
extent permitted by law), to set off and apply any deposit (general or special,
time or demand, provisional or final), or other indebtedness, held by it for
the credit or account of such Obligor at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such
Lender's Loans or any other amount payable to such Lender hereunder, that is
not paid when due (regardless of whether such deposit or other indebtedness are
then due to such Obligor), in which case it shall promptly notify such Obligor
and the Administrative Agent thereof, provided that such Lender's failure to
give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Obligor payment of
any principal of or interest on any Loan owing to it or payment of any other
amount under this Agreement or any other Basic Document through the exercise of
any right of set-off, banker's lien or counterclaim or similar right or
otherwise (other than from the Administrative Agent as provided herein), and,
as a result of such payment, such Lender shall have received a greater
percentage of the principal of or interest on the Loans or such other amounts
then due hereunder or thereunder by such Obligor to such Lender than the
percentage received by any other Lender, it shall promptly purchase from such
other Lenders participations in (or, if and to the extent specified by such
Lender, direct interests in) the Loans or such other amounts, respectively,
owing to such other Lenders (or in interest due thereon, as the case may be) in
such amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit of such
excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans or such other amounts,
respectively, owing to each of the Lenders, provided that if at the time of
such payment the outstanding principal amount of the Loans shall not be held by
the Lenders pro rata in accordance with their respective Commitments in effect
at the time such Loans were made (whether by reason of a failure of a Lender to
make a Loan hereunder or otherwise), then such purchases of participations
and/or direct interests shall be made in such manner as will result, as nearly
as is practicable, in the outstanding principal amount of the Loans being held
by the Lenders pro rata according to the amounts of such Commitments. To such
end all the Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such payment is rescinded or
must otherwise be restored.
(c) Each Obligor agrees that, to the extent permitted by law,
any Lender so purchasing such a participation (or direct interest) may exercise
all rights of set-off, banker's lien, counterclaim or similar rights with
respect to such participation as fully as if such Lender were a direct holder
of Loans or other amounts (as the case may be) owing to such Lender in the
amount of such participation.
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(d) Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any of the Obligors. If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a set-off to which this Section 4.07 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this Section 4.07 to share in the benefits of any recovery on such
secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Borrower shall pay directly to each Lender from time
to time such amounts as such Lender may reasonably determine to be necessary to
compensate such Lender for any costs that such Lender determines are
attributable to its making or maintaining of any Eurodollar Loans or its
obligation to make any Eurodollar Loans hereunder, or any reduction in any
amount receivable by such Lender hereunder in respect of any of such Loans or
such obligation (such increases in costs and reductions in amounts receivable,
together with costs referred to in Section 5.01(b) hereof, being herein called
"Additional Costs"), resulting from any Regulatory Change that:
(i) shall (without duplication of amounts paid pursuant
to Section 5.06 (or that would have been paid pursuant to Section 5.06
but for Subsection (a)(i) or (a)(ii) thereof), 6.07 (or that would
have been paid pursuant to Section 6.07 but for Subsection (b)
thereof) or 12.03(c) hereof) subject any Lender (or its Applicable
Lending Office for any of such Loans) to any tax, duty or other charge
in respect of such Loans or its Note or changes the basis of taxation
of any amounts payable to such Lender under this Agreement or its Note
in respect of any of such Loans (excluding, in each case, any such
changes in the rate of tax on the overall net income of, or the rate
at which franchise taxes are imposed on, such Lender or such
Applicable Lending Office by the jurisdiction in which such Lender has
its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements (other than, in the case of any Lender for any
period as to which the Borrower is required to pay any amount under
paragraph (d) below, the reserves against "Eurocurrency liabilities"
under Regulation D therein referred to) relating to any extensions of
credit or other assets of, or any deposits with or other liabilities
of, such Lender (including, without limitation, any of such Loans or
any deposits referred to in the definition of "Eurodollar Rate" in
Section 1.01 hereof), or any commitment of such Lender (including,
without limitation, the Commitments of such Lender hereunder); or
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(iii) imposes any other condition affecting this Agreement
or its Note (or any of such extensions of credit or liabilities) or
its Commitments.
If any Lender requests compensation from the Borrower under this Section
5.01(a), the Borrower may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to make
or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar
Loans, until the Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 5.04 hereof shall be
applicable), provided that such suspension shall not affect the right of such
Lender to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions
of this Section 5.01 (but without duplication), the Borrower shall pay directly
to each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the holding company of which such Lender is a subsidiary) for any costs that it
determines are attributable to the maintenance by such Lender (or any
Applicable Lending Office or such bank holding company) of capital in respect
of its Commitments or Loan that it would not have incurred but for a Regulatory
Change (such compensation to include, without limitation, an amount equal to
any reduction of the rate of return on assets or equity of such Lender (or any
Applicable Lending Office or such bank holding company) to a level below that
which such Lender (or any Applicable Lending Office or such bank holding
company) could have achieved but for such Regulatory Change).
(c) Each Lender shall notify the Borrower of any event
occurring after the date hereof entitling such Lender to compensation under
paragraph (a) or (b) of this Section 5.01 as promptly as practicable, but in
any event within 45 days, after such Lender obtains actual knowledge thereof;
provided that (i) if any Lender fails to give such notice within 45 days, after
it obtains actual knowledge of such an event, such Lender shall, with respect
to compensation payable pursuant to this Section 5.01 in respect of any
Additional Costs resulting from such event, only be entitled to payment under
this Section 5.01 for Additional Costs incurred from and after the date 45
days, prior to the date that such Lender does give such notice and (ii) each
Lender will make all reasonable efforts to avoid the need for or minimize the
amount of such compensation, including, without limitation, designating a
different Applicable Lending Office for the Loans of such Lender affected by
such event if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the reasonable opinion of such Lender,
be disadvantageous to such Lender, except that such Lender shall have no
obligation to designate an Applicable Lending Office located in the United
States of America. Each Lender will furnish to the Borrower a certificate
setting forth the basis and amount of each request by such Lender for
compensation under paragraph (a) or (b) of this Section 5.01. Determinations
and allocations by any Lender for purposes of this Section 5.01 of the effect
of any Regulatory Change pursuant to paragraph (a) of this Section 5.01, or of
the effect of capital maintained pursuant to paragraph (b) of this Section
5.01, on its costs or rate of return of maintaining Loans or its obligation to
make Loans, or on amounts receivable by it in respect of Loans, and of the
amounts required to compensate such Lender under this Section 5.01, shall (i)
be made in good faith and on a
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reasonable basis and (ii) be prima facie evidence of such Lender's right to
receive such compensation.
(d) Without limiting the effect of the foregoing, but without
duplication of amounts required to be paid in respect of any Reserve
Requirement under the calculation of Eurodollar Rate hereunder, the Borrower
shall pay to each Lender on the last day of each Interest Period so long as
such Lender is maintaining reserves against "Eurocurrency liabilities" under
Regulation D (or so long as such Lender is, by reason of any Regulatory Change,
maintaining reserves against any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Loans is
determined as provided in this Agreement or against any category of extensions
of credit or other assets of such Lender that includes any Eurodollar Loans) an
additional amount (determined in good faith and on a reasonable basis by such
Lender and notified to the Borrower through the Administrative Agent) equal to
the product of the following for each Eurodollar Loan held by such Lender for
each day during such Interest Period:
(i) the principal amount of such Eurodollar Loan
outstanding on such day; and
(ii) the remainder of (x) a fraction the numerator of
which is the rate (expressed as a decimal) at which interest accrues
on such Eurodollar Loan for such Interest Period as provided in this
Agreement (less the Applicable Margin) and the denominator of which is
one minus the effective rate (expressed as a decimal) at which such
reserve requirements are imposed on such Lender on such day minus (y)
such numerator; and
(iii) 1/360.
5.02 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate for any Interest Period:
(a) the Administrative Agent determines, which determination
shall be conclusive, that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Rate"
in Section 1.01 hereof are not being provided in the relevant amounts
or for the relevant maturities for purposes of determining rates of
interest for Eurodollar Loans as provided herein; or
(b) the Majority Lenders determine, which determination shall
be conclusive, and notify the Administrative Agent that the relevant
rates of interest referred to in the definition of "Eurodollar Rate"
in Section 1.01 hereof upon the basis of which the rate of interest
for Eurodollar Loans for such Interest Period is to be determined are
not likely to be adequate to cover the cost to such Lenders of making
or maintaining Eurodollar Loans for such Interest Period;
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then the Administrative Agent shall give the Borrower and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Borrower shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurodollar Loans, either prepay such Loans or Convert such
Loans into Base Rate Loans in accordance with Section 2.08 hereof.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain
Eurodollar Loans hereunder (and, in the sole opinion of such Lender, the
designation of a different Applicable Lending Office would either not avoid
such unlawfulness or would be disadvantageous to such Lender), then such Lender
shall promptly notify the Borrower thereof (with a copy to the Administrative
Agent) and such Lender's obligation to make or Continue, or to Convert Loans of
any other Type into, Eurodollar Loans shall be suspended until such time as
such Lender may again make and maintain Eurodollar Loans (in which case the
provisions of Section 5.04 hereof shall be applicable).
5.04 Treatment of Affected Loans. If the obligation of any
Lender to make Eurodollar Loans or to Continue, or to Convert Base Rate Loans
into, Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03
hereof, such Lender's Eurodollar Loans shall be automatically Converted into
Base Rate Loans on the last day(s) of the then current Interest Period(s) for
Eurodollar Loans (or, in the case of a Conversion required by Section 5.01(b)
or 5.03 hereof, on such earlier date as such Lender may specify to the Borrower
with a copy to the Administrative Agent) and, unless and until such Lender
gives notice as provided below that the circumstances specified in Section 5.01
or 5.03 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have
been so Converted, all payments and prepayments of principal that
would otherwise be applied to such Lender's Eurodollar Loans shall be
applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Eurodollar Loans shall be made or Continued instead as
Base Rate Loans, and all Base Rate Loans of such Lender that would
otherwise be Converted into Eurodollar Loans shall remain as Base Rate
Loans.
If such Lender gives notice to the Borrower with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent necessary so that, after
giving effect thereto, all Loans held by the
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Lenders holding Eurodollar Loans and by such Lender are held pro rata (as to
principal amounts, Types and Interest Periods) in accordance with their
respective Commitments.
5.05 Broken Funding. The Borrower shall pay to the
Administrative Agent for account of each Lender, upon the request of such
Lender through the Administrative Agent, such amount or amounts as shall be
sufficient (in the reasonable opinion of such Lender) to compensate it for any
loss, cost or expense that such Lender reasonably determines in good faith is
attributable to:
(a) any payment, prepayment or Conversion of a Eurodollar
Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10
hereof) on a date other than the last day of an Interest Period for
such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any of the conditions precedent
specified in Section 7 hereof to be satisfied) to borrow a Eurodollar
Loan from such Lender on the date for such borrowing specified in the
relevant notice of borrowing given pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein (minus the relevant Applicable Margin) over (ii) the amount of
interest that otherwise would have accrued on such principal amount at a rate
per annum equal to the interest component of the amount such Lender would have
offered in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Lender in good faith). Each
Lender claiming compensation under this Section 5.05 will furnish to the
Borrower through the Administrative Agent a certificate setting forth the basis
of the calculation and the amount of such compensation, which certificate shall
(i) be prepared in good faith and on a reasonable basis and (ii) be prima facie
evidence of such Lender's right to receive the compensation claimed.
5.06 U.S. Taxes.
(a) The Borrower agrees to pay to each Lender that is not a
U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to such non-U.S. Person hereunder after deduction for
or withholding in respect of any U.S. Taxes imposed with respect to such
payment (or in lieu thereof, payment of such U.S. Taxes by such
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non-U.S. Person), will not be less than the amount stated herein to be then due
and payable, provided that the foregoing obligation to pay such additional
amounts shall not apply:
(i) to any payment to any Lender hereunder unless such
Lender has, on the date hereof (or on the date it becomes a Lender
hereunder as provided in Section 12.06(b) hereof), on the date of any
change in the Applicable Lending Office of such Lender or on the date
of such payment, either submitted to the Borrower a Form 1001
(relating to such Lender and entitling it to a complete exemption from
withholding on all interest in respect of the Loans and other amounts
to be received by it hereunder) or Form 4224 (relating to all interest
in respect of the Loans and other amounts to be received by such
Lender hereunder) and the relevant form, or any successor form
provided in the following paragraph, remains in effect at the time of
payment, or
(ii) to any U.S. Taxes imposed solely by reason of the
failure by such non-U.S. Person (or, if such non-U.S. Person is not
the beneficial owner of the relevant amount, such beneficial owner) to
comply with applicable certification, information, documentation or
other reporting requirements concerning the nationality, residence,
identity or connections with the United States of America of such
non-U.S. Person (or beneficial owner, as the case may be) if such
compliance is required by statute or regulation of the United States
of America as a precondition to relief or exemption from such U.S.
Taxes.
For the purposes of this Section 5.06(a), (A) "U.S. Person" shall mean a
citizen, national or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under any laws of the
United States of America or any State thereof, or any estate or trust that is
subject to Federal income taxation regardless of the source of its income, (B)
"U.S. Taxes" shall mean any present or future tax, assessment or other charge
or levy imposed by or on behalf of the United States of America or any taxing
authority thereof or therein, (C) "Form 1001" shall mean Form 1001 (Ownership,
Exemption, or Reduced Rate Certificate) of the Department of the Treasury of
the United States of America and (D) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates).
(b) Within 30 days after paying any amount to the
Administrative Agent or any Lender from which it is required by law to make any
deduction or withholding, and within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing or other authority,
the Borrower shall deliver to the Administrative Agent for delivery to such
non-U.S. Person evidence satisfactory to such Person of such deduction,
withholding or payment (as the case may be).
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5.07 Replacement of Certain Lenders. If (a) any Lender
becomes the subject of an insolvency proceeding or any United States Government
Authority assumes control of such Lender or any holding company of which such
Lender is a Subsidiary, requests compensation under Section 5.01 or Section
5.06 hereof or gives notice under Section 5.03 hereof suspending its obligation
to make or maintain Eurodollar Loans hereunder and (b) no Default shall have
occurred and be continuing, then the Borrower, upon not less than three
Business Days' prior notice to such Lender (with a copy to the Administrative
Agent), may require that such Lender assign (in which case such Lender shall
assign as provided in Section 12.06 hereof) its Loan(s) to one or more other
Lenders, or another lender (reasonably acceptable to the Administrative Agent),
specified by the Borrower in such notice that are willing to accept such
assignment for an amount equal to the sum of the outstanding aggregate
principal amount of such Lender's Loan(s) and unpaid interest thereon accrued
to the date of the consummation of such assignment (such assignment to be
pursuant to documentation reasonably acceptable to the assigning Lender),
provided that upon the consummation of such assignment the Borrower shall pay
to such Lender (if not paid to such Lender by the assignee) (x) such amounts
(if any) as are then owing to such Lender under this Section 5 (including,
without limitation, amounts under Section 5.05 hereof, if any, that the
Borrower would be required to pay to such Lender if the Loan(s) assigned by
such Lender were being prepaid by the Borrower on the date of such assignment)
and (y) all other amounts then owing by the Borrower hereunder to or for the
account of such Lender.
Section 6. Guarantee.
6.01 The Guarantee. Each of the Subsidiary Guarantors hereby
jointly and severally guarantees to each Lender and the Administrative Agent
and their respective successors and assigns the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the principal of
and interest on the Loans made by the Lenders to, and, without duplication, the
Note held by each Lender of, the Borrower and all other amounts from time to
time owing to the Lenders or the Administrative Agent by the Borrower under
this Agreement and, without duplication, under the Notes and by the Borrower
under any of the other Basic Documents, in each case strictly in accordance
with the terms thereof (such obligations being herein collectively called the
"Guaranteed Obligations"). Each of the Subsidiary Guarantors hereby further
agrees that it is bound jointly (but solely for purposes of Sections 688, 689,
690 and 691 of the Civil and Commercial Code of Thailand, and each Subsidiary
Guarantor expressly waives any rights it may have under such Sections of the
Civil and Commercial Code of Thailand) with the Borrower and that if the
Borrower shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, such Subsidiary
Guarantor will promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of
the Guaranteed Obligations, the same will be promptly paid in full when due
(whether at extended maturity, by acceleration or otherwise) in accordance with
the terms of such extension or renewal.
6.02 Obligations Unconditional. The obligations of each
Subsidiary Guarantor under Section 6.01 hereof are, to the fullest extent
permitted by law, absolute, irrevocable and
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unconditional irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of the Borrower under this Agreement, the
Notes or any other agreement or instrument referred to herein or therein, or
any substitution, release or exchange of any other guarantee of or any security
for any of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 6.02 that the obligations of
each Subsidiary Guarantor hereunder shall be absolute and unconditional under
any and all circumstances (other than full and final payment of the Guaranteed
Obligations). Without limiting the generality of the foregoing, it is agreed
that, to the fullest extent permitted by law, the occurrence of any one or more
of the following shall not alter or impair the liability of each Subsidiary
Guarantor hereunder which shall remain absolute and unconditional as described
above:
(i) at any time or from time to time, without notice to
either Subsidiary Guarantor, the time for any performance of or
compliance with any of the Guaranteed Obligations shall be extended
(except to the extent otherwise required by Section 12.04 hereof), or
such performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations
shall be accelerated, or any of the Guaranteed Obligations shall be
modified, supplemented or amended in any respect, or any right under
this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be waived or any other guarantee
of any of the Guaranteed Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor
of, the Administrative Agent or any Lender or Lenders as security for
any of the Guaranteed Obligations shall fail to be perfected.
Each Subsidiary Guarantor hereby expressly waives diligence, presentment,
demand of payment, protest and all notices whatsoever, and any requirement that
the Administrative Agent or any Lender exhaust any right, power or remedy or
proceed against either or both of the Borrower or the other Subsidiary
Guarantors under this Agreement or the Notes or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations. Each
Subsidiary Guarantor agrees that its obligations pursuant to this Section 6
shall not be affected by any assignment or participation entered into by any
Lender pursuant to Section 12.06 hereof.
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6.03 Reinstatement. The obligations of each Subsidiary
Guarantor under this Section 6 shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of the Borrower in
respect of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of any of the Guaranteed Obligations, whether as a
result of any proceedings in bankruptcy or reorganization or otherwise and each
Subsidiary Guarantor agrees that it will indemnify the Administrative Agent and
each Lender on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Administrative Agent or such
Lender in connection with such rescission or restoration, including any such
costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
6.04 Subrogation. Each Subsidiary Guarantor hereby jointly
and severally agrees that until the payment and satisfaction in full of all
Guaranteed Obligations it shall not exercise any right or remedy arising by
reason of any performance by it of its Guarantee in Section 6.01 hereof,
whether by subrogation or otherwise, against the Borrower or any other
guarantor of any of the Guaranteed Obligations or any security for any of the
Guaranteed Obligations. Each Subsidiary Guarantor agrees that it shall remain
liable for the Guaranteed Obligations in full notwithstanding any act of any
Lender or the Administrative Agent which results in any Subsidiary Guarantor's
inability to be subrogated to any of the Lenders' rights against the Borrower
or any Subsidiary Guarantor.
6.05 Remedies. Each Subsidiary Guarantor agrees that, as
between it and the Lenders, to the fullest extent permitted by law, its
obligations under this Agreement may be declared to be forthwith due and
payable as provided in Section 10 hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 10)
for purposes of Section 6.01 hereof notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from
becoming automatically due and payable) as against the Borrower and that, in
the event of such declaration (or such obligations being deemed to have become
automatically due and payable), (i) such obligations (whether or not due and
payable by the Borrower) shall forthwith become due and payable by such
Subsidiary Guarantor for purposes of said Section 6.01 and (ii) the
Administrative Agent and the Lenders shall have the right to exercise any of
their rights or remedies set forth in the Pledge Agreements, subject to
applicable law.
6.06 Continuing Guarantee. The guarantee in this Section 6
is a continuing guarantee, and shall apply to all Guaranteed Obligations
whenever arising.
6.07 Thai Taxes.
(a) Any and all payments by Thai Romo hereunder shall be made
free and clear of, and without deduction or withholding for or on account of,
any taxes, levies, imposts, duties, fees, liabilities or similar charges of the
Kingdom of Thailand or any area subject to the
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jurisdiction of the Kingdom of Thailand ("Foreign Taxes") or imposed by any
federation or association of or with which the Kingdom of Thailand may be a
member or associated, or by any jurisdiction from which any payment hereunder
is made by Thai Romo or any political subdivision or taxing authority thereof
or therein (together with the Foreign Taxes, the "Applicable Taxes"). If, as a
result of any applicable law, regulations or treaty, or official application or
interpretation thereof, Thai Romo is required by law or regulation to make any
deduction, withholding or backup withholding of any Applicable Taxes from any
payments to a Lender in respect of the Guaranteed Obligations the amount
payable with respect thereto will be increased to the amount which, after
deduction from such increased amount of all Applicable Taxes required to be
withheld or deducted therefrom, will yield the amount required under this
Agreement to be payable with respect thereto.
(b) No Lender shall be entitled to compensation for any
Foreign Taxes incurred by it or withheld from amounts paid to it by reason of
(i) such Lender having some connection with the Kingdom of Thailand, other than
merely the transactions contemplated by this Agreement, (ii) such Lender's
failure to comply with the certification, identification, information or other
reporting requirement concerning its nationality, residence, identity or
connection with the Government of the Kingdom of Thailand or any political
subdivision or taxing authority thereof or therein or (iii) such Lender's
demanding compensation more than 45 days after the date such demand was due
and, to the extent such Lender makes such demand after such 45th day, such
Lender shall only be entitled to such payment with respect to compensation from
and after the date which is 45 days prior to the date such demand is made. No
Lender shall be entitled to compensation for any Applicable Taxes (excluding
Foreign Taxes) imposed by the United States or any political subdivision or
taxing authority thereof or therein unless such Lender is entitled to receive
additional amounts pursuant to Section 5.06(a) hereof.
(c) The obligations of Thai Romo under this Section 6.07
shall survive the payment in full of the Loans and the termination of any
Commitment, and payment in full of each of the Notes.
6.08 Rights of Contribution. The Subsidiary Guarantors
hereby agree, as between themselves, that if any Subsidiary Guarantor shall
become an Excess Funding Obligor (as defined below) by reason of the payment by
such Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary
Guarantor shall, on demand of such Excess Funding Obligor (but subject to the
next sentence), pay to such Excess Funding Obligor an amount equal to such
Subsidiary Guarantor's Pro Rata Share (as defined below and determined, for
this purpose, without reference to the Properties, debts and liabilities of
such Excess Funding Obligor) of the Excess Payment (as defined below) in
respect of such Guaranteed Obligations.
For purposes of this Section 6.08, (i) "Excess Funding
Obligor" shall mean, in respect of any Guaranteed Obligations, a Subsidiary
Guarantor that has paid an amount in excess of its Pro Rata Share of such
Guaranteed Obligations, (ii) "Excess Payment" shall mean, in respect of any
Guaranteed Obligations, the amount paid by an Excess Funding Obligor in excess
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of its Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share"
shall mean, for any Subsidiary Guarantor, the ratio (expressed as a percentage)
of (x) the amount by which the aggregate fair saleable value of all Properties
of such Subsidiary Guarantor on the date of this Agreement exceeds the amount
of all the debts and liabilities of such Subsidiary Guarantor (including
contingent, subordinated, unmatured and unliquidated liabilities, but excluding
the obligations that have been Guaranteed by such Subsidiary Guarantor in
Section 6.01 hereof) to (y) the amount by which the aggregate fair saleable
value of all Properties of the Borrower and all of the Subsidiary Guarantors
exceeds the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of the Borrower and the Subsidiary Guarantors hereunder) of the
Borrower and all of the Subsidiary Guarantors, all as of the date hereof.
6.09 General Limitation on Guarantee Obligations. In any
action or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 6.01 hereof would otherwise, taking into account the provisions of
Section 6.08 hereof, be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under said Section 6.01, then, notwithstanding
any other provision hereof to the contrary, the amount of such liability shall,
without any further action by such Subsidiary Guarantor, any Lender, the
Administrative Agent or any other Person, be automatically limited and reduced
to the highest amount that is valid and enforceable and not subordinated to the
claims of other creditors and determined in such action or proceeding.
Section 7. Conditions Precedent.
7.01 Conditions to Effectiveness. The effectiveness of this
Amended and Restated Credit Agreement and the obligations of any Lender to make
its initial Loan on or subsequent to the date hereof is subject to the receipt
by the Administrative Agent of the following documents and evidence (with, in
the case of clauses (a), (b), (c) and (d) below, sufficient copies for each
Lender), each of which shall be satisfactory to the Administrative Agent in
form and substance:
(a) Corporate Documents. The following documents, each
certified as indicated below:
(i) (x) a certificate dated the date hereof of
the secretary of each Obligor certifying that the copy of the
charter of each Obligor (other than Thai Romo), as in effect
on September 10, 1996, previously delivered to Chase, has not
been amended since such delivery to Chase and (y) a
certificate from such Secretary of State dated as of a date
reasonably close to the date hereof as to the good standing of
and charter documents filed by such Obligor;
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(ii) a certificate of the Secretary or an
Assistant Secretary of each Obligor (other than Thai Romo),
dated the date hereof and certifying (A) that the by-laws of
such Obligor as in effect on September 10, 1996, previously
delivered to Chase, have not been amended since such delivery
to Chase and were in effect at all times from the date on
which the resolutions referred to in clause (B) below were
adopted to and including the date of such certificate, (B)
that attached thereto is a true and complete copy of
resolutions duly adopted by the board of directors of such
Obligor authorizing the execution, delivery and performance of
such of the Basic Documents to which it is or is intended to
be a party (including the borrowings hereunder), and that such
resolutions have not been modified, rescinded or amended and
are in full force and effect, and (C) as to the incumbency and
specimen signature of each officer of such Obligor executing
such of the Basic Documents to which such Obligor is or is
intended to be a party and each other document to be delivered
by such Obligor from time to time in connection therewith (and
the Administrative Agent and each Lender may conclusively rely
on such certificate until it receives notice in writing from
such Obligor);
(iii) a certification of another officer of each
Obligor, dated the date hereof, as to the incumbency and
specimen signature of the Secretary or Assistant Secretary, as
the case may be, of such Obligor;
(iv) Certificates of the appropriate official of
the State of Texas, dated a date reasonably close to the date
hereof, as to the good standing of, and authority to transact
business of each of the Obligors (other than Thai Romo); and
(v) a certificate, dated the date hereof of the
secretary of Thai Romo certifying that the constitutive
documents of Thai Romo previously delivered to Chase have not
been amended since such delivery to Chase and copies,
certified as of the date hereof, of all corporate authority
for Thai Romo (including, without limitation, board of
director or executive committee resolutions and evidence of
the incumbency, including specimen signatures, of officers)
with respect to the execution, delivery and performance of the
transactions contemplated by this Agreement (and the
Administrative Agent and each Lender may conclusively rely on
such certificate until it receives notice in writing from Thai
Romo);
(b) Officer's Certificates. A certificate of a Senior
Officer of each of the Obligors, dated the date hereof, to the effect
set forth in clauses (a) and (b) of Section 7.02 hereof.
(c) Opinions of Counsel to the Obligors. Opinions, dated the
date hereof, of (i) Hughes & Luce, special counsel to the Obligors,
substantially in the form of Exhibit C-1 hereto and covering such
other matters as the Administrative Agent or any Lender may reasonably
request and (ii) Baker & McKenzie, special Thai counsel to the
Obligors, substantially in the form of Exhibit C-2 hereto and covering
such other matters as the
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Administrative Agent or any Lender may reasonably request (and each
Obligor hereby instructs each such counsel to deliver such opinions to
the Lenders and the Administrative Agent).
(d) Opinions of Special New York Counsel to Chase. An
opinion, dated the date hereof, of Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase, substantially in the form of
Exhibit D hereto (and Chase hereby instructs such counsel to deliver
such opinion to the Lenders).
(e) Notes. The Notes, duly completed and executed for each
Lender in exchange for the Original Notes of each Lender.
(f) Pledge Agreements. The Pledge Agreements, duly executed
and delivered by each of the parties thereto and the stock
certificates identified in Section 3(a) of each such Pledge Agreement
thereof, accompanied by undated stock powers executed in blank. In
addition, the Borrower, RMEC and TRH shall have taken such other
action (including, without limitation, causing Thai Romo to register
the pledges in the share register book of Thai Romo, and delivering to
the Administrative Agent, for filing, appropriately completed and duly
executed copies of Uniform Commercial Code financing statements) as
the Administrative Agent shall have requested in order to perfect the
security interests created pursuant to the Pledge Agreements.
(g) Project Agreements; Etc. With respect to each of the
Project Agreements, (i) all conditions precedent to such Project
Agreements shall have been satisfied in all material effects, (ii) all
Project Agreements shall be in full force and effect, enforceable
against each of the parties thereto, and (iii) there shall not have
been any amendment or waiver of any such Project Agreement (other than
the First Amendment to Gas Sales Agreement) since December 31, 1995
nor any cancellation, suspension, termination of or default under, any
Project Agreement and the Administrative Agent shall have received a
certificate from a Senior Officer of Thai Romo with respect to (i)
through (iii) above, which such certificate shall also certify that
all requisite material governmental approvals, consents and permits
required for the development, completion and operation of the Project
have been obtained. The Administrative Agent shall also have received
executed copies of all of the Project Agreements.
(h) Insurance. Certificates of insurance evidencing the
existence of all insurance required to be maintained by the Obligors
pursuant to Section 9.04 hereof, such certificates to be in such form
and contain such information as is specified in said Section 9.04.
(i) Warrant Agreement. The Warrant Agreement, duly executed
and delivered by the Borrower.
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(j) Process Administrative Agent Acceptance. A Process
Administrative Agent Acceptance, duly executed and delivered by CT
Corporation System in respect of each of the Obligors, substantially
in the form of Exhibit G hereto.
(k) Process Agent Power of Attorney for Thai Romo. A Process
Agent Power of Attorney for Thai Romo, duly executed and delivered by
Thai Romo and CT Corporation System, substantially in the form of
Exhibit H hereto.
(l) No Material Adverse Change. There shall have been no
material adverse change since September 30, 1997 in the financial
condition of the Borrower and its Subsidiaries taken as a whole, and
the Administrative Agent shall have received a certificate of a Senior
Officer of the Borrower and Thai Romo, respectively, to such effect.
(m) Assignment and Assumption Agreement. Immediately prior
to the date hereof, in the event that any Lender under the Existing
Credit Agreement is not contemplated to be a Lender under the Amended
and Restated Credit Agreement (each a "Departing Lender"), each
Departing Lender shall have executed and delivered an Assignment and
Assumption Agreement with one or more Lenders (to be designated) that
are continuing as Lenders under the Amended and Restated Credit
Agreement pursuant to which all of the Loans and Commitments of such
Departing Lender are assigned to such continuing Lender(s) and
evidence of receipt by such Departing Lender pursuant to such
Assignment and Assumption Agreement, as the case may be, of an amount
equal to the principal of the Loan held by it and all other amounts
owing to it under the Existing Credit Agreement as of the date hereof.
In addition, the obligation of any Lender to make its Loan hereunder
is further subject to the Administrative Agent's receipt of evidence
of:
(i) payment in full of all commitment fees
payable under the Existing Credit Agreement accrued to but not
including the date hereof;
(ii) payment of all interest on the Loans under
the Existing Credit Agreement accrued to but not including the
date hereof;
(iii) payment of "break funding" costs payable
under Section 5.05(a) of the Existing Credit Agreement
associated with the termination of the Interest Periods with
respect to the Loans outstanding under the Existing Credit
Agreement;
(iv) payment of all other amounts due and payable
to the Existing Lenders; and
(v) payment and reimbursement of costs and
expenses of the Administrative Agent in connection herewith
including, without limitation, the fees and expenses of
Milbank, Tweed, Hadley & McCloy, special New York counsel to
Chase and of special Thai counsel to Chase and its affiliates,
in connection with the
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<PAGE> 51
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negotiation, preparation, execution and delivery of this
Agreement (to the extent that statements for such fees and
expenses have been delivered to the Borrower).
(n) Other Documents. Such other documents as the
Administrative Agent or any Lender or special New York counsel to
Chase may reasonably request.
The obligation of any Lender to make its Loan hereunder is also subject to the
payment by the Obligors of such fees payable on or before the date hereof as
the Obligors shall have agreed to pay or deliver to any Lender or the
Administrative Agent in connection herewith, (to the extent that statements for
such fees and expenses have been delivered to the Obligors).
7.02 Further Conditions Precedent. The obligation of any
Lender to make any Loan subsequent to its initial Loan hereunder is subject to
the conditions precedent that both immediately prior to the making of such Loan
and also after giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Obligors
in Section 8 and by each Obligor in each of the Basic Documents to
which such Obligor is a party, shall be true and correct on and as of
the date of the making of such Loan with the same force and effect as
if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date,
as of such specific date).
The notice of borrowing by the Borrower hereunder shall
constitute a certification by the Borrower to the effect set forth in the
preceding sentence (both as of the date of such notice and, unless the Borrower
otherwise notifies the Administrative Agent prior to such borrowing, as of the
date of such borrowing).
Section 8. Representations and Warranties. Each Obligor (as
to itself and each of its Subsidiaries) represents and warrants to the
Administrative Agent and the Lenders that:
8.01 Corporate Existence. Each Obligor and its Subsidiaries:
(a) is a corporation or other entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization; (b) has
all requisite corporate or other power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets
and carry on its business as now being or as proposed to be conducted; and (c)
is qualified to do business and is in good standing in all jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify could reasonably be expected to
(either individually or in the aggregate) have a Material Adverse Effect.
8.02 Financial Condition. The Borrower has heretofore
furnished to each of the Lenders the following financial statements:
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(a) a consolidated balance sheet of the Borrower and its
Subsidiaries as at September 30, 1997 and the related consolidated
statements of income, retained earnings and cash flows of the Borrower
and its Subsidiaries for the fiscal quarter ended on said date; and
(b) an audited consolidated balance sheet of the Borrower and
its Subsidiaries as of December 31, 1996 and the related audited
consolidated statements of income, retained earnings and cash flows of
the Borrower and its Subsidiaries for the fiscal year ended on said
date.
All such financial statements are complete and accurate in all material
respects and fairly present in all material respects the actual financial
condition of the Borrower and its Subsidiaries as at said dates and the actual
condition, consolidated results of such operations for the fiscal quarter or
fiscal year ended on said date (subject in the case of clause (a) to normal
year-end audit adjustments), all in accordance with GAAP (to the extent
applicable).
8.03 Litigation. Except as disclosed in Schedule IV hereto,
there are no legal or arbitral proceedings, or any proceedings by or before any
Governmental Authority, now pending or (to the knowledge of any Obligor)
threatened against any Obligor or any of its Subsidiaries that could reasonably
be expected to be adversely determined and which, if adversely determined,
could reasonably be expected to (either individually or in the aggregate) have
a Material Adverse Effect.
8.04 No Breach. (a) None of the execution and delivery of
this Agreement and the Notes and the other Basic Documents to which any of the
Obligors is a party, the consummation of the transactions herein and therein
contemplated or compliance with the terms and provisions hereof and thereof
will conflict with or result in a breach of, or require any consent (which has
not been obtained or the requirement for which has not been waived) under, the
charter or by-laws of any Obligor, or any agreement or instrument to which any
Obligor or any of its Subsidiaries is a party or by which any of them or any of
their Property is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or (except for the Liens
created pursuant to the Pledge Agreements) result in the creation or imposition
of any Lien upon any Property of any Obligor or any of its Subsidiaries
pursuant to the terms of any such agreement or instrument.
(b) None of the execution and delivery of this Agreement and
the Notes and the other Basic Documents to which any of the Obligors is a
party, the consummation of the transactions herein and therein contemplated or
compliance with the terms and provisions hereof and thereof will violate any
Legal Requirements other than any Legal Requirements the violation of which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
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8.05 Action. Each Obligor has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents to which it is a party; the execution, delivery and
performance by each Obligor of each of the Basic Documents to which it is a
party have been duly authorized by all necessary corporate action on its part
(including, without limitation, any required shareholder approvals); and this
Agreement has been duly and validly executed and delivered by each Obligor and
constitutes, and each of the Notes and the other Basic Documents to which it is
a party when executed and delivered (in the case of the Notes, for value) will
constitute, its legal, valid and binding obligation, enforceable against such
Obligor in accordance with its terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar
laws of general applicability affecting the enforcement of creditors' rights
and (b) the application of general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
8.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority, or any
securities exchange, are necessary for the execution, delivery or performance
by any Obligor of the Basic Documents to which it is a party or for the
legality, validity or enforceability thereof, except for (a) any thereof the
failure of which to be obtained or effected could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect and (b)
filings and recordings in respect of Liens created pursuant to the Pledge
Agreements.
8.07 Use of Credit. None of the Obligors nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying margin stock (as such term is defined in
Regulation U), and no part of the proceeds of the Loans hereunder will be used
to buy or carry any margin stock.
8.08 ERISA. Each Plan, and, to the knowledge of each
Obligor, each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with,
the applicable provisions of ERISA, the Code and any other U.S. Federal or
State law, and no event or condition has occurred and is continuing as to which
any Obligor would be under an obligation to furnish a report to the Lenders
under Section 9.01(e) hereof.
8.09 Taxes. The Borrower and its Subsidiaries (other than
Thai Romo) are members of an affiliated group of corporations filing
consolidated returns for U.S. Federal income tax purposes, of which the
Borrower is the "common parent" (within the meaning of Section 1504 of the
Code) of such group. The Borrower and its Subsidiaries have filed all U.S.
Federal income tax returns and all other material tax returns that are required
to be filed by them (or have obtained extensions with respect thereto) and have
paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower or any of its Subsidiaries. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
and other governmental charges are, in the opinion of the Obligors, adequate.
Except as set forth in
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Schedule V hereto, none of the Obligors nor any other Person acting on its
behalf has given or been requested to give a waiver of the statute of
limitations relating to the payment of any U.S. Federal, state, local and
foreign taxes or other impositions.
8.10 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
8.11 Public Utility Holding Company Act. Neither the
Borrower nor any of its Subsidiaries is a "holding company", or an "affiliate"
of a "holding company" or a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
8.12 Material Agreements and Liens.
(a) Part A of Schedule I hereto is a complete and correct
list of each Production Payment, each credit agreement, loan agreement,
indenture, purchase agreement, Guarantee, letter of credit or other arrangement
(other than under the Basic Documents) providing for or otherwise relating to
any Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or Guarantee by, the Borrower or any of its Subsidiaries,
outstanding on the date hereof the aggregate principal or face amount of or
obligations under which equals or exceeds or may equal or exceed $500,000, and
the aggregate principal or face amount outstanding or that may become
outstanding under each such arrangement is correctly described in Part A of
said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct
list of each Lien securing Indebtedness of any Person outstanding on the date
hereof the aggregate principal or face amount of which equals or exceeds or may
equal or exceed $500,000, and covering any Property of the Borrower or any of
its Subsidiaries, and the aggregate Indebtedness secured (or that may be
secured) by each such Lien and the Property covered by each such Lien is
correctly described in Part B of said Schedule I.
8.13 Compliance with Laws. Except as set forth on Schedule
II hereto, each Obligor and its Subsidiaries has prepared and submitted all
reports and has obtained all permits, consents, licenses and other
authorizations required under all Laws to carry on its business as now being or
as proposed to be conducted, except to the extent failure to have any such
permit, license or authorization could not reasonably be expected to (either
individually or in the aggregate) have a Material Adverse Effect. Each of such
permits, licenses and authorizations is in full force and effect and each
Obligor and its Subsidiaries is in compliance with (i) the terms and conditions
thereof, and (ii) all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Law, except, in each case, to the extent failure to comply
therewith could not reasonably be expected to (either individually or in the
aggregate) have a Material Adverse Effect.
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8.14 Capitalization.
(a) The authorized capital stock of the Borrower consists, on
the date hereof, of (i) an aggregate of 40,000,000 shares of common stock, par
value $.01 of which 25,614,000 shares are duly and validly issued and
outstanding and (ii) an aggregate of 10,000,000 shares of preferred stock, par
value $.01, of which no shares are issued and outstanding, each of which
outstanding common shares is fully paid and nonassessable.
(b) The authorized capital stock of RMEC consists, on the
date hereof, of an aggregate of 10,000 shares of common stock, par value $.01
per share, of which 1000 shares are duly and validly issued and outstanding,
each of which shares is fully paid and nonassessable. As of the date hereof
all of such issued and outstanding shares of common stock are owned
beneficially and of record by the Borrower.
(c) The authorized capital stock of TRH consists, on the date
hereof, of an aggregate of 1000 shares of common stock, par value $.01 of which
1000 shares are duly and validly issued and outstanding, each of which shares
is fully paid and nonassessable. As of the date hereof, such issued and
outstanding shares of common stock are owned beneficially and of record by the
Borrower.
(d) The registered capital of Thai Romo consists, on the date
hereof, of an aggregate of 1,065,317 ordinary shares of common stock of which
1,065,317 shares are duly and validly issued and outstanding, each of which
shares is fully paid and nonassessable. As of the date hereof, such issued and
outstanding ordinary shares of common stock are owned beneficially and of
record by the Persons as set forth on Schedule VI hereto.
(e) The registered capital of B8/32 Partners consists, on the
date hereof, of an aggregate of 110,000 ordinary shares of common stock all of
which are duly and validly issued and outstanding, each of which shares is
fully paid and non-assessable. As of the date hereof, such issued and
outstanding ordinary shares of common stock are owned beneficially and of
record by the Persons as set forth on Schedule VI hereto.
8.15 Subsidiaries, Etc.
(a) In each case as of the date hereof, the Borrower does not
have any Subsidiaries other than the Subsidiary Guarantors and Thai-Tex; RMEC
and TRH do not have any Subsidiaries other than Thai Romo; and Thai Romo has no
Subsidiaries.
(b) Set forth in Schedule III hereto is a complete and
correct list as of the date hereof of all Investments (other than operating
deposit accounts with banks and Permitted Investments) held by the Borrower or
any of its Subsidiaries in any Person on the date hereof (including, without
limitation, all interests of the Borrower or any of its Subsidiaries in any
partnership or joint venture ("Partnership Interests") and, for each such
Investment or Partnership
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Interest, (x) the identity of the Person or Persons holding such Investment or
Partnership Interest (as the case may be) and (y) the nature of such Investment
or Partnership Interest (as the case may be). Except as disclosed in Schedule
III hereto, each of the Borrower and its Subsidiaries owns, free and clear of
all Liens (other than Liens created pursuant to the Pledge Agreements and other
Liens permitted by Section 9.06 hereof), all such Investments and such
Partnership Interests.
8.16 Title to Assets. Each Obligor owns or leases and has on
the date hereof indefeasible and defensible title (subject only to Liens
permitted by Section 9.06 hereof) to the material Properties reflected as owned
or leased by it in the most recent financial statements referred to in Section
8.02 hereof (other than Properties disposed of in the ordinary course of
business). Each Obligor owns or leases and has on the date hereof indefeasible
and defensible title to, and enjoys on the date hereof peaceful and undisturbed
possession of, all Properties (subject only to Liens permitted by Section 9.06
hereof) that are necessary for the operation and conduct of its businesses.
8.17 True and Complete Disclosure. The information, reports,
exhibits and schedules furnished in writing by or on behalf of the Obligors to
the Administrative Agent or any Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Basic Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole, are true and correct in all material respects as of the date
hereof, and do not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading, and any
such financial statements fairly present the financial condition of the
Borrower and its Subsidiaries as of the date indicated therein provided that,
in the case of projections and pro forma financial statements, the Obligors
represent and warrant only that the same were prepared in good faith and on the
basis of assumptions and estimates that were reasonable as of the date as of
which the same are stated to have been prepared. All written information
furnished after the date hereof by the Obligors and their respective
Subsidiaries to the Administrative Agent and the Lenders in connection with
this Agreement and the other Basic Documents to which any of the Obligors are
parties and the transactions contemplated hereby and thereby will be true,
correct and complete in every material respect on, or (in the case of
projections and pro forma financial statements) will be prepared in good faith
and on the basis of reasonable assumptions and estimates as of, the date as of
which such information is stated or certified.
8.18 Project Agreements; Completion. The Obligors have
heretofore delivered to the Administrative Agent true and complete copies of
each Project Agreement each as in effect on the date hereof. Each such Project
Agreement to which Thai Romo is a party is in full force and effect as of the
date hereof and as of the date hereof no event or condition has occurred or
exists that could result in the termination of such agreement to the extent
such termination would result in a Material Adverse Effect. Thai Romo is in
compliance in all material respects, with each of the Project Agreements to
which it is a party.
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8.19 Special Purpose Company. RMEC and TRH have (a) no
material assets other than cash, Investments in Thai Romo and other Investments
permitted to be made by it as provided in Section 9.08 hereof and its rights and
interests under the documents referred to in clause (b) below and (b) no
Indebtedness, and no material obligations other than its obligations under the
Basic Documents and the other documents referred to therein to which it is a
party and Indebtedness permitted by Section 9.07 hereof. Thai Romo is not party
to any material agreements, contracts or commitments other than the Project
Agreements, the Share Sale Agreement and the Basic Documents and, other than the
Project Agreements, the Indenture pursuant to which the Senior Subordinated
Notes were issued and certain Hedging Agreements with the Administrative Agent,
Thai Romo as of the date hereof does not engage to any significant degree in
business activities in which it incurs or could reasonably be expected to incur
material Indebtedness to Persons other than the other Obligors.
8.20 Registration Statement. The Borrower's Registration
Statement was, as of its date and is, as of the date of this Agreement, true
and correct in all material respects, and the Registration Statement did not,
as of its date, omit or fail to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which
they are made, not misleading. Except as set forth in Schedule VIII, the
Registration Statement is, as of the date hereof, true and correct in all
material respects, and, as of the date hereof, except as set forth in Schedule
VIII, the Registration Statement does not omit or fail to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not materially misleading.
8.21 SBM. The financing and lease arrangements with SBM in
respect of the Project Agreements have not resulted in any material disruption
to the cash flow of Thai Romo or the Borrower and neither Thai Romo nor the
Borrower has knowledge of any event or condition (other than the non-payment by
the Operator of amounts payable to SBM) which is likely to cause a material
disruption of such cash flow.
8.22 Use of Proceeds. The Borrower will use the proceeds of
the Loans hereunder to repay Indebtedness under the Existing Credit Agreement
and for exploration and development activities of the Borrower or any
Subsidiary Guarantor and for general corporate purposes of the Borrower or any
Subsidiary Guarantor.
Section 9. Covenants of the Obligors. Each Obligor covenants
and agrees with the Lenders and the Administrative Agent that, so long as any
Commitment or Loan is outstanding and until payment in full of all amounts
payable by the Borrower hereunder:
9.01 Financial Statements Etc. The Borrower shall deliver to
Administrative Agent (and the Administrative Agent shall deliver to each of the
Lenders):
(a) as soon as available and in any event within 55 days
after the end of each quarterly fiscal period of each fiscal year of
the Borrower, consolidated statements of
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income, changes in stockholders' equity and cash flows of the Borrower
and its Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and
the related consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such period, setting forth in each case
in comparative form the corresponding consolidated figures for the
corresponding periods in the preceding fiscal year (except that, in
the case of balance sheets, such comparison shall be to the last day
of the prior fiscal year), or, if the Borrower is then subject to the
periodic reporting requirements of the Exchange Act, copies of the
Borrower's Quarterly Report on Form 10-Q for such quarterly period as
filed with the SEC containing such consolidated financial statements;
(b) as soon as available and in any event within 100 days
after the end of each fiscal year of the Borrower, consolidated
statements of income, changes in stockholders' equity and cash flows
of the Borrower and its Subsidiaries for such fiscal year and the
related consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such fiscal year, setting forth in each
case in comparative form the corresponding consolidated figures for
the preceding fiscal year, and accompanied by an opinion thereon of
independent certified public accountants of recognized national
standing, which opinion shall state that said consolidated financial
statements present fairly, in all material respects, the consolidated
financial condition and results of operations of the Borrower and its
Subsidiaries as at the end of, and for, such fiscal year in accordance
with GAAP or, if the Borrower is then subject to the periodic
reporting requirements of the Exchange Act, copies of the Borrower's
Annual Report on Form 10-K for such fiscal year as filed with the SEC
containing such consolidated financial statements and opinion;
(c) promptly upon their becoming available, copies of all
registration statements that have been filed and regular periodic
reports (other than as set forth in paragraphs (a) and (b) above), if
any, that the Borrower shall have filed with the Securities and
Exchange Commission (or any governmental agency substituted therefor)
or any national securities exchange;
(d) promptly upon the mailing thereof to the holders of any
publicly-traded debt securities or equity securities of any of the
Obligors generally, copies of all financial statements, reports and
proxy statements so mailed;
(e) as soon as possible, and in any event within ten days
after a Senior Officer of any Obligor knows that any of the events or
conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, a statement signed by a senior financial
officer of such Obligor setting forth details respecting such event or
condition and the action, if any, that such Obligor or its ERISA
Affiliate proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to the PBGC by
such Obligor or an ERISA Affiliate with respect to such event or
condition):
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(i) any reportable event, as defined in Section
4043(c) of ERISA and the regulations issued thereunder, with
respect to a Plan, as to which the PBGC has not by regulation
waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard
of Section 412 of the Code or Section 302 of ERISA, including,
without limitation, the failure to make on or before its due
date a required installment under Section 412(m) of the Code
or Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code); and any request for a waiver
under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041(c) of
ERISA of a notice of intent to terminate any Plan or any
action taken by such Obligor or an ERISA Affiliate to
terminate any Plan;
(iii) the institution by the PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by such Obligor or any ERISA Affiliate of a notice
from a Multiemployer Plan that such action has been taken by
the PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by such Obligor or any ERISA Affiliate that
results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt by such Obligor
or any ERISA Affiliate of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a
fiduciary of any Multiemployer Plan against such Obligor or
any ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan
that, pursuant to Section 401(a)(29) of the Code or Section
307 of ERISA, would result in the loss of tax-exempt status of
the trust of which such Plan is a part if such Obligor or an
ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections;
(f) not later than March 15 of each calendar year (commencing
with the calendar year beginning January 1, 1998), a Reserve
Evaluation Report prepared by the Independent Petroleum Engineer with
respect to the Hydrocarbon Properties owned or leased by the Obligors
as of December 31 of the immediately preceding calendar year;
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(g) not later than September 15 of each calendar year
(commencing with September 15, 1998), a Reserve Evaluation Report
prepared by the Borrower with respect to the Hydrocarbon Properties
owned or leased by the Obligors as of June 30 of such calendar year;
(h) promptly after a Senior Officer of the Borrower or a
Subsidiary Guarantor knows that any Default (other than a Default that
has ceased to exist) has occurred, a notice of such Default describing
the same in reasonable detail and, together with such notice or as
soon thereafter as possible, a description of the action that the
Borrower or such Subsidiary Guarantor, as the case may be, has taken
or proposes to take with respect thereto;
(i) promptly after a Senior Officer of any Obligor becomes
aware thereof, notice of the occurrence of any event or the existence
of any event or condition that could reasonably be expected to result
in the premature termination of any Project Agreement (other than
information previously delivered pursuant to Section 9.18(b) hereof),
provided that the Obligors will notify the Administrative Agent within
five days following any payment default by any Obligor under any Joint
Operating Agreement. Within ten days following such notice the
Obligors shall cure such payment default, provided further that if the
Obligors have not cured such payment default within such period, the
Lenders, without being required to exercise any other remedy
hereunder, may cure such default and the amount required to be paid by
the Lenders to cure such default shall, at the option of the Lenders,
be added to the principal amount of the Loans hereunder (without
regard to whether such Loans cause the aggregate principal amount of
the Loans to exceed the Borrowing Base or Threshold Amount);
(j) as soon as reasonably practicable after its execution by
the parties thereto, the Escrow Agreement; and
(k) from time to time such other information regarding the
Properties, financial condition, operations or business of any Obligor
and their respective Subsidiaries (including, without limitation, any
Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA), the Project Agreements, the Sales
Agreements, purchasers under the Sales Agreements and the transactions
contemplated hereby and thereby as any Lender (through the
Administrative Agent) or the Administrative Agent may reasonably
request.
The Borrower will furnish to the Administrative Agent, at the time it furnishes
each set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a senior financial officer of the Borrower (i) to the effect
that no Default has occurred and is continuing (or, if any Default has occurred
and is continuing, describing the same in reasonable detail and describing the
action that the Obligors have taken or propose to take with respect thereto),
(ii) setting forth in reasonable detail the computations and information
necessary to determine whether the Obligors
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are in compliance with Sections 9.06(n), 9.07(e) and 9.10 hereof as of the end
of the respective quarterly fiscal period or fiscal year and (iii) setting
forth the amount and parties to any Investments pursuant to Section 9.08(g)
hereof.
9.02 Litigation. The Borrower will promptly give to the
Administrative Agent (and the Administrative Agent shall give to each Lender)
notice of all legal or arbitral proceedings, and of all proceedings by or
before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceedings, affecting the
Borrower or any of its Subsidiaries, except (i) proceedings that, if adversely
determined, could not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect and (ii) any such development that
could not reasonably be expected to have a Material Adverse Effect.
9.03 Existence, Etc. Each of the Obligors will, and will
cause each of its Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that
nothing in this Section 9.03 shall prohibit any transaction expressly
permitted under Section 9.05 hereof);
(b) comply with the requirements of all applicable Laws of
Governmental Authorities if failure to comply with such requirements
could reasonably be expected to (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any
of its Property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of
which is being contested in good faith and by proper proceedings;
(d) maintain all of its Properties used or useful in its
business in good working order and condition, ordinary wear and tear
excepted;
(e) keep adequate records and books of account in accordance
with GAAP; and
(f) permit representatives of any Lender or the
Administrative Agent, during normal business hours, upon reasonable
notice, and at the expense of such Lender or Administrative Agent (as
the case may be), to examine, copy and make extracts from its books
and records, to inspect any of its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably
requested by such Lender or the Administrative Agent (as the case may
be).
9.04 Insurance. Each of the Obligors will, and will cause
each of its Subsidiaries to, maintain insurance with financially sound and
reputable third party insurance companies with
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respect to Property and risks of a character usually maintained by corporations
engaged in the same or similar business similarly situated and may reinsure
such risks with Thai-Tex, against loss, damage and liability of the kinds and
in the amounts customarily maintained by such corporations.
9.05 Prohibition of Fundamental Changes. None of the
Obligors will, nor will they permit any of their Subsidiaries to, enter into
any transaction of merger or consolidation or amalgamation, or liquidate, wind
up or dissolve itself (or suffer any liquidation or dissolution).
Thai Romo shall not convey, sell, lease, transfer or otherwise
dispose of any interest in any Project Agreement to which it is a party, and no
Obligor shall make a Disposition.
Notwithstanding the foregoing provisions of this Section 9.05,
the Obligors (other than Thai Romo) may merge or consolidate with each other if
(i) in any such merger or consolidation involving the Borrower, the Borrower is
the surviving corporation, (ii) in any such merger or consolidation not
involving the Borrower, a Subsidiary Guarantor is the surviving corporation,
(iii) after giving effect thereto no Default would exist hereunder and (iv) any
such merger will not have an adverse effect on any Project Agreement.
9.06 Limitation on Liens. None of the Obligors will, nor
will they permit any of their Subsidiaries to, create, incur, assume or suffer
to exist any Lien upon any of its Property, whether now owned or hereafter
acquired, except:
(a) Liens created pursuant to the Pledge Agreements;
(b) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings;
(c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's or other like Liens arising in the ordinary
course of business that are not overdue for a period of more than 30
days or that are being contested in good faith and by appropriate
proceedings and Liens securing judgments but only to the extent for an
amount and for a period not resulting in an Event of Default under
Section 10(h) hereof;
(d) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(e) deposits, pledges and other Liens granted to secure the
performance of bids, trade contracts (other than for Indebtedness),
leases, tenders, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
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(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that
do not in any case materially detract from the value of the Property
subject thereto or interfere with the ordinary conduct of the business
of the Subsidiary Guarantors and any of their respective Subsidiaries;
(g) Liens upon real and/or tangible personal Property
acquired after the date hereof (by purchase, capital lease,
construction or otherwise) by any Obligor, each of which Liens either
(A) existed on such Property before the time of its acquisition and
was not created in anticipation thereof or (B) was created solely for
the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost (including the cost of
construction) of such Property; provided that (i) no such Lien shall
extend to or cover any Property of any Obligor or any of its
Subsidiaries other than the Property so acquired and improvements
thereon, (ii) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed 75% of the fair market value (as
determined in good faith by a senior financial officer of the
Borrower) of such Property at the time it was acquired (by purchase,
construction or otherwise), and (iii) no Lien shall be incurred in
connection with any Production Payment;
(h) Liens under farm-in, farm-out, joint operating, area of
mutual interest agreements or similar agreements entered into by any
Obligor or any of its Subsidiaries in the ordinary course of business
which such Person determines in good faith to be necessary for or
advantageous to the economic development of its Properties; provided
that no such Lien (other than Liens under joint operating agreements,
which arise in the ordinary course of business) shall be granted upon
Property which is given any value in determining the Borrowing Base;
(i) Liens created pursuant to any Interest Rate Protection
Agreements permitted under Section 9.07(h) hereof with any Lender that
are pari passu or subordinated to the Liens created pursuant to the
Pledge Agreements;
(j) Liens in existence on the date hereof and listed on Part
B of Schedule I hereto;
(k) statutory and contractual landlords' and lessors' liens
under leases to which any Obligor or its Subsidiaries is a party;
(l) any interest or title of a lessor, sublessor, licensee or
licensor under any lease or license agreement permitted by this
Agreement;
(m) Liens in favor of a banking institution arising as a
matter of law encumbering deposits (including the right of set-off)
held by such banking institutions incurred in the
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ordinary course of business and which are within the general
parameters customary in the banking industry;
(n) additional Liens created after the date hereof upon real
and/or personal property; provided that (i) the outstanding aggregate
principal or face amount of Indebtedness secured thereby and incurred
after the date hereof shall not exceed $2,500,000 in the aggregate any
one time outstanding and (ii) no such additional Liens shall be
created on any Property of Thai Romo;
(o) Liens in existence on the date hereof, in connection with
Capital Lease Obligations under any capital lease arrangement entered
into by any Obligor;
(p) royalties, overriding royalties, revenue interests, net
revenue interests, advance payment obligations and other similar
burdens incurred in the ordinary course of business; provided that no
such royalties, interests, obligations or burdens shall be granted on
or with respect to Property which is given any value in determining
the Borrowing Base;
(q) Liens on Property of any Person that becomes a Subsidiary
of any Obligor after the date of this Agreement, provided that such
Liens are in existence at the time such Person becomes a Subsidiary of
such Obligor and were not created in anticipation thereof and such
Liens shall not spread to cover any additional Property;
(r) rights reserved to or vested in any municipality or other
Government Authority by the terms of any right, power, franchise,
grant, license or permit, or by any provision of law, to terminate
such right, power, franchise, grant, license or permit or to purchase,
condemn, expropriate or recapture, or to designate a purchaser of, any
of the property of any Obligor or any of its Subsidiaries;
(s) rights reserved to or vested in any municipality or other
Government Authority to control or regulate any property of any
Obligor or any of its Subsidiaries, or to use such property in a
manner which does not materially impair the use of such property for
the purposes for which it is held by such Obligor or any of its
Subsidiaries;
(t) any obligations or duties affecting the Property of any
Obligor or any of its Subsidiaries to any municipality or other
Government Authority with respect to any franchise, grant, license or
permit;
(u) subject to the provisions of Section 9.13 hereof rights
under common law of a common owner of any interest in real estate,
right-of-way or easement held by any Obligor, or any of its
Subsidiaries and such common owner as tenants-in-common or through
other common ownership;
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(v) Liens created in respect of the transaction described in
the second sentence of 9.15(a) hereof;
(w) Liens in favor of Bank of Montreal Trust Company on a
portion of the proceeds of the Senior Subordinated Notes, such portion
not to exceed an amount equal to the first four semi-annual interest
payments on the Senior Subordinated Notes; and
(x) any extension, renewal or replacement of the foregoing,
provided that the Liens permitted hereunder shall not be spread to
cover any increase in the Indebtedness or to cover additional Property
(other than a substitution of like Property).
9.07 Indebtedness. None of the Obligors will, nor will they
permit any of their Subsidiaries to, create, incur or suffer to exist any
Indebtedness except:
(a) Indebtedness hereunder and under the other Basic
Documents to the Lenders;
(b) Indebtedness outstanding on the date hereof and listed in
Part A of Schedule I hereto, together with any renewals, extensions,
modifications and refinancings thereof, provided that no such renewal,
extension, modification or refinancing shall, with respect to the
prior Indebtedness (i) be of an earlier maturity than originally
scheduled or (ii) be of an increased principal amount;
(c) Affiliate Subordinated Indebtedness of any Subsidiary
Guarantor; provided that the Borrower specifies to the Administrative
Agent, at or prior to the time any Affiliate Subordinated Indebtedness
is incurred, the principal amount thereof and the holder or holders
thereof;
(d) Indebtedness incurred by Thai Romo to the operator (the
"Operator") under the Operating Agreement in respect of Indebtedness
incurred by the Operator in connection with transactions under such
Operating Agreement or the Joint Operating Agreement and in respect of
which Thai Romo and the other parties to such agreements (other than
the Operator) are obligated to reimburse the Operator for their
respective pro rata shares of such Indebtedness of the Operator,
provided that such Indebtedness is repaid prior to the date on which
any interest or penalties accrues or are imposed;
(e) Indebtedness of the Subsidiary Guarantors in respect of
loans and advances made as permitted by Section 9.08(d) hereof;
(f) Non-Recourse Debt;
(g) Guarantees by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business;
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(h) Indebtedness in respect of Interest Rate Protection
Agreements and Hedging Agreements (x) existing on the date hereof and
described on Schedule I, Part C hereof or (y) entered into after the
date hereof for the purpose of hedging fluctuations in interest rates
and commodity prices and not for speculation;
(i) Indebtedness incurred in connection with Permitted
Investments of the type described in clause (f) of the definition of
such term;
(j) Indebtedness incurred in respect of the transaction
described in the second sentence of 9.15(a) hereof;
(k) Indebtedness of Thai-Tex in respect of loans and advances
made as permitted by Section 9.08(j) hereof;
(l) the Senior Subordinated Notes;
(m) additional Indebtedness of the Borrower (including,
without limitation, Capital Lease Obligations and other Indebtedness
secured by Liens permitted under Section 9.06(n) hereof) up to but not
exceeding $5,000,000 at any one time outstanding; provided that Thai
Romo shall not be the obligor or guarantor with respect to more than
$2,500,000 of such Indebtedness; and
(n) Subordinated Indebtedness other than Affiliated
Subordinated Indebtedness.
9.08 Investments. The Obligors will not, nor will they
permit any of their respective Subsidiaries to, make or permit to remain
outstanding any Investments except:
(a) Investments outstanding on the date hereof and identified
in Part B of Schedule III hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) loans and advances by the Borrower to the Subsidiary
Guarantors and Investments by the Borrower in common stock of, and
other capital contributions by the Borrower to, the Subsidiary
Guarantors;
(e) Investments permitted by 9.07(h);
(f) undivided fractional interests in hydrocarbon reserves
acquired by any Obligor (other than Thai Romo, RMEC or TRH) and
additional interests of Thai Romo in the hydrocarbon reserves subject
to the Concession Agreement;
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(g) Investments incurred in connection with the funding of
Affiliate Subordinated Indebtedness;
(h) Investments by Thai Romo referred to in the proviso at
the end of the definition of "Investments" in Section 1.01 hereof;
(i) Investments by one or more of the Obligors in up to
46.35% of the share capital of B8/B2 Partners;
(j) loans and advances by the Borrower to Thai-Tex up to but
not exceeding $3,000,000 in the aggregate and Investments by the
Borrower in common stock of Thai-Tex and other capital contributions
by the Borrower to Thai-Tex up to but not exceeding $500,000 in the
aggregate; and
(k) additional Investments, including Investments in
Subsidiaries of the Obligors other than Subsidiary Guarantors, by the
Obligors up to but not exceeding $10,000,000 in the aggregate.
9.09 Restricted Payments. The Borrower will not make any
Restricted Payment at any time. Any provision of this Agreement or any other
Basic Document notwithstanding, Thai Romo may pay to RMEC and TRH, and RMEC and
TRH may pay to the Borrower, dividends and other distributions on shares of its
respective capital stock and principal and interest on Indebtedness without
limitation. No Subsidiary Guarantor shall enter into any agreement that in any
manner (i) restricts or prohibits the payment of dividends and other
distribution on its shares of capital stock or (ii) restricts, prohibits or
subordinates (other than to the Lenders as provided herein) payment of any
Indebtedness owed by such Subsidiary Guarantor to the Borrower.
9.10 Interest Coverage Ratio. The Borrower will not permit
the Interest Coverage Ratio to be less than (i) 1.50 to 1.0 as of the end of
each fiscal quarter ending on or before September 30, 1998; and (ii) 2.50 to
1.0 as of the end of any fiscal quarter thereafter.
9.11 Maintenance of Corporate Separateness. The Obligors
will, and will cause each of their respective Subsidiaries to, satisfy
customary corporate formalities, including, without limitation, the holding of
regular board of directors' and shareholders' meetings (or the taking of
actions pursuant to written consents in lieu of such meetings) and the
maintenance of separate corporate records and accounts.
9.12 Lines of Business; Etc. The Obligors will not, nor will
they permit any of their respective Subsidiaries to, engage to any substantial
extent in any line or lines of business activity other than the acquisition,
exploration, development, production, processing and gathering of hydrocarbons
and the marketing and sale of such hydrocarbons, other than the ownership of
the capital stock of their respective subsidiaries and the transactions
reasonably associated therewith (and in no event shall any Obligor or any of
its respective Subsidiaries engage in refining or other
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"downstream" activities relating to oil products). Notwithstanding the
foregoing, Thai-Tex may engage in the business of a reinsurance captive, it
being understood that Thai-Tex shall only provide reinsurance for the Borrower,
its Subsidiaries and B8/32 Partners.
9.13 Transactions with Affiliates. Except as expressly
permitted by this Agreement, the Obligors will not, nor will they permit any of
their respective Subsidiaries to, enter into any transaction directly or
indirectly with or for the benefit of an Affiliate of the Borrower (including,
without limitation, Guarantees and assumptions of obligations of an Affiliate
of the Borrower); except that (1) any Affiliate of the Borrower who is an
individual may serve as a director, officer or employee of the Borrower or any
of its Subsidiaries and receive reasonable compensation for his or her services
in such capacity and (2) the Borrower and its Subsidiaries may enter into other
transactions (other than extensions of credit by the Borrower or any of its
Subsidiaries) with Affiliates of the Borrower providing for the leasing of
Property, the rendering or receipt of services, the purchase or sale of
inventory and other Property and other transactions in the ordinary course of
business if the monetary or business consideration arising therefrom would be
substantially as advantageous to the Borrower and its Subsidiaries as the
monetary or business consideration that would obtain in a comparable
transaction with a Person not an Affiliate of the Borrower.
9.14 Certain Obligations Respecting Subsidiaries. (a) The
Obligors will take such action from time to time as shall be necessary to
ensure that each Obligor maintains its percentage ownership interest in each of
the Subsidiary Guarantors as set forth on Schedule III hereto.
(b) In the event that any additional shares of stock shall be
issued by any Subsidiary Guarantor, the Borrower agrees, and each Subsidiary
Guarantor agrees, forthwith to promptly deliver (and in any event within ten
days) to the Administrative Agent pursuant to the Pledge Agreement such shares
of stock accompanied by undated stock powers executed in blank and to
diligently take, or commence taking and diligently pursue, such other action as
the Administrative Agent shall request to perfect the security interest created
therein pursuant to the Pledge Agreement.
(c) The Obligors may only make Investments in Subsidiaries
(other than Subsidiary Guarantors) to the extent permitted by Section 9.08(g),
(j) and (k) hereof.
9.15 Limitation on Sale and Leaseback Transactions and
Production Payments.
(a) Neither of the Obligors nor any of their respective
Subsidiaries will enter into, renew or extend any transaction or series of
related transactions pursuant to which the Borrowers or any such Subsidiary
sells or transfers any Property in connection with the leasing, or the release
against installment payments, or as part of an arrangement involving the
leasing or resale against installment payments, of such Property to the seller
or transferor ("Sale and Leaseback Transaction").
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(b) The Obligors will not, nor will they permit any of their
respective Subsidiaries to, voluntarily agree or consent to enter into any
Production Payment transaction or similar agreement to which any of them are
parties without the prior consent of the Majority Lenders.
9.16 Project Agreements.
(a) Thai Romo will at all times perform and observe all of
its material obligations under or in respect of the Project Agreements, enforce
all of its material rights and claims under or in respect of such Project
Agreements and take such other actions as shall be necessary to maintain such
Project Agreements in full force and effect and to maintain, preserve and
protect its interests in the Concession Agreement, the Joint Operating
Agreement, and in the other Project Agreements.
(b) The Obligors will not, nor will they permit any of their
respective Subsidiaries to, agree or consent to any modification, supplement or
waiver of any of the provisions of any of the Project Agreements except to the
extent such modifications, supplements and waivers of the Project Agreements
could not reasonably be expected to have (individually or in the aggregate) a
Material Adverse Effect.
9.17 Subordinated Indebtedness. The Borrower will not permit
any of its Subsidiaries to, purchase, redeem, retire or otherwise acquire for
value, or set apart any money for a sinking, defeasance or other analogous fund
for the purchase, redemption, retirement or other acquisition of, or make any
voluntary payment or prepayment of the principal of or interest on, or any
other amount owing in respect of, any Subordinated Indebtedness, including any
Affiliate Subordinated Indebtedness, except (subject to the subordination
provisions applicable thereto) payments permitted by Section 3.02 of the
related Affiliate Subordination Agreement.
9.18 Defaults Under Gas Sales and Certain Actions of Thai
Government Authorities.
(a) The Borrower will notify the Administrative Agent within
ten days of
(i) PTT's refusal to accept delivery of gas pursuant
to Section 4.2(ii) or 5.2(ii) of the Gas Sales Agreement for
10 consecutive days;
(ii) the reimbursement by the Concessionaire (as
defined in the Gas Sales Agreement) of costs and expenses
incurred by PTT pursuant to Section 4.2(i) or 5.2(i) of the
Gas Sales Agreement in an amount in excess of $5,000,000 in
any month; or
(iii) any "default" as described in Article XV of the
Gas Sales Agreement.
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(b) The Borrower will notify the Administrative Agent within
ten days of its receipt of information indicating one or more
Government Authorities of or in Thailand has, or has notified any
Obligor in writing or publicly announced its intention to, repudiate,
terminate, seize, appropriate, assume the management of, abrogate or
reduce all or any material portion of Thai Romo's interest in any of
the Project Agreements.
9.19 Additional Subsidiary Guarantors. The Borrower will
take such action, and will cause each of its Subsidiaries to take such action,
including without limitation the action specified below in this Section 9.19
from time to time as shall be necessary to ensure that each Subsidiary that has
interests in oil or gas reserves that the Borrower seeks to include in the
Borrowing Base is a Subsidiary Guarantor hereunder. Each Subsidiary of the
Borrower that is required to become a Subsidiary Guarantor after the date
hereof shall execute such instruments and agreements, in form and substance
reasonably satisfactory to, and as reasonably required by, the Administrative
Agent to acknowledge that such Subsidiary has all of the obligations of a
Subsidiary Guarantor pursuant to this Agreement.
9.20 Special Covenants with Respect to B8/32 Partners.
(a) Notwithstanding any provision of this Agreement to the
contrary, the Borrower shall not and shall not permit any Subsidiary to convey,
sell, lease, transfer, assign or otherwise dispose of any interest in B8/32
Partners.
(b) The Borrower shall not and shall not permit any
Subsidiary to consent to B8/32 Partners conveying, selling, leasing,
transferring or otherwise disposing of any interest in any Project Agreement to
which it is a party.
(c) The Borrower shall not and shall not permit any
Subsidiary to consent to any action by B8/32 Partners which action would be
prohibited by a Subsidiary Guarantor.
9.21 Modifications and Payments of Senior Subordinated Notes.
Without the consent of the Administrative Agent and the Required Lenders, the
Borrower will not, and will not permit any of the Subsidiary Guarantors to (a)
agree to any amendment, supplement or modification of the Senior Subordinated
Notes or any indenture pursuant to which the Senior Subordinated Notes are
issued in any manner materially adverse to the Lenders or (b) pay, prepay,
redeem, retire, purchase or otherwise acquire for value, or defease any Senior
Subordinated Notes except (subject to the subordination provisions relating
thereto) for regularly scheduled payments of principal thereof and interest
thereon on the respective dates on which such payments are required to be made;
provided that the Obligors may consummate the exchange offer contemplated by
the Registration Statement.
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Section 10. Events of Default. If one or more of the
following events (herein called "Events of Default") shall occur and be
continuing:
(a) the Borrower shall default in the payment when due
(whether at stated maturity or upon mandatory or optional prepayment)
of: (i) any principal of any Loan; or (ii) any interest on any Loan
or any fee or any other amount payable by it hereunder or under any
other Basic Document if not paid within three Business Days of the
date that the same shall become due; or
(b) the Borrower or any of its Subsidiaries shall default in
the payment when due of any principal of or interest on any of its
other Indebtedness aggregating $1,000,000 or more, or in the payment
when due of any amount under any Interest Rate Protection Agreement or
Hedging Agreement for a notional principal amount exceeding
$1,000,000; or
(c) Any representation or warranty made or deemed made herein
or in any other Basic Document (or in any modification or supplement
hereto or thereto) by or on behalf of any Obligor, or any certificate
furnished to any Lender or the Administrative Agent pursuant to the
provisions hereof or thereof, shall prove to have been false or
misleading as of the time made or furnished in any material respect;
or
(d) The Borrower or any Subsidiary Guarantor shall default in
the performance of any of its obligations under any of Sections
9.01(h), 9.01(i), 9.03(a), 9.05, 9.06, 9.07, 9.08, 9.09, 9.10,
9.14(b), 9.15, 9.16(b), 9.17 or 9.20 hereof; or any Obligor shall
default in the performance of its obligation under Section 9.16(a)
hereof and such default shall continue unremedied for a period of 15
or more days after notice thereof to the Borrower by the
Administrative Agent or any Lender (through the Administrative Agent);
or any Obligor shall default in the performance of any of its other
obligations in this Agreement or any other Basic Document and such
default shall continue unremedied for a period of 30 or more days
after notice thereof to the Borrower by the Administrative Agent or
any Lender (through the Administrative Agent); or
(e) Any Obligor shall admit in writing its inability to, or
be generally unable to, pay its debts as such debts become due; or
(f) Any Obligor shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner or liquidator of itself or of all or a substantial
part of its Property, (ii) make a general assignment for the benefit
of its creditors, (iii) commence a voluntary case under the Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment
of debts, (v) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an
involuntary case under the
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Bankruptcy Code, (vi) take any corporate action for the purpose of
effecting any of the foregoing or (vii) do the equivalent of any of
the foregoing under any foreign laws; or
(g) A proceeding or case shall be commenced, without the
application or consent of any Obligor, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of such Obligor
or of all or any substantial part of its Property, (iii) similar
relief in respect of such Obligor under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 or more days; or an order for relief against such
Obligor shall be entered in an involuntary case under the Bankruptcy
Code or (iv) the equivalent of any of the foregoing under any foreign
laws; or
(h) A final judgment or order for the payment of money shall
be entered against any Obligor (i) which, within 90 days after the
entry thereof, has not been discharged or execution thereof has not
been stayed pending appeal or as to which any enforcement proceeding
shall have been commenced (and not stayed) by any creditor thereon and
(ii) the aggregate amount of all such final judgments or orders
meeting the criteria set forth in clause (i) above exceeds $1,000,000
(net of insurance coverage as to which the insurer has acknowledged
coverage); or
(i) An event or condition specified in Section 9.01(e) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan
and, as a result of such event or condition, together with all other
such events or conditions, any Obligor or any ERISA Affiliate shall
incur a liability to a Plan, a Multiemployer Plan or the PBGC (or any
combination of the foregoing) that could reasonably be expected to
(either individually or in the aggregate) have a Material Adverse
Effect; or
(j) All of the outstanding shares of capital stock of Thai
Romo (other than Qualifying Shares) shall cease to be owned, directly
or indirectly, by the Borrower, or any of such shares (other than
Qualifying Shares) shall be owned, directly or indirectly, by an
entity which is not incorporated or organized under the laws of a
state of the United States of America and the business of which does
not consist solely of making and holding investments in the Subsidiary
Guarantors and in other Investments permitted by Section 9.08 hereof;
or
(k) The Borrower's percentage ownership interest in RMEC and
TRH, and RMEC's and TRH's percentage ownership interests in Thai Romo
shall decrease from their respective percentage ownership interests on
the date hereof as set forth in Schedule VI
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hereto; or the Qualifying Shares of Thai Romo shall at any time
constitute more than 1% of the voting and economic interests in Thai
Romo; or
(l) The Liens created by the Pledge Agreements shall at any
time not constitute valid and perfected Liens on the collateral
intended to be covered thereby (to the extent perfection by filing,
registration, recordation or possession is required herein or therein)
in favor of the Lenders and the Administrative Agent, free and clear
of all other Liens (other than Liens permitted under Section 9.06
hereof or under the respective Pledge Agreements) except as a result
of any action taken by the Administrative Agent or the Lenders, or,
except for expiration in accordance with its terms, any of the Pledge
Agreements shall for whatever reason be terminated or cease to be in
full force and effect in any respects material to the Administrative
Agent and the Lenders, or the enforceability thereof shall be
contested by any Obligor; or
(m) Any Property of any Obligor is seized pursuant to legal
process and not bonded within 30 days; or
(n) There shall occur a revocation of, repeal of, termination
prior to the scheduled term of, or default under, any Project
Agreement or any Project Agreement shall cease to be in full force and
effect in any material respect; or
(o) One or more Government Authorities of the Kingdom of
Thailand shall publicly announce its intention to or shall repudiate,
terminate, seize, appropriate, assume management of, abrogate or
reduce all or any material portion of the Concession Agreement, or the
rights, properties or interests subject thereto or take any of the
following actions that results in a Material Adverse Effect: (i)
suspending or terminating all or any material portion of the
production or exportation of hydrocarbons subject to the Concession
Agreement, (ii) subjecting Thai Romo to new or additional Taxes or
imposing currency controls that prevent Thai Romo from converting
payments to U.S. Dollars or prevent Thai Romo from transferring such
payment outside of the Kingdom of Thailand or (iii) the confiscation,
expropriation or nationalization of the Project, any Project Property,
or other assets used in the exploration or development of Block B8/32
by any Government Authority of the Kingdom of Thailand or any other
Government Authority; or
(p) The Project is abandoned or placed in a care and
maintenance basis, or a substantial part of the Project Property is
destroyed or damaged beyond repair except where such destruction or
damage would not have a Material Adverse Effect; or
(q) Thai Romo ceases to receive, for more than 30 consecutive
days, the proceeds from the sale of its hydrocarbons, net of lease or
other similar payments owed to SBM and its Affiliates, and such
failure to receive such payments results in a Material Adverse Effect.
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THEREUPON: (1) in the case of an Event of Default other than one referred to
in clause (f) or (g) of this Section 10 with respect to the Borrower or any
Subsidiary Guarantor, the Administrative Agent may and, upon request of the
Majority Lenders, will, by notice to the Borrower, terminate the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Borrower and the
Subsidiary Guarantors hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 hereof) to be forthwith due
and payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Obligors; (2) in the case of the
occurrence of an Event of Default referred to in clause (f) or (g) of this
Section 10 with respect to the Borrower or any Subsidiary Guarantor, the
principal amount then outstanding of, and the accrued interest on, the Loans
and all other amounts payable by the Obligors hereunder and under the Notes
(including, without limitation, any amounts payable under Section 5.05 hereof)
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Obligors; and (3) in the case of the occurrence of an
Event of Default caused by the breach of the covenant described in the proviso
to Section 9.01(i) hereof, the Lenders may, in their sole discretion, make the
payments as described in such Section 9.01(i).
Section 11. The Administrative Agent.
11.01 Appointment, Powers and Immunities. Each Lender hereby
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the other Basic Documents and any Affiliate Subordination Agreement
with such powers (including the power of execution of such documents on behalf
of the Lenders) as are specifically delegated to the Administrative Agent by
the terms of this Agreement and the other Basic Documents and any Affiliate
Subordination Agreement, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in Section 11.05 and the first sentence of Section 11.06 hereof
shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents):
(a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and in the other Basic Documents
and any Affiliate Subordination Agreement, and shall not by reason of
this Agreement or any other Basic Document be a trustee for any
Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement
or in any other Basic Document or any Affiliate Subordination
Agreement, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or
any other Basic Document or any Affiliate Subordination Agreement, or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, any Note or any other Basic Document or
any other document referred to or provided for herein or
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therein or for any failure by the Borrower or any Subsidiary Guarantor
or any other Person to perform any of its obligations hereunder
thereunder;
(c) shall not be responsible for any action taken or omitted
to be taken by it hereunder or under any other Basic Document or under
any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct; and
(d) shall have no liability or other obligation to the
Borrower, any other Obligor or any Lender in respect of any
determination made or to be made by the Administrative Agent relating
to the method used or to be used, any assumption made or to be made or
any other matter relating to the computation of the Borrowing Base,
the Threshold Amount or any component of any thereof, other than (i)
to the extent practicable, to consult with the Lenders as to any such
determination and (ii) to make any such determination in good faith
and in a manner consistent with the express requirements of this
Agreement.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee of a Note as the holder thereof for all purposes
hereof unless and until a notice of the assignment or transfer thereof shall
have been filed with the Administrative Agent, together with the consent of the
Borrower to such assignment or transfer (to the extent provided in Section
12.06(b) hereof).
11.02 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including, without limitation, any thereof by telephone,
telecopy, telegram or cable) in good faith believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Administrative Agent. As to any
matters not expressly provided for by this Agreement or any other Basic
Document or any Affiliate Subordination Agreement, the Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Lenders, and such instructions of the Majority Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.
11.03 Defaults. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of a Default unless the
Administrative Agent has received notice from a Lender or the Borrower or any
Subsidiary Guarantor specifying such Default and stating that such notice is a
"Notice of Default". In the event that the Administrative Agent receives such
a notice of the occurrence of a Default, the Administrative Agent shall give
prompt notice thereof to the Lenders. The Administrative Agent shall (subject
to Section 11.07 hereof) take such action with respect to such Default as shall
be directed by the Majority Lenders, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent
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may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall deem advisable in the
best interest of the Lenders except to the extent that this Agreement expressly
requires that such action be taken, or not be taken, only with the consent or
upon the authorization of the Majority Lenders or all of the Lenders.
11.04 Rights as a Lender. With respect to its Commitment and
the Loans made by it, Chase (and any successor acting as Administrative Agent)
in its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. Chase (and any successor acting as Administrative Agent)
and its affiliates may (without having to account therefor to any Lender)
accept deposits from, lend money to, make investments in and generally engage
in any kind of banking, trust or other business with the Borrower, any
Subsidiary Guarantor and their respective Subsidiaries or Affiliates as if it
were not acting as the Administrative Agent, and Chase (and any such successor)
and its affiliates may accept fees and other consideration from any such Person
for services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
11.05 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 12.03 hereof,
but without limiting the obligations of the Borrower under said Section 12.03)
ratably in accordance with the aggregate principal amount of the Loans held by
the Lenders (or, if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against the Administrative Agent (including by any
Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Basic Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses that the Borrower is obligated to pay under Section 12.03
hereof but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or
of any such other documents, provided that no Lender shall be liable for any of
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
11.06 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrower, the Subsidiary Guarantors and their respective Subsidiaries and
decision to enter into this Agreement and that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or under any other Basic Document. The Administrative
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Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower or any Subsidiary Guarantor of this Agreement or any
of the other Basic Documents or any other document referred to or provided for
herein or therein or to inspect the Properties or books of the Borrower or the
Subsidiary Guarantors. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or under the other Basic Documents or any
Affiliate Subordination Agreement, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or the Subsidiary Guarantors (or any of their affiliates) that may
come into the possession of the Administrative Agent or any of its affiliates.
11.07 Failure to Act. Except for action expressly required
of the Administrative Agent hereunder and under the other Basic Documents and
any Affiliate Subordination Agreement, the Administrative Agent shall in all
cases be fully justified in failing or refusing to act hereunder and thereunder
unless it shall receive further assurances to its satisfaction from the Lenders
of their indemnification obligations under Section 11.05 hereof against any and
all liability and expense that may be incurred by it by reason of taking or
continuing to take any such action and the Administrative Agent may consult
with counsel and the advice of counsel shall be full and complete authorization
and protection in respect of any action taken or omitted by it hereunder under
any of the other Basic Documents, any Affiliate Subordination Agreement or
under the Pledge Agreements.
11.08 Resignation or Removal of Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative Agent
as provided below, the Administrative Agent may resign at any time by giving
notice thereof to the Lenders, the Borrower and the Subsidiary Guarantors, and
the Administrative Agent may be removed at any time with or without cause by
the Majority Lenders with (unless an Event of Default has occurred or is
continuing) the approval of the Borrower. Upon any such resignation or
removal, the Majority Lenders shall have the right to appoint a successor
Administrative Agent with (unless an Event of Default has occurred and is
continuing) the approval of the Borrower (such approval not to be unreasonably
withheld). If no successor Administrative Agent shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent's giving of notice of resignation or
the Majority Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent with (unless an Event of Default has occurred
and is continuing) the approval of the Borrower (such approval not to be
unreasonably withheld). Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation or removal hereunder as Administrative Agent, the
provisions of this Section 11 shall continue in effect for its benefit in
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respect of any actions taken or omitted to be taken by it while it was acting
as the Administrative Agent.
11.09 Consents under Other Basic Documents. Except as
otherwise provided in Section 12.04 hereof with respect to this Agreement, the
Administrative Agent may, with the prior consent of the Majority Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the Basic Documents or any Affiliate Subordination Agreement, provided that,
without the prior consent of all of the Lenders, the Administrative Agent shall
not (except as provided herein or in the Pledge Agreements): (i) release any
collateral or otherwise terminate any Lien under any Basic Document providing
for collateral security, or agree to additional obligations being secured by
such collateral security (unless the Lien for such additional obligations shall
be junior to the Lien in favor of the other obligations secured by such Basic
Document), except that no such consent shall be required, and the
Administrative Agent is hereby authorized, to release any Lien covering
Property that is the subject of a disposition of Property permitted hereunder
or to which the Majority Lenders have consented, (ii) release any Obligor from
its obligations under any of the Basic Documents to which it is a party and
(iii) release any Subsidiary Guarantor from its obligations under Section 6
hereof.
Section 12. Miscellaneous.
12.01 Waiver. No failure on the part of the Administrative
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under this Agreement or
any Note shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement or any Note
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
12.02 Notices. All notices, requests and other
communications provided for herein and under the Pledge Agreements (including,
without limitation, any modifications of, or waivers, requests or consents
under, this Agreement) shall be given or made in writing (including, without
limitation, by telecopy) delivered to the intended recipient at the "Address
for Notices" specified below its name on the signature pages hereof); or, as to
any party, at such other address as shall be designated by such party in a
notice to each other party. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
12.03 Expenses, Etc. The Borrower agrees to pay or
reimburse each of the Lenders and the Administrative Agent for (without
duplication): (a) all reasonable out-of-pocket costs and expenses of the
Administrative Agent (including, without limitation, following presentation of
a reasonably detailed invoice therefor, the reasonable fees and expenses of
Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase, and the Law
Office of
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Paiboon Sutuntivorakoon Ltd., special Thai counsel to Chase, in connection with
(i) the negotiation, preparation, execution and delivery of this Agreement and
the other Basic Documents and the making and syndication of the Loans hereunder
and related matters and (ii) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of this Agreement or any
of the other Basic Documents or any Affiliate Subordination Agreement (whether
or not consummated); (b) all reasonable out-of-pocket costs and expenses of the
Lenders and the Administrative Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (i) any Event
of Default and any enforcement or collection proceedings resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (x) bankruptcy, insolvency, receivership, foreclosure, winding
up or liquidation proceedings, (y) judicial or regulatory proceedings and (z)
workout, restructuring or other negotiations or proceedings (whether or not the
workout, restructuring or transaction contemplated thereby is consummated) and
(ii) the enforcement of this Section 12.03; and (c) without duplication of any
amounts payable by the Borrower under Section 5.06 hereof, all transfer, stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement or any of the
other Basic Documents or any other document referred to herein or therein and
all costs, expenses, taxes, assessments and other charges incurred in
connection with any filing, registration, recording, or perfection of any
security interest contemplated by the Basic Documents or any document referred
to therein.
The Borrower hereby agrees to indemnify the Administrative
Agent and each Lender and their respective directors, officers, employees,
attorneys and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them
(including, without limitation, any and all losses, liabilities, claims,
damages or expenses incurred by the Administrative Agent to any Lender),
whether or not the Administrative Agent or any Lender is a party thereto
arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to the Loans hereunder or any of the other transactions
contemplated hereby or any actual or proposed use by the Borrower or any of
its Subsidiaries of the proceeds of the Loans hereunder, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct (or the failure of a
Lender to make a Loan hereunder when required pursuant to the terms hereof) of
the Person to be indemnified). Without limiting the generality of the
foregoing, the Borrower will indemnify the Administrative Agent and each Lender
from, and hold the Administrative Agent and each Lender harmless against, any
losses, liabilities, claims, damages or expenses described in the preceding
sentence (but excluding, as provided in the preceding sentence, any loss,
liability, claim, damage or expense incurred by reason of the gross negligence
or willful misconduct of the Person to be indemnified) arising under any Law as
a result of the past, present or future operations of the Borrower or any of
its Subsidiaries (or any predecessor in interest to the Borrower or any of its
Subsidiaries), or the past, present or future condition of any site or facility
owned, operated or leased at any time by the Borrower or any of
Credit Agreement
<PAGE> 80
- 75 -
its Subsidiaries (or any such predecessor in interest), including any such
losses, liabilities, claims, damages or expenses that shall occur during any
period when the Administrative Agent or any Lender shall be in possession of
any such site or facility following the exercise by the Administrative Agent or
any Lender of any of its rights and remedies hereunder to the extent that such
losses, liabilities, claims, damages or expenses are caused by the
Administrative Agent or the Lenders (but not if such losses, liabilities,
claims, damages or expenses are caused by the gross negligence or willful
misconduct of the Administrative Agent or the Lenders).
12.04 Amendments, Etc. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be modified or
supplemented only by an instrument in writing signed by the Borrower, the
Subsidiary Guarantors, the Administrative Agent and the Majority Lenders, or by
the Borrower, the Subsidiary Guarantors and the Administrative Agent acting
with the consent of the Majority Lenders, and any provision of this Agreement
may be waived by the Majority Lenders or by the Administrative Agent acting
with the consent of the Majority Lenders; provided that: (a) no modification,
supplement or waiver shall, unless by an instrument signed by all of the
Lenders or by the Administrative Agent acting with the consent of all of the
Lenders: (i) increase, or extend the term of the Commitments, or extend the
time or waive any requirement for the reduction or termination of the
Commitments, (ii) extend the date fixed for the payment of principal of or
interest on any Loan or any fee hereunder, (iii) reduce or forgive the amount
of any such payment of principal, (iv) reduce the rate at which interest is
payable thereon or any fee is payable hereunder, (v) alter the rights or
obligations of the Borrower to prepay Loans, (vi) alter the terms of this
Section 12.04, (vii) modify the definition of the term "Majority Lenders" or
"Required Lenders" or modify in any other manner the number or percentage of
the Lenders required to make any determinations or waive any rights hereunder
or to modify any provision hereof, (viii) alter the manner in which payments or
prepayments of principal, interest or other amounts hereunder shall be applied
as between the Lenders of Types of Loans, (ix) waive any of the conditions
precedent set forth in Section 7 hereof or (x) redetermine or otherwise change
the Borrowing Base or Threshold Amount; (b) any modification or supplement of
Section 11 hereof shall require the consent of the Administrative Agent; (c)
any modification or supplement of Section 6 hereof shall require the consent of
the Subsidiary Guarantors; (d) any waiver of any provision of this Agreement
that adversely affects the Borrower shall require the consent of the Borrower;
(e) any modification to Section 1.04 or the defined terms used therein shall
require the consent of the Required Lenders; and (f) any release of any Obligor
from its obligations under any Basic Document or any release of collateral
shall require the consent of all the Lenders to the extent set forth in Section
11.09 hereof. Notwithstanding any provision of this Section 12.04 to the
contrary, as long as Banque Paribas is a Lender hereunder and its Commitment
equals or exceeds $35,000,000, any amendment, supplement or waiver of this
Agreement shall require the consent of Banque Paribas.
12.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Credit Agreement
<PAGE> 81
- 76 -
12.06 Assignments and Participations.
(a) Neither the Borrower nor either Subsidiary Guarantor may
assign any of its rights or obligations hereunder or under the Notes without
the prior consent of all of the Lenders and the Administrative Agent.
(b) Each Lender may (and each Lender shall, if requested
pursuant to Section 5.07 hereof) assign any of its Loans and its Note, with the
consent, so long as no Event of Default shall have occurred and be continuing,
of the Borrower (such consent not to be unreasonably withheld or delayed);
provided that
(i) no such consent by the Borrower shall be required in the
case of any assignment to another Lender;
(ii) except to the extent the Administrative Agent and the
Borrower shall otherwise consent, any such partial assignment (other
than to another Lender) shall be in an amount at least equal to
$5,000,000;
(iii) each such assignment by a Lender of its Loans or Note
shall be made in such manner so that the same portion of its Loans and
Commitments is assigned to the respective assignee; and
(iv) upon each such assignment, the assignor and assignee
shall deliver to the Borrower and the Administrative Agent an
Assignment and Acceptance in the form of Exhibit F hereto.
Upon execution and delivery by the assignor and the assignee to and the
Administrative Agent of such Assignment and Acceptance, and upon consent
thereto by the Administrative Agent and the Borrower to the extent required
above, the assignee shall have, to the extent of such assignment (unless
otherwise consented to by the Administrative Agent and the Borrower), the
obligations, rights and benefits of a Lender hereunder holding the Loans (or
portions thereof) assigned to it and specified in such Assignment and
Acceptance (in addition to the Loans, if any, theretofore held by such
assignee). Unless otherwise agreed by the Administrative Agent, upon each such
assignment the assigning Lender shall pay the Administrative Agent an
assignment fee of $3,000.
(c) A Lender may sell or agree to sell to one or more other
Persons a participation in all or any part of any Loans held by it (such
purchaser of a participation a "Participant"), but, except as otherwise
provided in Section 4.07(c) hereof, a Participant shall not have any other
rights or benefits under this Agreement or any Note or any other Basic Document
and any Affiliate Subordination Agreement (the Participant's rights against
such Lender in respect of such participation to be those set forth in the
agreements executed by such Lender in favor of the Participant). All amounts
payable by the Borrower to any Lender under Section 5 hereof and Section 12.03
hereof in respect of Loans held by it, and its Commitments shall be determined
as if such Lender had not sold or agreed to sell any participations in such
Loans and Commitments, and as if such Lender were funding each of such Loan in
the same way that it is funding the portion of
Credit Agreement
<PAGE> 82
- 77 -
such Loan and Commitment in which no participations have been sold. In no
event shall a Lender that sells a participation agree with the Participant to
take or refrain from taking any action hereunder or under any other Basic
Document and any Affiliate Subordination Agreement except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) extend the date fixed for the payment of principal of
or interest on the related Loan or Loans or any portion of any fee hereunder
payable to the Participant, (ii) reduce the amount of any such payment of
principal, (iii) reduce the rate at which interest is payable thereon, or any
fee hereunder payable to the Participant, to a level below the rate at which
the Participant is entitled to receive such interest or fee, (iv) alter the
rights or obligations of the Borrower to prepay the related Loans or (v)
consent to any modification, supplement or waiver hereof or of any of the other
Basic Documents to the extent that the same, under Section 11.09 or 12.04
hereof, requires the consent of each Lender.
(d) In addition to the assignments and participations
permitted under the foregoing provisions of this Section 12.06, any Lender may
(without notice to or the consent of the Borrower, the Administrative Agent or
any other Lender and without payment of any fee) (i) assign and pledge all or
any portion of its Loan and its Note to any Federal Reserve Bank as collateral
security pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank and (ii) assign all or any portion of its rights under
this Agreement and its Loan and its Note to an affiliate. No such assignment
shall release the assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the
Borrower, the Subsidiary Guarantors or any of their respective Subsidiaries in
the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants), subject, however, to the
provisions of Section 12.12 hereof.
(f) Anything in this Section 12.06 to the contrary
notwithstanding, no Lender may assign or participate any interest in any Loan
held by it hereunder to the Borrower or any Subsidiary Guarantor or any of its
Affiliates or Subsidiaries without the prior consent of each Lender.
12.07 Survival. The obligations of the Borrower under
Sections 5.01, 5.05, 5.06 and 12.03 hereof and the obligations of the
Subsidiary Guarantors under Section 6.03 hereof, and the obligations of the
Lenders under Sections 11.05 and 12.12 hereof, shall survive the repayment of
the Loans and the termination of the Commitments and, in the case of any Lender
that may assign any interest in its Commitments or Loans hereunder, shall
survive the making of such assignment, notwithstanding that such assigning
Lender may cease to be a "Lender" hereunder. In addition, each representation
and warranty made, or deemed to be made by a notice of any Loan, herein or
pursuant hereto shall survive the making of such representation and warranty,
and no Lender shall be deemed to have waived, by reason of making any Loan, any
Default that may arise by reason of such representation or warranty proving to
have been false or misleading, notwithstanding that such Lender or the
Administrative Agent may have had notice or knowledge or reason to believe that
such representation or warranty was false or misleading at the time such Loan
was made.
Credit Agreement
<PAGE> 83
- 78 -
12.08 Captions. The table of contents and captions and
section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
12.09 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
12.10 Governing Law; Submission to Jurisdiction. (a) This
Agreement and the Notes shall be governed by, and construed in accordance with,
the law of the State of New York. The Borrower and the Subsidiary Guarantors
hereby submit to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of the Supreme Court of the
State of New York sitting in New York County (including its Appellate
Division), and of any other appellate court in the State of New York, for the
purposes of all legal proceedings arising out of or relating to this Agreement
or the other Basic Documents or the transactions contemplated hereby or
thereby. Each of the Borrower and the Subsidiary Guarantors hereby irrevocably
waive, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such
a court has been brought in an inconvenient forum.
Each Obligor agrees that final judgment in any such suit,
action or proceeding brought in such court shall be conclusive and binding upon
such Obligor and may be enforced in any court to the jurisdiction of which such
Obligor is subject by a suit upon such judgment, provided that service of
process is effected upon such Obligor in the manner provided in this Section
12.10.
(b) Each Obligor (other than Thai Romo) hereby agrees that
service of all writs, process and summonses in any such suit, action or
proceeding brought in the State of New York may be made upon it by service upon
CT Corporation System, presently having an office at 1633 Broadway, New York,
New York 10019, U.S.A. (each of such agents for service of process as
appropriate, being referred to herein as the "Process Agent"), and each Obligor
(other than Thai Romo) hereby irrevocably appoints the Process Agent its true
and lawful agent and attorney-in-fact in its name, place and stead to accept
such service of any and all such writs, process and summonses and agrees that
the failure of the Process Agent to give any notice of any such service of
process to any such Obligor shall not impair or affect the validity of such
service or of any judgment based thereon. If for any reason CT Corporation
System ceases to act, or to be able to act, as a Process Agent, as contemplated
hereby, each Obligor (including Thai Romo) will appoint a substitute therefor
and agrees to maintain at all times an agent for service of process in the
United States of America to act as its process agent. Each Obligor (including
Thai Romo) irrevocably consents to the service of process in any suit, action
or proceeding in said courts by the mailing thereof by the Administrative Agent
or any Lender or any holder of any Note by registered or certified mail,
postage prepaid, to such Obligor at the address given below its name on the
signature pages hereto.
Credit Agreement
<PAGE> 84
- 79 -
(c) Nothing herein shall in any way be deemed to limit the
ability of the Administrative Agent or any Lender to serve any such writs,
process or summonses in any other manner permitted by applicable law or to
obtain jurisdiction over the Obligors in such other jurisdictions, and in such
manner, as may be permitted by applicable law.
(d) To the extent that any Borrower or any Subsidiary
Guarantor has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service of notice, attachment
prior to judgment, attachment in aid of execution, execution, sovereign
immunity or otherwise) with respect to itself or its property, it hereby
irrevocably waives such immunity in respect of its obligations under this
Agreement and the other Basic Documents.
12.11 Waiver of Jury Trial. EACH OF THE BORROWER, EACH
SUBSIDIARY GUARANTOR, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT, THE NOTES, THE OTHER BASIC DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
12.12 Treatment of Certain Information; Confidentiality.
Each Lender and the Administrative Agent agrees (on behalf of itself and each
of its affiliates, directors, officers, employees and representatives) with
each of the Obligors to use its best efforts to keep confidential and not to
disclose any non-public information supplied to it by any of the Obligors
pursuant to this Agreement or any of the other Basic Documents that is
identified by any of the Obligors as being confidential at the time the same is
delivered to the Lenders or the Administrative Agent, provided that nothing
herein shall limit the disclosure of any such information (i) to the extent
required by statute, rule, regulation or judicial process, (ii) to counsel for
any of the Lenders or the Administrative Agent, (iii) to bank examiners,
auditors or accountants, (iv) to the Administrative Agent or any other Lender
(or to Chase Securities Inc., Chase Investment Bank, Ltd., and Chase Manhattan
Asia Limited), (v) in connection with any litigation relating to any of the
Basic Documents or any Affiliate Subordination Agreement or the transactions
contemplated thereby to which any one or more of the Lenders or the
Administrative Agent is a party, (vi) to a subsidiary or affiliate of such
Lender in connection with the administration, management or booking of any
Loans or (vii) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee
or participant) first executes and delivers to the respective Lender a
Confidentiality Agreement substantially in the form of Exhibit E hereto. The
obligations of each Lender under this Section 12.12 shall supersede and replace
the obligations of such Lender under any confidentiality letter in respect of
this financing signed and delivered by such Lender to any of the Obligors prior
to the date hereof; in addition, the obligations of any assignee that has
executed a Confidentiality Agreement in the form of Exhibit E hereto shall be
superseded by this Section 12.12 upon the date upon which such assignee becomes
a Lender hereunder pursuant to Section 12.06(b) hereof.
Credit Agreement
<PAGE> 85
- 80 -
12.13 Appointment of the Borrower as Agent. Each Subsidiary
Guarantor hereby irrevocably appoints the Borrower as its agent for the purpose
of giving and receiving any and all notices and other communications provided
for herein to be given by or to it hereunder. By its signature below, the
Borrower hereby accepts such appointment.
12.14 Joint and Several Liability. (a) All monetary
obligations of the Subsidiary Guarantors hereunder and under the other Basic
Documents to which the Subsidiary Guarantors are parties shall be their joint
and several obligations.
(b) Each Subsidiary Guarantor hereby agrees that until the
payment and satisfaction in full of all monetary obligations hereunder and the
expiration or termination of the Commitments it shall not exercise any right or
remedy against any other Subsidiary Guarantor arising by reason of any
performance by it of its joint and several obligations hereunder, whether by
subrogation or otherwise.
12.15 Judgment Currency. If, under any applicable law and
whether pursuant to a judgment being made or registered against any Obligor or
for any other reason, any payment under or in connection with this Agreement is
made or fails to be satisfied in a currency (the "Other Currency") other than
that in which the relevant payment is due (the "Required Currency") then, to
the extent of the payment (when converted into the Required Currency at the
rate of exchange on the date of payment, or, if it is not practicable for the
party entitled thereto (the "Payee") to purchase the Required Currency with the
Other Currency on the date of payment, at the rate of exchange as soon
thereafter as it is practicable for it to do so) actually received by the Payee
falls short of the amount due under the terms of this Agreement, such Obligor
shall, to the extent permitted by law, as a separate and independent
obligation, indemnify and hold harmless the Payee against the amount of such
shortfall. For the purpose of this Section, "rate of exchange" means the rate
at which the Payee is able on the relevant date to purchase the Required
Currency with the Other Currency and shall take into account any premium and
other costs of exchange.
Credit Agreement
<PAGE> 86
- 81 -
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
BORROWER
RUTHERFORD-MORAN OIL CORPORATION
By
-----------------------------------------
Title: Chief Financial Officer
Address for Notices:
Rutherford-Moran Oil Corporation
5 Greenway Plaza, Suite 220
Houston, Texas 77046
Attention: Chief Financial Officer
Telecopier No.: 713-621-7072
Telephone No.: 713-622-5555
Credit Agreement
<PAGE> 87
- 82 -
SUBSIDIARY GUARANTORS
RUTHERFORD-MORAN EXPLORATION COMPANY
By
-----------------------------------------
Title: Treasurer
Address for Notices:
Rutherford-Moran Exploration Company
5 Greenway Plaza, Suite 220
Houston, Texas 77046
Attention: Chief Financial Officer
Telecopier No.: 713-621-7072
Telephone No.: 713-622-5555
THAI ROMO HOLDINGS, INC
By
-----------------------------------------
Title: Treasurer
Address for Notices:
Thai Romo Holdings, Inc.
Greenway Plaza, Suite 220
Houston, Texas 77046
Attention: Chief Financial Officer
Telecopier No.: 713-621-7072
Telephone No.: 713-622-5555
Credit Agreement
<PAGE> 88
- 83 -
THAI ROMO LIMITED
By
-----------------------------------------
Title: Managing Director
Address for Notices:
Thai Romo Holdings, Inc.
5 Greenway Plaza, Suite 220
Houston, Texas 77046
Attention: Chief Financial Officer
Telecopier No.: 713-621-7072
Telephone No.: 713-622-5555
Credit Agreement
<PAGE> 89
- 84 -
LENDERS
Commitment THE CHASE MANHATTAN BANK
$100,000,000
By
-----------------------------------------
Title:
Lending Office for all Loans:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Address for Notices:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Richard Betz
Managing Director
Telecopier No.: 212-270-6971
Telephone No.: 212-270-2519
Credit Agreement
<PAGE> 90
- 85 -
Commitment BANQUE PARIBAS
$50,000,000
By
-----------------------------------------
Title: Vice President
By
-----------------------------------------
Title: Managing Director
Lending Office for all Loans:
Banque Paribas
1200 Smith, Suite 3100
Houston, Texas 77002
Address for Notices:
Banque Paribas
1200 Smith, Suite 3100
Houston, Texas 77002
Attention: Doug Liftman
Vice President
Telecopier No.: 713-659-6915
Telephone No.: 713-659-4811
Credit Agreement
<PAGE> 91
- 86 -
Administrative Agent
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
-----------------------------------------
Title:
Address for Notices to
Chase as Administrative Agent:
Administrative Agent Bank Services
Group One Chase Manhattan
Plaza 8th Floor New York,
New York 10081
Attention: Joselin Fernandes
Telecopier No.: 212-552-5777
Telephone No.: 212-552-7414
with copies to:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Richard Betz
Telecopier No.: 212-270-2519
Credit Agreement
<PAGE> 92
SCHEDULE I
Material Agreements, Liens and Interest Rate
and Commodity Hedging Arrangements
Part A - Material Agreements
Project Agreements
Guaranty made by RMEC (formerly known as "Rutherford/Moran Oil Corporation")
dated as of October 25, 1996 to Petroleum Authority of Thailand in connection
with the Gas Sales Agreement.
Guaranty made by RMEC (formerly known as "Rutherford/Moran Oil Corporation")
dated as of August 22, 1991 to Maersk in connection with the Joint Operating
Agreements dated as of August 1, 1991 between Maersk, Thai Romo, Thaipo, and
Sophonpanish.
Guaranty and Indemnity made by Thai Romo to SBM Marine Service Thailand Ltd.
dated February 9, 1996 in connection with the Operating Agreement whereby Thai
Romo guarantees 46.34146% of the Guaranteed Obligations defined therein.
Guaranty and Indemnity made by Thai Romo to Tantawan Production B.V. dated
February 9, 1996 in connection with the Bareboat Charter whereby Thai Romo
guarantees 46.34148% of the Guaranteed Obligations defined therein.
Non-interest bearing promissory note of Thai Romo dated June 17, 1996 payable
to RMEC in the principal amount $20,504,909.
Non-interest bearing promissory note of Thai Romo dated June 17, 1996 payable
to TRH in the principal amount of $8,417,344.
Non-interest bearing promissory note of Thai Romo dated June 27, 1996 payable
to RMOC in the principal amount $44,128,031.
Non-interest bearing promissory note of Thai Romo dated June 27, 1996 payable
to RMEC in the principal amount of $8,737,500.
Non-interest bearing promissory note of Thai Romo dated June 27, 1996 payable
to TRH in the principal amount $2,769,800.
Promissory note of RMEC dated June 27, 1996 payable to RMOC in the approximate
principal amount of $23,996,974 bearing interest at LIBOR plus 1.75%.
First Amendment to the Gas Sale Agreement between Petroleum Authority of
Thailand and B8/32 Partners Limited, Thaipo Limited, Thai Romo Limited, Palang
Sophon Limited, dated November 12, 1997.
Schedule I
<PAGE> 93
SCHEDULE II
Compliance with Laws
[Section 8.13]
Schedule II
<PAGE> 94
SCHEDULE III
Subsidiaries and Investments
The Borrower
As of December 1, 1997, the Borrower has $226,000 in the Fidelity 357 Money
Market with Fidelity Investment.
The Borrower is the parent company of RMEC, owns 1,000 shares of common stock,
$1.00 par value, of RMEC and has made loans to RMEC at 9/30/97 in the aggregate
amount of $23,274,069.
The Borrower is the parent company of TRH and owns 1,000 shares of common
stock, $1.00 par value, of TRH.
The Borrower has made loans to Thai Romo at 9/30/97 in the aggregate amount of
$152,688,386.
RMEC
RMEC owns approximately 57.5% of the issued and outstanding shares of common
stock of Thai Romo and has made loans to Thai Romo at 9/30/97 in the aggregate
amount of $25,173,068.
TRH
TRH owns approximately 42.5% of the issued and outstanding shares of common
stock of Thai Romo and has loans to Thai Romo at 9/30/97 in the aggregate
amount of $11,586,092.
Note: RMOC invested $250,000 in a wholly-owned subsidiary, Thai-Tex
Insurance Co., Inc.
Schedule III
<PAGE> 95
SCHEDULE IV
Litigation
[Section 8.03]
None.
Schedule IV
<PAGE> 96
SCHEDULE V
Taxes
[Section 8.09]
None.
Schedule V
<PAGE> 97
SCHEDULE VI
Capitalization
[Section 8.14]
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
------ ----------------
Thai Romo
<S> <C> <C>
1. Rutherford-Moran Oil Corporation 612,608 shares
2. Thai Romo Holdings, Inc. 452,704 shares
3. PRR Thai, Inc. 1 share
4. Thai PRR L.P. 1 share
5. JAM Thai, Inc. 1 share
6. Thai JAM L.P. 1 share
7. MDM Thai, Inc. 1 share
B8/32 Partners
1. Pogo Producing Company Limited 50,974 shares
2. Mr. Paul Gerrit Van Wagenen 1 share
3. Mr. Radford Phillip Laney 1 share
4. Thai Romo Holdings, Inc. 50,974 shares
5. Mr. Patrick Richard Rutherford 1 share
6. Mr. Michael Douglas McCoy 1 share
7. Palang Sophon Limited 8,048 shares
</TABLE>
Schedule VI
<PAGE> 98
SCHEDULE VII
Project Agreements
Bareboat Charter
Concession Agreement
Gas Sales Agreement
Joint Operating Agreement
Operating Agreement
Tantawan Joint Operating Agreement
Schedule VII
<PAGE> 99
SCHEDULE VIII
Exceptions to Statements in Registration Statement
[Section 8.20]
None, except to reflect the final terms contained in this Amended and Restated
Credit Agreement.
Schedule VIII
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Accountants
The Board of Directors
Rutherford-Moran Oil Corporation:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Houston, Texas
December 17, 1997
