<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____________________
FORMAN PETROLEUM CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
LOUISIANA 1311 72-0954774
(State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
MARVIN J. GAY
Vice President -- Finance
and Administration
650 POYDRAS STREET, SUITE 2200 650 POYDRAS STREET, SUITE 2200
New Orleans, Louisiana 70130-6101 New Orleans, Louisiana 70130-6101
(504) 586-8888 (504) 586-8888
(Address, including zip code, and telephone (Name, Address, including zip code, and
number, including area code, of registrant's telephone number, including area code,
principal executive offices) of agent for service)
</TABLE>
Copy to:
ALAN P. BADEN
Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
(713) 758-2222
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable following the effectiveness 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, check the following box. [ ]
____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Proposed Proposed
Title of each class of Amount to be maximum offering maximum aggregate Amount of
securities to be registered registered price per unit offering price registration fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13.5% Senior Secured
Notes due 2004, Series B $ 70,000,000 100% $ 70,000,000 $ 21,213
=====================================================================================================================
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
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* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed with *
* the Securities and Exchange Commission. These securities may not be sold *
* nor may offers to buy be accepted prior to the time the registration *
* statement becomes effective. This prospectus shall not constitute an offer *
* to sell or the solicitation of an offer to buy nor shall there be any sale *
* of these securities in any state in which such offer, solicitation or sale *
* would be unlawful prior to registration or qualification under the *
* securities laws of any such state. *
*******************************************************************************
SUBJECT TO COMPLETION, DATED ____________, 1997
PROSPECTUS
FORMAN PETROLEUM CORPORATION
OFFER TO EXCHANGE
13.5% SENIOR SECURED NOTES DUE 2004, SERIES B
FOR ALL OUTSTANDING 13.5% SENIOR SECURED NOTES DUE 2004, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON ____________, UNLESS EXTENDED
____________________
Forman Petroleum Corporation, a Louisiana corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 principal amount of its 13.5% Senior Secured Notes due 2004,
Series B (the "Exchange Notes"), which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement (as defined herein) of which this Prospectus constitutes a part, for
each $1,000 principal amount of its outstanding 13.5% Senior Secured Notes due
2004, Series A (the "Old Notes"), of which $70,000,000 principal amount is
outstanding. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Old Notes except for certain
transfer restrictions, certain registration rights and the provision for
Additional Interest, all relating to the Old Notes. The Exchange Notes will
evidence the same debt as the Old Notes and will be issued under and be entitled
to the benefits of the Indenture (as defined herein). The Exchange Notes and
the Old Notes are collectively referred to herein as the "Notes."
The Notes are senior secured obligations of the Company, ranking pari passu
in right of payment with all existing or future senior Indebtedness (as defined
herein) and senior to all existing or future Subordinated Indebtedness (as
defined herein) of the Company. The Notes are secured by a security interest in
certain of the Company's oil and gas properties, subject only to a prior lien on
such assets to secure future indebtedness in a limited amount and under limited
circumstances as permitted in the indenture governing the Notes (the
"Indenture").
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be ________, 1997, unless the Exchange Offer is
extended. See "The Exchange Offer -- Expiration Date; Extensions; Amendments."
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the business day prior to the Expiration Date (as defined herein),
unless previously accepted for exchange. The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes being tendered for exchange.
However, the Exchange Offer is subject to certain conditions which may be waived
by the Company and to the terms and provisions of the Registration Rights
Agreement (as defined herein). Old Notes may be tendered only in denominations
of $1,000 principal amount and integral multiples thereof. The Company has
agreed to pay the expenses of the Exchange Offer. See "The Exchange Offer."
(Cover continued on next page)
____________________
SEE "RISK FACTORS" BEGINNING ON PAGE __ OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING EXCHANGING NOTES 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 ________, 1997
<PAGE>
The Exchange Notes will bear interest at the rate of 13.5% per annum, payable
semi-annually in cash in arrears on June 1 and December 1 of each year,
commencing December 1, 1997. Holders of Exchange Notes of record on November
15, 1997 will receive interest on December 1, 1997 from the date of issuance of
the Exchange Notes, plus an amount equal to the accrued interest on the Old
Notes from the date of issuance of the Old Notes, June 3, 1997 ("Issue Date"),
to the date of exchange thereof. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
The Old Notes were sold by the Company on June 3, 1997 to Jefferies & Company,
Inc. in a transaction not registered under the Securities Act in reliance upon
Section 4(2) of the Securities Act and Rule 506 of Regulation D under the
Securities Act. The Old Notes were thereupon offered and sold by Jefferies &
Company, Inc. only to "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) and to a limited number of institutional "accredited
investors" (as defined in Rule 501(a)(1),(2),(3) or (7) of Regulation D under
the Securities Act), each of whom agreed to comply with certain transfer
restrictions and other conditions. Accordingly, the Old Notes may not be
offered, resold or otherwise transferred unless registered under the Securities
Act or unless an applicable exemption from the registration requirements of the
Securities Act is available. The Exchange Notes are being offered hereunder in
order to satisfy the obligations of the Company under the Registration Rights
Agreement entered into with Jefferies & Company, Inc. in connection with its
purchase of the Old Notes (the "Registration Rights Agreement"). See "The
Exchange Offer" and "Description of Notes."
Based on no-action letters issued by the staff of the Securities and Exchange
Commission (the "Commission" or "SEC") to third parties, including Exxon Capital
Holdings Corporation, SEC No-Action Letter (available April 13, 1989), Morgan
Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991) (the "Morgan
Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-Action Letter (available
June 5, 1991), the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer may be offered for resale, resold and otherwise transferred
by the respective holders thereof (other than a "Restricted Holder," being (i) a
broker-dealer who purchased Old Notes exchanged for such Exchange Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an affiliate of the
Company 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 Exchange Notes are acquired in the ordinary
course of such holder's business and such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of such Exchange Notes. Eligible holders
wishing to accept the Exchange Offer must represent to the Company that such
conditions have been met. Holders who tender Old Notes in the Exchange Offer
with the intention to participate in a distribution of the Exchange Notes may
not rely upon the Morgan Stanley Letter or similar no-action letters. See "The
Exchange Offer -- General." Each broker-dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. A
broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Rights Agreement (including certain indemnification rights and obligations).
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 Exchange Notes received 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.
The Company will not receive any proceeds from the Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes or as to the ability of or
price at which the holders of Exchange Notes would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including, among others, prevailing interest rates, the Company's
operating results and the market for similar securities. The Company does not
intend to apply for listing of the Exchange Notes on any securities exchange.
Jefferies & Company, Inc. has informed the Company that it currently intends to
make a market for the Exchange Notes. However, it is not so obligated, and any
such market making 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 Exchange Notes or as to the liquidity of or the trading market for the
Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY 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 OR BLUE SKY LAWS OF SUCH JURISDICTION.
2
<PAGE>
TABLE OF CONTENTS
PAGE NO.
--------
Available Information.......................................
Disclosure Regarding Forward Looking Statements.............
Prospectus Summary..........................................
Risk Factors................................................
The Company.................................................
Private Placement...........................................
Use of Proceeds.............................................
Capitalization..............................................
Selected Historical Financial Information...................
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................
Business and Properties.....................................
Management..................................................
Principal Stockholders......................................
Certain Transactions........................................
The Exchange Offer..........................................
Description of Capital Stock................................
Description of Notes........................................
Registration Rights.........................................
Certain Federal Income Tax Consequences.....................
Plan of Distribution........................................
Transfer Restrictions on Old Notes..........................
Legal Matters...............................................
Experts.....................................................
Glossary of Oil and Gas Terms...............................
Financial Statements........................................
AVAILABLE INFORMATION
The Company will be subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, will be required to file reports with the Commission. Such reports
can be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission, at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, the Commission maintains a site on the World
Wide Web that contains reports filed electronically by the Company with the
Commission which can be accessed over the Internet at http://www.sec.gov.
Pursuant to the Indenture, the Company also agreed to file with the Trustee
within 15 days after it files with the SEC such reports, information and other
documents that the Company filed with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act, along with a sufficient number of copies of all reports and
other documents and information that the Trustee may be required to deliver to
holders of the Notes. While any Old Notes remain outstanding, the Company will
make available, upon request, to any holder and any prospective purchaser of Old
Notes, the information required pursuant to Rule 144A(d)(4) under the Securities
Act during any period in which the Company is not subject to Section 13 or 15(d)
of the Exchange Act. Any such request should be directed to Marvin J. Gay, Vice
President of Finance and Administration of the Company, 650 Poydras Street,
Suite 2200, New Orleans, Louisiana, 70130-6101.
This Prospectus constitutes part of a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus omits certain of the information set forth in
the Registration Statement. Reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the securities offered hereby. Statements contained
herein concerning the provisions of contracts or other documents
3
<PAGE>
are not necessarily complete, and each such statement is qualified in its
entirety by reference to the copy of the applicable contract or other document
filed with the Commission. Copies of the Registration Statement and the exhibits
thereto are on file at the offices of the Commission and may be obtained upon
payment of the fee prescribed by the Commission, or may be examined without
charge at the public reference facilities of the Commission described above.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including without limitation statements under "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business and Properties" regarding the planned
capital expenditures, increases in oil and gas production, the number of
anticipated wells to be drilled in 1997 and thereafter, the Company's financial
position, business strategy and other plans and objectives for future
operations, are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
There are numerous uncertainties inherent in estimating quantities of proved oil
and natural gas reserves and in projecting future rates of production and timing
of development expenditures, including many factors beyond the control of the
Company. Reserve engineering is a subjective process of estimating underground
accumulations of oil and natural 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.
As a result, estimates made by different engineers often vary from one another.
In addition, results of drilling, testing and production subsequent to the date
of an estimate may justify revisions of such estimate and such revisions, if
significant, would change the schedule of any further production and development
drilling. Accordingly, reserve estimates are generally different from the
quantities of oil and natural gas that are ultimately recovered. Additional
important factors that could cause actual results to differ materially from the
Company's expectations are disclosed under "Risk Factors" and elsewhere in this
Prospectus. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by such factors.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
4
<PAGE>
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. As used in
this Prospectus, the terms "Forman" and the "Company" refer to Forman Petroleum
Corporation. Investors should carefully consider the information set forth
under "Risk Factors." Unless otherwise indicated herein, the information
contained in this Prospectus gives effect to the acquisition by the Company of
certain overriding royalty interests in the Company's properties and interests
in the Bayou Fer Blanc Field and the West Gueydan Field, as described in
"Private Placement," as if such transactions occurred on January 1, 1996 or
January 1, 1997, as the case may be.
THE COMPANY
The Company is an independent energy company engaged in the acquisition,
exploration, development, exploitation and production of crude oil and natural
gas. Since 1991, the Company has acquired five fields onshore in south
Louisiana. These fields have cumulative production of 153 MMBoe and contain
complex geologic structures that are well suited to 3-D seismic surveys and
interpretation to identify potential reserves. Since 1994, the Company has
acquired and processed over 74 square miles of 3-D seismic data over four of
these fields from which the Company has identified additional exploitation and
development prospects. In the Lake Enfermer Field, using this 3-D seismic data
along with existing well control, the Company drilled and completed three wells
in 1996, is currently in the process of completing a fourth well, and drilled
and temporarily abandoned a fifth well pending further evaluation. This
drilling activity increased net production from a daily average of 942 Boe/d in
January 1996 to 1,895 Boe/d in December 1996. Over the same period, proved
reserves increased 92% from 3.6 MMBoe with a present value of $31.0 million to
6.9 MMBoe with a present value of $96.4 million. In 1997 and 1998, the Company
plans aggregate capital expenditures of approximately $33.0 million to perform
an estimated seven recompletions and/or workovers and drill an estimated eight
new wells based on the Lake Enfermer 3-D seismic survey, to drill an estimated
two additional wells and to perform an estimated four recompletions on other
properties.
Since 1991, the Company has experienced considerable growth with proved
reserves and present value increasing from 1.8 MMBoe and $13.7 million,
respectively, at September 30, 1991 to 6.9 MMBoe and $96.4 million,
respectively, at December 31, 1996. The Company's average per well production
for the year ended December 31, 1996 was approximately 110 Boe/d, which
contributed to unit gross profit (gross margin less general and administrative
expense) that averaged $11.90 per Boe ($1.98 per Mcfe) in 1996. On a Boe basis,
52% of the Company's reserves are classified as proved developed and the
Company's reserve to production ratio was 11.6 years as of December 31, 1996.
The reserve replacement ratio and finding and development costs, including 3-D
seismic costs, during the five years ended December 31, 1996, have averaged 386%
and $5.43 per Boe, respectively. The Company operates each of its fields and
owns a weighted average working interest of 91% in its fields, which enables the
Company to control the timing and implementation of all exploitation and
exploration activities.
The Company believes that it can identify new drilling opportunities in its
fields by combining 3-D seismic survey data with other technologies, including
CAEX technology, as well as other available geological and engineering data.
The Company's advanced visualization and data analysis techniques and
sophisticated computing resources enable its geoscientists to view collectively
large volumes of information contained within the 3-D seismic data. These
techniques and resources also allow the Company's geoscientists to more easily
identify features such as shallow and deep amplitude anomalies, complex channel
systems, sharp structural details and fluid contacts, which might have been
overlooked using less sophisticated 3-D seismic data interpretation techniques.
The Company has made a significant investment in its 3-D seismic data
visualization technology, which is closely linked with the Company's well-log
data base and other geoscience application software. The Company uses a series
of workstations from Silicon Graphics, and has licensed Photon Seisx software
for interpreting the geophysical data on the 3-D workstations, Geographix
software for analysis, mapping and interpretation of geological data, and
Cogniseis' Voxtel Geo technology for advanced 3-D geologic interpretation of
data.
The Company's technological success is dependent in part upon hiring and
retaining highly skilled technical personnel. The Company has assembled a
technical team that it believes has the capacity to adapt to the rapidly
changing technological demands in the field of oil and natural gas exploration.
This team consists of six geoscientists and engineers with an average of 22
years industry experience, primarily concentrated in the Gulf Coast region. The
expertise of the Company's team of geoscientists and engineers reduces its
dependence on outside technical consultants and enables the Company to
internally generate substantially all of its prospects.
5
<PAGE>
BUSINESS STRATEGY
The Company's business strategy is to expand its proved reserves, production
and cash flow through a disciplined technology-based program of exploitation and
exploration for crude oil and natural gas, emphasizing the following key
competitive strengths:
Control of Critical Exploration Functions. The Company owns substantially all
of the working interests in its fields and is the operator of each field.
Controlling operations is a crucial element in the strategy of the Company,
since it allows the Company to control the critical functions in the exploration
and exploitation process. This has enabled the Company to manage the land
permitting and seismic option process; design the seismic surveys to ensure
optimum results; supervise the data acquisition and processing; integrate and
interpret the 3-D data with existing 2-D and subsurface geological data; select
well sites; and design and drill wells to exploit identified prospective
reserves.
Technological Expertise. Many of the fields in south Louisiana are ideally
suited for the application of 3-D seismic data surveys to interpret the large
structures of the area, using an exploitation technique in which the Company has
extensive experience. The geological complexities in the Lake Enfermer Field
have in the past made conventional interpretation very difficult. The Company
uses 3-D seismic data in this field combined with existing well control and
production information for its interpretations. In addition to enhancing the
interpretations of structures, the Company uses 3-D seismic data to optimize its
well programs.
Inventory of Exploratory Drilling Prospects. In addition to the proved
undeveloped reserves scheduled to be drilled during the next two years, the
Company has an inventory of what it believes are significant exploratory
prospects. These exploratory prospects have been identified through the
application of 3-D seismic technology in the Company's Lake Enfermer Field,
Bayou Fer Blanc Field and Manila Village Field. The Company believes that
additional exploratory prospects will be identified as soon as the recently
completed 3-D survey at the Company's West Gueydan Field has been interpreted
and a 3-D survey has been completed at the Boutte Field.
Geographic Specialization. The Company focuses its operations in the
environmentally sensitive coastal marshlands of south Louisiana. The Company's
reputation for preserving the integrity of these marshlands and years of
experience have enabled the Company to acquire fields owned by landowners who
restrict and carefully monitor all operations on their property.
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $70,000,000 principal
amount of Exchange Notes for up to $70,000,000 principal amount of Old Notes.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and will not contain certain transfer
restrictions and, hence, are not entitled to the benefits of the Registration
Rights Agreement relating to the contingent increases in the interest rate
provided for pursuant thereto. The Exchange Notes will evidence the same debt
as the Old Notes and will be issued under and be entitled to the benefits of the
Indenture governing the Old Notes. See "Description of Notes."
The Exchange Offer........ Each $1,000 principal amount of Exchange Notes will
be issued in exchange for each $1,000 principal
amount of outstanding Old Notes. As of the date
hereof, $70,000,000 principal amount of Old Notes are
issued and outstanding. The Company will issue the
Exchange Notes to tendering holders of Old Notes on
or promptly after the Expiration Date (as defined
herein).
Resale.................... The Company believes that the Exchange Notes issued
pursuant to the Exchange Offer generally will be
freely transferable by the holders thereof without
registration or any prospectus delivery requirement
under the Securities Act, except for certain
Restricted Holders who may be required to deliver
copies of this Prospectus in connection with any
resale of the Exchange Notes issued in exchange for
such Old Notes. See "The Exchange Offer -- General"
and "Plan of Distribution."
6
<PAGE>
Expiration Date........... 5:00 p.m., New York City time, on ___________, 1997,
unless the Exchange Offer is extended, in which case
the term "Expiration Date" means the latest date to
which the Exchange Offer is extended. See "The
Exchange Offer -- Expiration Date; Extensions;
Amendments."
Interest on the Notes..... The Exchange Notes will bear interest payable in
cash in arrears and semi-annually on June 1 and
December 1 of each year, commencing December 1, 1997.
Holders of Exchange Notes of record on November 15,
1997 will receive interest on December 1, 1997 from
the date of issuance of the Exchange Notes, plus an
amount equal to the accrued interest on the Old Notes
from the date of issuance of the Old Notes, June 3,
1997, to the date of exchange thereof. Consequently,
assuming the Exchange Offer is consummated prior to
the record date in respect of the December 1, 1997
interest payment for the Old Notes, holders who
exchange their Old Notes for Exchange Notes will
receive the same interest payment on December 1, 1997
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 Exchange Notes. See "The Exchange
Offer -- Interest on the Exchange Notes."
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, or an Agent's Message
(as defined herein) 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 effect a tender of Old Notes pursuant to
the procedures for book-entry transfer as provided
for herein. 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 on a timely basis and deliver an Agent's
Message, may tender their Old Notes according to the
guaranteed delivery procedures set forth herein. See
"The Exchange Offer -- Guaranteed Delivery
Procedures."
7
<PAGE>
Withdrawal Rights......... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The Exchange
Offer -- Withdrawal of Tenders."
Termination of the
Exchange Offer............ The Company may terminate the Exchange
Offer if it determines that the Exchange Offer
violates any applicable law or interpretation of the
staff of the SEC. Holders of Old Notes will have
certain rights against the Company under the
Registration Rights Agreement should the Company fail
to consummate the Exchange Offer. See "The Exchange
Offer -- Termination" and "Description of the Notes."
Acceptance of Old Notes
and Delivery of Exchange
Notes..................... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and described
more fully in "The Exchange Offer -- Termination"),
the Company will accept for exchange any and all Old
Notes which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant
to the Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer -- General."
Exchange Agent............ U. S. Trust Company of Texas, N.A. is serving as
exchange agent (the "Exchange Agent") in connection
with the Exchange Offer. The mailing address of the
Exchange Agent is P. O. Box 841, Cooper Station, New
York, New York 10276-0841. Hand deliveries should be
addressed to 111 Broadway, Lower Level, New York, New
York 10006-1906. Deliveries by overnight courier
should be addressed to 770 Broadway - 13th Floor,
Corporate Trust Operations, New York, New York 10003-
9598. For information with respect to the Exchange
Offer, the telephone number for the Exchange Agent is
(800) 225-2398, and the facsimile number for the
Exchange Agent is (212) 420-6504. See "The Exchange
Offer -- Exchange Agent."
Use of Proceeds........... There will be no cash proceeds payable to the
Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer.
8
<PAGE>
THE NOTES
Notes Outstanding......... $70,000,000 principal amount of 13.5% Senior Secured
Notes due 2004, Series A.
Maturity Date............. June 1, 2004
Interest Rate and
Payment Dates............. The Notes bear interest at a rate of 13.5 %
per annum payable semi-annually in cash in arrears on
June 1 and December 1 of each year, commencing
December 1, 1997. Approximately $9.5 million has
been deposited with the Trustee in a separate account
(the "Capitalized Interest Account") to pay interest
on the Notes through June 1, 1998.
Optional Redemption....... The Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after
June 1, 2002, at the redemption prices set forth
herein, together with accrued and unpaid interest to
the date of redemption. In the event the Company
consummates a Public Equity Offering (as defined
herein) on or prior to June 1, 1999, the Company may
at its option use all or a portion of the proceeds
from such offering to redeem up to 25% of the
principal amount of the Notes at a redemption price
equal to 113.5% of the aggregate principal thereof,
together with accrued and unpaid interest to the date
of redemption provided that at least $52.5 million
aggregate principal amount of the Notes remains
outstanding after such redemption. See "Description
of Notes -- Optional Redemption."
Mandatory Redemption...... None.
Change of Control......... Upon the occurrence of a Change of Control, each
holder of Notes has the right to require the Company
to purchase all or a portion of such holder's Notes
at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest,
if any, to the date of purchase. See "Description of
Notes -- Change of Control."
Ranking................... The Notes are senior secured obligations of the
Company, ranking pari passu in right of payment with
all existing and future senior Indebtedness of the
Company and senior to all existing and future
subordinated Indebtedness of the Company. Subject to
certain limitations, the Company may incur additional
indebtedness in the future. See "Management's
Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital
Resources" and "Description of Notes -- General."
Security.................. The Notes are secured by a security interest in
certain of the Company's oil and gas properties in
the Lake Enfermer Field, Manilla Village Field and
Boutte Field, subject only to a prior lien on such
assets to secure future indebtedness in a limited
amount and under limited circumstances. See
"Description of Notes -- Security."
Certain Covenants......... The indenture under which the Old Notes have been
issued (and the Exchange Notes will be issued) (the
"Indenture") contains certain covenants, including
but not limited to covenants with respect to the
following matters: (i) limitations on incurrence of
additional indebtedness; (ii) limitations on certain
investments; (iii) limitations on restricted
payments; (iv) limitations on disposition of assets;
9
<PAGE>
(v) limitation on dividends and other payment
restrictions affecting subsidiaries; (vi) limitations
on transactions with affiliates; (vii) limitations on
liens; and (viii) restrictions on mergers,
consolidations and transfers of assets. See
"Description of Notes -- Certain Covenants."
Exchange Offer and
Registration Rights
Agreement................. Pursuant to a Registration Rights Agreement
between the Company and Jefferies & Company, Inc.,
the Company agreed to use its best efforts (i) to
make a registered exchange offer pursuant to which
holders of the Old Notes will have the opportunity to
exchange their Old Notes for a like principal amount
of new notes that are identical in all material
respects to the Old Notes and that may be offered and
sold by the holders without restrictions or
limitations under the Securities Act or (ii) under
certain circumstances, to effect a shelf registration
of the Old Notes (the "Note Shelf Registration
Statement") that would include a prospectus under
cover of which holders would be free to offer and
sell their Old Notes from time to time. The Company
agreed to use its best efforts to file with the
Commission a registration statement relating to the
Exchange Offer (the "Exchange Offer Registration
Statement") or the Note Shelf Registration Statement
within 60 days after the date of issuance of the Old
Notes, and to use its best efforts to cause such
registration statement to be declared effective by
the Commission within 120 days after the Issue Date
and, in the case of the Note Shelf Registration
Statement, to cause such to remain effective until
the second anniversary after the Issue Date. The
interest rate on the Old Notes is subject to
increase under certain circumstances if the Company
is not in compliance with its obligations under the
Registration Rights Agreement. See "Registration
Rights."
Transfer Restrictions..... The Old Notes have not been registered under the
Securities Act and are subject to restrictions on
transferability and resale. There is currently no
established market for the Old Notes. If issued, the
Exchange Notes will generally be freely transferable
(subject to the restrictions discussed elsewhere
herein) but will be new securities for which there
will not initially be a market. Accordingly, there
can be no assurance as to the development or
liquidity of any market for the Old Notes or, if
issued, the Exchange Notes. Jefferies & Company,
Inc. advised the Company that it currently intends to
make a market in the Old Notes. However, Jefferies &
Company, Inc. is not obligated to do so, and any
market making with respect to the Old Notes may be
discontinued at any time without notice. The Company
does not intend to apply for a listing of the Old
Notes, or, if issued, the Exchange Notes, on a
securities exchange.
Private Placement......... A portion of the proceeds (approximately $9.5
million) received by the Company from the sale of the
Old Notes has been segregated into a Capitalized
Interest Account to pay interest on the Notes through
June 1, 1998. The Company has used the net proceeds
from the sale of the Old Notes and warrants to
purchase common stock combined with the net proceeds
from a sale of preferred stock and warrants to
purchase common stock to repay approximately $45.0
million of debt and to purchase for approximately
$7.6 million certain overriding royalty interests in
the Company's properties and interests in the Bayou
Fer Blanc Field and the West Gueydan Field. The
remainder
10
<PAGE>
of the net proceeds from these offerings is
being used for capital expenditures, working capital
and other general corporate purposes. See "Private
Placement."
PORTAL Listing............ The Old Notes that were sold to QIBs are eligible for
trading in the PORTAL System of the National
Association of Securities Dealers, Inc.
RISK FACTORS
The Exchange Notes involve certain risks that a potential investor should
carefully evaluate prior to making an investment. See "Risk Factors."
11
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The following tables set forth, as of the dates and for the periods indicated,
summary financial and operating information of the Company. The pro forma
information set forth below gives effect to the acquisition by the Company of
certain overriding royalty interests in the Company's properties and interests
in the Bayou Fer Blanc Field and the West Gueydan Field as described in "Private
Placement," as if such transactions occurred on the last day of the period prior
to the period presented. The following information should be read in
conjunction with "Capitalization," "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Financial Statements of the Company and the related notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------ --------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Pro Forma Pro Forma
1994 1995 1996 1996(1) 1996 1997 1997(1)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Oil and natural gas revenue................ $ 9,532 $ 6,919 $ 10,892 $ 11,773 $ 2,254 $ 3,737 $ 4,048
Interest income............................ 14 194 37 37 9 9 9
Overhead reimbursements.................... 74 131 95 95 18 15 15
Other...................................... 119 61 93 93 30 17 17
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues.......................... $ 9,739 $ 7,305 $ 11,117 $ 11,998 $ 2,311 $ 3,778 $ 4,089
Costs and expenses:
Production taxes........................... 791 661 585 655 193 129 146
Oil and natural gas operating expenses..... 2,775 2,196 2,526 2,526 585 557 557
General and administrative................. 1,204 921 1,539 1,539 410 429 429
Interest expense........................... 2,121 3,522 3,983 4,334 901 1,184 1,272
Depreciation, depletion and amortization... 2,391 3,558 4,259 4,491 1,061 1,542 1,630
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses................ $ 9,282 $ 10,858 $ 12,892 $ 13,545 $ 3,150 $ 3,841 $ 4,034
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss).......................... $ 457 $ (3,553) $ (1,775) $ (1,547) $ (839) $ (63) $ 55
========== ========== ========== ========== ========== ========== ==========
UNAUDITED PRO FORMA DATA:
Net income as reported above............... -- -- $ (1,775) $ (1,547) -- $ (63) $ 55
Pro forma (provision) benefit for income
taxes(2).................................. -- -- 657 572 -- 23 (20)
---------- ---------- ---------- ----------
Pro forma net income (loss)................ -- -- $ (1,118) $ (975) -- $ (40) $ 35
========== ========== ========== ==========
Weighted average shares outstanding........ -- -- 90,000 90,000 -- 90,000 100,557
========== ========== ========== ==========
Pro forma net income (loss) per share (3).. -- -- $ (12.42) $ (10.83) -- $ (.44) $ .35
========== ========== ========== ==========
OTHER FINANCIAL DATA:
EBITDA(4).................................... $ 4,969 $ 3,527 $ 6,467 $ 7,278 $ 1,123 $ 2,663 $ 2,957
Ratio of EBITDA to net interest(5)........... 2.3 x 1.0 x 1.6 x 1.7x 1.2x 2.2x 2.3%
ACNTA(6)..................................... $ 27,951 $ 29,888 $ 83,902 $ 118,260 $ 27,384 $ 83,030 $ 117,608
Ratio of ACNTA to total indebtedness(5)(6)... 0.9 x 1.0 x 2.1 x 1.5x 1.0x 2.0x 1.5%
Capital expenditures......................... $ 10,105 $ 8,079 $ 16,301 $ 22,401 $ 2,664 $ 3,424 $ 9,524
Ratio of earnings to fixed charges and
preferred stock dividends(7)................ 1.2x -- -- -- -- -- 1.0%
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
--------------------
(IN THOUSANDS)
PRO FORMA
AS
ADJUSTED
ACTUAL (8)
----------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................................... $ 693 $ 14,122
Working capital..................................................................................... (46,257) 18,610
Property and equipment, net......................................................................... 39,403 45,503
Total assets........................................................................................ 43,993 78,741
Long-term debt, including current maturities, net................................................... 40,571 67,820
Mandatorily Redeemable Preferred Stock, net......................................................... -- 9,667
Total stockholder's deficit......................................................................... (5,096) (5,827)
</TABLE>
12
<PAGE>
__________________________________________
(1) Reflects adjustments to oil and natural gas revenue, production taxes, and
depreciation, depletion and amortization for the incremental revenue and
expenses that would have been reported had the acquisition of the
overriding royalty interests occurred on the last day of the period prior
to the period presented. Interest expense has been adjusted assuming that
the $2.6 million purchase price of the overriding royalty interests would
have been financed with new indebtedness.
(2) For all periods presented herein, the Company has operated as an S
Corporation for Federal and state income tax purposes. Upon the issuance of
the Equity Units described under "Private Placement," the Company
terminated its Subchapter-S election and will subsequently be treated as a
C Corporation for tax purposes (see Note 1 to Financial Statements). The
unaudited pro forma data includes the effect of income taxes as if the
Company were a C Corporation for the year ended December 31, 1996 and the
three months ended March 31, 1997, and the related pro forma periods.
(3) Historical earnings per share data has not been presented due to the
Company's termination of its Subchapter-S election. Pro forma net income
(loss) per share amounts are calculated by dividing net income (loss) by
the weighted average number of common shares outstanding, plus the effect,
using the treasury stock method, of common shares contingently issuable, if
dilutive. Due to net losses reported in the 1996, pro forma 1996, and 1997
periods, exercise of the warrants to purchase 19,000 shares of common stock
(see Note 3 to Financial Statements) would be antidilutive and are
therefore not considered.
(4) EBITDA means earnings before interest, taxes, depreciation, depletion and
amortization. EBITDA is commonly used by debt holders and financial
statement users as a measurement to determine the ability of an entity to
meet its interest obligations. EBITDA is not a measurement presented in
accordance with generally accepted accounting principles ("GAAP") and is
not intended to be used in lieu of GAAP presentation of results of
operations and cash provided by operating activities.
(5) As adjusted for the issuance of the Notes, for the pro forma 1996 and 1997
periods the ratio of EBITDA to net interest and ratio of ACNTA to total
indebtedness would be 0.7x and 1.5x and 1.2x and 1.5x, respectively.
(6) For the purpose of this calculation, ACNTA means Adjusted Consolidated Net
Tangible Assets and indebtedness means Indebtedness as both terms are
defined in the Indenture. See "Description of Notes - Certain
Definitions."
(7) For purposes of computing this ratio, "earnings" represents income (loss)
before taxes and extraordinary items, plus fixed charges. "Fixed charges"
consist of interest expense on all indebtedness, amortization of deferred
financing costs and a portion of rental expense considered to be
representative of the interest factor therein. There was no preferred
stock outstanding during any of the historical periods presented. As a
result of the losses incurred for the years ended December 31, 1995 and
1996, and the 3 months ended March 31, 1996 and 1997, earnings did not
cover fixed charges by $3,553,000, $1,775,000, $839,000, and $63,000,
respectively. For the pro forma 1996 period, earnings did not cover fixed
charges by $1,547,000. As adjusted for the issuance of the Notes and
Equity Units, earnings would not have covered fixed charges by $8,816,000
and $1,484,000, respectively, for the pro forma 1996 and 1997 periods.
(8) As adjusted to give effect to the Notes and Equity Units and the
application of proceeds therefrom as described further in "Private
Placement" and "Capitalization." Long-term debt is net of debt discount of
$2,200,000 of which $667,000 represents the estimated value of the warrants
to purchase Common Stock.
13
<PAGE>
SUMMARY RESERVE AND PRODUCTION DATA
(IN THOUSANDS, EXCEPT PER BOE INFORMATION AND RATIOS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------
PRO FORMA
1994 1995 1996 1996(1)
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
PROVED RESERVE DATA:
ESTIMATED NET PROVED RESERVES (AT PERIOD END):
Crude oil and natural gas liquids (Bbls).................................... 1,718 2,000 2,512 2,721
Natural gas (Mcf)........................................................... 10,624 9,593 23,223 25,159
OIL EQUIVALENT (BOE).......................................................... 3,489 3,599 6,383 6,914
ESTIMATED FUTURE NET CASH FLOWS (BEFORE INCOME TAX)........................... $ 27,888 $ 42,084 $ 116,995 $ 128,966
PRESENT VALUE OF PROVED RESERVES (2).......................................... $ 19,228 $ 30,596 $ 87,381 $ 96,389
PROVED RESERVES TO PRODUCTION RATIO (YEARS)................................... 5.0 7.2 11.6 11.6
ANNUAL RESERVE ADDITION ACTIVITY:
Proved reserve additions (Boe).............................................. 536 612 3,334 3,612
Total capital costs attributable to:
Acquisition............................................................... $ 1,799 $ 0 $ 0 $ 6,100
Development and exploitation.............................................. 4,002 3,589 3,853 3,853
Exploration............................................................... 4,304 4,490 12,448 12,448
-------- -------- -------- ---------
Total................................................................... $ 10,105 $ 8,079 $ 16,301 $ 22,401
======== ======== ========= =========
Five year average finding and development cost (per Boe)(3)................... $ 5.43
Five year average reserve replacement ratio(4)................................ 386%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------- ----------------------------
ProForma ProForma
1994 1995 1996 1996(1) 1996 1997 1997(1)
-------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PRODUCTION DATA:
ANNUAL SALES VOLUMES:
Crude oil and natural gas liquids (Bbls)............ 330 252 330 357 74 78 85
Natural gas (Mcf)................................... 2,241 1,505 1,325 1,435 279 556 603
Oil equivalent (Boe)................................ 704 503 551 596 121 171 185
UNIT ECONOMICS:
Average sales price per Boe......................... $ 13.55 $ 13.76 $ 19.77 $ 19.77 $ 18.63 $ 21.85 $ 21.85
Production expense per Boe.......................... $ 5.06 $ 5.68 $ 5.65 $ 5.29 $ 6.43 $ 4.02 $ 3.78
-------- ------- ------- ------- ------- ------- -------
Gross margin per Boe................................ $ 8.49 $ 8.08 $ 14.12 $ 14.48 $ 12.20 $ 17.83 $ 18.07
General and administrative expenses per Boe......... $ 1.71 $ 1.83 $ 2.79 $ 2.58 $ 3.39 $ 2.51 $ 2.31
-------- ------- ------- ------- ------- ------- -------
Gross profit per Boe.................................. $ 6.78 $ 6.25 $ 11.33 $ 11.90 $ 8.81 $ 15.32 $ 15.76
======= ======= ======= ======= ======= ======= =======
</TABLE>
__________________________________________
(1) Reflects adjustments to give effect to the acquisition by the Company of
certain overriding royalty interests in the Company's properties and
interests in the Bayou Fer Blanc Field and the West Gueydan Field as
described in "Private Placement," as if such acquisition had occurred on
the last day of the period prior to the period presented.
(2) These amounts do not consider future income taxes which will be payable as
a result of the termination of the Company's S-Corporation election.
(3) The five year average finding and development cost per Boe is calculated by
dividing (a) total capital expenditures for the five year period by (b) the
sum of proved reserves added through purchases of reserves in place,
extensions, discoveries and other additions and the effects of revisions
("Reserve Additions") for such period. Reserve information at each year-
end is based on reports prepared by independent petroleum engineers.
(4) The five year average reserve replacement ratio is calculated by dividing
(a) aggregate Reserve Additions for the trailing five year period by (b)
aggregate production for such period.
14
<PAGE>
RISK FACTORS
The following factors, together with the other information contained in this
Prospectus, should be considered carefully before purchasing the securities
offered hereby.
VOLATILITY OF OIL AND NATURAL GAS PRICES
Revenues generated from the Company's operations are highly dependent upon the
price of, and demand for, oil and natural gas. Historically, the markets for oil
and natural gas have been volatile and are likely to continue to be volatile in
the future. Prices for oil and natural gas are subject to wide fluctuations in
response to relatively minor changes in the supply of and demand for oil and
natural gas, market uncertainty and a variety of additional factors that are
beyond the control of the Company. These factors include the level of consumer
product demand, weather conditions, domestic and foreign governmental
regulations, the price and availability of alternative fuels, political
conditions in the Middle East, the foreign supply of oil and natural gas, the
price of foreign imports and overall economic conditions. It is impossible to
predict future oil and natural gas price movements with any certainty. Declines
in oil and natural gas prices may materially adversely affect the Company's
financial condition, liquidity and results of operations. Lower oil and natural
gas prices also may reduce the amount of the Company's oil and natural gas that
can be produced economically. In order to reduce its exposure to price risks in
the sale of its oil and natural gas, the Company enters into hedging
arrangements from time to time; however, the Company's hedging arrangements
apply to only a portion of its production and provide only limited price
protection against fluctuations in the oil and natural gas markets. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "Business and Properties -- Marketing."
The Company uses the full cost method of accounting for its investment in oil
and natural 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 future gross revenues method based
on the ratio of current gross revenue to total proved future gross revenues,
computed based on current prices. To the extent that such capitalized costs (net
of accumulated depreciation, depletion and amortization) less deferred taxes
exceed the present value (using a 10% discount rate) of estimated future net
cash flow from proved oil and natural gas reserves, and the lower of cost and
fair value of unproved properties after income tax effects, excess costs are
charged to operations. Once incurred, a write down of oil and natural gas
properties is not reversible at a later date even if oil or natural gas prices
increase. While the Company has never been required to write down its asset
base, significant downward revisions of quantity estimates or declines in oil
and natural gas prices that are not offset by other factors could result in a
write down for impairment of oil and natural gas properties.
REPLACEMENT OF RESERVES
In general, the volume of production from oil and natural gas properties
declines as reserves are depleted. Except to the extent the Company acquires
properties containing proved reserves or conducts successful development and
exploration activities, or both, the proved reserves of the Company will decline
as reserves are produced. The Company's future oil and natural gas production
is, therefore, highly dependent upon its level of success in finding or
acquiring additional reserves. The business of exploring for, developing or
acquiring reserves is capital intensive. To the extent cash flow from operations
is reduced and external sources of capital become limited or unavailable, the
Company's ability to make the necessary capital investment to maintain or expand
its asset base of oil and natural gas reserves would be impaired. In addition,
there can be no assurance that the Company's future development, acquisition and
exploration activities will result in additional proved reserves or that the
Company will be able to drill productive wells at acceptable costs.
UNCERTAINTY OF RESERVE INFORMATION AND FUTURE NET REVENUE ESTIMATES
There are numerous uncertainties inherent in estimating oil and natural gas
reserves and their estimated values, including many factors beyond the control
of the producer. The reserve data set forth in this Prospectus represents only
estimates. Reservoir engineering is a subjective process of estimating
underground accumulations of oil and natural gas that cannot be measured in an
exact manner. Estimates of economically recoverable oil and natural gas reserves
and of future net cash flows necessarily depend upon a number of variable
factors and assumptions, such as historical production from the area compared
with production from other producing areas, the assumed effects of regulations
by governmental
15
<PAGE>
agencies and assumptions concerning future oil and natural gas prices, future
operating costs, severance and excise taxes, development costs and workover and
remedial costs, all of which may in fact vary considerably from actual results.
For these reasons, estimates of the economically recoverable quantities of oil
and natural gas attributable to any particular group of properties,
classifications of such reserves based on risk recovery and estimates of the
future net cash flows expected therefrom prepared by different engineers or by
the same engineers at different times may vary substantially and such reserve
estimates may be subject to downward or upward adjustment based upon such
factors. Actual production, revenues and expenditures with respect to the
Company's reserves will likely vary from estimates, and such variances may be
material. See "Business and Properties --Oil and Natural Gas Reserves."
The present values of estimated 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 proved reserves are generally based on
prices and costs as of the date of the estimate, whereas actual future prices
and costs may be materially higher or lower. Actual future net cash flows also
will be affected by factors such as the amount and timing of actual production,
supply and demand for oil and natural gas, curtailments or increases in
consumption by gas purchasers and changes in governmental regulations or
taxation. The timing of actual future net cash flows from proved reserves, and
their actual present value, will be affected by the timing of both the
production and the incurrence of expenses in connection with development and
production of oil and natural gas properties. In addition, the calculation of
the present value of the future net revenues using a 10% discount, as required
by the Commission, is not necessarily the most appropriate discount factor based
on interest rates in effect from time to time and risks associated with the
Company's reserves or the oil and natural gas industry in general.
SUBSTANTIAL LEVERAGE
As of March 31, 1997, as adjusted for the sale of the Old Notes and warrants
to purchase Common Stock and the sale of preferred stock and warrants to
purchase Common Stock concurrent with the sale of the Old Notes (the
"Offerings") and the application of the proceeds therefrom, the Company's long-
term debt (before debt discount and the allocation of proceeds to the warrants
issued in connection with the Offerings) and stockholder's deficit would have
been $70.0 million and $6.8 million, respectively. See "Capitalization." In
addition, the Indenture allows the Company to incur a minimum of $10.0 million
in additional Indebtedness that may be secured, under certain circumstances. See
"Description of Notes -- Certain Covenants."
The Company's level of indebtedness has several important effects on its
operations, including (i) the covenants contained in the Indenture require the
Company to meet certain financial tests, and other restrictions limit its
ability to borrow additional funds or to dispose of assets and may affect the
Company's flexibility in planning for, and reacting to, changes in business
conditions and (ii) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes may be impaired. Moreover, future
acquisition or development activities may require the Company to alter its
capitalization significantly. These changes in capitalization may significantly
alter the leverage of the Company. The Company's ability to meet its debt
service obligations and to reduce its total indebtedness will be dependent upon
the Company's future performance, which will be subject to general economic
conditions and to financial, business and other factors affecting the operations
of the Company, many of which are beyond its control. There can be no assurance
that the Company's future performance will not be adversely affected by such
economic conditions and financial, business and other factors. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
SUBSTANTIAL CAPITAL REQUIREMENTS
The Company makes, and will continue to make, substantial capital expenditures
for the development, exploration, acquisition and production of oil and natural
gas reserves. The Company made capital expenditures of $8.1 million during 1995
and $16.3 million during 1996. The Company plans to make capital expenditures,
not including expenditures for acquisitions, of approximately $33.0 million in
1997 and 1998. Although management believes that the Company will have
sufficient cash provided by operating activities and the proceeds from the
Offerings to fund planned capital expenditures in 1997 and 1998, if revenues
decrease as a result of lower oil and natural gas prices or operating
difficulties, the Company may be limited in its ability to expend the capital
necessary to undertake or complete its drilling program in future years. There
can be no assurance that additional debt or equity financing or cash generated
16
<PAGE>
by operations will be available to meet these requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes may
require the Company to purchase all or a portion of such holder's Notes at 101%
of the principal amount of the Notes, together with accrued and unpaid interest,
if any, to the date of purchase. The Indenture requires that, prior to such a
purchase, the Company must either repay all outstanding Debt (as defined
therein) or obtain any required consents to such purchase. If a Change of
Control were to occur, the Company may not have the financial resources to repay
all of the Notes and the other indebtedness that would become payable upon the
occurrence of such Change of Control. See "Description of Notes -- Change of
Control."
LACK OF PUBLIC MARKET
The Notes are new issues of securities for which there is currently no active
trading market. The Company does not currently intend to apply for a listing or
quotation of the Notes on any securities exchange or stock market. Jefferies &
Company, Inc. informed the Company that it currently intends to make a market in
the Notes. However, Jefferies & Company, Inc. is 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 Notes.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Notes. The Notes sold to QIBs are eligible for trading by
qualified buyers in the PORTAL System.
The liquidity of, and trading market for the Notes also may be adversely
affected by general declines in the market for similar securities. Such a
decline may adversely affect such liquidity and trading markets independent of
the financial performance of the Company.
VOTING CONTROL
McLain J. Forman, the Company's Chairman of the Board, President and Chief
Executive Officer, as of June 15, 1997, owned all of the outstanding voting
shares of Common Stock. Therefore, Mr. Forman has the ability to elect all of
the Company's directors and, directly and indirectly, influence all decisions
made by the Company. Upon completion of the Offerings, the Company acquired the
Bayou Fer Blanc Field and the West Gueydan Field from Forman Petroleum
Corporation II, a company whose sole stockholder is Mr. Forman. See "Certain
Transactions."
DRILLING RISKS
Drilling involves numerous risks, including the risk that no commercially
productive oil or natural gas reservoirs will be encountered. The cost of
drilling, completing and operating wells is often uncertain, and drilling
operations may be curtailed, delayed or canceled as a result of a variety of
factors, including unexpected drilling conditions, pressure or irregularities in
formations, equipment failures or accidents, adverse weather conditions and
shortages or delays in the delivery of equipment. The Company's future drilling
activities may not be successful and, if unsuccessful, such failure will have an
adverse effect on the Company's future results of operations and financial
condition.
RISKS OF HEDGING TRANSACTIONS
In order to manage its exposure to price risks in the marketing of its oil and
natural gas, the Company has in the past and expects to continue to enter into
oil and natural gas price hedging arrangements with respect to a portion of its
expected production. These arrangements may include futures contracts on the New
York Mercantile Exchange (NYMEX), fixed price delivery contracts and financial
swaps. While intended to reduce the effects of volatility of the price of oil
and natural gas, such transactions may limit potential gains by the Company if
oil and natural gas prices were to rise substantially over the price established
by the hedge. In addition, such transactions may expose the Company to the risk
of financial loss in certain circumstances, including instances in which (i)
production is less than expected, (ii) if there is a widening of price
differentials between delivery points for the Company's production and the
delivery point assumed in the hedge arrangement, (iii) the counterparties to the
Company's future contracts fail to perform the contract or (iv) a sudden,
unexpected event materially impacts oil or natural gas prices. See "Management's
Discussion and
17
<PAGE>
Analysis of Financial Condition and Results of Operations --Liquidity and
Capital Resources" and "Business and Properties --Marketing --Hedging
Activities."
DEPENDENCE ON KEY PERSONNEL
The Company depends to a large extent on the services of its founder,
McLain J. Forman, and certain other senior management personnel. The loss of the
services of Mr. Forman and other senior management personnel could have a
material adverse effect on the Company's operations. The Company does not
currently have an employment contract with any senior management or key
personnel. The Company believes that its success is also dependent upon its
ability to continue to employ and retain skilled technical personnel. The
inability of the Company to employ or retain skilled technical personnel could
have a material adverse effect on the Company's operations.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS
Oil and natural gas operations are subject to various federal, state and local
government regulations that may be changed from time to time in response to
economic or political conditions. Matters subject to regulation include
discharge permits for drilling operations, drilling and abandonment bonds or
other financial responsibility requirements, reports concerning operations, the
spacing of wells, utilization and pooling of properties and taxation. From time
to time, regulatory agencies have imposed price controls and limitations on
production by restricting the rate of flow of oil and natural gas wells below
actual production capacity to conserve supplies of oil and natural gas. In
addition, the production, handling, storage, transportation and disposal of oil
and natural gas, by-products thereof and other substances and materials produced
or used in connection with oil and natural gas operations are subject to
regulation under federal, state and local laws and regulations primarily
relating to protection of human health and the environment. These laws and
regulations have continuously imposed increasingly strict requirements for water
and air pollution control and solid waste management.
MARKETABILITY OF PRODUCTION
The marketability of the Company's production depends upon the availability
and capacity of gas gathering systems, pipelines and processing facilities, and
the unavailability or lack of capacity thereof could result in the shut-in of
producing wells or the delay or discontinuance of development plans for
properties. In addition, federal and state regulation of oil and natural gas
production and transportation, general economic conditions and changes in supply
and demand could adversely affect the Company's ability to produce and market
its oil and natural gas on a profitable basis.
SUBSTANTIAL COMPETITION
The Company operates in a highly competitive environment. The Company
competes with major and independent oil and natural gas companies for the
acquisition of desirable oil and natural gas properties, as well as for the
equipment and labor required to develop and operate such properties. The
Company also competes with major and independent oil and natural gas companies
in the marketing and sale of oil and natural gas to marketers and end-users.
Many of these competitors have financial and other resources substantially
greater than those of the Company. See "Business and Properties --
Competition."
OPERATING RISKS OF OIL AND NATURAL GAS OPERATIONS
The oil and natural gas business involves a variety of operating risks,
including the risk of fire, explosions, blow-outs, pipe failure, casing
collapse, abnormally pressured formations and hazards such as oil spills,
natural gas leaks, ruptures or discharges of toxic gases. The occurrence of any
of these operating risks could result in substantial losses to the Company due
to injury or loss of life, severe damage to or destruction of property and
equipment, pollution or other environmental damage, including damage to natural
resources, clean-up responsibilities, penalties and suspension of operations.
In accordance with customary industry practice, the Company maintains insurance
against some, but not all, of the risks described above. There can be no
assurance that any insurance obtained by the Company will be adequate to cover
any losses or liabilities. The Company cannot predict the continued
availability of insurance or the availability of insurance at premium levels
that justify its purchase.
18
<PAGE>
THE COMPANY
Forman Petroleum Corporation is an independent energy company engaged in the
exploration, acquisition, development, exploitation and production of crude oil
and natural gas.
The Company's principal executive office is located at 650 Poydras Street,
Suite 2200, New Orleans, Louisiana 70130-6101, and its telephone number is (504)
586-8888. Unless the context otherwise requires, the terms "Company" or
"Forman" as used in this Prospectus mean Forman Petroleum Corporation.
PRIVATE PLACEMENT
On June 3, 1997, the Company completed the private sale to Jefferies &
Company, Inc. of 70,000 units ("Note Units") consisting of $70,000,000 principal
amount of the Old Notes and warrants to purchase 29,067 shares of Common Stock,
no par value (the "Common Stock"), of the Company at a price of $68,467,000 in a
transaction not registered under the Securities Act in reliance upon Section
4(2) of the Securities Act and Rule 506 of Regulation D under the Securities
Act. Jefferies & Company, Inc. thereupon offered and resold the Note Units only
to qualified institutional buyers and a limited number of institutional
accredited investors at an initial price to such purchasers of $65,667,000.
Concurrently with the offering of the Note Units, the Company completed a
private sale to Jefferies & Company, Inc. of 200,000 units ("Equity Units")
consisting of 200,000 shares of Series A Cumulative Preferred Stock and warrants
to purchase 14,533 shares of Common Stock. The offerings and sales of the Note
Units and the Equity Units are referred to herein as the "Offerings."
The net proceeds to the Company from these Offerings was approximately $74.9
million. A portion of the net proceeds (approximately $9.5 million) was
segregated into the Capitalized Interest Account to pay interest on the Notes
through June 1, 1998. The Company used the remaining net proceeds of the
Offerings as follows: (i) approximately $35.2 million was used to repay all of
the outstanding indebtedness (including accrued interest and associated fees)
due under the Endowment Energy Partners ("EEP") and Endowment Energy Co-
Investment Partnership ("EECIP") loans; (ii) approximately $10.5 million was
used to repay all of the outstanding indebtedness (including accrued interest
and associated fees) under the Joint Energy Development Investments Limited
Partnership ("JEDI") loan; (iii) $2.6 million was used to purchase from EEP and
EECIP a 7.5% overriding royalty interest in the Company's Lake Enfermer Field,
Manila Village Field and Boutte Field; (iv) $5.0 million was used in connection
with the Company's acquisition from Forman Petroleum Corporation II ("FPC II"),
a company whose sole stockholder is McLain J. Forman, all of FPC II's interest
in the Bayou Fer Blanc Field and the West Gueydan Field, of which $1.5 million
was paid to FPC II, $1.0 million was used to pay bank debt and $2.5 million was
used to pay trade payables to third parties; (v) Jefferies & Company, Inc.
received a fee of $1.9 million for financial advisory services provided to the
Company and also received a warrant to purchase 4,844 shares of Common Stock at
an initial exercise price of $1.00 per share; and (vi) $0.9 million was used to
pay expenses of the Offerings. See "Certain Transactions."
The remaining net proceeds from the Offerings of $9.4 million are being used
for capital expenditures, working capital and other general corporate purposes.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange a like
principal amount of Old Notes, the terms of which are identical in all material
respects to the Exchange Notes. The Old Notes surrendered in exchange for the
Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any change in
capitalization of the Company.
19
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1997 short-term debt (including
current maturities of long-term debt) and capitalization of the Company and pro
forma as adjusted to reflect (i) the completion of the Offerings and (ii) the
application of the net proceeds therefrom as described under "Private Placement"
as if such transactions had occurred on March 31, 1997. The information was
derived from, and is qualified by reference to the Financial Statements of the
Company, including the notes thereto, included elsewhere in this Prospectus.
This information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------
PRO FORMA
ACTUAL AS ADJUSTED(5)
----------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt (including current maturities of long-term debt) (1)................ $ 20 $ 20
Long-term debt (less current maturities):
Notes Payable (1)............................................................ $ 40,551 --
13.5 % Senior Secured Notes due 2004 (2)..................................... -- $ 67,800
-------- --------
Total debt................................................................... $ 40,571 $ 67,820
======== ========
Mandatorily Redeemable Preferred Stock, no par value, 1,000,000 authorized
shares, none outstanding, 200,000 shares outstanding as adjusted (3)............... $ -- $ 9,667
Stockholder's equity:
Common Stock, no par value, 1,000,000 authorized shares;
90,000 outstanding (exclusive of 10,000 treasury shares)......................... 1 1
Additional paid-in capital (4).................................................... 786 --
Accumulated deficit (5)........................................................... (5,883) (5,828)
-------- --------
Total stockholder's deficit.................................................... (5,096) (5,827)
-------- --------
Total debt and capitalization.................................................. $ 35,475 $ 71,660
======== ========
</TABLE>
_______________
(1) See Notes 2 and 8 to the Financial Statements of the Company.
(2) Long-term debt is net of debt discount of $2,200,000 of which $667,000
represents the estimated value of the warrants attached to the Old Notes.
(3) Preferred Stock is net of $333,000 allocated to the value of the warrants
offered with the Equity Units.
(4) Pro forma as adjusted includes $1.0 million representing the value of the
warrants attached to the Old Notes and the warrants offered with the Equity
Units, recorded as additional paid-in capital. In connection with the
termination of the Subchapter-S Corporation election, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
$1,786,000 of accumulated deficit was reclassified to additional paid-in
capital (see also (5) below).
(5) Assumes that $1.5 million of the purchase price of the Bayou Fer Blanc Field
and the West Gueydan Field represents a distribution to McLain J. Forman,
and $231,000 of deferred financing costs related to prior indebtedness has
been expensed. Additionally, in connection with the termination of the
Subchapter-S Corporation election, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations," accumulated deficit has
been reclassified to additional paid-in capital to the extent possible.
20
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following tables set forth selected actual historical and pro forma
financial information of the Company for the periods set forth below. The pro
forma information set forth below gives effect to the acquisition by the Company
of certain overriding royalty interests in the Company's properties and
interests in the Bayou Fer Blanc Field and the West Gueydan Field as described
in "Private Placement," as if such transactions occurred on the last day of the
period prior to the period presented. The following information should be read
in conjunction with "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements of
the Company and the related notes thereto included elsewhere in this Prospectus.
In 1994, the Company changed its fiscal year end from September 30 to December
31. As such, the financial information for the years ended September 30, 1994
and December 31, 1994 overlaps for January 1, 1994 to September 30, 1994.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, MARCH 31,
------------------------- --------------------------------------- -------------------------------
PRO FORMA PRO FORMA
1992 1993 1994 1994 1995 1996 1996(1) 1996 1997 1997(1)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Oil and natural gas revenue... $ 2,090 $ 7,868 $ 8,718 $ 9,532 $ 6,919 $ 10,892 $ 11,773 $ 2,254 $ 3,737 $ 4,048
Costs and expenses:
Oil and natural gas
operating expenses........... 451 1,608 2,741 2,775 2,196 2,526 2,526 585 557 557
Production taxes.............. 233 684 678 791 661 585 655 193 129 146
Depreciation, depletion and
amortization............... 533 2,167 2,207 2,391 3,558 4,259 4,491 1,061 1,542 1,630
General and administrative.... 786 706 1,151 1,204 921 1,539 1,539 410 429 429
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Total operating expenses... 2,003 5,165 6,777 7,161 7,336 8,909 9,211 2,249 2,657 2,762
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Operating income (loss)....... 87 2,703 1,941 2,371 (417) 1,983 2,562 5 1,080 1,286
Interest expense.............. 617 1,354 1,897 2,121 3,522 3,983 4,334 901 1,184 1,272
Bad debt expense.............. 7 0 0 0 0 0 0 0 0 0
Other income:
Interest income............... 16 9 12 14 194 37 37 9 9 9
Overhead reimbursements....... 39 58 77 74 131 95 95 18 15 15
Other......................... 9 143 163 119 61 93 93 30 17 17
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Net income (loss).......... $ (473) $ 1,559 $ 296 $ 457 $ (3,553) $ (1,775) $ (1,547) $ (839) $ (63) $ 55
======== ======== ======== ======== ======== ======== ======== ======== ======== =========
Ratio of earnings to fixed
charges and preferred stock
dividends(2)............... -- 2.2x 1.2x 1.2x -- -- -- -- -- 1.0x
======== ======== ======== ======== ======== ======== ======== ======== ======== =========
UNAUDITED PRO FORMA DATA:
Net income (loss) as
reported above............... -- -- -- -- -- $ (1,775) $ (1,547) -- $ (63) $ 55
Pro forma (provision)
benefit for income taxes(3).. -- -- -- -- -- 657 572 -- 23 (20)
-------- -------- -------- ---------
Pro forma net income (loss)... -- -- -- -- -- $ (1,118) $ ( 975) -- $ (40) $ 35
======== ======== ======== =========
Weighted average shares
outstanding.................. -- -- -- -- -- 90,000 90,000 -- 90,000 100,557
======== ======== ======== =========
Pro forma net income (loss)
per share(4).................. -- -- -- -- -- $ (12.42) $ (10.83) -- $ (.44) $ .35
======== ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF DECEMBER 31, AS OF MARCH 31,
---------------------------- ---------------------------- ---------------------
PRO FORMA
AS
ADJUSTED
1992 1993 1994 1994 1995 1996 1997 1997(5)
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............. $ (1,989) $ (3,498) $ (3,654) $ (2,097) $ (2,117) $(44,198) $(46,257) $ 18,610
Property and equipment,
net......................... 5,411 10,859 20,446 20,874 25,814 37,352 39,403 45,503
Total assets................. 7,478 14,048 25,229 32,962 29,160 42,377 43,993 78,741
Long-term debt, including
current maturities, net..... 8,514 12,262 20,252 29,721 28,607 39,043 40,571 67,820
Mandatorily redeemable
preferred stock, net......... -- -- -- -- -- -- -- 9,667
Total stockholder's
equity (deficit)............. (1,803) (244) 52 295 (3,258) (5,033) (5,096) (5,827)
</TABLE>
21
<PAGE>
__________________
(1) Reflects adjustments to oil and natural gas revenue, production taxes, and
depreciation, depletion and amortization for the incremental revenue and
expenses that would have been reported had the acquisitions occurred on the
last day of the period prior to the period presented. Interest expense has
been adjusted assuming that the $2.6 million purchase price of the
overriding royalty interests would have been financed with new indebtedness.
(2) For purposes of computing this ratio, "earnings" represents income (loss)
before taxes and extraordinary items, plus fixed charges. "Fixed charges"
consist of interest expense on all indebtedness, amortization of deferred
financing costs and a portion of rental expense considered to be
representative of the interest factor therein. There was no preferred stock
outstanding during any of the historical periods presented. As a result of
the losses incurred for the years ended September 30, 1992 and December 31,
1995 and 1996, and the three months ended March 31, 1996 and 1997, earnings
did not cover fixed charges by $473,000, $3,553,000, $1,775,000, $839,000,
and $63,000, respectively. For the pro forma 1996 period, earnings did not
cover fixed charges by $1,547,000. As adjusted for the issuance of the Notes
and Equity Units, earnings would not have covered fixed charges by
$8,816,000 and $1,484,000, for the pro forma 1996 and 1997 periods,
respectively.
(3) For all periods presented herein, the Company has operated as an S
Corporation for Federal and state income tax purposes. Upon the issuance of
the Equity Units described under "Private Placement," the Company terminated
its Subchapter-S election and will subsequently be treated as a C
Corporation for tax purposes (see Note 1 to Financial Statements). The
unaudited pro forma data includes the effect of providing income taxes as if
the Company were a C Corporation for the year ended December 31, 1996 and
the three months ended March 31, 1997, and the related pro forma periods.
(4) Historical earnings per share data has not been presented due to the
Company's termination of its Subchapter-S election. Pro forma net income
(loss) per share amounts are calculated by dividing net income (loss) by the
weighted average number of common shares outstanding, plus the effect, using
the treasury stock method, of common shares contingently issuable if
dilutive. Due to net losses reported in the 1996, pro forma 1996, and 1997
periods, exercise of the warrants to purchase 19,000 shares of common stock
(see Note 3 to Financial Statements) would be antidilutive and are therefore
not considered.
(5) As adjusted to give effect to the Offerings and the application of proceeds
therefrom as described further in "Private Placement" and "Capitalization."
Long-term debt is net of debt discount of $2,200,000, of which $667,000
represents the estimated value of the warrants that were attached to the Old
Notes. Preferred stock is net of $333,000 allocated to the value of the
warrants offered with the Equity Units.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is an independent energy company engaged in the acquisition,
exploration, development, exploitation and production of crude oil and natural
gas. Since 1991, the Company has acquired five fields onshore in south
Louisiana. These fields have cumulative production of 153 MMBoe and contain
complex geologic structures that are well suited to 3-D seismic surveys and
interpretation to identify potential reserves. Since 1994, the Company has
acquired and processed over 74 square miles of 3-D seismic data over four of
these fields from which the Company has identified additional exploitation and
development prospects. In the Lake Enfermer Field, using this 3-D seismic data
along with existing well control, the Company drilled and completed three wells
in 1996 and is currently in the process of completing a fourth well. This
drilling activity increased net production from a daily average of 942 Boe/d in
January 1996 to 1,895 Boe/d in December 1996. Over the same period, proved
reserves increased 92% from 3.6 MMBoe with a present value of $31.0 million to
6.9 MMBoe with a present value of $96.4 million. In 1997 and 1998, the Company
plans aggregate capital expenditures of approximately $33.0 million to perform
an estimated seven recompletions and/or workovers and drill an estimated eight
new wells based on the Lake Enfermer 3-D seismic survey, to drill an estimated
two additional wells and to perform an estimated four recompletions on other
properties.
The Company uses the full cost method of accounting for its investment in oil
and natural 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 future gross revenue method based
on the ratio of current gross revenue to total proved future gross revenues,
computed based on current prices. To the extent that such capitalized costs (net
of accumulated depreciation, depletion and amortization) less deferred taxes
exceed the present value (using a 10% discount rate) of estimated future net
cash flow from proved oil and natural gas reserves, and the lower of cost and
fair value of unproved properties after income tax effects, excess costs are
charged to operations. Once incurred, a write-down of oil and natural gas
properties is not reversible at a later date even if oil or natural gas prices
increase. While the Company has never been required to write down its asset
base, significant downward revisions of quantity estimates or declines in oil
and natural gas prices that are not offset by other factors could result in a
write-down for impairment of oil and natural gas properties.
On June 3, 1997, the Company issued preferred stock as further described under
"Private Placement." Prior to the issuance of this preferred stock, the Company
was taxed as an S Corporation. See Note 1 to the financial statements of the
Company. The issuance of preferred stock terminated the S Corporation status
effective June 3, 1997. For the short year beginning June 4, 1997 and subsequent
years, the Company will be subject to Federal and state income tax.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to Three Months Ended
March 31, 1996
During the three months ended March 31, 1997, the Company reported increases
in total production, operating income and cash flow from operations, compared to
the comparable period of three months ended March 31, 1996. Oil and natural gas
revenues increased 66% from $2.3 million in 1996 to $3.7 million in 1997.
Production volumes for oil increased 6% from 74 MBbls in 1996 to 78 MBbls in
1997. The increase in oil production, combined with a 22% increase in average
sales prices for oil between 1996 and 1997, increased revenues $0.4 million.
Production volumes for natural gas increased 99% from 279 MMcf in 1996 to 556
MMcf in 1997. The increase in natural gas production, combined with a 12%
increase in average sales prices for natural gas between 1996 and 1997,
increased revenues $1.1 million. The overall increase in oil and natural gas
production was due to three new wells being drilled and completed between 1996
and 1997, which was partially offset by normal production declines from
previously existing wells. Increases in average oil and natural gas prices were
attributable in part to hedging by the Company in 1997, as well as general
improved market conditions in the early part of 1997.
23
<PAGE>
The following table summarizes production volumes, average sales prices and
operating revenues for the Company's oil and natural gas operations for the
three months ended March 31, 1996 and 1997.
Three Months Ended March 31,
-------------------------------
% Increase
1996 1997 (Decrease)
-------- -------- ----------
PRODUCTION VOLUMES:
Oil and condensate (MBbls)............ 74 78 6%
Natural gas (MMcf).................... 279 556 99%
AVERAGE SALES PRICES:
Oil and condensate ($ per Bbl)........ $18.87 $22.99 22%
Natural gas ($ per Mcf)............... $ 3.10 $ 3.48 12%
OPERATING REVENUES:
Oil and condensate (in thousands)..... $1,388 $1,799 30%
Natural gas (in thousands)............ $ 866 $1,938 124%
------ ------ ---
Total (in thousands)............. $2,254 $3,737 66%
Oil and natural gas operating expenses decreased 5% from $585,000 in 1996 to
$557,000 in 1997. This decrease was due primarily to the abandonment of one of
the Company's fields between 1996 and 1997. Production taxes decreased from
$193,000 in 1996 to $129,000 in 1997. This decrease is primarily due to credits
received during 1997 on production taxes paid in prior years.
Depreciation, depletion and amortization ("DD&A") expense increased 36% from
$1.1 million in 1996 to $1.5 million in 1997. This increase was due to the
overall increase in oil and natural gas production combined with an increase in
the annual DD&A rate from 6.7% in 1996 to 9.9% in 1997. In addition, due to the
maturity of all of the Company's debt in June 1997, the remaining deferred
financing costs as of December 31, 1996, is being amortized over the first six
months of 1997 at the rate of $77,000 per month.
General and administrative expenses ("G&A") increased by 5% from $410,000 in
1996 to $429,000 in 1997. This increase was due primarily to increased use of
professional services, such as legal, accounting and reservoir engineering
services, during 1997.
Interest expense increased 33% from $900,000 in 1996 to $1.2 million in 1997.
This increase was due to the additional indebtedness of the Company in 1997 as a
result of the capitalization of the accrued interest on the EEP and EECIP loans
and the new term loan from JEDI.
Net income (loss) was $(63,000) in 1997 as compared to $(839,000) in 1996, as
a result of the factors described above.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
During 1996, the Company reported increases in total production, operating
income and cash flow from operations, compared to 1995. Oil and natural gas
revenues increased 57% from $6.9 million in 1995 to $10.9 million in 1996.
Production volumes for oil increased 31% from 252 MBbls in 1995 to 330 MBbls in
1996. The increase in oil production increased revenues $2.6 million. Production
volumes for natural gas decreased 12% from 1,505 MMcf in 1995 to 1,325 MMcf in
1996. Although volumes decreased by 12%, revenues for natural gas increased $1.3
million due to a 72% increase in average natural gas prices in 1996. The overall
increase in oil and natural gas production was due to three new wells being
drilled and completed during 1996, which was partially offset by normal
production declines from existing wells. Increases in average oil and natural
gas prices were directly attributable to the general improved market conditions.
24
<PAGE>
The following table summarizes production volumes, average sales prices and
operating revenues for the Company's oil and natural gas operations for the
years ended December 31, 1995 and 1996.
YEAR ENDED DECEMBER 31,
-------------------------------
% Increase
1996 1997 (Decrease)
-------- -------- ----------
PRODUCTION VOLUMES:
Oil and condensate (MBbls)............. 251.8 329.9 31%
Natural gas (MMcf)..................... 1,504.5 1,325.1 (12)%
AVERAGE SALES PRICES:
Oil and condensate ($ per Bbl)......... $ 17.19 $ 21.10 23%
Natural gas ($ per Mcf)................ $ 1.72 $ 2.96 72%
OPERATING REVENUES:
Oil and condensate (in thousands)...... $ 4,327 $ 6,964 61%
Natural gas (in thousands)............. $ 2,592 $ 3,928 52%
-------- -------- ---
Total (in thousands).............. $ 6,919 $ 10,892 57%
Oil and natural gas operating expenses increased 14% from $2.2 million in 1995
to $2.5 million in 1996. This increase was due to the overall increase in
production generated from new oil and natural gas wells drilled and completed.
DD&A expense increased 19% from $3.6 million in 1995 to $4.3 million in 1996.
This increase was due to the overall increase in oil and natural gas production,
offset by a 27% decrease in the depletion rate.
G&A increased 67% from $0.9 million in 1995 to $1.5 million in 1996. This
increase was due to the capitalization of $0.5 million of G&A in 1995
attributable to the conduct of the 3-D seismic survey. Excluding this
capitalization, G&A increased 7% during 1996.
Interest expense increased 14% from $3.5 million in 1995 to $4.0 million in
1996. This increase was due to the imposition of interest on interest that was
accrued and not paid to the lender during all of 1996.
Net income (loss) was $(1.8 million) in 1996 as compared to $(3.6 million) in
1995, as a result of the factors described above.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
During 1995, the Company reported decreases in total production, operating
income and cash flow from operations. Oil and natural gas revenues decreased 27%
from $9.5 million in 1994 to $6.9 million in 1995. Production volumes for oil
decreased 24% from 331 MBbls in 1994 to 252 MBbls in 1995 due to the cessation
of drilling activities during the conduct of a 3-D seismic survey on the Lake
Enfermer Field. The decrease in oil production decreased revenues $1.3 million.
Production volumes for natural gas decreased 33% from 2,241 MMcf in 1994 to
1,505 MMcf in 1995. The decrease in natural gas production decreased revenues by
$1.3 million.
25
<PAGE>
The following table summarizes production volumes, average sales prices and
operating revenues for the Company's oil and natural gas operations for the
years ended December 31, 1994 and 1995.
YEAR ENDED DECEMBER 31,
-----------------------------------
% Increase
1996 1997 (Decrease)
-------- -------- ---------------
PRODUCTION VOLUMES:
Oil and condensate (MBbls)............ 330.5 251.8 (24)%
Natural gas (MMcf).................... 2,240.6 1,504.5 (33)%
AVERAGE SALES PRICES:
Oil and condensate ($ per Bbl)........ $ 17.09 $ 17.19 1%
Natural gas ($ per Mcf)............... $ 1.73 $ 1.72 (1)%
OPERATING REVENUES:
Oil and condensate (in thousands)..... $ 5,647 $ 4,327 (23)%
Natural gas (in thousands)............ $ 3,885 $ 2,592 (33)%
-------- -------- ---
Total (in thousands)............. $ 9,532 $ 6,919 (27)%
Oil and natural gas operating expenses decreased 21% from $2.8 million in 1994
to $2.2 million in 1995. This decrease was due to decreased production generated
from oil and natural gas wells drilled and completed.
DD&A expense increased 50% from $2.4 million in 1994 to $3.6 million in 1995.
This increase was due primarily to a 33% increase in the depletion rate.
G&A decreased 25% from $1.2 million in 1994 to $0.9 million in 1995. This
decrease is due to the capitalization of $0.5 million of G&A in 1995
attributable to the conduct of the 3-D seismic survey. Excluding this
capitalization, G&A in 1995 increased 17% primarily due to increased staffing
for 3-D seismic interpretations.
Interest expense increased 67% from $2.1 million in 1994 to $3.5 million in
1995. This increase was due to the additional debt in the amount of $7.0
million, which added to the Company's long-term debt the last day of December
1994. Thus, no interest was paid on this $7.0 million of new debt in 1994 while
a full year of interest was paid or accrued on it in 1995. In total, long-term
debt increased almost $15.0 million during 1994, and the full impact of
increased interest on this new debt was not reflected until 1995.
Net income (loss) was $(3.6 million) in 1995 as compared to net income of $0.5
million in 1994, as a result of the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have included funds generated by
operations, the sale of prospects, from borrowings from its senior lenders, EEP
and EECIP, and the Offerings. In addition, in September 1996, McLain J. Forman,
the sole stockholder of the Company, loaned the Company $1.0 million on an
unsecured basis for the purpose of paying certain trade payables. In late
November 1996, the Company secured a bridge loan in the amount of $4.0 million
from JEDI for the specific purpose of paying certain additional trade payables.
On December 23, 1996, the Company repaid the bridge loan with the proceeds of a
term loan from JEDI. As of May 31, 1997, the Company had drawn all of the $10.0
million available under the term loan, with $4.0 million applied toward payment
of the bridge loan, $0.5 million used to partially repay the $1.0 million loan
from Mr. Forman and $5.5 million used to pay trade payables. The borrowings from
EEP, EECIP and JEDI were repaid with the proceeds of the Offerings.
Operating cash flow was $222,000 and $1.5 million in the three months ended
March 31, 1996 and 1997, respectively. The increase in operating cash flow was
primarily attributable to increased production volumes and higher average sales
prices. Operating cash flow was $2.9 million, $5,500 and $2.5 million in 1994,
1995 and 1996, respectively. The increase in operating cash flow in 1996 as
compared to 1995 was primarily attributable to an increase in operating income
of $3.6 million, partially offset by an increase in oil and natural gas revenue
receivables and increased interest expenses. Accrued liabilities increased by
$3.4 million in 1996 as compared to 1995 due to the unpaid well costs incurred
in drilling the three post-3-D survey wells in 1996. The decrease in cash flows
used in 1995 as compared to 1994 was due primarily to the operating loss in 1995
and the cessation of drilling activity during the period the 3-D seismic survey
was being conducted.
26
<PAGE>
The Company has a budget of $33 million of capital expenditures in 1997 and
1998. A substantial portion of this amount is budgeted for the development
drilling necessary to bring the proved undeveloped and non-producing reserves
into production, as well as the exploratory drilling in the Lake Enfermer Field.
In addition, the Company used a portion of the net proceeds of the Offerings to
acquire from an affiliated entity, FPC II, two prospects (Bayou Fer Blanc Field
and West Gueydan Field), which, in the aggregate, cost approximately $5.0
million. See "Private Placement." As part of such acquisitions, the Company also
acquired a recently completed 3-D seismic survey covering the entire Bayou Fer
Blanc Field. The Bayou Fer Blanc Field is strategically located immediately
adjacent to the Lake Enfermer Field. The Company has integrated this 3-D data
with the data from the existing 3-D survey on the Lake Enfermer Field, resulting
in a contiguous 58 square mile 3-D survey over two of its oil and natural gas
fields.
During 1994, the Company invested approximately $1.8 million in the
acquisition of the Bayou Dularge Field, with the remainder of the investing
activities for the year focused on development drilling in the Company's four
producing fields. During 1995, the Company invested $4.0 million in the design,
conduct and processing of the 3-D seismic survey at the Lake Enfermer Field and
$3.6 million in development drilling on Company-owned properties. Beginning in
November 1995, the Company ceased making principal and interest payments on its
long-term debt in order to utilize the cash flow from operations to fund the
ongoing post-3-D survey drilling activities. In January 1996, the Company began
drilling the first of the four post-3-D survey wells, with the fourth well being
completed in July 1997.
Cash flows from financing activities in 1994 were $14.8 million, reflecting a
combination of borrowings from EEP and EECIP totaling $19.0 million, offset by
repayments of principal in the amount of $3.7 million. The Company received its
final funding from EEP on December 31, 1994 for $7.0 million for the conduct of
a 3-D survey and for drilling development wells, and the funds were placed into
an escrow account upon receipt, causing a commensurate shift in cash flows from
investing activities between 1994 and 1995, when the funds were subsequently
withdrawn from escrow. The cash applied to financing activities in 1995
consisted primarily of repayments of principal in the amount of $1.2 million.
During 1996, the Company continued to seek additional sources of financing for
its post-3-D survey drilling program to supplement operating cash flow. In
August 1996, the Company sold its interests in the Bayou Fer Blanc Field and the
West Gueydan Field to FPC II for $950,000, with the proceeds used to reduce the
Company's accrued trade payables. In September 1996, the Company borrowed $1.0
million from its sole shareholder, McLain J. Forman. The proceeds from both of
these transactions were applied to reduce the outstanding trade payables that
accrued from the post-3-D survey drilling activity. In December 1996, the
Company renegotiated its outstanding loans from EEP and EECIP in conjunction
with a commitment from JEDI to lend the Company $10.0 million on a six month
senior term loan. Under the terms of the loan, the accrued interest payable to
EEP and EECIP was capitalized as part of the outstanding balance due, and by
December 31, 1996, the Company had borrowed $6.0 million under the JEDI term
loan, with $5.5 million applied toward payment of the JEDI bridge loan and the
Company's accrued trade payables and $0.5 million applied toward partial
repayment of the $1.0 million loan from Mr. Forman.
With the objective of achieving more predictable revenues and cash flows and
reducing the exposure to fluctuations in oil and natural gas prices, the Company
has entered into hedging transactions of various kinds with respect to both oil
and natural gas. While the use of these hedging arrangements limits the downside
risk of adverse price movements, it may also limit future revenues from
favorable price movements. In January 1997, the Company entered into forward
sales and swap arrangements with respect to approximately 40% of its estimated
net natural gas production in the Lake Enfermer Field through April 1997, at a
weighted average price of approximately $3.18 per Mcf. At the same time, the
Company hedged approximately 30% of its estimated net oil production through
June 1997 at a weighted average price of $23.75 per Bbl. The Company
continuously reevaluates its hedging program in light of market conditions,
commodity price forecasts, capital spending and debt service requirements. The
Company may hedge additional volumes through the remainder of 1997 or it may
determine from time to time to terminate its then existing hedging positions.
As a result of the Company's active development and exploration program to be
conducted on the current producing properties and on the two prospects acquired
with a portion of the net proceeds of the Offerings, the Company anticipates
significant working capital requirements. The Company believes that the net
proceeds from the Offerings, when combined with cash flow from operations, will
be adequate to finance the Company's operations for the foreseeable future. The
Company is not pursuing a revolving credit facility at this time. The Company
may seek such a facility in the future to increase working capital. No assurance
can be given as to whether the Company will obtain such a facility or as to the
amount of any such facility. The Indenture imposes restrictions on the Company's
ability to incur additional indebtedness. In addition, the Indenture restricts
the ability of the Company to secure any new indebtedness, which may in turn
restrict the Company's ability to obtain a bank facility.
27
<PAGE>
BUSINESS AND PROPERTIES
OVERVIEW
The Company is an independent energy company engaged in the acquisition,
exploration, development, exploitation and production of crude oil and natural
gas. Since 1991, the Company has acquired five fields onshore in south
Louisiana. These fields have cumulative production of 153 MMBoe and contain
complex geologic structures that are well suited to 3-D seismic surveys and
interpretation to identify potential reserves. Since 1994, the Company has
acquired and processed over 74 square miles of 3-D seismic data over four of
these fields from which the Company has identified additional exploitation and
development prospects. In the Lake Enfermer Field, using this 3-D seismic data
along with existing well control, the Company drilled and completed three wells
in 1996 and is currently in the process of completing a fourth well. This
drilling activity increased net production from a daily average of 942 Boe/d in
January 1996 to 1,895 Boe/d in December 1996. Over the same period, proved
reserves increased 92% from 3.6 MMBoe with a present value of $31.0 million to
6.9 MMBoe with a present value of $96.4 million. In 1997 and 1998, the Company
plans aggregate capital expenditures of approximately $33.0 million to perform
an estimated seven recompletions and/or workovers and drill an estimated eight
new wells based on the Lake Enfermer 3-D seismic survey, to drill an estimated
two additional wells and to perform an estimated four recompletions on other
properties.
EXPLORATION TECHNOLOGY
The Company believes that it can identify new drilling opportunities in its
fields by combining 3-D seismic survey data with other technologies, including
CAEX technology, as well as other available geological and engineering data.
The principal advantage of 3-D seismic data over 2-D seismic data is that it
affords a geoscientist the ability to investigate the entire prospective area
using a 3-D seismic data volume, as compared to the limited number of two
dimensional profiles covering a small percentage of the prospective area that
are available using 2-D seismic data. As a consequence, a geoscientist using 3-
D seismic data can more fully evaluate prospective areas and produce more
accurate interpretations. The use of structural maps based upon 3-D seismic
data can improve the probability of drilling commercially successful wells,
since this data allows structurally advantageous positions to be more accurately
identified. The use of these modern technologies facilitates a more optimal
placement of development wells, more clearly identifies elements of risk and
aids in the prediction of geologic conditions and potential reserves.
The Company's advanced visualization and data analysis techniques and
sophisticated computing resources enable its geoscientists to view collectively
large volumes of information contained within the 3-D seismic data. This
improves the geoscientist's ability to recognize certain important patterns or
attributes in the data that may indicate hydrocarbon traps and that, if viewed
incorrectly or with the application of improper techniques, could go undetected.
Visualization techniques also enable the geoscientist to quickly identify and
prioritize key areas from the large volumes of data reviewed to realize early
benefits. The Company's sophisticated computing resources and visualization and
data analysis techniques and sophisticated computing resources allow its
geoscientists to more easily identify features such as shallow and deep
amplitude anomalies, complex channel systems, sharp structural details and fluid
contacts, which might have been overlooked using less sophisticated 3-D seismic
data interpretation techniques.
The application of advanced 3-D exploration technology requires large scale
information processing and graphic visualization, made possible by the rapid
improvements in computing technology. The Company has made a significant
investment in its 3-D seismic data visualization technology, which is closely
linked with the Company's well-log data base and other geoscience application
software. The Company uses a series of workstations from Silicon Graphics, and
has licensed Photon Seisx software for interpreting the geophysical data on the
3-D workstations, Geographix software for analysis, mapping and interpretation
of geological data, and Cogniseis' Voxel Geo technology for advanced 3-D
geologic interpretation of data.
The Company's technological success is dependent in part upon hiring and
retaining highly skilled technical personnel. The Company has assembled a
technical team that it believes has the capacity to adapt to the rapidly
changing technological demands in the field of oil and natural gas exploration.
This team consists of six geoscientists and engineers with an average of 22
years industry experience, primarily concentrated in the Gulf Coast region. The
expertise of the Company's team of geoscientists and engineers reduces its
dependence on outside technical consultants and enables the Company to
internally generate substantially all of its prospects.
28
<PAGE>
EXPLORATION AND OPERATING APPROACH
The Company's exploration approach is to utilize advanced 3-D seismic,
visualization and interpretation techniques to identify or evaluate prospects
and then drill the prospects that it believes provide the potential for
significant returns. The Company typically seeks to explore in areas (i) that
have shown a rich hydrocarbon content, (ii) with numerous accumulations of
normally pressured reserves at shallow depths and in geologic traps that are
difficult to define without the use of advanced 3-D data visualization and
interpretation and (iii) with the potential for large accumulations of deeper,
over-pressured reserves. Once the Company has identified a prospect, it begins
negotiations with landowners to secure a lease. The Company's experience in the
environmentally sensitive coastal marshlands of south Louisiana gives it
credibility with landowners who restrict and carefully monitor all operations on
their property. The Company designs the 3-D seismic survey to optimize data
acquisition at both shallow and deep horizons. After the data is acquired and
processed, the Company interprets such data in-house with its staff of
geoscientists and engineers. The 3-D seismic data is integrated with existing
well data to identify patterns of bright spots that could indicate productive
horizons. The Company's sophisticated computing resources and visualization and
data analysis techniques allow its geoscientists to more easily identify
features such as shallow and deep amplitude anomalies, complex channel systems,
sharp structural details and fluid contacts. With the 3-D seismic generated
subsurface mapping, the Company can seek to optimize the drilling locations and
wellbore paths to gain maximum structural advantage and identify the optimum
number of targets for a particular wellbore. When drilling commences, the
Company can integrate the 3-D seismic with logging while drilling techniques to
monitor the progress of the well and fine tune its geologic and engineering
profile in real time. Since the Company began to utilize advanced 3-D seismic,
visualization and interpretation techniques, the Company has drilled and
completed three wells, is currently in the process of completing a fourth well,
and drilled and temporarily abandoned a fifth well pending further evaluation.
The Company has emphasized preplanning in project development to lower capital
and operational costs and to efficiently integrate potential well locations into
the existing and planned infrastructure, including gathering systems and other
surface facilities. The Company also seeks to minimize cycle time from drilling
to hook-up of wells, thereby accelerating cash flow and improving ultimate
project economics. For example, the Company has developed an extensive gathering
infrastructure in Lake Enfermer Field with strategically placed production
facilities designed to handle high volumes and expedite the development cycle.
SIGNIFICANT PROJECT AREAS
Set forth below are descriptions of the Company's south Louisiana fields where
it is actively exploring for and developing oil and natural gas reserves and in
many cases currently has production. The 3-D surveys which the Company is using
to analyze its project areas range from regional non-proprietary group shoots to
single field proprietary surveys.
Although the Company is currently pursuing prospects within the project areas
listed below, there can be no assurance that these prospects will be drilled at
all or within the expected time frame. The final determination with respect to
the drilling of any scheduled or budgeted wells will be dependent on a number of
factors, including (i) results of the exploration efforts and the acquisition,
review and analysis of the seismic data, (ii) the availability of sufficient
capital resources by the Company and the other participants for the drilling of
the prospects, (iii) the approval of the prospects by the other participants
after additional data has been compiled, (iv) economic and industry conditions
at the time of drilling, including prevailing and anticipated prices for oil and
natural gas and the availability of drilling rigs and crews, (v) the financial
resources and operating results of the Company and (vi) the availability of
leases on reasonable terms and permitting for the prospect. There can be no
assurance that these projects can be successfully developed or that the
scheduled or budgeted wells discussed will, if drilled, encounter reservoirs of
commercially productive oil and natural gas. The reserve data set forth below
for the various prospects is based upon the estimate of the reserves, future
production and income attributable to certain leasehold and royalty interests of
the Company as of December 31, 1996 prepared by Ryder Scott Company, Petroleum
Engineers (the "Ryder Scott Report"). There are numerous uncertainties in
estimating quantities of proved reserves, including many factors beyond the
control of the Company. See "Risk Factors -- Replacement of Reserves," "--
Uncertainty of Reserve Information and Future Net Revenue Estimates" and "--
Drilling Risks."
29
<PAGE>
Lake Enfermer Field
The Lake Enfermer Field is located on a deep, complexly faulted, salt
structure in Lafourche Parish in a coastal marsh that is subsiding and grading
into an open bay environment. The Company has acquired 3,650 acres in this
field since 1992 and has an average 98.5% working interest in and is the
operator of the field. The field was first discovered in 1955 by Olin Gas.
Production through March 1997 for the field has been over 29 MMBoe. The
acquisition of the field included two production facilities and one satellite
location. In 1997, the Company built an additional production facility that
cost approximately $0.5 million. These three processing centers are located
approximately 1.5 miles apart from each other and are adequate to service all of
the Company's anticipated wells.
Upon the acquisition of the field, the Company used its extensive database of
2-D seismic data to drill and complete three wells in 1993 and 1994 (two of
which are currently productive) for a cost of $5.3 million. The Company
determined that an extensive 3-D survey of the Lake Enfermer Field area was
necessary to optimally develop the field. In April 1995 the Company commenced a
33 square mile proprietary 3-D survey encompassing the entire Lake Enfermer
Field for the purpose of better identifying additional reserve potential and
more accurately determining drilling locations. The 3-D survey resulted in the
identification of numerous drilling opportunities. The Company utilized this
seismic data to drill and complete three wells in 1996 at a cost of $12.3
million. The three wells added a total of 3.2 MMBoe to proved reserves. The
first post-3-D survey well, spudded in January 1996, logged over 200 feet of
productive sands and was successfully completed as a dually-producing oil well
in March 1996, adding approximately $9.1 million of pro forma present value.
The second and third post-3-D survey wells, spudded in April and July 1996,
together logged over 312 feet of productive sands, adding approximately $37.9
million of pro forma present value to the Company's reserve base. The fourth
post 3-D survey well is currently being completed, and a fifth well has been
drilled and temporarily abandoned pending further evaluation.
During 1997 and 1998, the Company plans to drill an estimated eight additional
wells and perform seven workovers and/or recompletions in the Lake Enfermer
Field at an estimated cost of approximately $25.0 million. In addition, the
Company has identified other exploratory and development locations that it could
drill in the future based upon its 3-D seismic survey and the wells drilled to
date.
Manila Village Field
The Manila Village Field is located in Jefferson Parish in a brackish water
marsh environment. The Company acquired 825 acres in this field in 1991 from
Manila Village Production Company, has an average 65% working interest in and is
the operator of the field. The field was first discovered by Whitestone in 1949
and through March 1997 the field had produced 35 MMBoe. Recently, the Company
undertook a 12 square mile 3-D survey over the area data from which is currently
being interpreted by the Company. During 1998, the Company plans to drill an
estimated one additional well at an estimated cost of approximately $2.0
million.
Boutte Field
The Boutte Field is located in a fresh water marsh in St. Charles Parish. All
well locations are accessible by roads. The Company acquired in 1992 from Texaco
and Apache a 100% working interest in 3,250 acres in this field, which it
operates. Discovered by Texaco in 1953, through March 1997 the field had
produced a total of 36 MMBoe with a production mix of 80% natural gas and 20%
oil. In 1996, the Company recompleted one well, which as of March 1997 was
producing 312 Boe/d. During 1997, the Company plans to recomplete an estimated
four additional wells.
Bayou Fer Blanc Field
The Bayou Fer Blanc Field is located in Lafourche Parish, adjacent to the Lake
Enfermer Field. The Company used a portion of the net proceeds of the Offerings
to purchase a 100% working interest in the Bayou Fer Blanc Field, which it now
operates. See "Private Placement." Although classified as two distinct fields,
the Lake Enfermer Field and the Bayou Fer Blanc Field have produced from a
single geologic structure. The Bayou Fer Blanc Field was discovered by Texaco in
1959 and through March 1997 the field had produced a total of 17 MMBoe. The
Company completed a 25 square mile proprietary 3-D seismic survey of the Bayou
Fer Blanc Field in 1996, which was integrated with the 33 square mile 3-D
seismic survey of the Lake Enfermer Field for a total of 58 contiguous square
miles for the two fields. The Company's initial analysis of the 3-D survey
suggests numerous undrilled amplitude anomalies with exploratory potential.
30
<PAGE>
West Gueydan Field
The West Gueydan Field is located in rice fields in Vermilion Parish on a deep
salt structure. The Company used a portion of the net proceeds of the Offerings
to purchase a 90% working interest in 1,180 acres in the field, which it now
operates. The field includes a wellbore that has been cleaned out to total depth
and is available for re-entry and sidetracking. See "Private Placement." The
field was discovered by Magnolia Oil Company in 1938 and through March 1997 the
field had produced a total of 36 MMBoe. The Company has an extensive 2-D seismic
data grid of the field and recently acquired additional 3-D seismic data.
OIL AND NATURAL GAS RESERVES
The following table summarizes the estimates of the Company's proved
producing, proved non-producing and proved undeveloped reserves as of
December 31, 1996, and the related present value of estimated future net
revenues before income taxes at such date, as estimated by independent petroleum
engineers, Ryder Scott Company, Petroleum Engineers.
<TABLE>
<CAPTION>
Pro Forma Proved Reserves(1)
------------------------------------------------------------------
Producing Non-Producing Undeveloped Total
-------------- ---------------- -------------- -----------
<S> <C> <C> <C> <C>
Natural gas (MMcf)............................ 4,165 5,029 15,965 25,159
Oil and NGLs (MBbls).......................... 848 1,209 664 2,721
Natural gas equivalents (MMcfe)............... 9,253 12,283 19,949 41,485
Oil equivalents (MBoe)........................ 1,542 2,047 3,325 6,914
Present value of estimated future net
revenues before income taxes
(discounted at 10%) (in thousands)(2)..... $ 25,329 $ 25,809 $ 45,251 $ 96,389
</TABLE>
_________________________
(1) Reflects adjustments to give effect to the acquisition by the Company of
certain overriding royalty interests in the Company's properties and
interests in the Bayou Fer Blanc Field and the West Gueydan Field as
described in "Private Placement."
(2) The present value of estimated future net revenues before income taxes
(discounted at 10%) as of December 31, 1996 was determined using the
weighted average sales prices of $3.78 per Mcf of natural gas and $25.32 per
Bbl of oil.
These estimates of the Company's proved reserves have not been filed with or
included in reports to any federal agency.
In accordance with applicable requirements of the Commission, estimates of the
Company's proved reserves and future net revenues are made using oil and natural
gas sales prices estimated to be in effect as of the date of such reserve
estimates and are held constant throughout the life of the properties (except to
the extent a contract specifically provides for escalation). Estimated
quantities of proved reserves and future net revenues therefrom are affected by
oil and natural gas prices, which have fluctuated widely in recent years. There
are numerous uncertainties inherent in estimating oil and natural gas reserves
and their estimated values, including many factors beyond the control of the
producer. The reserve data set forth in this Prospectus represents only
estimates. Reservoir engineering is a subjective process of estimating
underground accumulations of 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 engineering and geological interpretation and judgment.
As a result, estimates of different engineers may vary. In addition, estimates
of reserves are subject to revision based upon actual production, results of
future development and exploration activities, prevailing oil and natural gas
prices, operating costs and other factors, which revisions may be material.
Accordingly, reserve estimates are often different from the quantities of oil
and natural gas that are ultimately recovered. The meaningfulness of such
estimates is highly dependent upon the accuracy of the assumptions upon which
they are based.
In general, the volume of production from oil and natural gas properties
declines as reserves are depleted. Except to the extent the Company acquires
properties containing proved reserves or conducts successful exploration and
development activities, or both, the proved reserves of the Company will decline
as reserves are produced. The Company's future oil and natural gas production
is, therefore, highly dependent upon its level of success in finding or
acquiring additional reserves. See "Risk Factors--Replacement of Reserves" and
"--Uncertainty of Reserve Information and Future Net Revenue Estimates."
31
<PAGE>
ACREAGE
The table below describes the Company's developed and undeveloped leasehold
acreage as of December 31, 1996 on a pro forma basis.
DEVELOPED ACREAGE UNDEVELOPED ACREAGE TOTAL
------------------ ------------------- ----------------
FIELD GROSS NET GROSS NET GROSS NET
- ----- -------- -------- -------- ------- ------- -------
Lake Enfermer 3,650 3,595 0 0 3,650 3,595
Manila Village 825 536 0 0 825 536
Boutte 3,250 3,250 0 0 3,250 3,250
Bayou Fer Blanc 0 0 320 320 320 320
West Gueydan 0 0 1,180 1,062 1,180 1,062
----- ----- ----- ----- ----- -----
7,725 7,381 1,500 1,382 9,225 8,763
===== ===== ===== ===== ===== =====
No possible or probable reserves have been assigned to the Company's
undeveloped acreage. As is customary in the oil and natural gas industry, the
Company can retain its interests in undeveloped acreage by drilling activity
that establishes commercial production sufficient to maintain the leases, or by
payment of delay rentals during the remaining primary term of such a lease.
Delay rentals paid in 1996 and those projected for 1997 are insignificant. The
oil and natural gas leases in which the Company has an interest are for varying
primary terms.
DRILLING ACTIVITY
The following table sets forth the wells drilled by the Company during the
periods indicated:
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1994 1995 1996
------------------ ------------------- ---------------
GROSS NET GROSS NET GROSS NET
-------- -------- -------- ------- ------- -------
DEVELOPMENT:
Productive......... 2.0 2.0 0.0 0.0 0.0 0.0
Non-productive..... 2.0 1.7 1.0 0.5 0.0 0.0
---- ---- ---- ---- ---- ----
Total....... 4.0 3.7 1.0 0.5 0.0 0.0
==== ==== ==== ==== ==== ====
EXPLORATORY:
Productive......... 0.0 0.0 0.0 0.0 3.0 3.0
Non-productive..... 0.0 0.0 0.0 0.0 0.0 0.0
---- ---- ---- ---- ---- ----
Total....... 0.0 0.0 0.0 0.0 3.0 3.0
==== ==== ==== ==== ==== ====
TOTAL:
Productive......... 2.0 2.0 0.0 0.0 3.0 3.0
Non-productive..... 2.0 1.7 1.0 0.5 0.0 0.0
---- ---- ---- ---- ---- ----
Total....... 4.0 3.7 1.0 0.5 3.0 3.0
==== ==== ==== ==== ==== ====
As of December 31, 1996, the Company had a working interest in 16 gross (13
net) oil wells and seven gross (seven net) natural gas wells.
32
<PAGE>
PRODUCTION
The following table sets forth certain oil and natural gas production data of
the Company during the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------- -------------------------------
PRO FORMA PRO FORMA
1994 1995 1996 1996 1996 1997 1997
-------- -------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET PRODUCTION:
Natural gas (MMcf)............................. 2,241 1,505 1,325 1,435 279 556 603
Oil (MBbls).................................... 330 252 330 357 74 78 85
Natural gas equivalents (MMcfe)................ 4,221 3,017 3,305 3,577 723 1,024 1,113
Oil equivalents (MBoe)......................... 704 503 551 596 121 171 185
AVERAGE NET DAILY PRODUCTION:
Natural gas (Mcf).............................. 6,140 4,123 3,630 3,933 3,100 6,178 6,700
Oil (Bbls)..................................... 904 690 904 979 822 867 944
Natural gas equivalents (Mcfe)................. 11,564 8,263 9,054 9,807 8,032 11,380 12,364
Oil equivalents (Boe).......................... 1,927 1,377 1,509 1,635 1,339 1,897 2,061
AVERAGE SALES PRICE:
Natural gas($/Mcf)............................. $ 1.73 $ 1.72 $ 2.96 $ 2.96 $ 3.10 $ 3.48 $ 3.48
Oil ($/Bbl).................................... $ 17.09 $17.19 $21.10 $21.10 $18.87 $ 22.99 $ 22.99
Natural gas equivalents ($/Mcfe)............... $ 2.26 $ 2.29 $ 3.30 $ 3.30 $ 3.12 $ 3.65 $ 3.65
Oil equivalents ($/Boe)........................ $ 13.55 $13.76 $19.77 $19.77 $18.63 $ 21.85 $ 21.85
OTHER DATA:
Production taxes ($/Mcfe)...................... $ 0.19 $ 0.22 $ 0.18 $ 0.18 $ 0.27 $ 0.13 $ 0.13
Operating expenses ($/Mcfe).................... $ 0.66 $ 0.73 $ 0.76 $ 0.71 $ 0.81 $ 0.54 $ 0.50
General and administrative expenses ($/Mcfe)... $ 0.29 $ 0.30 $ 0.47 $ 0.43 $ 0.57 $ 0.42 $ 0.39
Depreciation, depletion and
amortization ($/Mcfe).......................... $ 0.57 $ 1.18 $ 1.29 $ 1.26 $ 1.47 $ 1.51 $ 1.46
Production taxes ($/Boe)....................... $ 1.12 $ 1.31 $ 1.06 $ 1.06 $ 1.59 $ 0.75 $ 0.79
Operating expenses ($/Boe)..................... $ 3.94 $ 4.37 $ 4.59 $ 4.23 $ 4.83 $ 3.26 $ 3.01
General and administrative
expenses ($/Boe)............................... $ 1.71 $ 1.83 $ 2.79 $ 2.58 $ 3.39 $ 2.51 $ 2.32
Depreciation, depletion and
amortization ($/Boe)........................... $ 3.40 $ 7.08 $ 7.73 $ 7.53 $ 8.76 $ 9.02 $ 8.81
</TABLE>
MARKETING
Hedging Activities. The Company utilizes commodity swap agreements in an
attempt to reduce its exposure to commodity price movements. In January 1997,
the Company entered into swap agreements fixing the price of 400 barrels per day
of its oil production for the period February through June 1997 at a weighted
average price of $23.75/Bbl. At the same time, the Company hedged 90,000 MMBtu's
per month of its natural gas production in the Lake Enfermer Field through April
1997 at a weighted average price of $2.83/MMBtu.
Customers. During 1996 Scurlock Permian Corporation purchased 69% of the oil
sold by the Company. During the same period, Olympic Fuels and BNG, Inc.
purchased 74% of the natural gas sold by the Company. The Company benefits from
a long-standing business relationship with the above purchasers; however, based
on the current demand for oil and natural gas, the Company does not believe the
loss of any of these purchasers would have a material adverse effect on the
Company.
Oil and Natural Gas Condensate. All of the Company's crude oil and condensate
is sold at current market prices, under various short and intermediate term
contracts. The Company aggregates the majority of its production into regional
packages and periodically solicits offers from qualified buyers.
33
<PAGE>
TITLE TO PROPERTIES
As is customary in the oil and natural gas industry, the Company makes only a
cursory review of title to farmout acreage and to undeveloped oil and natural
gas leases upon execution of any contracts. Prior to the commencement of
drilling operations, a thorough title examination is conducted and curative work
is performed with respect to significant defects. To the extent title opinions
or other investigations reflect title defects, the Company, rather than the
seller of the undeveloped property, is typically responsible to cure any such
title defects at its expense. If the Company were unable to remedy or cure any
title defect of a nature such that it would not be prudent to commence drilling
operations on the property, the Company could suffer a loss of its entire
investment in the property. The Company has obtained title opinions on
substantially all of its producing properties and believes that it has
satisfactory title to such properties in accordance with standards generally
accepted in the oil and natural gas industry. Prior to completing an acquisition
of producing oil and natural gas leases, the Company obtains title opinions on
all leases. The Company's oil and natural gas properties are subject to
customary royalty interests, liens for current taxes and other burdens that the
Company believes do not materially interfere with the use of or affect the value
of such properties.
COMPETITION
The oil and natural gas industry is highly competitive. The Company competes
for the acquisition of oil and natural gas properties, primarily on the basis of
the price to be paid for such properties, with numerous entities, including
major oil companies, other independent oil and natural gas concerns and
individual producers and operators. Many of these competitors have financial and
other resources substantially greater than those of the Company. See "Risk
Factors -- Competition."
VOLATILITY OF OIL AND NATURAL GAS PRICES
Historically, the markets for oil and natural gas have been volatile and are
likely to continue to be volatile in the future. Prices for oil and natural gas
are subject to wide fluctuation in response to relatively minor changes in the
supply of and demand for oil and natural gas, market uncertainty and a variety
of additional factors that are beyond the control of the Company. These factors
include the level of consumer product demand, weather conditions, domestic and
foreign governmental regulations, the price and availability of alternative
fuels, political conditions in the Middle East, the foreign supply of oil and
natural gas, the price of foreign imports and overall economic conditions. It is
impossible to predict future oil and natural gas price movements with any
certainty. Declines in oil and natural gas prices may adversely affect the
Company's financial condition, liquidity and results of operations. Lower oil
and natural gas prices also may reduce the amount of the Company's oil and
natural gas that can be produced economically.
REGULATION
General
Various aspects of the Company's oil and natural gas operations are subject to
extensive and continually changing regulation, as legislation affecting the oil
and natural gas industry is under constant review for amendment or expansion.
Numerous departments and agencies, both federal and state, are authorized by
statute to issue, and have issued, rules and regulations binding upon the oil
and natural gas industry and its individual members. The Federal Energy
Regulatory Commission ("FERC") regulates the transportation and sale for resale
of natural gas in interstate commerce pursuant to the Natural Gas Act of 1938
("NGA") and the Natural Gas Policy Act of 1978 ("NGPA"). In the past, the
Federal government has regulated the prices at which oil and natural gas could
be sold. While sales by producers of natural gas and all sales of crude oil,
condensate and natural gas liquids can currently be made at uncontrolled market
prices, Congress could reenact price controls in the future. Deregulation of
wellhead sales in the natural gas industry began with the enactment of the NGPA
in 1978. In 1989, Congress enacted the Natural Gas Wellhead Decontrol Act (the
"Decontrol Act"). The Decontrol Act removed all remaining NGA and NGPA price and
nonprice controls affecting wellhead sales of natural gas effective
January 1, 1993.
34
<PAGE>
Regulation of Oil and Natural Gas Exploration and Production
Exploration and production operations of the Company are subject to various
types of regulation at the federal, state and local levels. Such regulations
include requiring permits and drilling bonds for the drilling of wells,
regulating the location of wells, the method of drilling and casing wells, and
the surface use and restoration of properties upon which wells are drilled. Many
states also have statutes or regulations addressing conservation matters,
including provisions for the utilization or pooling of oil and natural gas
properties, the establishment of maximum rates of production from oil and
natural gas wells and the regulation of spacing, plugging and abandonment of
such wells. Some state statutes limit the rate at which oil and natural gas can
be produced from the Company's properties. See "Risk Factors -- Compliance with
Governmental Regulations."
Natural Gas Marketing, Gathering, Processing and Transportation
Federal legislation and regulatory controls in the United States have
historically affected the price of natural gas and the manner in which such
production is marketed.
Commencing in April 1992, the FERC issued Order Nos. 636, 636-A, 636-B and
636-C ("Order No. 636"), which require interstate pipelines to provide
transportation separate, or "unbundled," from the pipelines' sales of natural
gas. Also, Order No. 636 requires pipelines to provide open-access
transportation on a basis that is equal for all natural gas supplies. Although
Order No. 636 does not directly regulate the Company's activities, the FERC has
stated that it intends for Order No. 636 to foster increased competition within
all phases of the natural gas industry. It is unclear what impact, if any,
increased competition within the natural gas industry under Order No. 636 will
have on the Company's activities. Although Order No. 636 could provide the
Company with additional market access and more fairly applied transportation
service rates, Order No. 636 could also subject the Company to more restrictive
pipeline imbalance tolerances and greater penalties for violation of those
tolerances.
In many instances, the result of Order No. 636 and related initiatives have
been to substantially reduce or eliminate the interstate pipelines' traditional
role as wholesalers of natural gas in favor of providing only storage and
transportation services.
Order No. 636 has been implemented on all interstate pipelines. In July 1996,
the United States Court of Appeals for the District of Columbia Circuit largely
upheld Order No. 636. The Supreme Court denied certiorari on May 12, 1997.
Certain issues, however, were remanded to the FERC by the District of Columbia
Circuit. On remand, the FERC in Order No. 636-C reaffirmed some elements of
Order No. 636 and modified others. Order No. 636-C may be the subject of further
proceedings at the FERC and is subject to appeal. Numerous parties also have
filed petitions for review of orders in individual pipeline restructuring
proceedings. Upon judicial review, the FERC's orders may be remanded or reversed
in whole or in part. Consequently, it is difficult to predict Order No. 636's
ultimate effects.
The FERC has announced several important transportation-related policy
statements and proposed rule changes, including the appropriate manner in which
interstate pipelines release capacity under Order No. 636 and, more recently,
the price that shippers can charge for their released capacity. In addition, in
1995, FERC issued a policy statement on how interstate natural gas pipelines can
recover the costs of new pipeline facilities. In January 1996, the FERC issued a
policy statement and a request for comments concerning alternatives to its
traditional cost-of-service ratemaking methodology. A number of pipelines have
obtained FERC authorization to charge negotiated rates as one such alternative.
While any additional FERC action on these matters would affect the Company only
indirectly, these policy statements and proposed rule changes are intended to
further enhance competition in natural gas markets. In February 1997, the FERC
announced a broad inquiry into issues facing the natural gas industry to assist
the FERC in establishing regulatory goals and priorities in the post-Order No.
636 environment. The Company cannot predict what action the FERC will take on
these matters, nor can it predict whether the FERC's actions will achieve its
stated goal of increasing competition in natural gas markets. However, the
Company does not believe that it will be treated materially differently than
other natural gas producers and marketers with which it competes.
Regulation of onshore natural gas gathering activities is primarily a matter
of state oversight. Regulation of natural gas gathering and transportation
activities, depending upon the state involved, may include various
transportation, safety, rate, environmental and non-discriminatory purchase and
transport requirements.
35
<PAGE>
Oil Sales and Transportation Rates
Sales prices of crude oil and natural gas liquids by the Company are not
regulated. The price the Company receives from the sale of these products may be
affected by the cost of transporting the products to market. Effective January
1995, the FERC implemented regulations establishing an indexing system under
which oil pipelines will be able to change their transportation rates, subject
to prescribed ceiling levels. The indexing system generally indexes such rates
to inflation, subject to certain conditions and limitations. The Company is not
able at this time to predict the effects of these regulations, if any, on the
transportation costs associated with oil production from the Company's oil
producing operations.
Additional proposals and proceedings that might affect the oil and natural gas
industry are pending before the FERC and the courts. The Company cannot predict
when or whether any such proposals may become effective. In the past, the
natural gas industry has been heavily regulated. There is no assurance that the
regulatory approach currently pursued by the FERC will continue indefinitely.
Operating Hazards and Environmental Matters
The oil and natural gas business involves a variety of operating risks,
including the risk of fire, explosions, blow-outs, pipe failure, casing
collapse, abnormally pressured formations and hazards such as oil spills,
natural gas leaks, ruptures and discharges of toxic gases. The occurrence of any
of these operating risks could result in substantial losses to the Company due
to injury or loss of life, severe damage to or destruction of property and
equipment, pollution or other environmental damage, including damage to natural
resources, clean-up responsibilities, penalties and suspension of operations.
Such hazards may hinder or delay drilling, development and on-line operations.
Extensive federal, state and local laws regulating the discharge of materials
into the environment or otherwise relating to the protection of the environment
affect the Company's oil and natural gas operations. Numerous governmental
departments issue rules and regulations to implement and enforce such laws,
which are often difficult and costly to comply with and which carry substantial
penalties for failure to comply. Some laws, rules and regulations relating to
protection of the environment may, in certain circumstances, impose "strict
liability" for environmental contamination, rendering a person liable for
environmental damages and cleanup costs without regard to negligence or fault on
the part of such person. Other laws, rules and regulations may restrict the rate
of oil and natural gas production below the rate that would otherwise exist or
even prohibit exploration and production activities in sensitive areas. In
addition, state laws often require various forms of remedial action to prevent
pollution, such as closure of inactive pits and plugging of abandoned wells. The
regulatory burden on the oil and natural gas industry increases its cost of
doing business and consequently affects its profitability. The Company believes
that it is in substantial compliance with current applicable environmental laws
and regulations and that continued compliance with existing requirements will
not have a material adverse impact on the Company's operations. However,
environmental laws and regulations have been subject to frequent changes over
the years, and the imposition of more stringent requirements could have a
material adverse effect upon the capital expenditures, earnings or competitive
position of the Company.
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as "Superfund," imposes liability, without regard to
fault or the legality of the original conduct, on certain classes of persons
that are considered to be responsible for the release of a "hazardous substance"
into the environment. These persons include the current or former owner or
operator of the disposal site or sites where the release occurred and companies
that disposed or arranged for the disposal of hazardous substances. Under
CERCLA, such persons may be subject to joint and several liability for the costs
of investigating and cleaning up hazardous substances that have been released
into the environment, for damages to natural resources and for the costs of
certain health studies. In addition, companies that incur Superfund liability
frequently also confront third party claims because it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by hazardous substances or other
pollutants released into the environment from a Superfund site.
The Federal Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 ("RCRA"), regulates the generation, transportation,
storage, treatment and disposal of hazardous wastes and can require cleanup of
hazardous waste disposal sites. RCRA currently excludes drilling fluids,
produced waters and other wastes associated with the exploration, development or
production of oil and natural gas from regulation as "hazardous waste."
36
<PAGE>
However, other wastes handled at exploration and productions sites may not fall
within this exclusion. Disposal of non-hazardous oil and natural gas
exploration, development and production wastes usually are regulated by state
law.
Stricter standards for waste handling and disposal may be imposed on the oil
and natural gas industry in the future. From time to time legislation has been
proposed in Congress that would revoke or alter the current exclusion of
exploration, development and production wastes from the RCRA definition of
"hazardous wastes," thereby potentially subjecting such wastes to more stringent
handling, disposal and cleanup requirements. If such legislation were enacted,
it could have a significant impact on the operating costs of the Company, as
well as the oil and natural gas industry in general. Furthermore, although
petroleum, including crude oil and natural gas, is exempt from CERCLA, at least
two courts have ruled that certain wastes associated with the production of
crude oil may be classified as "hazardous substances" under CERCLA. The impact
of future revisions to environmental laws and regulations cannot be predicted.
The Oil Pollution Act of 1990 ("OPA") provides that persons responsible for
facilities and vessels (including the owners and operators of onshore
facilities) are subject to strict joint and several liability for cleanup costs
and certain other public and private damages arising from a spill of oil into
waters of the United States. OPA establishes a liability limit for onshore
facilities of $350.0 million. However, facilities located in coastal waters may
be considered "offshore" facilities subject to greater liability limits under
OPA (all removal costs plus $75.0 million). In addition, a party cannot take
advantage of this liability limit if the spill was caused by gross negligence or
willful misconduct or resulted from a violation of a federal safety,
construction or operating regulation. If a party fails to report a spill or
cooperate in the cleanup, liability limits likewise do not apply. OPA also
imposes other requirements on facility owners and operators, such as the
preparation of an oil spill response plan. Failure to comply with ongoing
requirements or inadequate cooperation in a spill event may subject the
responsible party to civil or criminal enforcement actions.
The OPA also imposes financial responsibility requirements on the person or
persons statutorily responsible for certain facilities. On March 25, 1997, the
U.S. Minerals Management Service ("MMS") proposed new regulations to implement
these financial responsibility requirements. Under the regulations proposed by
the MMS, oil production and storage facilities that are located in wetlands
adjacent to coastal waters could be required to demonstrate various levels of
financial ability to reimburse governmental entities and private parties for
costs that they could incur in responding to an oil spill, if the MMS determines
that spills from those particular facilities could reach coastal waters.
Although the Company owns and operates oil production and storage facilities in
wetland areas in southern Louisiana, the Company does not believe that an oil
spill from one of its facilities could reach coastal waters, and therefore the
Company does not expect to be subject to the financial responsibility
requirements, if such requirements are implemented in the manner proposed by the
MMS. However, if the financial responsibility requirements apply to the Company,
the amount of financial responsibility that the Company would have to
demonstrate (under the MMS's proposed rules) would be $10.0 million, an amount
that the Company believes it could satisfy without any negative impact on its
financial condition or cost of doing business.
The Federal Water Pollution Control Act ("FWPCA") imposes restrictions and
strict controls regarding the discharge of produced waters and other oil and
natural gas wastes into navigable waters. Permits must be obtained to discharge
pollutants to waters and to conduct construction activities in waters and
wetlands. The FWPCA and similar state laws provide for civil, criminal and
administrative penalties for any unauthorized discharges of pollutants and
unauthorized discharges of reportable quantities of oil and other hazardous
substances. Many state discharge regulations and the Federal National Pollutant
Discharge Elimination System general permits prohibit the discharge of produced
water and sand, drilling fluids, drill cuttings and certain other substances
related to the oil and natural gas industry to coastal waters. Although the
costs to comply with recently-enacted zero discharge mandates under federal or
state law may be significant, the entire industry is expected to experience
similar costs and the Company believes that these costs will not have a material
adverse impact on the Company's financial conditions and operations. In 1992 the
EPA adopted regulations requiring certain oil and natural gas exploration and
production facilities to obtain permits for storm water discharges. Costs may be
associated with the treatment of wastewater or developing and implementing storm
water pollution prevention plans.
The Company's operations are also subject to the Clean Air Act ("CAA") and
comparable state and local requirements. Amendments to the CAA were adopted in
1990 and contain provisions that may result in the gradual imposition of certain
pollution control requirements with respect to air emissions from operations of
the Company.
37
<PAGE>
The Company may be required to incur certain capital expenditures in the next
several years for air pollution control equipment in connection with obtaining
and maintaining operating permits and approvals for air emissions. However, the
Company does not believe its operations will be materially adversely affected by
any such requirements, and the requirements are not expected to be any more
burdensome to the Company than to other similarly situated companies involved in
oil and natural gas exploration and production activities.
Although the Company maintains insurance against some, but not all, of the
risks described above, including insuring the cost of clean-up operations,
public liability and physical damage, there can be no assurance that such
insurance will be adequate to cover all such costs or that such insurance will
continue to be available in the future or that such insurance will be available
at premium levels that justify its purchase. The occurrence of a significant
event not fully insured or indemnified against could have a material adverse
effect on the Company's financial condition and operations.
EMPLOYEES
On July 1, 1997, the Company employed 32 people, including 15 that work in
the Company's various field offices.
OFFICES
The Company leases its New Orleans, Louisiana headquarters under a lease
covering approximately 10,900 square feet, expiring in June 2000. The monthly
rent is approximately $11,300. The Company also leases office space for its
field offices in Houston, Texas and Lafayette, Louisiana.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings, other
than ordinary routine litigation incidental to its business that management
believes would not have a material adverse effect on its financial condition or
results of operations.
38
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information concerning the directors and
executive officers of the Company. All directors hold office until the next
annual meeting of stockholders of the Company and until their successors have
been duly elected and qualified. All officers serve at the discretion of the
Board of Directors.
<TABLE>
<CAPTION>
Director
Name Age Position Since
---- --- -------- --------
<S> <C> <C> <C>
McLain J. Forman, Ph.D. ..... 68 Chairman of the Board, Chief Executive
Officer and President 1982
Harold C. Block ............. 66 Vice President of Land and Acquisitions
Director 1997
Marvin J. Gay ............... 54 Vice President of Finance and
Administration and Director 1997
Michael A. Habetz ........... 48 Vice President, Manager of Operations
and Director 1997
Randolph R. Birkman ......... 42 Director 1997
John W. Sinders ............. 43 Director 1997
</TABLE>
A brief biography of each director and executive officer follows:
McLain J. Forman, Ph.D. founded the Company in 1982 and has served as the
Chairman of the Board, President and Chief Executive Officer of the Company
since inception. Dr. Forman began his career in 1955 as a consulting geologist
as a member of the predecessor firm of Atwater Consultants Ltd. Since 1960, Dr.
Forman has directed and supervised exploration and production activities for
clients and for his own account in the Gulf Coast Region. From 1972 to 1982,
Dr. Forman concentrated his efforts on originating and developing wildcat
exploration prospects with various industry and financial partners. With the
formation of the Company in 1982, his focus shifted to exploratory and
development prospects, and in 1991 the Company began to selectively acquire and
exploit producing properties. Dr. Forman earned a B.S. degree in Geology from
Tulane University and an M.A. degree and a Ph.D. in geology from Harvard
University.
Harold C. Block is the Vice President of Land and Acquisitions and a director
of the Company. Mr. Block joined Forman Exploration Company, the predecessor of
the Company, in 1973 as Manager of the Land Department, and in 1982 he moved to
his current position with the Company. Mr. Block began his career with F.A.
Callery, Inc. in 1957, where he became Land Manager in 1959. Upon leaving
Callery in 1971 until he joined the Company, Mr. Block was a consultant and
organized and conducted an oil and gas exploration program. Mr. Block has a
B.B.A. degree in Management from the University of Houston.
Marvin J. Gay is the Vice President of Finance and Administration and a
director of the Company. Mr. Gay has been a Vice President of the Company
since he joined the Company at its inception in 1982. Mr. Gay was the
Controller and Treasurer of Forman Exploration Company, the predecessor of the
Company, from 1974 to 1982. Before joining the Company, Mr. Gay was a
consultant with Arthur Andersen & Co. Mr. Gay holds a B.B.A. in Accounting from
the University of Mississippi. He is a Certified Public Accountant and a member
of the American Institute of Certified Public Accountants.
Michael A. Habetz is Vice President, Manager of Operations and a director of
the Company. Mr. Habetz has been a Vice President and the Manager of Operations
since he joined the Company in 1993. From 1970 to 1987, he held various
supervisory and management positions with Texaco and Edwin L. Cox, where he was
responsible for all phases of drilling, completion, workover and production
operations. From 1987 until 1991, Mr. Habetz provided consulting engineering
services through Energy Research and Development Corporation, and in 1991 he
began to provide those services on a consulting basis for the Company. Mr.
Habetz holds a B.S. degree in Mechanical Engineering from Louisiana State
University.
Randolph R. Birkman currently serves as Vice President for the High Yield Bond
Research Department of Trust Company of the West ("TCW") and has been with TCW
or its predecessor-in-interest, Crescent Capital Corporation, since May 1995.
From June 1993 to May 1995, Mr. Birkman was the Portfolio Manager of The Pilgrim
High Yield Trust, an open-end mutual fund which invested primarily in fixed
income corporate securities. Mr. Birkman also held the positions of Senior
Credit Analyst for Pilgrim Prime Rate Trust and an Equity Analyst for Pilgrim
Regional
39
<PAGE>
Bankshares, from October 1989 to June 1993. Mr. Birkman received his B.A. degree
in Psychology from the University of California, Davis and earned his M.B.A.
from Texas Tech University.
John W. Sinders is currently an Executive Vice President in the Energy Group
of Jefferies & Company, Inc. and is a member of the Board of Directors of
Jefferies & Co., Inc. Prior to joining Jefferies in January 1993, Mr. Sinders
was a Managing Director and Manager of the Corporate Finance Department at
Howard, Weil, Labouisse, Friedrichs Incorporated where he had primary
responsibility for the oil service, refining and transportation industries.
Prior to joining Howard Weil in 1987, Mr. Sinders was a Partner at McGlinchey,
Stafford, Cellini and Lang, a New Orleans law firm. Mr. Sinders is also a member
of the Board of Directors of The Shaw Group, Inc. Mr. Sinders is a graduate of
the University of Virginia and received his law degree from the University of
Virginia School of Law. Mr. Sinders is admitted to the Louisiana and Tennessee
Bars.
Pursuant to an understanding with McLain J. Forman, upon the completion of the
Offerings, Mr. Birkman and Mr. Sinders were elected directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information for the year ended
December 31, 1996 with respect to the compensation paid to Mr. Forman, the
Chairman, President and Chief Executive Officer, and the three other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers"). No other executive officers of the Company received annual
compensation (including salary and bonuses earned) that exceeded $100,000 for
the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
December 31, 1996
Annual Compensation
-----------------------
Name and Principal Position Salary ($) Bonus ($)
- --------------------------- ---------- ---------
McLain J. Forman Ph.D. ............................ $ 185,400 $ 7,725
Chairman of the Board, Chief Executive
Officer and President
Harold C. Block ................................... 108,150 4,506
Vice President of Land and Acquisitions
Marvin J. Gay ..................................... 86,071 3,586
Vice President of Finance and Administration
Michael A. Habetz ................................. 98,880 4,120
Vice President, Manager of Operations
1997 STOCK OPTION PLAN
The 1997 Stock Option Plan (the "Stock Option Plan") was adopted by the Board
of Directors and approved by the sole stockholder of the Company in April 1997.
A total of 36,333 shares of Common Stock have been reserved for issuance
pursuant to the Stock Option Plan. The Stock Option Plan provides for the grant
to employees, including officers of the Company, of "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and non-statutory stock options (collectively, the
"Awards"). In addition, nonemployee directors (the "Outside Directors") are
eligible to receive non-statutory stock options. The Company has granted
incentive stock options to certain employees, including directors and executive
officers, of the Company entitling such persons to purchase approximately 25% of
the Common Stock (on a fully diluted basis) at an exercise price equal to the
fair market value of the Common Stock as of the date of issuance, as established
by an independent appraiser selected by the Company.
The Stock Option Plan provides that Awards may be granted to employees
(including officers) and directors of the Company. The Stock Option Plan is
administered by a committee designated by the Board. Subject to special
provisions relating to Outside Directors, the Board's designated committee
selects the employees to which Awards may be granted and the type of Award to be
granted and determines, as applicable, the number of shares to be subject to
each Award, the exercise price and the vesting of each Award. In making such
determination, the Board's designated committee takes into account the
employee's present and potential contributions to the success of the Company and
other relevant factors.
40
<PAGE>
401(K) PLAN
The Company has adopted a defined contribution retirement plan that complies
with Section 401(k) of the Code (the "401(k) Plan"). Pursuant to the terms of
the 401(k) Plan, all employees with at least one year of continuous service are
eligible to participate and may contribute up to 15% of their annual
compensation (subject to certain limitations imposed under the Code). The 401(k)
Plan provides that a discretionary match of employee contributions may be made
by the Company in cash. The Company has not made any matching contributions to
the 401(k) Plan in the past and does not anticipate making any such
contributions in 1997. The amounts held under the 401(k) Plan are invested
among various investment funds maintained under the 401(k) Plan in accordance
with the directions of each participant. Employee contributions under the
401(k) Plan are 100% vested and participants are entitled to payment of vested
benefits upon termination of employment.
COMPENSATION OF DIRECTORS
Directors of the Company do not presently receive compensation for their
services as directors. Directors of the Company are entitled to reimbursement
of their reasonable out-of-pocket expenses in connection with their travel to
and attendance at meetings of the Board of Directors or committees thereof. In
addition, the Board or its designated committee may from time to time grant
Awards to directors pursuant to the terms of the Stock Option Plan. See " --
1997 Stock Option Plan."
PRINCIPAL STOCKHOLDERS
As of June 30, 1997, the beneficial ownership of the voting Common Stock was
as follows: (i) 70,000 shares of Common Stock (representing 100% of the issued
and outstanding voting shares of Common Stock) was owned by McLain J. Forman and
(ii) 67,444 shares of Common Stock were issuable upon exercise of certain
warrants (see "Description of Capital Stock -- Warrants"). Certain employees,
including directors and executive officers, of the Company have options to
purchase approximately 25% of the Common Stock (on a fully diluted basis). See
"Description of Capital Stock -- Common Stock."
CERTAIN TRANSACTIONS
September 1996 Company Loan. In September 1996, McLain J. Forman, the
Chairman of the Board, President, Chief Executive Officer and sole stockholder
of the Company, loaned $1.0 million to the Company on an unsecured basis for the
purpose of paying certain trade payables. As of April 10, 1997, the outstanding
balance of this loan was $140,000, the Company having repaid $500,000 from the
proceeds of the loan from JEDI and repaid $120,000 per month in February, March
and April 1997. The Company used a portion of the net proceeds from the
Offerings to pay the outstanding balance of such loan.
Sale of Bayou Fer Blanc Field and West Gueydan Field. In August 1996, the
Company sold its interests in the Bayou Fer Blanc Field and the West Gueydan
Field to FPC II, a company whose sole shareholder is Mr. Forman, for a purchase
price of $950,000. In connection with such sale, FPC II assumed certain
liabilities of the Company relating to the completion of the 3-D seismic survey
conducted on those fields and other related matters. The Company used $5.0
million of the net proceeds from the Offerings in connection with FPC II's sale
back to the Company of its interests in the fields, of which $1.5 million was
paid to FPC II, $1.0 million was used to pay bank debt incurred by Mr. Forman in
connection with FPC II's purchase of the fields and $2.5 million was used to pay
trade payables to third parties. As a consequence of this sale, the Company now
owns 100% of the working interest in the Bayou Fer Blanc Field and 90% of the
working interest in the West Gueydan Field. See "Private Placement" and
"Business and Properties -- Significant Project Areas."
Repurchase of Loan Warrants. The Company, Mr. Forman and the certain holders
of warrants are parties to an agreement pursuant to which such holders granted
to Mr. Forman the right to purchase all of such warrants. See "Description of
Capital Stock -- Warrants."
Purchase of Overriding Royalty Interests from EEP and EECIP. Pursuant to the
Repayment Agreement dated December 16, 1996, among the Company, Mr. Forman, EEP
and EECIP, upon the Company's repayment of the outstanding balance of the loans
from EEP and EECIP on a date prior to June 16, 1997, the Company purchased for
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$2.6 million overriding royalty interests in the Lake Enfermer Field, the Manila
Village Field and the Boutte Field equal to 7.5% of the Company's interests in
those fields. The effective date of the Company's acquisition of such
overriding royalty interests is the date on which the Company repaid such loans
and pays the purchase price of $2.6 million. The Company used $2.6 million of
the net proceeds from the Offerings to purchase such interests on June 3, 1997.
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THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights under the Registration
Rights Agreement. The Exchange Notes are being offered hereunder in order to
satisfy the obligations of the Company under the Registration Rights Agreement.
See "Registration Rights."
For each $1,000 principal amount of Old Notes surrendered to the Company
pursuant to the Exchange Offer, the holder of such Old Notes will receive $1,000
principal amount of Exchange Notes. Upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, the Company will accept all Old Notes properly tendered prior to
5:00 p.m., New York City time, on the Expiration Date. Holders may tender some
or all of their Old Notes pursuant to the Exchange Offer in integral multiples
of $1,000 principal amount.
Under existing interpretations of the staff of the SEC, including Exxon
Capital Holdings Corporation, SEC No-Action Letter (available April 13, 1989),
the Morgan Stanley Letter and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Company believes that the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act by the respective holders thereof (other
than a "Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company 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 Exchange Notes are
acquired in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Eligible holders wishing to accept the Exchange Offer must represent to the
Company that such conditions have been met. Any holder of Old Notes who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may not rely on the interpretation by the staff of the SEC
enunciated in the Morgan Stanley Letter and similar no-action letters, and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange Notes
in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a broker-dealer
tendering Old Notes acquired directly from the Company for its own account, (ii)
any Exchange Notes to be received by it are being acquired in the ordinary
course of its business and (iii) it is not participating in, and it has no
arrangement with any person to participate in, the distribution (within the
meaning of the Securities Act) of the Exchange Notes. In addition, in
connection with any resales of Exchange Notes, any broker-dealer (a
"Participating 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 deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes. The staff of the SEC 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 Exchange Notes (other than a resale of an unsold allotment
from the original sale of 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 Exchange Notes. See "Plan of Distribution."
The Exchange Offer shall be deemed to have been consummated upon the earlier
to occur of (i) the Company having exchanged Exchange Notes for all outstanding
Old Notes (other than Old Notes held by a Restricted Holder) pursuant to the
Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange
Offer, Exchange Notes for all Old Notes that have been tendered and not
withdrawn on the Expiration Date. In such event, holders of Old Notes seeking
liquidity in their investment would have to rely on exemptions to registration
requirements under the securities laws, including the Securities Act.
As of the date of this Prospectus, $70,000,000 aggregate principal amount of
Old Notes are issued and outstanding. Currently, Old Notes are eligible for
trading in the Private Offerings, Resales and Trading through Automated
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Linkages (PORTAL) Market, the National Association of Securities Dealers'
screen based, automated market trading of securities eligible for resale under
Rule 144A.
The Company shall be deemed to have accepted for exchange validly tendered Old
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. See "--Exchange Agent." The Exchange Agent will act as
agent for the tendering holders of Old Notes for the purpose of receiving
Exchange Notes from the Company and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender or the occurrence of certain other events set forth herein, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender 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 Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"--Fees and Expenses."
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of the date of this Prospectus.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean _________, 1997 unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time. The Company reserves the right
(i) to delay acceptance of any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Old Notes not previously
accepted, if any of the conditions set forth herein under "--Termination" shall
have occurred and shall not have been waived by the Company (if permitted to be
waived by the Company), by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, and (ii) to amend the terms of
the Exchange Offer in any manner deemed by it to be advantageous to the holders
of the Old Notes. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment. Without limiting the manner in which the Company may
choose to make public announcements of any delay in acceptance, extension,
termination or amendment of the Exchange Offer, the Company shall have no
obligation to publish, advertise, or otherwise communicate any such public
announcement, other than by making a timely release to the Dow Jones News
Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest payable in cash semi-annually in arrears
on June 1 and December 1 of each year, commencing December 1, 1997. Holders of
Exchange Notes of record on November 15, 1997 will receive interest on
December 1, 1997 from June 3, 1997. Assuming the Exchange Offer is consummated
prior to the record date in respect of the December 1, 1997 interest payment for
the Old Notes, holders who exchange their Old Notes for Exchange Notes will
receive the same interest payment on December 1, 1997 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 Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or an Agent's Message,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In
addition, either (i) the certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure
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is available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent along with an
Agent's Message prior to the Expiration Date or (iii) the Holder must comply
with the guaranteed delivery procedures described below. The tender by a holder
of Old Notes will constitute an agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal. Delivery of all documents must be made to the
Exchange Agent at its address set forth herein. Holders may also request that
their respective brokers, dealers, commercial banks, trust companies or nominees
effect such tender for such holders.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
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 holders. 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 timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company. Only a holder of Old Notes may tender such Old Notes in
the Exchange Offer. The term "holder" with respect to the Exchange Offer means
any person in whose name Old Notes are registered on the books of the Company or
any other person who has obtained a properly completed stock power from the
registered holder.
Any beneficial holder whose Old Notes are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on behalf of the registered holder. If such
beneficial holder wishes to tender directly, such beneficial holder must, prior
to completing and executing the Letter of Transmittal and delivering his 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.
If the Letter of Transmittal is signed by the record holder(s) of the Old Notes
tendered thereby, the signature must correspond with the name(s) written on the
face of the Old Notes without alteration, enlargement or any change whatsoever.
If the Letter of Transmittal is signed by a participant in Depositary Trust
Company ("DTC"), the signature must correspond with the name as it appears on
the security position listing as the holder of the Old Notes. Signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, must be
guaranteed 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") unless the Old Notes tendered pursuant thereto are
tendered (i) by a registered holder (or by a participant in DTC whose name
appears on a security position listing as the owner) who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the Letter of Transmittal and the Exchange Notes are being issued directly to
such registered holder (or deposited into the participant's account at DTC) or
(ii) for the account of an Eligible Institution. If the Letter of Transmittal
is signed by a person other than the registered holder of any Old Notes listed
therein, such Old Notes must be endorsed or accompanied by appropriate bond
powers which authorize such person to tender the Old Notes on behalf of the
registered holder, in either case signed as the name of the registered holder or
holders appears on the Old Notes. 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 Company, evidence satisfactory to the Company of their
authority to so act must be submitted with the Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC with an Agent's Message) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes (or a timely confirmation received of
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a book-entry transfer of Old Notes into the Exchange Agent's account at DTC with
an Agent's Message) with the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of the Company or its counsel, be unlawful. The Company
also reserves the absolute right to waive any conditions of the Exchange Offer
or defects or irregularities in tender as to particular Old Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) shall 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
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such 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 without cost by the Exchange Agent to the tendering holder of such Old
Notes unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date. In addition, the Company reserves
the right in its sole discretion to (i) purchase or make offers for any Old
Notes that remain outstanding subsequent to the Expiration Date, or, as set
forth under "--Termination," to terminate the Exchange Offer and (ii) 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 may differ from the terms of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Old Notes at
DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account in accordance with DTC's procedure for such transfer. Although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an Agent's Message must be transmitted to and
received by the Exchange Agent on or prior to the Expiration Date at one of its
addresses set forth below under "--Exchange Agent," or the guaranteed delivery
procedure described below must be complied with. DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All references in this
Prospectus to deposit or delivery of Old Notes shall be deemed to include DTC's
book-entry delivery method.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer on
a timely basis and deliver an Agent's Message, may effect a tender if: (i) the
tender is made by or through an Eligible Institution; (ii) 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 of the Old Notes, the registration number or numbers of such Old Notes
(if applicable), and the total principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, the Letter of Transmittal, together
with the Old Notes in proper form for transfer (or a confirmation of a book-
entry transfer into the Exchange Agent's account at DTC with an Agent's Message)
and any other documents required by the Letter of Transmittal, will be deposited
by the Eligible Institution with the Exchange Agent; and (iii) such properly
completed and executed Letter of Transmittal, together with the certificate(s)
representing all tendered Old Notes in proper form for transfer (or a
confirmation of such a book-entry transfer) and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within five
business days after the Expiration Date.
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TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.
Old Notes tendered in exchange for Exchange Notes (or a timely confirmation of
a book-entry transfer of such Old Notes into the Exchange Agent's account at
DTC) must be received by the Exchange Agent, with the Letter of Transmittal or
an Agent's Message and any other required documents, by the Expiration Date or
within the time periods set forth above pursuant to a Notice of Guaranteed
Delivery from an Eligible Institution. Each holder tendering the Old Notes for
exchange sells, assigns and transfers the Old Notes to the Exchange Agent, as
agent of the Company, and irrevocably constitutes and appoints the Exchange
Agent as the holder's agent and attorney-in-fact to cause the Old Notes to be
transferred and exchanged. The holder warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Old Notes and to
acquire the Exchange Notes issuable upon the exchange of such tendered Old
Notes, that the Exchange Agent, as agent of the Company, will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances, and that the Old Notes tendered for
exchange are not subject to any adverse claims when accepted by the Exchange
Agent, as agent of the Company. The holder also warrants and agrees that it
will, upon request, execute and deliver any additional documents deemed by the
Company or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment and transfer of the Old Notes. All authority
conferred or agreed to be conferred in the Letter of Transmittal by the holder
will survive the death, incapacity or dissolution of the holder and any
obligation of the holder shall be binding upon the heirs, personal
representatives, successors and assigns of such holder.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange. To withdraw a
tender of Old Notes in the Exchange Offer, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including, if applicable, the registration number
or numbers and total principal amount of such Old Notes), (iii) be signed by the
Depositor 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
permit the Trustee with respect to the Old Notes to register the transfer of
such Old Notes into the name of the Depositor withdrawing the tender, (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor and (v) if applicable because the Old Notes have been
tendered pursuant to the book-entry procedures, specify the name and number of
the participant's account at DTC to be credited, if different than that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
whose determination shall 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 Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have
been tendered but which are not accepted for exchange will be returned to the
holder thereof 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.
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TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not be
required to accept for exchange any Old Notes not theretofore accepted for
exchange, and may terminate the Exchange Offer if it determines that the
Exchange Offer violates any applicable law or interpretation of the staff of the
SEC.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period. Holders of Old Notes will have
certain rights against the Company under the Registration Rights Agreement
should the Company fail to consummate the Exchange Offer.
EXCHANGE AGENT
U.S. Trust Company of Texas, N.A., the trustee under the Indenture, has been
appointed as Exchange Agent for the Exchange Offer. Questions and requests for
assistance and requests for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
By Mail: By Hand Delivery:
U. S. Trust Company of Texas, N.A. U. S. Trust Company of Texas, N.A.
Attention: Corporate Trust Attention: Corporate Trust
P. O. Box 841 111 Broadway - Lower Level
Cooper Station New York, New York 10006-1906
New York, New York 10276-0841
By Overnight Courier:
U. S. Trust Company of Texas, N.A.
770 Broadway - 13th Floor
Corporate Trust Operations
New York, New York 10003-9598
Facsimile Transmission: (212) 420-6504
Confirm by Telephone: (800) 225-2398
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone. The Company will not make any payments to brokers,
dealers or other persons soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse the Exchange Agent for its reasonable out-of-
pocket expenses in connection therewith. The Company may also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable out-of-
pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for exchange.
The other expenses incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, will be paid by the Company. The Company will pay all transfer taxes, if
any, applicable to the exchange of Old Notes pursuant to the Exchange Offer.
If, however, Exchange Notes
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or Old Notes not tendered or accepted for exchange are to be delivered to, or
are to be registered or 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.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company upon
the consummation of the Exchange Offer. The expenses of the Exchange Offer will
be amortized by the Company over the term of the Exchange Notes under generally
accepted accounting principles.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 1,000,000 shares of Common
Stock, no par value per share (the "Common Stock"), divided into classes, voting
and non-voting, of which 70,000 voting shares and 20,000 non-voting shares
(which are convertible into voting shares) were issued and outstanding as of
June 30, 1997, and 1,000,000 shares of preferred stock, $0.01 par value per
share, 200,000 shares of which are outstanding. In addition, the Company has
reserved for issuance 19,000 shares of Common Stock upon exercise of certain
outstanding warrants and 36,333 shares of Common Stock under the Stock Option
Plan. See "Management -- 1997 Stock Option Plan" and "--Warrants" below. In
addition, the Company has reserved for issuance 14,533 shares of Common Stock
upon exercise of certain outstanding warrants issued in connection with the sale
of the Series A Cumulative Preferred Stock (the "Equity Units"), another 29,067
shares of Common Stock upon exercise of certain outstanding warrants issued in
connection with the sale of the Old Notes, and another 4,844 shares of Common
Stock upon exercise of certain warrants to Jefferies & Company, Inc., that were
also issued in connection with the sale of the Old Notes. See "Private
Placement."
COMMON STOCK
Holders of voting Common Stock are entitled to one vote for each share held in
the election of directors and all other matters submitted to a vote of
shareholders and do not have cumulative voting rights. Holders of a majority of
the shares of Common Stock entitled to vote in any election of directors may
elect all of the directors of the Company standing for election. Holders of
Common Stock are entitled to receive ratably such dividends, if any, that may be
declared by the Board of Directors out of funds legally available for such
purpose. The Company has never paid dividends on the Common Stock, and it is not
anticipated that the Company will pay any cash dividends in the foreseeable
future. Upon the liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to receive ratably the net assets of the
Company available after payment of all debts and other liabilities. Holders of
Common Stock have no preemptive rights.
PREFERRED STOCK
The Company is authorized to issue, without any action on the part of its
stockholders, 1,000,000 shares of preferred stock, $.01 par value per share.
The Board of Directors has the authority to divide the preferred stock into one
or more series and to fix and determine the relative rights and preferences of
the shares of each such series, including dividend rates, terms of redemption,
sinking funds, the amount payable in the event of voluntary liquidation,
dissolution or winding up of the affairs of the Company, conversion rights and
voting powers. The Company authorized the issuance of a series consisting of
550,000 shares of preferred stock, that is designated the "Series A Cumulative
Preferred Stock," 200,000 shares of which were offered and sold as part of the
Equity Units that were placed concurrently with the sale of the Old Notes.
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Terms of Series A Preferred Stock
Holders of the Series A Cumulative Preferred Stock (the "Preferred Stock")
are entitled to receive a cumulative annual dividend of $7.50 per share, payable
quarterly. Dividends are payable in additional shares of Preferred Stock (valued
at $50.00 per share) through June 1, 1999, and thereafter in cash, or at the
Company's election, in shares of Preferred Stock (valued at $50.00 per share).
In the event of any liquidation, dissolution or winding up of the Company, after
payment or provision for payment of the debts and other liabilities of the
Company, the holders of the Preferred Stock shall be entitled to receive, out of
the remaining net assets of the Company available for distribution to
stockholders, liquidating distributions in the amount of $50.00 per share, plus
an amount equal to all dividends accrued and unpaid on each such share (whether
or not declared) to the date fixed for distribution, before any distribution is
made to holders of the Common Stock or any other class of stock of the Company
ranking junior to the Preferred Stock. The Preferred Stock may be redeemed for
cash, in whole or in part, at the option of the Company under certain
circumstances. The Preferred Stock will be mandatorily redeemed, in whole, on
June 1, 2005 for cash.
WARRANTS
In connection with its loans from EEP and EECIP, the Company issued (i) to
EEP a warrant to purchase 9,000 shares of Common Stock for $25 per share
pursuant to the terms of the Common Stock Purchase Warrant dated March 5, 1991
and a warrant to purchase 5,000 shares of Common Stock for $44.57 per share
pursuant to the terms of the Common Stock Purchase Warrant dated March 17, 1994
(collectively, the "EEP Warrants"), (ii) to EECIP a warrant to purchase 4,000
shares of Common Stock for $44.57 per share pursuant to the terms of the Common
Stock Purchase Warrant dated March 17, 1994 (the "EECIP Warrant), and (iii) to
Associated Energy Managers, Inc., ("AEM," and together with EEP and EECIP, the
"Existing Holders"), a warrant to purchase 1,000 shares of Common Stock for
$44.57 per share pursuant to the terms of the Common Stock Purchase Warrant
dated March 17, 1994 (the "AEM Warrant"). The issuance of certain warrants
related to the Offerings has caused a minimal adjustment in the exercise price
of the EEP Warrants, the EECIP Warrants and the AEM Warrants.
The EEP Warrants, the EECIP Warrant and the AEM Warrant (collectively, the
"Loan Warrants") expire on December 31, 2025. The Loan Warrants may be
exercised on the earliest to occur of (a) the sale or merger of the Company or
the sale of substantially all of the assets of the Company, (b) an initial
public offering of Common Stock or (c) December 1, 2025. Pursuant to the terms
of the Loan Warrants, unexercised warrants are subject to adjustment if (i) the
Company issues Common Stock (or certain securities exercisable or exchangeable
for or convertible into Common Stock) for consideration per share less than the
fair market value per share of Common Stock at the time of issuance, (ii) there
is a subdivision or combination of the Common Stock, (iii) there is payment of a
stock dividend or distribution of assets to all holders of Common Stock or (iv)
there is any other increase or decrease in the number of shares of Common Stock
outstanding and the Company does not receive compensation therefor. In
addition, the number and type of securities subject to the Loan Warrants are
subject to adjustment if the Company is a party to a merger or consolidation.
As of the date of this Prospectus, the Loan Warrants have not been exercised.
In December 1996, the Company, Mr. Forman and the Existing Holders entered
into the Put/Call Agreement, pursuant to which the Existing Holders granted to
Mr. Forman the right to purchase all of the Loan Warrants (a) during the period
of June 30, 1999 through December 31, 1999, (b) at any time at which the
"Company Value" (as determined pursuant to the terms of the Put/Call Agreement)
reaches $75.0 million or (c) when Mr. Forman sells all of his shares of Common
Stock. In addition, Mr. Forman granted to the Existing Holders the right to
require Mr. Forman to purchase all of the Existing Holders' Loan Warrants at any
time that (i) the Company sells or transfers 33% or more of the Company's
interest in the Lake Enfermer Field, (ii) Mr. Forman sells or transfers 25% or
more of his shares of Common Stock, (iii) the Company Value reaches $125.0
million or (iv) the Company makes a distribution of property to its
shareholders, the value of which exceeds 25% of the Company Value. The Put/Call
Agreement provides that the purchase price per share of the Loan Warrants is
equal to Company Value plus the exercise price of the employee options divided
by the sum of the outstanding shares of Common Stock and the number of shares of
Common Stock covered by the Loan Warrants and employee options.
In connection with the offering and sale of the Note Units, the Company
issued warrants to purchasers of the Note Units to entitle the holders thereof
to purchase, in the aggregate, 29,067 shares of Common Stock (the "Note
Warrants"). Each Note Warrant, when exercised, entitles the holder thereof to
receive 0.41524 shares of Common Stock at the exercise price, as adjusted (the
"Note Exercise Price"), which initially is $1.00 per share. The Note
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Exercise Price, the number of shares of Common Stock received in respect of a
Note Warrant and the number of Note Warrants outstanding are subject to
adjustment in certain cases. The Note Warrants are currently exercisable and
will automatically expire on June 1, 2004. If the last day for the exercise of
the Note Warrants is not a business day, then the Note Warrants may be exercised
on the next succeeding business day.
In connection with the offering and sale of the Note Units, the Company
also issued to Jefferies & Company, Inc. a warrant to purchase 4,844 shares of
Common Stock at an initial exercise price of $1.00 per share.
In connection with the offering and sale of the Equity Units, the Company
issued warrants to purchasers of the Equity Units that entitle the holders
thereof to purchase, in the aggregate, 14,533 shares of Common Stock. Each
Equity Warrant, when exercised, entitles the holder thereof to receive 0.07267
shares of Common Stock at the exercise price, as adjusted (the "Equity Exercise
Price"), which initially is $1.00 per share. The Equity Exercise Price, the
number of shares of Common Stock received in respect of an Equity Warrant and
the number of Equity Warrants outstanding are subject to adjustment in certain
cases. The Equity Warrants are currently exercisable immediately and will
automatically expire on June 1, 2004. If the last day for the exercise of the
Equity Warrants is not a business day, then the Equity Warrants may be exercised
on the next succeeding business day.
REGISTRATION RIGHTS
Pursuant to the terms of the Loan Warrants, if the Company proposes to
register any shares of Common Stock under the Securities Act, the Existing
Holders may require the Company to include all or a portion of the shares of
Common Stock underlying the Loan Warrants in such registration, subject to
certain conditions and restrictions. Generally, all fees, costs and expenses
will be borne by the Company, except for fees of the Existing Holders' legal
counsel and financial advisors incurred by the Existing Holders in connection
with any such registration and applicable underwriting discounts and
commissions.
LOUISIANA CONTROL SHARE ACQUISITION STATUTE
The Louisiana Control Share Acquisition Statute provides that any shares
acquired by a person or group (an "Acquiror") in an acquisition that causes such
person or group to have the power to direct the exercise of voting power in the
election of directors in excess of 20%, 33 and 1/3% or 50% thresholds shall have
only such voting power as shall be accorded by the holders of all shares other
than "interested shares," as defined below, at a meeting called for the purpose
of considering the voting power to be accorded to such shares. "Interested
shares" include all shares as to which the Acquiror, any officer of a company
and any director of a company who is also an employee of a company may exercise
or direct the exercise of voting power. If a meeting of stockholders is held to
consider the voting rights to be accorded to an Acquiror and the stockholders do
not vote to accord voting rights to such shares, a company may have the right to
redeem the shares held by the Acquiror for their fair value. The statute permits
the articles of incorporation or by-laws of a company to exclude from the
statute's application acquisitions occurring after the adoption of the
exclusion. The Company's Articles of Incorporation and By-laws do not contain
such an exclusion.
DESCRIPTION OF NOTES
The Exchange Notes will be issued, and the Old Notes were issued, under the
Indenture between the Company and U. S. Trust Company of Texas, N.A., as trustee
(the "Trustee"), dated as of June 3 1997 (the Issue Date). References to the
Notes include the Exchange Notes unless the context otherwise requires. Upon
the issuance of the Exchange Notes, the Indenture will be subject to and
governed by the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indenture, including the
definition of certain terms contained therein and those terms that are made a
part of the Indenture by reference to the Trust Indenture Act. Capitalized
terms not otherwise defined below or elsewhere in this Prospectus have the
meanings given to them in the Indenture. The definitions of certain capitalized
terms used in the summary are set forth below under "--Certain Definitions."
The Notes are senior secured obligations of the Company and rank pari passu
in right of payment to all existing and future senior Indebtedness of the
Company. The Notes rank senior in right of payment to all existing and future
Subordinated Indebtedness of the Company. The Guarantees, to the extent issued
in the future, will be senior
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unsecured obligations of the Subsidiary Guarantors and will rank pari passu in
right of payment to all senior obligations of the Subsidiary Guarantors and
senior in right of payment to all Subordinated Indebtedness of the Subsidiary
Guarantors. The Guarantees, however, will be effectively subordinated to all
senior secured indebtedness of the Subsidiary Guarantors to the extent of the
value of the assets securing such indebtedness.
PRINCIPAL, MATURITY AND INTEREST
The Notes are secured obligations of the Company, mature on June 1, 2004
(the "Maturity Date"), and are limited in aggregate principal amount to $70.0
million. The Notes are issued in denominations of $1,000 and integral multiples
thereof in fully registered form.
The Notes accrue interest at the rate per annum shown on the cover page of
this Prospectus from June 3, 1997, or from the most recent interest payment date
to which interest has been paid or duly provided for, and accrued and unpaid
interest will be payable semi-annually on June 1 and December 1 of each year
commencing on December 1, 1997. Interest will be paid to the person in whose
name the Note is registered at the close of business on May 15 and November 15
next preceding such interest payment date. The interest rate on the Notes is
subject to increase if the Company fails to satisfy certain provisions of the
Registration Rights Agreement. See "Registration Rights." Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Notes are
payable both as to principal and interest at the office or agency of the Company
maintained for such purpose within the City and State of New York. In addition,
in the event the Notes do not remain in book-entry form, interest may be paid,
at the option of the Company, by check mailed to the holders of the Notes
("Holders") at their respective addresses set forth in the register of Holders.
Until otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Trustee maintained for such purpose. Any Notes
that remain outstanding after the completion of the Exchange Offer, together
with the Exchange Notes issued in connection with the Exchange Offer, will be
treated as a single class of securities under the Indenture.
REDEMPTION AND REPURCHASE
Optional Redemption. The Notes are redeemable at the option of the Company
in whole at any time or in part from time to time, on and after June 1, 2002, at
the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the twelve-month period commencing on June 1 of the
year set forth below, plus, in each case, accrued interest thereon to the date
of redemption:
Redemption
YEAR Price
---- ----------
2002 103.375%
2003 and thereafter 100.000%
In the event of a redemption of less than all of the Notes, the Notes will
be selected for redemption by the Trustee pro rata, by lot or by any other
method that the Trustee considers fair and appropriate and, if the Notes are
listed on any securities exchange, by a method that complies with the
requirements of such exchange. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at such Holder's registered address. On and after the
redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption (unless the Company shall default in the payment of the
redemption price or accrued interest).
In addition, at any time or from time to time prior to June 1, 1999, the
Company may redeem up to 25% of the principal amount of the Notes at 113.5% of
the principal amount thereof, together with accrued and unpaid interest, if any,
to the date of redemption with the Net Proceeds of a Public Equity Offering;
provided that, immediately after giving effect to such redemption, at least
$52.5 million aggregate principal amount of the Notes remains outstanding and
that such redemption occurs within 60 days following the closing of such Public
Equity Offering.
Offers to Purchase. As described below, (a) upon the occurrence of a
Change of Control, the Company will be obligated to make an offer to purchase
all outstanding Notes at a purchase price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
purchase and (b) upon certain sales or other dispositions of assets, the Company
may be obligated to make offers to purchase Notes with a portion of the Net
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Proceeds of such sales or other dispositions at a purchase price equal to 100%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of purchase. See "--Change of Control" and "--Certain
Covenants -- Limitation on Disposition of Assets."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company is obligated to
make an offer to purchase all of the then outstanding Notes (a "Change of
Control Offer"), and purchase, on a Business Day (the "Change of Control
Purchase Date") not more than 60 nor less than 30 days following the occurrence
of the Change of Control, all of the then outstanding Notes validly tendered
pursuant to such Change of Control Offer, at a purchase price (the "Change of
Control Purchase Price") equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the Change of Control Purchase Date.
The Change of Control Offer is required to remain open for at least 20 Business
Days and until the close of business on the fifth Business Day prior to the
Change of Control Purchase Date.
To effect such Change of Control Offer, the Company shall, not later than
the 30th day after the occurrence of the Change of Control, mail to the Trustee
and to each Holder of the Notes notice of the Change of Control Offer, which
notice shall govern the terms of the Change of Control Offer and shall state,
among other things, the procedures that Holders of the Notes must follow to
accept the Change of Control Offer.
The Company, to the extent applicable and if required by law, will comply
with Sections 13 and 14 of the Exchange Act and the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act and any other federal
and state securities laws, rules and regulations that may then be applicable to
any offer by the Company to purchase the Notes pursuant to the Change of Control
covenant.
Should a Change of Control occur and a substantial amount of the Notes be
presented for purchase, there can be no assurance that the Company would have
sufficient financial resources to enable it to purchase such Notes. In the
event the Company is required to purchase outstanding Notes pursuant to a Change
of Control Offer, the Company expects that it would seek third party financing
to the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing.
The Indenture provides that a default in the payment of the Change of
Control Purchase Price would constitute an Event of Default under the Indenture
as a remedy for which Holders would be entitled to receive the Change of Control
Purchase Price. If such an Event of Default resulted in a default under senior
Indebtedness, the right of the Holders of Notes to receive the Change of Control
Purchase Price (whether at a Change of Control Purchase Date or upon
acceleration) or any other amounts due on acceleration of the Notes would rank
pari passu with the rights of the holders of such senior Indebtedness.
The Change of Control provisions of the Indenture as well as the
restrictions in the Indenture on the ability of the Company and its Subsidiaries
to incur additional Indebtedness, to grant Liens on its property, to make
Restricted Payments and to make Asset Dispositions may make more difficult or
discourage a takeover of the Company, whether favored or opposed by current
management of the Company. Consummation of any such transaction in certain
circumstances may require redemption or repurchase of the Notes, and there can
be no assurance that the Company or the acquiring party will have sufficient
financial resources to effect such redemption or repurchase. Such restrictions
and the restrictions on transactions with Related Persons may, in certain
circumstances, make more difficult or discourage any leveraged buyout of the
Company or any of its Subsidiaries by the management of the Company. While such
restrictions cover a wide variety of arrangements that have traditionally been
used to effect highly leveraged transactions, the Indenture may not afford the
Holders of Notes protection in all circumstances from the adverse aspects of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
GUARANTEES
Currently, the Company has no Subsidiaries. The Company will cause each
Person (other than an Unrestricted Subsidiary) that becomes a Material
Subsidiary after the Issue Date to execute and deliver a supplement to the
Indenture pursuant to which such Person will become a Subsidiary Guarantor.
Each Person that becomes a Subsidiary Guarantor in the future will
unconditionally guarantee, jointly and severally, to each Holder and the
Trustee, the full and prompt performance of the Company's obligations under the
Indenture and the Notes, including the payment of
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principal of and interest on the Notes. As described below under "--Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness," a Subsidiary
that is not a Subsidiary Guarantor may not incur any Indebtedness with respect
to Indebtedness of the Company or another Subsidiary unless such Subsidiary
becomes a guarantor of the Notes.
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 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 Guarantee or pursuant to its contribution obligations under the Indenture,
result in the obligations of such Subsidiary Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Subsidiary Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell or
otherwise dispose of all or substantially all of its properties and assets to
the Company or another Subsidiary Guarantor without limitation, except to the
extent any such transaction is subject to the "Merger, Consolidation and Sale of
Assets" covenant of the Indenture. Each Subsidiary Guarantor may consolidate
with or merge into or sell all or substantially all of its properties and assets
to a Person other than the Company or another Subsidiary Guarantor (whether or
not affiliated with the Subsidiary Guarantor), provided that (a) if the
surviving Person is not the Subsidiary Guarantor, the surviving Person agrees to
assume such Subsidiary Guarantor's Guarantee and all its obligations pursuant to
the Indenture (except to the extent the following paragraph would result in the
release of such Guarantee) and (b) such transaction does not (i) violate any of
the covenants described below under "--Certain Covenants" or (ii) result in a
Default or Event of Default immediately thereafter that is continuing.
Upon the sale or other disposition (by merger or otherwise) of a Subsidiary
Guarantor (or all or substantially all of its properties and assets) pursuant to
a transaction that is otherwise in compliance with the Indenture (including as
described in the foregoing paragraph), such Subsidiary Guarantor shall be deemed
released from its Guarantee and the related obligations set forth in the
Indenture; provided, however, that any such termination shall occur only to the
extent that all obligations of such Subsidiary Guarantor under all of its
guarantees of, and under all of its pledges of assets or other security
interests that secure, other Indebtedness of the Company or any Subsidiary shall
also terminate or be released upon such sale or other disposition. Each
Subsidiary Guarantor that is designated as an Unrestricted Subsidiary in
accordance with the Indenture shall be released from its Guarantee and related
obligations set forth in the Indenture for so long as it remains an Unrestricted
Subsidiary.
SECURITY
All of the obligations of the Company under the Notes and the Indenture are
secured by a Lien on the Collateral, which is comprised of certain oil and gas
properties of the Company in the Lake Enfermer Field, Manilla Village Field and
Boutte Field. The Security Interest is subject to certain Permitted Liens,
including, if required by a lender, a first priority Lien pursuant to a Bank
Credit Agreement and the Subordination Agreement. The Security Interest is
currently pursuant to the Assigned Mortgage. The Company originally granted a
Lien on the Collateral to JEDI (the "JEDI Lien") pursuant to the terms of its
loan to the Company. JEDI was paid from the proceeds of the Old Notes to assign
the JEDI Lien pursuant to the Assigned Mortgage to the Trustee on behalf of the
Holders. The Company agreed to enter into one or more Acts of Mortgage,
Security Agreement, Assignment of Production and Financing Statement (the
"Replacement Mortgages") in form and substance acceptable to Jefferies &
Company, Inc. covering the Collateral together with any related documents within
60 days after the Issue Date, which Replacement Mortgages will replace the
Assigned Mortgage. Although the Company believes that the Replacement Mortgages
will be timely completed and filed of record, there can be no assurances to that
effect nor that the Replacement Mortgages will be acceptable to Jefferies &
Company, Inc. The Notes will not be secured by any other property, whether
currently existing or subsequently acquired, unless, under certain
circumstances, such property is acquired to replace Collateral disposed of in an
Asset Disposition.
Subject to the Subordination Agreement, the proceeds received by the
Trustee from a sale of the Collateral will be applied by the Trustee first to
pay the expenses of any foreclosure and fees and other amounts then payable to
the Trustee under the Indenture and the Security Documents and, thereafter, to
pay all amounts owing to the Holders under the Indenture, the Notes and the
Security Documents (with any remaining proceeds to be payable to the Company or
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as may otherwise be required by law). There can be no assurance that the
proceeds of any sale of the Collateral in whole or in part pursuant to the
Indenture and the related Security Documents following an Event of Default would
be sufficient to satisfy payments due on a Bank Credit Agreement and the Notes.
By its nature, some or all of the Collateral will be illiquid and may have no
readily ascertainable market value. Accordingly, there can be no assurance that
the Collateral can be sold in a short period of time, if saleable. To the
extent that third parties enjoy Permitted Liens, such third parties may have
rights and remedies with respect to the property subject to such Lien that, if
exercised, could adversely affect the value of the Collateral. In addition, the
ability of the Holders to realize upon the Collateral may be subject to certain
bankruptcy law limitations in the event of a bankruptcy.
The collateral release provisions of the Indenture permit the release of
Collateral without substitution of collateral of equal value under certain
circumstances. See "--Release of Collateral." As described under "--Certain
Covenants -- Limitation on Disposition of Assets", the Net Available Proceeds of
certain Asset Dispositions may under specified circumstances be required to be
utilized to make an offer to purchase Notes. To the extent that any such offer
to purchase Notes is not fully subscribed to by Holders thereof, the unutilized
Net Available Proceeds may, under certain circumstances, be retained and used by
the Company free of the Security Interest.
SUBORDINATION AGREEMENT
The Trustee, on behalf of the Holders, may enter into a Subordination
Agreement with the Company and any lender pursuant to the terms of a Bank Credit
Agreement. The Subordination Agreement provides, among other things, that (a)
the lender has a first priority mortgage lien and security interest in the
Collateral and the Trustee a second priority interest therein, (b) during any
insolvency proceeding, the lender and the Trustee will coordinate their efforts
to give effect to the relative priority of their mortgage liens and security
interests in the Collateral and (c) following an Event of Default, all decisions
with respect to the Collateral, including the time and method of any disposition
thereof, will be made by the lender. The Subordination Agreement also provides
that the Trustee and the lender will provide notices to each other with respect
to acceleration of the Notes or the Indebtedness outstanding under a Bank Credit
Agreement, as the case may be. If the Notes become due and payable prior to the
final stated maturity thereof for any reason or are not paid in full at the
final stated maturity thereof and after any applicable grace period has expired,
at a time when Collateral secures outstanding Indebtedness under a Bank Credit
Agreement, the Trustee will not have the right to foreclose upon the Collateral
unless the lender thereunder forecloses upon the Collateral. Thereafter, the
Trustee has the right to foreclose upon the Collateral in accordance with
instructions from the Holders of a majority in aggregate principal amount of the
Notes or, in the absence of such instructions, in such manner as the Trustee
deems appropriate in its absolute discretion. Proceeds from the sale of
Collateral will first be applied to repay Indebtedness outstanding under a Bank
Credit Agreement and thereafter paid to the Trustee.
CAPITALIZED INTEREST ACCOUNT
Pursuant to the Indenture, $9.45 million of the proceeds from the sale of
the Old Notes was placed in the Capitalized Interest Account held by the
Trustee. The Trustee will disburse the funds contained in the Capitalized
Interest Account to the Holders for the payment of interest when due on December
1, 1997 and June 1, 1998. Any earnings on the funds deposited in the
Capitalized Interest Account to the extent not required for the required
interest payments will be paid to the Company after June 1, 1998.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness
The Company will not, and will not permit any of the Subsidiaries directly
or indirectly, to issue, incur, assume, guarantee, become liable, contingently
or otherwise, with respect to or otherwise become responsible for the payment of
(collectively, "incur") any Indebtedness (other than Permitted Indebtedness);
provided, however, that if no Default or Event of Default with respect to the
Notes shall have occurred and be continuing at the time or as a consequence at
the incurrence of such Indebtedness, the Company and the Subsidiaries or any of
them may incur Indebtedness if on the date of the incurrence, (i) both (A) the
Company's Consolidated EBITDA Coverage Ratio would have been greater than 2.25
to 1.0 for the period from the Issue Date through May 31, 1998, and 2.5 to 1.0
from June 1, 1998,
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and thereafter, respectively, and (B) the Company's Adjusted Consolidated Net
Tangible Assets are equal to or greater than 150% of Indebtedness of the Company
and the Subsidiaries, or (ii) the Company's Adjusted Consolidated Net Tangible
Assets are equal to or greater than 250% of Indebtedness of the Company and the
Subsidiaries.
For purposes of determining any particular amount of Indebtedness under
this covenant, (i) guarantees of Indebtedness otherwise included in the
determination of such amount shall not also be included and (ii) any
Indebtedness incurred by the Company or any Subsidiary incurred for, or related
to, a Person other than another Subsidiary or the Company, as applicable, shall
be deemed to be in an amount equal to the greater of (i) the lesser of (A) the
full amount of the Indebtedness of such other Person or (B) the fair market
value of the assets and properties of the Company or such Subsidiary, as to
which the holder or holders of such Indebtedness are expressly limiting the
obligations of the Company or such Subsidiary, the value of which assets and
properties of the Company or any Subsidiary will be as determined in good faith
by the Board of Directors of the Company or such Subsidiary, as applicable
(which determinations shall be evidenced by a Board Resolution of the applicable
Person), and (ii) the amount of the Indebtedness of such other Person as has
been expressly contractually assumed or guaranteed by the Company or such
Subsidiary.
Notwithstanding anything to the contrary in this covenant, no Subsidiary
that is not already a Subsidiary Guarantor shall incur any Indebtedness with
respect to any Indebtedness of the Company or any other Subsidiary unless such
Subsidiary, the Company and the Trustee execute and deliver a supplemental
indenture evidencing such Subsidiary's Guarantee of the Notes, such Guarantee to
be a senior unsecured obligation of such Subsidiary.
The Company will not, and will not permit any Subsidiary Guarantor to,
incur any Indebtedness that by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated in right of payment to any other
Indebtedness of the Company or such Subsidiary Guarantor unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate in right of payment to the Notes
or the Guarantee of such Subsidiary Guarantor, as the case may be, pursuant to
subordination provisions that are substantively identical to the subordination
provisions of such Indebtedness (or such agreement) that are the most favorable
to the holders of any other Indebtedness of the Company or such Subsidiary
Guarantor, as the case may be.
Limitation on Restricted Payments
The Company will not, and will not permit any of the Subsidiaries to,
directly or indirectly, make any Restricted Payment, if at the time of such
Restricted Payment, or on a pro forma basis after giving effect thereto:
(x) a Default or an Event of Default under the Indenture has occurred and
is continuing;
(y) the aggregate amount expended for all Restricted Payments subsequent to
the Issue Date exceeds the sum of (without duplication):
(1) 50% of aggregate Consolidated Net Income (net of losses resulting from
full costs ceiling write downs attributable to any oil and gas
properties of the Company or any Subsidiary) of the Company (or if
such Consolidated Net Income is a loss, minus 100% of such loss)
earned on a cumulative basis during the period beginning on the Issue
Date and ending on the last date of the Company's fiscal quarter
immediately preceding such Restricted Payment; plus
(2) 100% of the aggregate Net Proceeds received by the Company from any
Person other than a Subsidiary from the issuance and sale subsequent
to the Issue Date of Qualified Capital Stock (excluding (A) any
Qualified Capital Stock paid as a dividend on any Capital Stock or as
interest on any Indebtedness, (B) the issuance of Qualified Capital
Stock upon the conversion of, or in exchange for, any Qualified
Capital Stock and (C) any Qualified Capital Stock with regard to
issuances and sales financed directly or indirectly using funds
borrowed from the Company or any Subsidiary, until and to the extent
such borrowing is repaid); plus
(3) to the extent not otherwise included in Consolidated Net Income,
dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or a Subsidiary after the date of
the Indenture from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Subsidiary
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(valued in each case as provided in the definition of Investment)
other than amounts constituting Permitted Unrestricted Subsidiary
Investments; plus
(4) $1.0 million; or
(z) the Company would not be able to incur $1.00 of additional Indebtedness
(excluding Permitted Indebtedness) as provided in the first paragraph of
"--Limitation on Incurrence of Additional Indebtedness."
The foregoing provisions of this covenant will not prevent the payment of
(a) any dividend within 60 days after the date of its declaration if the
dividend would have been permitted on the date of declaration and (b) cash
dividends by the Company in respect of its Series A Cumulative Preferred Stock
if (i) no Default or Event of Default under the Indenture shall have occurred
and be continuing at the time or as a consequence of the payment of such cash
dividends and (ii) on the date of the payment of such cash dividends and after
giving effect to such payment, the Company's Consolidated EBITDA Coverage Ratio
would have been greater than 1.5 to 1.0; provided, however, that payments made
in accordance with this paragraph shall be counted for purposes of computing
amounts expended pursuant to subclause (y) in the immediately preceding
paragraph.
Limitation on Disposition of Assets
The Company will not, and will not permit any Subsidiary to, make any Asset
Disposition unless:
(i) in the case of any Asset Disposition or series of related Asset
Dispositions having a fair market value of more than $5.0 million, the Company
or such Subsidiary receives consideration at the time of such Asset Disposition
at least equal to the fair market value as determined by either (a) a majority
of the disinterested directors of the Company or (b) a nationally recognized
investment banking firm,
(ii) at least (a) 70% of the consideration received by the Company or such
Subsidiary, as the case may be, from such Asset Disposition shall be in the form
of cash or cash equivalents and is received at the time of such Asset
Disposition and (b) 15% of such consideration received if in a form other than
cash or cash equivalents is converted into or exchanged for cash or cash
equivalents within 120 days of such Asset Disposition, and
(iii) within 365 days following the receipt of the Net Available Proceeds
from such Asset Disposition, 100% of the Net Available Proceeds from such Asset
Disposition are applied by the Company or such Subsidiary:
(a) to repay Indebtedness (other than Subordinated Indebtedness) of
the Company or any Subsidiary, provided, in each case, that the related
loan commitment of any revolving credit facility or other borrowing (if
any) is thereby permanently reduced by the amount of such Indebtedness
so repaid;
(b) at the Company's option to the extent that such Net Available
Proceeds are not applied to repay Indebtedness, to Permitted Industry
Investments made by the Company or a Subsidiary (or, to the extent not
so applied during such 365 day period, to Permitted Industry
Investments specifically identified during such 365 day period
reasonably anticipated in good faith by the Board of Directors of the
Company to be expended within 180 days after being specifically
identified (such 180-day period, the "Project Period")); and
(c) to the extent that any Net Available Proceeds are not applied to
repay Indebtedness or applied or to be applied to Permitted Industry
Investments, to make an offer to purchase (the "Net Proceeds Offer")
(on a Business Day (the "Net Proceeds Payment Date") not later than the
later of (1) 365 days following the receipt of such Net Available
Proceeds or (2) in the case of application of proceeds intended to be
applied under clause (b), 35 Business Days following any Project
Period) the Notes at a price equal to 100% of the principal amount of
the Notes plus accrued interest to the Net Proceeds Payment Date.
Notwithstanding the foregoing, the Company and its Subsidiaries will not be
required to apply any Net Available Proceeds in accordance with such provisions
except to the extent that the Net Available Proceeds from all Asset Dispositions
that are not applied in accordance with such provisions exceed $5.0 million.
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Notice of a Net Proceeds Offer to purchase the Notes will be made on behalf
of the Company not less than 25 Business Days nor more than 60 Business Days
before the Net Proceeds Payment Date. Notes tendered to the Company pursuant to
a Net Proceeds Offer will cease to accrue interest after the Net Proceeds
Payment Date. The Company will not be entitled to any credit against the above
obligations for the principal amount of Notes previously acquired by the
Company. For purposes of this covenant, the term "Net Proceeds Offer Amount"
means the principal of outstanding Notes in an aggregate principal amount equal
to any remaining Net Available Proceeds.
On the Net Proceeds Payment Date, the Company will (i) accept for payment
Notes or portions thereof tendered pursuant to the Net Proceeds Offer in an
aggregate principal amount equal to the Net Proceeds Offer Amount or such lesser
amount of Notes as has been tendered, (ii) deposit with the paying agent money
sufficient to pay the purchase price of all Notes or portions thereof so
tendered in an aggregate principal amount equal to the Net Proceeds Offer Amount
or such lesser amount, and (iii) deliver or cause to be delivered to the
Trustee, Notes so accepted together with an officers' certificate stating the
Notes or portions thereof tendered to the Company. If the aggregate principal
amount of Notes tendered exceeds the Net Proceeds Offer Amount, the Trustee will
select the Notes to be purchased on a pro rata basis based on the principal
amount of Notes so tendered. The paying agent will promptly mail or deliver to
Holders of the Notes so accepted payment in an amount equal to the purchase
price, and the Company will execute, and the Trustee will promptly authenticate
and mail or make available for delivery to such Holders, a new Note equal in
principal amount to any unpurchased portion of the Note surrendered. Any Notes
not so accepted will be promptly mailed or delivered to the Holder thereof. The
Company will publicly announce the results of the Net Proceeds Offer on or as
soon as practicable after the Net Proceeds Payment Date. For purposes of this
covenant, the Trustee or its agent will act as the paying agent. The Company
may make Asset Dispositions in accordance with this covenant and receive
consideration in the form of equity, partnership or other ownership interests
where it might not control such resulting entity.
The Company's ability to repurchase Notes in a Net Proceeds Offer may be
restricted by the terms of a Bank Credit Agreement and may be prohibited or
otherwise limited by the terms of any then existing borrowing arrangements and
by its financial resources.
Limitation on Liens Securing Indebtedness
The Company will not, and will not permit any of the Subsidiaries to,
create, incur, assume or suffer to exist any Liens (other than Permitted Liens)
upon any of their respective Properties securing (i) any Indebtedness of the
Company, unless the Notes are equally and ratably secured or (ii) any
Indebtedness of any Subsidiary Guarantor, unless the Notes or the Guarantees, as
the case may be, are equally and ratably secured; provided that if such
Indebtedness is expressly subordinated to the Notes or the Guarantees, the Lien
securing such Indebtedness will be subordinated and junior to the Lien securing
the Notes or the Guarantees, with the same relative priority as such
Subordinated Indebtedness will have with respect to the Notes or the Guarantees,
as the case may be.
Limitation on Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any Subsidiary to, directly or
indirectly, create or suffer to exist or allow to become effective any Payment
Restriction, except for such encumbrances or restrictions existing under or by
reason of (A) a Bank Credit Agreement, (B) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of the
Company or any Subsidiary, (C) any instrument governing Indebtedness of a Person
acquired by the Company or a Subsidiary at the time of such acquisition, which
encumbrance or restriction is not applicable to any Person, other than the
Person, or the Property of the Person, so acquired, provided that such
Indebtedness was not incurred in anticipation of such acquisition, (D) with
respect to clauses (i)(c) and (ii)(c) contained in the definition of Payment
Restriction, Purchase Money Obligations for Property acquired in the ordinary
course of business, (E) Indebtedness existing pursuant to a written agreement in
effect on the date of the Indenture, (F) Indebtedness under the Indenture, or
(G) Indebtedness incurred to refinance, refund, extend or renew Indebtedness
referred to in clauses (A), (C), (D), (E) or (F) above, provided that the
Payment Restrictions contained therein are not materially more restrictive than
those provided for in the Indebtedness being refinanced, refunded, extended or
renewed.
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Limitation on Transactions with Related Persons
Neither the Company nor any of the Subsidiaries will (i) sell, lease,
transfer or otherwise dispose of any of its Property to, (ii) purchase any
property from, (iii) make any Investment (other than Permitted Unrestricted
Subsidiary Investments and other Investments that do not breach the covenant
described under the caption "--Limitation on Restricted Payments") in, or (iv)
enter into any contract or agreement with or for the benefit of, a Related
Person of the Company or any Subsidiary (other than the Company or any such
Subsidiary in which no Related Person (other than the Company or another Wholly
Owned Subsidiary) owns, directly or indirectly, an equity interest) (a "Related
Person Transaction"), other than Related Person Transactions that are on terms
(which terms are in writing) no less favorable to the Company or a Subsidiary,
as applicable, than could be obtained in a comparable arm's length transaction
from an unaffiliated party; provided that, if the Company or any Subsidiary
enters into a Related Person Transaction or series of Related Person
Transactions involving or having an aggregate value of more than (i) $1.0
million, such Related Person Transaction will have been approved by a majority
of the independent directors of the Company and (ii) $5.0 million ($1.0 million
if there are no independent directors of the Company), such Related Person
Transaction will have been determined by a nationally recognized investment
banking firm to be fair from a financial standpoint to the Company and its
Subsidiaries. Notwithstanding anything to the contrary in the foregoing, the
foregoing restrictions shall not apply to (i) Related Person Transactions that
are approved by the Board of Directors of the Company and such Subsidiary, if
applicable, as in the best interests of the Company or such Subsidiary, which
transactions together with all other Related Person Transactions in a related
series involve or have an aggregate value not exceeding $1.0 million in each
fiscal year; (ii) fees and compensation paid to or agreements with officers,
directors, employees or consultants of the Company or any Subsidiary in each
case that are reasonable, as determined by the Board of Directors or senior
management thereof in good faith; and (iii) Restricted Payments that are not
prohibited by the "Limitation on Restricted Payments" covenant.
Limitation on Conduct of Business
The Company will be operated in a manner such that it will not engage in
any business other than the exploration for and the development, acquisition,
production, gathering, treating, processing, marketing, storage, selling and
transportation of, Hydrocarbons and such other businesses as are reasonably
necessary or desirable to facilitate the conduct and operations of the foregoing
businesses.
Reports
The Company will file on a timely basis with the Commission, to the extent
such filings are accepted by the Commission and whether or not the Company has a
class of securities registered under the Exchange Act, the annual reports,
quarterly reports and other documents that the Company would be required to file
if it were subject to Section 13 or 15 of the Exchange Act. The Company will
also be required (a) to file with the Trustee (with exhibits), and provide to
each Holder of Notes (without exhibits), without cost to such Holder, copies of
such reports and documents within 15 days after the date on which the Company
files such reports and documents with the Commission or the date on which the
Company would be required to file such reports and documents if the Company were
so required and (b) if filing such reports and documents with the Commission is
not accepted by the Commission or is prohibited under the Exchange Act, to
supply at its cost copies of such reports and documents (including any exhibits
thereto) to any Holder of Notes promptly upon written request.
Impairment of Security Interest
Subject to any Subordination Agreement, neither the Company nor any of its
Subsidiaries will take or omit to take any action which action or omission would
have the result of adversely affecting or impairing the security interest in
favor of the Trustee, on behalf of itself and the Holders, with respect to the
Collateral, and neither the Company nor any of its Subsidiaries shall grant to
any Person, or suffer any Person (other than the Company) to have (other than to
the Trustee on behalf of the Trustee and the Holders) any interest whatsoever in
the Collateral other than Liens securing a Bank Credit Agreement and Liens
permitted by the Security Documents. Neither the Company nor any of its
Subsidiaries will enter into any agreement or instrument that by its terms
requires the proceeds received from any sale of Collateral to be applied to
repay, redeem, defease or otherwise acquire or retire any Indebtedness of any
Person, other than pursuant to any Subordination Agreement, the Indenture, the
Notes and the Security Documents.
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Future Designation of Restricted and Unrestricted Subsidiaries
The foregoing covenants (including calculation of financial ratios and the
determination of limitations on the incurrence of Indebtedness and Liens) may be
affected by the designation by the Company of any future Subsidiary of the
Company as an Unrestricted Subsidiary. The definition of "Unrestricted
Subsidiary" set forth under the caption "-- Certain Definitions" describes the
circumstances under which a Subsidiary of the Company may be designated as an
Unrestricted Subsidiary by the Board of Directors of the Company.
MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
The Company will not consolidate with or merge with any other Person or
convey, transfer or lease all or substantially all of its Property to any
Person, unless: (i) the Company survives such merger or the Person formed by
such consolidation or into which the Company is merged or that acquires by
conveyance or transfer, or which leases, all or substantially all of the
Property of the Company is a corporation organized and existing under the laws
of the United States of America or any State thereof or the District of Columbia
and expressly assumes, by supplemental indenture, the due and punctual payment
of the principal of (and premium, if any) and interest on all the Notes and the
performance of every other covenant and obligation of the Company under the
Indenture; (ii) immediately before and after giving effect to such transaction,
no Default or Event of Default exists; (iii) immediately after giving effect to
such transaction on a pro forma basis, the Consolidated Net Worth of the Company
(or the surviving entity if the Company is not continuing) is equal to or
greater than the Consolidated Net Worth of the Company immediately before such
transaction and (iv) immediately after giving effect to such transaction on a
pro forma basis, the Company (or the surviving entity if the Company is not
continuing) would be able to incur $1.00 of additional Indebtedness (excluding
Permitted Indebtedness) under the tests described in the first paragraph of
"Limitation on Incurrence of Additional Indebtedness." Upon any such
consolidation, merger, conveyance, lease or transfer in accordance with the
foregoing, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture with the same effect as if such successor had
been named as the Company therein, and thereafter (except in the case of a
lease) the predecessor corporation will be relieved of all further obligations
and covenants under the Indenture and the Notes.
EVENTS OF DEFAULT
The following will constitute Events of Default under the Indenture:
(i) default in the payment of principal of, or premium, if any, on, the
Notes when due at maturity, upon repurchase, upon acceleration or otherwise,
including failure of the Company to repurchase the Notes required to be
repurchased upon a Change of Control or a Net Proceeds Offer and failure to make
any optional redemption payment;
(ii) default in the payment of any installment of interest on the Notes
when due (including any interest payable in connection with optional redemption
payment) and continuance of such default for 30 days;
(iii) default on any other Indebtedness of the Company, any Subsidiary
Guarantor or any other Subsidiary if either (a) such default results from the
failure to pay principal of, premium, if any, or interest on any such
Indebtedness when due in excess of $5.0 million and continuance of such default
beyond any applicable cure, forbearance or notice period, or (b) as a result of
such default, the maturity of such Indebtedness has been accelerated prior to
its scheduled maturity, without such default and acceleration having been
rescinded or annulled within a period of 10 days, and the principal amount of
such Indebtedness, together with the principal amount of any other such
indebtedness in default, or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
(iv) default in the performance, or breach, of any other covenant of the
Company or any Subsidiary Guarantor in the Indenture and failure to remedy such
default within a period of 60 days after written notice thereof from the Trustee
or Holders of 25% in principal amount of the outstanding Notes;
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(v) the entry by a court of one or more judgments or orders against the
Company, any Subsidiary Guarantor or any other Subsidiary in an aggregate amount
in excess of $5.0 million and which are not covered by insurance written by
third parties that has not been vacated, discharged, satisfied or stayed pending
appeal within 60 days from the entry thereof;
(vi) certain events of bankruptcy, insolvency or reorganization in respect
of the Company or any Material Subsidiary;
(vii) a Guarantee by a Subsidiary Guarantor that is a Material Subsidiary
shall cease to be in full force and effect (other than a release of a Guarantee
by designation of a Subsidiary Guarantor as an Unrestricted Subsidiary) or any
Subsidiary Guarantor shall deny or disaffirm its obligations with respect
thereto; or
(viii) any of the Security Documents cease to be in full force and effect
(other than in accordance with their respective terms or the terms of the
Indenture), or any of the Security Documents cease to give the Trustee the
Liens, rights, powers and privileges purported to be created thereby, or any
Security Document is declared null and void, or the Company denies any of its
obligations under any Security Document or any Collateral becomes subject to any
Lien other than the Liens created or permitted by the Security Documents and a
Bank Credit Agreement.
If any Event of Default (other than an Event of Default specified in clause
(vi) above) occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Notes then
outstanding may declare the unpaid principal of, and accrued and unpaid interest
on, all the Notes then outstanding to be due and payable, by a notice in writing
to the Company (and to the Trustee, if given by Holders) and upon any such
declaration such principal amount, premium, if any, and accrued and unpaid
interest shall become immediately due and payable, notwithstanding anything
contained in the Indenture or the Notes to the contrary. If an Event of Default
specified in clause (vi) above occurs, all unpaid principal of, premium, if any,
and accrued interest on, the Notes then outstanding will become due and payable,
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the then outstanding
Notes, by written notice to the Company, the Subsidiary Guarantors and the
Trustee, may rescind and annul a declaration of acceleration and its
consequences if (1) the Company or any Subsidiary Guarantor has paid or
deposited with such Trustee a sum sufficient to pay (A) all overdue installments
of interest on all the Notes, (B) the principal of, and premium, if any, on, any
Notes that have become due otherwise than by such declaration of acceleration
and interest thereon at the rate or rates prescribed therefor in the Notes, (C)
to the extent that payment of such interest is lawful, interest on the defaulted
interest at the rate or rates prescribed therefor in the Notes, and (D) all
money paid or advanced by the Trustee thereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; (2) all Events of Default, other than the non-payment of the
principal of any Notes that have become due solely by such declaration of
acceleration, have been cured or waived as provided in the Indenture; and (3)
the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. No such rescission will affect any subsequent Event of
Default or impair any right consequent thereon.
No Holder of any of the Notes will have any right to institute any
proceeding, judicial or otherwise, or for the appointment of a receiver or
trustee or pursue any remedy under the Indenture, unless (1) such Holder has
previously given notice to the Trustee of a continuing Event of Default, (2) the
Holders of not less than 25% in principal amount of the outstanding Notes have
made written request to such Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee under the Indenture, (3) such
Holder or Holders have offered to such Trustee reasonable indemnity against the
costs, expenses and liabilities to be incurred in compliance with such request,
(4) such Trustee for 30 days after its receipt of such notice, request and offer
of indemnity has failed to institute any such proceeding, and (5) no direction
inconsistent with such written request has been given to such Trustee during
such 30-day period by the Holders of a majority in principal amount of the
outstanding Notes.
The Holder of any Note will have the right, which is absolute and
unconditional, to receive payment of the principal of, premium, if any, and
interest on such Note on the stated maturity therefor and to institute suit for
the enforcement of any such payment, and such right may not be impaired without
the consent of such Holder.
The Holders of a majority in principal amount of the Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
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such Trustee, provided that (1) such direction is not in conflict with any rule
of law or with the Indenture and (2) the Trustee may take any other action
deemed proper by such Trustee that is not inconsistent with such direction.
MODIFICATIONS AND WAIVERS
The Indenture may be amended or rights thereunder may be waived with the
consent of the Company, the Subsidiary Guarantors, and the Holders of at least a
majority of the principal amount of Notes then outstanding, provided that,
without the consent of each Holder of Notes affected thereby, no such
modification or waiver will be made with regard to: (i) a default in the
payment of principal, premium (if any) or interest on the Notes; (ii) a
reduction of the interest rate on or principal amount of the Notes, an extension
of the maturity schedule of the Notes, or a modification of the redemption or
repurchase provisions of the Notes; (iii) a change that adversely affects
subordination rights; (iv) a change in the currency in which the Notes are
payable; or (v) a change in the percentage required by this provision.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may at any time terminate its Obligations under the Notes and
the Indenture, and the Subsidiary Guarantors may, at such times, terminate their
corresponding obligations under the Guarantees and the Indenture, with certain
exceptions specified in the Indenture, by irrevocably depositing in trust cash
or obligations of the United States government and its agencies for payment of
principal of, and interest on, the Notes to redemption or maturity, subject to
the satisfaction of certain conditions.
Subject to the conditions described below, at the Company's option, either
(a) the Company and the Subsidiary Guarantors will be deemed to have been
discharged from their obligations with respect to the Notes and Guarantees and
the provisions of the Indenture on the 91st day after the applicable conditions
set forth below have been satisfied or (b) the Company and the Subsidiary
Guarantors will cease to be under any obligation to comply with certain
restrictive covenants, including those described under "-- Certain Covenants,"
at any time after the applicable conditions set forth below have been satisfied:
(1) the Company or any Subsidiary Guarantor has deposited or caused to be
deposited irrevocably with the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the Holders (i)
money or (ii) United States government obligations, which through the payment of
interest and principal in respect thereof in accordance with their terms will
provide (without any reinvestment of such interest or principal), not later than
one day before the due date of any payment, money or (iii) a combination of (i)
and (ii), in an amount sufficient, in the opinion (with respect to (ii) and
(iii)) of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee at or
prior to the time of such deposit, to pay and discharge each installment of
principal of, premium, if any, and interest on, the outstanding Notes on the
dates such installments are due; (2) no Default or Event of Default has occurred
or is continuing on the date of such deposit or will occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company or a
Subsidiary Guarantor or any Subsidiary is a party or by which any of them is
bound, as evidenced to the Trustee in an officers' certificate delivered to the
Trustee concurrently with such deposit; (3) the Company has delivered to the
Trustee an opinion of counsel (which counsel may be an employee of the Company)
to the effect that Holders will not recognize income, gain or loss for federal
income tax purposes as a result of the Company's exercise of its option
described above and will be subject to federal income tax on the same amount and
in the same manner and at the same time as would have been the case if such
option had not been exercised, and, in the case of the Notes being discharged
pursuant to clause (a) above, accompanied by a ruling to the effect received
from or published by the Internal Revenue Service (it being understood that (A)
such opinion will also state, if applicable, that such ruling is consistent with
the conclusions reached in such opinion and (B) the Trustee will be under no
obligation to investigate the basis of correctness of such ruling); (4) the
Company has delivered to the Trustee an opinion of counsel (which counsel may be
an employee of the Company) to the effect that the Company's exercise of its
option described above will not result in any of the Company, the Trustee or the
trust created by the Company's deposit of funds hereunder becoming or being
deemed to be an "investment company" under the Investment Company Act of 1940,
as amended; (5) the Company or any Subsidiary Guarantor has paid or duly
provided for payment of all amounts then due to the Trustee pursuant to the
terms of the Indenture; and (6) the Company has delivered to the Trustee an
officers' certificate and an opinion of counsel (which counsel may be an
employee of the Company), each stating that all conditions precedent provided
for in the Indenture relating to the satisfaction and discharge of the Indenture
have been complied with.
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The Company or any Subsidiary Guarantor may make an irrevocable deposit
pursuant to this provision only if at such time it is not prohibited from doing
so under the Subordination Agreement and the Company has delivered to the
Trustee and any relevant paying agent an officer's certificate to that effect.
RELEASE OF COLLATERAL
Subject to compliance by the Company with the conditions set forth above in
respect of any Asset Disposition under "--Certain Covenants--Limitation on
Disposition of Assets," the Company will be entitled to obtain a release of, and
the Trustee shall release, items of Collateral (the "Released Interests") from
the Security Interest under any of the following circumstances:
(1) Oil and gas properties of the Company that are located onshore in South
Louisiana that are not a part of the Collateral and are of equal or greater fair
market value to the value of the Released Interests are then subjected to the
Security Interest.
(2) All of the proceeds from the disposition of the Released Interests are
used to develop the Collateral.
(3) The Released Interests are comprised of Farmout Interests entered into
with any Person other than a Related Person.
(4) If, as of the date of the release of the Released Interests, the
Company's Adjusted Consolidated Net Tangible Assets equal or exceed the
following percentages of the Company's Secured Indebtedness:
(i) 150%, then the value of the Released Interests may be in an amount
up to $5.0 million less the value of the Released Interests previously
released pursuant to this clause (4) and clause (5) at the time released;
(ii) 160%, then the value of the Released Interests may be in an amount
up to $6.0 million less the value of the Released Interests previously
released pursuant to this clause (4) and clause (5) at the time released;
(iii) 170%, then the value of the Released Interests may be in an
amount up to $7.0 million less the value of the Released Interests
previously released pursuant to this clause (4) and clause (5) at the time
released;
(iv) 180%, then the value of the Released Interests may be in an amount
up to $8.0 million less the value of the Released Interests previously
released pursuant to this clause (4) and clause (5) at the time released;
(v) 190%, then the value of the Released Interests may be in an amount
up to $9.0 million less the value of the Released Interests previously
released pursuant to this clause (4) and clause (5) at the time released;
and
(vi) 200%, then the value of the Released Interests may be in an amount
up to $10.0 million less the value of the Released Interests previously
released pursuant to this clause (4) and clause (5) at the time released.
(5) If, as of the date of the release of the Released Interests, the
Company's Adjusted Consolidated Net Tangible Assets exceed 200% of the Company's
Secured Indebtedness, then the value of the Released Interests may be in an
amount equal to the positive number, if any, of the difference of (x) the amount
obtained by multiplying the percentage amount by which the Company's Adjusted
Consolidated Net Tangible Assets exceed 200% of the Company's Secured
Indebtedness (e.g., if the Company's Adjusted Consolidated Net Tangible Assets
equal 250% of the Company's Secured Indebtedness, then the percentage amount
equals 50%) by the principal amount of the Securities then outstanding, less (y)
the value of the Released Interests previously released pursuant to this clause
(5) at the time released.
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The release of Collateral pursuant to the foregoing circumstances is
subject to the condition that the Company deliver to the Trustee the following:
(a) a notice from the Company requesting the release of the Released
Interests, (i) describing the proposed Released Interests, (ii) in the case
of clauses (1), (4) and (5) above, specifying the value of such Released
Interests on such date, (iii) stating that the release of such Released
Interests will not interfere with the Trustee's ability to realize the
value of the remaining Collateral and will not impair the maintenance and
operation of the remaining Collateral, (iv) certifying that release of the
Released Interests complies with the terms and conditions of the Indenture
with respect thereto, (v) specifying which of the circumstances described
in clauses (1) through (5) above pursuant to which the Collateral is
requested to be released and (vi) in the event there is to be a
substitution of property for the Released Interests, specifying the
property intended to be substituted for the Released Interests;
(b) an Officers' Certificate of the Company stating that (i) the release
covers only the Released Interests and complies with the terms and
conditions of the Indenture with respect to Asset Dispositions, (ii) there
is no Default or Event of Default in effect or continuing on the date
thereof, (iii) the release will not result in a Default or Event of Default
under the Indenture and (iv) all conditions precedent in the Indenture
relating to the release in question have been complied with; and
(c) all documentation required by the Trust Indenture Act, if any, prior
to the release of the Collateral by the Trustee and, in the event there is
to be a substitution of property for the Released Interests, all
documentation necessary to effect the substitution of such new Collateral.
GOVERNING LAW
The Indenture provides that it will be governed by, and construed in
accordance with, the laws of the State of New York but 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.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee need perform only those duties that are specifically set
forth (or incorporated by reference) in the Indenture and no others. During the
existence of an Event of Default, the Trustee will exercise such rights and
powers vested in it by the Indenture, and use the same degree of care and skill
in such exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payments of claims in
certain cases or to realize on certain property received in respect of any such
claims as security or otherwise.
CERTAIN DEFINITIONS
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (A) the sum of (i) the Present Value of Oil and
Gas Reserves, (ii) the Net Working Capital on a date no earlier than the date of
the Company's latest consolidated annual or quarterly financial statements, and
(iii) with respect to each other tangible asset of the Company or its
consolidated Subsidiaries, the greater of (a) the net book value of such other
tangible asset on a date no earlier than the date of the Company's latest
consolidated annual or quarterly financial statements, and (b) the appraised
value, as estimated by a qualified independent appraiser, of such other tangible
asset, as of a date no earlier than the date that is three years prior to the
date of determination (or such later date on which the Company shall have a
reasonable basis to believe that there has occurred a material decrease in value
since the determination of such appraised value), minus (B) minority interests
and, to the extent not otherwise taken into account in determining Adjusted
Consolidated Net Tangible Assets, any gas balancing liabilities of the Company
and its consolidated Subsidiaries. In addition to, but without duplication of,
the foregoing, for purposes of this definition, "Adjusted Consolidated Net
Tangible Assets" shall be calculated after giving effect, on a pro forma basis,
to (1) any Investment not prohibited by the Indenture, to and including the date
of the transaction giving rise to the need to
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calculate Adjusted Consolidated Net Tangible Assets (the "Assets Transaction
Date"), in any other Person that, as a result of such Investment, becomes a
Subsidiary of the Company, (2) the acquisition, to and including the Assets
Transaction Date (by merger, consolidation or purchase of stock or assets), of
any business or assets, including, without limitation, Permitted Industry
Investments, and (3) any sales or other dispositions of assets permitted by the
Indenture (other than sales of Hydrocarbons or other mineral products in the
ordinary course of business) occurring on or prior to the Assets Transaction
Date. For purposes of calculating the ratio of the Company's Adjusted
Consolidated Net Tangible Assets to Indebtedness of the Company and its
Subsidiaries, Indebtedness of a Subsidiary that is not a Wholly Owned Subsidiary
(which Indebtedness is non-recourse to the Company or any other Subsidiary or
any of their assets) shall be included only to the extent of the Company's pro
rata ownership interest in such Subsidiary.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Guarantee, of such Subsidiary Guarantor at such date and
(y) the present fair saleable value of the assets of such Subsidiary Guarantor
at such date exceeds the amount that will be required to pay the probable
liability of such Subsidiary Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date and
after giving effect to any collection from any Subsidiary of such Subsidiary
Guarantor in respect of the obligations of such Subsidiary under the Guarantee),
excluding debt in respect of the Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or 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 specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Asset" means each of the assets that are owned by the Company on the date
of the Indenture or that are acquired by the Company or a Subsidiary after the
date of the Indenture.
"Asset Disposition" means any sale, lease (other than a sale and leaseback
that creates a Capitalized Lease Obligation), transfer, exchange or other
disposition (or series of related sales, leases, transfers, exchanges or
dispositions) of shares of Capital Stock of a Subsidiary (other than directors'
qualifying shares), or of property or assets (including any interests therein)
(each referred to for purposes of this definition as a "disposition") by the
Company or any of its Subsidiaries, including any disposition by means of a
merger, consolidation or similar transaction (other than (A) by the Company to a
Subsidiary or by a Subsidiary to the Company or a Subsidiary (in the case of a
transfer to a Subsidiary that is not a wholly owned Subsidiary, dispositions
shall be excluded pursuant to clause (A) only to the extent of the Company's
interest in such Subsidiary after giving effect to such transfer), (B) any
Investment in an Unrestricted Subsidiary not prohibited under the provisions
described in the "Limitation on Restricted Payments" covenant, (C) a disposition
of Hydrocarbons or other mineral products in the ordinary course of business,
and (D) the disposition of all or substantially all of the assets of the Company
in compliance with the "Merger, Consolidation or Sale of Substantially All
Assets" covenant).
"Assigned Mortgage" means the Act of Mortgage, Security Agreement,
Assignment of Production and Financing Statement, assigned by the Act of
Assignment of Note and Liens executed by JEDI and the Company, dated as of the
Issue Date, related to the Collateral.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(x) the number of years from such date to the date of each successive scheduled
principal payment of such Indebtedness multiplied by (y) the amount of such
principal payment by (ii) the sum of all such principal payments.
"Bank Credit Agreement" means one or more credit agreements that may be
entered into between the Company and one or more lenders that may be secured by
certain assets of the Company, as such agreement may be amended, modified
(without limitation as to amount), supplemented, extended, restated, replaced,
renewed or refinanced from time to time in whole or in part in one or more
credit agreements, loan agreements, instruments or similar agreements,
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as such may be further amended, modified (without limitation as to amount),
supplemented, extended, restated, replaced, renewed or refinanced from time to
time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the board of directors of such
Person duly authorized to act on behalf of the board of directors of such
Person.
"Business Day" means any day other than a Saturday, Sunday or any other day
on which banking institutions in the City of New York are required or authorized
by law or other governmental action to be closed.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock and any and all warrants, options and rights with respect thereto,
including each class of common stock and preferred stock of such Person.
"Capitalized Lease Obligation" means the discounted present value of the
rental obligations of any Person under any lease of Property, which in
accordance with GAAP, is required to be capitalized on the balance sheet of such
Person.
"Change of Control" means (i) an event or series of events by which any
Person or other entity or group of Persons or other entities acting in concert
as a partnership or other group (a "Group of Persons") shall, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases,
merger, consolidation or otherwise, have become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the combined
voting power of the then outstanding Voting Stock of the Company; provided,
however, that such event or series of events shall not constitute a Change of
Control if the Principals continue to beneficially own more than 50% of the
combined voting power of the then outstanding Voting Stock of the Company, (ii)
during any period of two consecutive years, Continuing Directors cease for any
reason to constitute a majority of the Board of Directors then in office, or
(iii) the direct or indirect sale, lease, exchange or other transfer of all or
substantially all of the Assets to any Person or Group of Persons.
"Collateral" means the collateral described in the Security Documents,
which collateral includes certain oil and gas properties of the Company in the
Lake Enfermer Field, Manilla Village Field and Boutte Field.
"Company Properties" means all Properties, and equity, partnership or other
ownership interests therein, that are related or incidental to, or used or
useful in connection with, the conduct or operation of any business activities
of the Company or the Subsidiaries, which business activities are not prohibited
by the terms of the Indenture.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period increased (to the extent
deducted in determining Consolidated Net Income) by the sum of: (i) all income
taxes of such Person and its subsidiaries paid or accrued according to GAAP for
such period (other than income taxes attributable to extraordinary, unusual or
non-recurring gains or losses), (ii) all interest expense of such Person and its
subsidiaries paid or accrued in accordance with GAAP for such period (including
amortization of original issue discount and the interest portion of deferred
payment obligations), (iii) depreciation and depletion of such Person and its
subsidiaries, (iv) amortization of such Person and its subsidiaries including,
without limitation, amortization of capitalized debt issuance costs, (v) the
amount of any preferred stock dividends paid by such Person on its preferred
stock and (vi) any other non-cash charges to the extent deducted from
Consolidated Net Income.
"Consolidated EBITDA Coverage Ratio" means, with respect to any Person, the
ratio of (1) Consolidated EBITDA of such Person for the period (the "Pro Forma
Period") consisting of the most recent four full fiscal quarters for which
financial information in respect thereof is available immediately prior to the
date of the transaction giving rise to the need to calculate the Consolidated
EBITDA Coverage Ratio (the "Transaction Date") to (2) the aggregate Fixed
Charges that such Person will accrue during the fiscal quarter in which the
Transaction Date occurs and the three fiscal quarters immediately subsequent to
such fiscal quarter (the "Forward Period") on the aggregate amount of
Indebtedness outstanding on the Transaction Date, including any Indebtedness
proposed to be incurred on such date and excluding any Indebtedness repaid with
the proceeds of such Indebtedness (as though all such Indebtedness was incurred
or repaid on the first day of the quarter in which the Transaction Date
occurred). In addition to, but without duplication of, the foregoing, for
purposes of this definition, "Consolidated EBITDA" shall be calculated after
giving effect (without duplication), on a pro forma basis for the Pro Forma
Period (but no longer), to (a) any Investment, during the
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period commencing on the first day of the Pro Forma Period to and including the
Transaction Date (the "Reference Period"), in any other Person that, as a result
of such Investment, becomes a subsidiary of such Person, (b) the acquisition,
during the Reference Period (by merger, consolidation or purchase of stock or
assets) of any business or assets, which acquisition is not prohibited by the
Indenture, including but not limited to Permitted Industry Investments, as if
such acquisition had occurred on the first day of the Reference Period (c) any
sales or other dispositions of assets (other than sales of Hydrocarbons and
other mineral products in the ordinary course of business) occurring during the
Reference Period, in each case as if such incurrence, Investment, repayment,
acquisition or asset sale had occurred on the first day of the Reference Period
and (d) interest income reasonably anticipated by the Company to be received
during the Pro Forma Period from Investments in Permitted Obligations, which
Investments exist on the Transaction Date or will exist as a result of the
transaction giving rise to the need to calculate the Consolidated EBITDA
Coverage Ratio. For purposes of this definition, "Fixed Charges" shall be
calculated after giving effect (without duplication), on a pro forma basis for
the Forward Period, to any Indebtedness incurred or repaid on or after the first
day of the Forward Period and prior to the Transaction Date. For purposes of
calculating the Company's Consolidated EBITDA Coverage Ratio, Indebtedness of a
Subsidiary that is not a Wholly Owned Subsidiary (which Indebtedness is non-
recourse to the Company or any other Subsidiary or any of their assets) shall be
included only to the extent of the Company's pro rata ownership interest in such
Subsidiary.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of such Person and its subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP, provided
that (a) the net income of (i) any Unrestricted Subsidiary and (ii) any other
Person in which such Person or any subsidiary thereof has an interest (which
interest, in the case of those Persons referred to in clause (ii), does not
cause the net income of such other Person to be consolidated with the net income
of such Person in accordance with GAAP) will be included only to the extent of
the amount of dividends or distributions actually paid to such Person or its
subsidiaries by such other Person in such period; (b) the net income of any
subsidiary of such Person that is subject to any Payment Restriction will be
excluded to the extent of such Payment Restriction; and (c) (i) the net income
(or loss) of any other Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition, (ii) any net gain (but not
loss) on the sale or other disposition by such Person or any of its subsidiaries
of assets and of the Capital Stock of any subsidiary of such Person, and (iii)
after-tax items classified as extraordinary or nonrecurring gains, will each be
excluded.
"Consolidated Net Worth" means with respect to any Person as of any date
the amount by which the assets of such Person and its subsidiaries on a
consolidated basis exceed (i) the total liabilities of such Person and its
subsidiaries on a consolidated basis, plus (ii) Disqualified Capital Stock of
such Person or Disqualified Capital Stock of any subsidiary of such Person
issued to any Person other than such Person or another wholly owned Subsidiary
of such Person, in each case determined in accordance with GAAP.
"Continuing Directors" means any member of the Board of Directors of the
Company on the Issue Date, any director elected since the date thereof in any
annual meeting of the stockholders upon the recommendation of the Board of
Directors of the Company and any other member of the Board of Directors of the
Company who will be recommended or elected to succeed a Continuing Director by a
majority of Continuing Directors who are then members of the Board of Directors
of the Company.
"Currency Agreement" means the obligations of any Person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person or any of its subsidiaries against
fluctuations in currency values.
"Default" means any event that is, or after notice or passage of time would
be, an Event of Default.
"Disqualified Capital Stock" means, with respect to any Person, any Capital
Stock of such Person or its subsidiaries that, by its terms, by the terms of any
agreement related thereto or by the terms of any security into which,
mandatorily or at the option of the holder, it is convertible or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased by such Person or its subsidiaries, including at
the option of the holder, in whole or in part, or has, upon the happening of an
event or the passage of time would have, a redemption or similar payment due, in
each such case on or prior to the Maturity Date.
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"Farmout Interest" means an undivided interest in a portion of the
Collateral that has been assigned, transferred, subleased, granted or conveyed
pursuant to a farmout, conditional assignment or similar type agreement.
"Fixed Charges" means, with respect to any Person, for any period, the
aggregate amount of (i) interest, whether expensed or capitalized, paid, accrued
or scheduled to be paid or accrued during such period (except to the extent
accrued in a prior period) in respect of all Indebtedness of such Person and its
consolidated subsidiaries (including (a) original issue discount on any
Indebtedness and (b) the interest portion of all deferred payment obligations,
calculated in accordance with the effective interest method, in each case to the
extent attributable to such period) and (ii) the product of (a) the dividend
requirements on Disqualified Capital Stock of such Person and its consolidated
subsidiaries and, in the case of the Company, on the Series A Preferred Stock
(in each case, whether in cash or otherwise (except dividends payable in shares
of Qualified Capital Stock) (non-cash dividends being valued as determined in
good faith by the Board of Directors of such Person, as evidenced by a Board
Resolution)) paid, accrued or scheduled to be paid or accrued during such period
(except to the extent accrued in a prior period) times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local income tax rate of such
Person and its consolidated subsidiaries, expressed as a decimal, and, with
respect to all of the foregoing items in this definition, excluding items
eliminated in consolidation.
For purposes of the definition of Fixed Charges, (a) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Board of Directors of such Person (as evidenced by
a Board Resolution) to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP; (b) interest on Indebtedness that is
determined on a fluctuating basis shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest of such Indebtedness in effect on
the date Fixed Charges are being calculated, subject to the proviso in clause
(c); (c) interest on Indebtedness that may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rate, shall be deemed to have been based upon
the rate actually chosen, or, if none, then based upon such optional rate chosen
as the Company may designate, (provided that, for the period following the date
on which the rate actually chosen ceases to be in effect, the Company may
designate an optional rate other than that actually chosen, which optional rate
shall be deemed to accrue at a fixed per annum equal to the rate of interest on
such optional rate in effect on the date Fixed Charges are being calculated);
and (d) Fixed Charges shall be increased or reduced by the net cost (including
amortization of discount) or benefit associated with obligations under Interest
Rate Agreements attributable to such period.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of any date of determination.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all constituents, elements or compounds thereof and products refined or
processed therefrom.
"Immediate Family" of any specified Person means a spouse, sibling, child
or grandchild of such specified Person, whether related through blood, marriage
or adoption.
"Indebtedness" means, with respect to any Person, without duplication, any
liability, contingent or otherwise, of such Person (i) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures
or similar instruments, (iii) representing the deferred and unpaid balance of
the purchase price of any property or interest therein (other than any such
balance that represents an account payable or any other monetary obligation to a
trade creditor created, incurred, assumed or guaranteed by such Person in the
ordinary course of business of such Person in connection with obtaining goods,
materials or services and due within 12 months (or such longer period for
payment as is customarily extended by such trade creditor) of the incurrence
thereof, which account is not overdue by more than 150 days, according to the
original terms of sale, unless such account payable is being contested in good
faith or has been extended), (iv) for the payment of a Capitalized Lease
Obligation of such Person, (v) with respect to the reimbursement of any letter
of credit, banker's acceptance or similar credit transaction, (vi) with respect
to Indebtedness (as otherwise defined in this definition) of another Person
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person (provided that if the obligations so secured have not
been assumed in full by such Person or are not otherwise such Person's legal
liability in full, then such obligations shall be deemed to be in an amount
equal to the greater of (A) the lesser of (1) the full amount of such
obligations, and (2) the fair market value of such assets, as determined in
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good faith by the Board of Directors of such Person, which determination shall
be evidenced by a Board Resolution, and (B) the amount of obligations as have
been assumed by such Person or that are otherwise such Person's legal
liability), (vii) with respect to production payments in connection with oil and
gas properties of such Person, other than any Permitted Production Payment
Obligations, (viii) to the extent not otherwise included, under Currency
Agreements and Interest Rate Agreements entered into other than in the ordinary
course of such Person's business, (ix) in the case of such Person, the
liquidation preference and any mandatory redemption payment obligations in
respect of Disqualified Capital Stock, and, in the case of a subsidiary of such
Person, the liquidation preference and any mandatory redemption payment
obligations in respect of preferred stock of such subsidiary, and (x) in respect
of all Indebtedness of others that such Person has guaranteed, endorsed with
recourse (otherwise than for collection, deposit or other similar transactions
in the ordinary course of business), agreed to purchase or repurchase or in
respect of which such Person has agreed contingently to supply or advance funds
or for which such Person has otherwise become liable; provided, however,
Indebtedness arising pursuant to clause (iii) of this definition as a result of
such account payable becoming overdue by more than 150 days shall only be deemed
to be incurred at a time when Indebtedness, other than such Indebtedness, is
incurred.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
(a) an insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization proceeding or other similar case or proceeding,
relative to such Person or to its creditors, as such, or its assets, (b) any
liquidation, dissolution, or reorganization proceeding of such Person, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of such Person.
"Interest Rate Agreement" means the obligations of any Person pursuant to
any interest swap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in interest rates.
"Investment" means, in respect of any Person, any investment in another
Person, whether by means of a share purchase, capital contribution, loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
similar credit extension constituting Indebtedness of such other Person and any
guaranty of Indebtedness of any other Person. For purposes of the "Limitation
on Restricted Payments" covenant and the definition of Permitted Unrestricted
Subsidiary Investments, (i) an "Investment" in an Unrestricted Subsidiary shall
be deemed to include and be valued at the fair market value of the net assets of
any Subsidiary at the time that such Subsidiary is designated an Unrestricted
Subsidiary, and (ii) any Investment in an Unrestricted Subsidiary shall be
valued at fair market value at the time of such Investment (except however, when
such Investment consists of a loan or advance by a Person to another Person that
is of an intercompany or similar nature between such Persons and arises pursuant
to an agreement or understanding in the ordinary course of business relating to
tax sharing, administrative or other similar arrangements, then such Investment
shall be valued at fair market value at the time that the investing Person shall
have paid monies or transferred other consideration to another Person for the
benefit of the Person in whom the agreement to make such loan or advance was
made), in each case as determined by the Board of Directors of the Company and
such Subsidiary, as applicable, in good faith.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction).
"Material Change" means an increase or decrease of more than 10% during a
fiscal quarter in the discounted future net cash flows (excluding changes that
result solely from changes in prices) from proved oil and gas reserves of the
Company and consolidated Subsidiaries (before any state or federal income tax);
provided, however, that the following will be excluded from the Material Change
calculation: (i) any acquisitions during the quarter of oil and gas reserves
that have been estimated by independent petroleum engineers and on which a
report or reports exist, (ii) any reserves added during the quarter attributable
to the drilling or recompletion of wells not included in previous reserve
estimates, but which will be included in future quarters, and (iii) any
disposition of properties existing at the beginning of such quarter that have
been disposed of as provided in "Limitation on Disposition of Assets".
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"Material Subsidiary" means any Subsidiary of the Company that, as of the
relevant date of determination, would be a "significant subsidiary" as defined
in Reg. (S) 230.405 promulgated pursuant to the Securities Act as in effect on
the Issue Date, assuming the Company is the "registrant" referred to in such
definition, except that the 10% amounts referred to in such definition shall be
deemed to be 5%.
"Moody's" means Moody's Investors Service, Inc. and any successor to the
rating agency business thereof.
"Net Available Proceeds" means, with respect to any Asset Disposition of
any Person, cash proceeds received (including any cash proceeds received by way
of deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, and excluding any other consideration
until such time as such consideration is converted into cash) therefrom, in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred and (ii) all federal, state or local taxes
required to be accrued as a liability as a consequence of such Asset
Disposition, and in each case net of all Indebtedness that is secured by such
Assets, in accordance with the terms of any Lien upon or with respect to such
Assets, or that must, by its terms or to obtain a necessary consent to such
Asset Disposition or by applicable law, be repaid out of the proceeds from such
Asset Disposition and that is actually so repaid.
"Net Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock, the aggregate net cash proceeds received by the
Company, after payment of expenses, commissions and the like incurred in
connection therewith, and (b) in the case of any exchange, exercise, conversion
or surrender of any outstanding securities or Indebtedness of the Company for or
into shares of Qualified Capital Stock of the Company, the net book value of
such outstanding securities or Indebtedness as adjusted on the books of the
Company on the date of such exchange, exercise, conversion or surrender (plus
any additional amount required to be paid by the holder of such Indebtedness or
securities to the Company upon such exchange, exercise, conversion or surrender
and less any and all payments made to the holders of such Indebtedness or
securities, and all other expenses incurred by the Company in connection
therewith).
"Net Working Capital" means (i) all current assets of the Company and its
consolidated Subsidiaries, minus (ii) all current liabilities of the Company and
its consolidated Subsidiaries, except current liabilities included in
Indebtedness.
"Non-Recourse Indebtedness" means Indebtedness that, under the terms
thereof or pursuant to applicable law, neither the Company nor any Subsidiary of
the Company (other than a Subsidiary being designated as an Unrestricted
Subsidiary) is directly or indirectly liable for and there is no recourse
against any of the assets or properties of the Company or such Subsidiary.
"Obligations" mean the due and punctual payment of principal of and
interest on the Securities when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Company under
the Indenture and the Notes and the due and punctual performance of all other
obligations of the Company under the Indenture and the Notes.
"Oil and Gas Hedge Agreements" means, with respect to any Person, any oil
and gas agreements and other agreements or arrangements or any combination
thereof entered into by such Person in the ordinary course of business and that
is designed to provide protection against oil and natural gas price
fluctuations.
"Oil and Gas Properties" means all Properties, including equity or other
ownership interests therein, owned by any Person that have been assigned "proved
oil and gas reserves" as defined in Rule 4-10 of Regulation S-X of the
Securities Act as in effect on the Issue Date.
"Payment Restriction" means a consensual encumbrance or restriction of any
kind (i) on the ability of any of the Subsidiaries (a) to pay dividends or make
other distributions on its Capital Stock or make payments on any Indebtedness
owed to the Company or any other Subsidiary, (b) to make loans or advances to
the Company or any other Subsidiary, or (c) to transfer any of its Property to
the Company or any other Subsidiary; or (ii) on the ability of such Person or
any other subsidiary of such Person to receive or retain any such (a) dividends,
distributions or payments, (b) loans or advances, or (c) transfers of Property.
"Permitted Indebtedness" means (i) Indebtedness under the Notes and any
Exchange Note issued in exchange for Notes of equal principal amount; (ii)
Indebtedness outstanding under a Bank Credit Agreement in an aggregate
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principal amount at any one time outstanding not to exceed (a) $10.0 million if
the Present Value of Oil and Gas Reserves is less than $125.0 million and (b)
15% of the Present Value of Oil and Gas Reserves if the Present Value of Oil and
Gas Reserves is equal to or greater than $125.0 million; (iii) the Guarantees of
the Notes (and any assumption of the obligations guaranteed thereby); (iv)
Permitted Refinancing Indebtedness; (v) Indebtedness of the Company to any
Wholly Owned Subsidiary, and any Indebtedness of any Wholly Owned Subsidiary to
the Company or to any Wholly Owned Subsidiary of the Company; provided, that in
each case, such Indebtedness has not been incurred in contemplation of any
subsequent issuance or transfer of any Capital Stock or any other event that
would result in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any other subsequent transfer of any such Indebtedness (except to
the Company or a Wholly Owned Subsidiary), and if incurred in contemplation of
any of the foregoing events, then such Indebtedness shall be deemed to be
incurred and shall be treated as an incurrence of Indebtedness for purposes of
the "Limitation on Incurrence of Additional Indebtedness" covenant at the time
the Wholly Owned Subsidiary in question ceased to be a Wholly Owned Subsidiary;
(vi) obligations arising in connection with Oil and Gas Hedge Agreements of the
Company or a Subsidiary; (vii) Permitted Operating Obligations; (viii) other
Indebtedness outstanding at any time in an aggregate principal amount not to
exceed the greater of $5.0 million or 5% of Adjusted Consolidated Net Tangible
Assets; and (ix) Indebtedness outstanding on the Issue Date. Permitted
Refinancing Indebtedness that constitutes a refinancing of amounts referred to
in clauses (ii) and (viii) shall be deemed to be incurred pursuant to and
subject to the limitations in clauses (ii) and (viii), respectively. The Company
may elect at any time that amounts of Indebtedness incurred under clauses (ii)
or (viii) be deemed to be incurred pursuant to the first paragraph of the
"Limitation on Incurrence of Additional Indebtedness" covenant (if then
permitted to be so incurred), in which event such amounts so incurred shall be
deemed not to be incurred under clause (ii) or (viii); provided, however, any
such Indebtedness deemed not to be incurred under clause (ii) shall still be
treated as Indebtedness under and governed by a Bank Credit Agreement for
purposes of all other provisions of the Indenture.
"Permitted Industry Investments" means (i) capital expenditures, including,
without limitation, acquisitions of Company Properties and interests therein;
(ii)(a) entry into operating agreements, joint ventures, working interests,
royalty interests, mineral leases, unitization agreements, pooling arrangements
or other similar or customary agreements, transactions, properties, interests or
arrangements, and Investments and expenditures in connection therewith or
pursuant thereto, in each case made or entered into in the ordinary course of
the oil and gas business, or (b) exchanges of Company Properties for other
Company Properties of at least equivalent value as determined in good faith by
the Board of Directors of the Company; (iii) Investments by the Company or any
Subsidiary in any Subsidiary (or in any Person that becomes a Subsidiary as a
result of such Investment) that are not subject to any Payment Restriction; (iv)
Investments in the Company or another Subsidiary that are not subject to any
Payment Restriction by any Subsidiary; and (v) Investments of operating funds on
behalf of co-owners of Oil and Gas Properties of the Company or the Subsidiaries
pursuant to joint operating agreements.
"Permitted Investments" means Permitted Obligations and Permitted Industry
Investments (in each case, other than Investments in Unrestricted Subsidiaries).
"Permitted Liens" means (i) Liens for taxes, assessments and governmental
charges not yet delinquent or being contested in good faith and for such
adequate reserves have been established to the extent required by GAAP, (ii)
landlord's, carriers, warehouseman's, storage, mechanics', workmen's,
materialmen's, operator's or similar Liens arising in the ordinary course of
business, (iii) 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 Company Properties 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 Company Properties subject thereto or interfere with the
ordinary conduct of the business of the Company or the Subsidiaries, (iv) Liens
on, or related to, Properties to secure all or part of the costs incurred in the
ordinary course of business of exploration, drilling, development, production,
processing, transportation, marketing or storage, or operation thereof, (v)
Liens on pipeline or pipeline facilities, Hydrocarbons or Company Properties
that arise out of operation of law, (vi) judgment and attachment Liens not
giving rise to an Event of Default or Liens created by or existing from any
litigation or legal proceeding that are currently being contested in good faith
by appropriate proceedings and for which adequate reserves have been made, (vii)
(a) Liens upon any Property of any Person existing at the time of acquisition
thereof by the Company, (b) Liens upon any Property of a Person existing at the
time such Person is merged or consolidated with the Company or any Subsidiary or
existing at the time of the sale or transfer of any such Property of such Person
to the Company or any Subsidiary, or (c) Liens upon any Property of a Person
existing at the time such Person becomes a
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Subsidiary; provided that in each case such Lien has not been created in
contemplation of such sale, merger, consolidation, transfer or acquisition, and
provided further that in each such case no such Lien shall extend to or cover
any Property of the Company or any Subsidiary other than the Property being
acquired and improvements thereon, (viii) Liens existing on the Issue Date, (ix)
Liens on deposits made in the ordinary course of business, including, without
limitation, pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation and deposits to secure the
performance of bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a similar nature incurred in the ordinary course of business, (x)
Liens in favor of collecting or payor banks having a right of setoff,
revocation, refund or chargeback with respect to money or instruments of the
Company or any Subsidiary on deposit with or in possession of such bank, (xi)
royalties, overriding royalties, revenue interests, net revenue interests, net
profit interests, reversionary interests, production payments, production sales
contracts, operating agreements and other similar interests, properties,
arrangements and agreements, all as ordinarily exist with respect to Company
Properties, (xii) Liens upon any Property that were 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 no such Lien shall extend to or cover any Property of the Company
or any Subsidiary other than the Property so acquired and improvements thereon,
(xiii) Liens securing the Securities and the Guarantees, (xiv) with respect to
any Company Properties, Liens arising under, or in connection with, or related
to, farm-out, farm-in, joint operating, area of mutual interest agreements
and/or other similar or customary arrangements, agreements or interests that the
Company or any Subsidiary determines in good faith to be necessary for the
economic development of such Property, (xv) Liens upon any Property securing
obligations under hedging agreements, swap agreements or other similar
agreements entered into for the purpose of protecting against fluctuations in
oil or natural gas prices and (xvi) Liens upon any Property securing
Indebtedness under a Bank Credit Agreement; provided that if such Property is
part of the Collateral, the amount of Indebtedness so secured by such Liens does
not exceed, at the time of and after giving effect to the incurrence of such
Indebtedness, the greater of (A) $10.0 million if the ratio of the Company's
Consolidated EBITDA to all of the Company's consolidated interest expense paid
or accrued in accordance with GAAP for the prior four quarter period (including
amortization of original issue discount and the interest portion of deferred
payment obligations) is equal to or exceeds 1.5 and the Adjusted Consolidated
Net Tangible Assets at such time equals or exceeds 120% of the Company's
Consolidated Indebtedness or (B) the amount, if any, that Adjusted Consolidated
Net Tangible Assets at such time exceeds 200% of the Company's Consolidated
Indebtedness.
"Permitted Obligations" means (a) the following kinds of instruments if, in
the case of instruments referred to in clauses (i)-(iv) below, on the date of
purchase or other acquisition of any such instrument by the Company or any
Subsidiary, the remaining term to maturity is not more than one year: (i)
readily marketable obligations issued or unconditionally guaranteed as to
principal and interest by the United States of America or by any agency or
authority controlled or supervised by and acting as an instrumentality of the
United States of America; (ii) repurchase obligations for instruments of the
type described in clause (i) for which delivery of the instrument is made
against payment; (iii) obligations (including, but not limited to, demand or
time deposits, bankers' acceptances and certificates of deposit) issued by a
depository institution or trust company incorporated or doing business under the
laws of the United States of America, any state thereof or the District of
Columbia or a branch or subsidiary of any such depository institution or trust
company operating outside the United States, provided that such depository
institution or trust company has, at the time of the Company's or such
Subsidiary's investment therein or contractual commitment providing for such
investment, capital, surplus or undivided profits (as of the date of such
institution's most recently published financial statements), in excess of $100.0
million; and (iv) commercial paper issued by any Person, if such commercial
paper has, at the time of the Company's or any Subsidiary's investment therein
or contractual commitment providing for such investment, credit ratings of A-1
by Standard & Poor's and P-1 by Moody's; and (b) money market mutual or similar
funds having assets in excess of $100.0 million.
"Permitted Operating Obligations" means Indebtedness of the Company or any
Subsidiary in respect of one or more standby letters of credit, bid, performance
or surety bonds, or other reimbursement obligations, issued for the account of,
or entered into by, the Company or any Subsidiary in the ordinary course of
business (excluding obligations related to the purchase by the Company or any
Subsidiary of Hydrocarbons for which the Company or such Subsidiary has
contracts to sell), or in lieu of any thereof or in addition to any thereto,
guarantees and letters of credit supporting any such obligations and
Indebtedness (in each case, other than for an obligation for borrowed
money, other than borrowed money represented by any such letter of credit, bid,
performance or surety bond, or reimbursement obligation itself, or any guarantee
and letter of credit related thereto).
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"Permitted Production Payment Obligations" means obligations with respect
to production payments entered into in the ordinary course of the Company's or
any Subsidiary's business, which obligations are non-recourse to the Company and
its Subsidiaries other than to Hydrocarbon production from the properties
subject to such obligations.
"Permitted Refinancing Indebtedness" means Indebtedness of the Company or
any Subsidiary, the net proceeds of which are used to renew, extend, refinance,
refund or repurchase (including, without limitation, pursuant to a Change of
Control Offer as required by the terms of the Notes) outstanding Indebtedness of
the Company or any Subsidiary, provided that (i) if the Indebtedness (including
the Notes) being renewed, extended, refinanced, refunded or repurchased is pari
passu with or subordinated in right of payment to either the Notes or the
Guarantees, then such Indebtedness is pari passu with or subordinated in right
of payment to, as the case may be, the Notes or the Guarantees at least to the
same extent as the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, (ii) such Indebtedness is scheduled to mature no earlier than the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, and
(iii) such Indebtedness has an Average Life at the time such Indebtedness is
incurred that is greater than the Average Life of the Indebtedness being
renewed, extended, refinanced, refunded or repurchased; provided, further, that
such Indebtedness (to the extent that such Indebtedness constitutes Permitted
Refinancing Indebtedness) is in an aggregate principal amount (or, if such
Indebtedness is issued at a price less than the principal amount thereof, the
aggregate amount of gross proceeds therefrom is) not in excess of the aggregate
principal amount then outstanding of the Indebtedness being renewed, extended,
refinanced, refunded or repurchased (or if the Indebtedness being renewed,
extended, refinanced, refunded or repurchased was issued at a price less than
the principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees and expenses and premium, if any, incurred by the Company or
such Subsidiary in connection therewith.
"Permitted Unrestricted Subsidiary Investments" means Investments in
Unrestricted Subsidiaries in a cumulative aggregate amount (in cash or the fair
market value of property other than cash, as determined in good faith by the
Board of Directors of the Company) not to exceed the sum of (i) $3.0 million and
(ii) cash or cash equivalent distributions made from any Unrestricted Subsidiary
and received, after the Issue Date, as such by the Company, provided that any
amount included in this clause (ii) shall be deducted from any amounts referred
to in clause (y)(3) of the "Limitation on Restricted Payments" covenant.
Notwithstanding the foregoing, Permitted Unrestricted Subsidiary Investments
shall also include any Investments in Unrestricted Subsidiaries to the extent
such Investment consists of (A) Qualified Capital Stock of the Company or (B)
amounts referred to in clause (y)(2) of the "Limitation on Restricted Payments"
covenant, which Investments shall be excluded from the sum in the previous
sentence, provided that the amount of any Investments pursuant to clause (B)
shall be deducted from amounts referred to in clause (y)(2) of the "Limitation
on Restricted Payments" covenant.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Present Value of Oil and Gas Reserves" means the discounted future net
cash flows from proved oil and gas reserves of the Company and its consolidated
Subsidiaries, calculated in accordance with Commission guidelines (before any
state or federal income tax), as estimated by independent petroleum engineers as
of a date no earlier than the date of the Company's latest annual consolidated
financial statements (or, in the case that the date of determination is after
the end of the first fiscal quarter of the fiscal year of the Company, as
estimated by Company engineers as of a date no earlier than the end of the most
recent fiscal quarter, which estimates shall be confirmed in writing by a report
by independent petroleum engineers in accordance with Commission guidelines in
the event of a Material Change if the amount of Adjusted Consolidated Net
Tangible Assets or Permitted Indebtedness is required to be computed under the
Indenture).
"Principals" means (i) McLain J. Forman, (ii) Persons controlled by McLain
J. Forman, (iii) any member of the Immediate Family of McLain J. Forman, (iv) a
corporation that is wholly owned by any member of the Immediate Family of McLain
J. Forman, (v) a testamentary trust, the sole beneficiaries of which are members
of the Immediate Family of McLain J. Forman, or (vi) the Officers of the
Company, and "Principal" means any one of such Persons.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of the Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act.
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"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock, partnership
interests and other equity or ownership interests in any other Person.
"Public Equity Offering" means an underwritten public offer and sale of
common stock (that is Qualified Capital Stock) of the Company pursuant to a
registration statement that has been declared effective by the Commission
pursuant to the Securities Act (other than a registration statement on Form S-8
or otherwise relating to equity securities issuable under any employee benefit
plan of the Company).
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Rating Agency" means Standard & Poor's and Moody's or, if Standard &
Poor's or Moody's shall have ceased to be a "nationally recognized statistical
rating organization" (as defined in Rule 436 under the Securities Act) or shall
have ceased to make publicly available a rating on any outstanding securities of
any company engaged primarily in the oil and gas business, such other
organization or organizations, as the case may be, then making publicly
available a rating on the Notes as is selected by the Company.
"Related Person" means (i) any Affiliate of the Company, (ii) any
individual or other Person who directly or indirectly holds 10% or more of the
combined voting power of the then outstanding Voting Stock of the Company, (iii)
any relative of any individual referred to in clauses (i), (ii) and (iv) hereof
by blood, marriage or adoption not more remote than first cousin and (iv) any
officer or director of the Company.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Subsidiary, prior to the scheduled maturity or prior to any scheduled repayment
of principal or sinking fund payment, as the case may be, in respect of
Indebtedness of the Company or any Subsidiary that is subordinate in right to
the Notes or the Guarantees, provided, however, that any such acquisition shall
be deemed not to be a Restricted Debt Prepayment to the extent it is made (x) in
exchange for or with the proceeds from the substantially concurrent issuance of
Qualified Capital Stock or (y) in exchange for or with the proceeds from the
substantially concurrent issuance of Indebtedness, in a principal amount (or, if
such Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon the acceleration thereof, with an original issue
price) not to exceed the lesser of (i) the principal amount of Indebtedness
being acquired in exchange therefor (or with the proceeds therefrom) and (ii) if
such Indebtedness being acquired was issued at an original issue discount, the
original issue price thereof plus amortization of the original issue discount at
the time of the incurrence of the Indebtedness being issued in exchange therefor
(or the proceeds of which will finance such acquisition), and provided further
that any such Indebtedness shall have an Average Life not less than the Average
Life of the Indebtedness being acquired, and shall contain subordination and
default provisions no less favorable, in any material respect, to holders of the
Notes than those contained in such Indebtedness being acquired.
"Restricted Payment" means any (i) Stock Payment, (ii) Investment (other
than Permitted Investments and other than Permitted Unrestricted Subsidiary
Investments) or (iii) Restricted Debt Prepayment.
"Secured Indebtedness" means, with respect to any Person, any Indebtedness
of such Person that is secured by a Lien.
"Security Documents" means, collectively, the Assigned Mortgage and the
mortgages that will replace the Assigned Mortgage, as the same may be in force
from time to time.
"Security Interest" means the Lien on the Collateral created by the
Indenture and the Security Documents in favor of the Trustee for the benefit of
the Holders.
"Standard & Poor's" means Standard & Poor's Ratings Group, a division of
The McGraw Hill Companies, Inc. and any successor to the rating agency business
thereof.
"Stock Payment" means, with respect to any Person, (a) the declaration or
payment by such Person, either in cash or in property, of any dividend on
(except, in the case of the Company, dividends payable solely in Qualified
Capital
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Stock of the Company), or the making by such Person or any of its subsidiaries
of any other distribution in respect of, such Person's Capital Stock or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock (except for the issuance of Qualified Capital Stock pursuant to
the exercise thereof), or (b) the redemption, repurchase, retirement or other
acquisition for value by such Person or any of its subsidiaries, directly or
indirectly, of such Person's or any of its subsidiaries' Capital Stock or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock other than, in the case of the Company, through the issuance in
exchange therefor solely of Qualified Capital Stock of the Company; provided,
however, that in the case of a Subsidiary, the term "Stock Payment" shall not
include (i) any such payment with respect to its Capital Stock or warrants,
rights or options to purchase or acquire shares of any class of its Capital
Stock payable to the Company or a Wholly Owned Subsidiary, or (ii) the payment
of pro rata dividends to holders of minority interests in Capital Stock of a
Subsidiary.
"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor that is expressly subordinated in right of payment to the
Notes or the Guarantees, as the case may be.
A "subsidiary" of any Person means (i) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more wholly-owned subsidiaries of such Person or by such Person and one
or more wholly-owned subsidiaries of such Person, (ii) a partnership in which
such Person or a wholly-owned subsidiary of such Person is, at the date of
determination, a general or limited partner of such partnership, but only if
such Person or its wholly-owned subsidiary is entitled to receive more than
fifty percent of the assets of such partnership upon its dissolution, or (iii)
any other Person (other than a corporation or partnership) in which such Person,
a wholly-owned subsidiary of such Person or such Person and one or more wholly-
owned subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has (x) at least a majority ownership interest or (y) the
power to elect or direct the election of a majority of the directors or other
governing body of such Person.
"Subsidiary" means any subsidiary of the Company; provided, that an
Unrestricted Subsidiary shall not be deemed a subsidiary of the Company for
purposes of the Indenture.
"Subsidiary Guarantor" means (i) each of the Company's Subsidiaries that
becomes a guarantor of the Notes in compliance with the terms of the Indenture
and (ii) each of the Company's Subsidiaries executing a supplemental indenture
in which such Subsidiary agrees to be bound by the terms of the Indenture.
"Unrestricted Subsidiary" means (1) any subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (2) any subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any subsidiary of the Company (including any newly acquired or newly
formed subsidiary or a Person becoming a subsidiary through merger or
consolidation or Investment therein) to be an Unrestricted Subsidiary only if:
(A) such subsidiary does not own any Capital Stock of, or own or hold any Lien
on any property of, any other subsidiary of the Company that is not a subsidiary
of the subsidiary to be so designated or otherwise an Unrestricted Subsidiary;
(B) all the Indebtedness of such subsidiary shall at the date of designation,
and will at all times thereafter consist of, Non-Recourse Indebtedness; (C) the
Company certifies that such designation complies with the "Limitation on
Restricted Payments" covenant; and (D) such subsidiary, either alone or in the
aggregate with all other Unrestricted Subsidiaries, does not operate, directly
or indirectly, all or substantially all of the business of the Company and the
Subsidiaries. Any such designation by the Board of Directors of the Company
shall be evidenced to the Trustee by filing with the Trustee a Board Resolution
of the Board of Directors of the Company giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions. If, at any time, such Unrestricted Subsidiary would fail
to meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred as of
such date. The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Subsidiary; provided that immediately after giving effect to
such designation, the Company could incur at least $1.00 of additional
Indebtedness (excluding Permitted Indebtedness) pursuant to the first paragraph
of the "Limitation on Incurrence of Additional Indebtedness" covenant on a pro
forma basis taking into account such designation.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
board of directors or other governing body of such Person.
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"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock (other
than directors' qualifying shares, if applicable) of which is owned by the
Company or another Wholly Owned Subsidiary.
REGISTRATION RIGHTS
The Company and Jefferies & Company, Inc. have entered into a registration
rights agreement (the "Registration Rights Agreement") pursuant to which the
Company has agreed to use its best efforts, at its cost, for the benefit of the
holders of the Old Notes, to file a registration statement on an appropriate
registration form with respect to a registered offer to exchange the Old Notes
for notes (the "Exchange Notes") of the Company secured by the same collateral
as the Notes, which Exchange Notes will have terms substantially identical in
all material respects to the Notes (except that the Exchange Notes will not
contain terms with respect to transfer restrictions or liquidated damages). The
Company believes that the Registration Statement and the Exchange Offer will
fulfill these requirements of the Registration Rights Agreement.
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Division of Corporation Finance of the
Commission, the Company is not permitted to effect an Exchange Offer, (ii) the
Exchange Offer is not consummated within 180 days of the Issue Date, (iii) in
certain circumstances, certain holders of unregistered Exchange Notes so
request, or (iv) in the case of any Holder that participates in the Exchange
Offer, such Holder does not receive Exchange Notes on the date of the exchange
that may be sold without restriction under state and federal securities laws
(other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act), then in each case the Company
has agreed to use its best efforts to (x) promptly deliver to the Holders and
Trustee written notice thereof and (y) at its sole expense, (A) as promptly as
practicable, to file a shelf registration statement covering resales of the
Notes (the "Note Shelf Registration Statement"), (B) to cause the Note Shelf
Registration Statement to be declared effective under Securities Act and (C) to
keep effective the Note Shelf Registration Statement until the earlier of two
years after the Issue Date (or such earlier date as may be authorized under Rule
144(k), as it may be amended from time to time) or such time as all of the
applicable Notes have been sold thereunder or are otherwise eligible for sale
under Rule 144 under the Securities Act. The Company will, in the event that a
Note Shelf Registration Statement is filed, provide to each Holder a copy of the
prospectus that is a part of the Note Shelf Registration Statement, notify each
such Holder when the Note Shelf Registration Statement for the Notes has become
effective and take certain other actions as are required to permit unrestricted
resales of the Notes. A Holder that sells Notes pursuant to the Note Shelf
Registration Statement will 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 Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a Holder (including
certain indemnification rights and obligations). In addition, each holder of
the Notes will be required to deliver information to be used in connection with
the Note Shelf Registration Statement and to provide comments on the Note Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have its Notes included in the Note Shelf
Registration Statement and to benefit from the provisions regarding liquidated
damages set forth in the following paragraph.
In the event that the Exchange Offer is not consummated or the Note Shelf
Registration Statement is not declared effective on or prior to the date
required by the Registration Rights Agreement or the Note Shelf Registration
Statement ceases to be effective (such event referred to as a "Registration
Default"), the Company will pay, as liquidated damages, cash interest
("Additional Interest") to each Holder of the Notes during the first 90 day
period immediately following the occurrence of such Registration Default in an
amount equal to 0.50% per annum of the principal amount of such Notes. The
amount of the Additional Interest will increase by an additional 0.50% per annum
for each subsequent 90 day period until the Exchange Offer is consummated or the
Note Shelf Registration Statement is declared effective or again becomes
effective, as the case may be, up to a maximum amount of Additional Interest of
2.00% per annum. All Additional Interest shall be paid to Holders of the Notes
on each interest payment date for the Notes, whether or not any other cash
interest would then be payable on such date. Upon the consummation of the
Exchange Offer or the effectiveness of a Note Shelf Registration Statement,
Additional Interest shall cease to accrue on the Notes from the date of such
filing, effectiveness or consummation.
If for any reason a Holder fails to exchange its Old Notes for Exchange
Notes or any Old Notes remain outstanding, the Company will promptly notify the
Trustee and the Old Notes and Exchange Notes will be deemed one class of
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security subject to the provisions of the Indenture and entitled to participate
in all the security granted by the Company pursuant thereto.
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, all the provisions of the Registration Rights Agreement, a copy
of which will be available upon request to the Company.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
consequences relating to exchange of Old Notes for Exchange Notes and the
ownership and disposition of the Exchange Notes. This discussion is based upon
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Regulations promulgated thereunder, and judicial and administrative
interpretations thereof, all as in effect as of the date hereof, and all of
which are subject to change (possibly on a retroactive basis) or different
interpretation. There can be no assurance that the Internal Revenue Service (the
"Service") will not challenge one or more of the tax consequences described
herein, and the Company has not obtained, nor does it intend to obtain, a ruling
from the Service with respect to the federal income tax consequences of the
purchase, ownership or disposition of the Note Units. Except as otherwise noted,
this summary only addresses the tax consequences to a person that acquired Old
Notes at the time of original issuance by the Company as part of the Note Units.
This discussion does not purport to address all aspects of United States federal
income taxation that may be relevant to particular holders in light of their
personal circumstances, the United States federal income tax consequences to
certain types of holders subject to special treatment under the Code (e.g., life
insurance companies, tax exempt organizations, financial institutions, dealers
in securities or currencies, persons holding Notes as a part of a hedging or
conversion transaction or a straddle and foreign taxpayers), or the effect of
any applicable state, local or foreign tax laws. The discussion assumes that the
Notes, the Note Warrants and the Common Stock will be held as "capital assets"
within the meaning of Section 1221 of the Code. INVESTORS CONSIDERING THE
PURCHASE OF NOTE UNITS OR THE EXCHANGE OF OLD NOTES IN THE EXCHANGE OFFER ARE
URGED TO CONSULT THEIR OWN TAX ADVISOR TO DETERMINE THEIR PARTICULAR TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTE UNITS UNDER
FEDERAL AND APPLICABLE STATE, LOCAL AND OTHER TAX LAWS.
EXCHANGE NOTE
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
should not constitute a material modification of the terms of the Notes and,
therefore, such exchange should not constitute an exchange for United States
federal income tax purposes. Accordingly, such exchange should have no United
States federal income tax consequences to United States Holders of Notes and the
holding period of the Exchange Notes will include the holding period of the
Notes, and the adjusted tax basis of the Exchange Notes will be the same as that
of the Notes immediately before the exchange.
ALLOCATION OF UNIT ISSUE PRICE TO NOTES AND WARRANTS
Each Old Note was treated for federal income tax purposes as having been
issued as part of an "investment unit" consisting of the Old Note and the
associated Note Warrants. The issue price of an investment unit consisting of
the Note and the associated Note Warrants was the first price at which a
substantial amount of Note Units are sold to investors. The "issue price" of an
investment unit is allocated between its component parts based on their relative
fair market values. The Company will allocate the issue price of a Note Unit
between the Old Note and the associated Note Warrants in accordance with the
Company's determination of their relative fair market values on the issue date
of the Note Units. In connection with the issuance of the Note Units, the
Company allocated $667,000 of the issue price of the Note Units (approximately
$9.53 per Note Unit) to the Note Warrants. Although the Company's allocation is
not binding on the Service, a United States Holder, as defined below, of a Note
Unit must use the Company's allocation unless the United States Holder discloses
on its federal income tax return that it plans to use an allocation that is
inconsistent with the Company's allocation.
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STATED INTEREST AND ORIGINAL ISSUE DISCOUNT
The stated interest on the Notes will be includable in a United States
Holder's gross income as ordinary income for United States federal income tax
purposes at the time it is paid or accrued in accordance with the United States
Holder's method of tax accounting. As used herein, a "United States Holder" of
a Note means a holder that is a citizen or resident of the United States, a
corporation, partnership or other entity formed under the laws of the United
States or any political subdivision thereof, an estate the income of which is
subject to United States federal income taxation regardless of its source and a
trust subject to the primary supervision of a court within the United States
and the control of a United States fiduciary as described in Section 7701(a)(30)
of the Code.
The Notes are considered to be issued with original issue discount ("OID")
to the extent the stated redemption price at maturity of the Notes (which, for
these purposes, will be its stated principal amount) exceeds the portion of the
issue price of the Note Units that is allocable to the Notes. The amount of OID
is, however, considered de minimis and deemed to be zero if such excess is less
than 1/4 of 1% of the stated redemption price at maturity multiplied by the
number of complete years to maturity. It is anticipated that the Notes will be
issued with OID in excess of the de minimis threshold.
The stated redemption price at maturity of each Note is $1000. After
taking into account the allocation of issue price to the Note Warrants described
above, the issue price of the Notes was $67,800,000 in the aggregate or $968.57
(96.857%) per Note. The amount of OID attributable to each Note therefore is
$31.43, an amount in excess of the de minimis threshold.
A United States Holder of a Note (regardless of its method of accounting)
will be required to include in income the sum of the daily portions of OID with
respect to such Note for each day during the taxable year or portion of a
taxable year in which such United States Holder holds the Note (such sum,
"Accrued OID"), with the result that a United States Holder will be required to
include amounts in income without any current corresponding receipt of cash.
The daily portion is determined by allocating to each day of any accrual period
within a taxable year a pro rata portion of an amount equal to the adjusted
issue price of the Note at the beginning of the accrual period multiplied by the
yield to maturity of the Note. The adjusted issue price of a Note at the
beginning of any accrual period is the issue price of the Note increased by the
Accrued OID for all prior accrual periods (less all payments made on the Notes
other than payments of stated interest on the Notes). The Company will annually
furnish to record holders of the Notes and to the IRS information with respect
to any OID accruing during the calendar year as may be required by applicable
regulations.
RULES AFFECTING HIGH YIELD DEBT INSTRUMENTS
Sections 163(e) (5) and (i) of the Code affect the treatment of interest on
applicable high yield debt obligations maturing more than five years from the
date of issuance ("AHYDOs"). The rules are complex and ambiguous in many
respects, and their full potential application to the Notes cannot be
anticipated with precision.
The Notes will constitute AHYDOs if (i) the Notes have "significant
original issue discount" within the meaning of the Code, and (ii) the yield to
maturity of the Notes is equal to or greater than the sum of the relevant
applicable federal rate (the "AFR") for the month in which the Notes are issued,
plus five percentage points. Based upon their terms, the Notes may have
"significant original issue discount." The relevant AFR for long-term debt
instruments issued in June 1997 is 6.69% compounded semiannually. The yield to
maturity of the Note is approximately 14.2% and thus exceeds the threshold
amount. While the yield to maturity of the Notes exceeds threshold amount,
based on the Company's allocation of the issue price of the Units between the
Notes and the Warrants, the Notes should not be treated as issued with
significant OID and therefore should not be treated as AHYDOs.
If the Notes were treated as AHYDOs, a portion of the tax deductions that
would otherwise be available to the Company in respect of the Notes would be
deferred or disallowed, which, in turn, might reduce the after-tax cash flows of
the Company. More particularly, if the Notes were treated as AHYDOs, the
Company would not be entitled to deduct OID that accrues with respect to the
Notes until amounts attributable to OID are paid in cash or property (excluding,
however, stock of the Company or a related entity). In addition, if the Notes
were treated as AHYDOs, the "disqualified portion" of the OID accruing on the
Notes will be characterized as a nondeductible dividend with respect to the
Company. The "disqualified portion" of the OID is the lesser of (i) the amount
of OID on the instrument
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and (ii) the portion of the total return on such instrument that bears the same
ratio to such total return as the "Excess Yield" bears to the total yield to
maturity on the instrument. The "Excess Yield" is the amount by which the yield
to maturity exceeds the AFR plus six percentage points. The tax treatment to
United States Holders of Notes will be unaffected by these provisions except
that corporate holders of the Notes may be treated as receiving distributions
with respect to the stock of the Company (rather than interest on such Notes)
eligible for the dividends received deduction, subject to applicable
limitations, to the extent of the "disqualified portion" of the OID and to the
extent that such distributions would have been treated as dividends if actually
made by the Company with respect to its stock.
ADJUSTED TAX BASIS
A United States Holder's adjusted tax basis in a Note will be equal to the
portion of the issue price of a Note Unit that is allocable to the Note,
increased by OID (if any) included in gross income with respect to such Note.
AMORTIZABLE BOND PREMIUM
If a United States Holder of a Note acquires the Note at a cost that is in
excess of the amount payable at maturity (which, under certain Proposed Treasury
Regulations, will be determined by reference to an earlier call date if the call
price would increase a United States Holder's yield on the Note), the United
States Holder may elect under Section 171 of the Code to amortize the excess
cost (as an offset to interest income) on a constant interest rate basis over
the term of such Note. If the United States Holder makes an election to
amortize bond premium, the tax basis of all of such United States Holder's Notes
will be reduced by the allowable bond premium amortization. The amortization
election would apply to all debt instruments held or subsequently acquired by
the electing purchaser and cannot be revoked without permission from the
Service.
MARKET DISCOUNT
Except as described below, gain recognized on the disposition of a Note
that has accrued market discount will be treated as ordinary income, and not
capital gain, to the extent of the accrued market discount. "Market discount"
is defined generally as the excess, if any, of (i) the principal amount of the
Note over (ii) the tax basis of the Note in the hands of the United States
Holder immediately after its acquisition.
Under a de minimis exception, there is no market discount if the excess of
the principal amount of the Note over the United States Holder's tax basis in
the Note is less than 0.25% of the principal amount multiplied by the number of
complete years after the acquisition date to the Note's date of maturity.
Unless the United States Holder elects otherwise, the accrued market discount
generally would be the amount calculated by multiplying the market discount by a
fraction, the numerator of which is the number of days the Note has been held by
the United States Holder and the denominator of which is the number of days
after the United States Holder's acquisition of the Note up to and including its
maturity date.
If a United States Holder of a Note acquired with market discount disposes
of such Note in any transaction other than a sale, exchange or involuntary
conversion, such United States Holder will be deemed to have realized an amount
equal to the fair market value of the Note and will be required to recognize as
ordinary income any accrued market discount. See the discussion below under
"Sale or Redemption" for the tax consequences of a sale or exchange. A partial
principal payment (if any) on a Note will be includable as ordinary income upon
receipt to the extent of any accrued market discount thereon. A United States
Holder of a Note acquired at a market discount also may be required to defer the
deduction of all or a portion of the interest on any indebtedness incurred or
maintained to purchase or carry the Note until it is disposed of in a taxable
transaction.
A United States Holder of a Note acquired at a market discount may elect to
include the market discount in income as it accrues. This election would apply
to all market discount obligations acquired by the electing United States Holder
on or after the first day of the first year to which the election applies. The
election may be revoked only with the consent of the Service. If a United
States Holder of a Note elects to include market discount in income currently,
the rules discussed above regarding (i) ordinary income recognition resulting
from a sale and certain other disposition transactions and (ii) deferral of
interest deductions would not apply.
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SALE OR REDEMPTION
A United States Holder of a Note who disposes of such Note in a taxable
sale, exchange, redemption or other disposition generally will recognize gain or
loss equal to the difference between (i) the amount of cash plus the fair market
value of any property received for such Note (other than cash or property
received in payment of accrued and unpaid interest) and (ii) the United States
Holder's adjusted tax basis in such Note (other than any portion of the tax
basis attributable to accrued and unpaid interest that was included in the
United States Holder's income). Subject to the market discount rules discussed
above, such gain or loss will be a capital gain or loss and will be long-term if
the Note has been held for a period of one year or more at the time of sale,
exchange, redemption or other disposition. Any portion of the amount realized
on the sale or other disposition of a Note that represents accrued but unpaid
interest will be treated as a payment of such interest. Under current law, net
capital gains of individuals are, under certain circumstances, taxed at lower
rates than items of ordinary income. The deductibility of capital losses is
subject to limitations.
BACKUP WITHHOLDING
Under the Code, a United States Holder of Notes may be subject, under
certain circumstances, to "backup withholding" at a 31% rate with respect to
interest payments or gross proceeds. This withholding generally applies only if
the United States Holder (i) fails to furnish to the payor the United States
Holder's social security or other taxpayer identification number ("TIN") within
a reasonable time after the request therefor, (ii) furnishes an incorrect TIN,
(iii) is notified by the Service that it has failed to report properly interest
or dividends or (iv) fails, under certain circumstances, to provide a certified
statement, signed under penalty of perjury, that the TIN provided is its correct
number and that it is not subject to backup withholding. Any amount withheld
from a payment to a United States Holder under the backup withholding rules is
allowable as a credit against such United States Holder's United States federal
income tax liability, provided that the required information is furnished to the
Service. Corporations and certain other entities described in the Code and
Treasury Regulations are exempt from such withholding if their exempt status is
properly established. United States Holders of Notes should consult their tax
advisors as to their qualifications for exemption from withholding and the
procedure for obtaining such exemption.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange 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 Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of market-
making activities or other trading activities. A broker-dealer that delivers
such a prospectus to purchasers in connection with such resales will be subject
to certain of the civil liability provisions under the Securities Act and will
be bound by the provisions of the Registration Rights Agreement (including
certain indemnification rights and obligations).
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange 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 Exchange 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 concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-
dealer that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Company has
agreed in the Registration Rights Agreement to indemnify such broker-dealers
against certain liabilities, including liabilities under the Securities Act.
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TRANSFER RESTRICTIONS ON OLD NOTES
OFFERS AND SALES BY JEFFERIES & COMPANY, INC.
The Old Notes have not been registered under the Securities Act and may not
be offered or sold in the United States or to, or for the account or benefit of,
U.S. persons except in accordance with an applicable exemption from the
registration requirements thereof. Accordingly, the Old Notes were offered and
sold only to QIBs under Rule 144A under the Securities Act and other
Institutional Accredited Investors in a private sale exempt from the
registration requirements of the Securities Act.
INVESTOR REPRESENTATIONS AND RESTRICTIONS ON RESALE
Each purchaser of the Old Notes was deemed to have represented and agreed
as follows:
(1) it was acquiring the Old Notes for its own account or for an account
with respect to which it exercises sole investment discretion, and that it or
such account is a QIB, an Institutional Accredited Investor acquiring the Old
Notes for investment purposes and not for distribution or a foreign purchaser
outside the United States;
(2) it acknowledged that the Old Notes were not registered under the
Securities Act and may not be offered or sold except as permitted below;
(3) it understood and agreed (x) that such Old Notes were being offered
only in a transaction not involving any public offering within the meaning of
the Securities Act, and (y) that (A) if within one year after the date of
original issuance of the Old Notes or if within three months after it ceases to
be an affiliate (within the meaning of Rule 144 under the Securities Act) of the
Company, it decides to resell, pledge or otherwise transfer the Old Notes on
which the legend set forth below appears, such securities may be resold, pledged
or transferred only (i) to the Company, (ii) so long as such securities are
eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a QIB that purchases for its own account or for the
account of a QIB to whom notice is given that the resale, pledge or transfer is
being made in reliance on Rule 144A (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the Note if such
Note is not in book-entry form), (iii) in an offshore transaction in accordance
with Regulation S under the Securities Act (as indicated by the box checked by
the transferor on the Certificate of Transfer on the reverse of the Note), but,
if such transfer is being effected by any foreign purchaser who has purchased
Old Notes from any person other than a QIB or an Institutional Accredited
Investor pursuant to this clause (iii) prior to the expiration of the "40-day
restricted period" (within the meaning of Rule 903(c)(3) of Regulation S under
the Securities Act), the transferee shall have certified to the Company and the
Trustee for the Old Notes that such transferee is a non-U.S. person (within the
meaning of Regulation S) and that such transferee is acquiring the Old Notes in
an offshore transaction, (iv) to an Institutional Accredited Investor (as
indicated by the box checked by the transferor on the Certificate of Transfer on
the reverse of the Note if such Old Note is not in book-entry form ) who has
certified to the Company and the Trustee for the Old Notes that such transferee
is an Institutional Accredited Investor and is acquiring the Old Notes for
investment purposes and not for distribution (provided that any foreign
purchaser who has purchased Old Notes from any person other than a QIB or an
Institutional Accredited Investor pursuant to clause (iii) shall not be
permitted to transfer any Old Notes so purchased by it to an Institutional
Accredited Investor pursuant to this clause (iv) prior to the expiration of the
"40-day restricted period" (within the meaning of Rule 903(c)(3) of Regulation S
under the Securities Act), (v) pursuant to an exemption from the registration
requirements of the Securities Act provided by Rule 144 (if applicable) under
the Securities Act or (vi) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States, (B) the purchaser will, and each
subsequent holder is required to, notify any purchaser of Old Notes from it of
the resale restrictions referred to in (A) above, if then applicable, and (C)
with respect to any transfer of Old Notes by an Institutional Accredited
Investor, such holder will deliver to the Company and the Trustee such
certificates and other information as they may reasonably require to confirm
that the transfer by it complies with the foregoing restrictions.
(4) it understood that the notification requirement referred to in (3)
above will be satisfied, in the case only of transfers by physical delivery of
certificated securities other than a global note by virtue of the fact that the
following legend was placed on the Old Notes unless otherwise agreed by the
Company:
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"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE
BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED (X) PRIOR TO THE FIRST ANNIVERSARY OF THE ISSUANCE
HEREOF (OR A PREDECESSOR NOTE HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE
DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE
BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE
OF THIS NOTE), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION
S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY),
AND IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN
THE INDENTURE RELATING TO THIS NOTE [THE NOTE WITH WHICH THIS WARRANT
COMPRISES A UNIT] PRIOR TO THE EXPIRATION OF THE "40-DAY RESTRICTED PERIOD"
(WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES
ACT), A CERTIFICATE THAT MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS
DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
NOTE) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO THIS NOTE IS
DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT
CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY
PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40-DAY
RESTRICTED PERIOD" (WITHIN THE MEANING OR RULE 903(c)(3) OF REGULATION S
UNDER THE SECURITIES ACT)), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE
SECURITIES ACT OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL
ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE
COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS NOTE COMPLIES
WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS
NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT
SATISFYING THE REQUIREMENTS OF PARAGRAPH (O)(2) OF RULE 902 UNDER)
REGULATION S UNDER THE SECURITIES ACT."
(5) it (i) had such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its prospective
investment in the Old Notes and (ii) had the ability to bear the economic risks
of its prospective investment and can afford the complete loss of such
investment;
(6) it received a copy of the Offering Circular relating to the offering
and acknowledged that it had access to such financial and other information, and
has been afforded the opportunity to ask questions of the Company and receive
answers thereto, as it deemed necessary in connection with its decision to
purchase the Old Notes; and
(7) it understood that the Company, Jefferies & Company, Inc. and others
relied upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and agreed that if any of the acknowledgments,
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<PAGE>
representations and warranties deemed to have been made by it by its purchase of
the Old Notes were no longer accurate, it would promptly notify the Company and
Jefferies & Company, Inc. If it was acquiring the Old Notes as a fiduciary or
agent for one or more investor accounts, it represented that it had sole
investment discretion with respect to each such account and it had full power to
make the foregoing acknowledgments, representations and agreements on behalf of
such account.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1996,
and for each of the three years in the period ended December 31, 1996, included
in this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
Information relating to the estimated proved reserves of oil and natural
gas and the related estimates of future net revenues and present values thereof
for the periods included in this Prospectus and in the notes to the Financial
Statements of the Company have been prepared by Ryder Scott Company, Petroleum
Engineers, independent petroleum engineers.
83
<PAGE>
GLOSSARY OF OIL AND GAS TERMS
The definitions set forth below shall apply to the indicated terms as used
in this Prospectus. All volumes of natural gas referred to herein are stated at
the legal pressure base of the state or area where the reserves exist and at 60
degrees Fahrenheit and in most instances are rounded to the nearest major
multiple.
Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein
in reference to crude oil or other liquid hydrocarbons.
Bbl/d. One Bbl per day.
Bcf. Billion cubic feet.
Bcfe. Billion cubic feet equivalent, determined using the ratio of six Mcf
of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
Boe. Barrel of oil equivalent, determined using the ratio of one Bbl of
crude oil, condensate or natural gas liquids to six Mcf of natural gas.
Boe/d. One barrel of oil equivalent per day.
Btu. British thermal unit, which is the heat required to raise the
temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.
Completion. The installation of permanent equipment for the production of
oil or natural gas, or in the case of a dry hole, the reporting of abandonment
to the appropriate agency.
Developed acreage. The number of acres that are allocated or assignable to
producing wells or wells capable of production.
Development well. A well drilled within the proved area of an oil or
natural gas reservoir to the depth of a stratigraphic horizon known to be
productive.
Dry hole or well. A well found to be incapable of producing hydrocarbons
in sufficient quantities such that proceeds from the sale of such production
exceed production expenses and taxes.
Exploratory well. A well drilled to find and produce oil or natural gas
reserves not classified as proved, to find a new reservoir in a field previously
found to be productive of oil or natural gas in another reservoir or to extend a
known reservoir.
Farm-in or farm-out. An agreement whereunder the owner of a working
interest in an oil and natural gas lease assigns the working interest or a
portion thereof to another party that desires to drill on the leased acreage.
Generally, the assignee is required to drill one or more wells to earn its
interest in the acreage. The assignor usually retains a royalty or reversionary
interest in the lease. The interest received by an assignee is a "farm-in"
while the interest transferred by the assignor is a "farm-out."
Field. An area consisting of a single reservoir or multiple reservoirs all
grouped on or related to the same individual geological structural feature
and/or stratigraphic condition.
Gross acres or gross wells. The total acres or wells, as the case may be,
in which a working interest is owned.
Horizontal drilling. A drilling technique that permits the operator to
contact and intersect a larger portion of the producing horizon than
conventional vertical drilling techniques and can result in both increased
production rates and greater ultimate recoveries of hydrocarbons.
Liquids. Crude oil, condensate and natural gas liquids.
84
<PAGE>
MBbls. One thousand barrels of crude oil or other liquid hydrocarbons.
MBbls/d. One thousand barrels of crude oil or other liquid hydrocarbons
per day.
MBoe. One thousand barrels of oil equivalent, determined using the ratio
of one Bbl of crude oil, condensate or natural gas liquids to six Mcf of natural
gas.
Mcf. One thousand cubic feet.
Mcf/d. One thousand cubic feet per day.
Mcfe. One thousand cubic feet equivalent, determined using the ratio of
six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas
liquids.
MMBbls. One million barrels of crude oil or other liquid hydrocarbons.
MMBoe. One million barrels of oil equivalent, determined using the ratio
of one Bbl of crude oil, condensate or natural gas liquids to six Mcf of natural
gas.
MMBoe/d. One million barrels of oil equivalent per day.
MMBtu. One million Btus.
MMcf. One million cubic feet.
MMcfe. One million cubic feet equivalent, determined using the ratio of
six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas
liquids.
Net acres or net wells. The sum of the fractional working interests owned
in gross acres or gross wells, as the case may be.
Oil. Crude oil and condensate.
Present value. When used with respect to oil and natural gas reserves, the
estimated future gross revenue to be generated from the production of proved
reserves, net of estimated production and future development costs, using prices
and costs in effect as of the date indicated, without giving effect to non-
property related expenses such as general and administrative expenses, debt
service and future income tax expenses or to depreciation, depletion and
amortization, discounted using an annual discount rate of 10%.
Productive well. A well that is found to be capable of producing
hydrocarbons in sufficient quantities such that proceeds from the sale of such
production exceed production expenses and taxes.
Proved developed nonproducing reserves. Proved developed reserves expected
to be recovered from zones behind casing in existing wells.
Proved developed producing reserves. Proved developed reserves that are
expected to be recovered from completion intervals currently open in existing
wells and capable of production.
Proved reserves. The estimated quantities of crude oil, natural gas and
natural gas liquids that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
Proved undeveloped location. A site on which a development well can be
drilled consistent with spacing rules for purposes of recovering proved
undeveloped reserves.
85
<PAGE>
Proved undeveloped reserves. Proved reserves that are expected to be
recovered from new wells on undrilled acreage or from existing wells where a
relatively major expenditure is required for recompletion.
Recompletion. The completion for production of an existing well bore in
another formation from that in which the well has been previously completed.
Reservoir. A porous and permeable underground formation containing a
natural accumulation of producible oil and/or natural gas that is confined by
impermeable rock or water barriers and is individual and separate from other
reservoirs.
Royalty interest. An interest in an oil and natural gas property entitling
the owner to a share of oil or natural gas production free of costs of
production.
Undeveloped acreage. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and natural gas regardless of whether such acreage contains proved
reserves.
Working interest. The operating interest that gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
production.
Workover. Operations on a producing well to restore or increase
production.
86
<PAGE>
FORMAN PETROLEUM CORPORATION
----------------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE
----
Report of Independent Public Accountants F-2
Balance Sheets as of March 31, 1997 and December 31, 1996 and 1995 F-3
Statements of Operations and Accumulated Deficit for the Three
Months Ended March 31, 1997 and 1996 and the Years Ended
December 31, 1996, 1995 and 1994 F-4
Statements of Cash Flows for the Three Months Ended March 31, 1997
and 1996 and the Years Ended December 31, 1996, 1995 and 1994 F-5
Notes to Financial Statements F-6
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of Forman Petroleum Corporation:
We have audited the accompanying balance sheets of Forman Petroleum Corporation
(a Louisiana corporation) as of December 31, 1996 and 1995, and the related
statements of operations and accumulated deficit and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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 financial statements referred to above present fairly, in
all material respects, the financial position of Forman Petroleum Corporation as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
New Orleans, Louisiana,
March 26, 1997, except with
respect to Note 8, as to which
the date is June 3, 1997.
F-2
<PAGE>
FORMAN PETROLEUM CORPORATION
----------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
March 31, ------------------------------
1997 1996 1995
--------------- -------------- --------------
(Unaudited)
----------
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 693,135 $ 130,551 $ 314,070
Accounts receivable 559,165 500,602 130,577
Oil and gas revenue receivable 1,319,038 2,503,478 1,200,013
Unbilled well costs 180,508 7,269 9,737
Prepaid expenses 66,765 52,919 93,575
Due from related parties (Note 6) 12,457 12,457 12,457
------------ ------------ -----------
Total current assets 2,831,068 3,207,276 1,760,429
------------ ------------ -----------
PROPERTY AND EQUIPMENT, at cost (Notes 1, 2 and 9):
Oil and gas properties, full cost method 51,783,635 48,359,890 33,009,297
Other property and equipment 1,364,989 1,425,451 1,366,117
------------ ------------ -----------
53,148,624 49,785,341 34,375,414
Less- accumulated depreciation, depletion and
amortization (Note 1) (13,745,887) (12,433,801) (8,561,900)
------------ ------------ -----------
Net property and equipment 39,402,737 37,351,540 25,813,514
------------ ------------ -----------
OTHER ASSETS:
Due from affiliate (Note 6) 489,972 327,828
Escrowed and restricted funds (Note 5) 891,149 881,970 897,662
Deferred financing costs (net of accumulated
amortization of $2,002,501, $1,772,026 and $1,206,383
respectively) (Note 1) 230,479 460,954 543,096
Deferred charges (Note 1) 147,097 147,097 145,747
------------ ------------ -----------
Total assets $ 43,992,502 $ 42,376,665 $29,160,448
============ ============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 6,914,320 $ 6,241,069 $ 2,855,388
Undistributed oil and gas revenues 1,343,544 1,625,517 956,422
Current portion of long-term debt (Notes 2 and 8) 19,160 21,160 65,602
Note payable to stockholder (Note 6) 260,000 500,000
------------ ------------
Total current liabilities 8,537,024 8,387,746 3,877,412
------------ ------------ -----------
LONG-TERM LIABILITIES:
Notes payable (Notes 2 and 8) 40,551,535 39,021,487 28,541,055
------------ ------------ -----------
STOCKHOLDER'S EQUITY:
Common stock, no par value, authorized 1,000,000
shares; issued and outstanding 90,000 shares 1,000 1,000 1,000
Treasury stock (10) (10) (10)
Additional paid-in capital 785,823 785,823 785,823
Accumulated deficit (5,882,870) (5,819,381) (4,044,832)
------------ ------------ -----------
Total stockholder's equity (5,096,057) (5,032,568) (3,258,019)
------------ ------------ -----------
$ 43,992,502 $ 42,376,665 $29,160,448
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
FORMAN PETROLEUM CORPORATION
----------------------------
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
------------------------------------------------
<TABLE>
<CAPTION>
Three Months Year Ended
Ended March 31, December 31,
----------------------------- ------------------------------------------
1997 1996 1996 1995 1994
-------------- ------------- ------------ ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 3,736,526 $ 2,254,080 $10,891,640 $ 6,918,727 $9,532,408
Interest income 9,179 9,185 36,740 193,594 14,076
Overhead reimbursements 14,744 18,131 95,672 131,308 73,621
Other income 17,375 29,306 94,051 60,615 119,227
----------- ----------- ----------- ----------- ----------
3,777,824 2,310,702 11,118,103 7,304,244 9,739,332
----------- ----------- ----------- ----------- ----------
COSTS AND EXPENSES:
Production taxes 129,152 192,606 584,710 660,132 791,013
Lease operating expenses 556,709 585,049 2,526,488 2,196,420 2,775,060
General and administrative
expenses 428,648 410,459 1,539,245 919,837 1,204,012
Interest expense 1,184,243 900,818 3,982,797 3,522,285 2,121,115
Depreciation, depletion and
amortization 1,542,561 1,060,491 4,259,412 3,558,215 2,390,694
----------- ----------- ----------- ----------- ----------
3,841,313 3,149,423 12,892,652 10,856,889 9,281,894
----------- ----------- ----------- ----------- ----------
Net income (loss) $ (63,489) $ (838,721) $(1,774,549) $(3,552,645) $ 457,438
=========== =========== =========== =========== ==========
ACCUMULATED DEFICIT:
Beginning of period $(5,819,381) $(4,044,832) $(4,044,832) $ (492,187) $ (949,625)
Current period net income (loss) (63,489) (838,721) (1,774,549) (3,552,645) 457,438
----------- ----------- ----------- ----------- ----------
End of period $(5,882,870) $(4,883,553) $(5,819,381) $(4,044,832) $ (492,187)
=========== =========== =========== =========== ==========
UNAUDITED PRO FORMA DATA (Note 1):
Net loss reported above $ (63,489) $(1,774,549)
Pro forma benefit for
income taxes related to
operations as an S Corp 23,491 656,583
----------- -----------
Pro forma net loss $ (39,998) $(1,117,966)
=========== ===========
Weighted average shares
outstanding 90,000 90,000
======= ========
Pro forma net loss per
share $ (.44) $ (12.42)
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
FORMAN PETROLEUM CORPORATION
----------------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
-------------------------- ------------------------------------------
1997 1996 1996 1995 1994
------- ------- --------- -------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ (63,489) $ (838,721) $ (1,774,549) $(3,552,645) $ 457,438
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation and amortization 1,542,561 1,060,491 4,259,412 3,558,215 2,390,694
Gain on sale of assets -- -- -- (11,189) --
Interest expense refinanced -- -- 3,627,948 -- --
Change in assets and liabilities-
(Increase) Decrease in oil and gas revenue receivable 1,184,440 85,124 (1,303,465) 39,033 (735,670)
(Increase) Decrease in accounts receivable (58,563) (6,230) (370,025) 321,120 (269,097)
(Increase) Decrease in unbilled well costs (173,239) 2,183 2,468 75,212 114,215
(Increase) Decrease in prepaids (13,846) (7,287) 40,656 12,609 (45,627)
Increase (Decrease) in accounts payable 673,251 2,539,059 4,260,163 1,201,047 (227,190)
Increase (Decrease) in undistributed oil and gas revenues (281,973) (116,137) 669,095 (287,570) 655,668
Increase in deferred charges -- (1,350) (1,350) (22,405) (123,342)
Increase in due from related parties (162,144) -- (327,828) (12,457) --
Decrease in due to stockholder -- -- -- (47,935) --
----------- ---------- ----------- ---------- ----------
Net cash provided by operating activities 2,646,998 2,717,132 9,082,525 1,273,035 2,217,089
----------- ----------- ------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (3,423,745) (2,664,046) (16,300,593) (8,078,633) (10,104,678)
Reduction of (deposit into) escrow account (9,179) (7,353) 15,692 6,715,008 (6,927,325)
Purchase of other property and equipment -- (14,939) (59,334) (179,346) (355,291)
Proceeds from sale of oil and gas property -- -- 950,000 -- --
Proceeds from sale of non-oil & gas property 60,462 -- -- 75,000 --
----------- ----------- ------------ ----------- ------------
Net cash used in investing activities (3,372,462) (2,686,338) (15,394,235) (1,467,971) (17,387,294)
----------- ----------- ------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 1,533,692 -- 7,000,000 39,139 18,939,137
Repayment of notes payable (245,644) (7,599) (566,442) (1,152,216) (3,688,463)
Deferred financing costs -- -- (305,367) (17,224) (438,218)
----------- ----------- ------------ ----------- -----------
Net cash (used) provided by financing activities 1,288,048 (7,599) 6,128,191 (1,130,301) 14,812,456
----------- ----------- ------------ ----------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS 562,584 23,195 (183,519) (1,325,237) (357,749)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 130,551 314,070 314,070 1,639,307 1,997,056
----------- ----------- ------------ ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 693,135 $ 337,265 $ 130,551 $ 314,070 $ 1,639,307
=========== =========== ============ =========== ============
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $ 87,837 $ 2,072 $ 21,721 $ 2,258,565 $ 2,047,313
=========== =========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
FORMAN PETROLEUM CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Information with respect to March 31, 1997 and 1996, is unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------------
Organization
- ------------
Forman Petroleum Corporation ("Forman" or the "Company"), a Louisiana
corporation, is an independent energy company engaged in the exploration,
development, acquisition and production of crude oil and natural gas, with
operations primarily in the onshore Gulf Coast area of Louisiana. Forman was
incorporated in Louisiana in 1982 and began operations in that year.
The Company is substantially leveraged. As such, a significant portion of the
Company's cash flow from operations will be dedicated to debt service. As with
other independent oil and gas producers, the Company is subject to numerous
uncertainties and commitments associated with its operations. For example, the
Company's results of operations are highly dependent upon the prices received
for oil and gas. In addition, the Company will be required to make substantial
future capital expenditures for the acquisition, exploration, development,
production and abandonment of its oil and gas properties.
Oil and Gas Properties
- ----------------------
Forman utilizes the full-cost method of accounting, which involves capitalizing
all exploration and development costs incurred for the purpose of finding oil
and gas reserves, including the costs of drilling and equipping productive
wells, dry hole costs, lease acquisition costs and delay rentals. Such costs
are amortized on the future gross revenue method whereby amortization is
computed using the ratio of gross revenues generated during the period to total
estimated future gross revenues from proved oil and gas reserves. Additionally,
the capitalized costs of oil and gas properties cannot exceed the present value
of the estimated net cash flow from its proved reserves, together with the lower
of cost or estimated fair value of its undeveloped properties (the full cost
ceiling). Transactions involving sales of reserves in place, unless
extraordinarily large portions of reserves are involved, are recorded as
adjustments to accumulated depreciation, depletion and amortization.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 (SFAS 121) regarding
accounting for the impairment of long-lived assets. The Company adopted SFAS
121 in 1996, the effect of which was not material.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash and cash equivalents.
Depreciation of Other Property and Equipment
- --------------------------------------------
Depreciation of property and equipment other than oil and gas properties is
provided on the straight-line method over the estimated useful lives of the
assets.
F-6
<PAGE>
Deferred Financing Costs
- ------------------------
For oil and gas property acquisitions which are burdened by an overriding
royalty interest assigned to its lenders (see Note 3), the Company allocated a
portion of the purchase price of such acquisitions to deferred financing costs.
The amount allocated is proportional to the discounted future net cash flows
associated with the interest assigned as compared to the total discounted future
net cash flows for the acquisition (before carve-out of the overriding royalty
interest) as of the date of the acquisition. These allocated costs, along with
other costs of obtaining financing, are deferred and amortized using the
effective interest method over the term of the related debt.
Fair Value of Financial Instruments
- -----------------------------------
Fair value of cash, cash equivalents, accounts receivable and accounts payable
approximates book value at December 31, 1996. Fair value of debt is determined
by discounting the debt at the estimated rate the Company would incur currently
on similar debt. At December 31, 1996, given existing market conditions, the
book value approximates fair value of the outstanding long-term debt.
Income Taxes
- ------------
Forman has elected to file as a Subchapter S corporation for income tax
reporting purposes. Under this election, income from the corporation is treated
as taxable federal and state income of the individual stockholder. Accordingly,
no provision for income taxes has been included in the accompanying financial
statements.
As discussed in Note 8, the Company issued a second class of stock on June 3,
1997, effectively terminating its Subchapter S election. As a result, the
Company will be subject to federal and state taxes. The Company will also be
required to establish a net deferred tax liability calculated at the applicable
federal and state tax rates resulting primarily from financial reporting and
income tax reporting basis differences in oil and gas properties. At December
31, 1996, such net deferred tax liability would have been approximately
$5,800,000.
For purposes of the unaudited pro forma income tax benefit and net loss per
share, the accompanying financial statements include income tax benefits for the
portion of the losses which would have been offset against the deferred tax
liability created as a result of the termination of the Subchapter S election.
Pervasiveness of Estimates
- --------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Deferred Charges
- ----------------
The Company has capitalized $147,097 of legal and professional costs as of
December 31, 1996, related to the preparation of documents for an initial public
offering. These costs will be deducted from proceeds of the offering discussed
in Note 8 or charged to expense if an initial public offering is not
consummated.
Derivatives
- -----------
The Company uses derivative financial instruments (see Note 7) for price
protection purposes on a limited amount of its future production and does not
use them for trading purposes. Such derivatives are accounted for on an accrual
basis and amounts paid or received under the agreements are recognized as oil
and gas sales in the period in which they accrue.
F-7
<PAGE>
Certain Concentrations
- ----------------------
During 1996, a significant portion of the Company's oil and gas production was
sold to three customers. Based on the current demand for oil and gas, the
Company does not believe the loss of any of these customers would have a
significant financially disruptive effect on its business or financial
condition.
Per Share Amounts
- -----------------
Historical earnings per share data has not been presented due to the Company's
termination of its Subchapter S election discussed under Income Taxes above.
Pro forma net loss per share amounts are calculated by dividing pro forma net
loss by the weighted average number of common shares outstanding plus the
effect, using the treasury stock method, of common shares contingently issuable,
if dilutive.
2. NOTES PAYABLE:
--------------
Notes payable was composed of the following at:
<TABLE>
<CAPTION>
December 31,
March 31, ---------------------------------
1997 1996 1995
-------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C>
Whitney National Bank, due June 30, 1996,
and bearing interest at 8.75% in 1996;
interest due monthly, unsecured. $ -- $ -- $ 40,000
Whitney National Bank, due November 9, 1997,
and bearing interest at 8.75% in 1996;
interest due monthly, unsecured. 8,000 10,000 23,000
Endowment Energy Partners, L.P. ("EEP"), principal and
interest due June 23, 1997, and bearing interest at 12%. 13,607,469 13,607,469 11,751,892
Endowment Energy Co. - Investment Partnership ("EECIP"),
principal and interest due June 23, 1997, and bearing
interest at 12%. 19,410,259 19,410,259 16,763,403
Joint Energy Development Investments Ltd Partnership
("JED"), principal and interest due June 16, 1997, and
bearing interest at 10%. 7,533,692 6,000,000 --
Other 11,275 14,919 28,362
----------- ----------- -----------
40,570,695 39,042,647 28,606,657
Less: current portion (19,160) (21,160) (65,602)
----------- ----------- -----------
$40,551,535 $39,021,487 $28,541,055
=========== =========== ===========
</TABLE>
The EEP note was originally secured 1) by a first priority lien against 100% of
Forman's right, title and interest in the Manila Village and Bayou Dularge
Fields, and 2) second priority lien against 100% of Forman's right, title and
interest in the Lake Enfermer, Boutte and Lafourche Crossing Fields. The EECIP
note was originally secured 1) by a first priority lien against 100% of Forman's
right, title and interest in the Lake Enfermer, Boutte and Lafourche Crossing
Fields, and 2) second priority lien against 100% of Forman's right, title and
interest in the Manila Village and Bayou Dularge Fields. During 1996, both
lenders' liens were subordinated to the new JED term loan. Additionally, as
discussed in Note 1, Forman has assigned a 10% overriding
F-8
<PAGE>
royalty interest on its interests acquired in the Manila Village Field to EEP,
an 8% overriding royalty interest on its interest acquired in the Bayou Dularge
Field and a 10% overriding royalty interest on its interests acquired in the
Boutte and Lake Enfermer Fields to EECIP. Both the EEP and EECIP agreements
contain covenants which require, among other things, that Forman maintain a
certain working capital level and debt service ratio. In connection with the
Repayment Agreement with EEP and EECIP (discussed below), the Company received
certain waivers to these covenants which were to remain in effect until maturity
of the EEP and EECIP loans on June 16, 1997 (See Note 8).
The JED note was issued December 16, 1996, and had a maximum commitment of
$10,000,000. Proceeds from the note were used to repay a prior bridge note and
outstanding accounts payables. It is expected that the unfunded $4,000,000
portion will be drawn upon by the Company during 1997 to finance developmental
activities at Lake Enfermer Field. As mentioned above, EEP and EECIP have
subordinated their respective liens to the liens of JED. The JED note agreement
contains convenants with which Forman has complied. Under the JED loan
agreement, the Company has agreed to auction off its oil and gas properties if
it is unable to satisfy the principal indebtedness in full before the maturity
date (June 16, 1997).
Concurrent with the issuance of the JED note, the Company, EEP, and EECIP
entered into a repayment agreement concerning the current principal and accrued
interest balances outstanding under the EEP and EECIP loans. Unpaid accrued
interest of $4,502,000 at December 16, 1996, was added to the outstanding
principal balance and a forbearance of loan covenants was granted. The terms of
the repayment agreement called for the full repayment of all amounts due EEP and
EECIP no later than the maturity date of the JED note (June 16, 1997). In the
event the Company was unable to secure alternate financing sufficient to repay
the JED note and the EEP and EECIP loans, the Company had agreed to promptly
auction off its oil and gas properties in order to generate sufficient funds to
fully repay the EEP and EECIP loans.
Also, concurrent with the above transactions, EEP and EECIP granted certain
options to JED and the Company to purchase a portion of the respective lenders'
overriding royalty interest discussed above for a predetermined amount,
exerciseable upon the full satisfaction of all outstanding indebtedness to EEP
and EECIP.
The aggregate principal payments required for each of the next five years are as
follows (see Note 8):
December 31,
------------
1997 $ 21,160
1998 3,759
1999 --
2000 --
2001 --
Thereafter 39,017,728
-----------
$39,042,647
===========
F-9
<PAGE>
3. STOCK WARRANTS ISSUED:
----------------------
As a condition precedent to the loan from EEP, Forman executed and delivered to
EEP a warrant assigning and conveying to EEP the right to purchase nine shares
of Forman's common stock, no par value per share, at an exercise price of
$25,000 per share. No value was assigned to this warrant because its exercise
price was substantially in excess of the estimated market value of Forman's
stock at the date of grant. The exercise date of the warrant is the earliest of
a) the date on which Forman agrees to sell all or substantially all of the
outstanding common stock or assets of the Company; b) the date on which the
Company files a registration for public sale of the Company's stock; or c)
thirty days prior to the expiration date of the warrants, which is December 31,
2025. In any event, EEP is precluded from exercising this warrant if, in the
opinion of Forman's counsel, such exercise would affect the Company's
qualification under Subchapter S of the Internal Revenue Code of 1986, as
amended. As a result of a stock split during 1993, the number of common shares
available for purchase under this warrant increased from 9 to 9,000, with a
corresponding reduction of the exercise price from $25,000 per share to $25 per
share.
In connection with the EECIP financing, Forman executed and delivered to EECIP a
warrant assigning and conveying the right to purchase ten shares of Forman's
common stock. The exercise price was based on a calculated value of the Company,
and was subsequently established at $44,567 per share. No value was assigned to
this warrant because its exercise price was substantially in excess of the
estimated market value of Forman's stock, at the date of grant. The exercise
date for this warrant is the earliest of (a) the date Forman agrees to sell all
or substantially all of the outstanding shares of common stock or assets of the
Company for cash or securities in a publicly traded company; (b) the date Forman
files a registration for the public sale of its common stock; or (c) thirty days
prior to the expiration date, which is December 31, 2025. As a result of a stock
split during 1993, the number of common shares available for purchase under this
warrant increased from 10 to 10,000, with a corresponding reduction of the
exercise price from $44,567 per share to $44.57 per share.
4. COMMITMENTS UNDER OPERATING LEASES:
-----------------------------------
Forman has two noncancellable operating leases for the rental of office space,
which expire on July 31, 1999 and January 14, 2000. Future commitments under
these leases are as follows:
December 31,
------------
1997 $204,046
1998 204,046
1999 185,647
2000 --
2001 --
Rental expense under operating leases during 1996, 1995 and 1994 was $192,633,
$192,847 and $105,262, respectively.
F-10
<PAGE>
5. RESTRICTED CASH:
----------------
Cash restricted for payment of abandonment costs for the Boutte and Bayou
Dularge Fields is classified as a long-term asset. Such amounts are invested in
short-term interest-bearing investments. The cash is escrowed under an
agreement which required Forman to make additional specified monthly
contributions through November 1995. As of December 31, 1996, the escrow
accounts are fully funded.
6. RELATED PARTY TRANSACTIONS:
---------------------------
In August 1996, the Company sold all of its interests in the Bayou Fer Blanc
Field and the West Gueydan Field to a company (the "Purchaser") that is owned by
the sole stockholder. The purchase price was $950,000 cash, which was paid at
the closing. The Company did not realize any gain or loss on the sale of these
properties. In connection with the sale, the Purchaser also agreed to assume
certain liabilities of the Company relating to the completion of the 3-D seismic
survey and other related matters. As of December 31, 1996, the Company had
incurred aggregate costs of $327,828 subsequent to the closing on behalf of the
Purchaser, which are recorded as due from affiliate. It was anticipated that
these properties will be sold back to the Company (See Note 8).
During 1996, the sole stockholder loaned the Company $1,000,000, of which
$500,000 had been repaid as of December 31, 1996. The outstanding balance bears
interest at 10% and is due June 26, 1997. The Company recorded interest expense
of $27,361 during 1996 related to this loan.
At December 31, 1996 and 1995, the Company had $12,457 receivable from the sole
stockholder for advances.
7. HEDGING CONTRACTS:
------------------
The Company hedges with third parties certain of its crude oil and natural gas
production in various swap agreement contracts. The contracts are tied to
published market prices for crude oil and natural gas and are settled monthly
based on the differences between contract prices and the average defined market
price for that month applied to the related contract volume. As of March 31,
1997, the Company's open forward sales position (all expiring in 1997) consisted
of 36,400 barrels of oil at an average price of $23.19 per barrel.
For the three months ended March 31, 1997, the Company recorded revenue of
$71,200 under these swap agreements.
8. SUBSEQUENT EVENT:
-----------------
On June 3, 1997, the Company closed offerings for 70,000 units consisting of
$70,000,000 of 13.5% Senior Notes due 2004 with warrants to purchase common
stock and 200,000 units consisting of $10,000,000 of Series A Cumulative
Preferred Stock with warrants to purchase common stock. A portion of the
proceeds from the offerings were used to repay the EEP, EECIP, and JED notes
(see Note 2), purchase 75% of the overriding royalty interests held by EEP and
EECIP (see Note 2), and buy back its interests in Bayou Fer Blanc and West
Gueydan Fields (see Note 6). In addition, the Company was required to escrow
from the proceeds the first year's interest obligation on the 13.5% Senior Notes
($9,450,000). As part of the offerings, the Company has also agreed to publicly
register the 13.5% Senior Notes and Preferred Stock and bear all costs related
thereto.
At March 31, 1997 and December 31, 1996, the EEP, EECIP, and JED notes have been
classified as long-term in the accompanying balance sheets as a result of the
refinancing discussed above.
F-11
<PAGE>
9. OIL AND GAS ACTIVITIES:
-----------------------
This footnote provides unaudited information required by SFAS No. 69
"Disclosures About Oil and Gas Producing Activities."
CAPITALIZED COSTS - Capitalized costs and accumulated depreciation, depletion
and amortization relating to the Company's oil and gas producing activities, all
of which are conducted within the continental United States, are summarized
below:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
March 31,
1997 1996 1995 1994
--------------- -------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
Proved producing oil and gas
properties $51,783,635 $48,359,890 $33,009,297 $24,931,450
Accumulated depreciation, depletion
and amortization 12,568,564 11,307,719 7,641,102 4,592,467
----------- ----------- ----------- -----------
Net capitalized costs $39,215,071 $37,052,171 $25,368,195 $20,338,983
=========== =========== =========== ===========
</TABLE>
COSTS INCURRED - Costs incurred in oil and gas property acquisition, exploration
and development activities are summarized below:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
March 31,
1997 1996 1995 1994
--------------- ------------- ------------ -------------
(Unaudited)
<S> <C> <C> <C> <C>
Acquisition costs $ -- $ -- $ -- $ 1,799,044
Exploration costs 3,361,924 12,448,239 4,490,045 4,304,342
Development costs 61,821 3,852,354 3,588,588 4,001,292
---------- ----------- ---------- -----------
Gross costs incurred 3,423,745 16,300,593 8,078,633 10,104,678
Less proceeds from sales of prospects -- 950,000 -- --
---------- ----------- ---------- -----------
Net cost incurred $3,423,745 $15,350,593 $8,078,633 $10,104,678
========== =========== ========== ===========
</TABLE>
Gross cost incurred excludes sales of proved and unproved properties which are
accounted for as adjustments of capitalized costs with no gain or loss
recognized, unless such adjustments would significantly alter the relationship
between capitalized costs and proved reserves.
RESERVES - (UNAUDITED) - Proved reserves are estimated quantities of oil and
natural gas 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 reasonably be expected to be recovered through existing
wells with existing equipment and operating methods.
Proved oil and natural gas reserve quantities and the related discounted future
net cash flows before income taxes for the periods presented are based on
estimates prepared by Ryder Scott Company, independent petroleum engineers.
Such estimates have been prepared in accordance with guidelines established by
the Securities and Exchange Commission.
F-12
<PAGE>
The Company's net ownership interests in estimated quantities of proved oil and
natural gas reserves and changes in net proved reserves, all of which are
located in the continental United States, are summarized below.
<TABLE>
<CAPTION>
Oil, Condensate and Natural Gas Liquids
(Bbls)
-------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Proved developed and undeveloped reserves:
Beginning of year 1,999,859 1,718,480 1,762,919
Revisions of previous estimates 87,871 42,099 25,483
Purchases of oil and gas properties - - 92,445
Extensions and discoveries 753,776 482,970 178,273
Production (329,944) (243,690) (340,640)
--------- --------- ---------
End of year 2,511,562 1,999,859 1,718,480
========= ========= =========
Proved developed reserves at end of year 1,898,978 -- --
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Natural Gas (Mcf)
------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Proved developed and undeveloped reserves:
Beginning of year 9,593,000 10,624,000 11,362,000
Revisions of previous estimates 619,282 622,115 145,681
Purchases of oil and gas properties - - 634,443
Extensions and discoveries 14,335,783 138,235 1,135,279
Production (1,325,065) (1,791,350) (2,653,403)
---------- ---------- ----------
End of year 23,223,000 9,593,000 10,624,000
========== ========== ==========
Proved developed reserves at end of year 8,485,000 -- --
========== ========== ==========
</TABLE>
STANDARDIZED MEASURE (UNAUDITED) - The table of the Standardized Measure of
Discounted Future Net Cash Flows related to the Company's ownership interests in
proved oil and gas reserves as of period end is shown below:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1996 1995 1994
--------------- ----------------- ------------
(In Thousands)
<S> <C> <C> <C>
Future cash inflows $143,652 $ 57,650 $ 43,151
Future oil and natural gas operating expenses (12,598) (9,993) (10,562)
Future development costs (14,059) (5,573) (4,702)
-------- -------- --------
Future net cash flows 116,995 42,084 27,887
10% annual discount for estimating timing of
cash flows (29,614) (11,488) (8,659)
-------- -------- --------
Standardized measure of discounted future net
cash flows $ 87,381 $ 30,596 $ 19,228
======== ======== ========
</TABLE>
F-13
<PAGE>
Future cash flows are computed by applying year end prices of oil and natural
gas to year end quantities of proved oil and natural gas reserves. Future
operating expenses and development costs are computed primarily by the Company's
petroleum engineers by estimating the expenditures to be incurred in developing
and producing the Company's proved oil and natural gas reserves at the end of
the year, based on year end costs and assuming the continuation of existing
economic conditions. The standardized measure of discounted future net cash
flows does not purport, nor should it be interpreted, to present the fair value
of the Company's oil and natural gas reserves. An estimate of fair value would
also take into account, among other things, the recovery of reserves not
presently classified as proved, anticipated future changes in prices and costs,
a discount factor more representative of the time value of money and the risks
inherent in reserve estimates.
Oil and natural gas prices have declined subsequent to December 31, 1996.
Accordingly, the discounted future net cash flows would be reduced if the
standardized measure was calculated at a later date.
CHANGES IN STANDARDIZED MEASURE (UNAUDITED) - Changes in standardized measure of
future net cash flows relating to proved oil and gas reserves are summarized
below:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
(In Thousands)
<S> <C> <C> <C>
Changes due to current year operations:
Sales of oil and natural gas, net of oil and
natural gas operating expenses $(7,781) $(4,063) $(5,966)
Extensions and discoveries 42,983 5,557
Purchases of oil and gas properties 2,325
Changes due to revisions in standardized
variables:
Prices and operating expenses 28,682 7,113 55
Revisions of previous quantity estimates 3,633 1,336 1,445
Estimated future development costs (7,784) (901) (170)
Accretion of discount 3,060 1,923 1,817
Production rates (timing) and other (6,008) 403 1,549
------- ------- -------
Net Change 56,785 11,368 1,055
Beginning of year 30,596 19,228 18,173
------- ------- -------
End of year $87,381 $30,596 $19,228
======= ======= =======
</TABLE>
F-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Articles of Incorporation, as amended (the
"Articles"), provide that no director or officer of the Company will be
personally liable to the Company or its stockholders for monetary damages for
any breach of fiduciary duty as a director or officer, except for liability (i)
for breach of the director's or officer's duty of loyalty to the Company or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under Section 92(D)
of the Louisiana Business Corporation Law (the "LBCL"), which concerns unlawful
payments of dividends, stock purchases or redemptions, or (iv) for any
transaction from which the director or officer derived an improper personal
benefit. If the LBCL is amended to authorize corporate action further
eliminating or limiting the personal liability of directors and officers, then
the liability of each officer and director of the Company shall be eliminated or
limited to the fullest extent permitted by the LBCL, as so amended from time to
time.
The Articles provide that each person who was or is a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), including any action by or in the right of the
Company, by reason of the fact that he or she, or a person of whom he or she is
the legal representative, is or was a director or officer of the Company or, as
a director or officer of the Company, is or was serving at the request of the
Company as a director, officer, partner, employee or agent of another business,
nonprofit or foreign corporation, partnership, joint venture, limited liability
company, registered limited liability partnership, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such Proceeding is alleged action in an official capacity as a director,
officer, partner, trustee, employee or agent or in any other capacity, shall be
indemnified and held harmless by the Company to the fullest extent authorized by
law, including but not limited to the LBCL, as the same exists or may hereafter
be amended (but, in the case of any amendment to the LBCL, such amendment shall
be enforced only to the extent that such amendment permits the Company to
provide broader indemnification rights than the LBCL permitted the Company to
provide prior to such amendment), against any and all expenses, including
attorneys' fees, liabilities, losses, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement actually and reasonably
incurred or suffered by such person in connection with such Proceeding, if he or
she acted in good faith and in a manner he or she reasonably believed to be in,
or not opposed to, the best interests of the Company, and, with respect to any
criminal Proceeding, had no reasonable cause to believe his or her conduct was
unlawful; provided, however, that the Company shall indemnify any such person
seeking indemnity in connection with a Proceeding (or part thereof) initiated by
such person only if such Proceeding (or part thereof) initiated by such person
was first authorized by the Board of Directors of the Company.
Pursuant to the Articles, if a claim described in the preceding paragraph
is not paid in full by the Company within ninety days after a written claim has
been received by the Company, the claimant may bring suit against the Company to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall also be entitled to be paid the expense, including attorneys'
fees, of prosecuting such claim. The Articles provide that it is a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any Proceeding in advance of its final disposition where
the required undertaking, if any, has been tendered to the Company) that the
claimant has not met the standards of conduct which make it permissible under
the LBCL for the Company to indemnify the claimant for the amount claimed, but
the burden of proving such defense is on the Company. Neither the failure of
the Company (including the Board, independent legal counsel or shareholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the LBCL, nor an actual
determination by the Company (including the Board, independent legal counsel or
shareholders) that the claimant has not met such applicable standard of conduct,
is a defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct.
The Articles provide that the right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its final disposition
conferred in the Articles is not exclusive of any other right which any
II-1
<PAGE>
person may have or may in the future acquire under any statute, provision of the
Certificate, the Bylaws, Indemnification Agreement, vote of stockholders or
disinterested directors or otherwise. The Articles permit the Company to
maintain insurance, at its expense, to protect itself and any director, officer,
employee or agent of the Company or any person serving at the request of the
Company as a director, officer, employee or agent of another corporation, or of
a partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans maintained or sponsored by the Company,
against any such expense, liability or loss, whether or not the Company would
have the power to indemnify such person against such expense, liability or loss
under the LBCL.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES
The following instruments and documents are included as Exhibits to this
Registration Statement. Exhibits incorporated by reference are so indicated by
parenthetical information.
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
3(i) Restated Articles of Incorporation dated July 2, 1997.
3(ii) Bylaws.
4.1 Indenture dated as of June 3, 1997 by and among the Forman Petroleum
Corporation, as issuer, and U.S. Trust Company of Texas, N.A., as trustee.
4.2 Act of Mortgage, Security Agreement, Assignment of Production and
Financing Statement dated November 21, 1996, by Forman Petroleum
Corporation for the benefit of Joint Energy Development Investments
Limited Partnership.
4.3 Act of First Amendment to Mortgage, Security Agreement, Assignment
of Production and Financing Statement dated December 23, 1996, by
and among Forman Petroleum Corporation and Joint Energy
Development Investments Limited Partnership.
4.4 Act of Second Amendment to Mortgage, Security Agreement,
Assignment of Production and Financing Statement dated June 3, 1997,
by and among Forman Petroleum Corporation and U.S. Trust Company
of Texas, N.A.
4.5 Act of Assignment of Note and Liens dated June 3, 1997, by and among
Joint Energy Development Investments Limited Partnership, as assignor,
and U.S. Trust Company of Texas, N.A., as assignee.
5 Opinion of Vinson & Elkins L.L.P.
10.1 Registration Rights Agreement dated June 3, 1997 by and between Forman
Petroleum Corporation and Jefferies & Company, Inc. regarding Old Notes
and warrants to purchase Common Stock.
10.2 Registration Rights Agreement dated June 3, 1997 by and between Forman
Petroleum Corporation and Jefferies & Company, Inc. regarding Series A
Cumulative Preferred Stock and warrants to purchase Common Stock.
10.3 Warrant Agreement dated June 3, 1997 by and between Forman Petroleum
Corporation and U.S. Trust Company of Texas, N.A. regarding warrants
issued in connection with issuance of Series A Cumulative Preferred
Stock.
10.4 Warrant Agreement dated June 3, 1997 by and between Forman Petroleum
Corporation and U.S. Trust Company of Texas, N.A. regarding warrants
issued in connection with issuance of Old Notes.
12 Statements Regarding Computation of Ratios.
23(i) Consent of Ryder Scott Company.
23(ii) Consent of Arthur Andersen L.L.P.
23(iii) Consent of Vinson & Elkins L.L.P. (included in Opinion filed as Exhibit
No. 5).
</TABLE>
II-2
<PAGE>
24 Power of Attorney.
25 Statement of Eligibility of U.S. Trust Company of Texas, N.A.
27 Financial Data Schedule.
99 Form of Letter of Transmittal.
ITEM 22. UNDERTAKINGS
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
Issuer 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 ((S) 230.415 of this chapter), 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described under Item 15 above, or otherwise, the
Company 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 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 Company 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 Company will, unless, in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New Orleans, the State of
Louisiana on June 30, 1997.
FORMAN PETROLEUM CORPORATION
By: /s/ McLain J. Forman
----------------------
McLain J. Forman
Chairman of the Board, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ McLain J. Forman Chairman of the Board, July 14, 1997
- --------------------------- Chief Executive Officer and President
McLain J. Forman (Principal Executive Officer)
/s/ Harold C. Block Vice President of Land and Acquisition July 10, 1997
- --------------------------- and Director
Harold C. Block
/s/ Marvin J. Gay Vice President of Finance and July 14, 1997
- --------------------------- Administration and Director
Marvin J. Gay (Principal Financial and
Accounting Officer)
/s/ Michael A. Habetz Vice President, Manager of Operations July 10, 1997
- --------------------------- and Director
Michael A. Habetz
/s/ Randolph R. Birkman Director July 15, 1997
- ---------------------------
Randolph R. Birkman
Director
- ---------------------------
John W. Sinders
</TABLE>
II-4
<PAGE>
EXHIBIT 3(i)
RESTATED ARTICLES OF INCORPORATION
OF
FORMAN PETROLEUM CORPORATION
Forman Petroleum Corporation, a corporation organized and existing under
the laws of the State of Louisiana, hereby certifies as follows:
1. The name of the corporation is Forman Petroleum Corporation. Its
registered office is in the Parish of Orleans.
The date of incorporation was December 9, 1982.
2. The Restated Articles of Incorporation accurately copies the articles
and all amendments thereto in effect at the date of this restatement, without
substantive change.
3. The Restated Articles of Incorporation are attached hereto as
"Exhibit A."
4. Each amendment reflected herein has been effected in conformity with
Law.
IN WITNESS WHEREOF, this instrument has been signed on behalf of Forman
Petroleum Corporation by its President and Secretary on this 2nd day of July,
1997.
FORMAN PETROLEUM CORPORATION
By: /s/ McLain J. Forman
------------------------------
McLain J. Forman, President
By: /s/ Susan N. Richards
------------------------------
Susan N. Richards, Secretary
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
BE IT KNOWN that on this 2nd day of July, 1997, before me the undersigned,
a Notary Public in and for the County and State aforesaid, duly commissioned and
qualified, there came and appeared McLain J. Forman, known to me, Notary and
known by me to be the President of Forman Petroleum Corporation, who signed the
within and foregoing instrument before me, and who acknowledged to me, Notary,
that he signed, executed, and delivered said instrument in his capacity as
President of Forman Petroleum Corporation for the uses and purposes therein set
forth and apparent.
IN WITNESS WHEREOF the said appeared has signed these presents and I have
hereunto affixed my official hand and seal, on the day and date first
hereinabove written, after due reading of the whole.
/s/ McLain J. Forman
---------------------------------
McLain J. Forman
(NOTARIAL SEAL)
/s/ Thomas J. Sevy
-----------------------------
NOTARY PUBLIC
<PAGE>
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
OF
FORMAN PETROLEUM CORPORATION
ARTICLE I
NAME
The name of the corporation shall be: FORMAN PETROLEUM CORPORATION
ARTICLE II
PURPOSE
This corporation is formed for the purposes of engaging in any lawful
activity for which corporations may be formed under the provisions of the
Business Corporations Law (Title 12, Chapter 1, Louisiana Revised Statutes as
amended).
ARTICLE III
CAPITAL STOCK
The total number of shares which the corporation shall have authority to
issue is 2,200,000, which shall consist of 1,000,000 shares of Preferred Stock,
$.01 par value per share, 1,000,000 shares of Common Stock, no par value per
share, and 200,000 shares of Class A Common Stock, no par value per share.
The following is a statement fixing certain of the designations,
preferences and relative, participating, optional or other special rights of the
Preferred Stock, the Common Stock and the Class A Common Stock of the
corporation, and the qualifications, limitations or restrictions thereof, and
the authority with respect thereto expressly granted to the Board of Directors
of the corporation to fix any such provisions not fixed by these Articles of
Amendment to the Articles of Incorporation:
I. Preferred Stock
---------------
The Preferred Stock may be divided into and issued from time to time
in one or more series as may be fixed and determined by the Board of
Directors. The relative rights and preferences of the Preferred Stock of
each series shall be such as shall be stated in any resolution or
resolutions adopted by the Board of Directors setting forth the
designations of the series and fixing and determining the relative rights
and preferences thereof, any such resolution or resolutions being herein
called a "Directors' Resolution." The Board of Directors is hereby
authorized to fix and determine such variations in the designations,
preferences, and relative, participating,
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optional or other special rights (including, without limitation, special
voting rights, preferential rights to receive dividends or assets upon
liquidation, rights of conversion into Common Stock or other securities,
redemption provisions or sinking fund provisions) as between series and as
between the Preferred Stock or any series thereof and the Common Stock, and
the qualifications, limitations or restrictions of such rights
(collectively, "Series Terms"), all as shall be stated in a Directors'
Resolution, and the shares of Preferred Stock or any series thereof may
have full or limited voting powers, or be without voting powers, all as
shall be stated in a Directors' Resolution.
Any of the Series Terms, including without limitation voting rights,
of any series may be made dependent upon facts ascertainable outside the
Articles of Incorporation and the Directors' Resolution, provided that the
manner in which such facts shall operate upon such Series Terms is clearly
and expressly set forth in the Articles of Incorporation or in the
Directors' Resolution.
II. Common Stock and Class A Common Stock
-------------------------------------
1. Dividends. Subject to the provisions of any Directors'
Resolution, the Board of Directors may, in its discretion, out of funds
legally available for the payment of dividends and at such times and in
such manner as determined by the Board of Directors, declare and pay
dividends on the Common Stock and the Class A Common Stock of the
corporation.
No dividend (other than a dividend in capital stock ranking on a
parity with the Common Stock and the Class A Common Stock or cash in lieu
of fractional shares with respect to such stock dividend) shall be declared
or paid on any share or shares of any class of stock or series thereof
ranking on a parity with the Common Stock and the Class A Common Stock in
respect of payment of dividends for any dividend period unless there shall
have been declared, for the same dividend period, like proportionate
dividends on all shares of Common Stock and Class A Common Stock and such
shares ranking on a parity then outstanding.
2. Liquidation. In the event of any liquidation, dissolution or
winding up of the corporation, whether voluntary or involuntary (each, a
"Liquidation Event"), after payment or provision for payment of the debts
and other liabilities of the corporation and payment or setting aside for
payment of any preferential amount due to the holders of any other class or
series of stock, the holders of the Common Stock and the Class A Common
Stock and any shares of any class of stock or series thereof ranking on a
parity with Common Stock and Class A Common Stock upon a Liquidation Event
shall be entitled to receive ratably any or all assets remaining to be paid
or distributed.
3. Voting Rights. The holders of the Common Stock of the corporation
shall be entitled to one vote for each share of such stock held by them.
The holders of the Class A Common Stock shall not be entitled to vote,
except as required by law.
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4. Automatic Conversion of Class A Common Stock. On the date that an
Initial Public Offering (as defined below) has been consummated, each share
of Class A Common Stock then outstanding shall be automatically converted
into one share of Common Stock. Notwithstanding that any certificates for
shares of Class A Common Stock shall not have been surrendered for
cancellation, the shares of Class A Common Stock so converted shall no
longer be deemed outstanding, and the holders of certificates representing
such shares of Class A Common Stock shall have, from and after the date
referred to above, the same rights in or with respect to the corporation as
holders of shares of the number of shares of Common Stock into which such
shares of Class A Common Stock have been so converted. Within 5 days
following the Initial Public Offering, the corporation shall deliver to
each holder whose shares of Class A Common Stock have been converted into
Common Stock as provided hereunder a written notice setting forth the fact
and effective date of such conversion, the number of shares of Common Stock
into which such holder's shares of Class A Common Stock were converted, and
a statement that such holder is entitled to receive a new certificate
representing such number of shares of Common Stock in exchange for the
certificates representing such holder's shares of Class A Common Stock;
provided, however, that the failure of the corporation to provide such
notice to any holder or any deficiency in any such notice shall not impair
or affect the automatic conversion of such holder's Class A Common Stock
into Common Stock as provided herein. "Initial Public Offering" means a
public offering of Common Stock underwritten by one or more nationally
recognized investment banking firms pursuant to a registration statement
filed under the Securities Act of 1933, as amended (other than any
registration statement relating to warrants, options or shares of capital
stock of the Corporation granted or to be granted or sold primarily to
employees, directors, or officers of the Corporation, a registration
statement relating to employee benefit plans or interests therein or any
registration statement covering securities issued in connection with any
debt financing of the Corporation) and listed on a nationally recognized
stock exchange or on the NASDAQ Stock Market. When shares of Class A
Common Stock have been converted pursuant to this paragraph they shall be
canceled and not reissued.
III. Prior, Parity or Junior Stock
-----------------------------
Whenever reference is made in this Article III to shares "ranking
prior to" another class of stock or "on a parity with" another class of
stock, such reference shall mean and include all other shares of the
corporation in respect of which the rights of the holders thereof as to the
payment of dividends or as to distributions upon a Liquidation Event, as
the case may be, are given preference over, or rank on an equality with, as
the case may be, the rights of the holders of such other class of stock.
Whenever reference is made to shares "ranking junior to" another class of
stock, such reference shall mean and include all shares of the corporation
in respect of which the rights of the holders thereof as to the payment of
dividends or as to distributions upon a Liquidation Event, as the case may
be, are junior and subordinate to the rights of the holders of such class
of stock.
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Except as otherwise provided herein or in any Directors' Resolution,
each series of Preferred Stock ranks on a parity with each other and each
ranks prior to the Common Stock and the Class A Common Stock, in each case
with respect to the payment of dividends or as to distributions upon a
Liquidation Event. Except as otherwise provided herein or in any
Directors' Resolution, Common Stock and Class A Common Stock ranks junior
to Preferred Stock with respect to the payment of dividends or as to
distributions upon a Liquidation Event.
IV. Reservation and Retirement of Shares
------------------------------------
The corporation shall at all times reserve and keep available, out of
its authorized but unissued shares of Common Stock or out of shares of
Common Stock held in its treasury, the full number of shares of Common
Stock into which the Class A Common Stock and all shares of any series of
Preferred Stock having conversion privileges from time to time outstanding
are convertible.
Unless otherwise provided in a Directors' Resolution with respect to a
particular series of Preferred Stock, all shares of Preferred Stock
redeemed or acquired (as a result of conversion or otherwise) shall be
canceled and restored to the status of authorized but unissued shares."
Article 3A. Preferred Stock
Section 1. Designation; Number of Shares. The shares of the series
authorized by this Article 3A shall be designated as Series A Cumulative
Preferred Stock. The number of shares initially constituting such series
shall be limited to Five Hundred Fifty Thousand (550,000). Such number of
shares may be decreased, at any time and from time to time, by resolution
of the Board of Directors; provided, however, that at no time shall there
be issued and outstanding more than 200,000 shares plus the shares of
Preferred Dividend Stock (as defined below) and provided, however, that no
decrease shall reduce the number of shares of Series A Cumulative Preferred
Stock to a number less than the number of shares then outstanding. The
liquidation value of the Series A Cumulative Preferred Stock shall be
$50.00 per share.
Section 2. Dividends.
---------
(a) Amount. The holders of Series A Cumulative Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors,
out of funds legally available for the payment of dividends, dividends at
the rate of $7.50 per share per annum, and no more, payable quarterly on
June 1, September 1, December 1 and March 1, in each year, commencing
September 1, 1997, except that if such date is not a business day then such
dividend shall be payable on the next succeeding business day (the
"Dividend Payment Date" or "Dividend Payment Dates") (as used herein, the
term "business day" shall mean any day except a Saturday, Sunday or day on
which banking institutions are authorized or required by law to close in
New York
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City or in New Orleans, Louisiana). Such dividends shall be cumulative
(whether or not declared) and shall accrue, without interest, from the
first day in which such dividend may be payable as provided herein, except
that with respect to the first quarterly dividend, such dividend shall
accrue from the date of issuance of such shares of Series A Cumulative
Preferred Stock (the "Issue Date"). Dividends shall be payable to holders
of record as they appear on the share transfer records of the corporation
on such record dates as may be fixed by the Board of Directors, not more
than sixty (60) days nor less than ten (10) days preceding such Dividend
Payment Date. Dividends in arrears may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to holders of
record on such date, not more than sixty (60) days preceding the payment
date thereof, as may be fixed by the Board of Directors. The amount of
dividends payable on shares of Series A Cumulative Preferred Stock for each
full quarterly dividend period (the "Quarterly Dividend"), shall be
computed by dividing by four the annual rate per share set forth in this
subsection (a). During the period commencing on the Issue Date to and
including the Dividend Payment Date on June 1, 1999, dividends shall be
paid in additional fully paid and nonassessable shares of Series A
Cumulative Preferred Stock (the "Preferred Dividend Stock"), and,
thereafter, dividends shall be paid in cash, or, at the sole election of
the corporation, in shares of Preferred Dividend Stock. The number of
shares of Preferred Dividend Stock payable on the Series A Cumulative
Preferred Stock for each quarterly dividend period shall be computed by
dividing the amount of the full Quarterly Dividend by fifty (50). No
fractional shares of Preferred Dividend Stock shall be issued by the
corporation. Instead of any fractional share of Preferred Dividend Stock
that would otherwise be issuable to a holder by way of a dividend on the
Series A Cumulative Preferred Stock, the corporation shall either (i) pay a
cash adjustment in respect of such fractional share in an amount equal to
the same fraction of $50.00 computed to the nearest whole cent or (ii)
aggregate all such fractional shares into a whole number of shares and sell
such aggregated fractional shares on behalf of the holders entitled thereto
in a public or private sale and distribute the net cash proceeds from the
sale thereof to such holders pro rata. If the corporation shall elect so
to aggregate and sell such fractional shares, it shall endeavor to use its
best efforts to secure the best available sales price for such shares but
shall not be obligated to secure the highest price obtainable for such
shares. The amount of Preferred Dividend Stock issuable to a holder by way
of a dividend shall be computed on the basis of the aggregate number of
shares of Series A Cumulative Preferred Stock registered in such holder's
name on the record date fixed for the payment of such dividend plus the
amount of accrued but not declared dividends of Preferred Dividend Stock.
Dividends payable on the Series A Cumulative Preferred Stock for any period
less than a full quarterly period shall be computed on the basis of a 360-
day year of twelve 30-day months.
(b) Priority. If dividends upon any shares of Series A Cumulative
Preferred Stock, or any other outstanding class or series of stock of the
corporation ranking on a parity with the Series A Cumulative Preferred
Stock as to dividends, are in arrears, all dividends or other distributions
declared upon each class or series of such stock (other than dividends paid
in stock of the corporation ranking junior to the
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<PAGE>
Series A Cumulative Preferred Stock as to dividends and upon liquidation,
dissolution or winding up) may only be declared pro rata so that in all
cases the amount of dividends or other distributions declared per share on
the Series A Cumulative Preferred Stock and such class or series bear to
each other the same ratio that the accrued and unpaid dividends per share
on the shares of the Series A Cumulative Preferred Stock and such class or
series bear to each other. Except as set forth above, if dividends upon any
shares of Series A Cumulative Preferred Stock are in arrears: (i) no
dividends (in cash, stock or other property) may be paid, declared or set
aside for payment or any other distribution made on any stock of the
corporation ranking junior to the Series A Cumulative Preferred Stock as to
dividends (other than dividends or distributions in stock of the
corporation ranking junior to the Series A Cumulative Preferred Stock as to
dividends and upon liquidation, dissolution or winding up) and upon
liquidation, dissolution or winding up; and (ii) no stock of the
corporation ranking junior to or on a parity with the Series A Cumulative
Preferred Stock as to dividends may be redeemed, purchased or otherwise
acquired by the corporation, except by conversion of such stock into, or
exchange of such stock for, stock of the corporation ranking junior to the
Series A Cumulative Preferred Stock as to dividends and upon liquidation,
dissolution or winding up.
(c) No Interest. No interest, sum of money in lieu of interest, or
other property or securities shall be payable in respect of any dividend
payment or payments which are accrued but unpaid. Dividends paid on shares
of Series A Cumulative Preferred Stock in an amount less than the total
amount of such dividends at the time accumulated and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares
at the time outstanding.
Section 3. General Class and Series Voting Rights. The Series A
Cumulative Preferred Stock shall have no voting rights except (i) any
special voting rights for a class of stock, as specifically required by the
laws of the State of Louisiana, (ii) as are provided in this Section 3, and
(iii) as provided by the provisions of the Articles of Incorporation of the
corporation, as amended:
(a) So long as any shares of Series A Cumulative Preferred Stock
remain outstanding, the vote or consent of the holders of at least two-
thirds of the shares of Series A Cumulative Preferred Stock outstanding at
the time (voting separately as a class) given in person or by proxy, either
in writing or at any special or annual meeting called for the purpose,
shall be necessary to permit, effect or validate any one or more of the
following:
(i) The authorization, creation or issuance, or any increase in
the authorized or issued amount, of any class or series of stock
(including any class or series of preferred stock) ranking prior (as
that term is hereinafter defined in this Section 3) to the Series A
Cumulative Preferred Stock; or
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<PAGE>
(ii) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Articles
of Incorporation or of these resolutions which would alter, change or
repeal the powers, preferences, or special rights of the shares of the
Series A Cumulative Preferred Stock so as to affect them adversely.
(b) The foregoing voting provisions shall not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of Series A Cumulative
Preferred Stock shall have been redeemed or sufficient funds shall have
been deposited in trust to effect such redemption.
Section 4. Redemption Rights.
-----------------
(a) Optional Redemption. The corporation may at its option, at any
time, redeem (an "Optional Redemption") all, or any number less than all,
of the outstanding shares of Series A Cumulative Preferred Stock, at a
redemption price per share of $50.00, plus, in each case, an amount equal
to all dividends (whether or not declared) accrued and unpaid on such share
of Series A Cumulative Preferred Stock to the date fixed for redemption
(the price from time to time to redeem the Series A Cumulative Preferred
Stock excluding any dividends (whether or not declared) accrued and unpaid,
is referred to herein as the "Redemption Price").
(b) Mandatory Redemption. Each issued and outstanding share of Series
A Cumulative Preferred Stock shall be redeemed on June 1, 2005 (the
"Mandatory Redemption") at a Redemption Price of $50.00 per share, plus all
dividends (whether or not declared) accrued and unpaid on such share of
Series A Cumulative Preferred Stock to the date fixed for redemption,
payable in cash or, at the election of the corporation, in shares of Common
Stock ("Redemption Stock").
(c) Accrued Dividends. The corporation may not purchase, redeem or
otherwise acquire for value any shares of Series A Cumulative Preferred
Stock or shares of any other series of Preferred Stock then outstanding
ranking on a parity with or junior to the Series A Cumulative Preferred
Stock unless all accrued dividends on all shares of Series A Cumulative
Preferred Stock then outstanding shall have been paid or declared and a sum
of cash (or shares of Preferred Dividend Stock) sufficient for the payment
thereof set apart. No sinking fund shall be established for the Series A
Cumulative Preferred Stock.
(d) Notice of Redemption. Notice of any proposed Optional Redemption
or Mandatory Redemption of shares of Series A Cumulative Preferred Stock
shall be mailed to each record holder of the shares of Series A Cumulative
Preferred Stock to be redeemed at least thirty (30) but not more than sixty
(60) days prior to the date fixed for such redemption (herein referred to
as the "Redemption Date"). Each such notice shall set forth the following:
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<PAGE>
(i) the Redemption Date;
(ii) the Redemption Price per share;
(iii) the place for payment and for delivering the stock
certificate(s) and transfer instrument(s) in order to receive the
Redemption Price; and
(iv) the shares of Series A Cumulative Preferred Stock to be
redeemed.
Any notice mailed in such manner shall be conclusively deemed to have
been duly given regardless of whether such notice is in fact received. If
less than all the outstanding shares of Series A Cumulative Preferred Stock
are to be redeemed, the corporation will select those to be redeemed
ratably or by lot in a manner determined by the Board of Directors. In
order to facilitate the redemption of the Series A Cumulative Preferred
Stock, the Board of Directors may fix a record date for determination of
holders of Series A Cumulative Preferred Stock to be redeemed, which shall
not be more than thirty (30) days prior to the Redemption Date with respect
thereto.
The holder of any shares of Series A Cumulative Preferred Stock
redeemed pursuant to this Section 4 upon any exercise of the corporation's
redemption right shall not be entitled to receive payment of the Redemption
Price for such shares until such holder shall cause to be delivered to the
place specified in the notice given with respect to such redemption (i) the
certificate(s) representing such share of Series A Cumulative Preferred
Stock and (ii) transfer instrument(s) sufficient to transfer such shares of
Series A Cumulative Preferred Stock to the corporation free of any adverse
interest. No interest shall accrue on the Redemption Price of any share of
Series A Cumulative Preferred Stock after the Redemption Date.
At the close of business on the Redemption Date for any share of
Series A Cumulative Preferred Stock, such share shall (provided the
Redemption Price (including any accrued and unpaid dividends to the
Redemption Date) of such share has been paid or properly provided for) be
deemed to cease to be outstanding and all rights of any person other than
the corporation in such share shall be extinguished on the Redemption Date
for such share (including all rights to receive future dividends with
respect to such share) except for the right to receive the Redemption Price
(including any accrued and unpaid dividends to the Redemption Date),
without interest, for such share in accordance with the provisions of this
Section 4, subject to applicable escheat laws.
Notwithstanding the foregoing provisions of this Section 4, and
subject to the provisions of Section 2 hereof; if a dividend upon any
shares of Series A Cumulative Preferred Stock is past due, (i) no share of
the Series A Cumulative Preferred Stock may be redeemed, except by means of
a redemption pursuant to which all outstanding
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<PAGE>
shares of the Series A Cumulative Preferred Stock are simultaneously
redeemed and all accrued dividends paid and (ii) the corporation shall not
purchase or otherwise acquire any shares of the Series A Cumulative
Preferred Stock, except pursuant to a purchase or exchange offer made on
the same terms to all holders of the Series A Cumulative Preferred Stock.
Section 5. Rank; Liquidation. Upon any voluntary or involuntary
dissolution, liquidation or winding up of the corporation (for the purposes
of this Section 5, a "Liquidation"), after payment or provision for payment
of the debts and other liabilities of the corporation, the holders of
Series A Cumulative Preferred Stock shall be entitled to be paid out of the
assets of the corporation available for distribution to its stockholders,
an amount equal to $50.00 per share of Series A Cumulative Preferred Stock
then held by such stockholder, plus all dividends (whether or not declared
or due) accrued and unpaid on such share to the date fixed for the
distribution of assets of the corporation to the holders of Series A
Cumulative Preferred Stock. The shares of Series A Cumulative Preferred
Stock shall rank prior to the shares of Common Stock and any other class or
series of stock of the corporation ranking junior to the Series A
Cumulative Preferred Stock, so that the holders of the Series A Cumulative
Preferred Stock shall receive the full amount to which they shall be
entitled before any distribution of assets shall be made to the holders of
the Common Stock or the holders of any other stock that ranks junior to the
Series A Cumulative Preferred Stock in respect of distributions upon the
Liquidation of the corporation.
If upon any Liquidation of the corporation, the assets available for
distribution to the holders of Series A Cumulative Preferred Stock and any
other stock of the corporation ranking on a parity with the Series A
Cumulative Preferred Stock upon Liquidation which shall then be outstanding
(hereinafter in this paragraph called the "Total Amount Available") shall
be insufficient to pay the holders of all outstanding shares of Series A
Cumulative Preferred Stock and all other such parity stock the full amounts
(including all dividends accrued and unpaid) to which they shall be
entitled by reason of such Liquidation of the corporation, then there shall
be paid to the holders of the Series A Cumulative Preferred Stock in
connection with such Liquidation of the corporation, an amount equal to the
product derived by multiplying the Total Amount Available times a fraction,
the numerator of which shall be the full amount to which the holders of the
Series A Cumulative Preferred Stock shall be entitled under the terms of
the preceding paragraph by reason of such Liquidation of the corporation
and the denominator of which shall be the total amount which would have
been distributed by reason of such Liquidation of the corporation with
respect to the Series A Cumulative Preferred Stock and all other stock
ranking on a parity with the Series A Cumulative Preferred Stock upon
Liquidation then outstanding had the corporation possessed sufficient
assets to pay the maximum amount which the holders of all such stock would
be entitled to receive in connection with such Liquidation of the
corporation.
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The voluntary sale, conveyance, lease, exchange or transfer of all or
substantially all of the property or assets of the corporation, or the
merger or consolidation of the corporation into or with any other
corporation, or the merger of any other corporation into the corporation,
or any purchase or redemption of some or all of the shares of any class or
series of stock of the corporation, shall not be deemed to be a Liquidation
of the corporation for the purposes of this Section 5 (unless in connection
therewith the Liquidation of the corporation is specifically approved).
The holder of any shares of Series A Cumulative Preferred Stock shall
not be entitled to receive any payment owed for such shares under this
Section 5 until such holder shall cause to be delivered to the corporation
(i) the certificate(s) representing such shares of Series A Cumulative
Preferred Stock and (ii) transfer instrument(s) satisfactory to the
corporation and sufficient to transfer such shares of Series A Cumulative
Preferred Stock to the corporation free of any adverse interest. No
interest shall accrue on any payment upon Liquidation after the due date
thereof.
After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of the Series A Cumulative
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the corporation.
Section 6. Payments. The corporation may provide funds for any
payment of the Redemption Price for any shares of Series A Cumulative
Preferred Stock or any amount distributable with respect to any Series A
Cumulative Preferred Stock under Sections 4 and 5 hereof by depositing such
funds with a bank or trust corporation selected by the corporation having a
net worth of at least $50,000,000, in trust for the benefit of the holders
of such shares of Series A Cumulative Preferred Stock under arrangements
providing irrevocably for payment upon satisfaction of any conditions to
such payments by the holders of such shares of Series A Cumulative
Preferred Stock which shall reasonably be required by the corporation. The
corporation shall be entitled to make any deposit of funds contemplated by
this Section 6 under arrangements designed to permit such funds to generate
interest or other income for the corporation, and the corporation shall be
entitled to receive all interest and other income earned by any funds while
they shall be deposited as contemplated by this Section 6, provided that
the corporation shall maintain on deposit funds sufficient to satisfy all
payments which the deposit arrangement shall require to be paid by the
corporation.
Any payment which may be owed for the payment of the Redemption Price
for any shares of Series A Cumulative Preferred Stock pursuant to Section 4
or the payment of any amount distributable with respect to any shares of
Series A Cumulative Preferred Stock under Section 5 shall be deemed to have
been "paid or properly provided for" upon the earlier to occur of: (i) the
date upon which such funds sufficient to make such payment shall be
deposited in a manner contemplated by the preceding paragraph or (ii) the
date upon which a check payable to the person entitled to receive such
payment shall be delivered to such person or mailed to such
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person at either the address of such person then appearing on the books of
the corporation or such other address as the corporation shall deem
reasonable.
Subject to applicable escheat laws, if the conditions precedent to the
disbursement of any funds deposited by the corporation pursuant to this
Section 6 shall not have been satisfied within six (6) months after the
establishment of the trust for such funds (or shares), then (i) such funds
(or shares) shall be returned to the corporation upon its request; (ii)
after such return, such funds (or shares) shall be free of any trust which
shall have been impressed upon them; (iii) the person entitled to this
payment for which such funds (or shares) shall have been originally
intended shall have the right to look only to the corporation for such
payment, subject to applicable escheat laws; and (iv) the trustee which
shall have held such funds (or shares) shall be relieved of any
responsibility for such funds (or shares) upon the return of such funds (or
shares) to the corporation.
Section 7. Status of Reacquired Shares. Shares of Series A
Cumulative Preferred Stock issued and reacquired by the corporation
including, without limitation, shares of Series A Cumulative Preferred
Stock which have been redeemed pursuant to the terms of Section 4 hereof
shall have the status of authorized and unissued shares of preferred stock,
undesignated as to series, subject to later issuance.
Section 8. Preemptive Rights. The Series A Cumulative Preferred
Stock is not entitled to any preemptive or subscription rights in respect
of any securities of the corporation.
Section 9. Miscellaneous.
(a) Transfer Taxes. The corporation shall pay any and all stock
transfer and documentary stamp taxes that may be payable in respect of any
original issuance and delivery of shares of Series A Cumulative Preferred
Stock or shares of Preferred Dividend Stock or certificates or instruments
evidencing such shares. The corporation shall not, however, be required to
pay any such tax which may be payable in respect of any transfer involved
in the issuance or delivery of shares of Series A Cumulative Preferred
Stock in a name other than that in which the shares of Series A Cumulative
Preferred Stock with respect to which such shares are issued or delivered
were registered, or in respect of any payment to any person with respect to
any such shares other than a payment to the registered holder thereof; and
shall not be required to make any such issuance, delivery or payment unless
and until the person otherwise entitled to such issuance, delivery or
payment has paid to the corporation the amount of any such tax or has
established, to the satisfaction of the corporation, that such tax has been
paid or is not payable.
(b) Failure to Designate Stockholder or Payee. In the event that a
holder of shares of Series A Cumulative Preferred Stock shall not by
written notice designate the name in which shares of Preferred Dividend
Stock to be issued as a dividend should be registered or to whom payment
upon redemption of shares of
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Series A Cumulative Preferred Stock should be made or the address to which
the certificates or instruments evidencing such shares or such payment
should be sent, the corporation shall be entitled to register such shares
and make such payment in the name of the holder of such Series A Cumulative
Preferred Stock as shown on the records of the corporation and to send the
certificates or instruments evidencing such shares or such payment, to the
address of such holder shown on the records of the corporation.
(c) Registrar and Transfer Agent. The corporation may appoint, and
from time to time discharge and change, the registrar and transfer agent
for the Series A Cumulative Preferred Stock. The initial registrar and
transfer agent for the Series A Cumulative Preferred Stock shall be the
corporation.
(d) Severability. Whenever possible, each provision hereof shall be
interpreted in such a manner as to be effective and valid under applicable
law, but if any provision hereof is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of
competent jurisdiction should determine that a provision hereof would be
valid or enforceable if a period of time were extended or shortened or a
particular percentage were increased or decreased, then such court may make
such change as shall be necessary to render the provision in question
effective and valid under applicable law.
ARTICLE IV
INCORPORATOR
The incorporator and her post office address is:
Carol Iazaro
Suite 1500 - BNO Building
1010 Common Street
New Orleans, LA 70112
ARTICLE V
SHAREHOLDERS RIGHTS
No holder of shares of the corporation shall have any preemptive or other
rights, except such rights as are expressly provided by contract, to purchase,
or subscribe for or receive any shares of any class, or series thereof, of the
corporation, whether now or hereafter authorized, or any warrants, options,
bonds, debentures or other securities convertible into, exchangeable for or
carrying any right to purchase any shares of any class, or series thereof, may
be issued or disposed of by the board of directors to such persons, and on such
terms and for such lawful consideration, as in its discretion it shall deem
advisable or as to which the corporation shall have by binding contract agreed."
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ARTICLE VI
AMENDMENT TO ARTICLES
Any corporate action of shareholders, including by way of illustration and
not limitation, adoption of amendments to these articles of incorporation,
approval of merger and consolidation agreements, and authorization of voluntary
disposition of all or substantially all of the corporation's assets, may be
taken on the affirmative vote of a majority of the voting power present.
ARTICLE VII
DIRECTORS
There shall be no less than one nor more than seven directors of the
corporation.
ARTICLE VIII
REVERSION
Cash, property or share dividends, shares issuable to shareholders in
connection with a re-classification of stock, and the redemption price of
redeemed shares, which are not claimed by the shareholders entitled thereto
within one year after the dividend or redemption price became payable or the
shares become issuable, despite reasonable efforts by the corporation to pay the
dividend or redemption price or deliver the certificates for the shares to such
shareholders within such time, at the expiration of such time, revert in full
ownership to the corporation, and the corporation's obligation to pay such
dividend or redemption price or issue such shares, as the case may be, shall
thereupon cease.
ARTICLE IX
WRITTEN CONSENTS
Consents in writing to corporate actions may be adopted by those
shareholders having that proportion of the total voting power which would be
required to authorize or constitute such action at a meeting of the
shareholders.
ARTICLE X
LIMITATION OF LIABILITY
No director or officer of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for any breach of fiduciary
duty as a director or officer, except for liability (i) for breach of the
director's or officer's duty of loyalty to this Corporation or its shareholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under Section 92(D) of the
Louisiana Business Corporation Law (the "LBCL"), or (iv) for any transaction
from which the director or officer derived an improper personal benefit. If the
LBCL is hereafter amended to authorize corporate action further limiting or
eliminating the personal liability of directors and officers, then the liability
of each director and officer of this Corporation shall be limited or eliminated
to the fullest extent permitted by the LBCL, as so amended from time to time.
Neither the amendment nor repeal of this Article X, nor the
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adoption of any provision of this Corporation's Articles of Incorporation
inconsistent with this Article X, nor the adoption of any provision of this
Corporation's Articles of Incorporation inconsistent with this Article X, shall
eliminate or reduce the effect of this Article X in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article X,
would accrue or arise, prior to such amendment, repeal or adoption of any
inconsistent provision.
ARTICLE XI
INDEMNIFICATION
Section 1. Right to Indemnification. Each person who was or is a party or
is threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), including any action by or in the right of the
Corporation, by reason of the fact that he or she, or a person of whom he or she
is the legal representative, is or was a director or officer of the Corporation
or, as a director or officer of the Corporation, is or was serving at the
request of the Corporation as a director, officer, partner, employee or agent of
another business, nonprofit or foreign corporation, partnership, joint venture,
limited liability company, registered limited liability partnership, trust or
other enterprise, including service with respect to employee benefit plans,
whether the basis of such Proceeding is alleged action in an official capacity
as a director, officer, partner, trustee, employee or agent or in any other
capacity, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by law, including but not limited to the LBCL, as the
same exists or may hereafter be amended (but, in the case of any amendment to
the LBCL, such amendment shall be enforced hereunder only to the extent that
such amendment permits the Corporation to provide broader indemnification rights
that the LBCL permitted the Corporation to provide prior to such amendment),
against any and all expenses, including attorneys' fees, liabilities, losses,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement actually and reasonably incurred or suffered by such person in
connection with such Proceeding, if he or she acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his or her conduct was unlawful; provided,
however, that the Corporation shall indemnify any such person seeking indemnity
in connection with a Proceeding (or part thereof) initiated by such person only
if such Proceeding (or part thereof) initiated by such person was first
authorized by the Board of Directors of the Corporation.
In case of actions by or in the right of the Corporation, no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable for willful or
intentional misconduct in the performance of his or her duty to the Corporation,
unless, and only to the extent that the court shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, he or she is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
The termination of any Proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the
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best interests of the Corporation, and, with respect to any criminal Proceeding,
had reasonable cause to believe that his or her conduct was unlawful.
To the extent that a director or officer has been successful on the merits
or otherwise in defense of any such Proceeding, or in defense of any claim,
issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
Any indemnification under this Article XI, unless ordered by the court,
shall be made by the Corporation only as authorized in a specific case upon a
determination that the applicable standard of conduct has been met. Such
determination shall be made:
(1) First, by the Board of Directors of the Corporation by a majority vote
of a quorum consisting of directors who were not parties to such
Proceeding, or
(2) If such a quorum is not obtainable and the Board of Directors so
directs, by independent legal counsel, or
(3) If not by legal counsel, by vote of shareholders that are not a party
to such Proceeding.
Any right to indemnification hereunder shall include the right to be paid
by the Corporation any and all expenses, including attorneys' fees incurred in
defending any such Proceeding, in advance of its final disposition; provided,
however, that the payment of such expenses in advance of the final disposition
of such Proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer who is a party to such
Proceeding, in which such director or officer agrees to repay all amounts so
advanced if it ultimately should be determined that such person is not entitled
to be indemnified under this Article XI or otherwise. Such right to
indemnification shall also continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of his or her heirs or legal
representatives.
Section 2. Right of Claimant to Bring Suit.
-------------------------------
(i) If a claim under Section 1 of this Article XI is not paid in full
by the Corporation within ninety (90) days after a written claim therefor
has been received by the Corporation, the claimant may bring suit against
the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall also be entitled to be
paid the expense (including attorneys' fees) of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any,
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the LBCL for the
Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation.
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(ii) Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he or she has met
the applicable standard of conduct, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel,
or its shareholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that
the claimant has not met the applicable standard of conduct.
Section 3. Contractual Rights; Applicability. The rights and obligations
of the Corporation and the person entitled to relief from liability or
indemnification under Articles X and XI hereof (i) shall be deemed to be a
contract between the Corporation and such person based upon good and valuable
consideration, pursuant to which the person entitled thereto may bring suit as
if the provisions hereof were set forth in a separate written contract between
the Corporation and the director or officer, (ii) shall be retroactive and shall
be available with respect to events occurring prior to the adoption hereof,
(iii) shall continue to exist after the rescission or restrictive modification
hereof with respect to events occurring prior thereto, and (iv) any repeal,
amendment or modification of Articles X and XI hereof shall not adversely affect
any right or protection of a director or officer existing at the time of such
repeal, amendment or modification.
Section 4. Requested Service. Any director or officer of the Corporation
serving, in any capacity, (i) another corporation or other entity of which a
majority of the shares entitled to vote in the election of its directors or
other ownership interests are held by the Corporation, or (ii) any employee
benefit plan of the Corporation or of any corporation or entity referred to in
clause (i), shall be deemed to be doing so at the request of the Corporation.
Section 5. Non-Exclusivity of Rights. The rights conferred on any person
by Sections 1 and 2 of this Article XI shall not be deemed exclusive of, and
shall be in addition to, any other rights which such person may have or may
hereafter acquire under any statute, rule, provision of these Articles of
Incorporation, By-Laws, agreement, vote of share-holders or disinterested
directors or otherwise; provided, however, that no such other right shall permit
indemnification of any officer or director for the results of such person's
willful or intentional misconduct.
Section 6. Insurance. The Corporation may purchase and maintain
insurance, obtain letters of credit, act as a self-insurer, create a reserve,
trust, escrow or other fund or account or enter into indemnification agreements
either within or beyond the scope of the LBCL, with or on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, limited
liability company, registered limited liability partnership, trust or other
enterprise, including service with respect to employee benefit plans, against
any liability asserted against him or her or incurred by such person in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under this Article XI or the LBCL.
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EXHIBIT 3(ii)
FORMAN PETROLEUM CORPORATION
BY - LAWS
ARTICLE I
OFFICES
Section 1. The principal office shall be the Parish of State of Louisiana.
Section 2. The corporation may also have offices at such other places both
within and without the State of Louisiana as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. Meetings of the stockholders may be held at such places as may
be fixed from time to time by the President or the Board of Directors in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1983,
shall be held on the first Tuesday in the month of December if not a legal
holiday, or if a legal holiday, then on the next secular day following, at 3:30
P.M., at which they shall elect by a plurality vote a Board of Directors, and
transact such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting shall be given to each
stockholder entitled to vote thereat at least ten days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
Directors, a complete list of the stockholders
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entitled to vote at said election, arranged in alphabetical order, showing the
address of and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, during ordinary
business hours, for a period of at least ten days prior to the election, either
at a place within the city, town or village where the election is to be held and
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where said meeting is to be held, and the list shall be
produced and kept at the time and place of election during the whole time
thereof, and subject to the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of at least _____ of the Board
of Directors, or at the request of stockholders owning twenty-five percent of
the amount of the entire capital stock of the corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting of stockholders, stating
the time, place and object thereof, shall be given to each stockholder entitled
to vote thereat, at least five days before the date fixed for the meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Articles of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy,
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shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Articles of Incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period,
and, except where the transfer books of the corporation have been closed or a
date has been fixed as a record date for the determination of its stockholders
entitled to vote, no share of stock shall be voted on at any election for
Directors which has been transferred on the books of the corporation within
twenty days next preceding such election of directors.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by any
provisions of the statutes or of the Articles of Incorporation, the meeting and
vote of stockholders may be dispensed with, if all the stockholders who would
have been entitled to vote upon the action if such meeting were held, shall
consent in writing to such corporate action being taken.
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ARTICLE III
DIRECTORS
Section 1. The number of Directors which shall constitute the Board shall
be one or more. The Directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article. Each Director
elected shall hold office until his successor is elected and qualified.
Directors must be stockholders.
Section 2. Vacancies and newly created Directorships resulting from any
increase in the authorized number of Directors may be filed by a majority of the
Directors then in office, though less than a quorum, and the Directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify, unless sooner displaced.
Section 3. The business of the corporation shall be managed by its Board
of Directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
MEETING OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Louisiana.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected Directors in order to legally constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at
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such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the Directors.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
Section 7. Special meetings of the Board may be called by the President on
five days' notice to each Director, either personally or by mail or by telegram;
special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of two Directors.
Section 8. At all meetings of the Board a majority of the Directors shall
constitute a quorum for the transaction of business and the act of a majority of
the Directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the Articles of Incorporation. If a quorum shall not be present
at any meeting of the Board of Directors, the Directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the Articles of Incorporation or
these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if prior to such action a written consent thereto is signed by all
members of the Board or of such committee as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
COMMITTEE OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of two or more of the Directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the
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powers of the Board of Directors in the management of the business and affairs
of the corporation and may authorize the seal of the corporation to be affixed
to all papers which may require it. Such committee shall have such name or names
as may be determined from time to time by resolution adopted by the Board of
Directors may additionally, by resolution passed by a majority of the whole
Board, designate an Executive Committee which shall have all of the power and
authority of the Board of Directors and which shall consist of one or more of
the members of the Board of Directors. The Executive Committee shall keep
minutes of its meetings. The members of the Executive Committee shall be chosen
by the Board of Directors at its annual or any special meeting.
Section 11. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. The Directors shall not be entitled to any compensation or any
expenses for attending either the regular or special meetings of the Board.
ARTICLE IV
NOTICES
Section 1. Notices to Directors and stockholders shall be in writing and
delivered personally or mailed to the Directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
Directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Articles of Incorporation or of these By-
Laws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a President, a Secretary, and a Treasurer. The Board of
Directors may also choose one or more Vice Presidents, Assistant Secretaries and
Assistant Treasurers. Two or more offices may be held by the same person
provided, that when the offices of the President and Secretary are held by the
same person, such person shall not hold any other office, except as permitted by
law.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a President, one or more Vice-Presidents, a
Secretary and a Treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE PRESIDENT
Section 6. The President shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the Board of
Directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
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Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
THE VICE PRESIDENT
Section 8. The Vice President shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committee
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or the
President, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation, and, when authorized by the Board of Directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of the Assistant Secretary.
Section 10. The Assistant Secretary shall, in the absence of or disability
of the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
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THE TREASURER
Section 11. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
ARTICLE VI
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
President or a Vice President and the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
corporation and a registrar , the signature of any such President, Vice
President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may
be
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facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificate or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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CLOSING OF TRANSFER BOOKS
Section 5. The Board of Directors may close the stock transfer books of
the corporation for a period not exceeding fifty days preceding the date of any
meeting of stockholders or the date for payment of any dividend or the date for
the allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect or for a period of not exceeding fifty days
in connection with obtaining the consent of stockholders for any purpose. In
lieu of closing the stock transfer books as aforesaid, the Board of Directors
may fix in advance a date, not exceeding fifty days preceding the date of any
meetings of stockholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, or to give such consent, and if
fixed for the purpose of determining shareholders entitled to notice of and to
vote at a meeting, not less than ten days prior to said meeting, and in such
case such stockholders and only such stockholders as shall be stockholders of
record or the date so fixed shall be entitled to such notice of, and to vote at,
such meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, or
to give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the corporation after any such record date fixed as
aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and
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to hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Louisiana.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
corporation, and the Directors may modify or abolish any such reserves in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
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CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, and the words "Corporate Seal, Louisiana." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise. An impression of the seal is affixed to the margin hereof.
ARTICLE VIII
AMENDMENTS
Section 1. These By-Laws may be amended or repealed at any regular meeting
of the stockholders or of the Board of Directors or at any special meeting of
the stockholders or of the Board of Directors, if notice of such amendment or
repeal be contained in the notice of such special meeting. No change of the
time or place of the meeting for the election of Directors shall be made within
sixty days next before the day on which such meeting is to be held, and in case
of any change of such time or place, notice thereof shall be given to each
stockholder in person or by letter mailed to his last known Post Office address
at least twenty days before the meeting is held.
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[THIS PAGE LEFT BLANK]
VEHOU05:54524.1
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<PAGE>
EXHIBIT 4.1
________________________________________________________________________________
FORMAN PETROLEUM CORPORATION
and
U.S. TRUST COMPANY OF TEXAS, N.A.
Trustee
__________________
INDENTURE
Dated as of June 3, 1997
__________________
$70,000,000
13.5% SENIOR SECURED NOTES DUE 2004, SERIES A
13.5% SENIOR SECURED NOTES DUE 2004, SERIES B
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<PAGE>
CROSS-REFERENCE TABLE
Indenture Section
310(a)(1)...................................................... 7.10
(a)(2)....................................................... 7.10
(a)(3)....................................................... N.A.
(a)(4)....................................................... N.A.
(a)(5)....................................................... 7.8; 7.10
(b).......................................................... 7.8; 7.10
(c).......................................................... N.A.
311(a)......................................................... 7.11
(b).......................................................... 7.11
(c).......................................................... N.A.
312(a)......................................................... 2.5
(b).......................................................... 1.33
(c).......................................................... 1.33
313(a)......................................................... 7.6
(b)(1)....................................................... N.A.
(b)(2)....................................................... 7.6
(c).......................................................... 7.6; 1.32
(d).......................................................... 7.6
314(a)......................................................... 4.2; 4.3; 1.32
(b).......................................................... 1.23
(c)(1)....................................................... 1.34
(c)(2)....................................................... 1.34
(c)(3)....................................................... N.A.
(d).......................................................... 1.24
(e).......................................................... 1.35
(f).......................................................... N.A.
315(a)......................................................... 7.1
(b).......................................................... 7.5; 1.32
(c).......................................................... 7.1
(d).......................................................... 7.1
(e).......................................................... 6.11
316(a)(last sentence).......................................... 2.9
(a)(1)(A).................................................... 6.5
(a)(1)(B).................................................... 6.2; 6.4; 9.2
(a)(2)....................................................... N.A.
(b).......................................................... 6.7
(c).......................................................... N.A.
317(a)(1)...................................................... 6.8
(a)(2)....................................................... 6.9
(b).......................................................... 2.4
318(a)......................................................... 1.31
318(c)......................................................... 1.31
_____________
N.A. means Not Applicable.
NOTE: This Cross-Reference table shall not, for any purpose, be deemed to be
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions........................................ 1
Section 1.2 Other Definitions.................................. 18
Section 1.3 Incorporation by Reference of Trust Indenture Act.. 19
Section 1.4 Rules of Construction.............................. 19
ARTICLE TWO
THE SECURITIES
Section 2.1 Form and Dating.................................... 20
Section 2.2 Execution and Authentication....................... 20
Section 2.3 Registrar and Paying Agent......................... 22
Section 2.4 Paying Agent to Hold Money in Trust................ 22
Section 2.5 Holder Lists....................................... 22
Section 2.6 Transfer and Exchange.............................. 23
Section 2.7 Book-Entry Provisions for Global Securities........ 26
Section 2.8 Replacement Securities............................. 27
Section 2.9 Outstanding Securities............................. 27
Section 2.10 Treasury Securities................................ 27
Section 2.11 Temporary Securities............................... 27
Section 2.12 Cancellation....................................... 27
Section 2.13 Defaulted Interest................................. 28
Section 2.14 Private Placement Legend........................... 28
Section 2.15 Additional Interest Under Registration
Rights Agreement.................................. 28
ARTICLE THREE
REDEMPTION
Section 3.1 Notice to Trustee.................................. 28
Section 3.2 Selection of Securities To Be Redeemed............. 29
Section 3.3 Notice of Redemption............................... 29
Section 3.4 Effect of Notice of Redemption..................... 30
Section 3.5 Deposit of Redemption Price........................ 30
Section 3.6 Securities Redeemed in Part........................ 30
ARTICLE FOUR
COVENANTS
Section 4.1 Payment of Securities.............................. 30
Section 4.2 SEC Reports........................................ 31
Section 4.3 Compliance Certificate............................. 31
Section 4.4 Maintenance of Office or Agency.................... 32
Section 4.5 Corporate Existence................................ 32
Section 4.6 Waiver of Stay, Extension or Usury Laws............ 32
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Section 4.7 Payment of Taxes and Other Claims.................. 32
Section 4.8 Maintenance of Properties and Insurance............ 33
Section 4.9 Limitation on Incurrence of Additional
Indebtedness...................................... 33
Section 4.10 Limitation on Restricted Payments.................. 34
Section 4.11 Limitation on Disposition of Assets................ 35
Section 4.12 Limitation on Liens Securing Indebtedness.......... 37
Section 4.13 Limitation on Payment Restrictions Affecting
Subsidiaries...................................... 37
Section 4.14 Limitation on Transactions with Related Persons.... 37
Section 4.15 Limitation on Conduct of Business.................. 38
Section 4.16 Change of Control.................................. 38
Section 4.17 Provision of Financial Information................. 40
Section 4.18 Registration Rights Agreement...................... 40
Section 4.19 Qualification of Indenture......................... 40
Section 4.20 Payment of Existing Secured Debt................... 40
Section 4.21 Replacement Mortgages.............................. 40
Section 4.22 Impairment of Security Interest.................... 41
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.1 When Company May Merge, etc........................ 41
Section 5.2 Successor Corporation Substituted.................. 42
ARTICLE SIX
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.................................. 42
Section 6.2 Acceleration....................................... 44
Section 6.3 Other Remedies..................................... 44
Section 6.4 Waiver of Past Defaults............................ 44
Section 6.5 Control by Majority................................ 45
Section 6.6 Limitation on Remedies............................. 45
Section 6.7 Rights of Holders To Receive Payment............... 45
Section 6.8 Collection Suit by Trustee......................... 45
Section 6.9 Trustee May File Proofs of Claim................... 46
Section 6.10 Priorities......................................... 46
Section 6.11 Undertaking for Costs.............................. 46
ARTICLE SEVEN
TRUSTEE
Section 7.1 Duties of Trustee.................................. 47
Section 7.2 Rights of Trustee.................................. 48
Section 7.3 Individual Rights of Trustee....................... 48
Section 7.4 Trustee's Disclaimer............................... 48
Section 7.5 Notice of Defaults................................. 49
Section 7.6 Reports by Trustee to Holders...................... 49
Section 7.7 Compensation and Indemnity......................... 49
Section 7.8 Replacement of Trustee............................. 50
Section 7.9 Successor Trustee by Merger, etc................... 50
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Section 7.10 Eligibility; Disqualification...................... 51
Section 7.11 Preferential Collection of Claims Against Company.. 51
ARTICLE EIGHT
DISCHARGE OF INDENTURE
Section 8.1 Termination of Company's Obligations............... 51
Section 8.2 Application of Trust Money......................... 52
Section 8.3 Repayment to Company............................... 53
Section 8.4 Reinstatement...................................... 53
Section 8.5 Survival of Certain Obligations.................... 53
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Without Consent of Holders......................... 54
Section 9.2 With Consent of Holders............................ 54
Section 9.3 Compliance with Trust Indenture Act................ 55
Section 9.4 Revocation and Effect of Consents.................. 55
Section 9.5 Notation on or Exchange of Securities.............. 55
Section 9.6 Trustee Protected.................................. 56
ARTICLE TEN
SUBORDINATION
Section 10.1 Subordination of Security Interest................. 56
Section 10.2 Holders Authorize Trustee To Effectuate
Subordination..................................... 56
ARTICLE ELEVEN
GUARANTEES
Section 11.1 Unconditional Guarantee............................ 56
Section 11.2 Subsidiary Guarantors May Consolidate, etc.,
on Certain Terms.................................. 57
Section 11.3 Release of a Subsidiary Guarantor.................. 58
Section 11.4 Limitation of Subsidiary Guarantor's Liability..... 58
Section 11.5 Contribution....................................... 59
Section 11.6 Execution and Delivery of Guarantee................ 59
Section 11.7 Severability....................................... 59
ARTICLE TWELVE
SECURITY
Section 12.1 Grant of Security Interest......................... 60
Section 12.2 Execution of Security Documents.................... 60
Section 12.3 Recording and Opinions............................. 60
Section 12.4 Release of Collateral.............................. 61
Section 12.5 Specified Releases of Collateral................... 61
Section 12.6 Form and Sufficiency of Release.................... 63
Section 12.7 Purchaser Protected................................ 64
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Section 12.8 Authorization of Actions To Be Taken by the
Trustee Under the Security Documents.............. 64
Section 12.9 Authorization of Receipt of Funds by the
Trustee Under the Security Documents.............. 64
Section 12.10 Disbursement Account............................... 64
Section 12.11 Escrow Account..................................... 65
ARTICLE THIRTEEN
MISCELLANEOUS
Section 13.1 Trust Indenture Act Controls....................... 66
Section 13.2 Notices............................................ 66
Section 13.3 Communication by Holders with Other Holders........ 67
Section 13.4 Certificate and Opinion as to Conditions
Precedent......................................... 67
Section 13.5 Statements Required in Certificate or Opinion...... 68
Section 13.6 Rules by Trustee and Agents........................ 68
Section 13.7 Legal Holidays..................................... 68
Section 13.8 Governing Law...................................... 68
Section 13.9 No Adverse Interpretation of Other Agreements...... 68
Section 13.10 No Recourse Against Others......................... 68
Section 13.11 Successors......................................... 69
Section 13.12 Duplicate Originals................................ 69
Section 13.13 Severability....................................... 69
EXHIBITS
Exhibit A - Form of Security
Exhibit A-1 - Form of Notation on Security Relating to Guarantee
Exhibit A-2 - Form of Legend for Global Securities
Exhibit A-3 - Certificate Upon Exchange or Registration of Transfer
of Securities
Exhibit A-4 - Certificate in Connection with Transfers to Institutional
Accredited Investors
Exhibit A-5 - Certificate in Connection with Regulation S Transfers
Exhibit B - Registration Rights Agreement
Exhibit C - Subordination Agreement
Exhibit D - Assignment
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<PAGE>
THIS INDENTURE, dated as of June 3, 1997, is between FORMAN PETROLEUM
CORPORATION, a Louisiana corporation (hereinafter called the "Company"), and
U.S. TRUST COMPANY OF TEXAS, N.A. (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 13.5% Senior
Secured Notes due 2004, Series A, and an issue of 13.5% Senior Secured Notes due
2004, Series B (such two issues, as amended or supplemented from time to time in
accordance with the terms hereof, being herein collectively called the
"Securities"), of substantially the tenor and in the aggregate principal amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture.
The 13.5% Senior Secured Notes due 2004, Series A, are to be issued and
sold in transactions exempt from registration under the Securities Act, pursuant
to the Purchase Agreement, and the 13.5% Senior Secured Notes due 2004, Series
B, are to be issued in exchange for the 13.5% Senior Secured Notes due 2004,
Series A, pursuant to the Registration Rights Agreement. The Securities will be
secured by a first lien and security interest in the Collateral (as defined
below) pursuant to the terms of the Security Documents (as defined below).
All things necessary have been done on the part of the Company to make the
Securities, when issued against consideration received and executed by the
Company and authenticated and delivered by the Trustee as herein provided, the
valid obligations of the Company, and to make this Indenture a valid agreement
of the Company and the Trustee, in accordance with their respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
(together with the related Guarantees) by the Holders thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders of
the Securities (together with the related Guarantees), without preference of one
series of Securities over the other, as follows:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Additional Interest" shall have the meaning set forth in the Registration
Rights Agreement.
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (A) the sum of (i) the Present Value of Oil and
Gas Reserves, (ii) the Net Working Capital on a date no earlier than the date of
the Company's latest consolidated annual or quarterly financial statements and
(iii) with respect to each other tangible asset of the Company or its
consolidated Subsidiaries, the greater of (a) the net book value of such other
tangible asset on a date no earlier than the date of the Company's latest
consolidated annual or quarterly financial statements, and (b) the appraised
value, as estimated by a qualified independent appraiser, of such other tangible
asset, as of a date no earlier than the date that is three years prior to the
date of determination (or such later date on which the Company shall have a
reasonable basis to believe that there has occurred a material decrease in value
since the
<PAGE>
determination of such appraised value), minus (B) minority interests and, to the
extent not otherwise taken into account in determining Adjusted Consolidated Net
Tangible Assets, any gas balancing liabilities of the Company and its
consolidated Subsidiaries. In addition to, but without duplication of, the
foregoing, for purposes of this definition, "Adjusted Consolidated Net Tangible
Assets" shall be calculated after giving effect, on a pro forma basis, to (1)
any Investment not prohibited by this Indenture, to and including the date of
the transaction giving rise to the need to calculate Adjusted Consolidated Net
Tangible Assets (the "Assets Transaction Date"), in any other Person that, as a
result of such Investment, becomes a Subsidiary of the Company, (2) the
acquisition, to and including the Assets Transaction Date (by merger,
consolidation or purchase of stock or assets), of any business or assets,
including, without limitation, Permitted Industry Investments, and (3) any sales
or other dispositions of assets permitted by this Indenture (other than sales of
Hydrocarbons or other mineral products in the ordinary course of business)
occurring on or prior to the Assets Transaction Date. For purposes of
calculating the ratio of the Adjusted Consolidated Net Tangible Assets to
Indebtedness of the Company and its Subsidiaries, Indebtedness of a Subsidiary
that is not a Wholly Owned Subsidiary (which Indebtedness is non-recourse to the
Company or any other Subsidiary or any of their assets) shall be included only
to the extent of the Company's pro rata ownership interest in such Subsidiary.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Guarantee, of such Subsidiary Guarantor at such date and
(y) the present fair saleable value of the assets of such Subsidiary Guarantor
at such date exceeds the amount that will be required to pay the probable
liability of such Subsidiary Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date and
after giving effect to any collection from any Subsidiary of such Subsidiary
Guarantor in respect of the obligations of such Subsidiary under the Guarantee),
excluding debt in respect of the Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or 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 specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset" means each of the assets that are owned by the Company or a
Subsidiary on the date of this Indenture or that are acquired by the Company or
a Subsidiary after the date of this Indenture.
"Asset Disposition" means any sale, lease (other than a sale and leaseback
that creates a Capitalized Lease Obligation), transfer, exchange or other
disposition (or series of related sales, leases, transfers, exchanges or
dispositions) of shares of Capital Stock of a Subsidiary (other than directors'
qualifying shares), or of property or assets (including any interests therein)
(each referred to for purposes of this definition as a "disposition") by the
Company or any of its Subsidiaries, including any disposition by means of a
merger, consolidation or similar transaction (other than (A) by the Company to a
Subsidiary or by a Subsidiary to the Company or a Subsidiary (in the case of a
transfer to a Subsidiary that is not a wholly owned Subsidiary, dispositions
shall be excluded pursuant to clause (A) only to the extent of the Company's
interest in such Subsidiary after giving effect to such transfer), (B) any
Investment in an
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Unrestricted Subsidiary not prohibited under the provisions of Section 4.10, (C)
a disposition of Hydrocarbons or other mineral products in the ordinary course
of business, including farmouts in the ordinary course of business, and (D) the
disposition of all or substantially all of the assets of the Company in
compliance with Article Five of this Indenture).
"Assigned Mortgage" means the Act of Mortgage, Security Agreement,
Assignment of Production and Financing Statement, assigned by the Assignment.
"Assigned Mortgage Amendment" means the amendment to the Assigned Mortgage
executed by the Company and the Trustee, dated as of the Issue Date.
"Assignment" means the Act of Assignment of Note and Liens executed by
Joint Energy Development Investments Limited Partnership and the Trustee, dated
as of the Issue Date, related to the Collateral substantially in the form
attached hereto as Exhibit D.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(x) the number of years from such date to the date of each successive scheduled
principal payment of such Indebtedness multiplied by (y) the amount of such
principal payment by (ii) the sum of all such principal payments.
"Bank Credit Agreement" means one or more credit agreements that may be
entered into between the Company and one or more lenders that may be secured by
certain assets of the Company, as such agreement may be amended, modified
(without limitation as to amount), supplemented, extended, restated, replaced,
renewed or refinanced from time to time in whole or in part in one or more
credit agreements, loan agreements, instruments or similar agreements, as such
may be further amended, modified (without limitation as to amount),
supplemented, extended, restated, replaced, renewed or refinanced from time to
time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the board of directors of such
Person duly authorized to act on behalf of the board of directors of such
Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other day
on which banking institutions in the City of New York are required or authorized
by law or other governmental action to be closed.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock and any and all warrants, options and rights with respect thereto,
including each class of common stock and preferred stock of such Person.
"Capitalized Lease Obligation" means the discounted present value of the
rental obligations of any Person under any lease of Property, which in
accordance with GAAP, is required to be capitalized on the balance sheet of such
Person.
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"Cash Equivalents" shall mean Permitted Obligations.
"Change of Control" means (i) an event or series of events by which any
Person or other entity or group of Persons or other entities acting in concert
as a partnership or other group other than, in the case of the Company, the
Principals (a "Group of Persons") shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases, merger,
consolidation or otherwise, have become the beneficial owner (within the meaning
of Rule 13d-3 under the Exchange Act) of 40% or more of the combined voting
power of the then outstanding Voting Stock of the Company; provided, however,
that such event or series of events shall not constitute a Change of Control if
the Principals continue to beneficially own more than 50% of the combined voting
power of the then outstanding Voting Stock of the Company, (ii) during any
period of two consecutive years, Continuing Directors cease for any reason to
constitute a majority of the Board of Directors then in office, or (iii) the
direct or indirect sale, lease, exchange or other transfer of all or
substantially all of the Assets to any Person or Group of Persons.
"Company" means the party named as such above, until a successor replaces
such Person in accordance with the terms of this Indenture, and thereafter means
such successor.
"Company Properties" means all Properties, and equity, partnership or other
ownership interests therein, that are related or incidental to, or used or
useful in connection with, the conduct or operation of any business activities
of the Company or the Subsidiaries, which business activities are not prohibited
by the terms of this Indenture.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period increased (to the extent
deducted in determining Consolidated Net Income) by the sum of: (i) all income
taxes of such Person and its subsidiaries paid or accrued according to GAAP for
such period (other than income taxes attributable to extraordinary, unusual or
non-recurring gains or losses), (ii) all interest expense of such Person and its
subsidiaries paid or accrued in accordance with GAAP for such period (including
amortization of original issue discount and the interest portion of deferred
payment obligations), (iii) depreciation and depletion of such Person and its
subsidiaries, (iv) amortization of such Person and its subsidiaries including,
without limitation, amortization of capitalized debt issuance costs, (v) the
amount of any Preferred Stock dividends paid by such Person on its Preferred
Stock and (vi) any other non-cash charges to the extent deducted from
Consolidated Net Income.
"Consolidated EBITDA Coverage Ratio" means, with respect to any Person, the
ratio of (1) Consolidated EBITDA of such Person for the period (the "Pro Forma
Period") consisting of the most recent four full fiscal quarters for which
financial information in respect thereof is available immediately prior to the
date of the transaction giving rise to the need to calculate the Consolidated
EBITDA Coverage Ratio (the "Transaction Date") to (2) the aggregate Fixed
Charges that such Person will accrue during the fiscal quarter in which the
Transaction Date occurs and the three fiscal quarters immediately subsequent to
such fiscal quarter (the "Forward Period") on the aggregate amount of
Indebtedness outstanding on the Transaction Date, including any Indebtedness
proposed to be incurred on such date and excluding any Indebtedness repaid with
the proceeds of such Indebtedness (as though all such Indebtedness was incurred
or repaid on the first day of the quarter in which the Transaction Date
occurred). In addition to, but without duplication of, the foregoing, for
purposes of this definition, "Consolidated EBITDA" shall be calculated after
giving effect (without duplication), on a pro forma basis for the Pro Forma
Period (but no longer), to (a) any Investment, during the period commencing on
the first day of the Pro Forma Period to and including the Transaction Date (the
"Reference Period"), in any other Person that, as a result of such Investment,
becomes a subsidiary of such Person, (b) the acquisition, during the Reference
Period (by
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<PAGE>
merger, consolidation or purchase of stock or assets) of any business or assets,
which acquisition is not prohibited by this Indenture, including but not limited
to Permitted Industry Investments, as if such acquisition had occurred on the
first day of the Reference Period, (c) any sales or other dispositions of assets
(other than sales of Hydrocarbons and other mineral products in the ordinary
course of business) occurring during the Reference Period, in each case as if
such incurrence, Investment, repayment, acquisition or asset sale had occurred
on the first day of the Reference Period and (d) interest income reasonably
anticipated by the Company to be received during the Pro Forma Period from
Investments in Permitted Obligations, which Investments exist on the Transaction
Date or will exist as a result of the transaction giving rise to the need to
calculate the Consolidated EBITDA Coverage Ratio. For purposes of this
definition, "Fixed Charges" shall be calculated after giving effect (without
duplication), on a pro forma basis for the Forward Period, to any Indebtedness
incurred or repaid on or after the first day of the Forward Period and prior to
the Transaction Date. For purposes of calculating the Company's Consolidated
EBITDA Coverage Ratio, Indebtedness of a Subsidiary that is not a Wholly Owned
Subsidiary (which Indebtedness is non-recourse to the Company or any other
Subsidiary or any of their assets) shall be included only to the extent of the
Company's pro rata ownership interest in such Subsidiary.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of such Person and its subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP, provided
that (a) the net income of (i) any Unrestricted Subsidiary and (ii) any other
Person in which such Person or any subsidiary thereof has an interest (which
interest, in the case of those Persons referred to in clause (ii), does not
cause the net income of such other Person to be consolidated with the net income
of such Person in accordance with GAAP) will be included only to the extent of
the amount of dividends or distributions actually paid to such Person or its
subsidiaries by such other Person in such period; (b) the net income of any
subsidiary of such Person that is subject to any Payment Restriction will be
excluded to the extent of such Payment Restriction; and (c) (i) the net income
(or loss) of any other Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition, (ii) any net gain (but not
loss) on the sale or other disposition by such Person or any of its subsidiaries
of assets and of the Capital Stock of any subsidiary of such Person, and (iii)
after-tax items classified as extraordinary or nonrecurring gains, will each be
excluded.
"Consolidated Net Worth" means with respect to any Person as of any date
the amount by which the assets of such Person and its subsidiaries on a
consolidated basis exceed (i) the total liabilities of such Person and its
subsidiaries on a consolidated basis, plus (ii) Disqualified Capital Stock of
such Person or Disqualified Capital Stock of any subsidiary of such Person
issued to any Person other than such Person or another wholly owned Subsidiary
of such Person, in each case determined in accordance with GAAP.
"Continuing Directors" means any member of the Board of Directors of the
Company on the Issue Date, any director elected since the date thereof in any
annual meeting of the stockholders upon the recommendation of the Board of
Directors of the Company and any other member of the Board of Directors of the
Company who will be recommended or elected to succeed a Continuing Director by a
majority of Continuing Directors who are then members of the Board of Directors
of the Company.
"Currency Agreement" means the obligations of any Person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person or any of its subsidiaries against
fluctuations in currency values.
"Default" means any event that is, or after notice or passage of time would
be, an Event of Default.
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"Disbursement Account" means the custodial account in the name of the
Company, under the sole dominion and control of the Trustee, into which the
Company, under certain circumstances, will deposit proceeds received pursuant to
a release of Collateral from the Security Interest.
"Disqualified Capital Stock" means, with respect to any Person, any Capital
Stock of such Person or its subsidiaries that, by its terms, by the terms of any
agreement related thereto or by the terms of any security into which,
mandatorily or at the option of the holder, it is convertible or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased by such Person or its subsidiaries, including at
the option of the holder, in whole or in part, or has, upon the happening of an
event or the passage of time would have, a redemption or similar payment due, in
each such case on or prior to the Maturity Date.
"Escrow Account" means that custodial account in the name of the Company,
under the sole dominion and control of the Trustee, pursuant to which the
Company has deposited the Escrow Funds in immediately available funds.
"Escrow Funds" means that certain $9.45 million of proceeds from the sale
of the Series A Securities to pay interest on the Securities that accrues and is
unpaid from the Issue Date through and including the Interest Payment Date of
June 1, 1998.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Exchange Offer" means the offer by the Company, pursuant to an effective
registration statement filed with the SEC, to exchange for any and all of the
Series A Securities a like aggregate principal amount of Series B Securities in
accordance with the terms and provisions of the Registration Rights Agreement.
"Exchange Offer Consummation Date" means the date on which the Exchange
Offer is consummated in accordance with the terms and provisions of the
Registration Rights Agreement.
"Farmout Interest" means an undivided interest in a portion of the
Collateral that has been assigned, transferred, subleased, granted or conveyed
pursuant to a farmout, conditional assignment or similar type agreement.
"Fixed Charges" means, with respect to any Person, for any period, the
aggregate amount of (i) interest, whether expensed or capitalized, paid, accrued
or scheduled to be paid or accrued during such period (except to the extent
accrued in a prior period) in respect of all Indebtedness of such Person and its
consolidated subsidiaries (including (a) original issue discount on any
Indebtedness and (b) the interest portion of all deferred payment obligations,
calculated in accordance with the effective interest method, in each case to the
extent attributable to such period) and (ii) the product of (a) the dividend
requirements on Disqualified Capital Stock of such Person and its consolidated
subsidiaries and, in the case of the Company, on the Series A Preferred Stock
(in each case, whether in cash or otherwise (except dividends payable in shares
of Qualified Capital Stock) (non-cash dividends being valued as determined in
good faith by the Board of Directors of such Person, as evidenced by a Board
Resolution)) paid, accrued or scheduled to be paid or accrued during such period
(except to the extent accrued in a prior period) times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local income tax rate of such
Person and its consolidated subsidiaries, expressed as a decimal, and, with
respect to all of the foregoing items in this definition, excluding items
eliminated in consolidation.
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For purposes of the definition of Fixed Charges, (a) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Board of Directors of such Person (as evidenced by
a Board Resolution) to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP; (b) interest on Indebtedness that is
determined on a fluctuating basis shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest of such Indebtedness in effect on
the date Fixed Charges are being calculated, subject to the proviso in clause
(c); (c) interest on Indebtedness that may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rate, shall be deemed to have been based upon
the rate actually chosen, or, if none, then based upon such optional rate chosen
as the Company may designate, (provided that, for the period following the date
on which the rate actually chosen ceases to be in effect, the Company may
designate an optional rate other than that actually chosen, which optional rate
shall be deemed to accrue at a fixed per annum equal to the rate of interest on
such optional rate in effect on the date Fixed Charges are being calculated);
and (d) Fixed Charges shall be increased or reduced by the net cost (including
amortization of discount) or benefit associated with obligations under Interest
Rate Agreements attributable to such period.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of any date of determination.
"Guarantee" means, individually and collectively, the guarantees given by
the Subsidiary Guarantors pursuant to Article Eleven, including a notation in
the Securities substantially in the form attached hereto as Exhibit A-1.
"Holder" means a Person in whose name a Security is registered on the
Registrar's books.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all constituents, elements or compounds thereof and products refined or
processed therefrom.
"Immediate Family" of any specified Person means a spouse, sibling, child
or grandchild of such specified Person, whether related through blood, marriage
or adoption.
"Indebtedness" means, with respect to any Person, without duplication, any
liability, contingent or otherwise, of such Person (i) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures
or similar instruments, (iii) representing the deferred and unpaid balance of
the purchase price of any property or interest therein (other than any such
balance that represents an account payable or any other monetary obligation to a
trade creditor created, incurred, assumed or guaranteed by such Person in the
ordinary course of business of such Person in connection with obtaining goods,
materials or services and due within 12 months (or such longer period for
payment as is customarily extended by such trade creditor) of the incurrence
thereof, which account is not overdue by more than 150 days, according to the
original terms of sale, unless such account payable is being contested in good
faith or has been extended, (iv) for the payment of a Capitalized Lease
Obligation of such Person, (v) with respect to the reimbursement of any letter
of credit, banker's acceptance or similar credit transaction, (vi) with respect
to Indebtedness (as otherwise defined in this definition) of another Person
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person (provided that if the obligations so secured have not
been assumed in full by such Person or are not otherwise such Person's legal
liability in full, then such obligations shall be deemed to be in an amount
equal to the greater of (A) the lesser of (1) the full amount of such
obligations, and (2) the fair market value of such assets, as determined in good
faith by the
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Board of Directors of such Person, which determination shall be evidenced by a
Board Resolution, and (B) the amount of obligations as have been assumed by such
Person or which are otherwise such Person's legal liability), (vii) with respect
to production payments in connection with oil and gas properties of such Person,
other than any Permitted Production Payment Obligations, (viii) to the extent
not otherwise included, under Currency Agreements and Interest Rate Agreements
entered into other than in the ordinary course of such Person's business, (ix)
in the case of such Person, the liquidation preference and any mandatory
redemption payment obligations in respect of Disqualified Capital Stock, and, in
the case of a subsidiary of such Person, the liquidation preference and any
mandatory redemption payment obligations in respect of preferred stock of such
subsidiary, and (x) in respect of all Indebtedness of others which such Person
has guaranteed, endorsed with recourse (otherwise than for collection, deposit
or other similar transactions in the ordinary course of business), agreed to
purchase or repurchase or in respect of which such Person has agreed
contingently to supply or advance funds or for which such Person has otherwise
become liable; provided, however, Indebtedness arising pursuant to clause (iii)
of this definition as a result of such account payable becoming overdue by more
than 150 days shall only be deemed to be incurred at a time when Indebtedness,
other than such Indebtedness, is incurred.
"Indenture" means this Indenture as amended or supplemented from time to
time in accordance with the terms hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
(a) an insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization proceeding or other similar case or proceeding,
relative to such Person or to its creditors, as such, or its assets, or (b) any
liquidation, dissolution, or reorganization proceeding of such Person, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of such Person.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Rate Agreement" means the obligations of any Person pursuant to
any interest swap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in interest rates.
"Investment" means, in respect of any Person, any investment in another
Person, whether by means of a share purchase, capital contribution, loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
similar credit extension constituting Indebtedness of such other Person and any
guaranty of Indebtedness of any other Person. For purposes of Section 4.10 and
the definition of Permitted Unrestricted Subsidiary Investments, (i) an
"Investment" in an Unrestricted Subsidiary shall be deemed to include and be
valued at the fair market value of the net assets of any Subsidiary at the time
that such Subsidiary is designated an Unrestricted Subsidiary, and (ii) any
Investment in an Unrestricted Subsidiary shall be valued at fair market value at
the time of such Investment (except, however, when such Investment consists of a
loan or advance by a Person to another Person that is of an intercompany or
similar nature between such Persons and arises pursuant to an agreement or
understanding in the ordinary course of business relating to tax sharing,
administrative or similar arrangements, then such Investment shall be valued at
fair market value at the time that the investing Person shall have paid monies
or transferred other consideration to another Person for the benefit of the
Person in whom the agreement to make such loan or advance was made), in
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each case as determined by the Board of Directors of the Company and such
Subsidiary, as applicable, in good faith.
"Issue Date" means the date of first issuance of the Series A Securities
under this Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction).
"Material Change" means an increase or decrease of more than 10% during a
fiscal quarter in the discounted future net cash flows (excluding changes that
result solely from changes in prices) from proved oil and gas reserves of the
Company and consolidated Subsidiaries (before any state or federal income tax);
provided, however, that the following will be excluded from the Material Change
calculation: (i) any acquisitions during the quarter of oil and gas reserves
that have been estimated by independent petroleum engineers and on which a
report or reports exist, (ii) any reserves added during the quarter attributable
to the drilling or recompletion of wells not included in previous reserve
estimates, but which will be included in future quarters, and (iii) any
disposition of properties existing at the beginning of such quarter that have
been disposed of as provided in Section 4.11.
"Material Subsidiary" means any Subsidiary of the Company that, as of the
relevant date of determination, would be a "significant subsidiary" as defined
in Reg. (S) 230.405 promulgated pursuant to the Securities Act as in effect on
the Issue Date, assuming the Company is the "registrant" referred to in such
definition, except that the 10% amounts referred to in such definition shall be
deemed to be 5%.
"Maturity Date" means June 1, 2004.
"Moody's" means Moody's Investors Service, Inc. and any successor to the
rating agency business thereof.
"Net Available Proceeds" means, with respect to any Asset Disposition of
any Person, cash proceeds received (including any cash proceeds received by way
of deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, and excluding any other consideration
until such time as such consideration is converted into cash) therefrom, in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and (ii) all federal, state or local taxes
required to be accrued as a liability as a consequence of such Asset
Disposition, and in each case net of all Indebtedness which is secured by such
Assets, in accordance with the terms of any Lien upon or with respect to such
Assets, or that 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 and which is actually so repaid.
"Net Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock, the aggregate net cash proceeds received by the
Company, after payment of expenses, commissions and the like incurred in
connection therewith, and (b) in the case of any exchange, exercise, conversion
or surrender of any outstanding securities or Indebtedness of the Company for or
into shares of Qualified Capital Stock of the Company, the net book value of
such outstanding securities or Indebtedness as adjusted
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on the books of the Company on the date of such exchange, exercise, conversion
or surrender (plus any additional amount required to be paid by the holder of
such Indebtedness or securities to the Company upon such exchange, exercise,
conversion or surrender and less any and all payments made to the holders of
such Indebtedness or securities, and all other expenses incurred by the Company
in connection therewith).
"Net Working Capital" means (i) all current assets of the Company and its
consolidated Subsidiaries, minus (ii) all current liabilities of the Company and
its consolidated Subsidiaries, except current liabilities included in
Indebtedness.
"Non-Recourse Indebtedness" means Indebtedness that, under the terms
thereof or pursuant to applicable law, neither the Company nor any Subsidiary of
the Company (other than a Subsidiary being designated as an Unrestricted
Subsidiary) is directly or indirectly liable for and there is no recourse
against any of the assets or properties of the Company or such Subsidiary.
"Obligations" mean the due and punctual payment of principal of and
interest on the Securities when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Company under
this Indenture and the Securities and the due and punctual performance of all
other obligations of the Company under this Indenture and the Securities.
"Officer" means, with respect to any Person, the Chairman of the Board, the
President, any Vice President, the Chief Financial Officer or the Treasurer of
such Person.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Officers or by an Officer and either a Secretary, Assistant
Secretary or Assistant Treasurer of such Person.
"Oil and Gas Hedge Agreements" means, with respect to any Person, any oil
and gas agreements and other agreements or arrangements or any combination
thereof entered into by such Person in the ordinary course of business and that
is designed to provide protection against oil and natural gas price
fluctuations.
"Oil and Gas Properties" means all Properties, including equity or other
ownership interests therein, owned by any Person that have been assigned "proved
oil and gas reserves" as defined in Rule 4-10 of Regulation S-X of the
Securities Act as in effect on the Issue Date.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company (or any Subsidiary Guarantor, if applicable).
"Payment Restriction" means a consensual encumbrance or restriction of any
kind (i) on the ability of any of the Subsidiaries (a) to pay dividends or make
other distributions on its Capital Stock or make payments on any Indebtedness
owed to the Company or any other Subsidiary, (b) to make loans or advances to
the Company or any other Subsidiary, or (c) to transfer any of its Property to
the Company or any other Subsidiary; or (ii) on the ability of such Person or
any other subsidiary of such Person to receive or retain any such (a) dividends,
distributions or payments, (b) loans or advances, or (c) transfers of Property.
"Permitted Indebtedness" means (i) Indebtedness under the Series A
Securities and any Series B Securities issued in exchange for Series A
Securities of equal principal amount; (ii) Indebtedness outstanding under the
Bank Credit Agreement in an aggregate principal amount at any one time
outstanding
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not to exceed (a) $10.0 million if the Present Value of Oil and Gas Reserves is
less than $125.0 million and (b) 15% of the Present Value of Oil and Gas
Reserves if the Present Value of Oil and Gas Reserves is equal to or greater
than $125.0 million; (iii) the Guarantees of the Securities (and any assumption
of the obligations guaranteed thereby); (iv) Permitted Refinancing Indebtedness;
(v) Indebtedness of the Company to any Wholly Owned Subsidiary, and any
Indebtedness of any Wholly Owned Subsidiary to the Company or to any Wholly
Owned Subsidiary of the Company; provided, that in each case, such Indebtedness
has not been incurred in contemplation of any subsequent issuance or transfer of
any Capital Stock or any other event that would result in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any other subsequent
transfer of any such Indebtedness (except to the Company or a Wholly Owned
Subsidiary), and if incurred in contemplation of any of the foregoing events,
then such Indebtedness shall be deemed to be incurred and shall be treated as an
incurrence of Indebtedness for purposes of Section 4.9 at the time the Wholly
Owned Subsidiary in question ceased to be a Wholly Owned Subsidiary; (vi)
obligations arising in connection with Oil and Gas Hedge Agreements of the
Company or a Subsidiary; (vii) Permitted Operating Obligations; (viii) other
Indebtedness outstanding at any time in an aggregate principal amount not to
exceed the greater of $5.0 million or 5% of Adjusted Consolidated Net Tangible
Assets; and (ix) Indebtedness outstanding on the Issue Date. Permitted
Refinancing Indebtedness that constitutes a refinancing of amounts referred to
in clauses (ii) and (viii) shall be deemed to be incurred pursuant to and
subject to the limitations in clauses (ii) and (viii), respectively. The Company
may elect at any time that amounts of Indebtedness incurred under clauses (ii)
or (viii) be deemed to be incurred pursuant to the first paragraph of
Section 4.9 (if then permitted to be so incurred), in which event such amounts
so incurred shall be deemed not to be incurred under clause (ii) or (viii);
provided, however, any such Indebtedness deemed not to be incurred under clause
(ii) shall still be treated as Indebtedness under and governed by the Bank
Credit Agreement for purposes of all other provisions of this Indenture.
"Permitted Industry Investments" means (i) capital expenditures, including,
without limitation, acquisitions of Company Properties and interests therein;
(ii) (a) entry into operating agreements, joint ventures, working interests,
royalty interests, mineral leases, unitization agreements, pooling arrangements
or other similar or customary agreements, transactions, properties, interests or
arrangements, and Investments and expenditures in connection therewith or
pursuant thereto, in each case made or entered into in the ordinary course of
the oil and gas business, or (b) exchanges of Company Properties for other
Company Properties of at least equivalent value as determined in good faith by
the Board of Directors of the Company; (iii) Investments by the Company or any
Subsidiary in any Subsidiary (or in any Person that becomes a Subsidiary as a
result of such Investment) that are not subject to any Payment Restriction; (iv)
Investments in the Company or another Subsidiary that are not subject to any
Payment Restriction by any Subsidiary; and (v) Investments of operating funds on
behalf of co-owners of Oil and Gas Properties of the Company or the Subsidiaries
pursuant to joint operating agreements.
"Permitted Investments" means Permitted Obligations and Permitted Industry
Investments (in each case, other than Investments in Unrestricted Subsidiaries).
"Permitted Liens" means (i) Liens for taxes, assessments and governmental
charges not yet delinquent or being contested in good faith and for such
adequate reserves have been established to the extent required by GAAP, (ii)
landlord's, carriers, warehouseman's, storage, mechanics', workmen's,
materialmen's, operator's or similar Liens arising in the ordinary course of
business, (iii) 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 Company Properties or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and that do not in any case materially
detract from the Company Properties subject thereto or interfere with the
ordinary conduct of the business of the Company or the Subsidiaries, (iv) Liens
on, or related to,
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Properties to secure all or part of the costs incurred in the ordinary course of
business of exploration, drilling, development, production, processing,
transportation, marketing or storage, or operation thereof, (v) Liens on
pipeline or pipeline facilities, Hydrocarbons or Company Properties that arise
out of operation of law, (vi) judgment and attachment Liens not giving rise to
an Event of Default or Liens created by or existing from any litigation or legal
proceeding that are currently being contested in good faith by appropriate
proceedings and for which adequate reserves have been made, (vii) (a) Liens upon
any Property of any Person existing at the time of acquisition thereof by the
Company, (b) Liens upon any Property of a Person existing at the time such
Person is merged or consolidated with the Company or any Subsidiary or existing
at the time of the sale or transfer of any such Property of such Person to the
Company or any Subsidiary, or (c) Liens upon any Property of a Person existing
at the time such Person becomes a Subsidiary; provided that in each case such
Lien has not been created in contemplation of such sale, merger, consolidation,
transfer or acquisition, and provided further that in each such case no such
Lien shall extend to or cover any Property of the Company or any Subsidiary
other than the Property being acquired and improvements thereon, (viii) Liens
existing on the Issue Date, (ix) Liens on deposits made in the ordinary course
of business, including, without limitation, pledges or deposits under worker's
compensation, unemployment insurance and other social security legislation and
deposits to secure the performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a similar nature incurred in the
ordinary course of business, (x) Liens in favor of collecting or payor banks
having a right of setoff, revocation, refund or chargeback with respect to money
or instruments of the Company or any Subsidiary on deposit with or in possession
of such bank, (xi) royalties, overriding royalties, revenue interests, net
revenue interests, net profit interests, reversionary interests, production
payments, production sales contracts, operating agreements and other similar
interests, properties, arrangements and agreements, all as ordinarily exist with
respect to Company Properties, (xii) Liens upon any Property that were 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 no such Lien shall extend to or cover any Property
of the Company or any Subsidiary other than the Property so acquired and
improvements thereon, (xiii) Liens securing the Securities and the Guarantees,
(xiv) with respect to any Company Properties, Liens arising under, or in
connection with, or related to, farm-out, farm-in, joint operating, area of
mutual interest agreements and/or other similar or customary arrangements,
agreements or interests that the Company or any Subsidiary determines in good
faith to be necessary for the economic development of such Property, (xv) Liens
upon any Property securing obligations under hedging agreements, swap agreements
or other similar agreements entered into for the purpose of protecting against
fluctuations in oil or natural gas prices and (xvi) Liens upon any Property
securing Indebtedness under the Bank Credit Agreement; provided that, if such
Property is part of the Collateral, the amount of Indebtedness so secured by
such Liens does not exceed, at the time of and after giving effect to the
incurrence of such Indebtedness, the greater of (A) $10.0 million if the ratio
of the Company's Consolidated EBITDA to all of the Company's consolidated
interest expense paid or accrued in accordance with GAAP for the prior four
quarter period (including amortization of original issue discount and the
interest portion of deferred payment obligations) is equal to or exceeds 1.5 to
1 and the Adjusted Consolidated Net Tangible Assets at such time equals or
exceeds 120% of the Company's Consolidated Indebtedness or (B) the amount, if
any, that Adjusted Consolidated Net Tangible Assets at such time exceeds 200% of
the Company's Consolidated Indebtedness.
"Permitted Obligations" means (a) the following kinds of instruments if, in
the case of instruments referred to in clauses (i) through (iv) below, on the
date of purchase or other acquisition of any such instrument by the Company, any
Subsidiary or, in the case of the Disbursement Account and the Escrow Account,
the Trustee, the remaining term to maturity is not more than one year: (i)
readily marketable obligations issued or unconditionally guaranteed as to
principal and interest by the United States of America
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or by any agency or authority controlled or supervised by and acting as an
instrumentality of the United States of America; (ii) repurchase obligations for
instruments of the type described in clause (i) for which delivery of the
instrument is made against payment; (iii) obligations (including, but not
limited to, demand or time deposits, bankers' acceptances and certificates of
deposit) issued by a depository institution or trust company incorporated or
doing business under the laws of the United States of America, any state thereof
or the District of Columbia or a branch or subsidiary of any such depository
institution or trust company operating outside the United States, provided that
such depository institution or trust company has, at the time of the Company's
or such Subsidiary's investment therein or contractual commitment providing for
such investment, capital, surplus or undivided profits (as of the date of such
institution's most recently published financial statements), in excess of $100.0
million; and (iv) commercial paper issued by any Person, if such commercial
paper has, at the time of the Company's or any Subsidiary's investment therein
or contractual commitment providing for such investment, credit ratings of A-1
by S&P and P-1 by Moody's; and (b) money market mutual or similar funds having
assets in excess of $100.0 million.
"Permitted Operating Obligations" means Indebtedness of the Company or any
Subsidiary in respect of one or more standby letters of credit, bid, performance
or surety bonds, or other reimbursement obligations, issued for the account of,
or entered into by, the Company or any Subsidiary in the ordinary course of
business (excluding obligations related to the purchase by the Company or any
Subsidiary of Hydrocarbons for which the Company or such Subsidiary has
contracts to sell), or in lieu of any thereof or in addition to any thereto,
guarantees and letters of credit supporting any such obligations and
Indebtedness (in each case, other than for an obligation for borrowed money,
other than borrowed money represented by any such letter of credit, bid,
performance or surety bond, or reimbursement obligation itself, or any guarantee
and letter of credit related thereto).
"Permitted Production Payment Obligations" means obligations with respect
to production payments entered into in the ordinary course of the Company's or
any Subsidiary's business, which obligations are non-recourse to the Company and
its Subsidiaries other than to Hydrocarbon production from the properties
subject to such obligations.
"Permitted Refinancing Indebtedness" means Indebtedness of the Company or
any Subsidiary, the net proceeds of which are used to renew, extend, refinance,
refund or repurchase (including, without limitation, pursuant to a Change of
Control Offer as required by the terms of the Securities) outstanding
Indebtedness of the Company or any Subsidiary, provided that (i) if the
Indebtedness (including the Securities) being renewed, extended, refinanced,
refunded or repurchased is pari passu with or subordinated in right of payment
to either the Securities or the Guarantees, then such Indebtedness is pari passu
with or subordinated in right of payment to, as the case may be, the Securities
or the Guarantees at least to the same extent as the Indebtedness being renewed,
extended, refinanced, refunded or repurchased, (ii) such Indebtedness is
scheduled to mature no earlier than the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, and (iii) such Indebtedness has an Average
Life at the time such Indebtedness is incurred that is greater than the Average
Life of the Indebtedness being renewed, extended, refinanced, refunded or
repurchased; provided, further, that such Indebtedness (to the extent that such
Indebtedness constitutes Permitted Refinancing Indebtedness) is in an aggregate
principal amount (or, if such Indebtedness is issued at a price less than the
principal amount thereof, the aggregate amount of gross proceeds therefrom is)
not in excess of the aggregate principal amount then outstanding of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased (or if
the Indebtedness being renewed, extended, refinanced, refunded or repurchased
was issued at a price less than the principal amount thereof, then not in excess
of the amount of liability in respect thereof determined in accordance with
GAAP) plus the amount of reasonable fees and expenses and premium, if any,
incurred by the Company or such Subsidiary in connection therewith.
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"Permitted Unrestricted Subsidiary Investments" means Investments in
Unrestricted Subsidiaries in a cumulative aggregate amount (in cash or the fair
market value of property other than cash, as determined in good faith by the
Board of Directors of the Company) not to exceed the sum of (i) $3.0 million and
(ii) cash or Cash Equivalent distributions made from any Unrestricted Subsidiary
and received, after the Issue Date, as such by the Company, provided that any
amount included in this clause (ii) shall be deducted from any amounts referred
to in clause (y)(3) of Section 4.10. Notwithstanding the foregoing, Permitted
Unrestricted Subsidiary Investments shall also include any Investments in
Unrestricted Subsidiaries to the extent such Investment consists of (A)
Qualified Capital Stock of the Company or (B) amounts referred to in clause
(y)(2) of Section 4.10, which Investments shall be excluded from the sum in the
previous sentence, provided that the amount of any Investments pursuant to
clause (B) shall be deducted from amounts referred to in clause (y)(2) of
Section 4.10.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" of an entity means the Capital Stock of that entity which
is preferred as to the payment of dividends or the distribution of assets on any
voluntary or involuntary liquidation, over the shares of any other class or
series of Capital Stock of said entity.
"Present Value of Oil and Gas Reserves" means the discounted future net
cash flows from proved oil and gas reserves of the Company and its consolidated
Subsidiaries, calculated in accordance with SEC guidelines (before any state or
federal income tax), as estimated by independent petroleum engineers as of a
date no earlier than the date of the Company's latest annual consolidated
financial statements (or, in the case that the date of determination is after
the end of the first fiscal quarter of the fiscal year of the Company, as
estimated by Company engineers as of a date no earlier than the end of the most
recent fiscal quarter, which estimates shall be confirmed in writing by a report
by independent petroleum engineers in accordance with SEC guidelines in the
event of a Material Change if the amount of Adjusted Consolidated Net Tangible
Assets or Permitted Indebtedness is required to be computed under this
Indenture).
The term "principal" of a debt security means the principal amount of the
security plus the premium, if any, on the security.
"Principals" means (i) McLain J. Forman, (ii) Persons controlled by
McLain J. Forman, (iii) any member of the Immediate Family of McLain J. Forman,
(iv) a corporation that is wholly owned by any member of the Immediate Family of
McLain J. Forman, (v) a testamentary trust, the sole beneficiaries of which are
members of the Immediate Family of McLain J. Forman or (vi) the Officers of the
Company, and "Principal" means any one of such Persons.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Exhibit A attached hereto.
The term "pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock, partnership
interests and other equity or ownership interests in any other Person.
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"Public Equity Offering" means an underwritten public offer and sale of
common stock (that is Qualified Capital Stock) of the Company pursuant to a
registration statement that has been declared effective by the SEC pursuant to
the Securities Act (other than a registration statement on Form S-8 or otherwise
relating to equity securities issuable under any employee benefit plan of the
Company).
"Purchase Agreement" means the Purchase Agreement dated June 3, 1997,
between the Company and the Purchaser.
"Purchaser" means the initial purchaser of Series A Securities named in
Schedule I attached to the Purchase Agreement.
"Purchase Money Obligations" means indebtedness evidenced by a note,
debenture, bond or other security or investment (whether or not secured by any
lien or other security interest) issued to or assumed in favor of a vendor as
all or part of the purchase price of property acquired by the Company or any
Subsidiary; provided, however, that such term shall not include any account
payable or any other indebtedness incurred, created or assumed in the ordinary
course of business in connection with the obtaining of material, products or
services.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Institutional Buyer" has the meaning attributed thereto in Rule
144A under the Securities Act.
"Registration Default" shall have the meaning ascribed thereto in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
dated June 3, 1997, between the Company and the Purchaser, substantially in the
form attached hereto as Exhibit B, with such changes thereto that do not have a
material adverse effect on the Holders.
"Regulation S" means Regulation S under the Securities Act.
"Related Person" means (i) any Affiliate of the Company, (ii) any
individual or other Person who directly or indirectly holds 10% or more of the
combined voting power of the then outstanding Voting Stock of the Company, (iii)
any relative of any individual referred to in clauses (i), (ii) and (iv) hereof
by blood, marriage or adoption not more remote than first cousin and (iv) any
officer or director of the Company.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Subsidiary, prior to the scheduled maturity or prior to any scheduled repayment
of principal or sinking fund payment, as the case may be, in respect of
Indebtedness of the Company or any Subsidiary that is subordinate in right to
the Securities or the Guarantees, provided, however, that any such acquisition
shall be deemed not to be a Restricted Debt Prepayment to the extent it is made
(x) in exchange for or with the proceeds from the substantially concurrent
issuance of Qualified Capital Stock or (y) in exchange for or with the proceeds
from the substantially concurrent issuance of Indebtedness, in a principal
amount (or, if such Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon the acceleration thereof, with an
original issue price) not to exceed the lesser of (i) the principal amount of
Indebtedness being acquired in exchange therefor (or with
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the proceeds therefrom) and (ii) if such Indebtedness being acquired was issued
at an original issue discount, the original issue price thereof plus
amortization of the original issue discount at the time of the incurrence of the
Indebtedness being issued in exchange therefor (or the proceeds of which will
finance such acquisition), and provided further that any such Indebtedness shall
have an Average Life not less than the Average Life of the Indebtedness being
acquired, and shall contain subordination and default provisions no less
favorable, in any material respect, to holders of the Securities than those
contained in such Indebtedness being acquired.
"Restricted Payment" means any (i) Stock Payment, (ii) Investment (other
than Permitted Investments and other than Permitted Unrestricted Subsidiary
Investments) or (iii) Restricted Debt Prepayment.
"Restricted Security" has the meaning attributed thereto in Rule 144(a)(3)
under the Securities Act; provided, however, that the Trustee shall be entitled
to request and conclusively rely upon an Opinion of Counsel with respect to
whether or not any Security is a Restricted Security.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill
Companies, Inc. and any successor to the rating agency business thereof.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means, with respect to any Person, any Indebtedness
of such Person that is secured by a Lien.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Series A Securities or any Series B Securities
authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Security Documents" means, collectively, the Assignment, the Assigned
Mortgage and the Replacement Mortgages, as the same may be in force from time to
time.
"Security Interest" means the Lien on the Collateral created by this
Indenture and the Security Documents in favor of the Trustee for the benefit of
the Holders.
"Series A Preferred Stock" means the series of Preferred Stock of the
Company designated as Series A Cumulative Preferred Stock, $.01 par value.
"Series A Securities" means the 13.5% Senior Secured Notes due 2004,
Series A, being issued and sold pursuant to the Purchase Agreement and this
Indenture.
"Series B Securities" means the 13.5% Senior Secured Notes due 2004,
Series B, being issued and sold pursuant to the Registration Rights Agreement
and this Indenture.
"Stock Payment" means, with respect to any Person, (a) the declaration or
payment by such Person, either in cash or in property, of any dividend on
(except, in the case of the Company, dividends
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payable solely in Qualified Capital Stock of the Company), or the making by such
Person or any of its subsidiaries of any other distribution in respect of, such
Person's Capital Stock or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock (except for the issuance of Qualified
Capital Stock pursuant to the exercise thereof), or (b) the redemption,
repurchase, retirement or other acquisition for value by such Person or any of
its subsidiaries, directly or indirectly, of such Person's or any of its
subsidiaries' Capital Stock or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock other than, in the case of the
Company, through the issuance in exchange therefor solely of Qualified Capital
Stock of the Company; provided, however, that in the case of a Subsidiary, the
term "Stock Payment" shall not include (i) any such payment with respect to its
Capital Stock or warrants, rights or options to purchase or acquire shares of
any class of its Capital Stock payable to the Company or a Wholly-Owned
Subsidiary, or (ii) the payment of pro rata dividends to holders of minority
interests in Capital Stock of a Subsidiary.
"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor that is expressly subordinated in right of payment to the
Securities or the Guarantees, as the case may be.
"Subordination Agreement" means an agreement between the Company and any
lender pursuant to the terms of the Bank Credit Agreement, substantially in the
form attached hereto as Exhibit C, with such changes thereto that do not have a
material adverse effect on the Holders.
A "subsidiary" of any Person means (i) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more wholly-owned subsidiaries of such Person or by such Person and one
or more wholly-owned subsidiaries of such Person, (ii) a partnership in which
such Person or a wholly-owned subsidiary of such Person is, at the date of
determination, a general or limited partner of such partnership, but only if
such Person or its wholly-owned subsidiary is entitled to receive more than
fifty percent of the assets of such partnership upon its dissolution, or (iii)
any other Person (other than a corporation or partnership) in which such Person,
a wholly-owned subsidiary of such Person or such Person and one or more wholly-
owned subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has (x) at least a majority ownership interest or (y) the
power to elect or direct the election of a majority of the directors or other
governing body of such Person.
"Subsidiary" means any subsidiary of the Company; provided, that an
Unrestricted Subsidiary shall not be deemed a subsidiary of the Company for
purposes of this Indenture.
"Subsidiary Guarantor" means (i) each of the Company's Subsidiaries that
becomes a guarantor of the Securities in compliance with the provisions of
Article Eleven and (ii) each of the Company's Subsidiaries executing a
supplemental indenture in which such Subsidiary agrees to be bound by the terms
of this Indenture.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended and in force at the date as of which this Indenture was executed until
such time as this Indenture is qualified under the TIA, and thereafter as in
effect on the date on which this Indenture is qualified under the TIA, except as
provided in Section 9.3.
"Trust Officer" means any officer or assistant officer within the corporate
trust department of the Trustee assigned by the Trustee to administer its
corporate trust matters.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor.
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"U.S. Legal Tender" means such coin or currency of the United States as at
the time of payment shall be legal tender for the payment of public and private
debts.
"United States" means the United States of America.
"Unrestricted Subsidiary" means (1) any subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (2) any subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary or a Person becoming a Subsidiary through merger or consolidation or
Investment therein) to be an Unrestricted Subsidiary only if: (A) such
Subsidiary does not own any Capital Stock of, or own or hold any Lien on any
property of, any other Subsidiary of the Company which is not a Subsidiary of
the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary; (B)
all the Indebtedness of such Subsidiary shall at the date of designation, and
will at all times thereafter, consist of Non-Recourse Indebtedness; (C) the
Company certifies that such designation complies with Section 4.10; and (D) such
Subsidiary, either alone or in the aggregate with all other Unrestricted
Subsidiaries, does not operate, directly or indirectly, all or substantially all
of the business of the Company and the Subsidiaries. Any such designation by
the Board of Directors of the Company shall be evidenced to the Trustee by
filing with the Trustee a Board Resolution of the Board of Directors of the
Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions. If, at
any time, such Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred as of such date. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Subsidiary; provided that immediately after giving effect to such designation,
the Company could incur at least $1.00 of additional Indebtedness (excluding
Permitted Indebtedness) pursuant to the first paragraph of Section 4.9 on a pro
forma basis taking into account such designation.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
board of directors or other governing body of such Person.
"Wholly-Owned Subsidiary" means a Subsidiary all the Capital Stock (other
than directors' qualifying shares, if applicable) of which is owned by the
Company or another Wholly-Owned Subsidiary.
Section 1.2 Other Definitions.
Term Defined in Section
"Agent Members"................................... 2.7
"Bankruptcy Law".................................. 6.1
"Change of Control Offer"......................... 4.16
"Change of Control Notice"........................ 4.16
"Change of Control Purchase Date"................. 4.16
"Collateral"...................................... 12.1
"Custodian"....................................... 6.1
"DTC"............................................. 2.1
"Event of Default"................................ 6.1
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"Funding Guarantor"............................... 11.5
"Global Security"................................. 2.1
"incur"........................................... 4.9
"Net Proceeds Offer".............................. 4.11
"Net Proceeds Offer Amount"....................... 4.11
"Net Proceeds Payment Date"....................... 4.11
"Paying Agent".................................... 2.3
"Physical Securities"............................. 2.1
"Project Period".................................. 4.11
"Registrar"....................................... 2.3
"Related Person Transaction"...................... 4.14
"Released Interests".............................. 12.5
"Replacement Mortgages"........................... 4.21
"Security Register"............................... 2.6
"U.S. Government Obligations"..................... 8.2
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms, if used in this Indenture, have the following meanings:
"indenture securities" means the Securities and the Guarantees.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Subsidiary Guarantors and any other obligor on the Securities or the
Guarantees.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them therein.
Section 1.4 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accor dance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
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(5) any gender used in this Indenture shall be deemed to include the
neuter, masculine or feminine genders;
(6) provisions apply to successive events and transactions;
(7) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision; and
(8) when used with reference to the Securities, the expression "of
like tenor" refers to Securities of the same series.
ARTICLE TWO
THE SECURITIES
Section 2.1 Form and Dating.
The definitive Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities or notations of Guarantees,
as the case may be, as evidenced by their execution of such Securities or
notations of Guarantees, as the case may be.
Except as indicated in the next succeeding paragraph, Securities
(including the notations thereon relating to the Guarantees and the Trustee's
certificate of authentication) shall be issued initially in the form of one or
more permanent global Securities substantially in the form set forth in Exhibits
A, A-1 and A-2 (each being herein called a "Global Security") deposited with the
Trustee, as custodian for The Depository Trust Company ("DTC"), duly executed by
the Company and authenticated by the Trustee as hereinafter provided, and each
shall bear the legend set forth on Exhibit A hereto. Subject to the limitation
set forth in Section 2.2, the principal amounts of the Global Securities may be
increased or decreased from time to time by adjustments made on the records of
the Trustee, as custodian for DTC, as hereinafter provided.
Securities (including the notations thereon relating to the Guarantees
and the Trustee's certificate of authentication) originally issued and sold in
reliance on any exemption from registration under the Securities Act other than
Rule 144A shall be issued, and Securities originally offered and sold in
reliance on Rule 144A may be issued, in the form of permanent certificated
securities in registered form in substantially the form set forth in Exhibits A
and A-1 ("Physical Securities"). The Securities may also have such insertions,
omissions, substitutions and variations as may be permitted by or consistent
with this Indenture. The provisions of Exhibits A, A-1 and A-2 are part of this
Indenture. The Securities may have notations, legends and endorsements required
by law, stock exchange rule or usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on them. Each Security shall
be dated the date of its authentication.
The terms and provisions contained in the Securities and the
Guarantees shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company, the Subsidiary Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.
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Section 2.2 Execution and Authentication.
One Officer and the Secretary or an Assistant Secretary of the Company
shall sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be reproduced on the Physical Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall be valid
nevertheless.
A Security shall not be valid until the Trustee or an authenticating
agent manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The aggregate principal amount of Series A Securities that may be
authenticated and delivered under this Indenture for original issue is limited
to $70.0 million, and the aggregate principal amount of Series B Securities that
may be authenticated and delivered under this Indenture for original issue is
limited to $70.0 million. The aggregate principal amount of Securities
outstanding at any one time may not exceed $70.0 million except as provided in
Section 2.8.
The Series A Securities and the Series B Securities shall be
considered collectively to be a single class for all purposes of this Indenture,
including, without limitation, waivers, amendments, redemptions and offers to
purchase.
As provided in the Registration Rights Agreement and subject to the
limitations set forth therein, at the option of the Holders, the Series A
Securities shall be exchangeable for Series B Securities of like aggregate
principal amount pursuant to the Exchange Offer.
At any time after the execution and delivery of this Indenture, the
Company may deliver Series A Securities executed by the Company and, if there
are Subsidiary Guarantors, having the notations of Guarantees executed by the
Subsidiary Guarantors to the Trustee for authentication, together with a request
from the Company for the authentication and delivery of such Series A
Securities, and the Trustee in accordance with such request shall authenticate
and deliver such Series A Securities with the notations of Guarantees thereon,
if applicable, as provided in this Indenture. Such request from the Company
shall specify the principal amount of the Series A Securities to be
authenticated and the date on which the original issue of Series A Securities is
to be authenticated. In addition, on or prior to the Exchange Offer
Consummation Date, the Company may deliver Series B Securities executed by the
Company and, if there are Subsidiary Guarantors, having the notations of
Guarantees executed by the Subsidiary Guarantors to the Trustee for
authentication, together with a request from the Company for the authentication
and delivery of such Series B Securities, and the Trustee in accordance with
such request shall authenticate and deliver such Series B Securities with the
notations of Guarantees thereon, if applicable, as provided in this Indenture.
Such request from the Company shall specify the principal amount of the Series B
Securities to be authenticated and the date on which the Series B Securities are
to be exchanged for an equal principal amount of Series A Securities.
In connection with the transfer of an entire Global Security to
beneficial owners pursuant to this Section, the Global Security shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall upon a request from the Company authenticate and
deliver, to each beneficial owner identified by DTC, in exchange for its
beneficial interest in the Global Security, an equal aggregate principal amount
of Physical Securities of authorized denominations.
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The Holder of a Global Security may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever the
Trustee may do so except on original issuance. Each reference in this Indenture
to authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
its Affiliates.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency designated pursuant to
Section 4.4 where Securities may be presented for registration of transfer or
for exchange (the "Registrar") and an office or agency designated pursuant to
Section 4.4 where Securities may be presented for payment (the "Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional paying
agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. Such agency agreement shall provide for
reasonable compensation for such services. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent and shall furnish
the Trustee with an executed counterpart of any such agency agreement. If the
Company fails to maintain or act as Registrar or Paying Agent, the Trustee shall
act as such and shall be duly compensated therefor.
The Registrar or a co-registrar and a Paying Agent shall be maintained
by the Company in the City of New York. The Company initially designates the
Trustee as the Registrar and Paying Agent.
Section 2.4 Paying Agent to Hold Money in Trust.
On or prior to each due date of the principal and interest on any
Security, the Company shall deposit with the Paying Agent immediately available
funds sufficient to pay such principal and interest becoming due. The Company
shall require each Paying Agent other than the Trustee to hold in trust for the
benefit of Holders or the Trustee all money held by such Paying Agent for the
payment of principal or interest on the Securities, and to notify the Trustee of
any Default by the Company or any Subsidiary Guarantor in making any such
payment. While any such Default continues, the Trustee may require the Paying
Agent to pay all money held by it to the Trustee. Except as provided in the
immediately preceding sentence, the Company at any time may require a Paying
Agent to pay all money held by it to the Trustee. Upon doing so, such Paying
Agent (other than the Company or a Subsidiary) shall have no further liability
for the money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold as separate trust funds all money held by it as Paying Agent.
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Section 2.5 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the name and addresses of
Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not
the Registrar, the Company shall furnish or cause to be furnished to the Trustee
at least five Business Days before each semiannual interest payment date, and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Holders, and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.6 Transfer and Exchange.
The Company shall cause to be kept a register (the "Security
Register") in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration of Securities and of transfers of
Securities. The Security Register shall be in written form or any other form
capable of being converted into written form within a reasonable time. At all
reasonable times and during normal business hours, the Security Register shall
be open to inspection by the Trustee.
Subject to the provisions of this Section 2.6 and Section 2.7, upon
surrender for registration of transfer of any Security at the office or agency
of the Company designated pursuant to Section 4.4, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of like tenor and of any
authorized denomination and of a like aggregate principal amount, each such
Security having the notation of Guarantees thereon.
Furthermore, any Holder of a Global Security shall, by acceptance of
such Global Security, be deemed to have agreed that transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by DTC (or its agent), and that ownership of a beneficial
interest in a Global Security shall be required to be reflected in book entry
form.
At the option of any Holder, Securities may be exchanged for other
Securities of like tenor and of any authorized denomination and of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at
the office or agency of the Company designated pursuant to Section 4.4. Further,
at the option of any Holder Series A Securities may be exchanged, pursuant to
the Exchange Offer, for Series B Securities of like aggregate principal amount,
upon surrender of the Series A Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, the Subsidiary Guarantors shall execute notations of Guarantees
on, and the Trustee shall authenticate and deliver, the Securities which the
Holder making the exchange is entitled to receive.
All Securities and the Guarantees noted thereon issued upon any
registration of transfer or exchange of Securities shall be the valid
obligations of the Company and the respective Subsidiary Guarantors, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. As a special condition to
registration of transfer or exchange of any Restricted Securities involving
removal of a Private Placement Legend (other than pursuant to an effective
registration statement under the Securities Act), the Holder requesting such
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registration of transfer or exchange shall furnish the Opinion of Counsel called
for by Section 2.14. The following additional special conditions shall apply to
the indicated types of transfers or exchanges:
(a) Respecting any requested registration of transfer or exchange of
Restricted Securities in the form of Physical Securities, such Physical
Securities shall be accompanied, in the sole discretion of the Company, by
the following additional information and documents, as applicable:
(1) if such Physical Security is being delivered to the Registrar
by a Holder for registration in the name of such Holder, without
transfer, a certification from such Holder to that effect (in
substantially the form of Exhibit A-3 hereto); or
(2) if such Physical Security is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A, a certification to
that effect (in substantially the form of Exhibit A-3 hereto); or
(3) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification to that
effect (in substantially the form of Exhibit A-3 hereto), a Transferee
Certificate for Institutional Accredited Investors in the form of
Exhibit A-4 hereto and an Opinion of Counsel to the effect that such
transfer is in compliance with the Securities Act; or
(4) if such Physical Security is being transferred in reliance on
Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit A-3 hereto), a Transferor
Certificate for Regulation S Transfers in the form of Exhibit A-5
hereto and an Opinion of Counsel to the effect that such transfer is
in compliance with the Securities Act; or
(5) if such Physical Security is being transferred in reliance on
Rule 144 promulgated under the Securities Act, delivery of a
certification to that effect (substantially in the form of Exhibit A-3
hereto) and an Opinion of Counsel to the effect that such transfer is
in compliance with the Securities Act; or
(6) if such Physical Security is being transferred in reliance on
another exemption from the registration requirements of the Securities
Act, a certification to that effect (in substantially the form of
Exhibit A-3 hereto) and an Opinion of Counsel to the effect that such
transfer is in compliance with the Securities Act.
(b) Respecting any requested exchange of a Physical Security for a
beneficial interest in a Global Security, such Physical Security shall be
accompanied, in the sole discretion of the Company, by the following
additional information and documents:
(1) a certification, substantially in the form of Exhibit A-3
hereto, that such Physical Security is being transferred to a
Qualified Institutional Buyer; and
(2) written instructions directing the Registrar to make, or to
direct DTC to make, an endorsement on the Global Security to reflect
an increase in the aggregate amount of the Securities represented by
the Global Security;
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whereupon the Registrar shall cancel such Physical Security and cause, or
direct DTC to cause, in accordance with the standing instructions and
procedures existing between DTC and the Registrar, the aggregate principal
amount of Securities represented by the Global Security to be increased
accordingly. If no Global Security is then outstanding, the Company shall
issue and the Trustee shall upon a request from the Company authenticate a
new Global Security in the appropriate amount.
(c) Any Person having a beneficial interest in a Global Security may
upon request to the Registrar exchange such beneficial interest for a
Physical Security. Upon receipt by the Registrar of written instructions
(or such other form of instructions as is customary for DTC) from DTC or
its nominee on behalf of any Person having a beneficial interest in a
Global Security and upon receipt by the Registrar of a written order or
such other form of instructions as is customary for DTC or the Person
designated by DTC as having such a beneficial interest containing
registration instructions and, in the case of any such transfer or exchange
of a beneficial interest in Restricted Securities, the following additional
information and documents:
(1) if such beneficial interest is being transferred to the
Person designated by DTC as being the beneficial owner, a
certification from such Person to that effect (in substantially the
form of Exhibit A-3 hereto); or
(2) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A, a
certification to that effect (in substantially the form of Exhibit A-3
hereto); or
(3) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of a certification to that
effect (substantially in the form of Exhibit A-3 hereto), a Transferee
Certificate for Institutional Accredited Investors in the form of
Exhibit A-4 hereto and an Opinion of Counsel to the effect that such
transfer is in compliance with the Securities Act; or
(4) if such beneficial interest is being transferred in reliance
on Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit A-3 hereto), a Transferor
Certificate for Regulation S Transfers in the form of Exhibit A-5
hereto and an Opinion of Counsel to the effect that such transfer is
in compliance with the Securities Act; or
(5) if such beneficial interest is being transferred in reliance
on Rule 144 under the Securities Act, delivery of a certification to
that effect (substantially in the form of Exhibit A-3 hereto) and an
Opinion of Counsel to the effect that such transfer is in compliance
with the Securities Act; or
(6) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification to that effect (in substantially the
form of Exhibit A-3 hereto) and an Opinion of Counsel to the effect
that such transfer is in compliance with the Securities Act,
then the Registrar will cause, in accordance with the standing instructions
and procedures existing between DTC and the Registrar, the aggregate
principal amount of the Global Security to be reduced and, following such
reduction, the Company will execute and, upon receipt of a request
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from the Company, the Trustee will authenticate and deliver to the
transferee a Physical Security. Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this Section 2.6 shall
be registered in such names and in such authorized denominations as DTC,
pursuant to instructions from Agent Members or otherwise, shall instruct
the Registrar in writing. The Registrar shall deliver such Physical
Securities to the Persons in whose names such Physical Securities are so
registered.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to the Exchange Offer or Section 2.11, 3.6 or 9.5 not
involving any transfer.
Neither the Trustee, the Registrar nor the Company shall be required
(i) to issue, register the transfer of or exchange any Physical Security during
a period of 30 days before a selection of Securities to be redeemed or (ii) to
register the transfer of or exchange any Physical Security so selected for
redemption in whole or in part, except the unredeemed portion of any such
Security being redeemed in part.
Section 2.7 Book-Entry Provisions for Global Securities.
Each Global Security shall be (i) registered in the name of DTC or its
nominee, (ii) delivered to the Trustee as custodian for DTC and (iii) bear the
legend set forth in Exhibit A-2 hereto.
Members of, or participants in, DTC ("Agent Members") shall have no
rights under this Indenture with respect to any Global Security held on their
behalf by DTC, or the Trustee as its custodian, or under such Global Security,
and DTC may be treated by the Company, the Subsidiary Guarantors, the Trustee
and any agent of the Company, the Subsidiary Guarantors or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Subsidiary Guarantors, the Trustee or any agent of the Company, the Subsidiary
Guarantors or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by DTC or shall impair, as between DTC and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a holder of any Security.
Transfers of a Global Security shall be limited to transfers of such
Global Security in whole, but not in part, to DTC, its successors or their
respective nominees. Interests of beneficial owners in a Global Security may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of DTC and the provisions of Section 2.6. In addition, Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in a Global Security if, and only if, either (1) DTC
notifies the Company that it is unwilling or unable to continue as depositary
for the Global Security and a successor depositary is not appointed by the
Company within 90 days of such notice, (2) an Event of Default has occurred and
is continuing and the Registrar has received a request from DTC to issue
Physical Securities in lieu of all or a portion of the Global Security (in which
case the Company shall deliver Physical Securities within 30 days of such
request) or (3) the Company determines not to have the Securities represented by
the Global Security and notifies DTC and the Registrar thereof.
In connection with the transfer of an entire Global Security to
beneficial owners pursuant to this Section, the Global Security shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall upon request of the Company authenticate and
deliver,
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to each beneficial owner identified by DTC, in exchange for its beneficial
interest in the Global Security, an equal aggregate principal amount of Physical
Securities of authorized denominations.
The Holders of a Global Security may grant proxies or otherwise
authorize any Persons, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
Section 2.8 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or the Registrar
or if the Holder of a Security claims that the Security has been lost, destroyed
or wrongfully taken, the Company shall issue and the Trustee shall authenticate
a replacement Security if the requirements of the Trustee are met. An indemnity
bond may be required by the Trustee, the Company or any Subsidiary Guarantor
that is sufficient in the judgment of the Company, the Subsidiary Guarantors and
the Trustee to protect the Company, the Subsidiary Guarantors, the Trustee or
any Agent from any loss which any of them may suffer if a Security is replaced.
The Company may charge for its expenses (including fees and expenses of the
Trustee) in replacing a Security.
Section 2.9 Outstanding Securities.
Securities outstanding at any time are all Securities authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section 2.9 as not outstanding. Except
as set forth in Section 2.10, a Security does not cease to be outstanding
because the Company, the Subsidiary Guarantors or any of their respective
Subsidiaries or Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.8, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under
Section 4.1, it ceases to be outstanding and interest on it ceases to accrue.
Section 2.10 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, any Subsidiary Guarantor or an Affiliate of the Company shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that the Trustee actually knows,
without investigation by the Trustee, are so owned shall be so disregarded.
Section 2.11 Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and, upon written order of the Company, the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate and deliver definitive
Securities in exchange for temporary Securities surrendered to it.
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Section 2.12 Cancellation.
The Company or any Subsidiary Guarantor at any time may deliver
Securities to the Trustee for cancellation. The Registrar and Paying Agent
shall forward to the Trustee any Securities surrendered to them for transfer,
exchange or payment. The Trustee shall cancel all Securities surrendered for
registration, transfer, exchange, payment or cancellation and shall destroy
canceled Securities or retain canceled Securities in accordance with the
Trustee's standard retention policy unless the Company directs their return to
the Company. Except as provided in Section 2.8, the Company may not issue new
Securities to replace Securities that it has paid or delivered to the Trustee
for cancellation.
Securities that are mandatorily or optionally redeemed by the Company
or that are purchased by the Company pursuant to a Net Proceeds Offer, or
pursuant to a Change of Control Offer, or that are otherwise acquired by the
Company, will be surrendered to the Trustee for cancellation.
Section 2.13 Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner (plus interest on such
defaulted interest to the extent lawful) to the persons who are Holders on a
subsequent special record date, in each case at the rate provided in the
Securities and in Section 4.1. The Company shall fix the special record date and
payment date. At least 10 days before the special record date, the Company shall
mail to each Holder a notice that states the special record date, the payment
date and the amount of defaulted interest to be paid.
Section 2.14 Private Placement Legend.
(a) All Series A Securities issued hereunder on the Issue Date shall
bear the Private Placement Legend. Upon the transfer, exchange or replacement
of Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless, and the Trustee
is hereby authorized to deliver Securities without the Private Placement Legend
if, (i) there is delivered to the Trustee an Opinion of Counsel to the effect
that neither such legend nor the related restrictions on transfer are required
to maintain compliance with the provisions of the Securities Act or (ii) such
Security has been sold pursuant to an effective registration statement under the
Securities Act, which fact has been certified to the Trustee in an Officers'
Certificate. Upon the transfer, exchange or replacement of Securities not
bearing the Private Placement Legend, the Registrar shall deliver Securities
that do not bear the Private Placement Legend.
(b) By its acceptance of any Security bearing the Private Placement
Legend, each Holder of such a Security acknowledges the restrictions on transfer
of such Security set forth in this Indenture and in the Private Placement Legend
and agrees that it will transfer such Security only as provided in this
Indenture.
Section 2.15 Additional Interest Under Registration Rights Agreement.
Under certain circumstances, the Company shall be obligated to pay
Additional Interest to the Holders, all as set forth in Section 4 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference.
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ARTICLE THREE
REDEMPTION
Section 3.1 Notice to Trustee.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the redemption price and the
principal amount of Securities to be redeemed.
The Company shall give each notice provided for in this Section 3.1 at
least 45 days before the redemption date (unless a shorter notice period shall
be satisfactory to the Trustee). Any notice given pursuant to this Section 3.1
may be canceled at any time prior to notice of such redemption being mailed to
any Holder and shall thereby be void and of no effect.
Section 3.2 Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed in multiples of $1,000 pro rata, by
lot or by any other method that the Trustee considers fair and appropriate and,
if the Securities are listed on any securities exchange, by a method that
complies with the requirements of such exchange. The Trustee shall make the
selection from outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities that
have denominations larger than $1,000. Securities and portions of them it
selects shall be in amounts of $1,000 or whole multiples of $1,000. Provisions
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be called for
redemption.
Section 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption by first-class mail to each Holder
of Securities to be redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in the payment of the
redemption price or accrued interest, interest on Securities called for
redemption ceases to accrue on and after the redemption date;
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(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued; and
(7) the subparagraph of paragraph 5 of the Securities pursuant to
which the Securities called for redemption are being redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
Section 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3,
Securities called for redemption become due and payable on the redemption date
at the redemption price. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price, plus accrued interest to the redemption
date.
Section 3.5 Deposit of Redemption Price.
On or before the redemption date, the Company shall deposit with the
Paying Agent immediately available funds sufficient to pay the redemption price
of, and accrued interest on, the Securities to be redeemed on that date. The
Paying Agent shall promptly return to the Company any money so deposited that is
not required for that purpose upon the written request of the Company, except
with respect to monies owed as obligations to the Trustee pursuant to Article
Seven.
If any Security called for redemption shall not be so paid upon
redemption because of the failure of the Company to comply with the preceding
paragraph, interest will continue to be payable on the unpaid principal,
including from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case at
the rate provided in the Securities and in Section 4.1.
Section 3.6 Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the
Trustee shall authenticate for the Holder a new Security or Securities equal in
aggregate amount to the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
Section 4.1 Payment of Securities.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities and this Indenture.
Principal of and interest on the Securities shall be considered paid on the date
due if the Trustee or Paying Agent holds on that date money deposited by the
Company designated for and sufficient to pay all principal and interest then
due.
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The Company shall pay interest on overdue principal at the rate borne
by the Securities and shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
The Company shall notify the Trustee and any Paying Agent immediately
upon the occur rence of any Registration Default and, with respect to
Additional Interest payments pursuant to Section 4 of the Registration Rights
Agreement, the Company shall notify the Trustee and any Paying Agent prior to
the date of any interest payment of the amount of Additional Interest payable to
each Holder.
Section 4.2 SEC Reports.
(a) Each of the Company and the Subsidiary Guarantors shall file with
the Trustee within 15 days after it files them with the SEC 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 SEC may by rules and regulations
prescribe) that each of the Company and the Subsidiary Guarantors is required to
file with the SEC pursuant to Section 1.3 or 15(d) of the Exchange Act. If the
Company is not subject to the requirements of such Section 1.3 or 15(d) of the
Exchange Act, the Company shall file with the Trustee such reports, information
and other documents as required pursuant to Section 4.17. The Company and each
of the Subsidiary Guarantors also shall comply with the other provisions of TIA
(S) 3.14(a).
(b) So long as any of the Securities remain outstanding, the Company
shall cause each annual, quarterly and other financial report mailed or
otherwise furnished by it generally to stockholders to be filed with the Trustee
and mailed to the Holders at their addresses appearing in the register of
Securities maintained by the Registrar, in each case at the time of such mailing
or furnishing to stockholders.
(c) The Company and the Subsidiary Guarantors shall provide the
Trustee with a sufficient number of copies of all reports and other documents
and information that the Trustee may be required to deliver to Holders under
this Section 4.2.
Section 4.3 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year of the Company, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
such Officer's knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which such Officer may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and that
to the best of such Officer's knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Securities are prohibited. Such Officers' Certificate
shall comply with TIA (S) 314(a)(4).
(b) The Company and the Subsidiary Guarantors will, so long as any of
the Securities are outstanding, deliver to the Trustee forthwith upon any
Officer becoming aware of any Default or Event of Default or default in the
performance of any covenant, agreement or condition contained in this
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Indenture, an Officers' Certificate specifying such Default or Event of Default
and what action the Company or any Subsidiary Guarantor proposes to take with
respect thereto.
(c) The Company shall promptly deliver to the Trustee an Officers'
Certificate notifying the Trustee of any refunding, refinancing or replacement
of each Bank Credit Agreement.
Section 4.4 Maintenance of Office or Agency.
The Company will maintain in the City of New York, an office or agency
where Securities may be surrendered for registration of transfer or exchange or
for presentation for payment and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 13.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the City of New
York, for such purposes. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency.
Section 4.5 Corporate Existence.
Subject to Article Five, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each Material
Subsidiary in accordance with the respective organizational documents of the
Company and each Material Subsidiary and the material rights (charter and
statutory) and material franchises of the Company and the Material Subsidiaries;
provided, that the Company shall not be required to preserve any such right or
franchise, or the corporate existence of any Material Subsidiary, if the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not, and will not be, adverse to the payment and performance of the
obligations under the Securities and otherwise under this Indenture.
Section 4.6 Waiver of Stay, Extension or Usury Laws.
The Company and each Subsidiary Guarantor covenants (to the extent
that each may lawfully do so) that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension, or usury law or other law, that would prohibit or forgive the Company
or any Subsidiary Guarantor from paying all or any portion of the principal of
and/or interest on the Securities as contemplated herein, wherever enacted, now
or at any time hereafter in force, or that may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Subsidiary Guarantor hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
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Section 4.7 Payment of Taxes and Other Claims.
The Company and each Material Subsidiary will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (1) all
taxes, assessments and governmental charges levied or imposed upon the Company
or any Material Subsidiary or upon the income, profits or property of the
Company or any Material Subsidiary other than any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which appropriate provision has been
made in accordance with GAAP, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a Lien (other than a Permitted
Lien) upon the property of the Company or any Material Subsidiary, in each case
except to the extent the failure to do so would have, in the judgment of the
Company, a material adverse effect on the Company and the Subsidiaries taken as
a whole.
Section 4.8 Maintenance of Properties and Insurance.
(a) The Company shall cause all material Property used or useful in
the conduct of its business or the business of any Subsidiary to be maintained
and kept in good condition, repair and working order (ordinary wear and tear
excepted) and supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section 4.8
shall prevent the Company or any Subsidiary from discontinuing the operation or
maintenance of any such Property, or disposing of it, if such discontinuance or
disposal is, in the judgment of the Company or such Subsidiary, desirable in the
conduct of its business and not adverse to the payment and performance of the
obligations under the Securities and otherwise under this Indenture.
(b) The Company shall provide or cause to be provided, for itself and
each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of the Company are adequate and appropriate for the conduct of the business of
the Company and such Subsidiaries in a prudent manner, with reputable insurers
or with the government of the United States or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such methods as shall be
either (i) consistent with past practices of the Company or the applicable
Subsidiary or (ii) customary, in the reasonable, good faith opinion of the
Company, for corporations similarly situated in the industry, unless the failure
to provide such insurance (together with all other such failures) would not have
a material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
Section 4.9 Limitation on Incurrence of Additional Indebtedness.
The Company will not, and will not permit any of the Subsidiaries
directly or indirectly, to issue, incur, assume, guarantee, become liable,
contingently or otherwise, with respect to or otherwise become responsible for
the payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default with
respect to the Securities shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness, the Company and the
Subsidiaries or any of them may incur Indebtedness if on the date of the
incurrence, (i) both (A) the Company's Consolidated EBITDA Coverage Ratio would
have been greater than 2.25 to 1.0 for the period from the Issue Date through
May 31, 1998 and 2.5 to 1.0 from June 1, 1998, and thereafter, respectively, and
(B) the Adjusted Consolidated Net Tangible Assets are equal to or greater than
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150% of Indebtedness of the Company and the Subsidiaries, or (ii) the Adjusted
Consolidated Net Tangible Assets are equal to or greater than 250% of
Indebtedness of the Company and the Subsidiaries.
For purposes of determining any particular amount of Indebtedness
incurred under this Section 4.9, (i) guarantees of Indebtedness otherwise
included in the determination of such amount shall not also be included and (ii)
any Indebtedness incurred by the Company or any Subsidiary incurred for, or
related to, a Person other than another Subsidiary or the Company, as
applicable, shall be deemed to be in an amount equal to the greater of (i) the
lesser of (A) the full amount of the Indebtedness of such other Person or (B)
the fair market value of the assets and properties of the Company or such
Subsidiary, as to which the holder or holders of such Indebtedness are expressly
limiting the obligations of the Company or such Subsidiary, the value of which
assets and properties of the Company or any Subsidiary will be as determined in
good faith by the Board of Directors of the Company or such Subsidiary, as
applicable (which determination shall be evidenced by a Board Resolution of the
applicable Person), and (ii) the amount of the Indebtedness of such other Person
as has been expressly contractually assumed or guaranteed by the Company or such
Subsidiary.
The Company will not, and will not permit any Subsidiary Guarantor to,
incur any Indebtedness that by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated in right of payment to any other
Indebtedness of the Company or such Subsidiary Guarantor unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate in right of payment to the
Securities or the Guarantee of such Subsidiary Guarantor, as the case may be,
pursuant to subordination provisions that are substantively identical to the
subordination provisions of such Indebtedness (or such agreement) that are the
most favorable to the holders of any other Indebtedness of the Company or such
Subsidiary Guarantor, as the case may be.
Notwithstanding anything to the contrary in this Section 4.9, no
Subsidiary that is not already a Subsidiary Guarantor shall incur any
Indebtedness with respect to any Indebtedness of the Company or any other
Subsidiary unless such Subsidiary, the Company and the Trustee execute and
deliver a supplemental indenture evidencing such Subsidiary's Guarantee of the
Securities, such Guarantee to be a senior unsecured obligation of such
Subsidiary.
Section 4.10 Limitation on Restricted Payments.
The Company will not, and will not permit any of the Subsidiaries to,
directly or indirectly, make any Restricted Payment, if at the time of such
Restricted Payment, or on a pro forma basis after giving effect thereto:
(x) a Default or an Event of Default under this Indenture has occurred
and is continuing;
(y) the aggregate amount expended for all Restricted Payments
subsequent to the Issue Date exceeds the sum of (without duplication):
(1) 50% of aggregate Consolidated Net Income (net of losses
resulting from full costs ceiling writedowns attributable to any oil
and gas properties of the Company or any Subsidiary) of the Company
(or if such Consolidated Net Income is a loss, minus 100% of such
loss) earned on a cumulative basis during the period beginning on the
Issue Date and ending on the last date of the Company's fiscal quarter
immediately preceding such Restricted Payment; plus
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(2) 100% of the aggregate Net Proceeds received by the Company
from any Person other than a Subsidiary from the issuance and sale
subsequent to the Issue Date of Qualified Capital Stock (excluding (A)
any Qualified Capital Stock paid as a dividend on any Capital Stock or
as interest on any Indebtedness, (B) the issuance of Qualified Capital
Stock upon the conversion of, or in exchange for, any Qualified
Capital Stock and (C) any Qualified Capital Stock with regard to
issuances and sales financed directly or indirectly using funds
borrowed from the Company or any Subsidiary, until and to the extent
such borrowing is repaid); plus
(3) to the extent not otherwise included in Consolidated Net
Income, dividends, repayments of loans or advances, or other transfers
of assets, in each case to the Company or a Subsidiary after the Issue
Date from any Unrestricted Subsidiary or from the redesignation of an
Unrestricted Subsidiary as a Subsidiary (valued in each case as
provided in the definition of Investment) other than amounts
constituting Permitted Unrestricted Subsidiary Investments; plus
(4) $1.0 million; or
(z) the Company would not be able to incur $1.00 of additional
Indebtedness (excluding Permitted Indebtedness) as provided in the first
paragraph of Section 4.9.
The foregoing provisions of this covenant will not prevent the payment of
(a) any dividend within 60 days after the date of its declaration if the
dividend would have been permitted on the date of declaration and (b) cash
dividends by the Company in respect of its Series A Preferred Stock if (i) no
Default or Event of Default under this Indenture shall have occurred and be
continuing at the time or as a consequence of the payment of such cash dividends
and (ii) on the date of the payment of such cash dividends and after giving
effect to such payment, the Company's Consolidated EBITDA Coverage Ratio would
have been greater than 1.5 to 1.0; provided, however, that payments made in
accordance with this paragraph shall be counted for purposes of computing
amounts expended pursuant to subclause (y) in the immediately preceding
paragraph. The Company will not issue any additional shares of its Series A
Preferred Stock except for dividends paid in kind.
Section 4.11 Limitation on Disposition of Assets.
The Company will not, and will not permit any Subsidiary to, make any
Asset Disposition unless:
(a) in the case of any Asset Disposition or series of related Asset
Dispositions having a fair market value of more than $5.0 million, the
Company or such Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value as determined by either
(a) a majority of the disinterested directors of the Company or (b) a
nationally recognized investment banking firm,
(b) at least (i) 70% of the consideration received by the Company or
such Subsidiary, as the case may be, from such Asset Disposition shall be
in the form of cash or Cash Equivalents and is received at the time of such
Asset Disposition and (ii) 15% of such consideration received if in a form
other than cash or Cash Equivalents is converted into or exchanged for cash
or Cash Equivalents within 120 days of such Asset Disposition, and
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(c) within 365 days following the receipt of the Net Available
Proceeds from such Asset Disposition, 100% of the Net Available Proceeds
from such Asset Disposition are applied by the Company or such Subsidiary:
(i) to repay Indebtedness (other than Subordinated
Indebtedness) of the Company or any Subsidiary, provided, in each
case, that the related loan commitment of any revolving credit
facility or other borrowing (if any) is thereby permanently reduced by
the amount of such Indebtedness so repaid;
(ii) at the Company's option to the extent that such Net
Available Proceeds are not applied to repay Indebtedness, to Permitted
Industry Investments made by the Company or a Subsidiary (or, to the
extent not so applied during such 365 day period, to Permitted
Industry Investments specifically identified during such 365 day
period reasonably anticipated in good faith by the Board of Directors
of the Company to be expended within 180 days after being specifically
identified (such 180-day period, the "Project Period")); and
(iii) to the extent that any Net Available Proceeds are not
applied to repay Indebtedness or applied or to be applied to Permitted
Industry Investments, to make an offer to purchase (the "Net Proceeds
Offer") (on a Business Day (the "Net Proceeds Payment Date") not later
than the later of (1) 365 days following the receipt of such Net
Available Proceeds or (2) in the case of application of proceeds
intended to be applied under clause (b), 35 Business Days following
any Project Period) the Securities at a price equal to 100% of the
principal amount of the Securities plus accrued interest to the Net
Proceeds Payment Date.
Notwithstanding the foregoing, the Company and its Subsidiaries will
not be required to apply any Net Available Proceeds in accordance with such
provisions except to the extent that the Net Available Proceeds from all Asset
Dispositions that are not applied in accordance with such provisions exceed $5.0
million.
Notice of a Net Proceeds Offer to purchase the Securities will be made
on behalf of the Company not less than 25 Business Days nor more than 60
Business Days before the Net Proceeds Payment Date. Securities tendered to the
Company pursuant to a Net Proceeds Offer will cease to accrue interest after the
Net Proceeds Payment Date. The Company will not be entitled to any credit
against the above obligations for the principal amount of Securities previously
acquired by the Company. For purposes of this covenant, the term "Net Proceeds
Offer Amount" means the principal of outstanding Securities in an aggregate
principal amount equal to any remaining Net Available Proceeds.
To exercise the repurchase right, the Holder must deliver on or before
the fifth calendar day prior to the Net Proceeds Payment Date, written notice to
the Company (or an agent designated by the Company for such purpose) of the
Holder's exercise of such right, together with (i) the Security or Securities
with respect to which the right is being exercised, duly endorsed for transfer
with the form entitled "Option of Holder to Elect Purchase" on the reverse side
of the Security completed, and (ii) if the Net Proceeds Payment Date falls
between any record date for the payment of interest on the Securities and the
next succeeding interest payment date, an amount equal to the interest which the
Holder is entitled to receive on such interest payment date; provided, however,
that with respect to Securities held of record by DTC, the Company or its
designated agent may accept as tendered for repurchase pursuant to this Section
4.11 Securities tendered by means of book entry in accordance with the normal
procedures of
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DTC, provided that any such interest amount shall be delivered by the Holder to
the Company or its designated agent.
On the Net Proceeds Payment Date, the Company will (i) accept for
payment Securities or portions thereof tendered pursuant to the Net Proceeds
Offer in an aggregate principal amount equal to the Net Proceeds Offer Amount or
such lesser amount of Securities as has been tendered, (ii) deposit with the
Paying Agent money sufficient to pay the purchase price of all Securities or
portions thereof so tendered in an aggregate principal amount equal to the Net
Proceeds Offer Amount or such lesser amount, and (iii) deliver or cause to be
delivered to the Trustee, Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof tendered to the Company.
If the aggregate principal amount of Securities tendered exceeds the Net
Proceeds Offer Amount, the Trustee will select the Securities to be purchased on
a pro rata basis based on the principal amount of Securities so tendered. The
Paying Agent will promptly mail or deliver to Holders of Securities so accepted
payment in an amount equal to the purchase price, and the Company will execute
and the Trustee will promptly authenticate and mail or make available for
delivery to such Holders of Physical Securities a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted will be promptly mailed or delivered to the Holder
thereof. The Company will publicly announce the results of the Net Proceeds
Offer on or as soon as practicable after the Net Proceeds Payment Date. For
purposes of this Section 4.11, the Trustee will act as the Paying Agent. The
Company may make Asset Dispositions in accordance with this Section 4.11 and
receive consideration in the form of equity, partnership or other ownership
interests where it might not control such resulting entity.
Section 4.12 Limitation on Liens Securing Indebtedness.
The Company will not, and will not permit any of the Subsidiaries to,
create, incur, assume or suffer to exist any Liens (other than Permitted Liens)
upon any of their respective Properties securing (i) any Indebtedness of the
Company, unless the Securities are equally and ratably secured or (ii) any
Indebtedness of any Subsidiary Guarantor, unless the Securities or the
Guarantees, as the case may be, are equally and ratably secured; provided that
if such Indebtedness is expressly subordinated to the Securities or the
Guarantees, the Lien securing such Indebtedness will be subordinated and junior
to the Lien securing the Securities or the Guarantees, with the same relative
priority as such Subordinated Indebtedness will have with respect to the
Securities or the Guarantees, as the case may be.
Section 4.13 Limitation on Payment Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, create or suffer to exist or allow to become effective any
Payment Restriction, except for such encumbrances or restrictions existing under
or by reason of (A) the Bank Credit Agreement, (B) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of the Company or any Subsidiary, (C) any instrument governing Indebtedness of a
Person acquired by the Company or a Subsidiary at the time of such acquisition,
which encumbrance or restriction is not applicable to any Person, other than the
Person, or the Property of the Person, so acquired, provided that such
Indebtedness was not incurred in anticipation of such acquisition, (D) with
respect to clauses (i)(c) and (ii)(c) contained in the definition of Payment
Restriction, Purchase Money Obligations for Property acquired in the ordinary
course of business, (E) Indebtedness existing pursuant to a written agreement in
effect on the date of this Indenture, (F) Indebtedness under this Indenture, or
(G) Indebtedness incurred to refinance, refund, extend or renew Indebtedness
referred to in clauses (A), (C), (D), (E) or (F) above; provided that the
Payment Restrictions contained therein are not materially more restrictive than
those provided for in the Indebtedness being refinanced, refunded, extended or
renewed.
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Section 4.14 Limitation on Transactions with Related Persons.
Neither the Company nor any of the Subsidiaries will (i) sell, lease,
transfer or otherwise dispose of any of its Property to, (ii) purchase any
property from, (iii) make any Investment (other than Permitted Unrestricted
Subsidiary Investments and other Investments in accordance with the provisions
of Section 4.10) in, or (iv) enter into any contract or agreement with or for
the benefit of, a Related Person of the Company or any Subsidiary (other than
the Company or any such Subsidiary in which no Related Person (other than the
Company or another Wholly Owned Subsidiary) owns, directly or indirectly, an
equity interest) (a "Related Person Transaction"), other than Related Person
Transactions that are on terms (which terms are in writing) no less favorable to
the Company or a Subsidiary, as applicable, than could be obtained in a
comparable arm's length transaction from an unaffiliated party; provided that,
if the Company or any Subsidiary enters into a Related Person Transaction or s
eries of Related Person Transactions involving or having an aggregate value of
more than (i) $1.0 million, such Related Person Transaction will have been
approved by a majority of the disinterested directors of the Company and (ii)
$5.0 million ($1.0 million if there are no disinterested directors of the
Company), such Related Person Transaction will have been determined by a
nationally recognized investment banking firm to be fair from a financial
standpoint to the Company and its Subsidiaries. Notwithstanding anything to the
contrary in the foregoing, the foregoing restrictions shall not apply to (i)
Related Person Transactions that are approved by the Board of Directors of the
Company and such Subsidiary, if applicable, as in the best interests of the
Company or such Subsidiary, which transactions together with all other Related
Person Transactions in a related series involve or have an aggregate value not
exceeding $1.0 million in each fiscal year; (ii) fees and compensation paid to
or agreements with officers, directors, employees or consultants of the Company
or any Subsidiary in each case that are reasonable, as determined by the Board
of Directors or senior management thereof in good faith; and (iii) Restricted
Payments that are not prohibited by Section 4.10.
Section 4.15 Limitation on Conduct of Business.
The Company and the Subsidiaries will be operated in a manner such
that it will not engage in any business other than the exploration for and the
development, acquisition, production, gathering, treating, processing,
marketing, storage, selling and transportation of, Hydrocarbons and such other
businesses as are reasonably necessary or desirable to facilitate the conduct
and operations of the foregoing businesses.
Section 4.16 Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase (a "Change of Control Offer") all of the
then outstanding Securities from the Holders of such Securities at a purchase
price (the "Change of Control Purchase Price") equal to 101% of the aggregate
principal amount of such Securities, plus accrued and unpaid interest, if any,
to the Change of Control Purchase Date (as defined below), in accordance with
the procedures set forth in paragraphs (b), (c) and (d) of this Section 4.16.
The Company shall, subject to the provisions described below, be required to
purchase all Securities properly tendered pursuant to a Change of Control Offer
and not withdrawn.
(b) The Change of Control Offer shall remain open for at least 20
Business Days and until the close of business on the fifth Business Day prior to
the Change of Control Purchase Date (as defined below).
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(c) Not later than the 30th day following the occurrence of the Change
of Control, the Company shall mail to the Trustee and to each Holder of the
Securities a notice (the "Change of Control Notice") stating:
(1) that a Change in Control has occurred and that such Holder has the
right to require the Company to repurchase such Holder's Securities, or
portion thereof, at the Change of Control Purchase Price;
(2) any information regarding such Change of Control required to be
furnished pursuant to Rule 13e-1 under the Exchange Act and any other
securities laws and regulations thereunder;
(3) a purchase date (the "Change of Control Purchase Date"), which
shall be on a Business Day and no earlier than 30 days nor later than 60
days after the occurrence of a Change of Control;
(4) that any Security, or portion thereof, not tendered or accepted
for payment will continue to accrue interest:
(5) that unless the Company defaults in making payments therefor, or
payment is otherwise prevented, any Security, or portion thereof, accepted
for payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date; and
(6) the instructions a Holder must follow in order to have his
Securities repurchased in accordance with paragraph (d) of this Section
4.16.
No failure of the Company to give the foregoing notice shall limit any
Holder's right to exercise a repurchase right.
(d) To exercise the repurchase right, the Holder must deliver, on or
before the fifth calendar day prior to the Change of Control Purchase Date,
written notice to the Company (or an agent designated by the Company for such
purpose) of the Holder's exercise of such right, together with (i) the Security
or Securities with respect to which the right is being exercised, duly endorsed
for transfer with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, and (ii) if the Change of Control Purchase
Date falls between any record date for the payment of interest on the Securities
and the next succeeding interest payment date, an amount equal to the interest
which the Holder is entitled to receive on such interest payment date; provided,
however, that with respect to Securities held of record by DTC, the Company or
its designated agent may accept as tendered for repurchase pursuant to this
Section 4.16 Securities tendered by means of a book entry in accordance with the
normal procedures of DTC, provided that any such interest amount shall be
delivered by the Holder to the Company or its designated agent. Notwithstanding
the foregoing, if prior to the date that a Change of Control Notice is required
to be mailed, a notice of optional redemption of all of the outstanding
Securities has been mailed in accordance with the terms of this Indenture, the
Company's obligation to send the Change of Control Notice shall be suspended
(unless the Company shall default in the payment of the redemption price or
accrued interest).
(e) On the Change of Control Purchase Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Notice, (ii) if the Company
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appoints a depository or Paying Agent, deposit with such depository or Paying
Agent money sufficient to pay the purchase price of all Securities or portions
thereof so tendered and (iii) deliver to the Trustee Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof tendered to the Company. DTC, the Company or the Paying Agent, as the
case may be, shall promptly mail to the Holder of Securities so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders of Physical Securities a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Purchase
Date. For purposes of this Section 4.16, the Trustee shall act as the Paying
Agent.
(f) The Company, to the extent applicable and if required by law, will
comply with Sections 1.3 and 1.4 of the Exchange Act and the provisions of
Regulation 14E and any other tender offer rules under the Exchange Act and any
other federal and state securities laws, rules and regulations that may then be
applicable to any offer by the Company to purchase the Securities pursuant to
the provisions of this Section 4.16.
Section 4.17 Provision of Financial Information.
The Company shall file on a timely basis with the SEC, to the extent
such filings are accepted by the SEC and whether or not the Company has a class
of securities registered under the Exchange Act, the annual reports, quarterly
reports and other documents that the Company would be required to file if it
were subject to Section 1.3 or 1.5 of the Exchange Act. The Company shall also
file with the Trustee (with exhibits), and provide to each Holder of Securities
(without exhibits), without cost to such Holder, copies of such reports and
documents within 15 days after the date on which the Company files such reports
and documents with the SEC or the date on which the Company would be required to
file such reports and documents if the Company were so required and, if filing
such reports and documents with the SEC is not accepted by the SEC or is
prohibited under the Exchange Act, the Company shall supply at its cost copies
of such reports and documents (including any exhibits thereto) to any Holder of
Securities promptly upon written request.
Section 4.18 Registration Rights Agreement.
The Company will comply with all of the terms and provisions of the
Registration Rights Agreement, including, without limitation, its obligation to
pay Additional Interest (as defined therein) and to notify the Trustee
immediately of the occurrence of any Registration Default (as defined therein)
thereunder.
Section 4.19 Qualification of Indenture.
The Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agreement and shall pay
all costs and expenses (including attorneys' fees for the Company and the
Trustee) incurred in connection therewith. In connection with any such
qualification of this Indenture under the TIA, the Trustee shall be entitled to
receive from the Company any such Officers' Certificates, Opinions of Counsel or
other documentation as it may reasonably request.
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Section 4.20 Payment of Existing Secured Debt.
Concurrently with the execution of this Indenture, the Indebtedness
under the Endowment Energy Partners loan, the Endowment Energy Co-Investment
Partnership loan and the Joint Energy Development Investments Limited
Partnership loan shall be paid in full.
Section 4.21 Replacement Mortgages.
The Company will enter into one or more Acts of Mortgage, Security
Agreement, Assignment of Production and Financing Statement (the "Replacement
Mortgages") in form and substance acceptable to the Purchaser covering the
Collateral together with any related documents within 60 days of the Issue Date,
which Replacement Mortgages shall replace the Assigned Mortgage. The Company
will cause to be prepared by title attorneys acceptable to the Purchaser and to
be delivered to the Purchaser title opinions in form and substance satisfactory
to the Purchaser covering the Collateral within 60 days of the Issue Date.
Section 4.22 Impairment of Security Interest.
Subject to any Subordination Agreement, neither the Company nor any of
its Subsidiaries will take or omit to take any action which action or omission
would have the result of adversely affecting or impairing the Security Interest
in favor of the Trustee, on behalf of itself and the Holders, with respect to
the Collateral, and neither the Company nor any of its Subsidiaries shall grant
to any Person, or suffer any Person (other than the Company) to have (other than
to the Trustee on behalf of the Trustee and the Holders) any interest whatsoever
in the Collateral other than Liens securing the Bank Credit Agreement and Liens
permitted by the Security Documents. Neither the Company nor any of its
Subsidiaries will enter into any agreement or instrument that by its terms
requires the proceeds received from any sale of Collateral to be applied to
repay, redeem, defease or otherwise acquire or retire any Indebtedness of any
Person, other than pursuant to any Subordination Agreement, this Indenture, the
Securities and the Security Documents.
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.1 When Company May Merge, etc.
The Company shall not consolidate with or merge with any Person or
convey, transfer or lease all or substantially all of its Property to any
Person, unless:
(1) the Company survives such merger or the Person formed by such
consolidation or into which the Company is merged or that acquires by
conveyance or transfer, or which leases, all or substantially all of the
Property of the Company is a corporation organized and existing under the
laws of the United States, any state thereof or the District of Columbia
and expressly assumes, by supplemental indenture, the due and punctual
payment of the principal of (and premium, if any) and interest on all the
Securities and the performance of every other covenant and obligation of
the Company under this Indenture;
(2) immediately before and after giving effect to such transaction no
Default or Event of Default exists;
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(3) immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the Company (or, if not the Company,
the surviving or transferee entity) is equal to or greater than the
Consolidated Net Worth of the Company immediately before such transaction;
and
(4) immediately after giving effect to such transaction on a pro forma
basis, the Company (or, if not the Company, the surviving or transferee
entity) would be able to incur $1.00 of additional Indebtedness (excluding
Permitted Indebtedness) under the test, described in the first paragraph of
Section 4.9.
The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
Section 5.2 Successor Corporation Substituted.
Upon any consolidation, merger, conveyance, lease or transfer in
accordance with Section 5.1, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, lease or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture with the same effect
as if such successor had been named as the Company herein and thereafter (except
in the case of a lease) the predecessor corporation will be relieved of all
further obligations and covenants under this Indenture and the Securities.
ARTICLE SIX
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
An "Event of Default" occurs upon:
(1) default in the payment of principal of, or premium, if any, on,
the Securities when due at maturity, upon repurchase, upon acceleration or
otherwise, including failure of the Company to repurchase the Securities
required to be repurchased, at the required purchase price, upon a Change
of Control or in the event of a Net Proceeds Offer, and failure to make any
optional redemption payment;
(2) default in the payment of any installment of interest on the
Securities when due (including any interest payable in connection with
optional redemption payments) and continuance of such default for 30 days;
(3) default on any other Indebtedness of the Company, any Subsidiary
Guarantor or any other Subsidiary if either (a) such default results from
the failure to pay principal of, premium, if any, or interest on any such
Indebtedness when due which aggregates in excess of $5.0 million and
continuance of such default beyond any applicable cure, forbearance or
notice period, or (b) as a result of such default, the maturity of such
Indebtedness has been accelerated prior to its scheduled maturity, without
such default and acceleration having been rescinded or annulled within
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a period of 10 days, and the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default, or the maturity of which has been so accelerated, aggregates $5.0
million or more;
(4) default in the performance, or breach, of any other covenant of
the Company or any Subsidiary Guarantor in this Indenture and failure to
remedy such default within a period of 60 days after written notice thereof
from the Trustee or Holders of 25% in principal amount of the outstanding
Securities;
(5) the entry by a court of one or more judgments or orders against
the Company, any Subsidiary Guarantor or any other Subsidiary in an
aggregate amount in excess of $5.0 million and which are not covered by
insurance written by third parties that has not been vacated, discharged,
satisfied or stayed pending appeal within 60 days from the entry thereof;
(6) a Guarantee by a Subsidiary Guarantor that is a Material
Subsidiary shall cease to be in full force and effect (other than a release
of a Guarantee by designation of a Subsidiary Guarantor as an Unrestricted
Subsidiary) or any Subsidiary Guarantor shall deny or disaffirm its
obligations with respect thereto;
(7) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) admits in writing that it generally is unable to pay its
debts as the same become due;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief (with respect to the petition commencing such
case) against the Company or any Material Subsidiary in an involuntary
case or proceeding,
(B) appoints a Custodian of the Company or any Material
Subsidiary or for all or substantially all of its respective property,
or
(C) orders the liquidation of the Company or any Material
Subsidiary,
and the order or decree remains unstayed and in effect for 60 days; or
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(9) any of the Security Documents cease to be in full force and effect
(other than in accordance with their respective terms or the terms of this
Indenture), or any of the Security Documents cease to give the Trustee the
Liens, rights, powers and privileges purported to be created thereby, or
any Security Document is declared null and void, or the Company denies any
of its obligations under any Security Document or any Collateral becomes
subject to any Lien other than the Liens created or permitted by the
Security Documents and a Bank Credit Agreement.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Section 6.2 Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (7) and (8)) under Section 6.1 occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in principal
amount of the Securities then outstanding may declare the unpaid principal of
(or the Change of Control Purchase Price if the Event of Default includes
failure to pay the Change of Control Purchase Price), and accrued and unpaid
interest on, all the Securities then outstanding to be due and payable, by a
notice in writing to the Company (and to the Trustee, if given by Holders) and
upon any such declaration such principal, premium, if any, and accrued and
unpaid interest shall become immediately due and payable, notwithstanding
anything contained in this Indenture or the Securities to the contrary. If an
Event of Default specified in clauses (7) or (8) above occurs, all unpaid
principal of, premium, if any, and accrued interest on, the Securities then
outstanding will become due and payable, without any declaration or other act on
the part of the Trustee or any Holder. Except as set forth in the first
sentence of this paragraph, the Company hereby waives presentment, demand,
notice of dishonor, notice of acceleration, notice of intent to accelerate, and
all other notices and demands.
The Holders of a majority in principal amount of the then outstanding
Securities, by written notice to the Company, the Subsidiary Guarantors and the
Trustee, may rescind and annul a declaration of acceleration and its
consequences if (1) the Company or any Subsidiary Guarantor has paid or
deposited with such Trustee a sum sufficient to pay (A) all overdue installments
of interest on all the Securities, (B) the principal of and premium, if any, on
any Securities that have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed therefor in
the Securities, (C) to the extent that payment of such interest is lawful,
interest on the defaulted interest at the rate or rates prescribed therefor in
the Securities, and (D) all money paid or advanced by the Trustee thereunder and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; (2) all Events of Default, other than the non-
payment of the principal of any Securities that have become due solely by such
declaration of acceleration, have been cured or waived as provided in this
Indenture; and (3) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction. No such rescission will affect any
subsequent Event of Default or impair any right consequent thereon.
Section 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue, in its own name and as trustee of an express trust, any available remedy
by proceeding at law or in equity to collect the payment of principal or
interest on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of
any other remedy. All available remedies are cumulative.
Section 6.4 Waiver of Past Defaults.
Subject to Sections 6.7 and 9.2, the Holders of at least a majority in
principal amount of Securities then outstanding by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default or Event of Default in payment of principal or interest on the
Securities, including any optional redemption payments or Change of Control or
Net Proceeds Offer payments.
Section 6.5 Control by Majority.
The Holders of a majority in principal amount of the Securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exer cising any trust or power
conferred on such Trustee, provided that (1) such direction is not in conflict
with any rule of law or with this Indenture and (2) the Trustee may take any
other action deemed proper by such Trustee that is not inconsistent with such
direction.
Section 6.6 Limitation on Remedies.
No Holder of any of the Securities will have any right to institute
any proceeding, judicial or otherwise, or for the appointment of a receiver or
trustee or pursue any remedy under this Indenture, unless:
(1) such Holder has previously given notice to the Trustee of a
continuing Event of Default,
(2) the Holders of not less than 25% in principal amount of the
outstanding Securities have made written request to such Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee under this Indenture,
(3) such Holder or Holders have offered to such Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request,
(4) such Trustee for 30 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding, and
(5) no direction inconsistent with such written request has been given
to such Trustee during such 30-day period by the Holders of a majority in
principal amount of the outstanding Securities.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over other Holders.
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Section 6.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the Holder of
any Securities will have the right, which is absolute and unconditional, to
receive payment of the principal, of premium, if any, and interest on such
Securities on the stated maturity therefor and to institute suit for the
enforcement of any such payment, and such right may not be impaired without the
consent of such Holder.
Section 6.8 Collection Suit by Trustee.
If an Event of Default in payment of interest or principal specified
in Section 6.1(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any Subsidiary Guarantor for the whole amount of principal of and interest on
the Securities remaining unpaid and such further amounts as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation and expenses of the Trustee, its agents and counsel.
Section 6.9 Trustee May File Proofs of Claim.
(a) The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Holders allowed in any judicial proceedings relative to the
Company, the Subsidiary Guarantors, their creditors or their property and may
collect and receive any money or other property payable or deliverable on any
such claims and to distribute the same.
(b) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article Six, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for interest accrued on the Securities, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for interest, if any;
Third: to Holders for the principal amounts (including any premium)
owing under the Securities, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for the
principal thereof (including any premium); and
Fourth: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10.
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Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by Holders of more than 10% in principal
amount of the then outstanding Securities.
ARTICLE SEVEN
TRUSTEE
Section 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such rights and powers vested in it by this Indenture and use the
same degree of care and skill in such exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth (or incorporated by reference) in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine such certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph (c) does not limit the effect of paragraph (b) of
this Section 7.1.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by an officer of the Trustee, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to action it takes or
omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.5 or any other direction permitted by this Indenture,
and the Trustee shall be entitled from time to time to request such a
direction.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.1.
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(e) The Trustee shall be under no obligation and may refuse to perform
any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.2 Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely on and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney, to the extent reasonably required by such inquiry or
investigation.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) For all purposes under this Indenture, the Trustee shall not be
deemed to have notice or knowledge of any Event of Default (other than under
Section 6.1(1) or (2)) unless a Trust Officer knows of such Event of Default or
unless written notice of any Event of Default (other than under Section 6.1(1)
or (2)) is received by the Trustee at its address in Section 13.2 and such
notice references the Securities generally, the Company or this Indenture.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Subsidiaries or Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
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Section 7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than its certificate of authentication.
Section 7.5 Notice of Defaults.
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Holder pursuant to Section 13.2 a notice
of the Default within 90 days after it occurs. Except in the case of a Default
in any payment on any Security, the Trustee may withhold the notice if and so
long as the board of directors, executive committee or a trust committee of its
directors and/or officers in good faith determines that withholding the notice
is in the interests of Holders.
Section 7.6 Reports by Trustee to Holders.
Within 60 days after each May 15, beginning with May 15, 1998, the
Trustee shall mail to each Holder a brief report dated as of such May 15 that
complies with TIA (S) 313(a), but only if such report is required in any year
under TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and
313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange, if any, on which the Securities are
listed. The Company shall promptly notify the Trustee in writing if the
Securities become listed on any national securities exchange or of any delisting
thereof.
Section 7.7 Compensation and Indemnity.
The Company shall pay the Trustee from time to time reasonable
compensation (including compensation for extraordinary services relating to
default administration) for its services (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust). The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses, disbursements and advances incurred by it.
Such expenses may include the reasonable compensation and expenses of the
Trustee's agents and counsel.
The Trustee shall not be under any obligation to institute any suit,
or take any remedial action under this Indenture, or to enter any appearance or
in any way defend any suit in which it may be a defendant, or to take any steps
in the execution of the trusts created hereby or thereby or in the enforcement
of any rights and powers under this Indenture, until it shall be indemnified to
its satisfaction against any and all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture, including compensation for services, costs, expenses, outlays,
counsel fees and other disbursements, and against all liability not due to its
negligence or willful misconduct. The Company shall indemnify the Trustee
against any loss or liability incurred by it in connection with the acceptance
and administration of the trust and its duties hereunder as Trustee, Registrar
and/or Paying Agent, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. The Trustee shall notify the Company of
any claim for which it may seek indemnity; however, unless the position of the
Company is prejudiced by such failure, the failure of the Trustee to promptly
notify the Company shall not limit its right to indemnification. The Company
shall defend each such claim and the Trustee shall
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cooperate in the defense. The Trustee may retain separate counsel and the
Company shall reimburse the Trustee for the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through the Trustee's negligence or
willful misconduct.
To satisfy the Company's payment obligations in this Section 7.7, the
Trustee shall have a claim prior to that of the Holders of the Securities on all
money or property held or collected by the Trustee, except that held in trust to
pay principal of and interest on particular Securities.
When the Trustee incurs expenses or renders services after the
occurrence of any Event of Default specified in Sections 6.1(7) or (8), the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
Section 7.8 Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities may remove the Trustee by so
notifying the Trustee, in writing. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting as Trustee hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the claim provided for in Section 7.7, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Holder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee. Any successor Trustee shall comply with
TIA (S) 310(a)(5).
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Section 7.9 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust assets to, another corporation, the
successor corporation without any further act shall be the successor Trustee;
provided such corporation or association shall be otherwise eligible and
qualified under this Article.
Section 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case
of a Trustee that is a corporation included in a bank holdings company system,
the related bank holding company) shall have a combined capital and surplus of
at least $100 million as set forth in its most recent published annual report of
condition, and have a Corporate Trust Office in the City of New York. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S)
310(b); provided, however, that there shall be excluded from the operation of
TIA (S) 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the Company, as
obligor of the Securities.
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA (S) 311(a). A Trustee who has
resigned or been removed shall be subject to TIA (S) 311(a) to the extent
indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
Section 8.1 Termination of Company's Obligations.
(a) This Indenture shall cease to be of further effect (subject to
Section 8.5) when all outstanding Securities theretofore authenticated and
issued hereunder have been delivered (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.7) to the Trustee for cancellation and the Company has
paid all sums payable hereunder and under the Securities.
(b) In addition to the provisions of Section 8.1, at the Company's
option, either (i) the Company and the Subsidiary Guarantors shall be deemed to
have been discharged from their obligations with respect to the Securities and
the provisions of this Indenture (subject to Section 8.5) on the 91st day after
the applicable conditions set forth below have been satisfied or (ii) the
Company and the Subsidiary Guarantors shall cease to be under any obligation to
comply with any term, provision or condition set forth in Sections 4.2, 4.3, 4.7
through 4.17, 5.1 and the last paragraph of Section 11.1 with respect to the
Securities at any time after the applicable conditions set forth below have been
satisfied:
(1) the Company or any Subsidiary Guarantor shall have deposited or
caused to be deposited irrevocably with the Trustee as trust funds in
trust, specifically pledged as security for,
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and dedicated solely to, the benefit of the Holders (i) money, or (ii) U.S.
Government Obligations, which through the payment of interest and principal
in respect thereof in accordance with their terms will provide (without any
reinvestment of such interest or principal), not later than one day before
the due date of any payment, money or (iii) a combination of (i) and (ii),
in an amount sufficient, in the opinion (with respect to (ii) and (iii)) of
a nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee at or prior to the
time of such deposit, to pay and discharge each installment of principal of
and interest on the outstanding Securities on the dates such installments
are due;
(2) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company or a
Subsidiary Guarantor or any Subsidiary is a party or by which any of them
is bound, as evidenced to the Trustee in an Officers' Certificate delivered
to the Trustee concurrently with such deposit;
(3) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that Holders will not recognize income, gain or loss
for federal income tax purposes as a result of the Company's exercise of
its option under this Section 8.1 and will be subject to federal income tax
on the same amount and in the same manner and at the same time as would
have been the case if such option had not been exercised, and, in the case
of the Securities being discharged pursuant to clause (i) of this Section
8.1(b), accompanied by a ruling to that effect received from or published
by the Internal Revenue Service (it being understood that (A) such Opinion
of Counsel shall also state, if applicable, that such ruling is consistent
with the conclusions reached in such Opinion of Counsel and (B) the Trustee
shall be under no obligation to investigate the basis of correctness of
such ruling);
(4) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Company's exercise of its option under this
Section 8.1 will not result in any of the Company, the Trustee or the trust
created by the Company's deposit of funds hereunder becoming or being
deemed to be an "investment company" under the Investment Company Act of
1940, as amended;
(5) the Company or any Subsidiary Guarantor shall have paid or duly
provided for payment of all amounts then due to the Trustee pursuant to
Section 7.7; and
(6) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for in this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with.
(c) The Company or any Subsidiary Guarantor may make an irrevocable
deposit pursuant to this Section 8.1 only if at such time it is not prohibited
from doing so under the provisions of the Subordination Agreement and the
Company shall have delivered to the Trustee and any Paying Agent an Officers'
Certificate to that effect.
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Section 8.2 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.1. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with the provisions of the Securities and this Indenture to the
payment of principal of and interest on the Securities. Money and securities so
held in trust need not be segregated from other funds except to the extent
required by law.
The term "U.S. Government Obligations" means direct obligations of the
United States for the payment of which the full faith and credit of the United
States is pledged.
Section 8.3 Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company
upon request any money or securities held by them at any time in excess of
amounts required to pay principal of or interest on the Securities. The Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal or interest that remains unclaimed for one
year; provided, however, that the Trustee or such Paying Agent before being
required to make any such repayment, may at the expense of the Company cause to
be published once in a newspaper of general circulation in the City of New York
or mail to each such Holder notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication or mailing any unclaimed balance of such money then
remaining will be paid to the Company. After repayment to the Company, any
Holder entitled to such money shall thereafter, as an unsecured general
creditor, look (unless an applicable law designates another Person) only to the
Company for payment, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease.
Section 8.4 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.1 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and the Subsidiary Guarantors' obligations under this Indenture and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.1 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.1; provided, however, that if the Company or any Subsidiary
Guarantor has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company or such Subsidiary
Guarantor shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
Section 8.5 Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture and
of the Securities referred to in Section 8.1(a) and (b)(i), the respective
obligations of the Company, the Subsidiary Guarantors and the Trustee under
Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 4.1 (with respect to Section
8.1(a)), 4.4, 6.7, 7.7, 7.8, 8.2, 8.3, 8.4, 11.3, and 11.4 shall survive until
the Securities are no longer outstanding, and thereafter the obligations of the
Company and the Trustee under Sections 7.7, 8.2,
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8.3, and 8.4 shall survive. Nothing contained in this Article Eight shall
abrogate any of the obligations or duties of the Trustee under this Indenture.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Without Consent of Holders.
The Company and the Trustee may amend or supplement this Indenture or
the Securities without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Sections 5.1 or 11.2;
(3) to provide for uncertificated Securities in addition to
certificated Securities;
(4) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(5) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder.
Notwithstanding the above, the Trustee and the Company may not make
any change that adversely affects the legal rights of any Holders hereunder.
Section 9.2 With Consent of Holders.
Subject to Section 6.7, the Company, when authorized by a Board
Resolution, and the Trustee may amend or supplement this Indenture or the
Securities with the written consent of the Subsidiary Guarantors and the Holders
of at least a majority of the principal amount of the Securities then
outstanding, and the Holders of a majority in principal amount of the
Securities, together with the Subsidiary Guarantors, may waive compliance by the
Company with any provision of this Indenture or the Securities, including, but
not limited to, a release of items of Collateral pursuant to Section 12.5(b).
However, without the consent of each Holder affected, an amendment, supplement
or waiver, including a waiver pursuant to Section 6.4, may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of interest on the Securities;
(3) reduce the principal amount of the Securities or extend the
maturity schedule of the Securities or modify the redemption or repurchase
provisions of the Securities;
(4) waive a default in the payment of the principal or interest on the
Securities;
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(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in the subordination of the Securities in a manner
that is adverse to the Holders; or
(7) make any change in Section 6.4 or Section 6.7 or in this sentence
of this Section 9.2.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof. Any amendment, waiver or consent shall be deemed effective upon
receipt by the Trustee of the necessary consents and shall not require execution
of any supplemental indenture to be effective.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders of each Security
affected thereby, with a copy to the Trustee, a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail such notice,
or any defect therein, shall not, however, in any way impair or affect the
validity of any such amendment, waiver, consent or supplemental indenture.
Except as otherwise provided in Section 6.4 and this Section 9.2, the Holders of
a majority in aggregate principal amount of the Securities then outstanding may
waive compliance in a particular instance by the Company or the Subsidiary
Guarantors with any provisions of this Indenture or the Securities.
Section 9.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
Section 9.4 Revocation and Effect of Consents.
A consent to an amendment, supplement or waiver by a Holder of a
Security shall bind the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security. However,
until an amendment, supplement or waiver becomes effective, any such Holder or
subsequent Holder may revoke the consent as to his Security or portion of a
Security. For such revocation to be effective, the Trustee must receive the
notice of revocation before the date the amendment, supplement or waiver becomes
effective.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it makes a change described in any of clauses (1)
through (7) of Section 9.2. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
Section 9.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company
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or the Trustee so determines, the Company in exchange for the Security shall
issue and the Trustee shall authenticate a new Security that reflects the
changed terms.
Section 9.6 Trustee Protected.
The Trustee shall sign any amendment or supplement or waiver
authorized pursuant to this Article if the amendment or supplement or waiver
does not adversely affect the rights of the Trustee. If it does adversely
affect the rights of the Trustee, the Trustee may but need not sign it. In
signing such amendment or supplement or waiver the Trustee shall be entitled to
receive, and (subject to Article Seven) shall be fully protected in relying
upon, an Opinion of Counsel stating that such amendment or supplement or waiver
is authorized or permitted by and complies with this Indenture. The Company may
not sign an amendment or supplement until the Board of Directors of the Company
approves it.
ARTICLE TEN
SUBORDINATION
Section 10.1 Subordination of Security Interest.
The Company agrees, and each Holder by its acceptance thereof likewise
agrees, that the Trustee, on behalf of each Holder, may enter into a
Subordination Agreement with the Company and any lender pursuant to the terms of
the Bank Credit Agreement; provided that (i) entering into the Bank Credit
Agreement at the time the Subordination Agreement is entered into is not
prohibited by Section 4.9 and (ii) the Liens upon any Property securing
Indebtedness under the Bank Credit Agreement are Permitted Liens both as
evidenced to the Trustee in an Officers' Certificate delivered to the Trustee
concurrently with the entering into of the Subordination Agreement.
Section 10.2 Holders Authorize Trustee To Effectuate Subordination.
Each Holder by his acceptance thereof authorizes and expressly directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article Ten and appoints the
Trustee his attorney-in-fact for such purpose.
ARTICLE ELEVEN
GUARANTEES
Section 11.1 Unconditional Guarantee.
Each Subsidiary Guarantor will unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Guarantee") to each
Holder of Securities authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, the full and prompt performance of the
Company's obligations under this Indenture and the Securities and that:
(1) the principal of and interest on the Securities will be promptly
paid in full when due, whether at maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal of and interest on the
Securities, if any, to the extent lawful, and all other obligations of
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the Company to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in accordance with the terms hereof
and thereof; and
(2) in case of any extension of time of payment or renewal of any
Securities or of any such other obligations, that same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or
otherwise,
subject, however, in the case of clauses (1) and (2) above, to the limitations
set forth in Section 11.4.
Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Subsidiary Guarantors will be
jointly and severally obligated to pay the same immediately. Each Subsidiary
Guarantor hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Securities or
this Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Securities with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any action to enforce
the same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each Subsidiary Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice, notice of intent to
accelerate, notice of acceleration, and all other notices and all demands
whatsoever and covenants that this Guarantee will not be discharged except by
complete performance of the obligations contained in the Securities, this
Indenture and in this Guarantee. If any Holder or the Trustee is required by
any court or otherwise to return to the Company, any Subsidiary Guarantor, or
any custodian, trustee, liquidator or other similar official acting in relation
to the Company or any Subsidiary Guarantor, any amount paid by the Company or
any Subsidiary Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Subsidiary Guarantor agrees it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Subsidiary Guarantor further agrees that, as between each Subsidiary Guarantor,
on the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article Six for the purposes of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any acceleration of such
obligations as provided in Article Six, such obligations (whether or not due and
payable) shall forthwith become due and payable by each Subsidiary Guarantor for
the purpose of this Guarantee.
The Company agrees to cause each Person (other than an Unrestricted
Subsidiary) that shall become a Material Subsidiary after the date of this
Indenture to become a Subsidiary Guarantor and execute and deliver a supplement
to this Indenture pursuant to which such Person will guarantee the payment of
the Securities on the same terms and conditions as contained in this Section
11.1.
Section 11.2 Subsidiary Guarantors May Consolidate, etc., on Certain
Terms.
(a) Except as set forth in Articles Four and Five, nothing contained
in this Indenture or in any of the Securities shall prevent any consolidation or
merger of a Subsidiary Guarantor with or into the Company or another Subsidiary
Guarantor or shall prevent any sale or conveyance of the property of a
Subsidiary Guarantor as an entirety or substantially as an entirety, to the
Company or another Subsidiary Guarantor.
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(b) Except as set forth in Articles Four and Five, nothing contained
in this Indenture or in any of the Securities shall prevent any consolidation or
merger of a Subsidiary Guarantor with or into a corporation or corporations
other than the Company or a Subsidiary Guarantor (whether or not affiliated with
the Subsidiary Guarantor), or successive consolidations or mergers in which a
Subsidiary Guarantor or its successor or successors shall be a party or parties,
or shall prevent any sale or conveyance of the property of a Subsidiary
Guarantor as an entirety or substantially as an entirety, to a corporation other
than the Company or another Subsidiary Guarantor (whether or not affiliated with
the Subsidiary Guarantor) authorized to acquire and operate the same; provided,
however, that, subject to Section 11.2(a) and 11.3, (i) immediately after such
transaction, and giving effect thereto, no Default or Event of Default shall
have occurred as a result of such transaction and be continuing, (ii) such
transaction shall not violate any of the covenants in Sections 4.1 through 4.16,
and (iii) each Subsidiary Guarantor hereby covenants and agrees that, upon any
such consolidation, merger, sale or conveyance, such Subsidiary Guarantor's
Guarantee set forth in this Article Eleven, and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
performed by such Subsidiary Guarantor, shall be expressly assumed (in the event
that the Subsidiary Guarantor is not the surviving corporation in the merger),
by supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee, by the corporation formed by such consolidation, or
into which the Subsidiary Guarantor shall have merged, or by the corporation
that shall have acquired such property. In the case of any such consolidation,
merger, sale or conveyance and upon the assumption by the successor corporation,
by supplemental indenture executed and delivered to the Trustee and satisfactory
in form to the Trustee of the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Subsidiary
Guarantor, such successor corporation shall succeed to and be substituted for
the Subsidiary Guarantor with the same effect as if it had been named herein as
a Subsidiary Guarantor.
Section 11.3 Release of a Subsidiary Guarantor.
Upon the sale or disposition of a Subsidiary Guarantor (or
substantially all of its assets), which is otherwise in compliance with the
terms of this Indenture, including but not limited to the provisions of Section
11.2, such Subsidiary Guarantor shall be deemed released from all of its
Guarantee and related obligations in this Indenture; provided that any such
termination shall occur only to the extent that all obligations of such
Subsidiary Guarantor under all of its guarantees of, and under all of its
pledges of assets or other security interests which secure, other Indebtedness
of the Company or any Subsidiary shall also terminate or be released upon such
sale or transfer. Each Subsidiary Guarantor that is designated as an
Unrestricted Subsidiary in accordance with this Indenture shall be released from
all of its Guarantee and related obligations set forth in this Indenture for so
long as it remains an Unrestricted Subsidiary. The Trustee shall deliver an
appropriate instrument evidencing such release upon receipt of a request by the
Company accompanied by an Officers' Certificate and an Opinion of Counsel
certifying that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture. Any Subsidiary Guarantor not
so released remains liable for the full amount of principal of and interest on
the Securities as provided in this Article Eleven.
Section 11.4 Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of any federal or state law. To
effectuate the foregoing intention, the Holders and each Subsidiary Guarantor
hereby irrevocably agree that the obligations of each Subsidiary Guarantor under
the Guarantee shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor
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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 Guarantee or pursuant to Section 11.5, result in
the obligations of such Subsidiary Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. This Section 11.4 is for the benefit of the creditors of each
Subsidiary Guarantor.
Section 11.5 Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under the Guarantee, such Funding Guarantor shall be
entitled to a contribution from each other Subsidiary Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Subsidiary Guarantor (including
the Funding Guarantor) for all payments, damages and expenses incurred by that
Funding Guarantor in discharging the Company's obligations with respect to the
Securities or any other Subsidiary Guarantor's obligations with respect to the
Guarantee.
Section 11.6 Execution and Delivery of Guarantee.
To evidence its Guarantee set forth in Section 11.1, each Subsidiary
Guarantor hereby agrees to execute the Guarantee in substantially the form of
Exhibit A-1 to be endorsed on each Security ordered to be authenticated and
delivered by the Trustee and each Subsidiary Guarantor agrees that this
Indenture shall be executed on behalf of each Subsidiary Guarantor by its
President or one of its Vice Presidents and attested to by an Officer. Each
Subsidiary Guarantor hereby agrees that its Guarantee set forth in Section 11.1
shall remain in full force and effect notwithstanding any failure to endorse on
each Security a notation of such Guarantee. Each such Guarantee shall be signed
on behalf of each Subsidiary Guarantor by one Officer, (who shall have been duly
authorized by all requisite corporate actions) prior to the authentication of
the Security on which it is endorsed, and the delivery of such Security by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of the Guarantee set forth in this Indenture on behalf of the
Subsidiary Guarantors. Such signatures upon the Guarantee may be by manual or
facsimile signature of such officers and may be imprinted or otherwise
reproduced on the Guarantee, and in case any such officer who shall have signed
the Guarantee shall cease to be such officer before the Security on which such
Guarantee is endorsed shall have been authenticated and delivered by the Trustee
or disposed of by the Company, such Security nevertheless may be authenticated
and delivered or disposed of as though the person who signed the Guarantee had
not ceased to be such officer of the Subsidiary Guarantor.
Section 11.7 Severability.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, that portion of such provision that is not invalid, illegal or
unenforceable shall remain in effect, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
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ARTICLE TWELVE
SECURITY
Section 12.1 Grant of Security Interest.
To secure the due and punctual payment of the principal of, premium,
if any, and interest on the Securities when and as the same shall be due and
payable, whether on an Interest Payment Date, at maturity, by acceleration,
purchase, repurchase, redemption or otherwise, and interest on the overdue
principal of, premium, if any, and interest (to the extent permitted by law), if
any, on the Securities and the performance of all other Obligations of the
Company to the Holders or the Trustee under this Indenture and the Securities,
the Company hereby covenants to (a) cause the Assignment to be executed and
delivered concurrently with this Indenture and (b) execute and deliver the
Replacement Mortgages within the period provided for by Section 4.21. The
Security Documents shall grant to the Trustee a security interest in the
collateral therein described (collectively referred to herein as the
"Collateral") and when filed shall be deemed hereby incorporated by reference
herein to the same extent and as fully as if set forth in their entirety at this
place, and reference is made hereby to each Security Document for a more
complete description of the terms and provisions thereof. Each Holder, by
accepting a Security, agrees to all of the terms and provisions of the Security
Documents and the Trustee agrees to all of the terms and provisions of the
Security Documents signed by it.
Section 12.2 Execution of Security Documents.
Concurrently with the execution and delivery of this Indenture, the
Trustee, on behalf of each Holder, will execute and deliver the Assignment, and
the Company and the Trustee, on behalf of each Holder, will execute and deliver
the Assigned Mortgage Amendment. Within the period provided for by Section
4.21, the Company and the Trustee, on behalf of each Holder, will execute and
deliver the Replacement Mortgages.
Section 12.3 Recording and Opinions.
(a) The Company shall take or cause to be taken all action required to
perfect, maintain, preserve and protect the Security Interest, including,
without limitation, the filing of financing statements, continuation statements
and any instruments of further assurance, in such manner and in such places as
may be required by law fully to preserve and protect the rights of the Holders
and the Trustee under this Indenture and the Security Documents to all property
comprising the Collateral. The Company shall from time to time promptly pay all
financing and continuation statement recording and/or filing fees, charges and
taxes relating to this Indenture and the Security Documents, any amendments
thereto and any other instruments of further assurance required pursuant to the
Security Documents.
(b) The Company shall furnish to the Trustee, at such time as required
by (S) 314(b) of the TIA, Opinion(s) of Counsel either (a) substantially to the
effect that, in the opinion of such counsel, this Indenture and the grant of a
Security Interest in the Collateral intended to be made by the Security
Documents and all other instruments of further assurance, including, without
limitation, financing statements, have been properly recorded and filed to the
extent necessary to perfect the Security Interest in the Collateral created by
the Security Documents and reciting the details of such action, and stating that
as to the Security Interests created pursuant to the Security Documents, such
recordings and filings are the only recordings and filings necessary to give
notice thereof and that no re-recordings or refilings are
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necessary to maintain such notice (other than as stated in such opinion), or (b)
to the effect that, in the opinion of such counsel, no such action is necessary
to perfect such Security Interest.
(c) To the extent required by the TIA, the Company shall furnish to
the Trustee on June 1 in each year, beginning with 1998, an Opinion of Counsel,
dated as of such date, either (i)(A) stating that, in the opinion of such
counsel, action has been taken with respect to the recording, filing, re-
recording and refiling of all supplemental indentures, financing statements,
continuation statements and other documents as is necessary to maintain the Lien
of the Security Documents and reciting with respect to the Security Interest in
the Collateral the details of such action or referring to prior Opinions of
Counsel in which such details are given, and (B) stating that, based on relevant
laws as in effect on the date of such Opinion of Counsel, all financing
statements, continuation statements and other documents have been executed and
filed that are necessary as of such date and during the succeeding 24 months
fully to maintain the Security Interests of the Holders and the Trustee
hereunder and under the Security Documents with respect to the Collateral, or
(ii) stating that, in the opinion of such counsel, no such action is necessary
to maintain such Lien.
Section 12.4 Release of Collateral.
(a) The Trustee, in its capacity as Trustee under the Security
Documents, shall not at any time release Collateral from the Security Interest
created by this Indenture and the Security Documents unless such release is in
accordance with the provisions of this Indenture and the Security Documents.
(b) At any time when an Event of Default shall have occurred and be
continuing, no release of Collateral pursuant to the provisions of this
Indenture and the Security Documents shall be effective as against the Holders
of the Securities.
(c) The release of any Collateral from the terms of the Security
Documents shall not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to this Indenture and the Security Documents. To the extent
applicable, the Company shall cause TIA (S) 314(d) relating to the release of
property from the Lien of the Security Documents and relating to the
substitution therefor of any property to be subjected to the Lien of the
Security Documents to be complied with. Any certificate or opinion required by
TIA (S) 314(d) may be made by an Officer of the Company, except in cases where
TIA (S) 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected or approved by the Trustee in the exercise of reasonable
care. A Person is "independent" if such Person (a) is in fact independent, (b)
does not have any direct financial interest or any material indirect financial
interest in the Company or in any Affiliate of the Company and (c) is not an
officer, employee, promoter, underwriter, trustee, partner or director or person
performing similar functions to any of the foregoing for the Company. The
Trustee shall be entitled to receive and rely upon a certificate provided by any
such Person confirming that such Person is independent within the foregoing
definition.
Section 12.5 Specified Releases of Collateral.
(a) The Company shall be entitled to obtain a full release of all of
the Collateral from the Security Interest upon compliance with the conditions
precedent set forth in Section 8.1 for satisfaction and discharge of this
Indenture pursuant to Section 8.1. Upon delivery by the Company to the Trustee
of an Officers' Certificate and an Opinion of Counsel, each to the effect that
such conditions precedent have been complied with (and which may be the same
Officers' Certificate and Opinion of Counsel required by
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Article Eight), the Trustee shall forthwith take all necessary action (at the
request of and the expense of the Company) to release and reconvey to the
Company all of the Collateral, and shall deliver such Collateral in its
possession to the Company and its applicable Subsidiary Guarantors including,
without limitation, the execution and delivery of releases and satisfactions
wherever required.
(b) Subject to compliance by the Company with the conditions set forth
in Sections 4.11 and 12.5(c), the Company shall be entitled to obtain a release
of, and the Trustee shall release, items of Collateral (the "Released
Interests") from the Security Interest under any of the following circumstances:
(i) Oil and gas properties of the Company that are located
onshore in South Louisiana that are not a part of the Collateral and
are of equal or greater fair market value to the Released Interests
are then subjected to the Security Interest.
(ii) All of the proceeds from the disposition of the Released
Interests are used to develop the Collateral.
(iii) The Released Interests are comprised of Farmout Interests
entered into with any Person other than a Related Person.
(iv) If, as of the date of the release of the Released
Interests, the Adjusted Consolidated Net Tangible Assets equal or
exceed the following percentages of the Company's Secured
Indebtedness:
(A) 150%, then the value of the Released Interests may be in
an amount up to $5.0 million less the value of the Released Interests
previously released pursuant to this Section 12.5(b)(iv) and Section
12.5(b)(v) at the time released;
(B) 160%, then the value of the Released Interests may be in
an amount up to $6.0 million less the value of the Released Interests
previously released pursuant to this Section 12.5(b)(iv) and Section
12.5(b)(v) at the time released;
(C) 170%, then the value of the Released Interests may be in
an amount up to $7.0 million less the value of the Released Interests
previously released pursuant to this Section 12.5(b)(iv) and Section
12.5(b)(v) at the time released;
(D) 180%, then the value of the Released Interests may be in
an amount up to $8.0 million less the value of the Released Interests
previously released pursuant to this Section 12.5(b)(iv) and Section
12.5(b)(v) at the time released;
(E) 190%, then the value of the Released Interests may be in
an amount up to $9.0 million less the value of the Released Interests
previously released pursuant to this Section 12.5(b)(iv) and Section
12.5(b)(v) at the time released; and
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(F) 200%, then the value of the Released Interests may be in
an amount up to $10.0 million less the value of the Released Interests
previously released pursuant to this Section 12.5(b)(iv) and Section
12.5(b)(v) at the time released.
(v) If, as of the date of the release of the Released Interests,
the Adjusted Consolidated Net Tangible Assets exceed 200% of the
Company's Secured Indebtedness, then the value of the Released
Interests may be in an amount equal to the positive number, if any, of
the difference of (x) the amount obtained by multiplying the
percentage amount by which the Adjusted Consolidated Net Tangible
Assets exceed 200% of the Company's Secured Indebtedness (e.g., if
Adjusted Consolidated Net Tangible Assets equal 250% of the Company's
Secured Indebtedness, then the percentage amount equals 50%) by the
principal amount of the Securities then outstanding, less (y) the
value of the Released Interests previously released pursuant to this
Section 12.5(b)(v).
(c) The release of Collateral pursuant to Section 12.5(b) is subject
to the condition that the Company deliver to the Trustee the following:
(i) a notice from the Company requesting the release of the
Released Interests, (A) describing the proposed Released Interests,
(B) in the case of Sections 12.5(b)(i), 12.5(b)(iv) and 12.5(b)(v)
above, specifying the value of such Released Interests on such date,
(C) stating that the release of such Released Interests will not
interfere with the Trustee's ability to realize the value of the
remaining Collateral and will not impair the maintenance and operation
of the remaining Collateral, (D) certifying that release of the
Released Interests complies with the terms and conditions of this
Indenture with respect thereto, (E) specifying which of the
circumstances described in Sections 12.5(b)(i), 12.5(b)(ii),
12.5(b)(iii), 12.5(b)(iv) and 12.5(b)(v) pursuant to which the
Collateral is requested to be released and (F) in the event there is
to be a substitution of property for the Released Interests,
specifying the property intended to be substituted for the Released
Interests;
(ii) an Officers' Certificate of the Company stating that (A)
the disposition covers only the Released Interests and complies with
the terms and conditions of this Indenture with respect to Asset
Dispositions, (B) there is no Default or Event of Default in effect or
continuing on the date thereof, (C) the release of the Collateral will
not result in a Default or Event of Default under this Indenture and
(D) all conditions precedent in this Indenture relating to the release
in question have been complied with; and
(iii) all documentation required by the TIA, if any, prior to
the release of the Collateral by the Trustee and, in the event there
is to be a substitution of property for the Released Interests, all
documentation necessary to effect the substitution of such new
Collateral.
Section 12.6 Form and Sufficiency of Release.
In the event that the Company has sold, exchanged, or otherwise
disposed of or proposes to sell, exchange or otherwise dispose of any portion of
the Collateral that may be sold, exchanged or otherwise disposed of by the
Company, and the Company requests the Trustee to furnish a written disclaimer,
release or quit-claim of any interest in such property under this Indenture and
the Security
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Documents, the Trustee, in its capacity as Trustee under the Security Documents,
shall execute, acknowledge and deliver to the Company (in proper form) such an
instrument promptly after satisfaction of the conditions set forth herein for
delivery of any such release. Notwithstanding the preceding sentence, all
purchasers and grantees of any property or rights purporting to be released
herefrom shall be entitled to rely upon any release executed by the Trustee
hereunder as sufficient for the purpose of this Indenture and as constituting a
good and valid release of the property therein described from the Lien of this
Indenture or of the Security Documents.
Section 12.7 Purchaser Protected.
No purchaser or grantee of any property or rights purporting to be
released herefrom shall be bound to ascertain the authority of the Trustee to
execute the release or to inquire as to the existence of any conditions herein
prescribed for the exercise of such authority; nor shall any purchaser or
grantee or any property or rights permitted by this Indenture to be sold or
otherwise disposed of by the Company be under any obligation to ascertain or
inquire into the authority of the Company to make such sale or other
disposition.
Section 12.8 Authorization of Actions To Be Taken by the Trustee Under
the Security Documents.
Subject to the provisions of the applicable Security Document and the
Subordination Agreement, (a) the Trustee may, in its sole discretion and without
the consent of the Holders, take all actions it deems necessary or appropriate
to (i) enforce any of the terms of the Security Documents and (ii) collect and
receive any and all amounts payable in respect of the Obligations of the Company
hereunder and (b) the Trustee shall have power to institute and to maintain such
suits and proceedings as it may deem expedient to prevent any impairment of the
Collateral by any act that may be unlawful or in violation of the Security
Documents or this Indenture, and such suits and proceedings as the Trustee may
deem expedient to preserve or protect its interests and the interests of the
Holders in the Collateral (including the power to institute and maintain suits
or proceedings to restrain the enforcement of or compliance with any legislative
or other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest thereunder or be prejudicial to
the interests of the Holders or of the Trustee).
Section 12.9 Authorization of Receipt of Funds by the Trustee Under the
Security Documents.
The Trustee is authorized to receive any funds for the benefit of the
Holders distributed under the Security Documents, and to make further
distributions of such funds to the Holders in accordance with the provisions of
Section 6.10 and the other provisions of this Indenture.
Section 12.10 Disbursement Account.
(a) To the extent that proceeds received from the disposition and
release of Collateral from the Security Interest pursuant to Section 12.5(b)(ii)
are not to be used to develop Collateral within 30 days of the receipt thereof,
such proceeds shall be deposited in the Disbursement Account, which the Trustee
shall establish and maintain in accordance with the terms and provisions of this
Indenture. The proceeds deposited in the Disbursement Account shall be invested
by the Trustee in Permitted Obligations. If no written instructions are provided
to the Trustee concerning investment of the funds in the Deposit Account, then
the Trustee is authorized to invest such funds in the Trustee's cash management
Federated Funds.
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(b) The Trustee shall release from the Disbursement Account such
proceeds or a portion thereof, as applicable, upon the delivery by the Company
to the Trustee of the following:
(i) a notice from the Company requesting the release of such
proceeds or a portion thereof, as applicable, (A) stating the amount
of such proceeds to be released, (B) stating that such proceeds will
be used to develop the Collateral within the next 30 days, (C) stating
that all prior releases of proceeds from the Disbursement Account have
been used to develop the Collateral and (D) certifying that release of
such proceeds complies with the terms and conditions of this Indenture
with respect thereto.
(ii) an Officers' Certificate of the Company stating that (A)
there is no Default or Event of Default in effect or continuing on the
date thereof, (B) the release of such proceeds will not result in a
Default or Event of Default under this Indenture and (C) all
conditions precedent in this Indenture relating to the release of the
proceeds in question have been complied with; and
(iii) all documentation required by the TIA, if any, prior to
the release of such proceeds by the Trustee.
Section 12.11 Escrow Account.
(a) Of the proceeds from the issuance of the Series A Securities, the
Escrow Funds shall be deposited in the Escrow Account on the Issue Date. The
Trustee shall establish and maintain the Escrow Account in accordance with the
terms and provisions of this Indenture, and the Trustee shall hold the Escrow
Funds for the equal and ratable benefit of the Holders without preference,
priority or distinction of any thereof over any other by reason of difference in
time of issuance, sale or otherwise, as security for the Company's Obligations
under this Indenture and the Securities to pay interest from the Issue Date
through the Interest Payment Date of June 1, 1998. The Trustee shall have sole
dominion and control over the Escrow Account and the funds from time to time on
deposit therein, and such funds may be withdrawn or transferred from the Escrow
Account only in accordance with the provisions of this Indenture to pay unpaid
and accrued interest on the Securities from the Issue Date through and including
the Interest Payment on June 1, 1998.
(b) The Escrow Funds shall be invested by the Trustee in Permitted
Obligations. All interest and other earnings on investments held in the Escrow
Account shall be for the Company's account and shall be disbursed to the Company
after the payment of all accrued and unpaid interest due on the Interest Payment
Date on June 1, 1998, to such accounts as may be designated by the Company in
written instructions delivered to the Trustee.
(c) Not earlier than June 1, 1998, the Trustee shall release from the
Escrow Account all interest and earnings on investments held in the Escrow
Account upon the delivery by the Company to the Trustee of the following:
(i) a notice from the Company requesting the release of such
earnings certifying that release of such earnings complies with the
terms and conditions of this Indenture with respect thereto.
(ii) an Officers' Certificate of the Company stating that (A)
there is no Default or Event of Default in effect or continuing on the
date thereof, (B) the release of such
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<PAGE>
earnings will not result in a Default or Event of Default under this
Indenture and (C) all conditions precedent in this Indenture relating
to the release of the earnings in question have been complied with;
and
(iii) all documentation required by the TIA, if any, prior to
the release of such earnings by the Trustee.
ARTICLE THIRTEEN
MISCELLANEOUS
Section 13.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of TIA (S) 318(c), the imposed duties shall
control; provided, however, that this Section 13.1 shall not of itself require
that this Indenture or the Trustee be qualified under the TIA or constitute any
admission or acknowledgment by any party hereto that any such qualification is
required prior to the time this Indenture and the Trustee are required by the
TIA to be so qualified.
Section 13.2 Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person, mailed by certified or registered mail (return receipt
requested) or overnight courier guaranteeing next-day delivery addressed as
follows or by facsimile transmission:
If to the Company or any Subsidiary Guarantor:
Forman Petroleum Corporation
650 Poydras Street
Suite 2200
New Orleans, Louisiana 70130-6101
Facsimile No.: (504) 522-1796
Attention: President
If to the Trustee:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue
Suite 2700
Dallas, Texas 75201
Facsimile No.: (214) 754-1303
Attention: Corporate Trust
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<PAGE>
For purposes of the Company's obligation hereunder to maintain an
office or agency in the City of New York for purposes of surrendering
Securities, the address of the Trustee's agent is:
By hand:
U.S. Trust Company of Texas, N.A.
111 Broadway, L.L.
New York, New York 10006
Telephone: (212) 374-4056
Attention: Corporate Trust
By mail:
U.S. Trust Company of Texas, N.A.
P.O. Box 841
Cooper Station
New York, New York 10276
The Company or any Subsidiary Guarantor or the Trustee by notice to
the other may designate additional or different addresses for subsequent notices
or communications.
Any notice or communication mailed to a Holder shall be mailed to him
by first-class mail at his address as it appears on the registration books of
the Registrar and shall be sufficiently given to him if so mailed within the
time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it. If the Company mails notice or
communications to Holders it shall mail a copy to the Trustee and each Agent at
the same time. All notices, requests or other communications shall be in
writing.
Section 13.3 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The
Company, the Subsidiary Guarantors, the Trustee, the Registrar and anyone else
shall have the protection of TIA (S) 312(c).
Section 13.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company and/or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Company
and/or such Subsidiary Guarantor, as the case may be, shall furnish to the
Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, the conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, such conditions precedent have been complied with.
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<PAGE>
Section 13.5 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
person, such covenant or condition has been complied with.
Section 13.6 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules for its
functions.
Section 13.7 Legal Holidays.
If a payment date is not a Business Day at a place of payment, payment
may be made at the place on the next succeeding Business Day, without additional
interest.
Section 13.8 Governing Law.
THIS INDENTURE AND THE SECURITIES AND THE GUARANTEES SHALL 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 LAWS TO THE EXTENT THAT
THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Each of the parties hereto agrees to submit to the non-exclusive jurisdiction of
the competent courts of the State of New York sitting in the City of New York or
the Untied States District Court for the Southern District of New York, in any
action or proceeding arising out of or relating to this Indenture or the
Securities.
Section 13.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
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<PAGE>
Section 13.10 No Recourse Against Others.
All liability described in paragraph 17 of the Securities of any
director, officer, employee or stockholder, as such, of the Company, the
Subsidiary Guarantors or the Trustee is waived and released.
Section 13.11 Successors.
All agreements of the Company and any Subsidiary Guarantor in this
Indenture and the Securities and under any Subsidiary Guarantee, as the case may
be, shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
Section 13.12 Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
instrument.
Section 13.13 Severability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
Dated: June 3, 1997
FORMAN PETROLEUM CORPORATION
By /s/ McLain J. Forman
________________________________
McLain J. Forman
Chairman of the Board, President
and Chief Executive Officer
U.S. TRUST COMPANY OF TEXAS, N.A.
By /s/ J. C. Stohlmann
________________________________
John C. Stohlmann
Vice President
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<PAGE>
EXHIBIT A
[Form of Security]
[If a Series A Security or a Series B Security constituting a Restricted
Security --
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR"); (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THE SECURITY EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE
SECURITY EVIDENCED HEREBY, EXCEPT (A) TO FORMAN PETROLEUM CORPORATION (THE
"COMPANY"), (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO U.S. TRUST COMPANY OF TEXAS, N.A., AS TRUSTEE, A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
SUCH TRUSTEE), (D) OUTSIDE THE UNITED STATES TO FOREIGN PURCHASERS IN OFFSHORE
TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY ARE TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE SECURITY EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF SUCH SECURITY, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO U.S. TRUST COMPANY OF TEXAS, N.A., AS REGISTRAR. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE COMPANY AND U.S. TRUST COMPANY OF TEXAS, N.A., AS
TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE
EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED
HEREBY IF THE PROVISIONS OF SECTION 2.14(a)(1) OF THE INDENTURE ARE SATISFIED.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S.
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE
SECURITIES ACT. THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE 3, 1997, BETWEEN THE COMPANY AND JEFFERIES & COMPANY, INC., A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
A-1
<PAGE>
REGISTERED
13.5% SENIOR SECURED NOTE DUE 2004
CUSIP:
NO. R- $
FORMAN PETROLEUM CORPORATION
(a Louisiana corporation)
promises to pay to ______________________________
or registered assigns
the principal sum of ____________________ Dollars on June 1, 2004
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Dated: FORMAN PETROLEUM CORPORATION
Attest: By:
__________________________________ _______________________________
Secretary President
[Seal]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
By:_______________________________
Authorized Signatory
OR
as Authenticating Agent
By:_______________________________
Authorized Signatory
[Seal]
A-2
<PAGE>
[Reverse Side of Security]
FORMAN PETROLEUM CORPORATION
13.5% Senior Secured Note Due 2004
1. Interest.
Forman Petroleum Corporation, a Louisiana corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semiannually on June 1 and
December 1 of each year, commencing [if a Series A Security - on December 1,
1997, and continuing semiannually thereafter, on June 1 and December 1 in each
year] [if a Series B Security - on the first June 1 or December 1 following the
original issuance of the Series B Securities and continuing semiannually
thereafter, on June 1 and December 1 in each year, from the date of the original
issuance of the Series B Securities], or from the most recent date to which
interest has been paid or duly provided for, until the principal hereof is paid
or duly provided for. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. Accrued but unpaid interest on any Series A Security
that is exchanged for a Series B Security pursuant to the Registration Rights
Agreement shall be paid on or before the first interest payment date on the
Series B Securities.
The interest rate on the Securities is subject to increase under certain
circumstances described in the Registration Rights Agreement.
The Company shall pay interest on overdue principal of and interest on
overdue installments of interest, to the extent lawful, at a rate equal to the
rate of interest otherwise payable on the Securities.
2. Method of Payment.
The Company will pay interest on the Securities to the persons who are
registered holders of Securities at the close of business on the May 15 or
November 15 immediately preceding the interest payment date even though
Securities are canceled after the record date and on or before the interest
payment date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal of and interest on the
Securities in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
interest by check payable in such money or by wire transfer of immediately
available funds. It may mail an interest check to a Holder's registered
address.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-registrar without notice. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
A-3
<PAGE>
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture dated as of June 3,
1997 (the "Indenture") between the Company and the Trustee. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Securities are senior secured obligations of the
Company limited to $70.0 million aggregate principal amount, except as otherwise
provided in the Indenture. Payment on each Security is guaranteed on a senior
basis, jointly and severally, by the Subsidiary Guarantors pursuant to Article
Eleven of the Indenture.
5. Optional Redemption.
At any time on or after June 1, 2002, the Company may, at its option,
redeem all or any portion of the Securities at the redemption prices (expressed
as percentages of the principal amount of the Securities) set forth below, plus,
in each case, accrued interest thereon to the applicable redemption date, if
redeemed during the 12-month period beginning June 1, of the years indicated
below:
Year Percentage
2002.................... 103.375%
2003 and thereafter..... 100.000%
In addition, at any time on or prior to June 1, 1999, up to $17.5 million in
aggregate principal amount of Securities may be redeemed, at the option of the
Company, upon not less than 30 or more than 60 days' notice, from the Net
Proceeds of a Public Equity Offering, at a price equal to 113.5% of the
principal amount thereof, together with accrued and unpaid interest to the date
of redemption, provided that at least $52.5 million in aggregate principal
amount of Securities remains Outstanding immediately after such redemption and
that such redemption occurs within 60 days following the closing of such Public
Equity Offering.
In the case of any redemption of Securities, interest installments due and
payable on or prior to the date of redemption will be payable to Holders of such
Securities of record at the close of business on the relevant Record Date
referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the date of redemption. In the event of
redemption or purchase of this Series __ Security in part only, a new Series __
Security or Securities for the unredeemed or unpurchased portion hereof shall be
issued in the name of the Holder hereof upon the cancellation hereof.
The Securities do not have the benefit of any sinking fund obligations.
6. Notice of Redemption.
Notice of redemption will be mailed to the Holder's registered address at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed. If less than all Securities are to be
redeemed, the Trustee shall select pro rata the Securities to be redeemed in
multiples of $1,000. Securities in denominations larger than $1,000 may be
redeemed in part.
A-4
<PAGE>
7. Change of Control.
Upon the occurrence of a Change of Control, the Company shall be obligated
to make an offer to purchase all of the then outstanding Securities (a "Change
of Control Offer"), and shall purchase, on a Business Day (the "Change of
Control Purchase Date") not more than 60 nor less than 30 days following the
occurrence of a Change of Control, all of the then outstanding Notes validly
tendered pursuant to such Change of Control Offer, at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the fifth Business Day
prior to the Change of Control Purchase Date.
To effect such Change of Control Offer, the Company shall, not later than
the 30th day after the occurrence of such Change of Control, mail to the Trustee
and to each Holder of the Notes notice of the Change of Control Offer, which
notice shall govern the terms of the Change of Control Offer and shall state,
among other things, the procedures that Holders of the Notes must follow to
accept the Change of Control Offer.
8. Net Proceeds Offer.
In the event of certain Asset Dispositions, the Company may be required to
make a Net Proceeds Offer to purchase all or any portion of each Holder's
Securities, at 100% of the principal amount of the Securities plus accrued
interest to the Net Proceeds Payment Date.
9. Restrictive Covenants.
The Indenture imposes certain limitations on, among other things, the
ability of the Company to merge or consolidate with any other Person or sell,
lease or otherwise transfer all or substantially all of its properties or
assets, the ability of the Company or the Subsidiaries to dispose of certain
assets, to pay dividends and make certain other distributions and payments, to
make certain investments or redeem, retire, repurchase or acquire for value
shares of capital stock, to incur additional Indebtedness or incur encumbrances
against certain property, to engage in other business activities, and to enter
into certain transactions with Related Persons, all subject to certain
limitations described in the Indenture.
10. Denominations, Transfer, Exchange.
The Securities are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not transfer or exchange any Securities selected
for redemption. Also, it need not transfer or exchange any Securities for a
period of 30 days before a selection of Securities to be redeemed.
11. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it for
all purposes and neither the Company, the Trustee nor any Agent shall be
affected by notice to the contrary.
A-5
<PAGE>
12. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for one
year, the Trustee or Paying Agent will pay the money back to the Company at its
request. After that, all liability of the Trustee and such Paying Agents with
respect to such money shall cease.
13. Amendment, Supplement, Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Securities, and any past default or noncompliance
with any provision may be waived with the consent of the Holders of a majority
in principal amount of the Securities. Without the consent of any Holder, the
Company may amend or supplement the Indenture or the Securities to, among other
things, cure any ambiguity, defect or incon sistency or to provide for
uncertificated Securities in addition to certificated Securities or to make any
change that does not adversely affect the rights of any Holder.
14. Successor Corporation.
When a successor corporation assumes all the obligations of its predecessor
under the Securities and the Indenture, the predecessor corporation will be
released from those obligations.
15. Defaults and Remedies.
An event of default generally is: default in payment of principal on the
Securities; default for 30 days in payment of interest on the Securities;
failure by the Company or any Subsidiary Guarantor for 60 days after notice to
comply with any of its other agreements in the Indenture; certain defaults under
or acceleration prior to maturity of other indebtedness; certain final judgments
against the Company or Subsidiaries; a failure of any Guarantee of a Material
Subsidiary to be in full force and effect or denial by any Subsidiary Guarantor
of its obligations with respect thereto; and certain events of bankruptcy or
insolvency. Subject to certain limitations in the Indenture, if an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Securities may declare all the
Securities to be due and payable immediately, except that in the case of an
Event of Default arising from certain events of bankruptcy, insolvency or
reorganization relating to the Company, all outstanding Securities shall become
due and payable immediately without further action or notice. Holders may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in principal amount of the Securities may direct the Trustee in its
exercise of any trust or power. The Company must furnish an annual compliance
certificate to the Trustee.
16. Trustee Dealings with Company.
U.S. Trust Company of Texas, N.A., the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Subsidiaries or Affiliates with
the same rights it would have if it were not Trustee.
A-6
<PAGE>
17. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company, any
Subsidiary Guarantor or the Trustee, shall not have any liability for any
obligations of the Company, any Subsidiary Guarantor or the Trustee, under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee or an authenticating
agent signs the certificate of authentication on the other side of this
Security.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT
TEN (=joint tenants with right of survivorship and not as tenants in common),
CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to Holders. No representation is
made as to the accuracy of such numbers as printed on the Securities and
reliance may be placed only on the other identification numbers printed hereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to: Secretary, Forman
Petroleum Corporation, 650 Poydras Street, Suite 2200, New Orleans, Louisiana
70130-6101.
21. Exchange Option.
[If a Series A Security -- At the option of the Holders hereof, the Series
A Securities may be exchanged, pursuant to the Registration Rights Agreement,
for a like aggregate principal amount of Series B Securities.]
A-7
<PAGE>
[FORM OF ASSIGNMENT]
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
_________________________________________________________________
_________________________________________________________________
(Insert assignee's soc. sec. or tax ID no.)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
_________________________________________________________________
_________________________________________________________________
Your Signature: ________________________________________________________
(Sign exactly as your name appears on the other
side of this Security)
Date:_____________________________
Signature Guarantee: __________________________________________
A-8
<PAGE>
[FORM OF OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.11 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.11 [ ]
Section 4.16 [ ]
If you want to have only part of this Security purchased by the Company
pursuant to Section 4.11 or Section 4.16 of the Indenture, state the amount (in
integral multiples of $1,000):
$_____________________________
Date:_________________________ Signature:_______________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:______________________________________
A-9
<PAGE>
EXHIBIT A-1
[Form of Notation on Security
Relating to Guarantee]
GUARANTEE
Subject to the limitations set forth in the Indenture, the Subsidiary
Guarantors (as defined in the Indenture referred to in the Security upon which
this notation is endorsed and each hereinafter referred to as a "Subsidiary
Guarantor," which term includes any successor or additional Subsidiary Guarantor
under the Indenture) have unconditionally guaranteed (a) the due and punctual
payment of the principal of and interest on the Securities, whether at maturity,
acceleration, redemption or otherwise, (b) the due and punctual payment of
interest on the overdue principal of and interest on the Securities, if any, to
the extent lawful, (c) the due and punctual performance of all other obligations
of the Company to the Holders or the Trustee, all in accordance with the terms
set forth in the Indenture, and (d) in case of any extension of time of payment
or renewal of any Securities or any of such other obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Capitalized terms used herein have the meanings assigned to them in the
Indenture unless otherwise indicated.
No stockholder, officer, director or incorporator, as such, past, present
or future, of the Subsidiary Guarantors shall have any personal liability under
this Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
This Guaranty shall be binding upon each Subsidiary Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof and
in the Indenture.
This Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Security upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
Subsidiary Guarantors:
A-1/1
<PAGE>
EXHIBIT A-2
[Form of Legend For Global Securities]
Any Global Security authenticated and delivered hereunder shall bear a
legend in addition to the Private Placement Legend, if required pursuant to
Section 2.14, in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER
OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A-2/1
<PAGE>
EXHIBIT A-3
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 13.5% Senior Secured Notes due 2004, Series A, and
13.5% Senior Secured Notes due 2004, Series B
(the "Securities"), of Forman Petroleum Corporation
This Certificate relates to $_______ principal amount of Securities held in
the form of * a beneficial interest in a Global Security or * Physical
Securities by _______________ (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in exchange
for its beneficial interest in the Global Security held by DTC a Physical
Security or Physical Securities in definitive, registered form of authorized
denominations and in an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[ ] has requested that the Registrar by written order exchange or register
the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such Security, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Securities and the restrictions on
transfers thereof as provided in Section 2.6 of such Indenture, and that the
transfer of these Securities does not require registration under the Securities
Act of 1933, as amended (the "Act") because *:
[ ] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of subparagraph (a)(1) or (c)(1) of
Section 2.6 of the Indenture).
[ ] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
[ ] Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule
501 under the Act).
[ ] Such Security is being transferred in reliance on Regulation S under
the Act.
[ ] Such Security is being transferred in reliance on Rule 144 under the
Act.
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<PAGE>
[ ] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 or Regulation S under the Act to a person other than an
institutional "accredited investor."
_______________________________________
[INSERT NAME OF TRANSFEROR]
By:____________________________________
[Authorized Signatory]
Date:___________________________
_____________
* Check applicable box.
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<PAGE>
EXHIBIT A-4
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS TO
INSTITUTIONAL ACCREDITED INVESTORS
__________________________________, _______
U.S. TRUST COMPANY OF TEXAS, N.A.
111 Broadway, L.L.
New York, New York 10006
Re: Forman Petroleum Corporation Indenture (the "Indenture")
relating to 13.5% Senior Secured Notes due 2004, Series A,
or 13.5% Senior Secured Notes due 2004, Series B
Ladies and Gentlemen:
In connection with our proposed purchase of 13.5% Senior Secured Notes due
2004, Series A, or 13.5% Senior Secured Notes due 2004, Series B (the
"Securities"), of Forman Petroleum Corporation (the "Company"), we confirm that:
1. We have received such information as we deem necessary in order to
make our investment decision.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture and
the undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities may not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities, we will do so only (A) to the
Company or any subsidiary thereof, (B) inside the United States in accordance
with Rule 144A under the Securities Act to a "qualified institutional buyer" (as
defined therein), (C) inside the United States to an institutional "accredited
investor" (as defined below) that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to the Trustee a signed letter
substantially in the form hereof, (D) outside the United States in accordance
with Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing Securities from us a
notice advising such purchaser that resales of the Securities are restricted as
stated herein.
4. We understand that, on any proposed resale of Securities, we will be
required to furnish to you and the Company, such certification, legal opinions
and other information as you and the Company
A-4/1
<PAGE>
may reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Securities purchased by
us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be, for an indefinite period.
6. We are acquiring the Securities purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion, for investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act.
You and the Company and your and their respective counsel are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:__________________________________
[Authorized Signatory]
A-4/2
<PAGE>
EXHIBIT A-5
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION
WITH REGULATION S TRANSFERS
_______________________________________,____
U.S. TRUST COMPANY OF TEXAS, N.A.
111 Broadway, L.L.
New York, New York 10006
Re: Forman Petroleum Corporation Indenture (the "Company")
13.5% Senior Secured Notes due 2004, Series A, and
13.5% Senior Secured Notes due 2004, Series B
Ladies and Gentlemen:
In connection with our proposed sale of $__________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knew that the transaction had been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
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<PAGE>
You and the Company and your and their respective counsel are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy thereof to any interested party in any administrative or legal proceeding
or official inquiry with respect to the matters covered hereby. Defined terms
used herein without definition have the respective meanings provided in
Regulation S.
Very truly yours,
[Name of Transferor]
By:__________________________________
[Authorized Signatory]
A-5/2
<PAGE>
2.1 7.10
2.2 7.11
2.3 8.1
2.4 8.1(a)
2.5 8.1(b)
2.6 8.2
2.6(c) 8.3
2.7 8.4
2.8 8.5
2.9 9.2
2.10 9.3
2.11 9.5
2.14 10.1
3.1 ?
3.3 ?
3.6 ?
4.1 ?
4.2 ?
4.3 11.1
4.4 11.2(a)
4.7 11.2
4.8 11.3
4.9 11.4
4.10 11.5
4.11 12.1
4.13 12.3
4.14 12.4
4.16 13.1
4.17 13.2
5.1 13.3
6.1 13.4
6.2 13.5
6.4 13.7
6.5
6.7
6.8
6.9
6.10
6.11
7.1
7.1(a)
7.1(b)
7.1(c)
7.2
7.5
7.6
7.7
7.8
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<PAGE>
[THIS PAGE LEFT BLANK]
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<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
Dated as of June 3, 1997
by and between
FORMAN PETROLEUM CORPORATION
and
JEFFERIES & COMPANY, INC.
_________________________________
13.5% SENIOR SECURED NOTES DUE JUNE 1, 2004
and
70,000 COMMON STOCK PURCHASE WARRANTS
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions......................................................... 1
2. Exchange Offer...................................................... 5
3. Shelf Registration.................................................. 8
4. Additional Interest................................................. 9
5. Notes Registration Procedures....................................... 10
6. Registration Expenses............................................... 17
7. Indemnification..................................................... 18
8. Rules 144 and 144A.................................................. 20
9. Underwritten Registrations of Registrable Notes..................... 21
10. Registration of Registrable Securities.............................. 21
11. Miscellaneous....................................................... 24
(a) No Inconsistent Agreements................................... 24
(b) Adjustments Affecting Registrable Securities or
Registrable Notes........................................... 24
(c) Amendments and Waivers....................................... 24
(d) Notices...................................................... 24
(e) Successors and Assigns....................................... 25
(f) Counterparts................................................. 26
(g) Headings..................................................... 26
(h) Governing Law................................................ 26
(i) Severability................................................. 26
(j) Notes Held by the Issuer or Its Affiliates................... 26
(k) Third Party Beneficiaries.................................... 26
(1) Entire Agreement............................................. 26
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of June 3, 1997, by and between Forman Petroleum Corporation, a
Louisiana corporation (the "Issuer"), and Jefferies & Company, Inc. (the
"Initial Purchaser").
This Agreement is entered into in connection with the Purchase Agreement,
dated June 3, 1997, by and between the Issuer and the Initial Purchaser (the
"Purchase Agreement") which provides for, among other things, the issuance and
sale to the Initial Purchaser of (i) 70,000 units (the "Units"), each consisting
of $1,000 principal amount of the Issuer's 13.5% Senior Secured Notes due June
1, 2004 (the "Notes"), and one warrant (collectively, along with the Additional
Warrants, the "Warrants") to purchase 0.41524 shares of common stock, no par
value, of the Issuer (the "Common Stock"). In order to induce the Initial
Purchaser to enter into the Purchase Agreement, the Issuer has agreed to provide
the registration rights set forth in this Agreement for the benefit of the
Initial Purchaser and its direct and indirect transferees and assigns. The
execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Units under the Purchase Agreement. The
Issuer is to deposit $9.45 million of the proceeds of the issuance of the Units
(representing the aggregate amount of interest due on the Notes through June 1,
1998) into a custodial account to be maintained by the Trustee (as defined in
Section 1 below).
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the term "day", unless otherwise expressly
provided, shall mean a calendar day and following terms shall have the following
meanings:
Additional Interest: See Section 4(a).
Additional Warrants: The 11,666 Warrants to purchase 4,844 shares of
Common Stock granted to the Initial Purchaser.
Advice: See the last paragraph of Section 5.
Agreement: See the first introductory paragraph to this Agreement.
Applicable Period: See Section 2(b).
Business Day: A day that is not a Saturday, a Sunday, or a day on which
banking institutions in New York, New York or Houston, Texas are required to be
closed.
Common Stock: See the second introductory paragraph to this Agreement.
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<PAGE>
Effectiveness Date: The 120th day after the Issue Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Filing Date: The 60th day after the Issue Date.
Holder: Any registered holder of Registrable Notes or Registrable
Securities.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of the Issue Date, by and between the
Issuer and U.S. Trust Company of Texas, N.A., as trustee, pursuant to which the
Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchaser: See the first introductory paragraph to this Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
IPO Effectiveness Date: See Section 10(a).
Issue Date: The date on which the Units were sold to the Initial Purchaser
pursuant to the Purchase Agreement.
Issuer: See the first introductory paragraph to this Agreement.
NASD: National Association of Securities Dealers, Inc.
Notes: See the second introductory paragraph to this Agreement.
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<PAGE>
Notes Prospectus: The prospectus included in any Notes Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Notes covered by such Notes Registration Statement,
and all other amendments and supplements to such prospectus, including post-
effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
Notes Registration Statement: Any registration statement of the Issuer
(and any then existing Subsidiary Guarantor) filed with the SEC under the
Securities Act, including, but not limited to, the Exchange Registration
Statement, that covers any of the Registrable Notes pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
Person: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Piggy-Back Registration: See Section 10(a).
Private Exchange: See Section 2(b).
Private Exchange Notes: See Section 2(b).
Prospectus: Any Notes Prospectus or Warrants Prospectus.
Purchase Agreement: See the second introductory paragraph to this
Agreement.
Records: See Section 5(o).
Registrable Notes: Each Note upon original issuance thereof and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance thereof and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until, in the case of any such Note, Exchange Note or
Private Exchange Note, as the case may be, the earliest to occur of (i) a Notes
Registration Statement (other than, with respect to any Exchange Note as to
which Section 2(c)(iv) hereof is applicable, the Exchange Registration
Statement) covering such Note, Exchange Note
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<PAGE>
or Private Exchange Note, as the case may be, has been declared effective by the
SEC and such Note, Exchange Note or Private Exchange Note, as the case may be,
has been disposed of in accordance with such effective Notes Registration
Statement, (ii) such Note, Exchange Note or Private Exchange Note, as the case
may be, is sold in compliance with Rule 144, (iii) in the case of any Note, such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes which may be resold without restriction under state and federal
securities laws, or (iv) such Note, Exchange Note or Private Exchange Note, as
the case may be, ceases to be outstanding for purposes of the Indenture.
Registrable Securities: Any of (i) the Warrant Shares (whether or not the
related Warrants have been exercised) and (ii) any other securities issued or
issuable with respect to any Warrant Shares by way of stock dividends or stock
splits or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (i) a Warrants Registration Statement with respect to the offering of such
securities by the Holder thereof shall have been declared effective under the
Securities Act and such securities shall have been disposed of by such Holder
pursuant to such Warrants Registration Statement, (ii) such securities are
eligible for sale to the public pursuant to Rule 144(k) (or an similar provision
then in force, but not Rule 144A) or are all otherwise eligible for sale under
Rule 144 by such Holder in the current calendar quarter, (iii) such securities
shall have been otherwise transferred by such Holder and new certificates for
such securities not bearing a legend restricting further transfer shall have
been delivered by the Issuer or its transfer agent and subsequent disposition of
such securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (iv) such securities
shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Issuer's performance
of or compliance with Section 10 of this Agreement, including, without
limitation, all SEC and stock exchange or NASD registration and filing fees and
expenses, fees and expenses of compliance with securities or blue sky laws
(including, without limitation, reasonable fees and disbursements of counsel for
any underwriters in connection with blue sky qualifications of the Registrable
Securities), preparing, printing, filing, duplicating and distributing a
Warrants Registration Statement and the related Prospectus, the cost of printing
stock certificates, the cost and charges of any transfer agent, rating agency
fees, printing expenses, messenger, telephone and delivery expenses, fees and
disbursements of any counsel for the Issuer and all independent certified public
accountants, the fees and disbursements of underwriters customarily paid by
issuers or sellers or securities (but not including any underwriting discounts
or commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Selling Holders), fees and expenses of one counsel for
the Selling Holders and other reasonable out-of-pocket expenses of the Selling
Holders.
Registration Statement: Any Notes Registration Statement or Warrants
Registration Statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by
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<PAGE>
the SEC providing for offers and sales of securities made in compliance
therewith resulting in offers and sales by subsequent holders that are not
affiliates of an issuer of such securities being free of the registration and
prospectus delivery requirements of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Selling Holder: A Holder who is selling Registrable Securities in
accordance with Section 10 hereof.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
Subsidiary Guarantor: Each subsidiary of the Issuer that guarantees the
obligations of the Issuer under the Notes and the Indenture.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent, the trustee
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).
Underwritten registration or underwritten offering: A registration in
which securities of one or more of the issuers are sold to an underwriter for
reoffering to the public.
Units: See the second introductory paragraph to this Agreement.
Warrants: See the second introductory paragraph to this Agreement.
Warrants Prospectus: The prospectus included in any Warrants Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or
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<PAGE>
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such Warrants
Registration Statement, and all other amendments and supplements to such
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
Warrants Registration Statement: Any registration statement of the Issuer
that covers any Warrant Shares filed with the SEC under the Securities Act
(except for a Warrant Shares Shelf Registration Statement), including the
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Warrant Shares: The shares of Common Stock issuable upon exercise of the
Warrants.
Warrant Shares Shelf Registration Statement: See Section 10(a).
2. Exchange Offer
(a) The Issuer agrees to use its best efforts to file (and to cause any
then existing Subsidiary Guarantor to file) with the SEC no later than the
Filing Date, an offer to exchange (the "Exchange Offer") any and all of the
Registrable Notes (other than the Private Exchange Notes, if any) for a like
aggregate principal amount of debt securities of the Issuer, guaranteed by each
such Subsidiary Guarantor and secured by the same collateral as the Notes, which
are identical in all material respects to the Notes (the "Exchange Notes") (and
which are entitled to the benefits of the Indenture or a trust indenture which
is identical in all material respects to the Indenture (other than such changes
to the Indenture or any such identical trust indenture as are necessary to
comply with any requirements of the SEC to effect or maintain the qualification
thereof under the TIA) and which, in either case, has been qualified under the
TIA), except that the Exchange Notes shall have been registered pursuant to an
effective Registration Statement under the Securities Act, shall not provide for
Additional Interest and shall contain no restrictive legend thereon. The
Exchange Offer shall be registered under the Securities Act on the appropriate
form (the "Exchange Registration Statement") and shall comply with all
applicable tender offer rules and regulations under the Exchange Act. The
Issuer agrees to use its best efforts to (x) cause the Exchange Registration
Statement to be declared effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for at least 30 calendar
days (or longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 45th day following the date on which the Exchange Registration
Statement is declared effective. If after such Exchange Registration Statement
is initially declared effective by the SEC, the Exchange Offer or the issuance
of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Exchange Registration Statement shall be deemed not to
have become effective for purposes of this Agreement. Each Holder who
participates in the Exchange Offer will be required to represent (i) that any
Exchange
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<PAGE>
Notes received by it will be acquired in the ordinary course of its business,
(ii) that at the time of the commencement of the Exchange Offer such Holder has
not entered into any arrangement or understanding with any Person to participate
in the distribution (within the meaning of the Securities Act) of the Exchange
Notes in violation of the provisions of the Securities Act, (iii) that such
Holder is not an affiliate of any of the Issuers within the meaning of the
Securities Act, (iv) if such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the distribution of the Notes and
(v) if such Holder is a Participating Broker-Dealer (as hereinafter defined),
that it will receive Exchange Notes for its own account in exchange for Notes
that were acquired as a result of market-making or other trading activity, and
that it will deliver a prospectus in connection with any resale of the Exchange
Notes. Upon consummation of the Exchange Offer in accordance with this Section
2, the provisions of this Agreement shall continue to apply, mutatis mutandis,
solely with respect to Registrable Notes that are Private Exchange Notes and
Exchange Notes held by Participating Broker-Dealers, and the Issuers shall have
no further obligation to register Registrable Notes (other than Private Exchange
Notes and other than in respect of any Exchange Notes as to which clause
2(c)(iv) hereof applies) pursuant to Section 3 of this Agreement.
(b) The Issuer shall include within the Notes Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution",
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer for its own account
in exchange for Notes that were acquired by it as a result of market-making or
other trading activity (a "Participating Broker-Dealer"), whether such positions
or policies have been publicly disseminated by the staff of the SEC or such
positions or policies, in the judgment of the Initial Purchaser, represent the
prevailing views of the staff of the SEC. Such "Plan of Distribution" section
shall also allow, to the extent permitted by applicable policies and regulations
of the SEC, the use of the Notes Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including, to the extent
so permitted, all Participating Broker-Dealers, and include a statement
describing the manner in which Participating Broker-Dealers may resell the
Exchange Notes.
The Issuer shall use its best efforts to keep the Exchange Registration
Statement effective and to amend and supplement the Notes Prospectus contained
therein, in order to permit such Notes Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such Persons must comply with such requirements
in order to resell the Exchange Notes (the "Applicable Period").
If, upon consummation of the Exchange Offer, the Initial Purchaser holds
any Notes acquired by it and having the status of an unsold allotment in the
initial distribution, the Issuer (upon the request of such Initial Purchaser)
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to the Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by the Initial Purchaser, a like principal amount
of debt securities of the Issuer, guaranteed by any then existing Subsidiary
Guarantor and secured by the same
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collateral as the Exchange Notes, that are identical in all material respects to
the Exchange Notes except for the existence of restrictions on transfer thereof
under the Securities Act and securities laws of the several states of the U.S.
(the "Private Exchange Notes") (and which are issued pursuant to the same
indenture as the Exchange Notes); provided, however, the Issuer shall not be
required to effect such exchange if, in the written opinion of counsel for the
Issuer (a copy of which shall be delivered to the Initial Purchaser and any
Holder affected thereby), such exchange cannot be effected without registration
under the Securities Act. The Private Exchange Notes shall bear the same CUSIP
number as the Exchange Notes, if permissible.
Interest on the Exchange Notes and the Private Exchange Notes will accrue
from (A) the later of (i) the last interest payment date on which interest was
paid on the Notes surrendered in exchange therefor or (ii) if the Notes are
surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest will be paid, the date of such interest payment date or (B)
if no interest has been paid on the Notes, from the Issue Date.
In connection with the Exchange Offer, the Issuer shall:
(1) mail to each Holder a copy of the Notes Prospectus forming part of
the Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer, which
may be the Trustee or an affiliate thereof;
(3) permit Holders to withdraw tendered Registrable Notes at any time
prior to the close of business on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws.
As soon as practicable after the close of the Exchange Offer or the Private
Exchange, as the case may be, the Issuer shall:
(1) accept for exchange all Registrable Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer or the Private Exchange,
as the case may be;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder tendering such Registrable Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the Notes of such
Holder so accepted for exchange.
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The Exchange Offer and the Private Exchange shall be subject to only the
following conditions: (i) the Exchange Offer or the Private Exchange, as the
case may be, does not violate applicable law or any applicable interpretation of
the staff of the SEC, (ii) no action or proceeding is instituted or threatened
in any court or by any governmental agency which might materially impair the
ability of the Issuer to proceed with the Exchange Offer or the Private Exchange
and (iii) all governmental approvals have been obtained, which approvals the
Issuer deem necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes may be issued under (i)
the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event will provide that the Exchange Notes will not
be subject to the transfer restrictions set forth in the Indenture and that the
Exchange Notes, the Private Exchange Notes and the Notes, if any, will be deemed
one class of security (subject to the provisions of the Indenture) and entitled
to participate in all the security granted by the Issuer pursuant to the
Security Documents and in any Subsidiary Guarantee (as such terms are defined in
the Indenture) on an equal and ratable basis.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuer (and any then existing
Subsidiary Guarantor) are not permitted to effect an Exchange Offer, (ii) the
Exchange Offer is not consummated within 180 days of the Issue Date, (iii) any
holder of Private Exchange Notes so requests in writing to the Issuer or (iv) in
the case of any Holder that participates in the Exchange Offer, such Holder does
not receive Exchange Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such Holder as an affiliate of the Issuer within the meaning of
the Securities Act) and so notifies the Issuer within 60 days after such Holder
first becomes aware of such restrictions and providing a reasonable basis for
its conclusions, in the case of each of clauses (i)-(iv), then the Issuer (and
any then existing Subsidiary Guarantor) shall promptly deliver to the Holders
and the Trustee written notice thereof (the "Shelf Notice") and shall file a
Shelf Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Shelf Registration. The Issuer shall as promptly as reasonably
practicable use its best efforts to file (and shall cause any then existing
Subsidiary Guarantor to file) with the SEC a Notes Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Notes (the "Initial Shelf Registration"). If the Issuer (and
any then existing Subsidiary Guarantor) shall have not yet filed the Exchange
Registration Statement, the Issuer shall use its best efforts to file (and shall
cause any then existing Subsidiary Guarantor to file) with the SEC the Initial
Shelf Registration as promptly as practicable and shall use its best efforts to
cause such Initial Shelf Registration to be declared effective under the
Securities Act. Otherwise, the Issuer shall use its best efforts to file (and
shall cause any then existing Subsidiary Guarantor to file) with the SEC the
Initial Shelf Registration as promptly as practicable after delivery of the
Shelf Notice and shall use its best efforts to cause such Shelf
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Registration to be declared effective under the Securities Act as promptly as
practicable thereafter. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuer shall not
permit any securities other than the Registrable Notes to be included in any
Shelf Registration (as defined below). The Issuer shall use its best efforts to
keep the Initial Shelf Registration continuously effective under the Securities
Act until the second anniversary of the Issue Date (subject to extension
pursuant to the last paragraph of Section 5 hereof) or such earlier date as may
be then authorized under Rule 144(k) under the Securities Act (the
"Effectiveness Period"), or such shorter period ending when (i) all Registrable
Notes covered by the Initial Shelf Registration have been sold in the manner set
forth and as contemplated in the Initial Shelf Registration or are otherwise
eligible for sale under Rule 144 by the Holders without restriction by virtue of
the operation of the volume limitations set forth in such Rule or (ii) a
Subsequent Shelf Registration (as defined below) covering all of the Registrable
Notes has been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (other than because of the sale of all of
the securities registered thereunder), the Issuer shall use its best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within 45 days of such cessation of effectiveness amend
such Shelf Registration in a manner to obtain the withdrawal of the order
suspending the effectiveness thereof, or file (and cause any then existing
Subsidiary Guarantor to file) an additional "shelf" Notes Registration Statement
pursuant to Rule 415 covering all of the Registrable Notes (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed, the Issuer shall
use its best efforts to cause the Subsequent Shelf Registration to be declared
effective as soon as practicable after such filing and to keep such Subsequent
Shelf Registration continuously effective for a period equal to the number of
days in the Effectiveness Period less the aggregate number of days during which
the Initial Shelf Registration or any Subsequent Shelf Registrations was
previously continuously effective. As used herein the term "Shelf Registration"
means the Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuer shall promptly supplement and
amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Shelf Registration or by any underwriter of such Registrable
Notes.
4. Additional Interest
(a) The Issuer and the Initial Purchaser agree that the Holders of
Registrable Notes will suffer damages if the Issuer fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Issuer agrees to pay, as liquidated damages, additional interest on the
Notes ("Additional
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Interest") under the circumstances and to the extent set forth below (each of
which shall be given independent effect):
(i) if the Exchange Registration Statement has not been filed on or
prior to the Filing Date, then commencing on the day after the Filing Date,
Additional Interest shall accrue on the Notes over and above any stated
interest at a rate of 0.50% per annum of the principal amount of such Notes
for the first 90 days immediately following the Filing Date, such
Additional Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period;
(ii) if the Exchange Registration Statement is not declared effective
on or prior to the Effectiveness Date, then commencing on the day after the
Effectiveness Date, Additional Interest shall accrue on the Notes over and
above any stated interest at a rate of 0.50% per annum of the principal
amount of such Notes for the first 90 days immediately following the day
after the Effectiveness Date, such Additional Interest rate increasing by
an additional 0.50% per annum at the beginning of each subsequent 90-day
period; and
(iii) if (A) the Issuer (and any then existing Subsidiary Guarantor)
has not exchanged Exchange Notes for all Notes validly tendered in
accordance with the terms of the Exchange Offer on or prior to the 45th day
after the date on which the Exchange Registration Statement is declared
effective or (B) the Initial Shelf Registration, if required to be filed
hereunder, is not declared effective on or prior to the Effectiveness Date
or (C) if applicable, a Shelf Registration has been declared effective and
such Shelf Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the Notes
over and above any stated interest at a rate of 0.50% per annum of the
principal amount of such Notes for the first 90 days commencing on the (x)
60th day after the date on which the Exchange Registration Statement is
declared effective, in the case of (A) or (B) above, or (y) the day such
Shelf Registration ceases to be effective in the case of (C) above, such
Additional Interest rate increasing by an additional 0.50% per annum at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 2.0% per annum; and provided further, that (1)
upon the filing of the Exchange Registration Statement (in the case of (i)
above), (2) upon the effectiveness of the Exchange Registration Statement (in
the case of (ii) above), or (3) upon the exchange of Exchange Notes for all
Notes tendered (in the case of (iii)(A) above), upon the effectiveness of the
Initial Shelf Registration (in the case of (iii)(B) above) or upon the
effectiveness of a Shelf Registration which had ceased to remain effective (in
the case of (iii)(C) above), Additional Interest on the Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.
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<PAGE>
(b) The Issuer shall notify the Trustee within one business day after each
and every date on which an event occurs in respect of which Additional Interest
is required to be paid (an "Event Date"). Any amounts of Additional Interest
due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable
semi-annually, on the dates and in the manner provided in the Indenture and
whether or not any cash interest would then be payable on such date, commencing
with the first such semi-annual date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Notes, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest rate was applicable during such
semi-annual period (determined on the basis of a 360-day year comprised of
twelve 30-day months and, in the case of a partial month, the actual number of
days elapsed), and the denominator of which is 360.
5. Notes Registration Procedures
In connection with the filing of any Notes Registration Statement pursuant
to Section 2 or 3 hereof, the Issuer shall effect such registrations to permit
the sale of such securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Notes Registration Statement filed by the Issuer hereunder, the Issuer
shall:
(a) Prepare and file with the SEC prior to the Filing Date, the
Exchange Registration Statement or if the Exchange Registration Statement
is not filed because of the circumstances contemplated by Section 2(c)(i),
a Shelf Registration as prescribed by Section 2 or 3, and use its best
efforts to cause each such Notes Registration Statement to become effective
and remain effective as provided herein; provided that, if (1) a Shelf
Registration is filed pursuant to Section 3, or (2) a Notes Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2
is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, before filing any Notes Registration Statement or Notes Prospectus
or any amendments or supplements thereto, the Issuer shall, if requested,
furnish to and afford the Holders of the Registrable Notes to be registered
pursuant to such Shelf Registration or each such Participating Broker-
Dealer, as the case may be, covered by such Notes Registration Statement,
their counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed (in each case at least five business days prior to
such filing). The Issuer shall not file any such Notes Registration
Statement or Notes Prospectus or any amendments or supplements thereto if
the Holders of a majority in aggregate principal amount of the Registrable
Notes covered by such Notes Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case
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may be, as may be necessary to keep such Notes Registration Statement
continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Notes Prospectus to be
supplemented by any Prospectus supplement required by applicable law, and
as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; and comply
with the provisions of the Securities Act and the Exchange Act applicable
to it with respect to the disposition of all securities covered by such
Notes Registration Statement as so amended or in such Notes Prospectus as
so supplemented and with respect to the subsequent resale of any securities
being sold by a Participating Broker-Dealer covered by any such Prospectus.
The Issuer shall be deemed not to have used its best efforts to keep a
Notes Registration Statement effective during the Applicable Period if it
voluntarily takes any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking
to sell Exchange Notes not being able to sell such Registrable Notes or
such Exchange Notes during that period unless such action is required by
applicable law or unless the Issuer complies with this Agreement,
including, without limitation, the provisions of paragraph 5(k) hereof and
the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period from whom the Issuer has received written notice that
it will be a Participating Broker-Dealer in the Exchange Offer, notify the
selling Holders of Registrable Notes, or each such Participating Broker-
Dealer, as the case may be, their counsel and the managing underwriters, if
any, promptly (but in any event within two business days), (i) when a Notes
Prospectus or any Notes Prospectus supplement or post-effective amendment
has been filed, and, with respect to a Notes Registration Statement or any
post-effective amendment, when the same has become effective (including in
such notice a written statement that any Holder may, upon request, obtain,
without charge, one conformed copy of such Notes Registration Statement or
post-effective amendment including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Notes Registration Statement or of any order preventing
or suspending the use of any Notes Prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of
the Registrable Notes the representations and warranties of the Issuer
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) hereof cease to be true and correct, (iv) of
the receipt by the Issuer of any notification with respect to the
suspension of the qualification or exemption from qualification of a Notes
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event, the existence of any
condition or any information becoming known that makes any statement made
in such Notes Registration Statement or related Notes Prospectus or any
document
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incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires the making of any changes in, or
amendments or supplements to, such Notes Registration Statement, Notes
Prospectus or documents so that, in the case of the Notes Registration
Statement, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and that in the case of the
Notes Prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (vi) of any of the Issuer's
reasonable determination that a post-effective amendment to a Notes
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use its best efforts to prevent the issuance of any
order suspending the effectiveness of a Notes Registration Statement or of
any order preventing or suspending the use of a Notes Prospectus or
suspending the qualification (or exemption from qualification) of any of
the Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use its best efforts to obtain the withdrawal of any such order
at the earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering, (i) as promptly as practicable
incorporate in a prospectus supplement or post-effective amendment such
information or revisions to information therein relating to such
underwriters or selling Holders as the managing underwriters, if any, or
such Holders or their counsel reasonably request to be included or made
therein and (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the Issuer has
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Registrable Notes
and to each such Participating Broker-Dealer who so requests and to counsel
and each managing underwriter, if any, without charge, one conformed copy
of the Notes Registration Statement or Notes Registration Statements and
each post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits.
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(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Registrable Notes
or each such Participating Broker-Dealer, as the case may be, their
respective counsel, and the underwriters, if any, without charge, as many
copies of the Notes Prospectus and each amendment or supplement thereto and
any documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this Section 5,
the Issuer hereby consents to the use of such Notes Prospectus and each
amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may
be, and the underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered by,
or the sale by Participating Broker-Dealers of the Exchange Notes pursuant
to, such Notes Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Notes Prospectus contained in the Exchange Registration Statement by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Notes or Exchange Notes, as the case may be, for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters, if any, reasonably request in
writing; provided that where Exchange Notes held by Participating Broker-
Dealers or Registrable Notes are offered other than through an underwritten
offering, the Issuer agrees to cause its counsel to perform Blue Sky
investigations and file any registrations and qualifications required to be
filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Notes Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable
the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; provided that neither the Issuer nor any
Subsidiary Guarantor shall be required to (A) qualify generally to do
business in any jurisdiction where it is not then so qualified, (B) take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in
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a form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request.
(j) Use its best efforts to cause the Registrable Notes covered by any
Notes Registration Statement to be registered with or approved by such
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Notes, except as may be required solely as
a consequence of the nature of such selling Holder's business, in which
case the Issuer will cooperate in all reasonable respects with the filing
of such Notes Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare
and (subject to Section 5(a) hereof) file with the SEC, at the expense of
the Issuer, a supplement or post-effective amendment to the Notes
Registration Statement or a supplement to the related Notes Prospectus or
any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes being sold thereunder
or to the purchasers of the Exchange Notes to whom such Notes Prospectus
will be delivered by a Participating Broker-Dealer, any such Notes
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by a
Notes Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Notes Registration
Statement or the managing underwriter or underwriters, if any.
(m) Prior to the initial issuance of the Exchange Notes, (i) provide
the Trustee with one or more certificates for the Registrable Notes in a
form eligible for deposit with The Depository Trust Company and (ii)
provide a CUSIP number for the Exchange Notes.
(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations, warranties to, and covenants
with, the underwriters, with respect to the business of the Issuer and its
subsidiaries and the Notes
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Registration Statement, Notes Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in underwritten
offerings of debt securities similar to the Notes, and confirm the same in
writing if and when requested; (ii) obtain the opinion of counsel to the
Issuer and updates thereof in form and substance reasonably satisfactory to
the managing underwriter or underwriters, addressed to the underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings of debt securities similar to the Notes and such
other matters as may be reasonably requested by underwriters; (iii) obtain
copies of "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or underwriters from
the independent certified public accountants of the Issuer (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Issuer or of any business acquired by the Issuer for
which financial statements and financial data are, or are required to be,
included in the Notes Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Notes Registration
Statement and the managing underwriter or underwriters or agents) with
respect to all parties to be indemnified pursuant to said Section. The
above shall be done at each closing under such underwriting agreement, or
as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, make available for inspection by any selling Holder
of such Registrable Notes being sold, or each such Participating Broker-
Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or
other agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records and pertinent corporate
documents of the Issuers and their respective subsidiaries (collectively,
the "Records") as shall be reasonably necessary to enable them to exercise
any applicable due diligence responsibilities, and cause the officers,
directors and employees of the Issuer and its subsidiaries to supply all
information reasonably requested by any such Inspector in connection with
such Notes Registration Statement. Such Records shall be kept confidential
by each Inspector and shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Notes Registration Statement, (ii) the
release of such Records is ordered pursuant to
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a subpoena or other order from a court of competent jurisdiction, (iii) the
information in such Records is public or has been made generally available
to the public other than as a result of a disclosure or failure to
safeguard by such Inspector or (iv) disclosure of such information is, in
the opinion of counsel for any Inspector, necessary or advisable in
connection with any action, claim, suit or proceeding, directly or
indirectly, involving or potentially involving such Inspector and arising
out of, based upon, related to, or involving this Agreement, or any
transactions contemplated hereby or arising hereunder. Each selling Holder
of such Registrable Notes and each such Participating Broker-Dealer will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Issuer unless
and until such is made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer
will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Issuer and allow the Issuer to undertake appropriate
action to prevent disclosure of the Records deemed confidential at their
expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Offer or
the first Notes Registration Statement relating to the Registrable Notes;
and in connection therewith, cooperate with the trustee under any such
indenture and the Holders of the Registrable Notes, to effect such changes
to such indenture as may be required for such indenture to be so qualified
in accordance with the terms of the TIA; and execute, and use its best
efforts to cause such trustee to execute, all documents as may be required
to effect such changes, and all other forms and documents required to be
filed with the SEC to enable such indenture to be so qualified in a timely
manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to the securityholders of the Issuer earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Issuer after the effective date of a Notes Registration Statement, which
statements shall cover said 12-month periods.
(r) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuer, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, that the Exchange
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Notes or the Private Exchange Notes, as the case may be, and the related
indenture constitute legally valid and binding obligations of the Issuer,
enforceable against the Issuer in accordance with their respective terms
subject to customary exceptions and qualifications; provided that the
Issuer need not comply with this Section 5(r) if all Exchange Notes and
Private Notes are issued pursuant to the Indenture.
(s) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuer (or to such
other Person as directed by the Issuer) in exchange for the Exchange Notes
or the Private Exchange Notes, as the case may be, the Issuer shall mark,
or caused to be marked, on such Registrable Notes that such Registrable
Notes are being canceled in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be; in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Notes Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the NASD.
(u) Use its best efforts to take all other steps reasonably necessary
to effect the registration of the Registrable Notes covered by a Notes
Registration Statement contemplated hereby.
The Issuer may require each seller of Registrable Notes as to which any
registration is being effected to furnish to the Issuer such information
regarding such seller and the distribution of such Registrable Notes as the
Issuer may, from time to time, reasonably request. The Issuer may exclude from
such registration the Registrable Notes of any seller who fails to furnish such
information within a reasonable time (which time in no event shall exceed 30
days) after receiving such request. Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to the Issuer all
information required to be disclosed in order to make the information previously
furnished to the Issuer by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuer of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by a Notes
Registration Statement and such Participating Broker-Dealer will forthwith
discontinue disposition of such Exchange Notes pursuant to any Notes Prospectus
and, in each case, forthwith discontinue dissemination of such Prospectus until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Notes Prospectus contemplated by Section 5(k), or until
it is advised in writing (the "Advice") by the Issuer that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto and, if so directed by the Issuer, such Holder or
Participating Broker-Dealer, as the case may be, will
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deliver to the Issuer all copies, other than permanent file copies, then in such
Holder's or Participating Broker-Dealer's possession, of the Notes Prospectus
covering such Registrable Securities current at the time of the receipt of such
notice. In the event the Issuer shall give any such notice, the Applicable
Period shall be extended by the number of days during such periods from and
including the date of the giving of such notice to and including the date when
each Participating Broker-Dealer shall have received (x) the copies of the
supplemented or amended Notes Prospectus contemplated by Section 5(k) or (y) the
Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Issuer (other than Registration Expenses, which are dealt
with exclusively in Section 10 hereof) shall be borne by the Issuer, whether or
not the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws as provided in Section 5(h)
hereof, (ii) printing expenses, including, without limitation, expenses of
printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, or by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Notes
Registration Statement or by any Participating Broker-Dealer during the
Applicable Period, as the case may be, (iii) reasonable messenger, telephone and
delivery expenses incurred in connection with the Exchange Registration
Statement and any Shelf Registration, (iv) fees and disbursements of counsel for
the Issuer and reasonable fees and disbursements of special counsel for the
sellers of Registrable Notes (subject to the provisions of Section 6(b)), (v)
fees and disbursements of all independent certified public accountants referred
to in Section 5(n)(iii) (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, (vii) Securities Act liability insurance,
if the Issuer desires such insurance, (viii) fees and expenses of all other
Persons retained by the Issuer, (ix) internal expenses of the Issuer (including,
without limitation, all salaries and expenses of officers and employees of the
Issuer performing legal or accounting duties), (x) the expense of any annual
audit, (xi) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange and (xii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuer shall
reimburse the Holders of the Registrable Notes being registered in such
registration for the fees and disbursements, not to exceed $25,000, of not more
than one counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Registrable Notes to
be included in such Shelf Registration and other out-of-pocket expenses of
Holders of Registrable Notes incurred in connection with the registration and
sale of Registrable Notes.
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7. Indemnification
(a) The Issuer agrees to indemnify and hold harmless each Holder of
Registrable Notes, each Holder of Registrable Securities and each Participating
Broker-Dealer selling Exchange Notes during the Applicable Period, the officers
and directors of each such Person, and each Person, if any, who controls any
such Person within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "Participant"), from and against any and
all losses, claims, damages and liabilities (including, without limitation, the
reasonable legal fees and other reasonable expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (as amended
or supplemented if the Issuer shall have furnished any amendments or supplements
thereto) or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if the Issuer shall have furnished any
amendments or supplements thereto) or caused by, arising out of or based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Issuer
in writing by or on behalf of such Participant expressly for use therein;
provided, however, that the Issuer will not be liable if such untrue statement
or omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus or any amendment or
supplement thereto and the Prospectus does not contain any other untrue
statement or omission or alleged untrue statement or omission of a material fact
that was the subject matter of the related proceeding and any such loss,
liability, claim, damage or expense suffered or incurred by the Participants
resulted from any action, claim or suit by any Person who purchased Registrable
Securities, Registrable Notes or Exchange Notes which are the subject thereof
from such Participant and it is established in the related proceeding that such
Participant failed to deliver or provide a copy of the Prospectus (as amended or
supplemented) to such Person with or prior to the confirmation of the sale of
such Registrable Securities, Registrable Notes or Exchange Notes sold to such
Person if required by applicable law, unless such failure to deliver or provide
a copy of the Prospectus (as amended or supplemented) was a result of
noncompliance by the Issuer with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify and
hold harmless the Issuer, its directors and officers and each Person who
controls the Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Issuer to each Participant, but only with reference to information
relating to such Participant furnished to the Issuer in writing by such
Participant expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto, or any preliminary prospectus. The liability
of any Participant under this paragraph shall in no event
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exceed the proceeds received by such Participant from sales of Registrable
Securities, Registrable Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any material rights or defenses by
the Indemnifying Person and the Indemnifying Person was not otherwise aware of
such action or claim). In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed in
writing to the contrary, (ii) the Indemnifying Person has failed within a
reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that, unless there is a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed promptly after
receipt of the invoice therefor as they are incurred. Any such separate firm for
the Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of the securities sold
by all such Participants and any such separate firm for the Issuer, its
directors, its officers and such control Persons of the Issuer shall be
designated in writing by the Issuer. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its prior written
consent, but if settled with such consent or if there is a final non-appealable
judgment for the plaintiff for which the Indemnified Person is entitled to
indemnification pursuant to this Agreement, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for reasonable fees and expenses actually
incurred by counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its prior written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement; provided, however,
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that the Indemnifying Person shall not be liable for any settlement effected
without its consent pursuant to this sentence if the Indemnifying Person is
contesting, in good faith, the request for reimbursement. No Indemnifying Person
shall, without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement (A) includes
an unconditional release of such indemnified Person, in form and substance
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of an
Indemnified Person.
(d) If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable (other than by reason of the exceptions
specifically provided therein) to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Registrable
Securities, Registrable Notes or Exchange Notes, as the case may be, or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other in connection with the statements or omissions (or alleged
statements or omissions) that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuers on the one hand or
by the Participants or such other Indemnified Person, as the case may be, on the
other, such Persons' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission and any other
equitable considerations appropriate under the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable
Securities, Registrable Notes or Exchange Notes, as the case may be, exceeds the
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amount of any damages that such Participant has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Issuer covenants that it will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder in a timely manner and, if at any time it is not
required to file such reports, it will, upon the request of any Holder of
Registrable Securities or Registrable Notes, make publicly available other
information so long as necessary to permit sales pursuant to Rule 144 and Rule
144A. The Issuer further covenants, for so long as any Registrable Securities
or Registrable Notes remain outstanding, to make available to any Holder or
beneficial owner thereof in connection with any sale thereof and any prospective
purchaser of such Registrable Securities or Registrable Notes from such Holder
or beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Securities or
Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations of Registrable Notes
If any of the Registrable Notes covered by any Shelf Registration is to be
sold in an underwritten offering, the investment banker or investment bankers
and manager or managers that will manage the offering will be selected by the
Holders of a majority in aggregate principal amount of such Registrable Notes
included in such offering and reasonably acceptable to the Issuer.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Registration of Registrable Securities
(a) Shelf Registration of Registrable Securities. The Company shall,
within 90 days after the effectiveness date (the "IPO Effectiveness Date") of a
registration statement filed with the Commission in connection with an initial
public offering of the Common Stock, use its best efforts to (a) file a shelf
registration statement covering resales of the Warrant Shares (the
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"Warrant Shares Shelf Registration Statement"), (b) cause the Warrant Shares
Shelf Registration Statement to be declared effective under Securities Act and
(c) keep effective the Warrant Shares Shelf Registration Statement until the
earlier of one year after the IPO Effectiveness Date (or such earlier date as
may be authorized under Rule 144(k), as it may be amended from time to time) or
such time as all of the applicable Warrant Shares have been sold thereunder or
are otherwise eligible for sale under Rule 144 under the Securities Act. The
Company shall, in the event that a Warrant Shares Shelf Registration Statement
is filed, provide to each Holder copies of the prospectus that is a part of the
Warrant Shares Shelf Registration Statement, notify each such Holder when the
Warrant Shares Shelf Registration Statement for the Warrant Shares has become
effective and take certain other actions as are required to permit unrestricted
resales of the Warrant Shares. The Company shall require a Holder that sells
Warrant Shares pursuant to the Warrant Shares Shelf Registration Statement to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, and any such Holder shall be bound by the provisions
of this Agreement that are applicable to such a Holder (including certain
indemnification rights and obligations). Each holder of the Warrant Shares shall
deliver information to be used in connection with the Warrant Shares Shelf
Registration Statement and provide comments on the Warrant Shares Shelf
Registration Statement within the time periods set forth in this Agreement in
order to have its Warrant Shares included in the Warrant Shares Shelf
Registration Statement.
(b) Piggy-Back Registration of Registrable Securities. If at any time
after the Issue Date the Issuer proposes to file a registration statement under
the Securities Act with respect to an offering by the Issuer for its own account
or for the account of any holders of its Common Stock (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC), (ii) a registration statement filed in connection with an
exchange offer or offering of securities solely to the Issuer's existing
securityholders or (iii) any Notes Registration Statement), then the Issuer
shall give written notice of such proposed filing to the Holders of Registrable
Securities as soon as practicable (but in no event fewer than 20 days before the
anticipated filing date), and such notice shall offer such Holders the
opportunity to register such number of Registrable Securities as each Holder may
request in writing within 20 days after receipt of such written notice from the
Issuer (which request shall specify the Registrable Securities intended to be
disposed of by such Selling Holder and the intended method of distribution
thereof) (a "Piggy-Back Registration"). The Issuer shall use its best efforts
to keep such Piggy-Back Registration continuously effective under the Securities
Act until at least the earlier of (A) an aggregate of 180 days after the
effective date thereof or (B) the consummation of the distribution by the
Holders of all of the Registrable Securities covered thereby. The Issuer shall
use its best efforts to cause the managing underwriter or underwriters, if any,
of such proposed offering to permit the Registrable Securities requested to be
included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Issuer or any other security holder
included therein and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof. Any
Selling Holder shall have the right to withdraw its request for inclusion of its
Registrable Securities in any Registration Statement pursuant to this Section 10
by giving written notice to the Issuer of its request to withdraw at any time
prior to the filing of such Registration Statement with the SEC.
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The Issuer will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 10,
and each Holder of Registrable Securities shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of such Holder's Registrable Securities pursuant to a Piggy-Back Registration
effected pursuant to this Section 10.
No registration effected under this Section 10, and no failure to
effect a registration under this Section 10, shall relieve the Issuer of its
obligation to effect a registration upon the request of Holders of Registrable
Notes pursuant to Section 2 or 3 hereof, and no failure to effect a registration
under this Section 10 and to complete the sale of securities registered
thereunder in connection therewith shall relieve the Issuer of any other
obligation under this Agreement.
(c) Priority in Piggy-Back Registration. In a registration pursuant to
this Section 10 involving an underwritten offering, if the managing underwriter
or underwriters of such underwritten offering have informed, in writing, the
Issuer and the Selling Holders requesting inclusion in such offering that in
such underwriter's or underwriters' opinion the total number of securities which
the Issuer, the Selling Holders and any other Persons desiring to participate in
such registration intend to include in such offering is such as to adversely
affect the success of such offering, including the price at which such
securities can be sold, then the Issuer will be required to include in such
registration only the amount of securities which it is so advised should be
included in such registration. In such event: (x) in cases initially involving
the registration for sale of securities for the Issuer's own account, securities
shall be registered in such offering in the following order of priority: (i)
first, the securities which the Issuer proposes to register, (ii) second,
provided that no securities proposed to be registered by the Issuer have been
excluded from such registration, the securities which have been requested to be
included in such registration by the Selling Holders and by Persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments to
"piggy-back" registration rights of the Issuer entered into prior to, and in
existence on, the date hereof (pro rata based on the amount of securities sought
to be registered by such Persons), and (iii) third, provided that no securities
sought to be included by the Selling Holders or such Persons have been excluded
from such registration, the securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Issuer entered into subsequent to the date hereof (pro rata based on the amount
of securities sought to be registered by such Persons); and (y) in cases not
initially involving the registration for sale of securities for the Issuer's own
account, securities shall be registered in such offering in the following order
of priority: (i) first, the securities of any Person whose exercise of a
"demand" registration right pursuant to a contractual commitment of the Issuer
is the basis for the registration, (ii) second, provided that no securities of
any Person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Issuer is the basis for such registration have
been excluded from such registration, the securities requested to be included in
such registration by the Selling Holders pursuant to this Agreement and by
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments to "piggy-back" registration rights of the Issuer
entered into prior to, and in existence on, the date hereof (pro rata based on
the total amount of securities sought to be included by such Persons), (iii)
third, provided that no securities sought to be included by the Selling Holders
or such Persons have been excluded
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from such registration, securities of other Persons entitled to exercise "piggy-
back" registration rights pursuant to contractual commitments entered into
subsequent to the date hereof (pro rata based on the amount of securities sought
to be registered by such Persons) and (iv) fourth, provided that no securities
sought to be included by other Persons entitled to exercise "piggy-back"
registration rights pursuant to such contractual commitments have been excluded
from such registration, any securities which the Issuer proposes to register.
(d) Suspension of Sales, etc. Subject to the next sentence of this
paragraph, the Issuer shall be entitled to postpone, for a reasonable period of
time, the effectiveness of, or suspend the rights of any Holders to make sales
pursuant to any Warrants Registration Statement otherwise required to be
prepared, filed and made and kept effective by it under this Section 10;
provided, however, that the duration of such postponement or suspension may not
exceed the earlier to occur of (A) 15 days after the cessation of the
circumstances described in the next sentence of this paragraph on which such
postponement or suspension is based or (B) 120 days after the date of the
determination of the Board of Directors referred to in the next sentence. Such
postponement or suspension may only be effected if the Board of Directors of the
Issuer determines in good faith that the effectiveness of, or sales pursuant to,
such Warrants Registration Statement would materially impede, delay or interfere
with any financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction involving the Issuer or any of
its affiliates or require disclosure of material information which the Issuer
has a bona fide business purpose for preserving as confidential. If the Issuer
shall so postpone the effectiveness of, or suspend the rights of any Holders to
make sales pursuant to, a Warrants Registration Statement, it shall, as promptly
as possible, notify any Selling Holders of such determination, and the Selling
Holders shall (y) have the right, in the case of a postponement of the
effectiveness of a Warrants Registration Statement, upon the affirmative vote of
Selling Holders of not less than a majority of the Registerable Securities to be
included in such Warrants Registration Statement, to withdraw the request for
registration by giving written notice to the Issuer within 10 days after receipt
of such notice or (z) in the case of a suspension of the right to make sales,
receive an extension of the registration period referred to in Section 10(a)
hereof equal to the number of days of the suspension.
(e) Exclusion of Registrable Securities. The Issuer shall not be required
by this Section 10 to include Registrable Securities in a Piggy-Back
Registration if (i) in the written opinion of counsel to the Issuer, addressed
to the Holders of Registrable Securities and delivered to them, the Holders of
such Registrable Securities seeking registration would be free to sell all such
Registrable Securities within the current calendar quarter without registration
under Rule 144, which opinion may be based in part upon the representation by
the Holders of such Registrable Securities seeking registration, which
representation shall not be unreasonably withheld, that each such Holder is not
an affiliate of the Issuer within the meaning of the Securities Act, and (ii)
all requirements under the Securities Act for effecting such sales are satisfied
at such time.
(f) Obligations of Selling Holders. The Issuer's obligations under this
Section 10 shall be subject to the obligations of the Selling Holders, which the
Selling Holders acknowledge, to
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furnish all information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations to
permit the Issuer to comply with all applicable requirements of the SEC and to
obtain any acceleration of the effective date of a Warrants Registration
Statement.
(g) No Special Audit. The Issuer shall not be obligated to cause any
special audit to be undertaken in connection with any Piggy-Back Registration
unless such audit is requested by the underwriters with respect to such Piggy-
Back Registration.
11. Miscellaneous
(a) No Inconsistent Agreements. The Issuer has not entered, as of the
date hereof, and the Issuer shall not enter, after the date of this Agreement,
into any agreement with respect to any of its securities that is inconsistent
with the rights granted to the Holders of Registrable Securities or Registrable
Notes in this Agreement or otherwise conflicts with the provisions hereof. The
Issuer has not entered and will not enter into any agreement with respect to any
of its securities which will grant to any Person piggy-back rights with respect
to a Notes Registration Statement.
(b) Adjustments Affecting Registrable Securities or Registrable Notes.
The Issuer shall not, directly or indirectly, take any action with respect to
the Registrable Securities or Registrable Notes as a class that would adversely
affect the ability of the Holders to include such Registrable Securities or
Registrable Notes in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) in circumstances that would adversely affect any Holders of
Registrable Securities or Registrable Notes, the Holders of a majority of the
Registrable Securities or the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable Notes, as the case may be,
and (B) in circumstances that would adversely affect Participating Broker-
Dealers, the Participating Broker-Dealers holding not less than a majority in
aggregate principal amount of the Exchange Notes held by all Participating
Broker-Dealers; provided, however, that Section 7 and this Section 11(c) may not
be amended, modified or supplemented without the prior written consent of each
Holder and each Participating Broker-Dealer (including any Person who was a
Holder or Participating Broker-Dealer of Registrable Securities or Registrable
Notes or Exchange Notes, as the case may be, disposed of pursuant to any
Registration Statement). Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Notes whose securities are
being tendered pursuant to the Exchange Offer or sold pursuant to a Notes
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being tendered or being sold by such Holders pursuant to such
Notes Registration Statement.
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(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:
1. if to a Holder of Registrable Securities or Registrable Notes or
to any Participating Broker-Dealer, at the most current address of such
Holder or Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar of the Warrants or the Notes, with a copy in like
manner to the Initial Purchaser as follows:
JEFFERIES & COMPANY, INC.
Two Houston Center
909 Fannin St., Suite 3100
Houston, Texas 77010
Facsimile No.: (713) 650-8730
Attention: Robert W. Carington
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Facsimile No.: (713) 651-5246
Attention: Charles L. Strauss
2. if to the Initial Purchaser, at the address specified in Section
11(d)(1);
3. if to the Issuer, as follows:
Forman Petroleum Corporation
650 Poydras Street, Suite 2200
New Orleans, Louisiana 70130-6101
Facsimile No.: (504) 522-1796
Attention: President
with copies to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Facsimile No.: (713) 615-5437
Attention: Alan P. Baden
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All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the United States mail, postage prepaid, if mailed, one
business day after being timely delivered to a next-day air courier guaranteeing
overnight delivery; and when receipt is acknowledged by the addressee, if
telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto and
the Holders; provided, however, that the provisions of this Agreement relating
to registration rights shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless such successor or assign holds
Registrable Securities or Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE NON-
EXCLUSIVE JURISDICTION OF THE COMPETENT COURTS OF THE STATE OF NEW YORK SITTING
IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) Notes Held by the Issuer or Its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities or
Registrable Notes is required
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hereunder, Registrable Securities or Registrable Notes, as the case may be, held
by the Issuer or its affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(k) Third Party Beneficiaries. Holders and Participating Broker-Dealers
are intended third party beneficiaries of this Agreement and this Agreement may
be enforced by such Persons.
(1) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Indenture and the Security Documents, is intended by the parties
as a final and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein and
any and all prior oral or written agreements, representations, or warranties,
contracts, understandings, correspondence, conversations and memoranda between
the Initial Purchaser on the one hand and the Issuer on the other, or between or
among any agents, representatives, parents, subsidiaries, affiliates,
predecessors in interest or successors in interest with respect to the subject
matter hereof and thereof are merged herein and replaced hereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
FORMAN PETROLEUM CORPORATION
By:________________________________
McLain J. Forman
Chairman of the Board,
Chief Executive Officer and President
JEFFERIES & COMPANY, INC.
By:________________________________
Robert W. Carington
Senior Vice President
VEHOU05:52593.1
VEHOU05:54518.1: Exhibit B
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EXHIBIT C
FORM OF
INTERCREDITOR AND SUBORDINATION AGREEMENT
LIENS
This Intercreditor and Subordination Agreement dated as of ___________,199_
(this "Agreement") is made by and between U.S. TRUST COMPANY OF TEXAS, N.A., AS
TRUSTEE under and pursuant to the hereinafter defined "Subordinated Creditor
Indenture" (the "Subordinated Creditor"), and ___________________________, as
Collateral Agent ("Collateral Agent") for the lenders ("Lenders") signatory to
the hereinafter defined "Lender Credit Agreement".
RECITALS
A. As of June ____, 1997, Forman Petroleum Corporation, a Delaware
corporation (the "Borrower"), and the Subordinated Creditor entered into an
Indenture (the "Subordinated Creditor Indenture") pursuant to which and upon the
terms and conditions stated therein indebtedness was incurred by the Borrower
(the "Subordinated Indenture Indebtedness") in order to refinance existing term
loans ("Existing Loans") secured by certain oil and gas properties of Borrower
located in the State of Louisiana in the Parishes of Jefferson, Lafourche, St.
Charles and Terrebonne (the "Collateral").
B. The Existing Loans were secured by liens and security interests (the
"Existing Liens") upon the Collateral created by and existing under that certain
Act of Mortgage, Security Agreement, Assignment of Production and Financing
Statement dated November 21, 1996, executed by Borrower, passed before Diane L.
Bailey, Notary Public, recorded in the parishes in the State of Louisiana as set
forth on Schedule I attached hereto, as amended by Act of First Amendment of
Mortgage, Security Agreement, Assignment of Production and Financing Statement
dated effective as of December 16, 1996, passed before Judy M. Sullivan, Notary
Public, recorded in the parishes in the State of Louisiana as set forth on
attached Schedule I (as so amended, the "Existing Mortgage").
C. The Subordinated Indenture Indebtedness to the extent of $_________
represents a renewal, rearrangement, extension and modification of Existing
Loans, and otherwise represents additional debts and obligations which
constitute additional "Obligations" under the terms of the Existing Mortgage,
and is secured by the Existing Liens.
D. The Existing Liens were assigned to the Subordinated Creditor, and the
Existing Mortgage has been further amended by Borrower and the Subordinated
Creditor pursuant to that
<PAGE>
certain Act of Second Amendment of Mortgage, Security Agreement, Assignment of
Production and Financing Statement dated June ____, 1997, passed before
__________________________, Notary Public, recorded in the parishes in the State
of Louisiana as set forth on attached Schedule I (the Existing Mortgage, as so
amended, hereinafter called the "Subordinated Creditor Mortgage"), to fully
secure all amounts advanced to Borrower pursuant to the Subordinated Creditor
Indenture [Note: This recital may need to be revised to reflect additional
amendments to the Existing Mortgage or that the Subordinated Creditor Mortgage
is a new mortgage replacing the Existing Mortgage.]
E. As of ____________, the Borrower, the Lenders and the Collateral Agent
entered into a Credit Agreement (the "Lender Credit Agreement") pursuant to
which each Lender agreed, upon the terms and conditions stated therein, to make
a loan to the Borrower, secured by a first and prior lien upon the Collateral
pursuant to the "Lender Mortgage" as defined below.
F. One of the conditions of the Lender Credit Agreement is that the liens
and security interests in the Collateral under the Lender Mortgage be senior to
the liens and security interests in the Collateral under the Subordinated
Creditor Mortgage, in the manner and to the extent provided in this Agreement.
G. The Lenders, the Collateral Agent and the Subordinated Creditor desire
to enter into this Agreement concerning the various loans, credits and other
liabilities (actual or contingent) for which the Borrower is or shall be
obligated, and the respective rights of the Lenders, the Collateral Agent and
the Subordinated Creditor with respect to the Collateral.
H. In order to induce the Lenders and the Collateral Agent to extend
credit to the Borrower and for purposes of certain conditions precedent and
covenants of the Lender Loan Documents, the Subordinated Creditor hereby agrees
with the Lenders and the Collateral Agent, and in order to induce the
Subordinated Creditor to approve the Senior Liabilities and the Lenders' and
Collateral Agent's liens and security interests in the Collateral for purposes
of certain conditions precedent and covenants of the Subordinated Creditor Loan
Documents, the Lenders, the Collateral Agent and the Subordinated Creditor agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Terms Defined Above and in the Recitals. As used in this
Agreement, the following terms shall have the respective meanings indicated in
the opening paragraph hereof and in the above Recitals:
"Agreement"
"Borrower"
"Collateral"
"Collateral Agent"
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"Indenture Indebtedness"
"Lenders"
"Lender Credit Agreement"
"Lender Mortgage"
"Subordinated Creditor Indenture"
"Subordinated Creditor"
"Subordinated Creditor Mortgage"
Section 1.02 Lender Credit Agreement Definitions. All capitalized terms
which are used but not defined herein shall have the same meaning as in the
Lender Credit Agreement.
Section 1.03 Other Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Insolvency Proceeding" shall mean any proceeding for the purposes of
dissolution, winding up, liquidation, arrangement or reorganization of the
Borrower or its successors or assigns, whether in bankruptcy, insolvency,
arrangement, reorganization or receivership proceedings or upon an assignment
for the benefit of creditors or any other marshaling of the assets and
liabilities of the Borrower or its successors or assigns.
"Lender Loan Documents" shall mean the ["Loan Documents"], as defined or
referred to in the Lender Credit Agreement, and shall include the Lender Credit
Agreement, the Lender Mortgage and the Lender Notes, as any or all of the same
may be amended or supplemented from time to time.
"Lender Mortgage" shall mean ______________________________________________
________________________________________________________________________________
"Lender Notes" shall mean the promissory notes executed by the Borrower in
favor of the Lenders pursuant to the Lender Credit Agreement.
"Lien" shall mean any interest in property securing an obligation owed to,
or a claim by, a person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the lien or security interest arising from a mortgage, encumbrance,
pledge, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. For the purposes of this
Agreement, the Borrower or any subsidiary of the Borrower shall be deemed to be
the owner of any property which it has acquired or holds subject to a
conditional sale agreement, financing lease or other arrangement pursuant to
which title to the property has been retained by or vested in some other person
for security purposes.
"Lien Priority" shall mean with respect to any Lien of the Collateral
Agent, the Lenders or the Subordinated Creditor in the Collateral, the order of
priority of such Lien as specified in Section 2.01.
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"Loan Documents" shall mean the Lender Loan Documents and the Subordinated
Creditor Loan Documents.
"Party" shall mean any signatory to this Agreement.
"Senior Liabilities" shall mean the "Obligations", contingent or otherwise,
of the Borrower to the Lender defined in Section ______ of the Lender Mortgage
(including interest, as provided in the Lender Notes, after the filing of a
petition initiating any Insolvency Proceeding), fees, expenses or otherwise.
"Subordinated Creditor Enforcement Event" shall mean an "Event of Default"
under Section 6.01(1) of the Subordinated Creditor Indenture, or any event or
condition which does not materially affect the Lenders or their interests in the
Collateral, but which the Subordinated Creditor reasonably determines does
materially affect repayment of the Subordinated Liabilities or the Subordinated
Creditor's interests in the Collateral.
"Subordinated Creditor Loan Documents" shall mean the "Security Documents",
as defined or referred to in the Subordinated Creditor Indenture, the
Subordinated Creditor Indenture, the Subordinated Creditor Mortgage, the
Subordinated Creditor Note and any and all other instruments or documents
executed in connection with or as security for the Subordinated Liabilities, as
any or all of the same may be amended or supplemented from time to time.
"Subordinated Liabilities" shall mean the "Obligations", contingent or
otherwise, of the Borrower to the Subordinated Creditor defined in Section 1.15
of the Subordinated Creditor Mortgage (including interest after the filing of a
petition initiating any Insolvency Proceeding), fees, expenses or otherwise, and
including the secured claim of the Subordinated Creditor in respect of the
Collateral in any Insolvency Proceeding.
"Subordinated Creditor Note" shall mean the "Note", as defined in Section
1.14 of the Subordinated Creditor Mortgage.
"Trigger Event" shall mean any of (a) an Event of Default under Section
_____ of the Lender Credit Agreement, (b) the acceleration of or demand for
payment on any of the Lender Notes by the Collateral Agent or any Lender
pursuant to Section _____ of the Lender Credit Agreement, or (c) the
commencement of any action by the Collateral Agent or the Lenders or the
Subordinated Creditor, whether judicial or otherwise, for the enforcement of the
Lenders' or the Subordinated Creditor's rights and remedies under any of the
Loan Documents, including (i) commencement of any receivership or foreclosure
proceedings against or any other sale of, collection on or disposition of any
Collateral, including any notification to third parties to make payment directly
to the Collateral Agent or the Lenders, (ii) exercise of any right of set-off,
(iii) commencement of any Insolvency Proceeding, and (iv) commencement of any
action or proceeding against the Borrower to recover all or any part of the
Senior Liabilities or Subordinated Liabilities.
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Section 1.04. Singular and Plural. All definitions herein (whether set
forth herein directly or by reference to definitions in other documents) shall
be equally applicable to both the singular and the plural forms of the terms
defined.
Section 1.05. Miscellaneous. The words "hereof", "herein" or "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Article and section references are to articles and sections of this Agreement
unless otherwise specified. The term "including" shall mean "including,
without limitation".
ARTICLE 2
LIEN PRIORITY
Section 2.01. Agreement to Subordinate. The Subordinated Creditor hereby
agrees that the liens and security interests of the Subordinated Creditor in the
Collateral are and shall be subordinate in priority of lien to the Lenders' and
the Collateral Agent's liens and security interests in the Collateral. The
subordination of liens and security interests in favor of the Collateral Agent
and the Lenders herein shall not be deemed to subordinate the Subordinated
Creditor's liens and security interests to the liens and security interests of
any other Person. Except to the extent provided in Section 2.02, the
Subordinated Liabilities are not subordinated to the Senior Liabilities.
Section 2.02. Payment on the Subordinated Liabilities. Except as
permitted in this Section, the Subordinated Creditor agrees not to ask, demand,
sue for, take or receive from the Borrower, directly or indirectly, in cash or
other property or by set-off or in any other manner from the Collateral, payment
of all or any of the Subordinated Liabilities unless and until the Senior
Liabilities shall have been paid in full. The Subordinated Creditor may receive
or seek payment of or on the Subordinated Liabilities to the extent that any of
the following circumstances are applicable:
(a) The Subordinated Creditor may receive payment from the Borrower of
the Subordinated Liabilities if, at the time of making such payment and
immediately after giving effect thereto, (i) no Trigger Event is then
existing of which the Subordinated Creditor has been notified pursuant to
Section 2.04 or Section 2.05, (ii) in the case of scheduled payments of
principal and/or interest on the Subordinated Liabilities, all scheduled
payments of principal and/or interest which shall have become due under the
Lender Notes, and all payments due by demand under the Lender Notes, are
paid first or simultaneously with the Subordinated Liabilities then owing.
(b) The Subordinated Creditor may exercise, and nothing herein shall
constitute a waiver of, any right it may have at law or equity to receive
notice of, or to join or participate in, any action or proceeding or other
activity described in Section 3.01 (a) or (b) if the Collateral Agent or
any Lender has commenced or joined in the commencement of such action,
proceeding or activity or is seeking to enforce the Senior Liabilities
thereby or
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<PAGE>
therein; provided, however, that exercise of any such right by the
Subordinated Creditor shall be subject to the Lien Priority and prior
application of proceeds of Collateral to the Senior Liabilities.
(c) If a Subordinated Creditor Enforcement Event has occurred and is
continuing, the Subordinated Creditor may give the Collateral Agent written
notice thereof, specifying the nature of the Subordinated Creditor
Enforcement Event in reasonable detail. If such Subordinated Creditor
Enforcement Event is continuing for more than 45 days after the delivery of
such notice, and if the Collateral Agent has not by the expiration of such
45 days period notified the Subordinated Creditor that the Collateral Agent
has commenced one or more types of enforcement actions described in Section
3.01, then the Subordinated Creditor may, subject to the Lien Priority and
prior application of proceeds of the Collateral to the Senior Liabilities,
take one or more types of enforcement actions described in Section 3.01. If
the Collateral Agent thereafter discontinues such enforcement action or
actions, and no other action described in Section 3.01 is then being taken
by the Collateral Agent, and such Subordinated Creditor Enforcement Event
is then continuing, then the Subordinated Creditor may, subject to the Lien
Priority and prior application of proceeds of the Collateral to the Senior
Liabilities, take one or more types of enforcement actions described in
Section 3.01.
(d) The Subordinated Creditor may make such demands or file such
claims in respect of the Subordinated Liabilities as may be necessary to
prevent the waiver or bar of such claims under applicable statutes of
limitations or other statutes, court orders or rules of procedure, but
except as provided in this Section 2.02, the Subordinated Creditor shall
not take any actions restricted by Article 3 in respect of such claims
until the Senior Liabilities are paid in full. For the purposes of this
Agreement, the Senior Liabilities shall not be deemed to have been paid in
full until the Lenders shall have received payment of the Senior
Liabilities in cash; provided, however, the Lenders shall credit payment on
the Senior Liabilities all amounts received from liquidation of the
Collateral less costs and expenses of collection and foreclosure reasonably
incurred.
Section 2.03. Priority of Liens. Irrespective of the order of recording
of mortgages, financing statements, security agreements or other instruments,
and irrespective of the descriptions of Collateral contained in the Loan
Documents, including any financing statements, the Parties agree among
themselves that their respective liens and security interests in the Collateral
shall be governed by the Lien Priority, which shall be controlling in the event
of any conflict between this Agreement and any of the Loan Documents.
Section 2.04. Payments to the Subordinated Creditor Prior to Notice. The
Subordinated Creditor may retain all payments received on the Subordinated
Liabilities permitted by Section 2.02(a) notwithstanding the existence of a
Trigger Event, unless either the Subordinated Creditor has actual knowledge of
such Trigger Event or the Collateral Agent has delivered written notice to the
Subordinated Creditor of such Trigger Event in accordance with Section 5.06.
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Section 2.05. Notice of Trigger Event. The Collateral Agent and the
Subordinated Creditor each agree that it will use best efforts to notify the
other if it receives actual notice of the occurrence of a Trigger Event or
Subordinated Creditor Enforcement Event, in accordance with Section 5.06;
provided, however, that, except as provided in Section 2.02(b), neither of such
Parties shall be liable to the other for failure to send such notice, nor shall
they have any duty of inquiry to one another in respect of the occurrence of a
Trigger Event or Subordinated Creditor Enforcement Event.
ARTICLE 3
ACTIONS OF THE PARTIES
Section 3.01. Limitation on Certain Actions by the Subordinated Creditor.
Subject to Section 2.02, so long as the Senior Liabilities remain unpaid, the
Subordinated Creditor will not, without the prior written consent of the
Collateral Agent, take any of the following actions:
(a) commence, or join with any creditor other than the Lenders in
commencing, any Insolvency Proceeding;
(b) commence receivership or foreclosure proceedings against or
otherwise sell, collect or dispose of any Collateral; or
(c) notify third parties (including, without limitation, purchasers of
production of the oil and gas properties comprising the Collateral) to make
payment directly to the Subordinated Creditor or any of its agents or other
Persons acting on its behalf.
Section 3.02. Change in or Disposition of Subordinated Liabilities. While
the Senior Liabilities remain unpaid, the Subordinated Creditor will not sell,
assign, pledge, encumber or otherwise dispose of any of the Subordinated
Liabilities unless such sale, assignment, pledge, encumbrance or disposition is
made expressly subject to this Agreement.
Section 3.03. Payments from Purchasers of Production. Notwithstanding
anything to the contrary contained in the Loan Documents, prior to an event of
default under any Loan Document, neither Party to this Agreement may, without
the prior written consent of the other Party, require direct payments from the
purchasers of production from the oil and gas properties comprising the
Collateral.
Section 3.04. Notices. The Collateral Agent shall provide the
Subordinated Creditor with notice of any event of default under the Lender
Mortgage concurrently with delivery of such notice to the Borrower. In
addition, the Lenders or the Collateral Agent shall provide the Subordinated
Creditor with written notice at least 15 days prior to the Lenders or the
Collateral Agent exercising any remedies with respect to the Collateral, other
than directing the purchasers of production from
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the Collateral to make payments of production proceeds directly to the
Collateral Agent or Lenders pursuant to the terms of the Lender Mortgage.
Section 3.05. Foreclosure. The Lenders and the Collateral Agent shall
take reasonable steps as permitted by applicable law to foreclose upon only such
portion of the Collateral as shall be reasonably necessary to fully repay the
Senior Liabilities.
ARTICLE 4
ENFORCEMENT OF PRIORITIES
Section 4.01. In Furtherance of Subordination. The Subordinated Creditor
agrees as follows:
(a) Upon any distribution of all or any of the assets of the Borrower
to creditors of the Borrower (whether in cash, securities or other
property) in connection with any Insolvency Proceeding which otherwise
would be payable or deliverable upon or with respect to the Collateral
securing the Subordinated Liabilities shall be paid or delivered directly
to the Collateral Agent for application (in the case of cash) to or as
collateral (in the case of securities or other non-cash property) for the
payment or prepayment of the Senior Liabilities until the Senior
Liabilities shall have been paid in full.
(b) If any Insolvency Proceeding is commenced by or against the
Borrower, the Subordinated Creditor shall duly and promptly take such
action as the Collateral Agent may reasonably request (i) to collect the
proceeds of Collateral securing the Subordinated Liabilities for account of
the Lenders and to file appropriate claims or proofs of claim in respect of
the Subordinated Liabilities and (ii) to collect and receive any and all
payments or distributions which may be payable or deliverable upon or with
respect to the Collateral securing the Subordinated Liabilities.
(c) All payments or distributions upon or with respect to the
Subordinated Liabilities which are received by the Subordinated Creditor
contrary to the provisions of this Agreement shall be segregated from other
funds and property held by the Subordinated Creditor and shall be forthwith
paid over to the Collateral Agent in the same form as so received (with any
necessary indorsement) to be applied (in the case of cash) to or held as
collateral (in the case of non-cash property or securities) for the payment
or prepayment of the Senior Liabilities in accordance with the terms of the
Lender Credit Agreement.
(d) The Collateral Agent is hereby authorized to demand specific
performance of this Agreement, whether or not the Borrower shall have
complied with any of the provisions hereof applicable to it, at any time
when the Subordinated Creditor shall have failed to comply with any of the
provisions of this Agreement applicable to it, provided,
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<PAGE>
however, the remedy of specific performance shall not be available, and the
Subordinated Creditor shall be free to assert any and all legal defenses it
may possess, if such remedy would result in, or otherwise constitute, a
violation of ERISA. The Subordinated Creditor hereby irrevocably waives any
defense based on the adequacy of a remedy at law, which might be asserted
as a bar to such remedy of specific performance.
(e) This Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Senior
Liabilities is, other than as a result of any malfeasance, intentional
fraud or negligence of a Lender or the Collateral Agent, rescinded or must
otherwise be returned by the Collateral Agent or any of the Lenders upon
the insolvency, bankruptcy or reorganization of the Borrower or otherwise,
all as though such payment had not been made.
ARTICLE 5
MISCELLANEOUS
Section 5.01. Rights of Subrogation. The Subordinated Creditor agrees
that no payment or distribution to the Collateral Agent or the Lenders pursuant
to the provisions of this Agreement shall entitle the Subordinated Creditor to
exercise any rights of subrogation in respect thereof until the Senior
Liabilities shall have been paid in full.
Section 5.02. Further Assurances. The Parties will, at the Subordinated
Creditor's expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that either Party may reasonably request, in
order to protect any right or interest granted or purported to be granted hereby
or to enable the Collateral Agent and the Lenders to exercise and enforce their
rights and remedies hereunder; provided, however, that neither Party shall be
required to pay over any payment or distribution, execute any instruments or
documents, or take any other action referred to in this Section 5.02 to the
extent that such action would contravene any law, order or other legal
requirement, and in the event of a controversy or dispute, either Party may
interplead any payment or distribution in any court of competent jurisdiction,
without further responsibility in respect of such payment or distribution under
this Section 5.02.
Section 5.03. Defenses Similar to Suretyship Defenses. All rights and
interests of the Collateral Agent and the Lenders hereunder, and all agreements
and obligations of the Subordinated Creditor under this Agreement, shall remain
in full force and effect irrespective of:
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Liabilities, or any other amendment
or waiver of or any consent to departure from the Lender Notes or the
Lender Credit Agreement, provided, however, that this clause (a) shall not
apply to, and the Subordinated Creditor's liens and security interests in
the Collateral shall not be subordinated in priority by virtue of this
Agreement to the
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<PAGE>
Lenders' or the Collateral Agent's liens and security interests therein, if
there is any amendment, without the express written consent of the
Subordinated Creditor, which alters the amount of the Senior Liabilities or
the rate of interest or commission payable with respect thereto or alters
the schedule of payments of principal or interest thereon, or which
subordinates the Senior Liabilities to the claims of any other Person or
which subordinates the liens and security interests of the Lenders or the
Collateral Agent in the Collateral to the liens and security interests in
the Collateral of any other Person, or which has the effect stated in the
proviso to clause (b) below; or
(b) any exchange, release or non-perfection of any Collateral, or any
release, amendment or waiver of or consent to departure from any guaranty,
for all or any of the Senior Liabilities, provided, however, that this
clause (b) shall not apply to, and the Subordinated Creditor's liens and
security interests in the Collateral shall not be subordinated in priority
by virtue of this Agreement to the Lenders' or the Collateral Agent's liens
and security interests therein, if there is any such release, amendment,
waiver or consent, without the express written consent of the Subordinated
Creditor, which releases any material items or amount of Collateral
(excluding substitutions or releases of Collateral expressly contemplated
by the Loan Documents).
Section 5.04. Waiver. Except as otherwise provided herein, the
Subordinated Creditor hereby waives (i) any failure, omission, delay or lack on
the part of the Collateral Agent or the Lenders to enforce, assert or exercise
any right, power or remedy conferred on any of them in any of the Lender Loan
Documents or this Agreement or the inability of the Collateral Agent or the
Lenders to enforce any provision of the Lender Loan Documents or this Agreement,
and (ii) without limiting the generality of the foregoing, any requirement that
the Collateral Agent or the Lenders to protect, secure, perfect or insure any
liens and security interests or other Lien or any property subject thereto or
exhaust any right or take any action against the Borrower or any other Person or
any Collateral; provided, however, that this Section 5.04 shall not be
applicable to, and the Subordinated Creditor's liens and security interests in
the Collateral shall not be subordinated in priority by virtue of this Agreement
to the Lenders' or the Collateral Agent's liens and security interests therein,
if, due to the Collateral Agent's or any Lender's malfeasance, intentional fraud
or negligence, or for any other reason, there is any lack of validity or
enforceability, in any material respect, of the Lender Loan Documents.
Section 5.05. Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by any Party shall in any event be
effective unless the same shall be in writing and signed by the each Party, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
Section 5.06. Addresses for Notices. All demands, notices and other
communications provided for hereunder shall be in writing and, if to the
Subordinated Creditor, mailed or sent by telecopy or delivered to it, addressed
to it as follows:
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<PAGE>
U.S. Trust Company of Texas, N.A., as Trustee
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust
Facsimile Number: 214/754-1303
and if to the Collateral Agent or the Lenders, mailed, sent or delivered to
such party or parties, addressed to it or them at the address of the Collateral
Agent or the Lenders (as the case may be) specified in the Lender Credit
Agreement, or as to any party at such other address as shall be designated by
such party in a written notice to the other parties complying as to delivery
with the terms of this Section. All such demands, notices and other
communications shall be effective, when mailed, two business days after deposit
in the mails, postage prepaid, when sent by telecopy, when receipt is
acknowledged by the receiving telecopy equipment (or at the opening of the next
business day if receipt is after normal business hours), or when delivered, as
the case may be, addressed as aforesaid.
Section 5.07. No Waiver; Remedies. No failure on the part of any Party to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 5.08. Continuing Agreement; Transfer of Lender Notes. This
Agreement is a continuing agreement and shall (i) remain in full force and
effect until the Senior Liabilities and, solely for the purposes of Section
5.14, the Subordinated Liabilities shall have been paid in full, (ii) be binding
upon the Parties and their successors and assigns, and (iii) inure to the
benefit of and be enforceable by the Parties and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing
clause (iii), any of the Lenders may assign or otherwise transfer its Lender
Note to any other Person (other than Borrower or an Affiliate of Borrower), and
such other Person shall thereupon become vested with all the rights in respect
thereof granted to such Lender herein or otherwise.
Section 5.09. Governing Law; Entire Agreement. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of [New
York] except as otherwise preempted by applicable federal law, and except to the
extent the law of the State of Louisiana mandatorily governs, being the
jurisdiction in which the Collateral is located. This Agreement constitutes the
entire agreement and understanding among the Parties with respect to the subject
matter hereof and supersedes any prior agreements, written or oral, with respect
thereto.
Section 5.10. Counterparts. This Agreement may be executed in any number
of counterparts, and it is not necessary that the signatures of all Parties be
contained on any one counterpart hereof; each counterpart will be deemed to be
an original, and all together shall constitute one and the same document.
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<PAGE>
Section 5.11. No Third Party Beneficiary. This Agreement is solely for
the benefit of the Parties (and their permitted assignees). No other Person
(including Borrower or any Affiliate of Borrower) shall be deemed to be a third
party beneficiary of this Agreement.
Section 5.12. Headings. The headings of the articles and sections of this
Agreement are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions hereof.
Section 5.13. Severability. If any of the provisions in this Agreement
shall, for any reason, be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement and shall not invalidate the Payment Priority or
Lien Priority set forth in this Agreement.
Section 5.14. Payment in Full of Senior Liabilities. Upon payment in full
of the Senior Liabilities:
(a) All payments or distributions from the Borrower or with respect to
the Collateral received by the Collateral Agent or any Lender shall be
segregated from other funds and property held by the Collateral Agent or
such Lender and shall be promptly paid over to the Subordinated Creditor in
the same form as received (with any necessary endorsement without recourse
or warranty) to be applied to or held for the payment or prepayment of the
Subordinated Liabilities in accordance with the terms of the Subordinated
Creditor Indenture; and
(b) The Collateral Agent and any Lender will promptly execute and
deliver all further instruments and documents, and take all further acts
that may be necessary or desirable, or that the Subordinated Creditor may
reasonably request, to permit the Subordinated Creditor to enforce the
Subordinated Liabilities or recover any proceeds of the Collateral;
provided, however, that neither the Collateral Agent nor any Lender shall be
required to pay over any payment or distribution, execute any instruments or
documents, or take any other action referred to in this Section 5.14 to the
extent that such action would contravene any law, order or other legal
requirement, and in the event of a controversy or dispute, the Collateral Agent
or any Lender may interplead any payment or distribution in any court of
competent jurisdiction, without further responsibility in respect of such
payment or distribution under this Section 5.14.
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<PAGE>
IN WITNESS WHEREOF, the Collateral Agent and the Subordinated Creditor each
has caused this Agreement to be duly executed and delivered as of the date first
above written.
COLLATERAL
AGENT: [____________________________________]
By:__________________________________
SUBORDINATED
CREDITOR: U.S. TRUST COMPANY OF TEXAS, N.A.,
AS TRUSTEE
By:__________________________________
Name:________________________________
Title:_______________________________
[APPROPRIATE ACKNOWLEDGMENTS TO BE ADDED]
VEHOU05:54519.1: Exhibit C
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<PAGE>
EXHIBIT D
ACT OF ASSIGNMENT OF NOTE AND LIENS
STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
BE IT KNOWN, that on the dates set forth below, before us, the undersigned
Notaries Public duly commissioned and qualified in and for the County of Harris,
State of Texas, therein residing, and in the presence of the witnesses whose
names are hereunto subscribed, personally came and appeared:
JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP, a Delaware
limited partnership, whose Federal Tax Identification Number is 76-0407964
with a mailing address of 1400 Smith Street, Houston, Texas, 77002,
appearing herein through its general partner Enron Capital Management
Limited Partnership, a Delaware limited partnership, appearing herein
through its general partner Enron Capital Corp., a Delaware corporation,
appearing herein through Wynne M. Snoots, Jr., its duly authorized Agent
and Attorney-in-Fact (hereinafter called "Assignor"), and
U.S. TRUST COMPANY OF TEXAS, N.A., as Trustee under and pursuant to the
Indenture (hereinafter defined), whose Federal Tax Identification Number is
75-23537458 with a mailing address of 2001 Ross Avenue, Suite 2700, Dallas,
Texas 75201, Attention: Corporate Trust appearing herein through John C.
Stohlmann, its duly authorized Vice President ("hereinafter called
Assignee"),
which Assignor and Assignee through their respective representative declared
unto us, Notaries as follows:
That, for and in consideration of the sum of Ten Dollars ($10.00) and other
good and valuable consideration to Assignor in hand paid by Assignee under and
pursuant to that certain Indenture dated as of June 3, 1997, by and between
Forman Petroleum Corporation and Assignee, the receipt and sufficiency of which
is hereby acknowledged, Assignor has GRANTED, TRANSFERRED and ASSIGNED, and does
by these presents GRANT, TRANSFER and ASSIGN, unto Assignee, without recourse on
or warranty or representation (except such warranty or representation as is
hereinafter expressly set forth) by Assignor, the following:
1. Promissory note (the "Note") dated December 16, 1996, in the original
principal amount of $10,000,000, executed by FORMAN PETROLEUM CORPORATION,
a Delaware corporation ("Forman"), payable to the order of Assignor on or
before June 16, 1997;
<PAGE>
2. All of Assignor's liens, mortgages, security interests and assignments held
by Assignor as security for the payment of the Note and the indebtedness
evidenced thereby (collectively, the "Liens and Security Interests"),
including, without limitation, all such Liens and Security Interests
created by and existing and to exist under the following (collectively, the
"Mortgage"):
Act of Mortgage, Security Agreement, Assignment of Production and
Financing Statement dated November 21, 1996, executed by Forman,
passed before Diane L. Bailey, Notary Public, recorded in the
following parishes in the State of Louisiana:
Parish Book Page/Folio Entry No.
------ ---- ---------- ---------
Jefferson Mineral Lease 151 96-63909
Book 136
MOB 3775 163 96-63909
Lafourche COB 1290 226 806225
MOB 728 673 806225
St. Charles COB 515 663 206916
MOB 622 586 206916
Terrebonne COB 1532 987329
MOB 1081 987329,
as amended by Act of First Amendment of Mortgage, Security Agreement,
Assignment of Production and Financing Statement dated December 23,
1996, executed by Forman, passed before Judy M. Sullivan, Notary
Public, recorded in the following parishes in the State of Louisiana:
Parish Book Page/Folio Entry No.
------ ---- ---------- ---------
Jefferson Mineral Lease
Book 136 166 96-68975
MOB 3778 580 96-68975
Lafourche COB 1293 358 807596
MOB 731 136 807596
St. Charles COB 516 659 207615
MOB 624 583 207615
Terrebonne COB 1538 989317
MOB 1085 989317.
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<PAGE>
EXCLUDING, however, to the extent (if any) that the following could be
considered part of the conveyed interests hereunder, any right, title, and
interest of the Assignor in (a) the Option to Purchase Overriding Royalty and
Royalty Interests dated as of December 16, 1996, by and between Endowment Energy
Partners, L.P. ("EEP"), Endowment Energy Co-Investment Partnership ("EECIP") and
the Assignor (b) the letter agreement dated as of even date herewith made by
Forman in favor of the Assignor providing for certain continuing
indemnifications provided by Forman to the Assignor, (c) price swap agreements,
option agreements or other agreements entered into by and between Forman and
Assignor pursuant to which the price of hydrocarbons is hedged, (d) the fee
letter agreement dated December 16, 1996 between ECT Securities Corp. and Forman
and (e) all intercreditor and subordination agreements by and among EEP, EECIP
and the Assignor.
Assignor acknowledges that, immediately prior to the execution of this act,
other obligations of Forman to Assignor and its affiliates were secured by the
Liens and Security Interests. In order that this act shall be effective to
transfer all Liens and Security Interests to Assignee upon Assignor's assignment
of the Note and the indebtedness evidenced thereby, and to insure that Assignor
and its affiliates retain no rights under the Liens and Security Interests as
security for any outstanding obligations or obligations of Forman to Assignor
that may be incurred in the future, Assignor hereby waives and disclaims all
rights to the Liens and Security Interests to the extent they may secure
obligations owed to Assignor other than the Note and indebtedness evidenced
thereby, and agrees that any obligations now or hereafter owed to Assignor or
its affiliates are and shall be unsecured by the Liens and Security Interests.
TO HAVE AND TO HOLD the Note, together and along with all Liens and
Security Interests unto Assignee, its successors and assigns forever. Assignor
hereby represents and warrants that (i) Assignor is the owner and holder of the
Note, and the indebtedness evidenced thereby, (ii) Assignor has not assigned,
mortgaged or hypothecated the Note, the indebtedness evidenced thereby or any of
the Liens or Security Interests in connection therewith to any other party,
(iii) Assignor has not amended the Mortgage (other than waivers of certain
representations, warranties and covenants relating to the transfers of stock of
Forman) or the Note, (iv) Assignor has not executed any instruments to release
any of the Liens and Security Interests under the Mortgage, (v) that
$10,000,000.00 principal amount is still owing and unpaid on the Note, (vi) that
the Note is not overdue, and (vii) that Assignor has the full right and
authority to transfer and convey the Note, indebtedness, Liens and Security
Interests and to execute this instrument. The Assignee acknowledges that,
except for the foregoing representations and warranties with respect to the Note
and Mortgage, it is relying on representations and warranties from Forman with
respect to all other documents, agreements and matters.
Assignor authorizes and directs the Clerks of Court of the Parishes of
Jefferson, Lafourche, St. Charles, and Terrebonne, Louisiana, to note in the
margin of the inscription of the Mortgage, recorded as aforesaid, this Act of
Assignment of Note and Liens, in order to give notice that from and after the
date of execution hereof Assignee is the mortgagee of record under the Mortgage
within the meaning of La. R.S. 9:5556.
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<PAGE>
And further, in the presence of the undersigned Notary Public, the Assignor
did endorse the Note "Pay to the order of U.S. Trust Company of Texas, N.A., as
Trustee, without representation, warranty or recourse, except as and to the
extent expressly set forth in the Act of Assignment of Note and Liens dated
effective as of June 3, 1997 from Lender to U.S. Trust Company of Texas, N.A.,
as Trustee". Assignor acknowledges that in accordance with the provisions of
Louisiana Civil Code article 3325 the Notary Public has not been requested to
paraph the Note or any other evidence of indebtedness for identification with
the Mortgage.
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<PAGE>
THUS DONE AND PASSED in my office in Houston, Harris County, Texas, on the
____ day of June, 1997, effective for all purposes as of June 3, 1997, in my
presence and in the presence of the undersigned competent witnesses who hereunto
signed with the Assignor and me, Notary, after due reading of the whole.
ASSIGNOR:
WITNESSES: JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP,
a Delaware limited partnership
___________________________________ By: Enron Capital Management
Name:______________________________ Limited Partnership, a Delaware limited
partnership, its general partner
___________________________________ By: Enron Capital Corp., a
Name:______________________________ Delaware corporation, its
general partner
By:___________________________________
Name: Wynne M. Snoots, Jr.
Title: Agent and Attorney-in-Fact
____________________________
Notary Public
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<PAGE>
THUS DONE AND PASSED in my office in Houston, Harris County, Texas, on the
____ day of June, 1997, effective for all purposes as of June 3, 1997, in my
presence and in the presence of the undersigned competent witnesses who hereunto
signed with the Assignee and me, Notary, after due reading of the whole.
ASSIGNEE:
WITNESSES: U.S. TRUST COMPANY OF TEXAS, N.A.,
AS TRUSTEE
_________________________________ By:_______________________________
Name:____________________________ Name: John C. Stohlmann
Title: Vice President
_________________________________
Name:____________________________
____________________________
Notary Public
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<PAGE>
SCHEDULE OF RECORDING DATA
Act of Assignment of Note and Liens dated effective June 3, 1997, executed
by Joint Energy Development Investments Limited Partnership and U.S. Trust
Company of Texas, N.A., recorded in the following parishes in the State of
Louisiana:
Parish Book Page/Folio Entry No.
------ ---- ---------- ---------
Jefferson Mineral Lease 328 97-28808
Book 136
MOB 3800 104 97-28808
Lafourche COB 1310 146 815667
Miscellaneous
Book 81 623 815667
St. Charles COB 522 267 211523
MOB 636 67 211523
Terrebonne COB 1560 172 999452
MOB 1107 626 999452
VEHOU05:54525.1: Exhibit D
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<PAGE>
Prepared by and upon EXHIBIT 4.2
recordation please return to:
Gray H. Muzzy
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002
ACT OF MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF PRODUCTION AND
FINANCING STATEMENT
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
Be it known that on this 21st day of November, 1996, before me, the
undersigned Notary Public, duly commissioned and qualified in and for the County
and State aforesaid, and therein residing, and in the presence of the
undersigned competent witnesses, whose names are subscribed hereto,
Personally came and appeared FORMAN PETROLEUM CORPORATION, a Louisiana
corporation, whose federal tax identification number is 72-0954774 with a
mailing address of 650 Poydras Street, Suite 2200, New Orleans, Louisiana,
70130-6101 appearing herein through Marvin J. Gay, its duly authorized
Treasurer, acting pursuant to resolutions of the Board of Directors of such
corporation, a certified extract of which are attached hereto
("Mortgagor"),
which Mortgagor through its representative declared unto me, Notary, as follows:
ARTICLE I
DEFINITIONS
-----------
Mortgagor agrees that, as used in this instrument, the following terms
shall have the following meanings:
1.1 "COLLATERAL" means the Realty Collateral, Personalty Collateral and
Immovable Collateral, all proceeds thereof (including without limitation the
right to receive insurance
<PAGE>
proceeds attributable to the loss of any portion of the foregoing), and
products, renewals, increases, profits, substitutions, replacements, additions,
amendments and accessions thereof, thereto or therefor.
1.2 "CONTRACTS" means all contracts, operating agreements, farm-out or
farm-in agreements, sharing agreements, mineral purchase agreements, rights-of-
way, servitudes, ease ments, surface leases, permits, franchises, licenses,
pooling, communitization or unitization agreements, unit designations and
pooling orders now in effect or hereafter entered into by Mortgagor affecting
any of the Oil and Gas Properties, Operating Equipment, Immovable Collateral, or
Hydrocarbons now, or hereafter covered hereby, or which are useful or
appropriate in drilling for, producing, treating, handling, storing,
transporting or marketing oil, gas or other minerals produced from any of the
property affected by the Oil and Gas Properties.
1.3 "DEFAULT RATE" means a rate of interest equal to the lesser of 18%
per annum or the Maximum Rate.
1.4 "ENGINEERING REPORT" means that certain report prepared by
Ryder Scott Company for Mortgagor dated July 1, 1996, titled Estimated Future
Reserves and Income Attributable to Certain Leasehold and Royalty Interests in
Boutte Field, Lake Enfermer Field and Manila Village Field.
1.5 "EVENT OF DEFAULT" shall have the meaning set forth in Article 5.1
hereof.
1.6 "HAZARDOUS MATERIALS" means any flammable explosives, radioactive
materials, hazardous wastes, hazardous materials, hazardous or toxic substances,
or related materials as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. (S) 9601 et seq.),
the Hazardous Materials Transportation Act, as amended (49 U.S.C. (S) 1801 et
seq.) the Resource Conservation and Recovery Act, as amended (42 U.S.C. (S) 6901
et seq.), and in the regulations adopted and publications promulgated pursuant
thereto, and all asbestos (friable or non-friable), petroleum derivatives,
polychlorinated biphenyls, and substances defined as hazardous materials under
any federal, state or local laws, ordinances, codes, rules, orders, regulations
or policies governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal thereof.
1.7 "HYDROCARBONS" means the oil, gas, casinghead gas, other liquid or
gaseous hydrocarbons and all other minerals in and under or attributable to and
that may be produced, obtained or secured from, the lands covered and affected
by the Oil and Gas Properties, and all products refined therefrom.
1.8 "IMMOVABLE COLLATERAL" means all of Mortgagor's interests now owned
or hereafter acquired in and to all Immovable Operating Equipment and all
proceeds, products,
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<PAGE>
renewals, increases, profits, substitutions, replacements, additions, amendments
and accessions thereof, thereto or therefor.
1.9 "IMMOVABLE OPERATING EQUIPMENT" means any of the items described in
the first sentence of paragraph 1.17 which as a result of being incorporated
into realty or structures or improvements located therein or thereon, constitute
immovables under the laws of the State of Louisiana.
1.10 "LENDER" means Joint Energy Development Investments Limited
Partnership, a Delaware limited Partnership, whose Federal tax identification
number is 76-0407964, with offices at 1400 Smith Street, Houston, Texas 77002,
herein represented by Wynne M. Snoots, Jr., Agent and Attorney-in-Fact on behalf
of Enron Capital Corp., the General Partner of the Lender.
1.11 "MAXIMUM RATE" is defined in Article 6.6.
1.12 "MORTGAGE" means this Act of Mortgage, Security Agreement,
Assignment of Production and Financing Statement, as it may be amended, modified
or supplemented from time to time.
1.13 "MORTGAGEE" means the Lender, its successors and assigns, and any
legal owner, holder, assignee or pledgee of any of the Obligations secured
hereby.
1.14 "NOTE" means that certain promissory note of Mortgagor payable to
the order of the Lender in the original principal amount of $4,000,000.00, dated
of even date herewith, and all modifications, amendments, renewals and
extensions thereof.
1.15 "OBLIGATIONS" means (a) the indebtedness evidenced by the Note in
the principal amount and with interest, collection and attorney's fees, all as
provided therein; all renewals, modifications, rearrangements or extensions of
the Note, in whole or in part; any sums which may be advanced or paid by
Mortgagee under the terms hereof on account of the failure of Mortgagor to
comply with the covenants of Mortgagor contained herein; and all other
indebtedness of Mortgagor arising pursuant to the provisions of this Mortgage,
(b) all promissory notes evidencing additional loans which Mortgagee may
hereafter make to Mortgagor, it being anticipated that Mortgagee may make such
additional loans (without having any obligation to do so); (c) all other
indebtedness and liabilities of all kinds of Mortgagor to Mortgagee now existing
or hereafter arising, whether fixed or contingent, joint or several, direct or
indirect, primary or secondary, and regardless of how created or evidenced; (d)
all sums advanced or costs or expenses incurred by Mortgagee, which are made or
incurred pursuant to, or allowed by, the terms of this instrument or any other
instrument executed in connection with the Note, including but not limited to
all legal fees and all engineering and other costs incurred in connection with
Mortgagee's due diligence, plus interest thereon from the date of the advance
-3-
<PAGE>
until reimbursement of Mortgagee charged at the Default Rate; (e) all renewals,
extensions, amendments and substitutions of the above whether or not Mortgagor
executes any renewal or extension agreement, any amounts due and payable by
Mortgagor to ECT Securities Corp. and (f) any amounts due and payable by
Mortgagor to Mortgagee under any swap or hedge agreement.
1.16 "OIL AND GAS PROPERTY OR PROPERTIES" means (a) the oil, gas and/or
mineral leases, mineral estates, mineral servitudes, subleases, farm outs,
royalties, overriding royalties, net profits interests, production payments and
similar mineral interests described in Exhibit A attached hereto and made a part
hereof for all purposes, (b) any wells, production unit or units and wells which
may affect all or any portion of such mineral interests including, without
limitation, those units which may be described or referred to on Exhibit A or
any unit created under orders, regulations, rules or other official acts of any
Federal, state or other governmental body or agency having jurisdiction, (c) any
other interest in, to or relating to (i) all or any part of the land or leases
described in Exhibit A or (ii) any of the estates, property rights or other
interests referred to above, and (d) any instrument executed in amendment,
correction, modifica tion, confirmation, renewal or extension of the same.
1.17 "OPERATING EQUIPMENT" means all surface or subsurface machinery,
fixtures, equipment, facilities, supplies or other property of whatsoever kind
or nature (excluding drilling rigs, trucks, automotive equipment or other
property taken to the premises to drill a well or for other similar temporary
uses) now or hereafter located on or attributable to any of the property
affected by the Oil and Gas Properties which are useful for the production,
treatment, storage or transportation of Hydrocarbons, including, but not limited
to, all oil wells, gas wells, water wells, injection wells, casing, tubing,
rods, pumping units and engines, christmas trees, derricks, separators, gun
barrels, flow lines, tanks, gas systems (for gathering, treating and
compression), water systems (for treating, disposal and injection), power
plants, poles, lines, transformers, starters and controllers, machine shops,
tools, storage yards and equipment stored therein, buildings and camps,
telegraph, telephone and other communication systems, roads, loading racks and
shipping facilities. Operating Equipment shall not include any items
incorporated into realty or structures or improvements located therein or
thereon in such a manner that they constitute immovables under the laws of the
State of Louisiana.
1.18 "PERSONALTY COLLATERAL" means all of Mortgagor's interest now
owned or hereafter acquired in and to (i) all Operating Equipment, (ii) all
Hydrocarbons severed and extracted from or attributable to the Oil and Gas
Properties, including oil in tanks, (iii) all accounts (including, but not
limited to, accounts resulting from the sale of Hydrocarbons at the wellhead),
contract rights and general intangibles now or hereafter arising in connection
with the sale or other disposition of any Hydrocarbons, (iv) all Contracts and
all general intangibles now or hereafter arising in connection with or resulting
from Contracts, (v) all proceeds and products of the Realty Collateral and/or
Immovable Collateral, and (vi) all rents, issues,
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proceeds, products, renewals, increases, profits, substitutions, replacements,
additions, amendments and accessions of, to or for all of the property described
in this subparagraph.
1.19 "REALTY COLLATERAL" means all of Mortgagor's interest now owned or
hereafter acquired, legal or beneficial in and to the Oil and Gas Properties and
all unsevered and unextracted Hydrocarbons (even though Mortgagor's interest
therein be incorrectly described in, or a description of a part or all such
interest be omitted from, Exhibit A).
1.20 "UNIFORM COMMERCIAL CODE" OR "UCC" shall have the meaning set
forth in Section 5.3.
ARTICLE II
CREATION OF PRIVILEGE AND SECURITY INTEREST
-------------------------------------------
2.1 MORTGAGE AND PLEDGE. In order to secure the full and punctual
payment and performance of the Obligations, and the performance of the covenants
and obligations contained herein, Mortgagor does by these presents specially
mortgage, pledge, assign, hypothecate and warrant unto and in favor of
Mortgagee, for itself and as collateral agent on behalf of ECT Securities Corp.
and any holder of Obligations described in clause (f) of the definition of
Obligations, the Realty Collateral and Immovable Collateral, together with the
right to receive insurance proceeds attributable to the insurance loss of such
property (as provided in LSA R.S. 9:5386).
2.2 SECURITY INTEREST. For the same consideration and to further
secure the Obligations, Mortgagor hereby grants to Mortgagee for itself and as
collateral agent on behalf of ECT Securities Corp. and any holder of Obligations
described in clause (f) of the definition of Obligations, a security interest in
and to the Personalty Collateral and the Immovable Collateral.
2.3 FUTURE ADVANCES. This Mortgage secures all future advances and
obligations constituting Obligations. The total amount of Obligations secured
by this instrument (including without limitation as a mortgage and as an
assignment, and including without limitation all advances and Default Rate
interest hereunder) may decrease or increase from time to time, but at no time
shall the total amount of Obligations secured hereby exceed the sum of
$100,000,000.
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ARTICLE III
PROCEEDS FROM PRODUCTION
------------------------
3.1 ASSIGNMENT OF PRODUCTION.
------------------------
(a) Mortgagor, in order to further secure the Obligations, up to the
maximum amount provided above in Section 2.3, effective as of the date hereof
at 7:00 a.m. Central Time, U.S.A., has assigned, transferred, conveyed and
delivered and does hereby assign, transfer, convey and deliver unto Mortgagee
for itself and as collateral agent on behalf of ECT Securities Corp. and any
holder of Obligations described in clause (f) of the definition of
Obligations, Mortgagor's interest, now owned or hereafter acquired, in and to
the Hydrocarbons (or the proceeds therefrom), the same to be delivered into
pipelines connected to the Oil and Gas Properties, or to any other purchaser
thereof to the credit of Mortgagee.
(b) All parties producing, purchasing, taking, possessing, processing or
receiving any production from the Oil and Gas Properties, or having in their
possession any such production or the proceeds of runs for which they or
others are accountable to Mortgagee by virtue of the provisions of this
Article 3.1, are authorized and directed by Mortgagor to treat and regard
Mortgagee as the assignee and transferee of Mortgagor and entitled in its
place and stead to receive Mortgagor's interest, now owned or hereafter
acquired, in and to the Hydrocarbons and the proceeds thereof.
(c) Mortgagor directs and instructs each purchaser of production from
the Oil and Gas Properties to pay to Mortgagee all of the proceeds of
Mortgagor's interest, now owned or hereafter acquired, in and to the
Hydrocarbons until such time as such purchaser has been furnished evidence
that all of the Obligations have been paid and that the privilege evidenced
hereby has been released. Mortgagor authorizes Mortgagee to receive and
collect all sums of money derived from the proceeds of all of Mortgagor's
interest, now owned or hereafter acquired in and to the Hydrocarbons, and no
purchaser of any production from the Oil and Gas Properties shall have any
responsibility for the application of any funds paid to Mortgagee.
(d) Mortgagee may (i) endorse and cash any and all checks and drafts
payable to the order of Mortgagor or Mortgagee for the account of Mortgagor,
received from or in connection with the revenues and proceeds of the
Hydrocarbons affected hereby, and the same may be applied as provided herein
and (ii) execute any transfer or division orders in the name of Mortgagor or
otherwise, with warrants and indemnities binding on Mortgagor; provided that
Mortgagee shall not be held liable for, nor be required to verify, the
accuracy of Mortgagor's interests as represented therein.
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(e) Mortgagee shall have the right at Mortgagee's election and in the
name of Mortgagor, or otherwise, to prosecute and defend any and all actions
or legal proceed ings deemed advisable by Mortgagee in order to collect such
funds and to protect the interests of Mortgagee and/or Mortgagor, with all
reasonable costs, expenses and attor neys fees incurred in connection
therewith being paid by Mortgagor.
(f) The foregoing provisions of this Section 3.1 shall constitute an
absolute and present assignment of all Mortgagor's interest in the
Hydrocarbons. Mortgagee grants to Mortgagor a conditional license to receive
and sell such Hydrocarbons, and the proceeds therefrom, and to use the same
in accordance with the terms of this Mortgage until Mortgagee delivers
written notice to Mortgagor that Mortgagee has elected to terminate such
license at which time such conditional license shall terminate without
further notice or action on the part of Mortgagee. The existence or exercise
of such conditional license shall not operate to subordinate this assignment,
in whole or in part, to any subsequent assignment by Mortgagor permitted
hereunder, and any such subsequent assignment by Mortgagor shall be subject
to the rights of Mortgagee hereunder.
3.2 APPLICATION OF PROCEEDS. All payments received by Mortgagee
pursuant to this Article III shall either be held by Mortgagee in a cash
collateral account as additional Collateral or, at the option of Mortgagee,
applied at the time of receipt, or from time to time at the discretion of
Mortgagee if held in such cash collateral account, as follows:
(a) First, to the satisfaction of all costs and expenses incurred in
connection with the collection of such proceeds, and the payment of any part
of the Obligations not represented by a written instrument;
(b) Second, to the payment of all accrued interest on the Obligations;
(c) Third, to the payment of any then due and owing principal
constituting part of the Obligations; and
(d) The balance, if any, shall be released to Mortgagor, if not retained
by Mortgagee in the cash collateral account.
3.3 RELEASE OF PROCEEDS. Mortgagee or any future Mortgagee or
Mortgagees may at any time and from time to time release to Mortgagor or its
order all or any portion of the funds received from the proceeds of oil, gas or
other minerals as provided in this Article III without in any wise impairing,
releasing or discharging the lien, privilege and security of this instrument,
and the pledge and assignment herein provided for or affecting the validity
thereof.
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3.4 MORTGAGOR'S PAYMENT DUTIES. Nothing contained herein will limit
Mortgagor's absolute duty to make payment of the Obligations when the proceeds,
if any, received by Mortgagee pursuant to this Article are insufficient to pay
the same, and the receipt of proceeds under this Article will be in addition to
all other security now or hereafter existing to secure payment of the
Obligations.
3.5 LIABILITY OF MORTGAGEE. Mortgagee is hereby absolved from all
liability for failure to enforce collection of any of such proceeds, and from
all other responsibility in connec tion therewith except the responsibility to
account to Mortgagor for proceeds actually received by Mortgagee.
3.6 INDEMNIFICATION. Mortgagor agrees to indemnify Mortgagee against
all claims, actions, liabilities, judgments, costs, attorneys fees or other
charges of whatsoever kind or nature (hereafter referred to in this Article as
"Claims") made against or incurred by Mortgagee as a consequence of the
assertion either before or after the payment in full of the Obligations, that
Mortgagee received Hydrocarbons or proceeds pursuant to this Article III which
were claimed by third persons. Mortgagee will have the right to employ
attorneys and to defend against any such Claims and unless furnished with
reasonable indemnity, Mortgagee will have the right to pay or compromise and
adjust all such Claims. Mortgagor will indemnify and pay to Mortgagee all such
amounts as may be paid in respect thereof, or as may be successfully adjudicated
against Mortgagee and all such amounts shall be a part of the Obligation secured
by this instrument. The liabilities of Mortgagor as set forth in this Article
will survive the termination of this instrument.
ARTICLE IV
MORTGAGOR'S WARRANTIES AND COVENANTS
------------------------------------
4.1 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Mortgagor covenants and
agrees that Mortgagor shall punctually pay when due all interest and principal
comprising the Obliga tions secured by this instrument and all other amounts
and indebtedness secured and to be secured hereby and will perform all of the
terms, covenants and provisions of any loan or other agreement entered into by
Mortgagor and Mortgagee in connection herewith.
4.2 WARRANTIES. Mortgagor warrants as follows:
(a) Mortgagor has good and marketable title to the Collateral free from
all liens, security interests or other encumbrances except as specifically
permitted by the provisions of Article 4.4(h) below. Notwithstanding
anything contained in Exhibit A to the contrary, Mortgagor's ownership of the
Oil and Gas Properties and the undivided interests therein as specified will
afford Mortgagor not less than those net interests in the production from the
Collateral (or properties now or hereafter pooled or unitized therewith), or
production which is allocated to such Oil and Gas Properties, and (ii) will
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cause Mortgagor to bear not more than that portion of the costs of drilling,
developing and operating such leases, than those set forth in the Engineering
Report; none of the Collateral is subject to a production sales contract;
none of the Collateral is subject at present to any regulatory refund
obligation and to Mortgagor's knowledge no facts exist which might cause the
same to be imposed;
(b) Mortgagor has the full power, authority and legal right to execute
the Note and any and all other instruments entered into in connection
therewith, to perform the Obligations and to mortgage, pledge, assign and
hypothecate the Collateral to Mortgagee without the consent of any person and
has all licenses, permits, qualifications and other documentation necessary
or appropriate to own, and if Mortgagor is the operator of any of the
Collateral, to operate the Collateral. Mortgagor (a) is a corporation
validly existing and in good standing under the laws of the State of
Louisiana; (b) has all requisite authority to conduct its business and own
and lease its properties; (c) is qualified and in good standing in every
jurisdiction in which the nature of its business makes qualification
necessary or where failure to qualify could have a material adverse effect on
its financial condition or the performance of its obligations under the Note
and this Mortgage. Mortgagor is in compliance in all respects with all laws
and requirements applicable to its business, the violation of which might
materially affect its obligations hereunder, and has obtained all approvals,
licenses, exemptions and other authorizations from, and has accomplished all
filings, registrations and qualifications with, any governmental agency that
are necessary for the transaction of its business.
(c) The representations of Mortgagor as to quantum and nature of the
interest of Mortgagor in and to the Oil and Gas Properties set forth in the
Engineering Report includes the entire interest of Mortgagor in the Oil and
Gas Properties and are complete and accurate in all respects. There are no
"back-in" or "reversionary" interests held by third parties which could
reduce the interest of Mortgagor in the Oil and Gas Properties except as
expressly set forth in the Engineering Report.
(d) Except as permitted by Article 4.4(h) below or as otherwise
disclosed in writing prior to the date hereof, Mortgagor has not received any
notice of any claim of lien, privilege, right, title or interest to any of
the Collateral from any third party and Mortgagor does not have any knowledge
of any facts, circumstances or conditions which could, by lapse of time or
otherwise, result in any claim of right, title, privilege, lien or interest
by any third party in or to the Collateral.
(e) There are no prior consent rights or preferential purchase rights in
third parties affecting any part of the Collateral.
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(f) No operating or other agreement to which Mortgagor is a party or by
which Mortgagor is bound affecting any part of the Collateral requires
Mortgagor to bear any of the costs relating to the Collateral greater than
the leasehold interest of Mortgagor in such portion of the Collateral, except
in the event Mortgagor is obligated under an operating agreement to assume a
portion of a defaulting or non-consenting party's share of costs.
(g) Mortgagor has not received any prepayment prior to the date hereof
under any agreement providing for the sale by Mortgagor of Hydrocarbons which
agree ment contains a "take or pay" clause or similar arrangement that
obligates Mortgagor to deliver Hydrocarbons at some future time without then
or thereafter receiving full payment therefor.
(h) Mortgagor is not obligated to "make up" any deliveries of oil or gas
to any third party out of the production from any of the Oil and Gas
Properties.
(i) No approval or consent of any person or of any regulatory or
administrative commission or authority or of any other governmental body is
necessary under any existing laws or regulations (A) to authorize the
execution and delivery of this instrument or of any written instruments
constituting part or all of the Obligations or (B) except as may be provided
by the rules of the Louisiana Department of Conservation or the relative
state regulatory authority having jurisdiction over oil and gas operations in
Louisiana, to authorize the observance or performance by Mortgagor of the
covenants contained in this instrument or in the written instruments
constituting all or part of the Obligations.
(j) To the best of Mortgagor's knowledge, after due inquiry and
investigation, all information and other data contained in statements or
reports furnished to Mortgagee by or on behalf of Mortgagor relating to the
Collateral was complete and accurate when made or delivered to Mortgagee and
did not omit to state any material facts necessary to make the information
contained therein not misleading.
(k) Each oil and gas lease constituting a portion of the Collateral is
valid and subsisting, all covenants, conditions and obligations contained in
each such oil and gas lease and any assignments or agreements relating
thereto have been fully performed and complied with in all material respects,
and there exists no unsatisfied demand or dispute between Mortgagor and any
lessor or any party to any such assignment or agreement.
(l) All proceeds from the sale of Mortgagor's interest in the
Hydrocarbons are currently being paid in full to Mortgagor by the purchaser
thereof on a timely basis and none of such proceeds are currently being held
in suspense by such purchaser or any other party.
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(m) The operation of the Oil and Gas Properties and the sale,
processing, transportation and marketing of Hydrocarbons has been and is
currently being conducted in accordance with all applicable federal, state
and local laws, rules, regulations, orders and ordinances including without
limitation all applicable local, state and federal environmental laws,
regulations, ordinances and administrative and judicial orders relating to
the generation, recycling, reuse, sale, storage, handling, transport and
disposal of any Hazardous Materials.
(n) There is no pending or, to the best knowledge of Mortgagor,
threatened claim, suit, judicial or administrative action or proceeding which
involves or may involve the Collateral or any part thereof or the production
of Hydrocarbons which, if adversely determined to Mortgagor, could have a
material adverse effect on the Collateral or the ability of Mortgagor to
perform its obligations under this instrument.
(o) All taxes, assessments, and governmental charges imposed upon the
Collateral or upon the income and profit of the Collateral have been paid
when due.
(p) The proceeds of the Note shall be used to satisfy all outstanding
trade payables of Mortgagor that are more than ninety (90) days past due.
Upon funding of the proceeds of the Note, there shall exist no trade payables
that are more than ninety (90) days past due.
(q) Mortgagor's federal taxpayer identification number is accurately
stated on page one of this instrument.
(r) The address of Mortgagor's place of business, residence, chief
executive office and office where Mortgagor keeps its records concerning
accounts, contract rights and general intangibles is as set forth in Article
6.12, and there has been no change in the location of Mortgagor's place of
business, residence, chief executive office and office where it keeps such
records and no change of Mortgagor's name during the four months immediately
preceding the date of this instrument.
4.3 FURTHER ASSURANCES.
------------------
(a) Mortgagor covenants that Mortgagor shall execute and deliver such
other and further instruments, and shall do such other and further acts as in
the opinion of Mortgagee may be necessary or desirable to carry out more
effectively the purposes of this instrument, including, without limiting the
generality of the foregoing, the following:
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(i) Prompt correction of any defect in the execution or acknowl-
edgment of this instrument, any written instrument comprising part or all of
the Obligations, or any other document used in connection herewith.
(ii) Prompt correction of any defect which may hereafter be
discovered in the title to the Collateral.
(iii) To indemnify and hold Mortgagee harmless from and against any
and all costs and expenses, including, but not limited to, any and all cost,
expense, loss, damage or liability which Mortgagee may suffer or incur by
reason of the failure of title to all or part of the Collateral or by reason
of the failure or inability of Mortgagor, for any reason, to convey the
rights, titles and interest which this instrument purports to mortgage,
pledge, hypothecate, convey, grant or assign.
(iv) Prompt execution and delivery of all division or transfer
orders or other instruments which in Mortgagee's opinion are required to
transfer to Mortgagee the proceeds from the sale of all of the Mortgagor's
interest in and to all Hydrocarbons.
(v) Prompt payment when due and owing of all taxes, assessments
and governmental charges imposed on this instrument, upon the interest of
Mortgagee or upon the income and profits from any of the above.
(b) Mortgagor covenants that Mortgagor shall maintain and preserve the
first and prior privilege, lien and security interest herein created so long
as any of the Obligations remain unpaid.
(c) Mortgagor covenants to immediately notify Mortgagee of any
discontinuance of or change in the address of Mortgagor's place of business,
residence, chief executive office or office where it keeps records concerning
accounts, contract rights and general intangibles.
(d) Mortgagor covenants that all information to be furnished to
Mortgagee by or on behalf of Mortgagor shall be complete and accurate when
made.
(e) Mortgagor covenants to maintain its existence and continue to be a
corporation in good standing in the states of Texas and Louisiana.
(f) Mortgagor covenants to not permit any sale, assignment, pledge,
merger or transfer of any interest or beneficial interest in Mortgagor, as
the case may be, without the prior written consent of Mortgagee;
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(g) Mortgagor covenants to not create, assume, incur, suffer to exist or
in any manner become liable, directly, indirectly, or contingently in respect
to any debt other than the following:
(i) debt owed to the Mortgagee;
(ii) debt currently outstanding to Endowment Energy Partners,
L.P., a Delaware limited partnership and Endowment Energy Co-
Investment Partnership, a Delaware general partnership
(collectively referred to herein as the "Endowment") which shall
not exceed $36,000,000;
(iii) debt in the form of accounts payable to trade creditors for
goods or services which are not aged more than ninety (90) days
from the billing date and current operating liabilities (other than
for borrowed money) which are not more than ninety (90) days past
due, and each case incurred in the ordinary course of business, as
presently conducted, and paid within the specified time, unless
contested in good faith and by appropriate proceedings; and
(h) Mortgagor covenants to not make any distributions to its
shareholders; and/or not make any advances to or investments in Mortgagor's
subsidiaries or affiliates without the prior written consent of Mortgagee.
4.4 OPERATION OF OIL AND GAS PROPERTIES. As long as any of the
Obligations remain unpaid or unsatisfied, and whether or not Mortgagor is the
operator of the Oil and Gas Properties, Mortgagor shall (at Mortgagor's own
expense):
(a) not enter into any operating agreement, contract or agreement which
materially adversely affects the Collateral;
(b) neither abandon, forfeit, surrender, release, sell, assign,
sublease, farmout or convey, nor agree to sell, assign, sublease, farmout or
convey, nor mortgage or grant a privilege or security interest in, nor
otherwise dispose of or encumber any of the Collateral or any interest
therein, except for releases of leases which have expired by their own terms,
reassignments under existing contract provisions, or the sale of Hydro
carbons in the ordinary course of business, and transactions otherwise
permitted in writing by Mortgagee;
(c) cause the Collateral to be maintained, developed and protected
against drainage and continuously operated for the production and marketing
of Hydrocarbons in a good and workmanlike manner as a prudent operator would
in accordance with
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generally accepted practices, applicable oil and gas leases and Contracts,
and all applicable Federal, state and local laws, rules and regulations,
including all environmental laws;
(d) promptly pay or cause to be paid when due and owing (i) all rentals
and royalties payable in respect of the Collateral; (ii) all expenses
incurred in or arising from the operation or development of the Collateral;
(iii) all taxes, assessments and governmental charges imposed upon the
Collateral, upon the income and profits from any of the Collateral, or upon
Mortgagee because of its interest therein; and (iv) all local, state and
federal taxes, payments and contributions for which Mortgagor may be liable;
and indemnify Mortgagee from all liability in connection with any of the
foregoing;
(e) promptly take all action necessary to enforce or secure the
observance or performance of any term, covenant, agreement or condition to be
observed or performed by third parties under any Contract, or any part
thereof, or to exercise any of its rights, remedies, powers and privileges
under any Contract, all in accordance with the respective terms thereof;
(f) cause the Operating Equipment and the Immovable Collateral to be
kept in good and effective operating condition, and cause to be made all
repairs, renewals, replacements, additions and improvements thereof or
thereto, necessary or appropriate in connection with the production of
Hydrocarbons from the Oil and Gas Properties;
(g) permit and do all things necessary or proper to enable Mortgagee
(through its agents and employees) to enter upon the Oil and Gas Properties
for the purpose of investigating and inspecting the condition and operations
of the Collateral whenever they so desire;
(h) cause the Collateral to be kept free and clear of liens, privileges,
charges, security interests and encumbrances of every character other than
liens:
(i) for taxes, assessments or other governmental charges on the
Collateral if the same shall be inchoate, or are being contested in good
faith and by appropriate proceedings and with respect to which reserves in
conformity with generally accepted accounting principles have been
provided on the books of the Mortgagor;
(ii) imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which are inchoate or are being contested in good faith and by
appropriate proceeding and with respect to which adequate reserves have
been provided;
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(iii) arising under operating agreements that are described in
Exhibit A and are inchoate or are being contested in good faith and by
appropriate proceedings and with respect to which adequate reserves have been
provided;
(iv) A subordinate lien and security interest created pursuant to
the following: Those various Acts of Collateral Mortgages identified in
Exhibit "A" to a Subordination of Mortgage dated November 20, 1996, executed
by the Endowment for the benefit of Mortgagee (the "Endowment Liens");
(v) in favor of the Mortgagee pursuant to this instrument;
(vi) predial servitudes, restrictions and other similar
encumbrances that, in the aggregate, do not materially interfere with the
use, operation or ownership of the property subject thereto or materially
impair the value thereof; and
(vii) otherwise permitted by Mortgagee in writing.
(i) carry with standard insurance companies and in amounts satisfactory
to Mortgagee the following insurance:
(A) workman's compensation insurance and public liability and
property damage insurance in respect of all activities relating to the
Collateral in which the Mortgagor might incur personal liability for the
death or injury of an employee or third person or damage to or destruction
of another's property; and
(B) to the extent such insurance is carried by others engaged in
similar undertakings in the same general areas in which the Collateral is
located, (i) well control insurance and (ii) insurance in respect of the
Operating Equipment and Immovable Collateral against loss or damage by
fire, lightning, hail, tornado, explosion and other similar risks;
(j) cause all policies of insurance to provide the maximum prior written
notice to Mortgagee of cancellation which the insurance company will provide
and to name Mortgagee as an additional named insured or as a "loss payee";
permit Mortgagee to apply any proceeds of such insurance which it may receive
toward part or full satisfaction of any or all of the Obligations secured
hereby whether or not they are then due and owing and whether or not they are
liquidated or contingent; and permit
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Mortgagee to obtain replacement insurance (which may, but need not, be single
interest insurance in favor of Mortgagee) if any insurance required hereby
expires, is canceled or is otherwise not in full force and effect;
(k) furnish to Mortgagee, upon request, copies of all operating
agreements, oil and/or gas purchase contracts, or other contracts or
agreements relating to the Collateral;
(l) promptly perform all express or implied covenants that are required
to be performed pursuant to any Contract;
(m) to use all cash flow generated by the Collateral from time to time:
first, to pay lease operating expenses relating to the Collateral and general
and administrative expenses approved by Mortgagee which in no event shall
exceed $150,000 per calendar month in the aggregate; second, to pay all trade
payables and third, to the establishment of cash reserves or for capital
expenditures pursuant to an Authority for Expenditure ("AFE") prepared by
Mortgagor and approved by Mortgagee in writing, including reasonable
expenditures necessary for completion of the current workover operations in
the LaFourche Parish School Board No. 1 Well.
4.5 RECORDING. Mortgagor covenants and agrees to promptly (at
Mortgagor's own expense) record, register, deposit and file this and every other
instrument in addition or supple mental thereto, including all applicable
financing statements, in such offices and places within the State of Louisiana,
the state where the Mortgagor has its principal place of business, and with the
Minerals Management Service and at such times and as often as may be necessary
to preserve, protect and renew the privilege and security interest herein
created as a first and prior privilege or security interest on real or personal
property, whether movable or immovable, as the case may be, and otherwise shall
do and perform all matters or things necessary or expedient to be done or
observed by reason of any applicable law or regulation of any state or of the
United States or any other competent authority for the purpose of effectively
creating, perfecting, maintaining and preserving the privilege and security
interest created hereby in and on the Collateral. Mortgagor shall pay all taxes
payable upon the recording of this and every other instrument in addition or
supplement hereto.
4.6 RECORDS, STATEMENTS AND REPORTS. Mortgagor agrees and covenants to
keep proper books of record and account in which complete and correct entries
shall be made of Mortgagor's transactions in accordance with generally accepted
accounting principles and to furnish or cause to be furnished to Mortgagee upon
request or, if such reports are prepared by third parties, when available after
request by Mortgagee, in addition to any information, schedules and reports
required hereby or by any loan agreements entered into by Mortgagee and
Mortgagor in connection herewith, the following:
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(a) As soon as available and in any event within one hundred twenty
(120) days after the end of each fiscal year, a statement of Mortgagor's
financial position as of the end of such fiscal year and the related
statements of revenues and expenses of Mortgagor for such fiscal year,
setting forth in each case in comparative form the figures from Mortgagor's
budget for such fiscal year and actual expenditures for such fiscal year.
Such statements shall be audited by a nationally recognized accounting firm
or other firm reasonably acceptable to Mortgagee, whose report shall be
unqualified and shall further state that such financial statements present
fairly the financial position of Mortgagor as of the end of such fiscal year
and the results of its operations and changes in financial position for such
fiscal year;
(b) As soon as available and in any event within thirty (30) days
following the end of each month, lease operating statements and a report
showing the calculation of cash flow in form and substance consistent with
the current financial report form provided to Mortgagee.
(c) As soon as available and in any event within sixty (60) days after
the end of each quarter, an unaudited statement of Mortgagor's financial
position as of the end of such quarter and the related statements of revenues
and expenses of Mortgagor for such quarter, setting forth in each case in
comparative form the figures from Mortgagor's budget for such quarter and
actual expenses for such quarter;
(d) Quarterly reports showing payment of all applicable severance, ad
valorem and other similar taxes; and
(e) Such other information concerning operation of the Collateral, the
title of Mortgagor to or the interest of Mortgagee in the Collateral and the
business and affairs and financial condition of Mortgagor as Mortgagee may
from time to time reasonably request.
ARTICLE V
DEFAULT AND REMEDIES
--------------------
5.1 EVENTS OF DEFAULT. Mortgagor will be in default under this
instrument upon the happening of any of the following events or conditions
("Event of Default"):
(a) Mortgagor or any endorser, guarantor, surety, accommodation party,
or other person liable upon or for payment of any of the Obligations secured
hereby fails to pay when due any of the Obligations secured hereby or to
perform punctually any other obligation, covenant, term, or provision
contained in or referred to in this instrument or any other instrument
executed in connection herewith, including without limitation the occurrence
of a Default as defined in the Note;
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(b) Any warranty or representation made in this instrument by Mortgagor
or furnished to Mortgagee on behalf of Mortgagor is determined by Mortgagee
to be untrue in any respect which would or might, in Mortgagee's opinion,
result in substantial loss or impairment of the security provided by this
instrument;
(c) The entry of an order for relief under Title 11 of the United States
Code as to Mortgagor or the adjudication of Mortgagor as insolvent or
bankrupt pursuant to the provisions of any state insolvency or bankruptcy
act; the commencement by Mortgagor of any case, proceeding or other action
seeking any reorganization, arrangement, composition, adjustment,
liquidation, dissolution or similar relief for itself under any present or
future statute, law or regulation relating to bankruptcy, insolvency,
reorganization or other relief for debtors; Mortgagor's consent to,
acquiescence in or attempt to secure the appointment of any receiver of all
or any substantial part of its properties or of the Collateral; Mortgagor
shall generally not pay its debts as they become due or shall admit in
writing its inability to pay its debts or shall make a general assignment for
the benefit of creditors; or Mortgagor shall take any corporate action to
authorize any of the acts set forth above in this Paragraph;
(d) Any case, proceeding or other action against Mortgagor shall be
commenced seeking to have an order for relief entered against it as a debtor
or seeking any reorganization, arrangement, composition, adjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation relating to bankruptcy, insolvency, reorganization
or other relief for debtors, or seeking appointment of any receiver for
Mortgagor or for all or any substantial part of its property or for the
Collateral, and such case, proceeding or other action (i) results in the
entry of an order for relief against it which is not fully stayed within
seven business days after the entry thereof, or (ii) remains undismissed for
an aggregate of thirty days (whether or not consecutive); or the possibility
that any portion of the Collateral would, by operation of law or otherwise,
devolve on or pass to any person other than Mortgagor and such situation
shall continue and not be remedied within thirty days after the happening of
any such event;
(e) Mortgagor's title to the Collateral or any substantial part thereof
becomes the subject matter of litigation which would or might, in Mortgagee's
opinion, upon final determination result in substantial impairment or loss of
the security provided by this instrument;
(f) Except as specifically authorized herein, there is substantial
damage to or destruction of or sale of any of the Collateral or the
Collateral is subjected to any privilege, lien or encumbrances not permitted
under subsection 4.4(h); or
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(g) Except as to any default which has been disclosed to Mortgagee in
writing as of the date of this Mortgage, there occurs a default in the
performance of any obligation of Mortgagor to any other party, including but
not limited to, a default under any document executed in connection with or
creating the Endowment Liens.
5.2 ACCELERATION UPON DEFAULT. In addition to the right and privilege to
demand payment of the Note at any time, as set forth therein, and without
limiting the Mortgagee's rights and privileges thereunder, upon the occurrence
of any Event of Default, or at any time thereafter, Mortgagee may, at its
option, declare the entire unpaid principal of and the interest accrued on the
Obligations to be forthwith due and payable, without any protest, presentment,
demand, notice of intent to accelerate, notice of acceleration or further notice
of any kind, all of which are hereby expressly waived by Mortgagor.
5.3 RIGHTS TO COLLATERAL UPON DEFAULT.
(a) Operation of property by Mortgagee. Upon the occurrence of an Event
of Default or at any time thereafter, and in addition to all other rights of
Mortgagee, Mortgagee shall have the following rights and powers (but no
obligation):
(i) To enter upon and take possession of any of the Realty
Collateral, to exclude Mortgagor therefrom, and to hold, use, administer,
manage and operate the same to the extent that Mortgagor could do so;
(ii) To operate the Realty Collateral, without any liability to
Mortgagor in connection with such operations, except for failure to use
ordinary care in the operation of the Realty Collateral; and
(iii) To the extent that Mortgagor could do so, to collect, receive
and receipt for all Hydrocarbons produced and sold from the Realty
Collateral, to make repairs, to purchase machinery and equipment, to conduct
workover operations, to drill additional wells, and to exercise every power,
right and privilege of Mortgagor with respect to the Realty Collateral.
When and if the expenses of such operation and development (including costs
of unsuccessful workover operations or additional wells) have been paid, and
the Obligations have been paid, the Realty Collateral shall be returned to
Mortgagor (providing there has been no foreclosure sale).
(b) Seizure. Mortgagor for itself and its successors and assigns,
agrees and stipulates that it shall be lawful for and Mortgagor authorizes
Mortgagee without making a demand or putting in default, putting in default
being expressly waived, to cause all and singular the Realty Collateral to be
seized and sold by executory or other
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legal process without appraisement (appraisement being hereby expressly
waived) either in its entirety or in lots, or parcels as Mortgagee may
determine to the highest bidder for cash or on such terms as Mortgagee may
direct, Mortgagor for itself, its successors and assigns, hereby
acknowledging the Obligations and confessing judgment for the full amount of
said Note in principal and interest and all other Obligations.
(c) Foreclosure. Upon the occurrence of an Event of Default (as
hereinafter defined), Mortgagee shall have the right and power to proceed by
suit or suits for spe cific performance of any covenant or agreement herein
contained or in aid of the execution of any power herein granted or for any
foreclosure hereunder or for the sale of the Realty Collateral under the
judgment or decree of any court or courts of competent jurisdiction, or for
the appointment of a receiver pending any foreclosure hereunder or the sale
of the Realty Collateral under the order of a court or courts of competent
jurisdiction or under executory or other legal process, or for the
enforcement of any other appropriate remedy. Mortgagor agrees that, in the
event any proceedings are taken under this instrument by way of executory
process or otherwise, any and all declarations of the facts made by authentic
act before a notary public and in the presence of two witnesses, by a person
declaring that such facts lie within his knowledge, shall constitute
authentic evidence of such facts for the purpose of executory process.
(d) Application of Proceeds. The proceeds of any sale of the Collateral
or any part thereof will be applied (A) first, to the payment of all expenses
incurred by Mortgagee; (B) second, to the payment of the Obligations; and (C)
third, the balance, if any, thereafter remaining will be paid to Mortgagor or
Mortgagor's successors or assigns as their interests may appear upon demand
of Mortgagor or Mortgagor's successors or assigns.
(e) Keeper Provisions. Upon the occurrence of an Event of Default,
Mortgagee is authorized prior or subsequent to the institution of any
foreclosure proceedings, to enter upon the Collateral, or any part thereof,
and to exercise without interference from Mortgagor any and all rights which
Mortgagor has with respect to the management, possession and operation of the
Collateral, it being the intention to confer on Mortgagee or Mortgagee's
agent, all of the rights granted to keepers of mineral interests by LSA R.S.
9:5131, et seq. It is hereby agreed that the keeper shall be entitled to
receive as compensation, in excess of its costs and expenses, an amount equal
to one percent of the gross revenues of the Collateral. All costs, expenses
and liabilities of every character incurred by Mortgagee in managing,
operating and maintaining such Collateral shall constitute a demand
obligation owing by Mortgagor to Mortgagee, shall draw interest thereon from
date of expenditure until date paid at the Default Rate, all of which shall
constitute a portion of the Obligations secured by the privilege and lien
evidenced by this instrument.
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(f) Waiver. Mortgagor hereby expressly waives:
(i) The benefit of appraisement as provided for in Articles 2332,
2336, 2723 and 2724 of the Louisiana Code of Civil Procedure and all other
laws conferring the same;
(ii) The demand and three (3) days delay accorded by Articles 2639
and 2721 of the Louisiana Code of Civil Procedure;
(iii) The notice of seizure required by Articles 2293 and 2721 of
the Louisiana Code of Civil Procedure; and
(iv) The benefit of any other provisions of Articles 2331, 2722 and
2723 of the Louisiana Code of Civil Procedure;
and Mortgagor agrees to the immediate seizure of the property subject
hereto in the event of suit hereon, and further, Mortgagee and any
future holder or holders of the Note shall be entitled to all of the
rights and remedies provided in the Louisiana Commercial Laws -- Secured
Transactions (Chapter 9 of the Louisiana Uniform Commercial Code (the
"UCC" or "Uniform Commercial Code")) , by Articles 203-204 of the
Louisiana Mineral Code and by Article 3278 et seq. of the Louisiana
Civil Code.
5.4 ACCUMULATION OF RIGHTS. Every right, power and remedy herein given
to Mortgagee shall be cumulative of and in addition to every other right, power
and remedy herein specifically given and now or hereafter existing; and each and
every right, power and remedy, whether specifically given or otherwise existing,
may be exercised from time to time and so often and in such order as may be
deemed expedient by Mortgagee, and the exercise or the beginning of the exercise
of any such right, power or remedy shall not be deemed a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy. No
delay or omission by Mortgagee in the exercise of any right, power or remedy
shall impair any such right, power or remedy or operate as a waiver thereof or
of any other right, power or remedy then or thereafter existing and no single
sale or series of sales under this Article V shall exhaust Mortgagee's rights
and powers, but such power shall continue to exist for so long as, and may be
exercised in the manner hereinabove provided as often as, the circumstances
require to give Mortgagee full relief hereunder.
5.5 MARSHALING. Mortgagor, for itself and all who may claim through or
under Mortgagor waives, to the extent that Mortgagor may lawfully do so under
applicable law of the State of Louisiana, any and all rights to have the
Collateral marshaled upon any foreclosure of the lien and privilege hereof, or
sold in inverse order of alienation, and Mortgagor agrees that Mortgagee may
cause the Collateral to be sold as an entirety or in parcels as Mortgagee may
direct.
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5.6 RIGHTS TO PERSONALTY COLLATERAL UPON DEFAULT. Upon the occurrence
of an Event of Default, or at any time thereafter, Mortgagee may proceed against
the Personalty Collateral in accordance with the rights and remedies granted
herein with respect to the Realty Collateral, or will have all rights and
remedies granted by the Uniform Commercial Code and this instrument. Mortgagee
shall have the right to take possession of the Personalty Collateral, and for
this purpose Mortgagee may enter upon any premises on which any or all of the
Personalty Collateral is situated and, to the extent that Mortgagor could do so,
take possession of and operate the Personalty Collateral or remove it therefrom.
Mortgagee may require Mortgagor to assemble the Personalty Collateral and make
it available to Mortgagee at a place to be designated by Mortgagee which is
reasonably convenient to both parties. Unless the Personalty Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Mortgagee will send Mortgagor reasonable notice of
the time and place of any public sale or of the time after which any private
sale or other disposi tion of the Personalty Collateral is to be made. This
requirement of sending reasonable notice will be met if such notice is mailed,
postage prepaid, to Mortgagor at the address designated in Section 6.12 (or such
other address as has been designated as provided herein) at least ten days
before the time of the sale or disposition. In addition to the expenses of
retaking, holding, preparing for sale, selling and the like, Mortgagee will be
entitled to recover reasonable attorney's fees and legal expenses as provided
for in this instrument and in the writings evidencing said Obligations before
applying the balance of the proceeds from the sale or other disposition toward
satisfaction of the Obligations. Mortgagor will remain liable for any
deficiency remaining after the sale or other disposition.
5.7 RIGHTS TO IMMOVABLE COLLATERAL UPON DEFAULT. Upon the occurrence
of any Event of Default, or at any time thereafter, Mortgagee may elect to treat
the Immovable Collateral as either Realty Collateral or as Personalty Collateral
(but not both) and proceed to exercise such rights as apply to the type of
Collateral selected.
5.8 ACCOUNT MORTGAGORS. Mortgagee may, in its discretion, before or
after the occurrence of an Event of Default, notify any account debtors to make
payments directly to Mortgagee and contact account debtors directly to verify
information furnished by Mortgagor. Mortgagee shall not have any obligation to
preserve any rights against prior parties.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 ADVANCES BY MORTGAGEE. Each and every covenant of Mortgagor herein
contained shall be performed and kept by Mortgagor solely at Mortgagor's
expense. If Mortgagor fails to perform or keep any of the covenants of
whatsoever kind or nature contained in this instrument, Mortgagee or any keeper
may, but will not be obligated to, make advances to perform the same on
Mortgagor's behalf, and Mortgagor hereby agrees to repay such sums and any
attorneys' fees incurred in connection therewith on demand plus interest thereon
from
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the date of the advance until paid at the Default Rate. In addition,
Mortgagor hereby agrees to repay on demand any reasonable costs, expenses and
attorney's fees incurred by Mortgagee or any keeper which are to be obligations
of the Mortgagor pursuant to, or allowed by, the terms of this instrument, plus
interest thereon from the date of the advance until paid at the Default Rate.
Any such amounts so paid by Mortgagee or any keeper shall be considered part of
the Obligations secured hereby and shall be secured by this instrument and the
amount and nature of any such payment by Mortgagee and the date when paid shall
be held to be fully and authentically established by affidavit of Mortgagee or
its or their agents, servants or employees, and such amounts shall be paid as
part of the Obligations out of the proceeds of the sale of the Collateral in the
event of foreclosure or other proceedings together with interest thereon at the
rate provided for above; provided, however (a) that the amount of the
Obligations secured and to be secured hereby shall in no event exceed the amount
set out in Article 2.3 above and (b) that the exercise of any right or
advancement or payment of cost or expenses by Mortgagee or any keeper shall in
no manner be construed as a waiver of the rights of Mortgagee to demand payment
on the Note. Mortgagee and any future holder or holders of the Note shall be
and are hereby subrogated to all rights, liens and privileges securing payment
of any debt or claim for the payment of which Mortgagee may make advances
pursuant to the terms hereof.
6.2 DEFENSE OF CLAIMS. Mortgagor shall promptly notify Mortgagee in
writing of the commencement of any legal proceedings affecting Mortgagor's title
to the Collateral or the lien and privilege created hereby, and shall take such
action, employing attorneys agreeable to the Mortgagee, as may be necessary to
preserve Mortgagor's and Mortgagee's rights herein. If Mortgagor fails or
refuses to defend Mortgagor's or Mortgagee's rights in and to the Collateral,
Mortgagee may take such action on behalf of and in the name of Mortgagor and at
Mortgagor's expense. Moreover, Mortgagee may take such independent action in
connection therewith as it may in its discretion deem proper, including, without
limitation, the right to employ indepen dent counsel and to intervene in any
suit affecting the Collateral. All costs, expenses and attorneys' fees incurred
by Mortgagee pursuant to this Article 6.2 shall be paid by Mortgagor on demand
plus interest thereon from the date of the advance by Mortgagee until paid at
the Default Rate.
6.3 PARTIAL RELEASES. The Mortgagee at all times shall have the right
to release any part of the Collateral now or hereafter subject to the lien and
privilege hereof or any part of the proceeds of production or any income herein
or hereafter assigned or pledged or any other security it now has or may
hereafter have securing said indebtedness, without releasing any other part of
said Collateral, proceeds, income or security and without affecting the lien
hereof as to the parts or parties not released, or the right to future proceeds
and income.
6.4 RENEWALS, AMENDMENTS AND OTHER SECURITY. Without notice or consent
of Mortgagor, renewals and extensions of the written instruments constituting
part or all of the Obligations may be given at any time and amendments may be
made to agreements relating to any part of such written instruments or the
Collateral. Mortgagee may take or hold other
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security for the Obligations without notice to or consent of Mortgagor. The
acceptance of this instrument by Mortgagee shall not waive or impair any other
security Mortgagee may have or hereafter acquire to secure the payment of the
Obligations nor shall the taking of any such additional security waive or impair
the lien and security interests herein granted. Mortgagee may resort first to
such other security or any part thereof, or first to the security herein given
or any part thereof, or from time to time to either or both, even to the partial
or complete abandonment of either security, and such action will not be a waiver
of any rights conferred by this instrument.
6.5 ASSIGNMENT AND FINANCING STATEMENT. This instrument will be deemed
to be and may be enforced from time to time as an assignment, chattel mortgage,
contract, deed of trust, financing statement, real estate mortgage, or security
agreement, and from time to time as any one or more thereof if appropriate under
applicable state law. As a financing statement this instrument is intended to
cover all Personalty Collateral and Immovable Collateral, including without
limitation Mortgagor's interest in all Hydrocarbons as and after they are
severed by being reduced to possession at the wellhead and all accounts arising
from the sale thereof at the wellhead. This instrument shall be filed in the
appropriate records of the county or counties or parish or parishes and the
state in which the Realty Collateral is located, in the Uniform Commercial Code
records of a parish in the State of Louisiana or other appropriate office of the
State in which any Personalty Collateral or any Realty Collateral is located and
in the Uniform Commercial Code Records of the state where Mortgagor's principal
place of business is located (if not in Louisiana). At Mortgagee's request
Mortgagor shall execute financing statements covering the Personalty Collateral
and Immovable Collateral, which financing statements may be filed in the Uniform
Commercial Code records of a parish in the State of Louisiana or any other state
or other appropriate office of the state in which any of the Collateral is
located or where Mortgagor has its principal place of business or in the county
where Mortgagor has its principal place of business.
6.6 LIMITATION ON INTEREST. As used herein, the term "Maximum Rate"
shall mean and refer to the maximum rate of nonusurious interest, if any, that
Mortgagee may from time to time charge Mortgagor and in regard to which
Mortgagor would be prevented successfully from raising the claim or defense of
usury under applicable law as now, or to the extent permitted by law, as may
hereafter be, in effect (said law permitting the highest rate being herein
referred to as the "Interest Law"). It is the intention of Mortgagor and
Mortgagee to conform strictly to the Interest Law applicable to this loan
transaction. Accordingly, it is agreed that notwithstanding any provision to
the contrary, the aggregate of all interest and any other charges or
consideration constituting interest under applicable Interest Law that is taken,
reserved, contracted for, charged or received under this Mortgage or otherwise
in connection with this loan transaction shall under no circumstances exceed the
maximum amount of interest allowed by the Interest Law applicable to this loan
transaction. If any excess of interest in such respect is provided for, or
shall be adjudicated to be so provided for, in the Note or in any of the
documents securing payment of the Note or otherwise relating thereto, then in
such event (a)
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the provisions of this paragraph shall govern and control, (b) neither Mortgagor
nor Mortgagor's heirs, legal representatives, successors or assigns or any other
party liable for the payment of the Note shall be obligated to pay the amount of
such interest to the extent that it is in excess of the maximum amount of
interest allowed by the Interest Law applicable to this loan transaction, (c)
any excess shall be deemed a mistake and canceled automatically and, if there
tofore paid, shall be credited on the Note by Mortgagee (or if the Note shall
have been paid in full, refunded to Mortgagor) and (d) the effective rate of
interest shall be automatically subject to reduction to the Maximum Rate allowed
under such Interest Law as now or hereafter construed by courts of appropriate
jurisdiction. All sums paid or agreed to be paid the Mortgagee for the use,
forbearance or detention of the indebtedness evidenced by the Note shall, to the
extent permitted by the Interest Law applicable to this loan transaction, be
amortized, prorated, allocated and spread throughout the full term of the Note.
6.7 UNENFORCEABLE OR INAPPLICABLE PROVISIONS. If any provision hereof
is invalid or unenforceable, the other provisions hereof will remain in full
force and effect and will be liberally construed in favor of Mortgagee in order
to carry out the provisions hereof.
6.8 RIGHTS CUMULATIVE. Each and every right, power and remedy herein
given to Mortgagee will be cumulative and not exclusive, and each and every
right, power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time and as often and in such order as may be
deemed expedient by Mortgagee, and the exercise, or the beginning of the
exercise, of any such right, power or remedy will not be deemed a waiver of the
right to exercise, at the same time or thereafter, any other right, power or
remedy. No delay or omission by Mortgagee in the exercise of any right, power
or remedy will impair any such right, power or remedy or operate as a waiver
thereof or of any other right, power or remedy then or thereafter existing.
6.9 WAIVER BY MORTGAGEE. Any and all covenants in this instrument may
from time to time by instrument in writing by the Mortgagee, be waived to such
extent and in such manner as Mortgagee may desire, but no such waiver will ever
affect or impair Mortgagee's rights hereunder, except to the extent specifically
stated in such written instrument. All changes to and modifications of this
instrument must be in writing by authentic act and signed by Mortgagee.
6.10 TERMS. The term "Mortgagor" as used in this instrument will be
construed as singular or plural to correspond with the number of persons
executing this instrument as Mortgagor. If more than one person executes this
instrument as Mortgagor, their duties, covenants, warranties and liabilities
under this instrument will be joint, several and in solido, and any occurrence
of an Event of Default as to one Mortgagor shall be deemed an Event of Default
as to each Mortgagor. The terms "Mortgagee" and "Mortgagor" as used in this
instrument include the heirs, executors or administrators, successors,
representatives, receivers, and assigns of those parties. This instrument is
binding upon Mortgagor, Mortgagor's successors and assigns, as well as upon
any person, firm or corporation hereafter acquiring title to any
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of the Collateral by, through or under Mortgagor and will inure to the benefit
of Mortgagee and its successors and assigns.
6.1 GOVERNING LAW. THIS INSTRUMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, SUBJECT, HOWEVER, TO THE
EFFECT OF APPLICABLE FEDERAL LAW (INCLUDING, WITHOUT LIMITATION, 12 U.S.C. 85).
6.1 NOTICE. All notices required or permitted to be given by Mortgagor
or Mortgagee shall be given in writing and may be effected by personal delivery,
by facsimile or by placing the same in the U. S. Mail, registered or certified,
return receipt requested, postage prepaid and addressed as follows:
Mortgagor: FORMAN PETROLEUM CORPORATION
650 Poydras Street - Suite 2200
New Orleans, Louisiana 70130-6101
Attn: Marvin J. Gay
Mortgagee: JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Keith Power/Brenda McGee,
Specialists - 28th Floor
With a copy to: JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Wynne M. Snoots
Unless otherwise provided herein, all notices shall be deemed given (i) upon
receipt if hand delivered or sent by facsimile, or (ii) if sent by mail, three
days following the date deposited in the mail. Mortgagor agrees that its
address shall be changed only by depositing notice of such change enclosed in a
post-paid wrapper in a post office or official depository under the care and
custody of the United States Postal Service, certified mail, postage prepaid,
return receipt requested, addressed to Mortgagee at the address set out above
(or to such other address as Mortgagee may have designated by notice given as
provided above, to Mortgagor). Any such notice of change of address of
Mortgagor or Mortgagee or other holder of the Obligations shall be effective
five business days after such deposit.
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6.13 SURETY WAIVERS. Mortgagor agrees that no acceleration of the
maturity of the Obligations, no renewal, extension or rearrangement of or any
other indulgence with respect to the Obligations, no change in the place or
manner of payment of or other change in the terms of the Obligations, no release
of or substitution for any security or other guaranty now or hereafter held by
Mortgagee for payment of the Obligations, no release of any person liable for
payment or purchase of the Obligations, including, without limitation, any
maker, endorser, guarantor or surety (any such other person is referred to
herein as an "Other Liable Party"), no delay in enforcement of payment of the
Obligations and no delay or omission or lack of dili gence or care in
exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof, shall in any manner impair or affect the rights of
Mortgagee or the obligations, duties and liabilities of Mortgagor hereunder.
Mortgagor agrees that it shall not be necessary or required that Mortgagee make
demand for payment upon any Other Liable Party or present the Obligations for
payment by any Other Liable Party or make protest thereof or give notice to any
Other Liable Party of maturity or nonpayment of the Obligations by any Other
Liable Party or file suit or proceed to obtain or assert a claim for personal
judgment against any Other Liable Party for the Obligations or make any effort
at collection of the Obligations or exercise or assert any other right or remedy
to which Mortgagee is or may be entitled in connection with the Obligations or
any security therefor or assert or file at any time any claim against the assets
or estate of any Other Liable Party as a condition of enforcing this instrument.
Mortgagor waives any right to the benefit of or to require or control
application of any Collateral now existing or hereafter obtained by Mortgagee as
security for the Obligations and agrees that Mortgagee shall have no duty
insofar as Mortgagor is concerned to apply upon any of the Obligations, any
money, payments or other property at any time received by or paid to or in the
possession of Mortgagee. Mortgagor agrees that except for the gross negligence
or willful misconduct of Mortgagee, Mortgagor shall have no recourse or action
against Mortgagee by reason of any action Mortgagee may take or omit to take in
connection with the Obligations or the collection of any sums or amounts herein
mentioned, or in connection with any security or any other guaranty at any time
existing therefor.
6.14 CONDEMNATION. All awards and payments heretofore and hereafter
made for the taking of or injury to the Collateral, or any portion thereof,
whether such taking or injury be done under the power of eminent domain or
otherwise, are hereby assigned, and shall be paid to Mortgagee. Mortgagee is
hereby authorized to collect and receive the proceeds of such awards and
payments and to give proper receipts and acquittances therefor. Mortgagor
hereby agrees to make, execute and deliver, upon request, any and all
assignments and other instruments sufficient for the purpose of confirming this
assignment of the awards and payments to Mortgagee free and clear of any
encumbrances of any king or nature whatsoever. Any such award or payment may,
at the option of Mortgagee, be retained and applied by Mortgagee after payment
of reasonable attorneys' fees, costs and expenses incurred in connection with
the collection of such award or payment toward payment of all or a portion of
the Obligations, whether or not the Obligations are then due and payable, or be
paid over wholly or in part to
-27-
<PAGE>
Mortgagor for the purpose of altering, restoring or rebuilding any part of the
Collateral which may have been altered, damaged or destroyed as a result of any
such taking, or other injury to the Collateral.
6.15 WAIVER OF NOTARY'S CERTIFICATES. The parties hereto expressly
waive the production of mortgage, conveyance or tax certificates and hereby
relieve and release me, said Notary, and agree to hold me harmless from and by
reason of the nonproduction and nonannexation thereof to this instrument.
6.16 SUBROGATION. This instrument is made with full substitution and
subrogation of Mortgagee, its successors and assigns, in and to all covenants,
warranties and representations by others heretofore given or made with respect
to title in and to the Collateral or any part thereof whether recorded or
unrecorded by contract or otherwise, to the extent that such covenants,
warranties and representations may be so subrogated and to any liens or
privileges covering any property or properties of Mortgagor securing the payment
of any indebtedness which is fully or partially discharged by funds made
available to Mortgagor and secured hereby, to the full extent that such
subrogation of liens and privileges is allowed under applicable state law.
-28-
<PAGE>
Thus done and passed in my office in Houston, Harris County, Texas, this
21st day of November, 1996 in the presence of the undersigned competent
witnesses who hereunto sign their names with the Mortgagor and me, Notary, after
due reading of the whole.
MORTGAGOR
Witnesses to all
signatures: FORMAN PETROLEUM CORPORATION
/s/ Gray H. Muzzy
- ------------------------
Gray H. Muzzy
By: /s/ Marvin J. Gay
-------------------
/s/ Lynn C. Woodson Marvin J. Gay
----------------------- Treasurer
Lynn C. Woodson
Stamp: /s/ Diane L. Bailey
Diane L. Bailey --------------------------------
Notary Public, State of Texas Notary Public in and for
My Commission The State of Texas
Expires 5/21/99 -------------------
Name: Diane L. Bailey
---------------------------
My Commission Expires: 5/21/99
----------
(Signature Page to Act of Mortgage, Security Agreement,
Assignment of Production and Financing Statement)
-29-
<PAGE>
EXHIBIT A
PREAMBLE
LOUISIANA
This Exhibit A sets forth the description of the Oil and Gas Properties
covered by the Act of Mortgage, Security Agreement, Assignment of Production and
Financing Statement to which this Exhibit A is attached (the "Mortgage").
Capitalized terms used in this Preamble and not otherwise defined herein shall
have the meanings ascribed thereto in the Mortgage.
1. This Exhibit A consists of descriptions of oil, gas and
mineral leases, overriding royalties and other interests covering lands located
within the State of Louisiana or federal lands located on the Outer Continental
Shelf and offshore of the State of Louisiana. The heading for each lease or
group of leases includes Mortgagor's internal prospect name.
2. Exhibit A includes one or more pages with the following
subheadings:
Leases: The description of the lease or leases in which Mortgagor owns
an interest covered by this Exhibit. Where applicable, the
original lessor and lessee, Federal Lease Number, the date of
the lease, the lands covered by the lease and other descriptive
information relating to the lease is set forth.
Limitations: The information next to this subheading describes the areas
under each lease in which Mortgagor owns an interest. Such
description shall include all of Mortgagor's right, title and
interest in the oil, gas and mineral leases and other interests
listed in this Exhibit and not any interest in excess thereof.
If "none" appears, there are no limitations on Mortgagor's
interest in the areas or depths under the lease.
Contract List: Exhibit A may include one or more pages with the heading
"Contract List" which list certain agreements that affect
Mortgagor's interest in the oil, gas and mineral leases and
other interests, and Mortgagor's interest in the wells or units
described or referred to in the Exhibit, which oil, gas and
mineral leases and other interests and wells or units are
located in the prospect identified in the heading of the page of
the Exhibit, to the extent such agreements are in force and
effect. The reference to such agreements shall not constitute a
ratification or other recognition of the validity or
effectiveness of such agreements or otherwise revive same. Such
contracts are referred to by the type of agreement and affects
Mortgagor's interest in oil, gas and mineral leases and other
interests. Also shown is the date or the effective date of the
agreement and amendments thereto, and the parties to the
agreement.
<PAGE>
Ownership
Interests: Exhibit A includes Mortgagor's Working Interest and the Mortgagor's
Net Revenue Interest (identified as Mortgaged Interest) for certain
wells, units or areas covered by a lease. The wells or units are
located in the prospect identified in the heading of the exhibit,
and the prospect is located in the parish of the State of Louisiana
referred to in the description or on federal lands located on the
Outer Continental Shelf and offshore of the State of Louisiana. The
wells or units in the particular prospect are located upon the
lands covered by the oil, gas and mineral leases, overriding
royalties or other interests described in the exhibit that relates
to that prospect or lands pooled therewith. The descriptions
include the following:
Well or
Unit Name: The particular well or unit located within
the prospect identified in the heading.
Working
Interest: Mortgagor's Working Interest.
Net Revenue
Interest: Mortgagor's Net Revenue Interest.
The Working Interests and Net Revenue Interests are computed and
set out herein after taking into account all of the terms,
provisions and conditions of the agreements and other instruments
listed on the "Contract List".
The Mortgagor's Net Revenue Interest means (i) with respect to a
unit for which the Mortgagor's Net Revenue Interest is stated, that
interest in the applicable oil or gas production produced, saved
and sold from such unitized, pooled, communitized or participating
areas with respect to the existing interval in which the well or
wells located on such unit are completed, which is owned by the
Mortgagor by virtue of its ownership of the Mortgagor's Working
Interest in the leases included in whole or in part in such area
after deducting all burdens against the production therefrom, and
(ii) with respect to a well for which the Mortgagor's Net Revenue
Interest is stated, that interest in the existing interval in which
such well is completed for production after deducting all burdens
against the production therefrom which is owned by the Mortgagor by
virtue of its ownership of the Mortgagor's Working Interest in the
lease on which such well is located.
"Before Payout" and "After Payout" refer to the Mortgagor's Working
Interest and the Mortgagor's Net Revenue Interest "before payout"
and "after payout" as
<PAGE>
defined in the applicable joint operating agreement or other
instrument affecting the well or unit as denoted in the Exhibit.
Mortgagor's interest may decrease or increase as a result of a
reversionary interest, an operation wherein Mortgagor has paid
costs attributable to the interest of a non-consenting party or a
con senting party has paid costs attributable to the interest of
Mortgagor as a non-consenting party, and the consenting party is
entitled to recover a percentage of its cost, or other circumstance
which triggers an increase or decrease in such interest. Mortgagor
makes no undertaking concerning the terms and conditions of the
reversion or the status of payout, the costs that may be recovered,
whether or when such recovery has occurred or will occur, or, in
the case of an election, what election will be made. If more than
one reversionary interest, non-consent operation or other
circumstance affects a well or unit, "After Payout" refers to the
occurrence of the reversion of the last of the reversionary
interest, recoupment or such other circumstance.
<PAGE>
Page 1 of 64
EXHIBIT A
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
02-0000082-001 08/20/1974 08/20/1974 523 34 393815
GROSS ACRES LESSOR : DR. J.A. GRAVOIS
0.00000 LESSOR ID :
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 2 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
05-0000200-001 03/08/1976 03/08/1976 569 667 422170
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY, INC.
4.58000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
05-0000203-001 12/12/1972 12/12/1972 552 208 414734
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
0.22900 LESSOR ID:
LESSEE : LYNAL INC
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
05-0000206-001 05/24/1973 05/24/1973 506 834 382504
GROSS ACRES LESSOR : JOHN M CULVER AND JANE DUSENBURY CULVER,
ET AL
0.35781 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
05-0000207-001 05/03/1973 05/03/1973 506 831 382503
GROSS ACRES LESSOR : JAMES B THOMAS, ET AL
0.35781 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 3 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
05-0000208-001 12/07/1972 12/07/1972 516 372 389020
GROSS ACRES LESSOR : JAMES P THOMAS
0.35781 LESSOR ID:
LESSEE : LYNAL, INC
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
05-0000209-001 05/12/1976 05/12/1976
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
1.12210 LESSOR ID:
LESSEE : MCMORAN EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 4 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001537-001 12/10/1973 12/10/1973 506 257 382128
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC.
7.62200 LESSOR ID:
LESSEE : LYNAL EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002046-001 09/26/1975 09/26/1975 551 357 414240
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
11.95100 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003268-001 06/13/1975 06/13/1975 543 479 408667
GROSS ACRES LESSOR : HUGH C MCNEIL
160.00000 LESSOR ID:
LESSEE : MCMORAN EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003268-002 06/13/1975 06/13/1975 543 475 408666
GROSS ACRES LESSOR : GRACE WELD COLBY
160.00000 LESSOR ID:
LESSEE : MCMORAN EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 5 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003271-001 03/26/1975 03/26/1975 537 869 404483
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
71.59400 LESSOR ID:
LESSEE : MCMORAN EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 6 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001542-001 04/01/1974 04/01/1974 602 365 452164
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
9.96000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003270-001 03/18/1974 03/18/1974 510 706 385730
GROSS ACRES LESSOR : RUTH DEXTER CLOW ET AL
160.00000 LESSOR ID:
LESSEE : XPO INC
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 7 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003272-001 09/04/1981 09/04/1981 749 279 548650
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC.
137.59900 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003273-001 03/29/1983 03/29/1983 824 679 585751
GROSS ACRES LESSOR : DELMAR D KNOWLES SR
160.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003273-002 03/29/1983 03/29/1983 824 613 585730
GROSS ACRES LESSOR : AUDREY E KNOWLES ET AL
160.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 8 of 64
WELL NAME PARISH/STATE
- --------- ------------
Lafourche Realty Co. #8 Lower CIB CARST Lafourche/Louisiana
Ruth D. Clow #2 T-1 SD SEG I Lafourche/Louisiana
Ruth D. Clow #1 V-3 SD SEG I Lafourche/Louisiana
Ruth D. Clow #2 V-2 SD SEG I Lafourche/Louisiana
Ruth D. Clow #2 T-7 SD SEG I Lafourche/Louisiana
Ruth D. Clow #2 S-2 SD SEG I Lafourche/Louisiana
Ruth D. Clow #2 T SD Lafourche/Louisiana
Ruth D. Clow #2 T-3 SD Lafourche/Louisiana
Ruth D. Clow #2 T-5 SD Lafourche/Louisiana
Ruth D. Clow #3 CIB CARST Lafourche/Louisiana
Ruth D. Clow #3 V-2 SD SEG I Lafourche/Louisiana
Lafourche Realty Co. #A2 V-2 RD SUA Lafourche/Louisiana
Lafourche Realty Co. #A2 V-3 SD SEG III Lafourche/Louisiana
Lafourche Realty Co. #B2 T-7 SD SEG III Lafourche/Louisiana
Lafourche Realty Co. #B2 R RA SUA Lafourche/Louisiana
Lafourche Realty Co. #B2D S-2 SD SEG II Lafourche/Louisiana
Lafourche Realty Co. #B2D T-1 SD SEG II Lafourche/Louisiana
H.C. McNeil #6 T-1 SD SEG I Lafourche/Louisiana
H.C. McNeil #6D R SD SEG I Lafourche/Louisiana
<PAGE>
EXHIBIT A Page 9 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
1-0001156-001 09/25/1972 09/25/1972 508 249 383445
GROSS ACRES LESSOR : WILLIAM H HARRISON, ET AL
82.44000 LESSOR ID:
LESSEE : LYNAL EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
1-0001441-001 08/30/1972 08/30/1972 554 533 416550
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
64.99600 LESSOR ID:
LESSEE : ROBERT A CHENOWITH
PROSPECT : LAKE ENFERMER
RESERVATION AND EXCEPTION:
LESS AND EXCEPT THOSE PORTIONS OF THE ABOVE LEASES TO THE EXTENT THAT SUCH
LEASES ARE SITUATED WITHIN THE SURFACE BOUNDARIES OF THE H SAND, RESERVOIR A,
IN THE LAKE ENFERMER FIELD, LAFOURCHE PARISH, LOUISIANA, AS ESTABLISHED BY
LOUISIANA OFFICE OF CONSERVATION ORDER NUMBER 340-A DATED JUNE 24, 1974,
EFFECTIVE MAY 9, 1974 RECORDED IN COB 518, FOLIO 112 UNDER ENTRY NO. 390257;
AND
LESS AND EXCEPT THOSE PORTIONS OF THE ABOVE LEASES TO THE EXTENT THAT SUCH
LEASES ARE SITUATED WITHIN THE SURFACE BOUNDARIES OF THE I RA SUA RESERVOIR A,
IN THE LAKE ENFERMER FIELD, LAFOURCHE PARISH, LOUISIANA, AS ESTABLISHED BY
LOUISIANA OFFICE OF CONSERVATION ORDER NUMBER 340-B DATED JUNE 4, 1974,
EFFECTIVE MAY 9, 1974 RECORDED IN COB 518, FOLIO 116 UNDER ENTRY NO. 390258.
<PAGE>
EXHIBIT A Page 10 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001441-001 08/30/1972 08/30/1972 554 533 416550
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
64.99600 LESSOR ID:
LESSEE : ROBERT A CHENOWETH
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001538-001 11/24/1973 11/24/1973 506 250 382127
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
0.48200 LESSOR ID:
LESSEE : LYNAL EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002032-001 08/30/1980 08/30/1980 711 616 527528
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
20.62600 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002332-001 11/26/1978 11/26/1978 642 626 480876
GROSS ACRES LESSOR : HAROLD J POTTER ET AL
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 11 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002332-002 11/26/1978 11/26/1978 642 630 480877
GROSS ACRES LESSOR : ROBERT J NEWELL
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002332-003 11/26/1978 11/26/1978 642 634 480878
GROSS ACRES LESSOR : DONNA NEWELL WICHSER
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-002333-001 02/06/1979 02/06/1979 642 618 480874
GROSS ACRES LESSOR : HUGH C MCNEIL, ET AL
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002333-002 01/17/1979 01/17/1979 642 622 480875
GROSS ACRES LESSOR : GRACE WELD COLBY, ET AL
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 12 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002367-001 11/21/1978 11/21/1978 642 602 480870
GROSS ACRES LESSOR : ADRIENNE F FABER
80.00000 LESSOR ID :
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002367-002 11/21/1978 11/21/1978 642 606 480871
GROSS ACRES LESSOR : JUNE R CLAUSE
80.00000 LESSOR ID :
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002367-003 11/25/1978 11/25/1978 642 610 480872
GROSS ACRES LESSOR : DR L PENFIELD FABER
80.00000 LESSOR ID :
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002367-004 11/21/1978 11/21/1978 642 614 480873
GROSS ACRES LESSOR : THOMAS L FASSETT ET AL
80.00000 LESSOR ID :
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 13 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-001 11/27/1978 11/27/1978 645 1 482083
GROSS ACRES LESSOR : PAUL A DOTY
32.43100 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-002 11/27/1978 11/27/1978 645 17 482087
GROSS ACRES LESSOR : MARIAN DOTY GEHLMANN
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-003 11/27/1978 11/27/1978 645 13 482086
GROSS ACRES LESSOR : DONALD R DOTY
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-004 11/27/1978 11/27/1978 645 5 482084
GROSS ACRES LESSOR : HELEN G DOTY ET AL
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 14 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-005 11/27/1978 11/27/1978 645 9 482085
GROSS ACRES LESSOR : ROXANN F RHEA
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003265-001 11/24/1982 11/24/1982 798 65 573212
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
37.00700 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003267-001 06/10/1982 06/10/1982 782 801 566560
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
1.92200 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0006385-001 11/01/1986 11/01/1986 990 446 669883
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
39.48900 LESSOR ID:
LESSEE : CSX OIL & GAS CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 15 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0006413-001 02/01/1987 02/01/1987 992 538 670646
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
1.47700 LESSOR ID:
LESSEE : CSX OIL & GAS CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240702-001 07/15/1992 07/15/1992 1151 608 741660
GROSS ACRES LESSOR : ROBERT J NEWELL
20.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240702-002 07/15/1992 07/15/1992 1152 335 741865
GROSS ACRES LESSOR : RUTH HOLLISTON SANDERS
20.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240708-001 07/15/1992 07/15/1992 1151 746 741711
GROSS ACRES LESSOR : THE ELLEN LUCY MCHUGH TRUST
20.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 16 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240709-001 07/15/1992 07/15/1992 1152 331 741864
GROSS ACRES LESSOR : JANICE DOTY HALL
80.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240709-002 07/15/1992 07/15/1992 1152 339 741866
GROSS ACRES LESSOR : KARL GEHLMANN
80.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 17 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-01/1992
LESSOR : LAFOURCHE REALTY COMPANY INC
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT: LAKE ENFERMER
LAFOURCHE REALTY COMPANY, INC. LANDS SITUATED IN LAFOURCHE PARISH, LOUISIANA AND
DESCRIBED AS FOLLOWS, TO-WIT:
12.187 acres, more or less, situated in Sections 7 and 18 of Township 20 South,
Range 23 East and being more particularly described by metes and bounds as
follows:
Beginning at a point along the intersection of the T-1 RA SUA
and the R RA SUA having Lambert coordinates
x = 2,372,047.33
y = 251,372.78
thence northwest along the T-1 RA SUA N66d11'9"W 107.58'
thence S85d06'05"W 286 84'
thence S44d55'87"W 136.89'
thence S26d12'00"W 210.64'
thence S15d03'42"W 311.71'
thence S10d21'12"W 422.08'
thence S06d27'01"W 832.00'
thence S01d58'64"W 632.39'
thence S00d46'13"E 685.05'
thence S05d48'02"E 608.05'
to a point along the intersection of the T-1 RA SUA
and the R RA SUA
x = 2,371,245.57
y = 247,982.78
thence northwest along the R RA SUA N11d 31'18"W 208.06'
thence N08d58'24"W 553.30'
thence N06d37'31"W 526.10'
thence N02d08'24"E 582.30'
thence N06d11'81"E 842.83'
thence N02d19'04"E 420.34'
thence N09d48'87"E 147.14'
thence N14d37'15"E 118.85'
thence N32d16'32"E 112.36'
thence N52d35'41"E 107.00'
thence N66d 48'05"E 114.23'
thence N80d54'35"E 126.59'
thence S76d30'15"E 128.55'
thence S65d51'16"E 158.90'
thence S58d114'46"E 182.87'
to the Point of Beginning
<PAGE>
EXHIBIT A Page 18 of 64
THE NOMENCLATURE FOR THE UNITS MENTIONED IN THE ABOVE METES AND BOUNDS ARE MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
R RA SUA ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NO. 340-P-3,
DATED OCTOBER 18, 1983, EFFECTIVE AUGUST 30, 1983, RECORDED COB 840, FOLIO -,
ENTRY NO. 593064.
T-1 RA SUA ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NO. 340-Q-2,
DATED OCTOBER 18, 1983, EFFECTIVE AUGUST 30, 1983, RECORDED COB 840, FOLIO -,
ENTRY NO. 593062.
<PAGE>
EXHIBIT A Page 19 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
LAFOURCHE REALTY COMPANY, INC. LANDS SITUATED IN LAFOURCHE PARISH, LOUISIANA AND
DESCRIBED AS FOLLOWS TO-WIT:
ALL THE LANDS WHICH LIE WITHIN THE R RB SUA UNIT AS ESTABLISHED BY THE LOUISIANA
OFFICE OF CONSERVATION ORDER NO. 340-P-3 EFFECTIVE AUGUST 30, 1983, RECORDED IN
BOOK 840, ENTRY NO. 593064, LAFOURCHE PARISH, LOUISIANA, BUT LIE OUTSIDE THE T-1
RB SUA UNIT ESTABLISHED BY THE LOUISIANA OFFICE OF CONSERVATION ORDER NO. 340-Q-
1, EFFECTIVE JUNE 17, 1981, RECORDED IN BOOK 754, FOLIO 341, ENTRY NO. 551518,
LAFOURCHE PARISH, LOUISIANA.
<PAGE>
EXHIBIT A Page 20 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01/01/1992
LESSOR : LAFOURCHE REALTY COMPANY INC
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
LAFOURCHE REALTY COMPANY, INC. LANDS SITUATED IN LAFOURCHE PARISH, LOUISIANA AND
DESCRIBED AS FOLLOWS TO-WIT:
TRACT 1: 2.122 acres, more or less, situated in Section 19, Township 20 South,
Range 23 East, and being more particularly described by metes and
bounds as follows:
Beginning at a point along the intersection of V-3 RD SU A and
V 2 RO SU A having Lambert coordinates
x = 2,378,160.00
y = 243,410.00
thence Southwest along the V-2 RD SU A S13d23'33"E 215.87
thence S08d06'25"E 263.10
thence S03d10'47"E 180.28
thence S07d07'30"W 241.87' to a point along the intersection of the V-2 RD SU A
and the V-3 RD SU A having Lambert coordinates
x = 2,378,220.00
y = 242,630.00
thence Northeast along the V-3 RD SU A N00d00'02"E 270.00'
thence N06d32'47"W 614.00' to the point of beginning.
TRACT 2: .458 acres, more or less, situated in Section 20, Township 20 South,
Range 23 East, and being more particularly described by metes and
bounds as follows:
Beginning at a point along the intersection of the V-3 RD SU A and
the V-2 RD SU A having Lambert coordinates
x = 2,374,776.92
y = 240,647.10
thence Southwest along the V-3 RD SU A S01d19'34"W 566.03' to the intersection
of the V-2 RD SU A and the V-3 RD SU A having Lambert coordinates
x = 2,374,763.85
y = 240,082.22
thence Northwestward along the V-2 RD SU A N83'd59'28"W 328.35'
to a point having Lambert coordinates
x = 2,374,437.31
y = 240,116.89
thence Northeast N02d37'35"W 629.91' to the point of beginning
THE NOMENCLATURE FOR THE UNITS MENTIONED IN THE ABOVE METES AND BOUNDS
DESCRIPTION ARE MORE PARTICULARLY DESCRIBED AS FOLLOWS:
V-2 RD SUA ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NO. 340-T-4,
DATED JULY 1985, EFFECTIVE MAY 7, 1985, RECORDED COB 918, FOLIO 756, ENTRY NO.
631920, RECORDS LAFOURCHE PARISH, LOUISIANA.
<PAGE>
EXHIBIT A Page 21 of 64
V-3 RD SUA ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NO. 340-S-4,
DATED JULY 1985, EFFECTIVE MAY 7, 1985, RECORDED COB 918, FOLIO 760, ENTRY NO.
631921, RECORDS LAFOURCHE PARISH, LOUISIANA.
<PAGE>
EXHIBIT A Page 22 of 64
WELL NAME PARISH/STATE
- --------- ------------
Harrison #3 L RA SUA Lafourche/Louisiana
Harrison #4 ALT L RA SUA Lafourche/Louisiana
Harrison #4 L RA SUA Lafourche/Louisiana
Harrison #4D UL RA SUA Lafourche/Louisiana
Lafourche Realty Co. #3 0-2 RA Lafourche/Louisiana
Lafourche Realty Co. #4 D-1 RA SUA Lafourche/Louisiana
Lafourche Realty Co. #4D C-2 RA Lafourche/Louisiana
Lafourche Realty Co. #7 V-3 SD SEG II Lafourche/Louisiana
Lafourche Realty Co. #7 V-2 SD SEG II Lafourche/Louisiana
Lafourche Realty Co. #8 V-4 SD Lafourche/Louisiana
Lafourche Realty Co. #8 T-7 RC SUA Lafourche/Louisiana
Lafourche Realty Co. #8 T-8 SD Lafourche/Louisiana
<PAGE>
EXHIBIT A Page 23 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001328-001 12/18/1972 12/18/1972 483 510 363827
GROSS ACRES LESSOR : STATE OF LOUISIANA
200.03500 LESSOR ID: 6024
LESSEE : LYNAL EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001535-001 05/13/1974 05/13/1974 514 581 388122
GROSS ACRES LESSOR : STATE OF LOUISIANA
1.58700 LESSOR ID: 6301
LESSEE : TEXAS GAS EXPLORATION
CORPORATION
ET AL
PROSPECT : LAKE ENFERMER
RESERVATION AND EXCEPTION:
LESS AND EXCEPT THOSE PORTIONS OF THE ABOVE LOUISIANA STATE LEASES TO THE
EXTENT THAT SUCH LEASES ARE SITUATED WITHIN THE SURFACE BOUNDARIES OF THE
UPPER L SAND, RESERVOIR A, IN THE LAKE ENFERMER FIELD, LAFOURCHE PARISH,
LOUISIANA, AS ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NUMBER
340-K DATED MARCH 4, 1976, EFFECTIVE MARCH 1, 1976 RECORDED IN COB 560, FOLIO
83__ UNDER ENTRY NO. 421706.
<PAGE>
EXHIBIT A Page 24 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002707-001 11/19/1979 11/19/1979 685 663 511082
GROSS ACRES LESSOR : STATE OF LOUISIANA
110.29500 LESSOR ID: 8403
LESSEE : S W PLAUCHE' III
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001156-001 09/25/1972 09/25/1972 508 249 383445
GROSS ACRES LESSOR : WILLIAM H HARRISON, ET AL
82.44000 LESSOR ID:
LESSEE : LYNAL EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001441-001 08/30/1972 08/30/1972 554 533 416550
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
64.99600 LESSOR ID:
LESSEE : ROBERT A CHENOWETH
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003274-001 04/15/1984 04/15/1984 873 488 610333
GROSS ACRES LESSOR : RICHARD JOSEPH HARRISON
13.02525 LESSOR ID:
LESSEE : KENNETH SAVAGE
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003274-002 04/15/1984 04/15/1984 873 440 610329
GROSS ACRES LESSOR : SHIRLEY HARRISON HYDE
13.02525 LESSOR ID:
LESSEE : KENNETH SAVAGE
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 25 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003274-003 04/15/1984 04/15/1984 873 464 610331
GROSS ACRES LESSOR : KATHERINE LORETTA HARRISON
13.02525 LESSOR ID:
LESSEE : KENNETH SAVAGE
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003274-004 04/15/1984 04/15/1984 873 476 610332
GROSS ACRES LESSOR : LYDIA HARRISON RYAN
13.02525 LESSOR ID:
LESSEE : KENNETH SAVAGE
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003274-005 04/15/1984 04/15/1984 873 452 610330
GROSS ACRES LESSOR : THE WILLIAM HARRISON JR FAMILY
PROJECT
13.02525 LESSOR ID:
LESSEE : KENNETH SAVAGE
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0005936-001 04/01/1986 04/01/1986 949 196 648110
GROSS ACRES LESSOR : LYDIA HARRISON RYAN
2.48700 LESSOR ID:
LESSEE : KENNETH SAVAGE
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 26 of 64
COVERING LANDS IN
LAFOURCHE PARISH, STATE OF LOUISIANA
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0005936-002 04/01/1986 04/01/1986 949 184 648109
GROSS ACRES LESSOR : THE WILLIAM HARRISON JR FAMILY
PROJECT A PTNSHP
2.48700 LESSOR ID:
LESSEE : KENNETH SAVABE
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0005936-003 04/01/1986 04/01/1986 949 172 648108
GROSS ACRES LESSOR : SHIRLEY HARRISON HYDE
2.48700 LESSOR ID:
LESSEE : KENNETH SAVAGE
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0005936-004 04/01/1986 04/01/1986 949 148 648106
GROSS ACRES LESSOR : RICHARD JOSEPH HARRISON
2.48700 LESSOR ID:
LESSEE : KENNETH SAVAGE
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0005936-005 04/01/1986 04/01/1986 949 160 648107
GROSS ACRES LESSOR : KATHERINE LORETTA HARRISON
2.48700 LESSOR ID:
LESSEE : KENNETH SAVAGE
PROSPECT : LAKE ENFERMER
RESERVATION AND EXCEPTION:
LESS AND EXCEPT THOSE PORTIONS OF THE ABOVE LOUISIANA STATE LEASES TO THE
EXTENT THAT SUCH LEASES ARE SITUATED WITHIN THE SURFACE BOUNDARIES OF THE
UPPER L SAND, RESERVOIR A, IN THE LAKE ENFERMER FIELD, LAFOURCHE PARISH,
LOUISIANA, AS ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NUMBER
340-K DATED MARCH 4, 1976, EFFECTIVE MARCH 1, 1976 RECORDED IN COB 560, FOLIO
830 UNDER ENTRY NO. 421706.
<PAGE>
EXHIBIT A Page 27 of 64
WELL NAME PARISH/STATE
- --------- ------------
Harrison #2 I RA SUA Lafourche/Louisiana
Harrison #2D H RA Lafourche/Louisiana
Harrison #5 H RC (well bore only) Lafourche/Louisiana
Harrison #6 ALT L-1 SD Lafourche/Louisiana
Harrison #6 H-1 RB Lafourche/Louisiana
Harrison #6 G-1 RA SUA Lafourche/Louisiana
Harrison #6 H RA Lafourche/Louisiana
Harrison #6D K SD Lafourche/Louisiana
Lafourche Realty Co. #1 O RA Lafourche/Louisiana
Lafourche Realty Co. #1 M RA Lafourche/Louisiana
Lafourche Realty Co. #1 I RA SUA Lafourche/Louisiana
Lafourche Realty Co. #1D N RA Lafourche/Louisiana
Lafourche Realty Co. #2 H RB (well bore only) Lafourche/Louisiana
Lafourche Realty Co. #2 ALT H-1 RA Lafourche/Louisiana
Lafourche Realty Co. #5 C-3 RA SUA (well bore only) Lafourche/Louisiana
Lafourche Realty Co. #5 B RA (well bore only) Lafourche/Louisiana
Lafourche Realty Co. #6 J SD (well bore only) Lafourche/Louisiana
<PAGE>
EXHIBIT A Page 28 of 64
UNITS
1. T-1 RB SUA as created by Louisiana Office of Conservation Order No. 340-Q-1
effective June 17, 1981;
2. R RA SU A as revised by Louisiana Office of Conservation Order No. 340-P-3
effective August 30, 1983;
3. T-7 RC SUA as created by Louisiana Office of Conservation Order No. 340-W
effective August 30, 1983;
4. V-2 RD SUA as created by Louisiana Office of Conservation Order No. 340-T-4
effective May 7, 1985;
5. R RB SU A as revised by Louisiana Office of Conservation Order No. 340-P-3
effective August 30, 1983;
6. Cib Carst RB SUA as created by Louisiana Office of Conservation Order No.
340-U-1 effective October 23, 1984;
7. L RA SUA as revised by Louisiana Office of Conservation Order No. 340-F-1
effective March 1, 1976;
8. T-1 RA SUA as revised by Louisiana Office of Conservation Order No. 340-Q-2
effective August 30, 1983;
9. H RA SUA as created by Louisiana Office of Conservation Order No. 340-A
effective May 9, 1974;
10. I RA SUA as created by Louisiana Office of Conservation Order No. 340-B
effective May 9, 1974.
<PAGE>
EXHIBIT A Page 29 of 64
WORKING NET REVENUE
EXHIBIT "A" & "A-2" WELLS INTEREST INTEREST
- ------------------------- -------- -----------
#2 CLOW T-1 RB SUA .5964447 .4407330
#B-2d LAFOURCHE REALTY R RA SUA .5664751 .4274966
#6-D HARRISON G
#2 CLOW T-1 UPPER .5654470 .4217100
#8 LAFOURCHE T-7 RC SUA .8620380 .6165744
#A-2 LAFOURCHE V-2 .5352910 .4000000
#6-D H.C. MCNEIL R-RB SUA .5979900 .4471250
#6-D HARRISON F
GRAHAM #8 LAFOURCHE CIB CARST .0151260 .0121648
#6-D MCNEIL R HIGHER .5979900 .4471250
WORKING NET REVENUE
EXHIBIT "A1" WELLS INTEREST INTEREST
- ------------------ -------- -----------
#3 HARRISON L RA SUA .733750 .5466550
#4 HARRISON L RA SUA .733750 .5466550
<PAGE>
EXHIBIT A Page 30 of 64
OIL, GAS AND MINERAL LEASES - LAFOURCHE
CROSSING FIELD PROSPECT, LAFOURCHE PARISH, LOUISIANA
CONVEYANCE RECORDS
OF LAFOURCHE
PARISH, LOUISIANA
LESSOR LEASE DATE ENTRY NO.
Dixon H. Cain, et ux 04/01/89 697209
American Cancer Society, Louisiana Division, Inc. 04/01/89 700119
Roland von Kurnatowski 04/01/89 700120
Evelyn von Kurnatowski Benham 04/01/89 700121
Clarence C. Clifton, Jr., et al 04/01/89 700122
Mary Cobb Black 04/06/89 700123
Ethel L. McDermott, et als 04/01/89 700124
Jean D. Babel, et vir 04/01/89 700125
Margaret D. Hunter, et vir 04/01/89 700126
Louise Ash Smaizys 04/01/89 700127
B. William Payne, et als 04/01/89 700128
Clara Louise Hagge, et vir 04/01/89 700129
W. Ridley Wheeler Estate 04/01/89 700130
Mary Jane Brown Courtney 04/27/89 700131
Lois Plummer Wachter 04/01/89 700132
B. Wendell Phillips, et ux 04/01/89 700133
Viola Shenk Branton 04/01/89 700134
Judy Branton Wilkins 04/01/89 700135
Paul Shenk, Jr. 04/01/89 700136
May Ayo Peltier, et als 04/01/89 700137
Emilio Alfredo Martinez, et als 04/01/89 700138
Nora Martinez Oliver 04/01/89 700139
Maria Martinez Bussmann 04/01/89 700140
First National Bank of Commerce, as Agent & Atty-in-
Fact for Berta Paulina Contreras, Elvira Maria
Contreras, and Maria de Los Angeles Contreras 04/01/89 700141
Donald G. Robichaux, et ux 04/01/89 700142
Donald G. Robichaux, et ux 04/14/89 700143
Donald G. Robichaux, et ux 04/01/89 700144
Lynn P. Thibodeaux, et ux 05/10/89 700145
Algy Irvin, Sr., et ux 05/10/89 700146
Emilio Alfredo Martinez, et als 04/01/89 700147
Nora Martinez Oliver 04/01/89 700148
Maria Martinez Bussman 04/01/89 700149
First National Bank of Commerce, as Agent & Atty-in-
Fact for Berta Paulina Contreras, Elvira Maria
Contreras, and Maria de Los Angeles Contreras 04/01/89 700150
Francis Dugas, et als 04/01/89 700151
Donald G. Robichaux, et ux 04/01/89 700152
Emily Baudoin Eroche, et als 04/01/89 700152
May Ayo Peltier, et als 04/01/89 700154
Hubert L. Brown, Jr. 06/23/89 700715
<PAGE>
EXHIBIT A Page 31 of 64
CONVEYANCE RECORDS
OF LAFOURCHE
PARISH, LOUISIANA
LESSOR LEASE DATE ENTRY NO.
American Cancer Society, Louisiana Division, Inc. 03/15/84 603761
Louise Ash Smaizys 03/30/84 603762
Evelyn von Kurnatowski Benham 03/30/84 603763
W. Ridley Wheeler Estate 03/30/84 604533
Clarence C. Clifton, Jr., et al 03/30/84 604532
Roland von Kurnatowski 03/30/84 604534
Paul Shenk, Jr. 03/30/84 609218
Truman Branton 03/30/84 609220
B. Wendell Phillips, et ux 03/30/84 609436
Clarebelle Housh 03/30/84 609219
Ethel L. McDermott, et als 03/30/84 609221
Hibernia National Bank of New Orleans, Trustee for 04/13/84 609222
Mireille Leibreton Cobb and Trustee for Mireille
Lebreton Cobb and Mary Cobb Black
Lois Plummer Wachter 03/30/84 611323
Emilio Alfredo Martinez, et als 01/01/84 603754
Dixon H. Cain, et ux 02/01/84 603769
Donald G. Robichaux, et ux 02/01/84 603755
May Ayo Peltier, et als 02/01/84 603760
David J. Robichaux, et ux 04/26/84 604581
Succession of Lupita Echeverria Martinez 07/01/84 613853
Mary Jane Brown Courtney 01/01/85 624879
Hubert L. Brown, Jr. 02/15/85 625253
B. William Payne, et als 12/01/84 625254
Frances G. Thompson, et al 12/01/84 625252
Clara Louise Hagge, et vir 12/01/84 631753
The above described leases INSOFAR AND ONLY INSOFAR as they cover the
following described property:
That portion of the Brock Exploration Corporation, 10,180' RB SU A, L.
Martinez No. 1, created by Conservation Department Order No. 63-J-1,
effective June 25, 1985, recorded under Entry No. 631793, records of
Lafourche Parish, Louisiana, falling within the Germany Operating Company,
9,630' RA SU A, Matherne No. 1, created by Conservation Department Order
No. 63-L, effective January 10, 1989, recorded under Entry No. 693985,
records of Lafourche Parish, Louisiana, INSOFAR AND ONLY INSOFAR as the
depth below the productive 9,630' zone, is concerned, and limited to one
hundred feet (100') below the deepest producing horizon on or before April
1, 1990. There is also expected herefrom, any and all production derived
from the above mentioned Germany Operating Company, 9,630' RA SU A Matherne
No. 1 Unit.
The above described tract contains approximately 5,337 acres, more or less.
<PAGE>
EXHIBIT A Page 32 of 64
CONVEYANCE RECORDS
OF LAFOURCHE
PARISH, LOUISIANA
LESSOR LEASE DATE ENTRY NO.
Sadie Fagot Peter, et als 04/15/84 609215
A.G. Fagot 04/15/84 609216
Robert Fagot 04/15/84 609217
Wilfred C. Fagot 04/15/84 610888
Caryl C. Fagot, et als 11/01/85 641119
INSOFAR AND ONLY INSOFAR as the above leases covering the following
described property:
TRACT NO. 1: A certain tract of land situated in Sections 133 and 134, Township
15 South, Range 17 East, Lafourche Parish, Louisiana, being more particularly
described as follows: Beginning at the Northeast corner of Section 133 having
Lambert Plane Coordinates X=2,185,757.27 and Y=389,661.91 go S1327'14"W along
East line of section approximately 330', more or less, to the point of
beginning, thence S1327; 14" W 4,000' along East line of Section 133 to a point
being the Southeast corner of said tract; thence at a right angle West-Northwest
1,600' to a point being the Southwest corner of said tract; thence N1322'40"E
4,000' to a point being the Northwest corner of said tract; thence East-
Southeast 1,600' at an angle and bearing common to the South line of said tract
to the point of beginning estimated to contain 146 acres, more or less. LESS
AND EXCEPT:
Approximately 18.5 acres, more or less, within the 9,630' RA SUA, Matherne No.
1, created by Department of Conservation Order No. 63-L, effective January 13,
1989, recorded under Entry No. 693985, records of Lafourche Parish, Louisiana.
The above described tract of land contains 127.5 acres, more or less.
TRACT NO. 2: That portion of the Brock Exploration Corporation, 10,180' RB SU
A, L. Martinez No. 1, created by Conservation Department Order No. 63-J-1,
effective June 25, 1985, recorded under Entry No. 631793, records of Lafourche
Parish, Louisiana, falling within the Germany Operating Company, 9630' RA SU A,
Matherne No. 1, created by Conservation Department Order No. 63-L, effective
January 10, 1989, recorded under Entry No. 693985, records of Lafourche Parish,
Louisiana, INSOFAR AND ONLY INSOFAR as the depth below the productive 9630'
zone, is concerned.
There is expressly excepted herefrom, any and all production derived from the
above mentioned Germany Operating Company, 9630' RA SU A, Matherne No. 1 Unit.
The hereinabove described tract contains approximately 5.337 acres, more or
less.
<PAGE>
EXHIBIT A Page 33 of 64
CONVEYANCE RECORDS
OF LAFOURCHE
PARISH, LOUISIANA
LESSOR LEASE DATE ENTRY NO.
Thompson Limited 08/01/89 702764
The Azby Fund, et al 08/25/89 702765
David J. Robichaux, Jr., et ux 08/01/89 705190
David J. Robichaux, Jr., et ux 08/01/89 705191
David J. Robichaux, Jr., et ux 08/01/90 705189
INSOFAR AND ONLY INSOFAR AS TO THAT PORTION OF ALL OF THE OIL, GAS AND
MINERAL LEASES DESCRIBED ABOVE ARE INCLUDED WITHIN THE 9,850' RB SU A CREATED BY
THE LOUISIANA OFFICE OF CONSERVATION ORDER 63-E-1, RECORDED IN CONVEYANCE BOOK
1077, FOLIO 114, ENTRY NO. 710980, THE SURVEY PLAT OF SUCH UNIT BEING RECORDED
IN CONVEYANCE sBOOK 1082, FOLIO 529, ENTRY NO. 713460, ALL IN THE RECORDS OF
LAFOURCHE PARISH, LOUISIANA AND INSOFAR AND ONLY INSOFAR AS THESE OIL, GAS AND
MINERAL LEASES COVER THE RIGHTS DOWN TO THE DEPTH OF 10,002 FEET BELOW THE
SURFACE OF THE EARTH.
FORMAN PETROLEUM CORPORATION'S INTEREST:
UNIT OPERATING INTEREST 15.000000%
UNIT REVENUE INTEREST 11.313022%
<PAGE>
EXHIBIT A Page 34 of 64
EXHIBIT "A"
TO
ACT OF MORTGAGE
FORMAN PETROLEUM CORPORATION
TO
JOINT ENERGY DEVELOPMENT INTERESTS LIMITED PARTNERSHIP
1. The following Exhibit "A" consists of Pages Nos. 1 through ___, inclusive.
2. The recording references in Exhibit "A", Pages 1-44 are the Conveyance
Records of LaFourche Parish, Louisiana.
3. The recording references in Page 59 of Exhibit "A" are to the records of
Terrebonne Parish, Louisiana.
<PAGE>
EXHIBIT A Page 35 of 64
<TABLE>
<CAPTION>
RECORDED
LESSOR LESSEE DATED COB PAGE ENTRY #
<S> <C> <C> <C> <C> <C>
Robert J. Newell Total Minatome Corporation 07/15/92 1151 608 741660
Ruth Holliston Sanders Total Minatome Corporation 07/15/92 1152 335 741865
Donna J. Wichser Total Minatome Corporation 07/15/92 1155 58 742881
Marjorie Reynolds Total Minatome Corporation 07/15/92 1156 444 743501
Thomas Potter Total Minatome Corporation 07/15/92 1156 453 743506
Thomas L. Fassett Total Minatome Corporation 07/15/92 1158 268 744471
Willard Fassett Total Minatome Corporation 07/15/92 1158 264 744470
Richard Fassett Total Minatome Corporation 07/15/92 1158 260 744469
The Adrienne F. Faber Trust Total Minatome Corporation 07/15/92 1158 256 744468
L. Penfield Faber Total Minatome Corporation 07/15/92 1158 252 744467
Janice Doty Hall Total Minatome Corporation 07/15/92 1152 331 741864
Karl Gehlmann Total Minatome Corporation 07/15/92 1152 339 741866
Donald R. Doty Total Minatome Corporation 07/15/92 1156 449 743505
Paul A. Doty III and Donald J. Total Minatome Corporation 07/15/92 1156 549 743565
Doty
Roxann F. Rhea Total Minatome Corporation 07/15/92 1156 680 743653
The Ellen Lucy McHugh Trust Total Minatome Corporation 07/15/92 1151 746 741711
June R. Claus Total Minatome Corporation 07/15/92 1167 368 748541
LaFourche Realty Company, Total Minatome Corporation 01/01/92 1179 754010
Inc.
LaFourche Realty Company, Total Minatome Corporation 01/01/92 1179 754011
Inc.
</TABLE>
That certain Operating Agreement providing a Carried Interest to State effective
January 11, 1978 between the State Mineral Board, for and on behalf of the State
of Louisiana, and Texas Gas Exploration Corporation, Lynal Exploration Company,
Tesoro Petroleum Corporation, Samedan Oil Corporation, Oppenheimer Oil & Gas,
Inc., McMoRan Exploration Co. and Natomas Exploration, Inc., referred to
collectively as Operator, recorded in the Conveyance Records of Lafourche
Parish, Louisiana on January 19, 1978, in Book 616 under Entry Nos. 463367,
463368, 463369, 463370, 463371, 463372, and 463373.
<TABLE>
<CAPTION>
NO. LESSOR LESSEE DATE COB FOLIO ENTRY
NO.
<C> <S> <C> <C> <C> <C> <C>
1. LAFOURCHE REALTY COMPANY FORMAN PETROLEUM CORPORATION SEPT. 1, 1993 1179 754012
2. LAFOURCHE REALTY COMPANY FORMAN PETROLEUM CORPORATION SEPT. 5, 1993 1179 754013
3. LAFOURCHE REALTY CO., INC. TOTAL MINATOME CORPORATION JAN. 1, 1992 1179 754010
4. LAFOURCHE REALTY CO., INC. TOTAL MINATOME CORPORATION JAN. 1, 1992 1179 754011
5. DONNA J. WICHSER TOTAL MINATOME CORPORATION JULY 15, 1992 1155 58 742881
6. MARJORIE REYNOLDS TOTAL MINATOME CORPORATION JULY 15, 1992 1156 444 743501
7. THOMAS POTTER TOTAL MINATOME CORPORATION JULY 15, 1992 1156 453 743506
8. ADRIENNE F. FABER TRUST, THE,
U/W TOTAL MINATOME CORPORATION JULY 15, 1992 1158 256 744468
9. JUNE R. CLAUS TOTAL MINATOME CORPORATION JULY 15, 1992 1167 368 748541
10. L. PENFIELD FABER TOTAL MINATOME CORPORATION JULY 15, 1992 1158 252 744467
11. THOMAS L. FASSETT TOTAL MINATOME CORPORATION JULY 15, 1992 1158 268 744471
12. WILLARD FASSETT TOTAL MINATOME CORPORATION JULY 15, 1992 1158 264 744470
13. RICHARD FASSETT TOTAL MINATOME CORPORATION JULY 15, 1992 1158 260 744469
14. PAUL A. DOTY, III, ET AL TOTAL MINATOME CORPORATION JULY 15, 1992 1156 549 743565
15. DONALD R. DOTY TOTAL MINATOME CORPORATION JULY 15, 1992 1156 449 743505
16. ROXANN F. RHEA TOTAL MINATOME CORPORATION JULY 15, 1992 1156 680 743653
17. SHIRLEY HARRISON HYDE, ET AL FORMAN PETROLEUM CORPORATION JAN. 1, 1993 1170 750093
18. WILLIAM HARRISON, ET AL FORMAN PETROLEUM CORPORATION JAN. 1, 1993 1170 750092
19. PATRICK J. HARRISON ESTATE FORMAN PETROLEUM CORPORATION JAN. 1, 1993 1173 751174
20. GLORIA K. FERRERA, ET AL FORMAN PETROLEUM CORPORATION JAN. 1, 1993 1170 750091
21. ANN V. PENMAN REVOCABLE
TRUST, THE, ET AL FORMAN PETROLEUM CORPORATION JULY 15, 1993 1173 241 751233
22. THE ALLEN COMPANY FORMAN PETROLEUM CORPORATION MARCH 1, 1993 1171 750581
23. LAFOURCHE REALTY COMPANY,
INC. FORMAN PETROLEUM CORPORATION OCT. 1, 1993 1189 348 757789
</TABLE>
<PAGE>
EXHIBIT A Page 36 of 64
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001156-001 09/25/1972 09/25/1972 508 249 383445
GROSS ACRES LESSOR : WILLIAM H. HARRISON, ET AL
82.44000 LESSOR ID:
LESSEE : LYNAL EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001441-001 08/30/1972 08/30/1972 554 533 416550
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
64.99600 LESSOR ID:
LESSEE : ROBERT A. CHENOWETH
PROSPECT : LAKE ENFERMER
RESERVATION AND EXCEPTION:
LESS AND EXCEPT THOSE PORTIONS OF THE ABOVE LEASES TO THE EXTENT THAT SUCH
LEASES ARE SITUATED WITHIN THE SURFACE BOUNDARIES OF THE H SAND, RESERVOIR A, IN
THE LAKE ENFERMER FIELD, LAFOURCHE PARISH, LOUISIANA, AS ESTABLISHED BY
LOUISIANA OFFICE OF CONSERVATION ORDER NUMBER 340-A DATED JUNE 4, 1974,
EFFECTIVE MAY 9, 1974 RECORDED IN COB 518, FOLIO 116 UNDER ENTRY NO. 390___ AND
LESS AND EXCEPT THOSE PORTIONS OF THE ABOVE LEASES TO THE EXTENT THAT SUCH
LEASES ARE SITUATED WITHIN THE SURFACE BOUNDARIES OF THE I RA SUA RESERVOIR A,
IN THE LAKE ENFERMER FIELD, LAFOURCHE PARISH, LOUISIANA, AS ESTABLISHED BY
LOUISIANA OFFICE OF CONSERVATION ORDER NUMBER 340-B DATED JUNE 4, 1974,
EFFECTIVE MAY 9, 1974 RECORDED IN COB 518, FOLIO 116 UNDER ENTRY NO. 390258.
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001441-001 08/30/1972 08/30/1972 554 533 416550
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
64.99600 LESSOR ID:
LESSEE : ROBERT A. CHENOWETH
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0001538-001 11/24/1973 11/24/1973 506 250 382127
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
0.48200 LESSOR ID:
LESSEE : LYNAL EXPLORATION COMPANY
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 37 of 64
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002032-001 08/30/1980 08/30/1980 711 616 527528
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY
20.62600 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002332-001 11/26/1978 11/26/1978 642 626 480876
GROSS ACRES LESSOR : HAROLD J POTTER ET AL
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002332-002 11/26/1978 11/26/1978 642 630 480877
GROSS ACRES LESSOR : ROBERT J NEWELL
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002332-003 11/26/1978 11/26/1978 642 634 480878
GROSS ACRES LESSOR : DONNA NEWELL WICHSER
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002333-001 02/06/1979 02/06/1979 642 618 480874
GROSS ACRES LESSOR : HUGH C MCNEIL, ET AL
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 38 of 64
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002333-002 01/17/1979 01/17/1979 642 622 480875
GROSS ACRES LESSOR : GRACE WELD COLBY, ET AL
20.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002367-001 11/21/1978 11/21/1978 642 602 480870
GROSS ACRES LESSOR : ADRIENNE F FABER
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002367-002 11/21/1978 11/21/1978 642 606 480871
GROSS ACRES LESSOR : JUNE R CLAUSE
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002367-003 11/25/1978 11/25/1978 642 610 480872
GROSS ACRES LESSOR : DR L PENFIELD FABER
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002367-004 11/21/1978 11/21/1978 642 614 480873
GROSS ACRES LESSOR : THOMAS L. FASSETT ET AL
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 39 of 64
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-001 11/27/1978 11/27/1978 645 1 482083
GROSS ACRES LESSOR : PAUL A DOTY
32.43100 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-002 11/27/1978 11/27/1978 645 17 482087
GROSS ACRES LESSOR : MARIAN DOTY GEHLMANN
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-003 11/27/1978 11/27/1978 645 13 482086
GROSS ACRES LESSOR : DONALD R. DOTY
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-004 11/27/1978 11/27/1978 645 5 482084
GROSS ACRES LESSOR : HELEN G DOTY ET AL
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0002536-005 11/27/1978 11/27/1978 645 9 482085
GROSS ACRES LESSOR : ROXANN F RHEA
80.00000 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 40 of 64
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003265-001 11/24/1982 11/24/1982 798 65 573212
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
37.00700 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0003267-001 06/10/1982 06/10/1982 782 801 566560
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
1.92200 LESSOR ID:
LESSEE : TEXAS GAS EXPLORATION CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0006385-001 11/01/1986 11/01/1986 990 446 669883
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
39.48900 LESSOR ID:
LESSEE : CSX OIL & GAS CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-0006413-001 02/01/1987 02/01/1987 992 538 670646
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
1.47700 LESSOR ID:
LESSEE : CSX OIL & GAS CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240702-001 07/15/1992 07/15/1992 1151 608 741660
GROSS ACRES LESSOR : ROBERT J NEWELL
20.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 41 of 64
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240702-002 07/15/1992 07/15/1992 1152 335 741865
GROSS ACRES LESSOR : RUTH HOLLISTON SANDERS
20.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240708-001 07/15/1992 07/15/1992 1151 746 741711
GROSS ACRES LESSOR : THE ELLEN LUCY MCHUGH TRUST
20.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240709-001 07/15/1992 07/15/1992 1152 331 741864
GROSS ACRES LESSOR : JANICE DOTY HALL
80.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-5240709-002 07/15/1992 07/15/1992 1152 339 741866
GROSS ACRES LESSOR : KARL GEHLMANN
80.00000 LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01-01/1992
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
LAFOURCHE REALTY COMPANY, INC. LANDS SITUATED IN LAFOURCHE PARISH, LOUISIANA AND
DESCRIBED AS FOLLOWS TO-WIT:
12.157 acres, more or less, situated in Sections 7 and 18 of Township 20 South,
Range 23 East and being more particularly described by metes and bounds as
follows:
<PAGE>
EXHIBIT A Page 42 of 64
Beginning at a point along the intersection of the T-1 RA SUA and the R RA SUA
having Lambert coordinates as
x = 2,372,047.33
y = 251,372.76
thence northwest along the T-1 RA SUA N86d 11'9"W 107.58'
thence S85d36'05"W 286.84'
thence S64d55'57"W 136.89'
thence S26d12'00"W 210.64'
thence S15d03'42"W 311.71'
thence S10d21'12"W 422.88'
thence S06d27'01"W 632.00'
thence S01d55'54"W 682.39'
thence S00d46'13"E 595.05'
thence S05d49'02"E 508.85'
to a point along the intersection of the T-1 RA SUA
and the R RA SUA
x = 2,371,245.57
y = 247,982.76
thence northwest along the R RA SUA N11d31'18"W 208.05'
thence N09d59'24"W 553.39'
thence N05d07'31"W 526.10'
thence N02d08'24"E 562.39'
thence N06d11'51"E 842.93'
thence N02d19'04"E 420.34'
thence N09d46'57"E 147 14'
thence N14d37'15"E 118 85'
thence N32d16'32"E 112 36'
thence N52d35'41"E 107 00'
thence N66d48'05"E 114 23'
thence N80d54'35"E 126 59'
thence S76d30'15"E 128.55'
thence S65d51'16"E 158 90'
thence S59d14'45"E 182 87'
to the Point of Beginning
THE NOMENCLATURE FOR THE UNITS MENTIONED IN THE ABOVE METES AND BOUNDS ARE MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
R RA SUA ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NO. 340-P-3,
DATED OCTOBER 18, 1983, EFFECTIVE AUGUST 30, 1983, RECORDED COB 840, FOLIO - ,
ENTRY NO. 593064.
T-1 RA SUA ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NO. 340-Q-2,
DATED OCTOBER 18, 1983, EFFECTIVE AUGUST 30, 1983, RECORDED COB 840, FOLIO - ,
ENTRY NO. 593062.
EFFECTIVE CURRENT RECORDING
PROPERTY NO LEASE DATE DATE BOOK PAGE ENTRY
01/01/1992
GROSS ACRES LESSOR : LAFOURCHE REALTY COMPANY INC
LESSOR ID:
LESSEE : TOTAL MINATOME CORPORATION
PROSPECT : LAKE ENFERMER
<PAGE>
EXHIBIT A Page 43 of 64
LAFOURCHE REALTY COMPANY, INC. LANDS SITUATED IN LAFOURCHE PARISH, LOUISIANA AND
DESCRIBED AS FOLLOWS TO-WIT:
TRACT 1: 2.122 acres, more or less, situated in Section 19, Township 20 South,
Range 23 East, and being more particularly described by metes and
bounds as follows:
Beginning at a point along the Intersection of V-3 RD SU A and
V 2 RD SU A having Lambert coordinates
x = 2,378,150.00
y = 243,410.00
thence Southwest along the V-2 RD SU A S13d23'33"E 215.87
thence S09d05'25"E 253.18
thence S03d10'47"E 180.28
thence S07d07'30"W 241.87" to a point along
the intersection of the V-2 RD SU A and the V-3 RD SU A having Lambert
coordinates
x = 2,378,220.00
y = 242,530.00
thence Northeast along the V-3 RD SU A N00d00'02"E 270.00'
thence N06d32'47"W 614.00' to the point of beginning.
TRACT 2: .459 acres, more or less, situated in Section 20, Township 20 South,
Range 23 East, and being more particularly described by metes and
bounds as follows:
Beginning at a point along the Intersection of the V-3 RD SU A and
the V-2 RD SU A having Lambert coordinates
x = 2,374,776.92
y = 240,647.10
thence Southwest along the V-3 RD SU A S01d19'34"W 565.03' to the
Intersection of the V-2 RD SU A and the V-3 RD SU A having Lambert coordinates
x = 2,374,763.85
y = 240,082.22
thence Northwestward along the V-2 RD SU A N83d59'28"W 328.35'
to a point having Lambert coordinates
x = 2,374,437.31
y = 240,118.59
thence Northeast N32d37'35"W 029 91' to the point of beginning
THE NOMENCLATURE FOR THE UNITS MENTIONED IN THE ABOVE METES AND BOUNDS
DESCRIPTION ARE MORE PARTICULARLY DESCRIBED AS FOLLOWS:
V-2 RD SUA ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NO. 340-T-
4, DATED JULY 1, 1985, EFFECTIVE MAY 7, 1985, RECORDED COB 918, FOLIO 756,
ENTRY NO. 631920, RECORDS OF LAFOURCHE PARISH, LOUISIANA.
V-2 RD SUA ESTABLISHED BY LOUISIANA OFFICE OF CONSERVATION ORDER NO. 340-S-
4, DATED JULY 1, 1985, EFFECTIVE MAY 7, 1985, RECORDED COB 918, FOLIO 760,
ENTRY NO. 631921, RECORDS OF LAFOURCHE PARISH, LOUISIANA.
<PAGE>
EXHIBIT A Page 44 of 64
Contract No. 136
Farmout Agreement dated April 10, 1973, between Lynal Exploration Company,
Samedan Oil Corporation, Tesoro Petroleum Corporation and Oppenheimer Oil
and Gas, Inc., as Farmors, and Texas Gas Exploration Corporation, as
Farmee, covering certain lands and leases in Lafourche Parish, Louisiana.
Contract No.137
Joint Operating Agreement dated December 14, 1973, between Texas Gas
Exploration Corporation, as Operator, and Lynal Exploration Company, Tesoro
Petroleum Corporation, Samedan Oil Corporation and Oppenheimer Oil & Gas,
Inc. as Non-Operators; a declaration and notice of same having been
recorded in the Conveyance Records of Lafourche Parish, Louisiana on
November 15, 1976, in Book 579, at Folio 138, under Entry No. 435086.
Contract No.138
Unit Operating Agreement dated May 9, 1974, between Texas Gas Exploration
Corporation, as Operator, and Lynal Exploration Company, Tesoro Petroleum
Corporation, Samedan Oil Corporation, Oppenheimer Oil & Gas, Inc., and
Petro-Lewis Corporation, as Non-Operators, covering the operation of the
"I" RA SU A, established by Louisiana Department of Conservation Order No.
340-B, effective May 9, 1974; a declaration and notice of said Agreement
having been recorded in the Conveyance Records of Lafourche Parish,
Louisiana on November 15, 1976, in Book 579, at Folio 144, under Entry No.
435087.
Contract No.139
Unit Operating Agreement dated August 14, 1974, between Texas Gas
Exploration Corporation, as Operator, and Lynal Exploration Company, Tesoro
Petroleum Corporation, Samedan Oil Corporation, Oppenheimer Oil & Gas,
Inc., and Petro-Lewis Corporation, as Non-Operators, covering the
operation of the "H" RB SU A, established by Louisiana Department of
Conservation Order No. 340-A-1, effective August 14, 1974; a declaration
and notice of said Agreement having been recorded in the Conveyance Records
of Lafourche Parish, Louisiana on November 15, 1976, in Book 579, at Folio
146, under Entry No. 435088.
Contract No.140
Unit Operating Agreement dated June 17, 1975 between Texas Gas Exploration
Corporation, as Operator, and Lynal Exploration Company, Tesoro Petroleum
Corporation, Samedan Oil Corporation, Oppenheimer Oil & Gas, Inc., and
Petro-Lewis Corporation, as Non-Operators, covering the operation of the
"J" RA SU A, established by Louisiana Department of Conservation Order No.
340-H, effective June 17, 1975; a declaration and notice of said Agreement
having been recorded in the Conveyance Records of Lafourche Parish,
Louisiana on April 4, 1977, in Book 591, at Folio 393 under Entry No.
443618.
Contract No. 141
Farmout Agreement dated February 13, 1976, as amended, between McMoRan
Exploration Company and Texas Gas Exploration Corporation, covering certain
lands and leases in Lafourche Parish, Louisiana.
<PAGE>
EXHIBIT A Page 45 of 64
Contract No.142
Joint Operating Agreement dated effective December 1, 1976, between Texas
Gas Exploration Corporation, as Operator, and Inc., Tesoro Petroleum
Corporation, Samedan Oil Corporation, OPCO Production Company, McMoRan Oil
& Gas Company and Natomas North America, Inc., as Non-Operators, a
declaration and notice of same having been recorded in the Conveyance
Records of Lafourche Parish, Louisiana on August 11, 1980 in Book 708, at
Folio 777 under Entry No. 525436.
Contract No.143
Unit Operating Agreement dated June 28, 1977 between Texas Gas Exploration
Corporation, as Operator, and Douglas D. Lynn, Alton Coats Estate, Tesoro
Petroleum Corporation, Samedan Oil Corporation, OPCO Production Company,
McMoRan Oil & Gas Company, and Natomas North America, Inc., as Non-
Operator, covering operations of the "R" RA SU A, established by Louisiana
Department of Conservation Order No. 340-P-1, effective June 28, 1977 as
amended by Orders 340-P-2 and 340-P-3; a declaration and notice of said
Agreement being recorded in the Conveyance Records of Lafourche Parish,
Louisiana on January 15, 1985 in Book 898, at Folio 456 under Entry No.
621391.
Contract No.144
Operating Agreement Providing A Carried Interest to State effective January
11, 1978 between the State Mineral Board, for and on behalf of the State of
Louisiana, and Texas Gas Exploration Corporation, Lynal Exploration
Company, Tesoro Petroleum Corporation, Samedan Oil Corporation, Oppenheimer
Oil & Gas, Inc., McMoRan Exploration Co. and Natomas Exploration, Inc.
referred to collectively as Operator, recorded in the Conveyance Records of
Lafourche Parish, Louisiana on January 19, 1978, in Book 616 under Entry
Nos. 463367, 463368, 463369, 463370, 463371, 463372, and 463373.
Contract No.145
Unit Operating Agreement dated March 15, 1978 between Texas Gas Exploration
Corporation, as Operator, and Douglas D. Lynn, Alton Coats Estate, Tesoro
Petroleum Corporation, Samedan Oil Corporation, OPCO Production Company,
McMoRan Oil & Gas Company, and Natomas North America, Inc., as Non-
Operator, covering operators of the "V-3" RA SU A, established by Louisiana
Department of Conservation Order No. 340-S, effective March 15, 1978, as
amended by Order 340-S-1; a declaration and notice of said Agreement being
recorded in the Conveyance Records of Lafourche Parish, Louisiana on
January 15, 1985 in Book 898, at Folio 454 under Entry No. 621390.
Contract No.146
Joint Operating Agreement dated effective March 15, 1978 between Texas Gas
Exploration Corporation, as Operator, and Lynal Exploration Company, Tesoro
Petroleum Corporation, Samedan Oil Corporation, OPCO Production Company,
McMoRan Oil & Gas Company and Natomas North America, Inc., as Non-
Operators, a declaration and notice of same having been recorded in the
Conveyance Records of Lafourche Parish, Louisiana on August 11, 1980, in
Book 708, at Folio 773, under Entry No.525435, as amended 11-20-80.
<PAGE>
EXHIBIT A Page 46 of 64
Contract No. 148
Farmout Agreement dated September 14, 1984, between Samedan Oil
Corporation, Yankee Exploration, Inc., Damson Oil Corporation, Lynal, Inc.,
as Farmors, and Texas Gas Exploration Corporation, as Farmee, covering
certain lands and leases in Lafourche Parish, Louisiana.
Contract No. 235
Unit Operating Agreement dated June 28, 1977 between Texas Gas Exploration
Corporation, as Operator, and Douglas D. Lynn, Alton Coats Estate, Tesoro
Petroleum Corporation, Samedan Oil Corporation, OPCO Production Company,
McMoRan Oil & Gas Company and Natomas North America, Inc., as Non-
Operators, covering the operations of the "T-1" RA SU A, established by
Louisiana Department of Conservation Order No. 340-Q, effective June 28,
1977 as amended by Orders 340-Q-1 and 340-Q-2; a declaration and notice of
said Agreement being recorded in the Conveyance Records of Lafourche
Parish, Louisiana on January 15, 1985 in Book 898, at Folio 452 under Entry
No. 621389.
Contract No. 209:
AMI Termination Agreement between TGEC and MCMORAN, et al dated 8/22/1979.
Lake Enfermer Prospect, Lafourche Parish, Louisiana.
Contract No. 147:
Farmout Agreement between MCMORAN Production Co-Opr, and TGEC-Non-Opr dated
10/11/1983. Lake Enfermer Prospect, Lafourche Parish, Louisiana, as
amended 4/25/84; 6/25/84.
Contract No. 1051:
Farmout Agreement dated 8/30/84, amended 9/14/84, between Samedan, et al
and TGEC. Lake Enfermer Prospect, Lafourche Parish, Louisiana.
Contract No. 1052:
Farmout Agreement dated 8/7/1984 between Damson and TGEC. Lake Enfermer
Prospect, Lafourche Parish, Louisiana.
Transportation Agreement between Louisiana Intrastate Gas Corporation (LIG)
and TOTAL MINATOME CORPORATION dated March 1, 1992.
Gas Agreement dated 4/10/75 between TGEC and Mr. Richard St. Pierre, Sr.
Graham Agency Agreement dated March 14, 1988.
Voluntary Unit with the State Mineral Board of the State of Louisiana
covering State Lease Numbers 8403 and 6024, being a pooled unit bounded by
V-3 RB SUA, V-4 RA SUA, V-2 RB SUA and T-7 RC SUA, recorded in Book 891,
Page 490, Entry No. 618326, Lafourche Parish, Louisiana. Contract No. 695.
<PAGE>
EXHIBIT A Page 47 of 64
LAKE ENFERMER FIELD
-------------------
1. Oil, Gas and Mineral Lease, dated October 1, 1993, between Lafourche Realty
Company, as Lessor, and Forman Petroleum Corporation, as Lessee, recorded
in Conveyance Book 118___, Folio 348, Entry No. 757789 of the records of
Lafourche Parish, Louisiana.
2. Oil, Gas and Mineral Lease, dated January 1, 1993, between Lafourche Realty
Company, as Lessor, and Forman Petroleum Corporation, as Lessee, recorded
in Conveyance Book 1201, Folio 149, Entry No. 763180 of the records of
Lafourche Parish, Louisiana.
3. Oil, Gas and Mineral Lease, dated March 1, 1993, between The Allan Company,
as Lessor, and Forman Petroleum Corporation, as Lessee, recorded in
Conveyance Book 1171, Entry No. 750581 of the records of Lafourche Parish,
Louisiana.
4. Oil, Gas and Mineral Lease, dated October 21, 1993, between William H.
Harrison, Jr., Administrator of the Succession of Patrick John Harrison, as
Lessor, and Forman Petroleum Corporation, as Lessee, recorded in Conveyance
Book 1194, Folio 650, Entry No. 759920 of the records of Lafourche Parish,
Louisiana.
5. Oil, Gas and Mineral Lease, dated October 21, 1993, between William H.
Harrison, Jr., et al, as Lessors, and Forman Petroleum Corporation, as
Lessee, recorded in Conveyance Book 1192, Entry No. 758828 of the records
of Lafourche Parish, Louisiana.
6. Oil, Gas and Mineral Lease, dated October 21, 1993, between Gloria Knight
Ferrera, et al, as Lessors, and Forman Petroleum Corporation, as Lessee,
recorded in Conveyance Book 1192, Entry No. 758827 of the records of
Lafourche Parish, Louisiana.
7. Oil, Gas and Mineral Lease, dated October 21, 1993, between Shirley
Harrison Hyde, et al, as Lessors, and Forman Petroleum Corporation, as
Lessee, recorded in Conveyance Book 1192, Entry No. 758829 of the records
of Lafourche Parish, Louisiana.
8. Oil, Gas and Mineral Lease, dated June 30, 1994, between Philip A. Grove,
et al, as Lessor and Forman Petroleum Corporation, as Lessee, recorded in
Conveyance Book 1215, Folio 597, Entry No. 770121 of the records of
Lafourche Parish, Louisiana.
9. Oil, Gas and Mineral Lease, dated July 25, 1994, between The Allan Company,
as Lessor, and Forman Petroleum Corporation, as Lessee, recorded in
Conveyance Book 1214, Folio 521, Entry No. 769655 of the records of
Lafourche Parish, Louisiana.
10. Oil, Gas and Mineral Lease, dated May 16, 1994, between the State Mineral
Board of the State of Louisiana, acting for and in behalf of the Lafourche
Parish School Board, as Lessor, and Forman Petroleum Corporation, as
Lessee, recorded in Conveyance Book 1208, Folio 818, Entry No. 767117 of
the records of Lafourche Parish, Louisiana.
<PAGE>
EXHIBIT A Page 48 of 64
LAKE ENFERMER FIELD
LAFOURCHE PARISH, LOUISIANA
1. Oil, Gas and Mineral Lease, dated November 1, 1993, between The William H.
Harrison, Jr. Family Project, as Lessor, and Forman Petroleum Corporation, as
Lessee, recorded in COB 1252, Folio 62, Entry No.786316, records of Lafourche
Parish, Louisiana. (Lease No. 9203-0008-04)
2. Oil, Gas and Mineral Lease, dated October 21,1993, between The William H.
Harrison, Jr. - Family Project, as Lessor, and Forman Petroleum Corporation, as
Lessee, recorded in COB 1240, Folio 223, Entry No. 780620, records of Lafourche
Parish, Louisiana. (Lease No. 9203-0008-07)
3. Oil, Gas and Mineral Lease, dated January 18, 1996, between The Ellen Lucy
McHugh Trust, as Lessor, and Forman Petroleum Corporation, as Lessee, recorded
in COB 1264, Entry No.792430, records of LaFourche Parish, Louisiana. (Lease No.
9203-0016-02)
4. Oil, Gas and Mineral Lease, dated January 18, 1996, between The Clint Colby
Revocable Trust, et al, as Lessor, and Forman Petroleum Corporation, as Lessee,
recorded in COB 1264, Entry No. 792429, records of LaFourche Parish, Louisiana.
(Lease No. 9203-0016-01)
5. Oil, Gas and Mineral Lease, dated January 18, 1996, between The Adrienne F.
Faber Testamentary Trust, el al, as Lessor, and Forman Petroleum Corporation, as
Lessee, recorded in COB 1264, Entry No.792425 records of Lafourche Parish,
Louisiana. (Lease No. 9203-0017-01)
6. Oil, Gas and Mineral Lease, dated January 18,1996, between Thomas L.
Fassett, as Lessor, and Forman Petroleum Corporation, as Lessee, recorded in COB
1264, Entry No. 792427, records of Lafourche Parish, Louisiana. (Lease No.9203-
0017-04)
7. Oil, Gas and Mineral Lease, dated January 18,1996, between Willard Fassett,
as Lessor, and Forman Petroleum Corporation, as Lessee, recorded in COB 1264,
Entry No. 792428, records of Lafourche Parish, Louisiana. (Lease No. 9203-0017-
05)
8. Oil, Gas and Mineral Lease, dated January 18,1996, between Richard Fassett,
as Lessor, and Forman Petroleum Corporation, as Lessee, recorded in COB 1264,
Entry No. 792426, records of Lafourche Parish, Louisiana. (Lease No. 9203-0017-
06)
9. Oil, Gas and Mineral Lease, dated September 26,1994, between Gloria Knight
Ferrera, et al as Lessor, and Forman Petroleum Corporation, as Lessee, recorded
in COB 1239, Folio 774, Entry No. 780495, records of Lafourche Parish,
Louisiana. (Lease No. 9203-0040-01)
10. Oil, Gas and Mineral Lease, dated September 26,1994, between Shirley
Harrison Hyde, et al, as Lessor, and Forman Petroleum Corporation, as Lessee,
recorded in COB 1239, Folio 782, Entry No.780496, records of Lafourche Parish,
Louisiana. (Lease No.9203-0040-02)
11. Oil, Gas and Mineral Lease, dated September 26,1994, between The William H.
Harrison, Jr. - Family Project, as Lessor, and Forman Petroleum Corporation, as
Lessee, recorded in COB 1239, Folio 790, Entry No.780497, records of Lafourche
Parish, Louisiana. (Lease No. 9203-0040-03)
<PAGE>
EXHIBIT A Page 49 of 64
FORMAN PETROLEUM CORPORATION
MANILLA VILLAGE FIELD
JEFFERSON PARISH, LOUISIANA
I.
OIL GAS AND MINERAL LEASES
1. 940001. That certain Oil, Gas and Mineral Lease dated October 9, 1963,
between Alma Franz Deichmann, et al, as Lessors and Whitestone Petroleum
Corporation, as Lessee, which lease is recorded in COB 23, Folio 919 as Entry
No. 273368 of the Conveyance Records of Jefferson Parish, Louisiana.
Before Payout After Payout
------------- ------------
Operating Interest 0.08166667 0.07145833
Net Revenue Interest 0.05843367 0.05112946
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
2. 940002. That certain Oil, Gas and Mineral Lease dated October 16, 1963,
between Herbert J. Harvey, as Lessor and Whitestone Petroleum Corporation, as
Lessee, which lease is recorded in Mineral Lease Book 24, Folio 47, as Entry No.
275432 of the Mineral Lease Records of Jefferson Parish, Louisiana.
Before Payout After Payout
------------- ------------
Operating Interest 0.01333333 0.01166667
Net Revenue Interest 0.00854019 0.00747266
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
3. 940003. That certain Oil, Gas and Mineral Lease dated October 9, 1963,
between Lillian Richards, et al, as Lessors and Whitestone Petroleum
Corporation, as Lessee, which lease is recorded in Mineral Lease Book 23, Folio
915, as Entry No. 273367, of the Mineral Lease Records of Jefferson Parish,
Louisiana.
Before Payout After Payout
------------- ------------
Operating Interest 0.18400000 0.16100000
Net Revenue Interest 0.13165464 0.11519779
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
4. 940004. That certain Oil, Gas and Mineral Lease dated October 9, 1963,
between George Deichmann, et al, as Lessors and Whitestone Petroleum
Corporation, as Lessee, which lease is recorded in Mineral Lease Book 23, Folio
911, as Entry No. 273366, of the Mineral Lease Records of Jefferson Parish,
Louisiana.
<PAGE>
EXHIBIT A Page 50 of 64
Before Payout After Payout
------------- ------------
Operating Interest 0.42100000 0.36837500
Net Revenue Interest 0.30123150 0.26357758
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
5. 940500. That certain Oil, Gas and Mineral Lease dated September 23, 1963,
between The State of Louisiana, as Lessor and Whitestone Petroleum Corporation,
as Lessee, which lease is recorded in Mineral Lease Book 23, Folio 903, Entry
No. 272461 of the Mineral Lease Records of Jefferson Parish, Louisiana, and
further designated as State Lease No. 4192,
INSOFAR AND ONLY INSOFAR AS THE TRACTS OR PARCELS OF LAND COVERED BY SAID
OIL, GAS AND MINERAL LEASE ARE LOCATED WITHIN THE PERIMETERS OF THE
FOLLOWING DESCRIBED LANDS, TO-WIT:
Beginning at U.S.C. & G.S. Station "Mud-1934", said point having Lambert
Plane Coordinates of x = 2,416,499.62 and Y = 295,408.07, go West 1,550
feet to a point, thence North 4,900 feet to a point on the West line of
State Lease 4192, being the Southwest corner of the 14,700 feet Sand Unit
B, and described herein as "Point of Beginning"; thence North along the
West line of State Lease 4192 a distance of 3,200 feet to the Northwest
Corner of said lease; thence East along the North line of said lease a
distance of 7,250 feet to the Northeast Corner of said lease; thence
Southerly a distance of 2,350 feet to a point on the East line of State
Lease 4192; thence Westerly at right angles, a distance of 3,610 feet to a
point; thence Southerly at right angles a distance of 250 feet to a point;
thence Westerly at right angles a distance of 1,000 feet to a point on the
East line of 14,700 feet Sand Unit "B"; thence Southerly a distance of 600
feet to the Southeast Corner of 14,700 feet Sand Unit B; thence West a
distance of 2,640 feet along the South boundary of said unit to the Point
of Beginning.
Before Payout After Payout
-------------- ------------
Operating Interest 0.70000000 0.61250000
Net Revenue Interest 0.46320754 0.40530660
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
6. 941001 and 941002. That certain Oil, Gas and Mineral Lease dated January
21, 1967, between Emile A. Maier, et al, as Lessors and Whitestone Petroleum
Corporation, as Lessee, which lease was signed in counterparts that are recorded
in Mineral Lease Book 26, Folio 684, Entry No. 384949 of the Mineral Lease
Records of Jefferson Parish, Louisiana, and in Mineral Lease Book 26, Folio 690,
Entry No. 384950 of the Mineral Lease Records of Jefferson Parish, Louisiana,
LESS AND EXCEPT THEREFROM THOSE PORTIONS OF THE TRACTS OR PARCELS OF LANDS
COVERED BY THE ABOVE DESCRIBED OIL, GAS AND MINERAL LEASE LYING OUTSIDE OF
THE FOLLOWING DESCRIBED UNITS, TO WIT:
<PAGE>
EXHIBIT A Page 51 of 64
1. MV Bigenerina Q Sand Unit established by Louisiana Department of
Conservation Order No. 582-C-1 dated October 19, 1970, effective October 1,
1970.
2. MV Bigenerina O Sand Unit established by Louisiana Department of
Conservation Order No. 582-D-1 dated October 16, 1970, effective October 1,
1970.
3. MV Bigenerina E Sand Unit established by Louisiana Department of
Conservation Order No. 582-E-l dated October 16, 1970, effective October 1,
1970.
4. MV Bigenerina K Sand Unit established by Louisiana Department of
Conservation Order No. 582-F-1 dated October 16, 1970, effective October 1,
1970.
5. MV 9900' Sand Unit established by Louisiana Department of
Conservation Order No. 582-J dated October 16, 1970, effective October 1,
1970.
6. MV Bigenerina Q-1 Sand Unit established by Louisiana Department of
Conservation Order No. 582-K dated October 19, 1970, effective October 1,
1970.
7. Bigenerina M Sand Unit established by Louisiana Department of
Conservation Order No. 582-G dated February 10, 1969, effective February 1,
1969.
8. Bigenerina "R" Sand Unit established by Louisiana Department of
Conservation Order No. 582-A-2 dated February 21, 1968, effective February
9, 1968.
Before Payout After Payout
------------- ------------
Operating interest 0.70000000 0.61250000
Net Revenue Interest 0.50085000 0.43824375
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
7. 941500. That certain Oil, Gas and Mineral Lease dated effective August 14,
1967, between The State of Louisiana, as Lessor and Whitestone Petroleum
Corporation, as Lessee, which lease is recorded in Mineral Lease Book 26, Folio
985, Entry No. 403622 of the Mineral Lease Records of Jefferson Parish,
Louisiana, and further designated as State Lease No. 4972.
Before Payout After Payout
------------- ------------
Operating Interest 0.70000000 0.61250000
Net Revenue Interest 0.44887500 0.39276563
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
<PAGE>
EXHIBIT A Page 52 of 64
8. 942001 and 942001. That certain Oil, Gas and Mineral Lease dated September
12, 1967, between Emile A. Maier, et al, as Lessors and Whitestone Petroleum
Corporation, as Lessee, which lease is recorded in Mineral Lease Book 27, Folio
64, Entry No. 405869 of the Mineral Lease Records of Jefferson Parish,
Louisiana, and in Mineral Lease Book 27, Folio 121, Entry No. 408393 of the
Mineral Lease Records of Jefferson Parish, Louisiana,
INSOFAR AND ONLY INSOFAR AS THE LANDS DESCRIBED IN SAID OIL, GAS AND
MINERAL LEASE ARE INCLUDED IN AND LIMITED TO THE MINERAL RIGHTS UNITIZED AS
TO:
a. The MV Bigenerina "0" RA Sand Unit established by Louisiana
Department of Conservation Order No. 582-D-l dated October 16, 1970,
effective October 1, 1970.
b. The MV 9900' Sand Unit established by Louisiana Department of
Conservation Order No. 582-J dated October 16, 1970, effective October 1,
1970.
c. The MV Bigenerina "R" RA SU A Sand Unit established by Louisiana
Department of Conservation Order No. 582-A-2 dated February 21, 1968,
effective February 9, 1968.
Before Payout After Payout
------------- ------------
Operating Interest 0.70000000 0.61250000
Net Revenue Interest 0.50085000 0.43824375
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
9. 943000. That certain Oil, Gas and Mineral Lease dated September 23, 1963,
between The State of Louisiana, as Lessor and Pel Tex Petroleum Company, as
Lessee, which lease is recorded in Mineral Lease Book 23, Folio 893, Entry No.
272125 of the Mineral Lease Records of Jefferson Parish, Louisiana, further
identified as State Lease 4190,
INSOFAR AND ONLY INSOFAR AS THE LANDS DESCRIBED IN SAID OIL, GAS AND
MINERAL LEASE ARE INCLUDED IN AND LIMITED TO THE MINERAL RIGHTS UNITIZED AS
TO:
a. The MV Bigenerina "O" RA Sand Unit created by La. Office of
Conservation Order No. 582-D-l dated effective October 1, 1970.
b. The MV Bigenerina "Q" RA Sand Unit created by La. Office of
Conservation Order No. 582-C-1 dated effective October 1, 1970.
c. The MV Bigenerina "R" RA SU A created by La. Office of
Conservation Order No. 582-A-2 dated effective February 9, 1968.
Before Payout After Payout
------------- ------------
Operating Interest 0.70000000 0.61250000
Net Revenue Interest 0.49560021 0.43365183
10. 943500. That certain Oil, Gas and Mineral Lease dated August 21, 1963,
between Ada Jamison Watt, et al, as Lessors and Robert L. Wolfe as Lessee, which
lease is recorded in Mineral
<PAGE>
EXHIBIT A Page 53 of 64
Lease Book 23, Folio 993, Entry No. 274377 of the Mineral Lease Records of
Jefferson Parish, Louisiana.
11. That certain Oil, Gas and Mineral Lease dated September 12, 1967, between
Emile A. Maier, et al, as Lessors and Whitestone Petroleum Corporation, as
Lessee, which lease is recorded in Mineral Lease Book 27, Folio 64, Entry No.
405869 of the Mineral Lease Records of Jefferson Parish, Louisiana, and in
Mineral Lease Book 27, Folio 121, Entry No. 408393 of the Mineral Lease Records,
of Jefferson Parish, Louisiana, SAVE AND EXCEPT THEREFROM THE FOLLOWING:
a. All lands and mineral rights unitized as to:
(i) The MV Bigenerina "0" RA Sand Unit established by Louisiana
Department of Conservation Order No. 582-D-1 dated October 16,
1970, effective October 1, 1970;
(ii) The MV 9900' Sand Unit established by Louisiana Department of
Conservation Order No. 582-J dated October 16, 1970, effective
October 1, 1970; and
(iii) The MV Bigenerina "R" RA SU A Sand Unit established by
Louisiana Department of Conservation Order No. 582-A-2 dated
February 21, 1968, effective February 9, 1968; and
b. All lands released by that certain instrument dated October 8, 1971
executed by Patrick Petroleum Company, et al, recorded in Mineral
Lease Book 29, Folio 889, Entry No. 538451.
Before Payout After Payout
------------- ------------
Operating Interest 0.70000000 0.61250000
Net Revenue Interest 0.50085000 0.43824375
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
INSOFAR AND ONLY INSOFAR AS THE LANDS DESCRIBED IN SAID OIL, GAS AND
MINERAL LEASE ARE INCLUDED IN AND LIMITED TO THE MINERAL RIGHTS UNITIZED AS
TO:
a. The MV Bigenerina "0" RA Sand Unit created by La. Office of
Conservation Order No. 582-D-1 dated effective October 1, 1970.
b. The MV Bigenerina "Q" RA Sand Unit created by La Office of
Conservation Order No. 582-C-1 dated effective October 1, 1970.
c. The MV Bigenerina "R" RA SU A created by La. Office of
Conservation Order No. 582-A-2 dated effective February 9, 1968.
Before Payout After Payout
------------- ------------
Operating Interest 0.70000000 0.61250000
Net Revenue Interest 0.49560021 0.43365177
<PAGE>
EXHIBIT A Page 54 of 64
Payout is determined pursuant to the terms of that certain Assignment and
Conveyance from C. T. Carden, et al to Forman Petroleum Corporation, recorded in
the records of Jefferson Parish, Louisiana, covering the above-described Oil,
Gas and Mineral Lease.
II.
FEE LAND
That certain tract of land comprising 25 acres, more or less, located in
Section 37, Township 18 South, Range 24 East, Jefferson Parish, Louisiana, being
the same tract of land acquired by Tidewater Associated Oil Company from Zodiac
Corporation by deed dated March 30, 1949, and recorded"in Conveyance Book 266,
Folio 685, and acquired by James D. Mullins, et al from Texaco Producing Inc.,
by deed dated May 31, 1985, recorded in COB 1260, Folio 28, Entry No. 85-25399,
in the records of Jefferson Parish, Louisiana, purporting to cover all surface
and mineral rights in and to subject property.
After Payout
#1 and
Before Payout Payout #2
Operating Interest 0.70000000 0.61250000
Net Revenue Interest 0.61110000 0.43135313
Payout #1, relating to a certain reversionary interest, and Payout #2,
relating to a certain mineral royalty interest, are determined pursuant to the
terms of that certain Assignment and Conveyance from C. T. Carden, et al to
Forman Petroleum Corporation, recorded in the records of Jefferson Parish,
Louisiana, covering the above-described Oil, Gas and Mineral Lease.
III.
UNIT INTERESTS
1. M V 9900' RA Sand Unit created by State of Louisiana, Office of
Conservation Order No. 582-J, effective October 1, 1970.
Total Unit Interest
Before Payout After Payout
------------- ------------
Net Revenue Interest 0.44505841 0.38862266
All payouts are determined pursuant to the terms of that certain Assignment
and Conveyance from C. T. Carden, et al to Forman Petroleum Corporation,
recorded in the records of Jefferson Parish, Louisiana, covering the above-
described Oil, Gas and Mineral Lease.
2. M V Bigenerina K Sand Unit created by State of Louisiana, Office of
Conservation Order No. 582-F-1, effective October 1, 1970.
Total Unit Interest
-------------------
Before Payout After Payout
------------- ------------
Net Revenue Interest 0.47256859 0.39994271
<PAGE>
EXHIBIT A Page 55 of 64
All payouts are determined pursuant to the terms of that certain Assignment
and Conveyance from C. T. Carden, et al to Forman Petroleum Corporation,
recorded in the records of Jefferson Parish, Louisiana, covering the above-
described Oil, Gas and Mineral Lease.
3. M V Bigenerina 0 Sand Unit created by State of Louisiana, Office of
Conservation Order No. 582-D-1, effective October 1, 1970.
Total Unit Interest
-------------------
Before Payout After Payout
------------- ------------
Net Revenue Interest 0.42960741 0.37259593
All payouts are determined pursuant to the terms of that certain Assignment
and Conveyance from C. T. Carden, et al to Forman Petroleum Corporation,
recorded in the records of Jefferson Parish, Louisiana, covering the above-
described Oil, Gas and Mineral Lease.
4. M V Bigemerina Q Sand Unit created by State of Louisiana, Office of
Conservation Order No. 582-C-l, effective October 1, 1970.
Total Unit Interest
-------------------
Before Payout After Payout
------------- ------------
Net Revenue Interest 0.48856586 0.42451424
All payouts are determined pursuant to the terms of that certain Assignment
and Conveyance from C. T. Carden, et al to Forman Petroleum Corporation,
recorded in the records of Jefferson Parish, Louisiana, covering the above-
described Oil, Gas and Mineral Lease.
5. M V Bigenerina Q-1 Sand Unit created by State of Louisiana, Department of
Conservation Order No. 582-K, effective October 1, 1970.
Total Unit Interest
-------------------
Before Payout After Payout
------------- ------------
Net Revenue Interest 0.48114320 0.41761012
All payouts are determined pursuant to the terms of that certain Assignment
and Conveyance from C. T. Carden, et al to Forman Petroleum Corporation,
recorded in the records of Jefferson Parish, Louisiana, covering the above-
described Oil, Gas and Mineral Lease.
IV.
WELLS
1. E. A. Maier "B", Well #1. S/N 124815. Located 3,150' South of North Line &
3,775' East of West Line of, and in Sec. 27, T18S-R24E, Jefferson Parish,
Louisiana. Serves as Unit Well for 9900' SU.
2. Getty Fee,Well #1. S/N 124108. Located 2,334' South of North Line & 2,321'
East of West Line of Section 27, to location in Sec. 37, T18S-R24E,
Jefferson Parish, Louisiana, being North, 82(degrees) 40'21" East, 1192.51'
from USC&GS Station "Saint 66". Serves as Unit Well for MV Big. "K" RA SU.
<PAGE>
EXHIBIT A Page 56 of 64
3. Wm. Deichmann et al., Well #1. S/N 119971. Located 2,340' South of North
Line & 250' West of East Line of, and in Sec. 28, T18S-R24E, Jefferson
Parish, Louisiana, being North 84(degrees) West, 2,275' from USC&GS Station
"St. Denis". Serves as Unit Well for MV Big. "Q" RA SU.
4. Wm. Deichmann et al., Well #2. S/N 121111. Located 2,167' South of North
Line & 735' East of West line of, and in Sec. 27, T18S-R24E, Jefferson
Parish, Louisiana. Serves as Unit Well for Big. "S" VU A.
5. Wm. Deichmann et al, Well #3. S/N 122813. Located 1,350' South of North
Line & 330' East of West Line of, and in Sec. 27, T18S-R24E, Jefferson
Parish, Louisiana, being North 36(degrees) 51'50" West of USC&GS Sta "Saint
66". Serves as Unit Well for MV Big. "O" SU.
6. Wm. Deichmann et al., Well #4. S/N 124286. Located 1,366' South of North
Line & 863.36' West of East Line of, and in Sec. 28, T18S-R24E, Jefferson
Parish, Louisiana, being North 62(degrees) 13'33" West, 2,280.48' from
USC&GS Sta "Saint 66". Serves as Unit Well for MV Big. "O" RA SU.
7. State Lease 4192, Well #3. S/N 108701. Located South 41(degrees) 34' West,
3,226.2' from USC&GS Sta "St. Denis" in T18S-R24E, Jefferson Parish,
Louisiana. Produces as a Lease Well from the 14,400' Sand.
8. State Lease 4192, Well #4. S/N 117135. Located South 65(degrees) 19'27" West,
1,986.22' from USC&GS Sta "St. Denis" in T18S-R24E, Jefferson Parish,
Louisiana.
V.
MAJOR ITEMS OF OWNED EQUIPMENT
Quantity
--------
1 Concrete Production Barge with cantilevered deck
2 3,000-Bbl galvanized, bolted stock tanks
1 1,500-Bbl galvanized, bolted stock tank
6 4' x 22'6" National 75# WP Heater Treaters
2 4' x 20' National 50# WP Recirculating Water Treaters
1 6' x 28' National 50# WP Test Heater Treater
6 24" x 5' Vertical Oil/Gas Separators, 125# WP
3 20" x 7'6" BS&B Vert. Oil/Gas Separators, 1440# WP
1 7' x 15' Vertical Oil/Gas Separator, 125# WP
1 24" x 10' BS&B Vert. Gas/Water Separator. 480# WP. Scrubber at
Compressor Inlet.
1 24" x 18'6" BS&B Vert. Glycol Tower, 1440# WP, c/w IMM BTU Glycol
Regenerator
<PAGE>
EXHIBIT A Page 57 of 64
3 2" x 12' Horiz Meter Runs w/ Daniel Jr Fittings & Barton Bellows-
type gas meters.
2 3" x 16' Horiz Meter Runs w/ Daniel Jr Fittings & Barton Bellows-
type gas meters.
1 Concrete Salt Water Disposal Deck Barge
2 1,500-Bbl galvanized, bolted SW settling Tanks
1 10' x 12' Dog House/Office Building
1 8' x 9' Tool House w/ aluminum Sides
<PAGE>
EXHIBIT A Page 58 of 64
BY FORMAN PETROLEUM CORPORATION
I.
OIL, GAS AND MINERAL LEASES
BOUTTE FIELD
ST. CHARLES PARISH, LOUISIANA
1. That certain Oil, Gas and Mineral Lease dated January 8, 1952, by Lydia B.
Simoneaux et al, as Lessors, and The Texas Company, as Lessee, which lease
is recorded in COB YYY, Folio 182, Entry No. 9119 of the Conveyance Records
of St. Charles Parish, Louisiana, as amended by that certain instrument
dated December 27, 1952, by Lydia B. Simoneaux et al and The Texas Company,
of record in COB 4, Folio 342, Entry No. 10536 of the Conveyance Records of
St. Charles Parish, Louisiana; and less and except the acreage described in
that certain Compromise Agreement and Partial Release dated effective
November 8, 1963, by and between Texaco, Inc. et al, of record in COB 39,
Folio 92, Entry No. 25144 of the Conveyance Records of St. Charles Parish,
Louisiana.
2. That certain Oil, Gas and Mineral Lease dated January 8, 1952, between St.
Charles Land Company, In Liquidation, as Lessor, and The Texas Company, as
Lessee, of record in COB YYY, Folio 188, Entry No. 9120 of the Conveyance
Records of St. Charles Parish, Louisiana, as amended by that certain
instrument dated December 26, 1952, by and between the St. Charles Land
Company, In Liquidation, and The Texas Company, of record in COB 4, Folio
345, Entry No. 10537 of the Conveyance Records of St. Charles Parish,
Louisiana; and less and except the acreage described in that certain
Compromise Agreement and Partial Release dated effective November 8, 1963,
by and between Texaco, Inc. et al, of record in COB 39, Folio 92, Entry No.
25144 of the Conveyance Records of St. Charles Parish, Louisiana.
The Interest of Forman Petroleum Corporation in Oil, Gas and Mineral Leases Nos.
1 and 2 above is owned in Tracts A and B as Follows:
TRACT A
The South Half of Southeast Quarter (S/2 of SE/4), and the Southwest
Quarter (SW/4) of Section 17; the Southeast Quarter (SE/4) and the
Southeast Quarter of Southwest Quarter (SE/4 of SW/4) of Section 18; All of
Section 19; All of Section 20; the West Half of West Half (W/2 of W/2) and
the East Half of Northwest Quarter (E/2 of NW/4) of Section 21; the
Northwest Quarter of Northwest Quarter (NW/4 of NW/4) of Section 28; the
North Half (N/2) of Section 29; and the North Half (N/2) of Section 30, all
in Township 14 South, Range 21 East, St. Charles Parish, Louisiana, LESS
AND EXCEPT the East Half of the Northwest Quarter (E/2 of NW/4) of Section
21, Township 14 South, Range 21 East, St. Charles Parish, Louisiana (Tract
B below).
LEASE OPERATING INTEREST .50000000
LEASE NET REVENUE INTEREST .42968750
The East Half of the Northwest Quarter
(E/2 of NW/4) of Section 21, Township 14 South,
Range 21 East. St. Charles Parish. Louisiana
OPERATING INTEREST .50000000
<PAGE>
EXHIBIT A Page 59 of 64
NET REVENUE INTEREST .40625000
UNITS
Subject to the following
drilling and production units, created by
Department of Conservation or Office of
Conservation Orders and/or Voluntary Units:
1. By instrument dated January 4, 1960, recorded on April 20, 1960, in
Conveyance Book 26, Folio 475, Entry No. 20109, executed by and between
Texaco Inc., Pan American Petroleum Corporation et al a 40 acre production
unit was created for the Robulus #1 Zone (being that zone encountered
between the electric log depths of 10262' through 10415' in The Texas
Company's (now Texaco Inc.) Rathborne #3 Well located in Section 18,
Township 14 South, Range 21 East, St. Charles Parish, Louisiana, inclusive
of the mineral leases covering the subject property. (30 acres).
2. A plat for Texaco Inc.'s Boutte Field, St. Charles Parish, Louisiana, Main
Pay R 100 SUA, created by Office of Conservation Order No. 605-H, dated
November 22, 1982, was registered on February 14, 1983, in Conveyance Book
293, Folio 763, Entry No. 93337 of the records of St. Charles Parish,
Louisiana.
3. A plat for Texaco Inc.'s Boutte Field, St. Charles Parish, Louisiana, ROB L
RA SUA created by Office Of Conservation Order No. 605-L dated August 17,
1989, was registered on November 2, 1989, in Conveyance Book 417, Folio
166, Entry No. 147127, of the records of St. Charles Parish, Louisiana.
4. The Rathborne 2 Sand, Sand Unit A and Sand Unit B, created by Department of
Conservation Order No. 605-D dated November 22, 1965, effective November 1,
1965, Boutte Field, St. Charles Parish, Louisiana.
5. Supplement to Office of Conservation Order No. 605-D, dated May 9, 1979,
effective May 9, 1979, Boutte Field, St. Charles Parish, Louisiana.
6. The Rathborne 2 Sand, Reservoir A, Sand Unit C, created by Department of
Conservation Order No. 605-D-1, dated November 25, 1975, effective November
1, 1975, Boutte Field, St. Charles Parish, Louisiana.
7. The Simoneaux 10 Sand, Sand Unit A, Sand Unit B, and Sand Unit C, created
by Department of Conservation Order No. 605-E, dated November 22, 1965,
effective November 1, 1965, Boutte Field, St. Charles Parish, Louisiana.
8. Supplement to Office of Conservation Order No. 605-E, dated June 28, 1979,
effective June 28, 1979, Boutte Field, St. Charles Parish, Louisiana.
9. The Simoneaux 10 Sand, Sand Unit D, created by Department of Conservation
Order No. 605-E-l, dated November 15, 1966, effective December 1, 1966,
Boutte Field, St. Charles Parish, Louisiana.
10. Supplement to Department of Conservation Order No. 605-E-l, dated January
3, 1977, effective January 3, 1977, Boutte Field, St. Charles Parish,
Louisiana.
11. The Simoneaux 10 Sand, Reservoir A, Sand Unit A, created by Department of
Conservation Order No. 605-E-2, dated November 25, 1975, effective November
1, 1975, Boutte Field, St. Charles Parish, Louisiana. This order also
dissolved Simoneaux 10 Sand
<PAGE>
EXHIBIT A Page 60 of 64
Unit A and Simoneaux Sand Unit B created by Department of Conservation
Order No. 605-E.
12. Supplement to Office of Conservation Order No. 605-E-2, dated July 25,
1980, effective July 25, 1980, Boutte Field, St. Charles Parish, Louisiana.
13. The 10000 Foot Sand, Reservoir A, Sand Unit A, created by Department of
Conservation Order No. 605-F, dated December 28, 1979, effective December
13, 1979, Boutte Field, St. Charles Parish, Louisiana.
14. Supplement to Department of Conservation Order No. 605-F, dated March 12,
1985, effective March 12, 1985, Boutte Field, St. Charles Parish,
Louisiana.
15. Supplement to Department of Conservation Order No. 605-F, dated December
28, 1989, effective December 28, 1989, Boutte Field, St. Charles Parish,
Louisiana.
16. The Simoneaux 4 Sand, Reservoir A, Sand Unit A, created by Department of
Conservation Order No. 605-G, dated February 13, 1981, effective October
21, 1980, Boutte Field, St. Charles Parish, Louisiana.
Unit Operating Interest - .7622699 - Unit NRI - .5731162
17. Supplement to Department of Conservation Order No. 605-G, dated December
28, 1989, effective December 28, 1989, Boutte Field, St. Charles Parish,
Louisiana.
18. The Main Pay Sand Reservoir 100, Sand Unit A, created by Department of
Conservation Order No. 605-H, dated November 22, 1982, effective September
29, 1982, Boutte Field, St. Charles Parish, Louisiana.
19. Supplement to Department of Conservation Order No. 605-H, dated January 6,
1986, effective January 6, 1986, Boutte Field, St. Charles Parish,
Louisiana.
20. Supplement to Department of Conservation Order No. 605-H, dated December
31, 1984, effective December 31, 1984, Boutte Field, St. Charles Parish,
Louisiana.
21. The Simoneaux 2C Sand, Reservoir A, Sand Unit B, created by Department of
Conservation Order No. 605-J, dated October 30, 1985, effective September
25, 1985, Boutte Field, St. Charles Parish, Louisiana.
22. The Simoneaux 2B Sand, Reservoir A, Sand Unit A, created by Department of
Conservation Order 605-K, dated February 18, 1987, effective February 10,
1987, Boutte Field, St. Charles Parish, Louisiana.
23. The ROB-L Sand, Reservoir A, Sand Unit A, created by Department of
Conservation Order 605-L, dated August 17, 1989, effective August 8, 1989,
Boutte Field, St. Charles Parish, Louisiana.
II.
OIL, GAS AND MINERAL LEASE
BOUTTE FIELD
ST. CHARLES PARISH. LOUISIANA
That certain Oil, Gas and Mineral Lease dated March 31, 1952, by Joseph
Rathborne Land and Lumber Company, Inc., as Lessor, and The California Company,
as Lessee, of record in COB
<PAGE>
EXHIBIT A Page 61 of 64
ZZZ, Folio 180, Entry No. 9317 of the Conveyance Records of St. Charles Parish,
Louisiana, LESS AND EXCEPT the lands covered by those certain Partial Releases
as follows:
(1) Dated February 6, 1970, by and between Chevron Oil Company et al and
Rathborne Land Company, Inc., unrecorded, releasing the following described
280.33 acres, more or less:
Those portions of Sections 8, 17 and 18, Township 14 South, Range 21 East,
Southeastern Land District West of the Mississippi River, St. Charles Parish,
Louisiana, described as follows:
Beginning at the Southeast corner of the North one-half of Section 18, Township
14 South, Range 21 East; thence South 89 degrees 16 minutes West 660.0 feet;
thence North 330.0 feet; thence East 657.7 feet; thence North 0 degrees 23
minutes West 244.4 feet; thence North 89 degrees 16 minutes East 2,030.0 feet;
thence North 330.0 feet; thence East 610.0 feet; thence North 330.0 feet; thence
East 330.0 feet; thence North 1,270.0 feet; thence East 330.0 feet; thence North
171.4 feet; thence North 89 degrees 16 minutes East 690.0 feet; thence North
160.0 feet; thence East 630.0 feet; thence North 200.0 feet; thence East 330.0
feet; thence North 300.0 feet; thence East 294.7 feet; thence South 0 degrees 23
minutes East 4,620.4 feet; thence South 89 degrees 16 minutes West 2,631.5 feet;
thence North 0 degrees 23 minutes West 1,325.5 feet; thence South 89 degrees 16
minutes West 2,631.5 feet to the place of beginning, containing 280.33 acres
more or less.
(2) Dated February 13, 1978, effective February 7, 1978, by and between Chevron
USA, Inc. et al and Rathborne Land Company, Inc., of record in COB 205,
Folio 564, Entry No. 61635 of the Conveyance Records of St. Charles Parish,
Louisiana; and
(3) Dated January 8, 1982, by and between Chevron USA, Inc. et al and Rathborne
Land Company, Inc., of record in COB 276, Folio 518, Entry No. 86878 of the
Conveyance Records of St. Charles Parish, Louisiana.
LEASE OPERATING INTEREST 1.00000000
LEASE NET REVENUE INTEREST .70312500
<PAGE>
EXHIBIT A Page 62 of 64
UNITS
Subject to the following
drilling and production units, created by
Department of Conservation or Office of
Conservation Orders and/or Voluntary Units:
1. By instrument dated January 4, 1960, recorded on April 20, 1960, in
Conveyance Book 26, Folio 475, Entry No. 20109, executed by and between
Texaco, Inc., Pan American Petroleum Corporation et al a 40 acre production
unit was created for the Robulus #1 Zone (being that zone encountered
between the electric log depths of 10262' through 10415' in the Texas
Company's (now Texaco Inc.) Rathborne #3 Well located in Section 18,
Township 14 South, Range 21 East, St. Charles Parish, Louisiana, inclusive
of the mineral leases covering the subject property. (10 acres).
2. A plat for Texaco Inc.'s Boutte Field, St. Charles Parish, Louisiana, Main
Pay R 100 SUA, created by Office of Conservation Order No. 605-H, dated
November 22, 1982, was registered on February 14, 1983, in Conveyance Book
293, Folio 763, Entry No. 93337 of the records of St. Charles Parish,
Louisiana.
3. A plat of Texaco Inc.'s Boutte Field, St. Charles Parish, Louisiana, ROB L
RA SUA, created by Office Of Conservation Order No. 605-L dated August 17,
1989, was registered on November 2, 1989, in Conveyance Book 417, Folio
166, Entry No. 147127, of the records of St. Charles Parish, Louisiana.
4. The Rathborne 2 Sand, Sand Unit A and Sand Unit B, created by Department of
Conservation Order No. 605-D dated November 22, 1965, effective November 1,
1965, Boutte Field, St. Charles Parish, Louisiana.
5. Supplemental to Office of Conservation Order No. 605-D, dated May 9, 1979,
effective May 9, 1979, Boutte Field, St. Charles Parish, Louisiana.
6. The Simoneaux 10 Sand, Sand Unit A, Sand Unit B, and Sand Unit C, created
by Department of Conservation Order No. 605-E, dated November 22, 1965,
effective November 1, 1965, Boutte Field, St. Charles Parish, Louisiana.
7. The Simoneaux 10 Sand, Sand Unit D, created by Department of Conservation
Order No. 605-E-1, dated November 15, 1966, effective December 1, 1966,
Boutte Field, St. Charles Parish, Louisiana.
8. Supplement to Department of Conservation Order No. 605-E-l, dated January
3, 1977, effective January 3, 1977, Boutte Field, St. Charles Parish,
Louisiana.
9. The 10000 Foot Sand, Reservoir A, Sand Unit A, created by Department of
Conservation Order No. 605-F, dated December 28, 1979, effective December
13, 1979, Boutte Field, St. Charles Parish, Louisiana.
Unit Operating Interest - .7588295 - Unit NRI - .5712350
10. Supplement to Department of Conservation Order No. 605-F, dated March 12,
1985, effective March 12, 1985, Boutte Field, St. Charles Parish,
Louisiana.
11. Supplement to Department of Conservation Order No. 605-F, dated December
28, 1989, effective December 28, 1989, Boutte Field, St. Charles Parish,
Louisiana.
<PAGE>
EXHIBIT A Page 63 of 64
12. The Simoneaux 4 Sand, Reservoir A, Sand Unit A, created by Department of
Conservation Order No. 605-G, dated February 13, 1981, effective October
21, 1980, Boutte Field, St. Charles Parish, Louisiana.
13. Supplement to Department of Conservation Order No. 605-G, dated December
28, 1989, effective December 28, 1989, Boutte Field, St. Charles Parish,
Louisiana.
14. The Main Pay Sand Reservoir 100, Sand Unit A, created by Department of
Conservation Order No. 605-H, dated November 22, 1982, effective September
29, 1982, Boutte Field, St. Charles Parish, Louisiana.
15. Supplement to Department of Conservation Order No. 605-H, dated January 6,
1986, effective January 6, 1986, Boutte Field, St. Charles Parish,
Louisiana.
16. Supplement to Department of Conservation Order No. 605-H, dated December
31, 1984, effective December 31, 1984, Boutte Field, St. Charles Parish,
Louisiana.
17. The Simoneaux 2C Sand, Reservoir A, Sand Unit B, created by Department of
Conservation Order No. 605-J, dated October 30, 1985, effective September
25, 1985, Boutte Field, St. Charles Parish, Louisiana.
18. The Simoneaux 2B Sand, Reservoir A, Sand Unit A, created by Department of
Conservation Order 605-K, dated February 18, 1987, effective February 10,
1987, Boutte Field, St. Charles Parish, Louisiana.
19. The ROB-L Sand, Reservoir A, Sand Unit A, created by Department of
Conservation Order 605-L, dated August 17, 1989, effective August 8, 1989,
Boutte Field, St. Charles Parish, Louisiana.
III.
SURFACE LEASE
BOUTTE FIELD
ST. CHARLES PARISH. LOUISIANA
That certain Surface Lease dated July 3, 1990, by Gerard M. Simoneaux et
al, as Lessors, to Texaco, Inc., as Lessee, of record in COB 428, Folio
127, Entry No. 152744 of the Conveyance Records of St. Charles Parish,
Louisiana.
<PAGE>
EXHIBIT A Page 64 of 64
(All recording references in this Exhibit "A" are to the records of Terrebonne
Parish, Louisiana.)
OIL GAS AND MINERAL LEASE
Oil, Gas and Mineral Lease dated December 20, 1985, by Tenneco Oil Company,
as Lessor, to Amoco Production Company, as Lessee, a declaration of which
being of record in Conveyance Book 1043, folio 660, Entry No. 774829, as
amended by Amendment to Lease dated March 30, 1987, of record in COB 1100,
folio 493, Entry No. 804214.
UNITS
Subject to the following drilling and production units created by the Department
of Conservation or the Office of Conservation Orders:
1. Tex W-10 RA SU A created by Order No. 898-G effective February 9,
1988, supplemented August 3, 1993 (COB 1379, folio 700, Entry No.
922193), Bayou Dularge Field, Terrebonne Parish, Louisiana.
2. Duval RB SU A created by Order No. 898-C-1 effective February 2, 1988,
Bayou Dularge Field, Terrebonne Parish, Louisiana.
3. Tex W-12A RA SU A, created by Order No. 898-H, effective February 9,
1988, Bayou Dularge Field, Terrebonne Parish, Louisiana.
II.
SURFACE RIGHTS
Boat Dockage Lease dated May 19, 1993, by Bayou Dularge Marina for a term
ending May 31, 1998.
<PAGE>
SCHEDULE OF RECORDING DATA
Act of Mortgage, Security Agreement, Assignment of Production and Financing
Statement dated November 21, 1996, executed by Forman Petroleum
Corporation, passed before Diane L. Bailey, Notary Public, recorded in the
following parishes in the State of Louisiana:
Parish Book Page/Folio Entry No.
- ------ ------------- ---------- ---------
Jefferson Mineral Lease 150 96-63909
Book 136
MOB 3775 163 96-63909
Lafourche COB 1290 226 806225
MOB 728 673 806225
St. Charles COB 515 663 206916
MOB 622 586 206916
Terrebonne COB 1532 987329
MOB 1081 987329
<PAGE>
Prepared by and upon EXHIBIT 4.3
recordation please return to:
Gray H. Muzzy
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002
ACT OF
FIRST AMENDMENT OF MORTGAGE,
SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND
FINANCING STATEMENT
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
Be it known that on this 23rd day of December, 1996, before me, the
undersigned Notary Public, duly commissioned and qualified in and for the
County and State aforesaid; and therein residing, and in the presence of
the undersigned competent witnesses, whose names are subscribed hereto,
personally came and appeared:
FORMAN PETROLEUM CORPORATION, a Louisiana corporation, whose Federal Tax
Identification Number is 72-0954774 with a mailing address of 650 Poydras
Street, Suite 2200, New Orleans, Louisiana, 70130-6101, appearing herein
through Marvin J. Gay, its duly authorized Treasurer, acting pursuant to
resolutions of the Board of Directors of such corporation, a certified
extract of which are attached hereto ("Mortgagor"), and
JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP, a Delaware
limited partnership, whose Federal Tax Identification Number is 76-0407964
with a mailing address of 1400 Smith Street, Houston, Texas 77002,
appearing herein through its general partner Enron Capital Management
Limited, a Delaware limited partnership, appearing herein through its
general partner Enron Capital Corp., a Delaware corporation, appearing
herein through Wynne M. Snoots, Jr., its duly authorized Agent and
Attorney-in-Fact ("Mortgagee"),
<PAGE>
which Mortgagor and Mortgagee through their respective representatives declared
unto me, Notary, as follows:
That, Mortgagor did execute that certain Act of Mortgage, Security
Agreement, Assignment of Production and Financing Statement dated November 21,
1996, before Diane Bailey, Notary Public, which was duly recorded in the Public
Records of Jefferson, LaFourche, St. Charles and Terrebonne Parishes, Louisiana,
as set forth on Exhibit "A" attached hereto and incorporated herein for all
purposes (the "Original Mortgage").
That, the Original Mortgage was given as security for certain indebtedness
described therein owed by Mortgagor to Mortgagee, including any and all future
indebtedness owed by Mortgagor to Mortgagee.
For and consideration of the benefits accruing to each of Mortgagor and
Mortgagee, Mortgagor and Mortgagee do hereby agree to amend and modify the
Original Mortgage effective for all purposes as of the date hereof, as follows:
1. Section 1.10. The words "Wynne N. Snoots, Jr." in Section 1.10 are
hereby amended to read "Wynne M. Snoots, Jr." and the words "the General Partner
of the Lender" in Section 1.10 are hereby amended to read "the general partner
of the general partner of the Lender".
2. Section 1.12. Section 1.12 is hereby amended in its entirety to read
as follows:
"1.12 "MORTGAGE" means this Act of Mortgage, Security Agreement,
Assignment of Production and Financing Statement, as amended by an Act of
First Amendment of Mortgage, Security Agreement, Assignment of Production
and Financing Statement dated effective as of December 16, 1996, as it may
be further amended, modified or supplemented from time to time."
3. Section 1.13. Section 1.13 is hereby amended in its entirety to read
as follows:
"1.13 "MORTGAGEE" means the Lender, its successors and assigns, and
any legal owner, holder, assignee or pledgee of the Note."
4. Section 1.14. Section 1.14 is hereby amended in its entirety to read
as follows:
"1.14 "NOTE" means that certain Promissory Note of Mortgagor payable
to the order of the Lender in the original principal amount of
$10,000,000.00, dated as of December 16, 1996, and all modifications,
amendments, renewals and extensions thereof."
-2-
<PAGE>
5. Section 1.15. Clauses (d), (e) and (f) of Section 1.15 are hereby
amended in their entirety to read as follows:
"(d) all sums advanced or costs or expenses incurred by Mortgagee, which
are made or incurred pursuant to, or allowed by, the terms of this
instrument or any other instrument executed in connection with the Note,
including but not limited, that certain Loan Agreement by and between
Mortgagor and Mortgagee dated effective as of the effective date of the
Note, including but not limited to, all legal fees and all engineering and
other costs incurred in connection with Mortgagee's due diligence, plus
interest thereon from the date of the advance until reimbursement of
Mortgagee charged at the Default Rate; (e) all renewals, extensions,
amendments and substitutions of the above whether or not Mortgagor executes
any renewal or extension agreement, any amounts due and payable by
Mortgagor to ECT Securities Corp. and/or its successors and assigns,
including Mortgagee; and (f) any amounts due and payable by Mortgagor under
any Price Protection Agreement approved by Mortgagee, including any costs
and expenses incurred by any counter-party in connection therewith."
6. Section 1.21. A new Section 1.21 is hereby added to the Mortgage as
follows:
"1.21 "PRICE PROTECTION AGREEMENTS" means each price swap agreement,
option agreement or other agreement entered into by and between Mortgagor
and Mortgagee or a counter-party acceptable to Mortgagee pursuant to which
the price of Hydrocarbons is hedged by the Mortgagor."
7. Section 3.2(c). Section 3.2(c) is amended in its entirety to read as
follows:
"(c) Third, to the payment of any then due and owing principal
constituting part of the Obligations and any other Obligations then due and
payable; and"
8. Section 4.4(m). Section 4.4(m) is amended by deleting the words ",
including reasonable expenditures necessary for completion of the current
workover operations in the LaFourche Parish School Board No. 1 Well", and
adding the following new sentence to the end thereof:
"Notwithstanding the foregoing, in the event that the Mortgagor's
EBITDA for any calendar month following the date hereof, as evidenced by
the monthly Pro Forma Cash Flow Statements to be provided by the Mortgagor
to the Mortgagee in accordance with the Loan Agreement, should ever exceed
$1,000,000, the Mortgagor may use up to $120,000 of such EBITDA for such
month in excess of said $1,000,000, as partial payment of any indebtedness
of the Mortgagor to McLain J. Forman, so long as McLain J. Forman has any
outstanding indebtedness to Whitney National Bank; provided that the
Mortgagor may not
-3-
<PAGE>
use such cash for repayment of indebtedness to McLain J. Forman if, and so
long as, a Default (as defined in that certain Loan Agreement by and
between Mortgagor and Mortgagee dated of even date with the Note (the "Loan
Agreement")) is outstanding and not cured. For purposes of the foregoing,
"EBITDA" shall be calculated in a manner consistent with the methodologies
reflected in the Pro Forma Cash Flow Report attached to the Loan Agreement,
including sources of income and all cost and expense items included in the
Pro Forma Cash Flow Report attached to the Loan Agreement".
9. Section 5.1(a). Subsection 5.1(a) is hereby amended in its entirety
to read as follows:
"(a) Mortgagor or any endorser, guarantor, surety, accommodation
party, or other person liable upon or for payment of any of the Obligations
secured hereby fails to pay when due any of the Obligations secured hereby
or to perform punctually any other obligation, covenant, term or provision
contained in or referred to in this instrument or any other instrument
executed in connection herewith, including without limitation, the
occurrence of an "Event of Default" as defined in that certain Loan
Agreement by and between Mortgagor and Mortgagee dated of even date with
the Note."
10. Section 5.2. Section 5.2 is hereby amended by deleting the following
words from the first sentence thereof:
"In addition to the right and privilege to demand payment of Note at any
time, as set forth therein, and without limiting the Mortgagee's rights and
privileges thereunder."
11. Section 6.12. The words "c/o Enron Corp." and "Attn: Wynne N. Snoots"
in the addresses for Mortgagee in Section 6.12 are hereby amended to read "c/o
Enron Capital Corp." and "Attn: Wynne M. Snoots, Jr.", respectively.
12. Ratification and Reaffirmation. Mortgagor does hereby ratify the
Mortgage as being in full force and effect, does hereby covenant and agree that,
except as set forth herein the Mortgage has not been amended or modified, and
does hereby reaffirm each and every representation and warranty set forth
therein as being true and correct as of the date hereof. Mortgagor does hereby
affirm unto Mortgagee that Mortgagor, as of the date hereof, has timely
performed each and every covenant and obligation under the Mortgage, and that no
Event of Default as defined therein, has occurred. This amendment shall be
effective for all purposes as of December 16, 1996.
Thus done and passed in my office in Houston, Harris County, Texas, this
23rd day of December, 1996, in the presence of the undersigned competent
witnesses who hereunto sign their names with the Mortgagor, Mortgagee and me,
Notary, after due reading of the whole.
-4-
<PAGE>
MORTGAGOR
Witnesses to all signatures: FORMAN PETROLEUM CORPORATION
/s/ Gray H. Muzzy
-----------------------------
Name: Gray H. Muzzy By: /s/ McLain J. Forman
------------------------ -------------------------------
McLain J. Forman
/s/ Harold C. Block President
-----------------------------
Name: Harold C. Block
-------------------------
MORTGAGEE:
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: ENRON CAPITAL MANAGEMENT,
LIMITED PARTNERSHIP, a Delaware
limited partnership, its general
partner
By: ENRON CAPITAL CORP., a
Delaware corporation, its general
partner
By: /s/ Wynne M. Snoots, Jr.
---------------------------------
Wynne M. Snoots, Jr.
Agent and Attorney-in-Fact
Stamp:
Judy M. Sullivan /s/ Judy M. Sullivan
Notary Public - State of Texas ---------------------------
My Commission Notary Public
Expires 7/3/99
(Signature Page to Act of First Amendment of Mortgage, Security Agreement,
Assignment of Production and Financing Statement)
-5-
<PAGE>
CERTIFICATE OF CORPORATE RESOLUTIONS
The undersigned, Secretary of FORMAN PETROLEUM CORPORATION, a Louisiana
corporation ("Company"), does hereby certify to JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP ("Lender") as follows:
1. The following is a true and correct copy of the resolutions duly
adopted by the Board of Directors of the Company, and such resolutions have
not been altered, amended, rescinded or repealed and are now in full force
and effect:
WHEREAS, the Company did execute a Promissory Note in the
original principal amount of $10,000,000.00, payable to the order of
Lender (the "Note"); and
NOW THEREFORE, the Board of Directors of the Company does hereby
ratify and reaffirm the execution and delivery of the Note to the
Lender and does hereby ratify and reaffirm all covenants and
obligations of the Company thereunder; and all liens and other
collateral heretofore given as security for the payment of the Note
(as hereinafter defined), including specifically, without limitation,
the Mortgage and the Financing Statements (each as hereinafter
defined); and
RESOLVED, that the Board of Directors of the Company does hereby
authorize the Company to execute and deliver to the Lender (i) an Act
of First Amendment of Mortgage, Security Agreement, Assignment of
Production and Financing Statement covering certain properties owned
by the Company as described therein (the "Mortgage"), (ii) Financing
Statements perfecting the security interests created by the Mortgage
(the "Financing Statements"), and (iii) the Note, all in substantially
the forms presented to this meeting, with such changes therein as the
person executing the same shall approve, such approval to be
conclusively evidenced by his execution thereof; and further
RESOLVED, that each officer of the Company is hereby authorized
to execute and deliver on behalf of the Company, in such forms as the
Lender may require any and all other agreements, instruments and
documents which may be requested or required by the Lender to take any
and all other action relating to or in connection with the Note, the
Mortgage, or the Financing Statements; and further
RESOLVED, that any and all documents, instruments and agreements
executed by an officer of the Company pursuant to these resolutions
may contain such terms and conditions as the person executing the same
shall approve, including confessions of judgment, pacts de non
alienando, waivers of appraisement, and
-6-
<PAGE>
waivers of notice and delay, such approval to be conclusively
evidenced by his execution thereof; and further
RESOLVED, that the signature of any officer of the Company on any
agreement, instrument or document is sufficient to bind the Company,
and no other signature shall be required; and further
RESOLVED, that the Lender may rely on these resolutions and these
resolutions shall remain in full force and effect until such time as
notice to the contrary is duly delivered to the Lender and receipted
for in writing by a Vice President of the Lender.
2. The person who, as an officer of the Company, executed the Note, the
Mortgage, and the Financing Statements that are referred to in such
resolutions was at the time of such signing and delivery, and is now duly
elected, qualified and acting as such officer and the signature appearing
on such Note, the Mortgage, and the Financing Statements, is the genuine
signature of such officer.
3. The Note, the Mortgage, and the Financing Statement actually executed
by the Company and delivered to the Lender are in substantially the forms
of the documents submitted to and approved by the Board of Directors of the
Company pursuant to such resolutions.
IN WITNESS HEREOF, I have hereunto signed my name and set the seal of the
Company this 23rd of December, 1996.
By: /s/ Susan N. Richards
---------------------------------
Susan N. Richards, Secretary
-7-
<PAGE>
NOTARIAL CERTIFICATION
I certify that a copy of these resolutions, certified by the Secretary of
Forman Petroleum Corporation is attached to an Act of First Amendment of
Mortgage, Security Agreement, Assignment of Production and Financing Statement
executed by said corporation before me, Notary this 23rd day of December 1996.
/s/ Thomas J. Say
----------------------------------
Notary Public
For the State of Louisiana
My commission expires at death
-8-
<PAGE>
SCHEDULE OF RECORDING DATA
Act of First Amendment of Mortgage, Security Agreement, Assignment of
Production and Financing Statement dated December 23, 1996, executed by
Forman Petroleum Corporation, passed before Judy M. Sullivan, Notary
Public, recorded in the following parishes in the State of Louisiana:
<TABLE>
<CAPTION>
Parish Book Page/Folio Entry No.
------ ------------- ---------- ---------
<S> <C> <C> <C>
Jefferson Mineral Lease
Book 136 166 96-68975
MOB 3778 580 96-68975
Lafourche COB 1293 358 807596
MOB 731 136 807596
St. Charles COB 516 659 207615
MOB 624 583 207615
Terrebonne COB 1538 989317
MOB 1085 989317
</TABLE>
-9-
<PAGE>
WHEN RECORDED MAIL TO: EXHIBIT 4.4
VINSON & ELKINS L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: Crystal L. Lightfield
ACT OF
SECOND AMENDMENT OF MORTGAGE,
SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND
FINANCING STATEMENT
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
Be it known that on this 3rd day of June, 1997, before me, the undersigned
Notary Public, duly commissioned and qualified in and for the County and State
aforesaid; and therein residing, and in the presence of the undersigned
competent witnesses, whose names are subscribed hereto, personally came and
appeared:
FORMAN PETROLEUM CORPORATION, a Louisiana corporation, whose Federal Tax
Identification Number is 72-0954774 with a mailing address of 650 Poydras
Street, Suite 2200, New Orleans, Louisiana, 70130-6101, appearing herein
through McLain J. Forman, its duly authorized President, acting pursuant to
resolutions of the Board of Directors of such corporation, a certified
extract of which are attached hereto ("Mortgagor"), and
U.S. TRUST COMPANY OF TEXAS, N.A., as Trustee under and pursuant to the
Indenture (hereinafter defined), whose Federal Tax Identification Number is
75-23537458 with a mailing address of 2001 Ross Avenue, Suite 2700, Dallas,
Texas 75201, Attention: Corporate Trust appearing herein through John C.
Stohlmann, its duly authorized Vice President ("Mortgagee"),
which Mortgagor and Mortgagee through their respective representative declared
unto me, Notary as follows:
That, Mortgagor executed that certain Act of Mortgage, Security Agreement,
Assignment of Production and Financing Statement dated November 21, 1996, passed
before Diane L. Bailey, Notary Public, in favor of Joint Energy Development
Investments Limited Partnership, a Delaware limited partnership ("JEDI"), filed
for record in the parishes in the State of Louisiana as set forth on Exhibit A
attached hereto, as amended by Act of First Amendment of Mortgage, Security
Agreement, Assignment of Production and Financing Statement dated effective as
of December 16,
<PAGE>
1996, passed before Judy M. Sullivan, Notary Public, recorded in the parishes in
the State of Louisiana as set forth on attached Exhibit A (as so amended, the
"Mortgage").
That, the Mortgage was executed to secure the indebtedness, obligations and
liabilities of Mortgagor to JEDI under that certain Loan Agreement dated
December 16, 1996, by and between Mortgagor and JEDI (the "Loan Agreement"),
including, without limitation, such indebtedness, obligations and liabilities
evidenced by that certain $10,000,000 promissory note dated December 16, 1996,
executed by Mortgagor and payable to the order of JEDI (the "Prior Note").
That, JEDI has assigned all of its rights, titles and interests in and to
the Prior Note and all liens and security interests securing the payment
thereof, including, without limitation, all liens and security interests created
by and existing under the Mortgage, to Mortgagee pursuant to that certain Act of
Assignment of Note and Liens dated of even date herewith filed for record
immediately prior to the recordation of this Act in each of the parishes in the
State of Louisiana referred to in attached Exhibit A.
That Mortgagor and Mortgagee have amended and restated the Prior Note
pursuant to the terms of that certain Indenture dated as of June 3, 1997 by and
between Mortgagor and Mortgagee (the "Indenture") and Mortgagee has further
extended additional credit to Mortgagor pursuant to the Indenture, all pursuant
to the terms and conditions of those certain senior secured notes (the "Notes")
issued pursuant to the Indenture in the maximum principal amount of $70,000,000,
which Notes, to the extent of $10,000,000.00 represent a renewal, extension, and
modification of the Prior Note, and otherwise represent additional debts and
obligations which constitute additional "Obligations" under the terms of the
Mortgage and which are secured by the Mortgage.
That Mortgagor and Mortgagee wish to amend the Mortgage to reflect the
foregoing and to confirm the continued validity, enforceability and priority of
the Mortgage as security for the Notes and obligations under the Indenture and
other Obligations from time to time outstanding.
That, pursuant to the Indenture, Mortgagor hereby desires to amend certain
definitions contained in the Mortgage.
Therefore, for and in consideration of the sum of Ten and No/100 Dollars
($10.00) and other good and valuable consideration in hand paid by Mortgagee to
Mortgagor, Mortgagor and Mortgagee hereby agree that the Mortgage is hereby
amended as follows:
1. Section 1.12. Section 1.12 is hereby amended in its entirety to read
as follows:
"1.12 'Mortgage' means this Act of Mortgage, Security Agreement,
Assignment of Production and Financing Statement, as amended by Act of
First Amendment of Mortgage, Security Agreement, Assignment of Production
and Financing Statement dated effective as of December 16, 1996, as further
amended by Act of Second Amendment of Mortgage, Security Agreement,
Assignment of Production and Financing Statement dated June 3, 1997, and as
it may be further amended, modified, supplemented and/or restated from time
to time."
-2-
<PAGE>
2. Section 1.13. The term "Mortgagee", as defined in Section 1.13, is
hereby amended to mean U.S. Trust Company of Texas, N.A., as Trustee under and
pursuant to the Indenture, its successors and assigns, and any legal owner,
holder, assignee or pledgee of all or any of the New Notes or other Obligations.
3. Section 1.14. Section 1.14 of the Mortgage is hereby amended in its
entirety to read as follows:
"1.14 'Note' means, collectively, those certain 13.5% Senior Secured
Notes due 2004, Series A, and 13.5% Senior Secured Notes due 2004, Series B
in the aggregate principal amount of $70,000,000, issued by Mortgagor
pursuant to that certain Indenture dated as of June 3, 1997, by and between
Mortgagor and Mortgagee (the "Indenture"), payable to the order of
Mortgagee and with final maturity on or before June 1, 2004, and any and
all renewals, extensions for any period, rearrangements, replacements,
reissues, substitutions, increases and/or modifications of any or all of
said Notes."
4. Section 1.15. Clauses (d), (e) and (f) of Section 1.15 are hereby
amended in their entirety to read as follows:
"(d) all sums advanced or costs or expenses incurred by Mortgagee,
which are made or incurred pursuant to, or allowed by, the terms of this
instrument, the Indenture, or any other instrument executed in connection
with the Note, including but not limited to, all legal fees and all
engineering and other costs incurred in connection with Mortgagee's due
diligence, plus interest thereon from the date of the advance until
reimbursement of Mortgagee charged at the Default Rate; (e) all renewals,
extensions, amendments and substitutions of the above whether or not
Mortgagor executes any renewal or extension agreement; and (f) any amounts
due and payable by Mortgagor under any Price Protection Agreement approved
by Mortgagee, including any costs and expenses incurred by any counter-
party in connection therewith."
5. Sections 2.1, 2.3 and 3.1(a). Sections 2.1, 2.2 and 3.1(a) are hereby
amended by deleting the phrase "and as collateral agent on behalf of ECT
Securities Corp."
6. Sections 4.3(g)(ii) and 4.4(h)(iv). Sections 4.3(g)(ii) and
4.4(h)(iv) are hereby deleted in their entirety.
7. Section 6.12. The name and address of Mortgagee contained in Section
6.12 is hereby amended to read as follows:
U.S. Trust Company of Texas, N.A.,
as Trustee
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust.
-3-
<PAGE>
8. No Paraph. Mortgagor and Mortgagee acknowledge that none of the Notes
or other evidences of Obligations have been presented to the undersigned Notary
Public to be paraphed for identification with the Mortgage as amended hereby.
9. Mortgage Renewed and Extended; Reaffirmation. None of the rights,
titles and interests existing or to exist under the Mortgage are hereby
released, diminished or impaired. The Mortgage is amended and is hereby renewed
and extended and Mortgagor reaffirms all covenants, representations and
warranties made in the Mortgage at the time the Mortgage was executed. Reference
is made herein to the Mortgage and the recording thereof for a description of
the property covered thereby and for all other purposes in connection herewith.
10. Counterparts. This Act is being executed in several counterparts, all
of which are identical. Each of such counterparts shall for all purposes be
deemed to be an original and all such counterparts shall together constitute but
one and the same instrument.
-4-
<PAGE>
Thus done and passed in my office in Houston, Harris County, Texas, this
3rd day of June, 1997, effective for all purposes as of June 3, 1997, in the
presence of the undersigned competent witnesses who hereunto sign their names
with the Mortgagor, Mortgagee and me, Notary, after due reading of the whole.
MORTGAGOR:
FORMAN PETROLEUM CORPORATION
Witnesses to all signatures: By: /s/ McLain J. Forman
------------------------------
Name: McLain J. Forman
/s/ Nina Bianchi Title: President
Name: Nina Bianchi
MORTGAGEE:
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
By: /s/ J. Stohlmann
------------------------------
Name: John C. Stohlmann
/s/ Brian R. Howard Title: Vice President
Name: Brian R. Howard
(Seal) /s/ LaNette Hopkins
---------------------------
Notary Public
-5-
<PAGE>
EXHIBIT A
TO
ACT OF SECOND AMENDMENT OF MORTGAGE,
SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND FINANCING STATEMENT
1. Act of Mortgage, Security Agreement, Assignment of Production and Financing
Statement dated November 21, 1996, executed by Forman Petroleum
Corporation, passed before Diane L. Bailey, Notary Public, recorded in the
following parishes in the State of Louisiana:
<TABLE>
<CAPTION>
Parish Book Page/Folio Entry No.
------ ------------- ---------- ---------
<S> <C> <C> <C>
Jefferson Mineral Lease 150 96-63909
Book 136
MOB 3775 163 96-63909
Lafourche COB 1290 226 806225
MOB 728 673 806225
St. Charles COB 515 663 206916
MOB 622 586 206916
Terrebonne COB 1532 987329
MOB 1081 987329
</TABLE>
2. Act of First Amendment of Mortgage, Security Agreement, Assignment of
Production and Financing Statement dated December 23, 1996, executed by
Forman Petroleum Corporation, passed before Judy M. Sullivan, Notary
Public, recorded in the following parishes in the State of Louisiana:
<TABLE>
<CAPTION>
Parish Book Page/Folio Entry No.
------ ------------- ---------- ---------
<S> <C> <C> <C>
Jefferson Mineral Lease
Book 136 166 96-68975
MOB 3778 580 96-68975
Lafourche COB 1293 358 807596
MOB 731 136 807596
St. Charles COB 516 659 207615
MOB 624 583 207615
Terrebonne COB 1538 989317
MOB 1085 989317
</TABLE>
-6-
<PAGE>
ASSISTANT SECRETARY'S CERTIFICATE OF
FORMAN PETROLEUM CORPORATION
The undersigned, being the Assistant Secretary of Forman Petroleum
Corporation, a Delaware corporation (the "Company"), hereby certifies that
attached hereto as Exhibit "A" is a true copy of resolutions duly adopted by the
Board of Directors of the Company, and such resolutions have not been revoked,
rescinded or modified and are now in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of the
3rd day of June, 1997.
/s/ Marvin J. Gay
---------------------------------------------------
Marvin J. Gay
Assistant Secretary of Forman Petroleum Corporation
-7-
<PAGE>
EXHIBIT "A"
RESOLUTIONS OF (EXTRACT)
THE BOARD OF DIRECTORS
OF
FORMAN PETROLEUM CORPORATION
--------------------
***********
(DEBT OFFERING)
RESOLVED, that the Company be, and it hereby is, authorized to offer, issue
and sell (the "Debt Offering") 70,000 units (the "Units"), each Unit
consisting of $1,000 aggregate principal amount of 13.5% Senior Secured
Notes due June 1, 2004, (collectively, the "Initial Notes") and one Common
Stock Purchase Warrant (collectively, the "Note Warrants") to purchase
0.41524 shares of the Company's common stock, no par value per share (the
"Common Stock"), at an initial exercise price of $1.00 per share, subject
to adjustment, to Jefferies & Company, Inc. (the "Initial Purchaser"),
pursuant to and on the terms and conditions set forth in the Offering
Circular dated May 30, 1997 (the "Final Debt Offering Circular") of the
Company with respect to the Debt Offering, and the Purchase Agreement dated
June 3, 1997 (the "Debt Purchase Agreement") among the Initial Purchaser
and the Company, setting forth the terms and conditions of the purchase and
sale of the Units pursuant to the Debt Offering; and it was
RESOLVED FURTHER, that the actions heretofore taken by the Chairman of the
Board and Chief Executive Officer of the Company to fix and determine the
price at which the Units to be issued by the Company pursuant to the Debt
Offering shall be sold be, and they hereby are, approved, ratified and
adopted in all respects; and it was
RESOLVED FURTHER, that the Chairman of the Board and Chief Executive
Officer; President; Vice President of Finance and Administration;
Secretary; Assistant Secretary or any other proper officer of the Company
(each, an "Authorized Officer") be, and each of them hereby is, authorized
and directed upon receipt of the consideration therefor, to deliver to the
Initial Purchaser the Units, in accordance with the terms and conditions of
the Final Debt Offering Circular and the Debt Purchase Agreement; and it
was
RESOLVED FURTHER, that the Final Debt Offering Circular be, and the same
hereby is, approved, adopted and ratified in all respects, with such
-8-
<PAGE>
changes thereto as any Authorized Officer may deem or have deemed necessary
or appropriate, and that all actions of the Company's officers heretofore
taken in connection with the Final Debt Offering Circular and the
Preliminary Offering Circular dated April 18, 1997 (the "Preliminary Debt
Offering Circular") including, without limitation, the preparation,
delivery and amendment thereof, be, and the same hereby are, approved,
adopted and ratified in all respects; and it was
RESOLVED FURTHER, that the Authorized Officers be, and each of them hereby
is, authorized and directed, in the name and on behalf of the Company, to
deliver copies of the Final Debt Offering Circular to the Initial Purchaser
prior to the closing under the Debt Offering (the "Closing"), with such
further additions, deletions or amendments thereto or thereof as any such
officer shall approve; and it was
RESOLVED FURTHER, that the preparation, execution, delivery and performance
by the Authorized Officers of the Debt Purchase Agreement be, and the same
hereby is, authorized, directed, approved, ratified and adopted in all
respects, with such further additions, deletions or amendments thereto or
thereof as such officer shall approve, his or her execution thereof
constituting conclusive evidence of such approval and his or her authority
so to do; and it was
RESOLVED FURTHER, that the form of Indenture dated as of June 3, 1997 (the
"Indenture") between the Company and U.S. Trust Company of Texas, N.A., as
trustee (the "Trustee"), be, and the same hereby is, approved in all
respects, and that the Authorized Officers be, and each of them hereby is,
authorized and directed in the name and on behalf of the Company, to
execute, deliver and perform the Indenture, with such further additions,
deletions or amendments thereto or thereof as such officer shall approve,
his or her execution thereof constituting conclusive evidence of such
approval and his or her authority so to do; and it was
RESOLVED FURTHER, that the form of Initial Notes, and the form of the 13.5%
Senior Notes due June 1, 2004, to be issued in exchange for the Initial
Notes (the "Exchange Notes" and, together with the Private Exchange Notes
(as defined in the Indenture) and the Initial Notes, the "Notes") to be
issued in connection with the Debt Offering and pursuant to the registered
exchange offer of the Exchange Notes for the Initial Notes as provided in
the Debt Registration Rights Agreement (as defined below), in substantially
the forms attached to the Indenture, be, and they each hereby are, approved
in all respects; that the Authorized Officers of the Company be, and each
of them hereby is, authorized and directed, in the name and on behalf of
the Company, to execute, acknowledge, issue and deliver up to $70,000,000
in aggregate principal amount of the Notes in accordance with the
provisions of the Debt Purchase Agreement,
-9-
<PAGE>
the Indenture and the Debt Registration Rights Agreement, with such further
additions, deletions or amendments thereto or thereof as such officer shall
approve, his or her execution thereof, constituting conclusive evidence of
such approval and his or her authority so to do; and that, upon such
issuance and delivery in accordance with the provisions of such agreements,
the Notes shall constitute valid and binding obligations of the Company and
shall be entitled to the benefits of the Indenture; and it was
RESOLVED FURTHER, that the form of Warrant Agreement dated as of June 3,
1997 (the "Debt Warrant Agreement") of the Company for the benefit of the
holders of the Warrant Certificates (as defined therein) relating to the
issuance of the Note Warrants to purchase an aggregate of 29,067 shares of
Common Stock, and warrants to purchase an additional 4,844 shares of
Common Stock (the "Additional Warrants") be, and the same hereby is,
approved in all respects, and that the Authorized Officers be, and each of
them hereby is, authorized and directed, in the name and on behalf of the
Corporation, to execute, deliver and perform the Debt Warrant Agreement
with such further additions, deletions or amendments thereto or thereof as
such officer shall approve, his or her execution thereof, constituting
conclusive evidence of such approval and his or her authority so to do; and
it was
RESOLVED FURTHER, that Note Warrants and Additional Warrants (collectively,
the "Debt Warrants"), in substantially the forms attached to the Debt
Warrant Agreement be, and they each hereby are, approved in all respects;
that the Corporation shall issue the Debt Warrants to the Initial Purchaser
pursuant to the terms and conditions set forth in the Debt Warrant
Agreement; and that the Authorized Officers be, and each of them hereby is,
authorized and directed, in the name and on behalf of the Corporation, to
execute, acknowledge, and deliver the Debt Warrants in accordance with the
provisions of the Debt Purchase Agreement and the Debt Warrant Agreement
with such further additions, deletions or amendments thereto or thereof as
such officer shall approve, his or her execution thereof, constituting
conclusive evidence of such approval and his or her authority so to do; and
that upon such issuance and delivery in accordance with the provisions of
such Agreements, the Debt Warrants shall constitute valid and binding
obligations of the Company, subject to the availability of a sufficient
amount of available shares of Common Stock to permit exercise of such
Warrants; and it was
RESOLVED FURTHER, that the form of Registration Rights Agreement dated as
of June 3, 1997 (the "Debt Registration Rights Agreement"), among the
Company and the Initial Purchaser relating to the Exchange Offer (as
hereinafter defined) and the "shelf" and "piggy back" registration of the
shares of Common Stock issuable upon exercise of the Debt Warrants be, and
the same hereby is, approved in all respects; and that the Authorized
Officers of the Company be, and each of them hereby is, authorized and
directed, in the name and on behalf
-10-
<PAGE>
of the Company, to execute, deliver and perform the Debt Registration
Rights Agreement, with such further additions, deletions or amendments
thereto or thereof as such officer shall approve, his or her execution
thereof constituting conclusive evidence of such approval and his or her
authority so to do; and it was
(MORTGAGE AND SECURITY AGREEMENTS)
RESOLVED FURTHER, that to continue and preserve the liens currently held by
JEDI for the benefit of the Indenture Trustee, the Company be, and it
hereby is, authorized (i) to purchase the JEDI note and related liens from
JEDI pursuant to an Assignment of Note and Lien, in a form acceptable to an
Authorized Officer, for a purchase price equal to the full amount of the
outstanding indebtedness under the JEDI note, (ii) to amend the mortgage
thereby acquired to increase the amount of the debt secured by the mortgage
to $70,000,000 for the benefit of the Indenture Trustee, and (iii) to file
such assignment and amendment of record for the benefit of the Indenture
Trustee; and
RESOLVED FURTHER, that the form of Mortgage, Security Agreement, Pledge and
Financing Statement dated as of June 3, 1997 (the "Security Agreement"),
among the Company and the Trustee, be, and the same hereby is, approved in
all respects; and that as soon as practicable after the Closing, the
Company be, and it hereby is, authorized to grant a first Lien and Security
Interest in the Collateral (as each such term is defined in the Security
Agreement) to secure payment of all of the Indebtedness of the Company
under the Notes and the Indenture; and that the Authorized Officers of the
Company be, and each of them hereby is, authorized and directed, in the
name and on behalf of the Company, to execute, deliver and perform the
Security Agreement, with such further additions, deletions or amendments
thereto or thereof as such officer shall approve, his or her execution
thereof constituting conclusive evidence of such approval and his or her
authority so to do.
WHEREAS, the Company did execute the 13.5% Senior Secured Notes due June 1,
2004, in the aggregate principal amount of $70,000,000.00, payable to the
order of the Indenture Trustee (the "Notes"); and
NOW THEREFORE, the Board of Directors of the Company does hereby ratify and
reaffirm the execution and delivery of the Notes to the Indenture Trustee
and does hereby ratify and reaffirm all covenants and obligations of
Company thereunder; and all liens and other collateral heretofore given as
security for the payment of the Notes (as hereinafter defined), including
specifically, without limitation, the Mortgage and the Financing Statements
(each as hereinafter defined); and
-11-
<PAGE>
RESOLVED, that the Board of Directors of the Company does hereby authorize
the Company to execute and deliver to the Indenture Trustee (i) Act of
Second Amendment of Mortgage, Security Agreement, Assignment of Production
and Financing Statement covering certain properties owned by the Company as
described therein (the "Mortgage"), (ii) Financing Statements perfecting
the security interests created by the Mortgage (the "Financing Statements")
and (iii) the Notes, with such changes therein as the person executing the
same shall approve, such approval to be conclusively evidenced by his
execution thereof; and further
RESOLVED, that each officer of the Company is hereby authorized to execute
and deliver on behalf of the Company, in such forms as the Indenture
Trustee may require any and all other agreements, instruments and documents
which may be requested or required by the Indenture Trustee to take any and
all other action relating to or in connection with the Notes, the Mortgage
or the Financing Statements; and further
RESOLVED, that any and all documents, instruments and agreements executed
by an officer of the Company pursuant to these resolutions may contain such
terms and conditions as the person executing the same shall approve,
including confessions of judgment, pacts de non alienando, waivers of
appraisement and waivers of notice and delay, such approval to be
conclusively evidenced by his execution thereof; and further
RESOLVED, that the signature of any officer of the Company on any
agreement, instrument or document is sufficient to bind the Company, and no
other signature shall be required; and further
RESOLVED, that the Indenture Trustee may rely on these resolutions and
these resolutions shall remain in full force and effect until such time as
notice to the contrary is duly delivered to the Indenture Trustee and
receipted for in writing by a vice president of the Indenture Trustee.
(RATIFICATION)
RESOLVED, that any action taken by any officer or director of the Company
prior to the date of this Meeting which would have been authorized by the
foregoing resolutions, except that such actions were taken prior to such
date, is hereby ratified, approved, and adopted.
(GENERAL IMPLEMENTING POWERS)
RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized and directed to negotiate, prepare, execute, deliver, file,
record, acknowledge, swear to, and affix the corporate seal to all such
agreements,
-12-
<PAGE>
documents, certificates, instruments and other papers, and take all such
action, and cause all such action to be taken, and do any and all of those
things as each such officer doing any such thing may deem necessary,
desirable, appropriate, expedient or proper to implement the foregoing
resolutions and to perform the terms and conditions of all such agreements
referred to herein, his or her execution thereof or action taken thereby to
be deemed conclusive evidence of his or her approval thereof and authority
therefor; and it was
RESOLVED FURTHER, that any person dealing with any of the Authorized
Officers in connection with transactions authorized by the foregoing
resolutions shall be conclusively entitled to rely upon the authority of
such Authorized Officer, and the execution and delivery of such document,
agreement or instrument by such Authorized Officer shall create a valid and
binding obligation of the Company, enforceable in accordance with its
terms; and it was
RESOLVED FURTHER, that the corporate seal of the Company may be affixed to
any instrument or document executed pursuant to the foregoing resolutions
in original or facsimile form; and it was
RESOLVED FURTHER, that the Secretary or an Assistant Secretary of the
Company be, and each of them hereby is, authorized and directed to certify
copies of these resolutions and/or minutes adopted by the Board of
Directors at the Meeting and to provide such certified copies to all such
parties as may be required or otherwise entitled to receive same.
-13-
<PAGE>
SCHEDULE OF RECORDING DATA
Act of Second Amendment of Mortgage, Security Agreement, Assignment of
Production and Financing Statement dated effective June 3, 1997, executed
by Forman Petroleum Corporation, passed before LaNette Hopkins, Notary
Public, recorded in the following parishes in the State of Louisiana:
<TABLE>
<CAPTION>
Parish Book Page/Folio Entry No.
------ ------------- ---------- ---------
<S> <C> <C> <C>
Jefferson Mineral Lease
Book 136 329 97-28809
MOB 3800 106 97-28809
Lafourche COB 1310 152 815670
MOB 744 609 815670
St. Charles COB 522 273 211524
MOB 636 73 211524
Terrebonne COB 1560 178 999453
MOB 1107 632 999453
</TABLE>
-14-
<PAGE>
EXHIBIT 4.5
ACT OF ASSIGNMENT OF NOTE AND LIENS
-----------------------------------
STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
BE IT KNOWN, that on the dates set forth below, before us, the undersigned
Notaries Public duly commissioned and qualified in and for the County of Harris,
State of Texas, therein residing, and in the presence of the witnesses whose
names are hereunto subscribed, personally came and appeared:
JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP, a Delaware
limited partnership, whose Federal Tax Identification Number is 76-0407964
with a mailing address of 1400 Smith Street, Houston, Texas, 77002,
appearing herein through its general partner Enron Capital Management
Limited Partnership, a Delaware limited partnership, appearing herein
through its general partner Enron Capital Corp., a Delaware corporation,
appearing herein through Wynne M. Snoots, Jr., its duly authorized Agent
and Attorney-in-Fact (hereinafter called "Assignor"), and
U.S. TRUST COMPANY OF TEXAS, N.A., as Trustee under and pursuant to the
Indenture (hereinafter defined), whose Federal Tax Identification Number is
75-23537458 with a mailing address of 2001 Ross Avenue, Suite 2700, Dallas,
Texas 75201, Attention: Corporate Trust appearing herein through John C.
Stohlmann, its duly authorized Vice President ("hereinafter called
Assignee"),
which Assignor and Assignee through their respective representative declared
unto us, Notaries as follows:
That, for and in consideration of the sum of Ten Dollars ($10.00) and other
good and valuable consideration to Assignor in hand paid by Assignee under and
pursuant to that certain Indenture dated as of June 3, 1997, by and between
Forman Petroleum Corporation and Assignee, the receipt and sufficiency of which
is hereby acknowledged, Assignor has GRANTED, TRANSFERRED and ASSIGNED, and does
by these presents GRANT, TRANSFER and ASSIGN, unto Assignee, without recourse on
or warranty or representation (except such warranty or representation as is
hereinafter expressly set forth) by Assignor, the following:
1. Promissory note (the "Note") dated December 16, 1996, in the original
principal amount of $10,000,000, executed by FORMAN PETROLEUM CORPORATION,
a Delaware corporation ("Forman"), payable to the order of sAssignor on or
before June 16, 1997;
<PAGE>
2. All of Assignor's liens, mortgages, security interests and assignments
held by Assignor as security for the payment of the Note and the
indebtedness evidenced thereby (collectively, the "Liens and Security
Interests"), including, without limitation, all such Liens and Security
Interests created by and existing and to exist under the following
(collectively, the "Mortgage"):
Act of Mortgage, Security Agreement, Assignment of Production and
Financing Statement dated November 21, 1996, executed by Forman,
passed before Diane L. Bailey, Notary Public, recorded in the
following parishes in the State of Louisiana:
<TABLE>
<CAPTION>
Parish Book Page/Folio Entry No.
------ ------------- ---------- ---------
<S> <C> <C> <C>
Jefferson Mineral Lease 151 96-63909
Book 136
MOB 3775 163 96-63909
Lafourche COB 1290 226 806225
MOB 728 673 806225
St. Charles COB 515 663 206916
MOB 622 586 206916
Terrebonne COB 1532 987329
MOB 1081 987329,
</TABLE>
as amended by Act of First Amendment of Mortgage, Security
Agreement, Assignment of Production and Financing Statement dated
December 23, 1996, executed by Forman, passed before Judy M.
Sullivan, Notary Public, recorded in the following parishes in
the State of Louisiana:
<TABLE>
<CAPTION>
Parish Book Page/Folio Entry No.
------ ------------- ---------- ---------
<S> <C> <C> <C>
Jefferson Mineral Lease
Book 136 166 96-68975
MOB 3778 580 96-68975
Lafourche COB 1293 358 807596
MOB 731 136 807596
St. Charles COB 516 659 207615
MOB 624 583 207615
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Terrebonne COB 1538 989317
MOB 1085 989317.
</TABLE>
EXCLUDING, however, to the extent (if any) that the following could be
considered part of the conveyed interests hereunder, any right, title, and
interest of the Assignor in (a) the Option to Purchase Overriding Royalty and
Royalty Interests dated as of December 16, 1996, by and between Endowment Energy
Partners, L.P. ("EEP"), Endowment Energy Co-Investment Partnership ("EECIP") and
the Assignor (b) the letter agreement dated as of even date herewith made by
Forman in favor of the Assignor providing for certain continuing
indemnifications provided by Forman to the Assignor, (c) price swap agreements,
option agreements or other agreements entered into by and between Forman and
Assignor pursuant to which the price of hydrocarbons is hedged, (d) the fee
letter agreement dated December 16, 1996 between ECT Securities Corp. and Forman
and (e) all intercreditor and subordination agreements by and among EEP, EECIP
and the Assignor.
Assignor acknowledges that, immediately prior to the execution of this act,
other obligations of Forman to Assignor and its affiliates were secured by the
Liens and Security Interests. In order that this act shall be effective to
transfer all Liens and Security Interests to Assignee upon Assignor's assignment
of the Note and the indebtedness evidenced thereby, and to insure that Assignor
and its affiliates retain no rights under the Liens and Security Interests as
security for any outstanding obligations or obligations of Forman to Assignor
that may be incurred in the future, Assignor hereby waives and disclaims all
rights to the Liens and Security Interests to the extent they may secure
obligations owed to Assignor other than the Note and indebtedness evidenced
thereby, and agrees that any obligations now or hereafter owed to Assignor or
its affiliates are and shall be unsecured by the Liens and Security Interests.
TO HAVE AND TO HOLD the Note, together and along with all Liens and
Security Interests unto Assignee, its successors and assigns forever. Assignor
hereby represents and warrants that (i) Assignor is the owner and holder of the
Note, and the indebtedness evidenced thereby, (ii) Assignor has not assigned,
mortgaged or hypothecated the Note, the indebtedness evidenced thereby or any of
the Liens or Security Interests in connection therewith to any other party,
(iii) Assignor has not amended the Mortgage (other than waivers of certain
representations, warranties and covenants relating to the transfers of stock of
Forman) or the Note, (iv) Assignor has not executed any instruments to release
any of the Liens and Security Interests under the Mortgage, (v) that
$10,000,000.00 principal amount is still owing and unpaid on the Note, (vi) that
the Note is not overdue, and (vii) that Assignor has the full right and
authority to transfer and convey the Note, indebtedness, Liens and Security
Interests and to execute this instrument. The Assignee acknowledges that,
except for the foregoing representations and warranties with respect to the Note
and Mortgage, it is relying on representations and warranties from Forman with
respect to all other documents, agreements and matters.
Assignor authorizes and directs the Clerks of Court of the Parishes of
Jefferson, Lafourche, St. Charles, and Terrebonne, Louisiana, to note in the
margin of the inscription of the Mortgage, recorded as aforesaid, this Act of
Assignment of Note and Liens, in order to give notice that from
-3-
<PAGE>
and after the date of execution hereof Assignee is the mortgagee of record under
the Mortgage within the meaning of La. R.S. 9:5556.
And further, in the presence of the undersigned Notary Public, the Assignor
did endorse the Note "Pay to the order of U.S. Trust Company of Texas, N.A., as
Trustee, without representation, warranty or recourse, except as and to the
extent expressly set forth in the Act of Assignment of Note and Liens dated
effective as of June 3, 1997 from Lender to U.S. Trust Company of Texas, N.A.,
as Trustee". Assignor acknowledges that in accordance with the provisions of
Louisiana Civil Code article 3325 the Notary Public has not been requested to
paraph the Note or any other evidence of indebtedness for identification with
the Mortgage.
-4-
<PAGE>
THUS DONE AND PASSED in my office in Houston, Harris County, Texas, on the
____ day of June, 1997, effective for all purposes as of June 3, 1997, in my
presence and in the presence of the undersigned competent witnesses who hereunto
signed with the Assignor and me, Notary, after due reading of the whole.
ASSIGNOR:
--------
WITNESSES: JOINT ENERGY DEVELOPMENT
- --------- INVESTMENTS LIMITED PARTNERSHIP,
a Delaware limited partnership
/s/ Nina Bianchi By: Enron Capital Management
Name: Nina Bianchi Limited Partnership, a Delaware limited
partnership, its general partner
/s/ Brian R. Howard By: Enron Capital Corp., a
Name: Brian R. Howard Delaware corporation, its
general partner
By: /s/ Wynne M. Snoots, Jr.
Name: Wynne M. Snoots, Jr.
Title: Agent and Attorney-in-Fact
/s/ Bobbi Wiley
------------------------
Notary Public
(stamp) Bobbi Wiley
Notary Public, State of Texas
My Commission Expires:
October 7, 1998
-5-
<PAGE>
THUS DONE AND PASSED in my office in Houston, Harris County, Texas, on the
____ day of June, 1997, effective for all purposes as of June 3, 1997, in my
presence and in the presence of the undersigned competent witnesses who hereunto
signed with the Assignee and me, Notary, after due reading of the whole.
ASSIGNEE:
--------
WITNESSES: U.S. TRUST COMPANY OF TEXAS, N.A.,
- --------- AS TRUSTEE
/s/ Nina Bianchi By: /s/ John C. Stohlmann
Name: Nina Bianchi Name: John C. Stohlmann
Title: Vice President
/s/ Brian R. Howard
Name: Brian R. Howard
/s/ LaNette Hopkins
------------------------
Notary Public
(stamp)
-6-
<PAGE>
SCHEDULE OF RECORDING DATA
Act of Assignment of Note and Liens dated effective June 3, 1997, executed
by Joint Energy Development Investments Limited Partnership and U.S. Trust
Company of Texas, N.A., recorded in the following parishes in the State of
Louisiana:
<TABLE>
<CAPTION>
Parish Book Page/Folio Entry No.
------ ------------- ---------- ---------
<S> <C> <C> <C>
Jefferson Mineral Lease 328 97-28808
Book 136
MOB 3800 104 97-28808
Lafourche COB 1310 146 815667
Miscellaneous
Book 81 623 815667
St. Charles COB 522 267 211523
MOB 636 67 211523
Terrebonne COB 1560 172 999452
MOB 1107 626 999452
</TABLE>
-7-
<PAGE>
EXHIBIT 5
July 16, 1997
Forman Petroleum Corporation
650 Poydras Street, Suite 2200
New Orleans, Louisiana 70130-6101
Dear Sirs:
We have acted as counsel for Forman Petroleum Corporation, a Louisiana
corporation (the "Company"), in connection with the proposed offer by the
Company to exchange (the "Exchange Offer") for all outstanding 13.5% Senior
Secured Notes Due 2004, Series A ($70 million principal amount outstanding) (the
"Old Notes") its 13.5% Senior Secured Notes Due 2004, Series B ($70 million
principal amount) (the "Exchange Notes"). The Old Notes have been, and the
Exchange Notes will be, issued pursuant to an Indenture dated as of June 3, 1997
(the "Indenture"), between the Company and U.S. Trust Company of Texas, N.A., as
trustee (the "Trustee").
In connection with such matters we have examined the Indenture, the form of
Registration Statement on Form S-4, to be filed by the Company with the
Securities and Exchange Commission, for the registration of the Exchange Notes
(the "Securities") under the Securities Act of 1933 (the Registration Statement,
as amended at the time it becomes effective, being referred to as the
"Registration Statement") and such corporate records of the Company,
certificates of public officials and such other documents as we have deemed
necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, subject to the qualifications hereinafter set
forth, and having regard for such legal considerations as we deem relevant, we
are of the opinion that the Securities proposed to be issued pursuant to the
Exchange Offer have been duly authorized for issuance and, subject to the
Registration Statement becoming effective under the Securities Act of 1933, and
to compliance with any applicable state securities laws, when issued, delivered
and sold in accordance with the Exchange Offer and the Indenture, will be valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms.
The opinions expressed herein are subject to the following: The
enforceability of the Securities may be limited or affected by (i) bankruptcy,
insolvency, reorganization, moratorium, liquidation, rearrangement, fraudulent
transfer, fraudulent conveyance and other similar laws
<PAGE>
(including court decisions) now or hereafter in effect and affecting the rights
and remedies of creditors generally or providing for the relief of debtors, (ii)
the refusal of a particular court to grant equitable remedies, including without
limitation specific performance and injunctive relief, and (iii) general
principles of equity (regardless of whether such remedies are sought in a
proceeding in equity or at law).
The opinions expressed herein are limited exclusively to the laws of the
State of New York and the General Corporation Law of the State of Louisiana.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to Vinson & Elkins L.L.P. under
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933 and the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
VINSON & ELKINS L.L.P.
<PAGE>
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
Dated as of June 3, 1997
by and between
FORMAN PETROLEUM CORPORATION
and
JEFFERIES & COMPANY, INC.
__________________________________
13.5% SENIOR SECURED NOTES DUE JUNE 1, 2004
and
70,000 COMMON STOCK PURCHASE WARRANTS
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions......................................................... 1
2. Exchange Offer...................................................... 5
3. Shelf Registration.................................................. 8
4. Additional Interest................................................. 9
5. Notes Registration Procedures....................................... 10
6. Registration Expenses............................................... 17
7. Indemnification..................................................... 18
8. Rules 144 and 144A.................................................. 20
9. Underwritten Registrations of Registrable Notes..................... 21
10. Registration of Registrable Securities.............................. 21
11. Miscellaneous....................................................... 24
(a) No Inconsistent Agreements...................................... 24
(b) Adjustments Affecting Registrable Securities or
Registrable Notes.............................................. 24
(c) Amendments and Waivers.......................................... 24
(d) Notices......................................................... 24
(e) Successors and Assigns.......................................... 25
(f) Counterparts.................................................... 26
(g) Headings........................................................ 26
(h) Governing Law................................................... 26
(i) Severability.................................................... 26
(j) Notes Held by the Issuer or Its Affiliates...................... 26
(k) Third Party Beneficiaries....................................... 26
(1) Entire Agreement................................................ 26
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of June 3, 1997, by and between Forman Petroleum Corporation, a
Louisiana corporation (the "Issuer"), and Jefferies & Company, Inc. (the
"Initial Purchaser").
This Agreement is entered into in connection with the Purchase Agreement,
dated June 3, 1997, by and between the Issuer and the Initial Purchaser (the
"Purchase Agreement") which provides for, among other things, the issuance and
sale to the Initial Purchaser of (i) 70,000 units (the "Units"), each consisting
of $1,000 principal amount of the Issuer's 13.5% Senior Secured Notes due June
1, 2004 (the "Notes"), and one warrant (collectively, along with the Additional
Warrants, the "Warrants") to purchase 0.41524 shares of common stock, no par
value, of the Issuer (the "Common Stock"). In order to induce the Initial
Purchaser to enter into the Purchase Agreement, the Issuer has agreed to provide
the registration rights set forth in this Agreement for the benefit of the
Initial Purchaser and its direct and indirect transferees and assigns. The
execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Units under the Purchase Agreement. The
Issuer is to deposit $9.45 million of the proceeds of the issuance of the Units
(representing the aggregate amount of interest due on the Notes through June 1,
1998) into a custodial account to be maintained by the Trustee (as defined in
Section 1 below).
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the term "day", unless otherwise expressly
provided, shall mean a calendar day and following terms shall have the following
meanings:
Additional Interest: See Section 4(a).
Additional Warrants: The 11,666 Warrants to purchase 4,844 shares of
Common Stock granted to the Initial Purchaser.
Advice: See the last paragraph of Section 5.
Agreement: See the first introductory paragraph to this Agreement.
Applicable Period: See Section 2(b).
Business Day: A day that is not a Saturday, a Sunday, or a day on which
banking institutions in New York, New York or Houston, Texas are required to be
closed.
Common Stock: See the second introductory paragraph to this Agreement.
-1-
<PAGE>
Effectiveness Date: The 120th day after the Issue Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Filing Date: The 60th day after the Issue Date.
Holder: Any registered holder of Registrable Notes or Registrable
Securities.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of the Issue Date, by and between the
Issuer and U.S. Trust Company of Texas, N.A., as trustee, pursuant to which the
Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchaser: See the first introductory paragraph to this Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
IPO Effectiveness Date: See Section 10(a).
Issue Date: The date on which the Units were sold to the Initial Purchaser
pursuant to the Purchase Agreement.
Issuer: See the first introductory paragraph to this Agreement.
NASD: National Association of Securities Dealers, Inc.
Notes: See the second introductory paragraph to this Agreement.
-2-
<PAGE>
Notes Prospectus: The prospectus included in any Notes Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Notes covered by such Notes Registration Statement,
and all other amendments and supplements to such prospectus, including post-
effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
Notes Registration Statement: Any registration statement of the Issuer
(and any then existing Subsidiary Guarantor) filed with the SEC under the
Securities Act, including, but not limited to, the Exchange Registration
Statement, that covers any of the Registrable Notes pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
Person: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Piggy-Back Registration: See Section 10(a).
Private Exchange: See Section 2(b).
Private Exchange Notes: See Section 2(b).
Prospectus: Any Notes Prospectus or Warrants Prospectus.
Purchase Agreement: See the second introductory paragraph to this
Agreement.
Records: See Section 5(o).
Registrable Notes: Each Note upon original issuance thereof and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance thereof and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until, in the case of any such Note, Exchange Note or
Private Exchange Note, as the case may be, the earliest to occur of (i) a Notes
Registration Statement (other than, with respect to any Exchange Note as to
which Section 2(c)(iv) hereof is applicable, the Exchange Registration
Statement) covering such Note, Exchange Note
-3-
<PAGE>
or Private Exchange Note, as the case may be, has been declared effective by the
SEC and such Note, Exchange Note or Private Exchange Note, as the case may be,
has been disposed of in accordance with such effective Notes Registration
Statement, (ii) such Note, Exchange Note or Private Exchange Note, as the case
may be, is sold in compliance with Rule 144, (iii) in the case of any Note, such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes which may be resold without restriction under state and federal
securities laws, or (iv) such Note, Exchange Note or Private Exchange Note, as
the case may be, ceases to be outstanding for purposes of the Indenture.
Registrable Securities: Any of (i) the Warrant Shares (whether or not the
related Warrants have been exercised) and (ii) any other securities issued or
issuable with respect to any Warrant Shares by way of stock dividends or stock
splits or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (i) a Warrants Registration Statement with respect to the offering of such
securities by the Holder thereof shall have been declared effective under the
Securities Act and such securities shall have been disposed of by such Holder
pursuant to such Warrants Registration Statement, (ii) such securities are
eligible for sale to the public pursuant to Rule 144(k) (or an similar provision
then in force, but not Rule 144A) or are all otherwise eligible for sale under
Rule 144 by such Holder in the current calendar quarter, (iii) such securities
shall have been otherwise transferred by such Holder and new certificates for
such securities not bearing a legend restricting further transfer shall have
been delivered by the Issuer or its transfer agent and subsequent disposition of
such securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (iv) such securities
shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Issuer's performance
of or compliance with Section 10 of this Agreement, including, without
limitation, all SEC and stock exchange or NASD registration and filing fees and
expenses, fees and expenses of compliance with securities or blue sky laws
(including, without limitation, reasonable fees and disbursements of counsel for
any underwriters in connection with blue sky qualifications of the Registrable
Securities), preparing, printing, filing, duplicating and distributing a
Warrants Registration Statement and the related Prospectus, the cost of printing
stock certificates, the cost and charges of any transfer agent, rating agency
fees, printing expenses, messenger, telephone and delivery expenses, fees and
disbursements of any counsel for the Issuer and all independent certified public
accountants, the fees and disbursements of underwriters customarily paid by
issuers or sellers or securities (but not including any underwriting discounts
or commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Selling Holders), fees and expenses of one counsel for
the Selling Holders and other reasonable out-of-pocket expenses of the Selling
Holders.
Registration Statement: Any Notes Registration Statement or Warrants
Registration Statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by
-4-
<PAGE>
the SEC providing for offers and sales of securities made in compliance
therewith resulting in offers and sales by subsequent holders that are not
affiliates of an issuer of such securities being free of the registration and
prospectus delivery requirements of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Selling Holder: A Holder who is selling Registrable Securities in
accordance with Section 10 hereof.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
Subsidiary Guarantor: Each subsidiary of the Issuer that guarantees the
obligations of the Issuer under the Notes and the Indenture.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent, the trustee
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).
Underwritten registration or underwritten offering: A registration in
which securities of one or more of the issuers are sold to an underwriter for
reoffering to the public.
Units: See the second introductory paragraph to this Agreement.
Warrants: See the second introductory paragraph to this Agreement.
Warrants Prospectus: The prospectus included in any Warrants Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or
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supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such Warrants
Registration Statement, and all other amendments and supplements to such
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
Warrants Registration Statement: Any registration statement of the Issuer
that covers any Warrant Shares filed with the SEC under the Securities Act
(except for a Warrant Shares Shelf Registration Statement), including the
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Warrant Shares: The shares of Common Stock issuable upon exercise of the
Warrants.
Warrant Shares Shelf Registration Statement: See Section 10(a).
2. Exchange Offer
(a) The Issuer agrees to use its best efforts to file (and to cause any
then existing Subsidiary Guarantor to file) with the SEC no later than the
Filing Date, an offer to exchange (the "Exchange Offer") any and all of the
Registrable Notes (other than the Private Exchange Notes, if any) for a like
aggregate principal amount of debt securities of the Issuer, guaranteed by each
such Subsidiary Guarantor and secured by the same collateral as the Notes, which
are identical in all material respects to the Notes (the "Exchange Notes") (and
which are entitled to the benefits of the Indenture or a trust indenture which
is identical in all material respects to the Indenture (other than such changes
to the Indenture or any such identical trust indenture as are necessary to
comply with any requirements of the SEC to effect or maintain the qualification
thereof under the TIA) and which, in either case, has been qualified under the
TIA), except that the Exchange Notes shall have been registered pursuant to an
effective Registration Statement under the Securities Act, shall not provide for
Additional Interest and shall contain no restrictive legend thereon. The
Exchange Offer shall be registered under the Securities Act on the appropriate
form (the "Exchange Registration Statement") and shall comply with all
applicable tender offer rules and regulations under the Exchange Act. The
Issuer agrees to use its best efforts to (x) cause the Exchange Registration
Statement to be declared effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for at least 30 calendar
days (or longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 45th day following the date on which the Exchange Registration
Statement is declared effective. If after such Exchange Registration Statement
is initially declared effective by the SEC, the Exchange Offer or the issuance
of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Exchange Registration Statement shall be deemed not to
have become effective for purposes of this Agreement. Each Holder who
participates in the Exchange Offer will be required to represent (i) that any
Exchange
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Notes received by it will be acquired in the ordinary course of its business,
(ii) that at the time of the commencement of the Exchange Offer such Holder has
not entered into any arrangement or understanding with any Person to participate
in the distribution (within the meaning of the Securities Act) of the Exchange
Notes in violation of the provisions of the Securities Act, (iii) that such
Holder is not an affiliate of any of the Issuers within the meaning of the
Securities Act, (iv) if such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the distribution of the Notes and
(v) if such Holder is a Participating Broker-Dealer (as hereinafter defined),
that it will receive Exchange Notes for its own account in exchange for Notes
that were acquired as a result of market-making or other trading activity, and
that it will deliver a prospectus in connection with any resale of the Exchange
Notes. Upon consummation of the Exchange Offer in accordance with this Section
2, the provisions of this Agreement shall continue to apply, mutatis mutandis,
solely with respect to Registrable Notes that are Private Exchange Notes and
Exchange Notes held by Participating Broker-Dealers, and the Issuers shall have
no further obligation to register Registrable Notes (other than Private Exchange
Notes and other than in respect of any Exchange Notes as to which clause
2(c)(iv) hereof applies) pursuant to Section 3 of this Agreement.
(b) The Issuer shall include within the Notes Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution",
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer for its own account
in exchange for Notes that were acquired by it as a result of market-making or
other trading activity (a "Participating Broker-Dealer"), whether such positions
or policies have been publicly disseminated by the staff of the SEC or such
positions or policies, in the judgment of the Initial Purchaser, represent the
prevailing views of the staff of the SEC. Such "Plan of Distribution" section
shall also allow, to the extent permitted by applicable policies and regulations
of the SEC, the use of the Notes Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including, to the extent
so permitted, all Participating Broker-Dealers, and include a statement
describing the manner in which Participating Broker-Dealers may resell the
Exchange Notes.
The Issuer shall use its best efforts to keep the Exchange Registration
Statement effective and to amend and supplement the Notes Prospectus contained
therein, in order to permit such Notes Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such Persons must comply with such requirements
in order to resell the Exchange Notes (the "Applicable Period").
If, upon consummation of the Exchange Offer, the Initial Purchaser holds
any Notes acquired by it and having the status of an unsold allotment in the
initial distribution, the Issuer (upon the request of such Initial Purchaser)
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to the Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by the Initial Purchaser, a like principal amount
of debt securities of the Issuer, guaranteed by any then existing Subsidiary
Guarantor and secured by the same
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collateral as the Exchange Notes, that are identical in all material respects to
the Exchange Notes except for the existence of restrictions on transfer thereof
under the Securities Act and securities laws of the several states of the U.S.
(the "Private Exchange Notes") (and which are issued pursuant to the same
indenture as the Exchange Notes); provided, however, the Issuer shall not be
required to effect such exchange if, in the written opinion of counsel for the
Issuer (a copy of which shall be delivered to the Initial Purchaser and any
Holder affected thereby), such exchange cannot be effected without registration
under the Securities Act. The Private Exchange Notes shall bear the same CUSIP
number as the Exchange Notes, if permissible.
Interest on the Exchange Notes and the Private Exchange Notes will accrue
from (A) the later of (i) the last interest payment date on which interest was
paid on the Notes surrendered in exchange therefor or (ii) if the Notes are
surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest will be paid, the date of such interest payment date or (B)
if no interest has been paid on the Notes, from the Issue Date.
In connection with the Exchange Offer, the Issuer shall:
(1) mail to each Holder a copy of the Notes Prospectus forming part of
the Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer, which
may be the Trustee or an affiliate thereof;
(3) permit Holders to withdraw tendered Registrable Notes at any time
prior to the close of business on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws.
As soon as practicable after the close of the Exchange Offer or the Private
Exchange, as the case may be, the Issuer shall:
(1) accept for exchange all Registrable Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer or the Private Exchange,
as the case may be;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder tendering such Registrable Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the Notes of such
Holder so accepted for exchange.
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The Exchange Offer and the Private Exchange shall be subject to only the
following conditions: (i) the Exchange Offer or the Private Exchange, as the
case may be, does not violate applicable law or any applicable interpretation of
the staff of the SEC, (ii) no action or proceeding is instituted or threatened
in any court or by any governmental agency which might materially impair the
ability of the Issuer to proceed with the Exchange Offer or the Private Exchange
and (iii) all governmental approvals have been obtained, which approvals the
Issuer deem necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes may be issued under (i)
the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event will provide that the Exchange Notes will not
be subject to the transfer restrictions set forth in the Indenture and that the
Exchange Notes, the Private Exchange Notes and the Notes, if any, will be deemed
one class of security (subject to the provisions of the Indenture) and entitled
to participate in all the security granted by the Issuer pursuant to the
Security Documents and in any Subsidiary Guarantee (as such terms are defined in
the Indenture) on an equal and ratable basis.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuer (and any then existing
Subsidiary Guarantor) are not permitted to effect an Exchange Offer, (ii) the
Exchange Offer is not consummated within 180 days of the Issue Date, (iii) any
holder of Private Exchange Notes so requests in writing to the Issuer or (iv) in
the case of any Holder that participates in the Exchange Offer, such Holder does
not receive Exchange Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such Holder as an affiliate of the Issuer within the meaning of
the Securities Act) and so notifies the Issuer within 60 days after such Holder
first becomes aware of such restrictions and providing a reasonable basis for
its conclusions, in the case of each of clauses (i)-(iv), then the Issuer (and
any then existing Subsidiary Guarantor) shall promptly deliver to the Holders
and the Trustee written notice thereof (the "Shelf Notice") and shall file a
Shelf Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Shelf Registration. The Issuer shall as promptly as reasonably
practicable use its best efforts to file (and shall cause any then existing
Subsidiary Guarantor to file) with the SEC a Notes Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Notes (the "Initial Shelf Registration"). If the Issuer (and
any then existing Subsidiary Guarantor) shall have not yet filed the Exchange
Registration Statement, the Issuer shall use its best efforts to file (and shall
cause any then existing Subsidiary Guarantor to file) with the SEC the Initial
Shelf Registration as promptly as practicable and shall use its best efforts to
cause such Initial Shelf Registration to be declared effective under the
Securities Act. Otherwise, the Issuer shall use its best efforts to file (and
shall cause any then existing Subsidiary Guarantor to file) with the SEC the
Initial Shelf Registration as promptly as practicable after delivery of the
Shelf Notice and shall use its best efforts to cause such Shelf
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Registration to be declared effective under the Securities Act as promptly as
practicable thereafter. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuer shall not
permit any securities other than the Registrable Notes to be included in any
Shelf Registration (as defined below). The Issuer shall use its best efforts to
keep the Initial Shelf Registration continuously effective under the Securities
Act until the second anniversary of the Issue Date (subject to extension
pursuant to the last paragraph of Section 5 hereof) or such earlier date as may
be then authorized under Rule 144(k) under the Securities Act (the
"Effectiveness Period"), or such shorter period ending when (i) all Registrable
Notes covered by the Initial Shelf Registration have been sold in the manner set
forth and as contemplated in the Initial Shelf Registration or are otherwise
eligible for sale under Rule 144 by the Holders without restriction by virtue of
the operation of the volume limitations set forth in such Rule or (ii) a
Subsequent Shelf Registration (as defined below) covering all of the Registrable
Notes has been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (other than because of the sale of all of
the securities registered thereunder), the Issuer shall use its best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within 45 days of such cessation of effectiveness amend
such Shelf Registration in a manner to obtain the withdrawal of the order
suspending the effectiveness thereof, or file (and cause any then existing
Subsidiary Guarantor to file) an additional "shelf" Notes Registration Statement
pursuant to Rule 415 covering all of the Registrable Notes (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed, the Issuer shall
use its best efforts to cause the Subsequent Shelf Registration to be declared
effective as soon as practicable after such filing and to keep such Subsequent
Shelf Registration continuously effective for a period equal to the number of
days in the Effectiveness Period less the aggregate number of days during which
the Initial Shelf Registration or any Subsequent Shelf Registrations was
previously continuously effective. As used herein the term "Shelf Registration"
means the Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuer shall promptly supplement and
amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Shelf Registration or by any underwriter of such Registrable
Notes.
4. Additional Interest
(a) The Issuer and the Initial Purchaser agree that the Holders of
Registrable Notes will suffer damages if the Issuer fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Issuer agrees to pay, as liquidated damages, additional interest on the
Notes ("Additional
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Interest") under the circumstances and to the extent set forth below (each of
which shall be given independent effect):
(i) if the Exchange Registration Statement has not been filed on or
prior to the Filing Date, then commencing on the day after the Filing Date,
Additional Interest shall accrue on the Notes over and above any stated
interest at a rate of 0.50% per annum of the principal amount of such Notes
for the first 90 days immediately following the Filing Date, such
Additional Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period;
(ii) if the Exchange Registration Statement is not declared effective
on or prior to the Effectiveness Date, then commencing on the day after the
Effectiveness Date, Additional Interest shall accrue on the Notes over and
above any stated interest at a rate of 0.50% per annum of the principal
amount of such Notes for the first 90 days immediately following the day
after the Effectiveness Date, such Additional Interest rate increasing by
an additional 0.50% per annum at the beginning of each subsequent 90-day
period; and
(iii) if (A) the Issuer (and any then existing Subsidiary Guarantor)
has not exchanged Exchange Notes for all Notes validly tendered in
accordance with the terms of the Exchange Offer on or prior to the 45th day
after the date on which the Exchange Registration Statement is declared
effective or (B) the Initial Shelf Registration, if required to be filed
hereunder, is not declared effective on or prior to the Effectiveness Date
or (C) if applicable, a Shelf Registration has been declared effective and
such Shelf Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the Notes
over and above any stated interest at a rate of 0.50% per annum of the
principal amount of such Notes for the first 90 days commencing on the (x)
60th day after the date on which the Exchange Registration Statement is
declared effective, in the case of (A) or (B) above, or (y) the day such
Shelf Registration ceases to be effective in the case of (C) above, such
Additional Interest rate increasing by an additional 0.50% per annum at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 2.0% per annum; and provided further, that (1)
upon the filing of the Exchange Registration Statement (in the case of (i)
above), (2) upon the effectiveness of the Exchange Registration Statement (in
the case of (ii) above), or (3) upon the exchange of Exchange Notes for all
Notes tendered (in the case of (iii)(A) above), upon the effectiveness of the
Initial Shelf Registration (in the case of (iii)(B) above) or upon the
effectiveness of a Shelf Registration which had ceased to remain effective (in
the case of (iii)(C) above), Additional Interest on the Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.
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(b) The Issuer shall notify the Trustee within one business day after each
and every date on which an event occurs in respect of which Additional Interest
is required to be paid (an "Event Date"). Any amounts of Additional Interest
due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable
semi-annually, on the dates and in the manner provided in the Indenture and
whether or not any cash interest would then be payable on such date, commencing
with the first such semi-annual date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Notes, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest rate was applicable during such
semi-annual period (determined on the basis of a 360-day year comprised of
twelve 30-day months and, in the case of a partial month, the actual number of
days elapsed), and the denominator of which is 360.
5. Notes Registration Procedures
In connection with the filing of any Notes Registration Statement pursuant
to Section 2 or 3 hereof, the Issuer shall effect such registrations to permit
the sale of such securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Notes Registration Statement filed by the Issuer hereunder, the Issuer
shall:
(a) Prepare and file with the SEC prior to the Filing Date, the
Exchange Registration Statement or if the Exchange Registration Statement
is not filed because of the circumstances contemplated by Section 2(c)(i),
a Shelf Registration as prescribed by Section 2 or 3, and use its best
efforts to cause each such Notes Registration Statement to become effective
and remain effective as provided herein; provided that, if (1) a Shelf
Registration is filed pursuant to Section 3, or (2) a Notes Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2
is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, before filing any Notes Registration Statement or Notes Prospectus
or any amendments or supplements thereto, the Issuer shall, if requested,
furnish to and afford the Holders of the Registrable Notes to be registered
pursuant to such Shelf Registration or each such Participating Broker-
Dealer, as the case may be, covered by such Notes Registration Statement,
their counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed (in each case at least five business days prior to
such filing). The Issuer shall not file any such Notes Registration
Statement or Notes Prospectus or any amendments or supplements thereto if
the Holders of a majority in aggregate principal amount of the Registrable
Notes covered by such Notes Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case
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may be, as may be necessary to keep such Notes Registration Statement
continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Notes Prospectus to be
supplemented by any Prospectus supplement required by applicable law, and
as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; and comply
with the provisions of the Securities Act and the Exchange Act applicable
to it with respect to the disposition of all securities covered by such
Notes Registration Statement as so amended or in such Notes Prospectus as
so supplemented and with respect to the subsequent resale of any securities
being sold by a Participating Broker-Dealer covered by any such Prospectus.
The Issuer shall be deemed not to have used its best efforts to keep a
Notes Registration Statement effective during the Applicable Period if it
voluntarily takes any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking
to sell Exchange Notes not being able to sell such Registrable Notes or
such Exchange Notes during that period unless such action is required by
applicable law or unless the Issuer complies with this Agreement,
including, without limitation, the provisions of paragraph 5(k) hereof and
the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period from whom the Issuer has received written notice that
it will be a Participating Broker-Dealer in the Exchange Offer, notify the
selling Holders of Registrable Notes, or each such Participating Broker-
Dealer, as the case may be, their counsel and the managing underwriters, if
any, promptly (but in any event within two business days), (i) when a Notes
Prospectus or any Notes Prospectus supplement or post-effective amendment
has been filed, and, with respect to a Notes Registration Statement or any
post-effective amendment, when the same has become effective (including in
such notice a written statement that any Holder may, upon request, obtain,
without charge, one conformed copy of such Notes Registration Statement or
post-effective amendment including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Notes Registration Statement or of any order preventing
or suspending the use of any Notes Prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of
the Registrable Notes the representations and warranties of the Issuer
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) hereof cease to be true and correct, (iv) of
the receipt by the Issuer of any notification with respect to the
suspension of the qualification or exemption from qualification of a Notes
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event, the existence of any
condition or any information becoming known that makes any statement made
in such Notes Registration Statement or related Notes Prospectus or any
document
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incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires the making of any changes in, or
amendments or supplements to, such Notes Registration Statement, Notes
Prospectus or documents so that, in the case of the Notes Registration
Statement, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and that in the case of the
Notes Prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (vi) of any of the Issuer's
reasonable determination that a post-effective amendment to a Notes
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use its best efforts to prevent the issuance of any
order suspending the effectiveness of a Notes Registration Statement or of
any order preventing or suspending the use of a Notes Prospectus or
suspending the qualification (or exemption from qualification) of any of
the Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use its best efforts to obtain the withdrawal of any such order
at the earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering, (i) as promptly as practicable
incorporate in a prospectus supplement or post-effective amendment such
information or revisions to information therein relating to such
underwriters or selling Holders as the managing underwriters, if any, or
such Holders or their counsel reasonably request to be included or made
therein and (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the Issuer has
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Registrable Notes
and to each such Participating Broker-Dealer who so requests and to counsel
and each managing underwriter, if any, without charge, one conformed copy
of the Notes Registration Statement or Notes Registration Statements and
each post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits.
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(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Registrable Notes
or each such Participating Broker-Dealer, as the case may be, their
respective counsel, and the underwriters, if any, without charge, as many
copies of the Notes Prospectus and each amendment or supplement thereto and
any documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this Section 5,
the Issuer hereby consents to the use of such Notes Prospectus and each
amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may
be, and the underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered by,
or the sale by Participating Broker-Dealers of the Exchange Notes pursuant
to, such Notes Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Notes Prospectus contained in the Exchange Registration Statement by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Notes or Exchange Notes, as the case may be, for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters, if any, reasonably request in
writing; provided that where Exchange Notes held by Participating Broker-
Dealers or Registrable Notes are offered other than through an underwritten
offering, the Issuer agrees to cause its counsel to perform Blue Sky
investigations and file any registrations and qualifications required to be
filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Notes Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable
the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; provided that neither the Issuer nor any
Subsidiary Guarantor shall be required to (A) qualify generally to do
business in any jurisdiction where it is not then so qualified, (B) take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in
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a form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request.
(j) Use its best efforts to cause the Registrable Notes covered by any
Notes Registration Statement to be registered with or approved by such
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Notes, except as may be required solely as
a consequence of the nature of such selling Holder's business, in which
case the Issuer will cooperate in all reasonable respects with the filing
of such Notes Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare
and (subject to Section 5(a) hereof) file with the SEC, at the expense of
the Issuer, a supplement or post-effective amendment to the Notes
Registration Statement or a supplement to the related Notes Prospectus or
any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes being sold thereunder
or to the purchasers of the Exchange Notes to whom such Notes Prospectus
will be delivered by a Participating Broker-Dealer, any such Notes
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by a
Notes Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Notes Registration
Statement or the managing underwriter or underwriters, if any.
(m) Prior to the initial issuance of the Exchange Notes, (i) provide
the Trustee with one or more certificates for the Registrable Notes in a
form eligible for deposit with The Depository Trust Company and (ii)
provide a CUSIP number for the Exchange Notes.
(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations, warranties to, and covenants
with, the underwriters, with respect to the business of the Issuer and its
subsidiaries and the Notes
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Registration Statement, Notes Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in underwritten
offerings of debt securities similar to the Notes, and confirm the same in
writing if and when requested; (ii) obtain the opinion of counsel to the
Issuer and updates thereof in form and substance reasonably satisfactory to
the managing underwriter or underwriters, addressed to the underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings of debt securities similar to the Notes and such
other matters as may be reasonably requested by underwriters; (iii) obtain
copies of "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or underwriters from
the independent certified public accountants of the Issuer (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Issuer or of any business acquired by the Issuer for
which financial statements and financial data are, or are required to be,
included in the Notes Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Notes Registration
Statement and the managing underwriter or underwriters or agents) with
respect to all parties to be indemnified pursuant to said Section. The
above shall be done at each closing under such underwriting agreement, or
as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Notes Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, make available for inspection by any selling Holder
of such Registrable Notes being sold, or each such Participating Broker-
Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or
other agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records and pertinent corporate
documents of the Issuers and their respective subsidiaries (collectively,
the "Records") as shall be reasonably necessary to enable them to exercise
any applicable due diligence responsibilities, and cause the officers,
directors and employees of the Issuer and its subsidiaries to supply all
information reasonably requested by any such Inspector in connection with
such Notes Registration Statement. Such Records shall be kept confidential
by each Inspector and shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Notes Registration Statement, (ii) the
release of such Records is ordered pursuant to
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a subpoena or other order from a court of competent jurisdiction, (iii) the
information in such Records is public or has been made generally available
to the public other than as a result of a disclosure or failure to
safeguard by such Inspector or (iv) disclosure of such information is, in
the opinion of counsel for any Inspector, necessary or advisable in
connection with any action, claim, suit or proceeding, directly or
indirectly, involving or potentially involving such Inspector and arising
out of, based upon, related to, or involving this Agreement, or any
transactions contemplated hereby or arising hereunder. Each selling Holder
of such Registrable Notes and each such Participating Broker-Dealer will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Issuer unless
and until such is made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer
will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Issuer and allow the Issuer to undertake appropriate
action to prevent disclosure of the Records deemed confidential at their
expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Offer or
the first Notes Registration Statement relating to the Registrable Notes;
and in connection therewith, cooperate with the trustee under any such
indenture and the Holders of the Registrable Notes, to effect such changes
to such indenture as may be required for such indenture to be so qualified
in accordance with the terms of the TIA; and execute, and use its best
efforts to cause such trustee to execute, all documents as may be required
to effect such changes, and all other forms and documents required to be
filed with the SEC to enable such indenture to be so qualified in a timely
manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to the securityholders of the Issuer earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Issuer after the effective date of a Notes Registration Statement, which
statements shall cover said 12-month periods.
(r) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuer, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, that the Exchange
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Notes or the Private Exchange Notes, as the case may be, and the related
indenture constitute legally valid and binding obligations of the Issuer,
enforceable against the Issuer in accordance with their respective terms
subject to customary exceptions and qualifications; provided that the
Issuer need not comply with this Section 5(r) if all Exchange Notes and
Private Notes are issued pursuant to the Indenture.
(s) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuer (or to such
other Person as directed by the Issuer) in exchange for the Exchange Notes
or the Private Exchange Notes, as the case may be, the Issuer shall mark,
or caused to be marked, on such Registrable Notes that such Registrable
Notes are being canceled in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be; in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Notes Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the NASD.
(u) Use its best efforts to take all other steps reasonably necessary
to effect the registration of the Registrable Notes covered by a Notes
Registration Statement contemplated hereby.
The Issuer may require each seller of Registrable Notes as to which any
registration is being effected to furnish to the Issuer such information
regarding such seller and the distribution of such Registrable Notes as the
Issuer may, from time to time, reasonably request. The Issuer may exclude from
such registration the Registrable Notes of any seller who fails to furnish such
information within a reasonable time (which time in no event shall exceed 30
days) after receiving such request. Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to the Issuer all
information required to be disclosed in order to make the information previously
furnished to the Issuer by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuer of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by a Notes
Registration Statement and such Participating Broker-Dealer will forthwith
discontinue disposition of such Exchange Notes pursuant to any Notes Prospectus
and, in each case, forthwith discontinue dissemination of such Prospectus until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Notes Prospectus contemplated by Section 5(k), or until
it is advised in writing (the "Advice") by the Issuer that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto and, if so directed by the Issuer, such Holder or
Participating Broker-Dealer, as the case may be, will
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deliver to the Issuer all copies, other than permanent file copies, then in such
Holder's or Participating Broker-Dealer's possession, of the Notes Prospectus
covering such Registrable Securities current at the time of the receipt of such
notice. In the event the Issuer shall give any such notice, the Applicable
Period shall be extended by the number of days during such periods from and
including the date of the giving of such notice to and including the date when
each Participating Broker-Dealer shall have received (x) the copies of the
supplemented or amended Notes Prospectus contemplated by Section 5(k) or (y) the
Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Issuer (other than Registration Expenses, which are dealt
with exclusively in Section 10 hereof) shall be borne by the Issuer, whether or
not the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws as provided in Section 5(h)
hereof, (ii) printing expenses, including, without limitation, expenses of
printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, or by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Notes
Registration Statement or by any Participating Broker-Dealer during the
Applicable Period, as the case may be, (iii) reasonable messenger, telephone and
delivery expenses incurred in connection with the Exchange Registration
Statement and any Shelf Registration, (iv) fees and disbursements of counsel for
the Issuer and reasonable fees and disbursements of special counsel for the
sellers of Registrable Notes (subject to the provisions of Section 6(b)), (v)
fees and disbursements of all independent certified public accountants referred
to in Section 5(n)(iii) (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, (vii) Securities Act liability insurance,
if the Issuer desires such insurance, (viii) fees and expenses of all other
Persons retained by the Issuer, (ix) internal expenses of the Issuer (including,
without limitation, all salaries and expenses of officers and employees of the
Issuer performing legal or accounting duties), (x) the expense of any annual
audit, (xi) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange and (xii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuer shall
reimburse the Holders of the Registrable Notes being registered in such
registration for the fees and disbursements, not to exceed $25,000, of not more
than one counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Registrable Notes to
be included in such Shelf Registration and other out-of-pocket expenses of
Holders of Registrable Notes incurred in connection with the registration and
sale of Registrable Notes.
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7. Indemnification
(a) The Issuer agrees to indemnify and hold harmless each Holder of
Registrable Notes, each Holder of Registrable Securities and each Participating
Broker-Dealer selling Exchange Notes during the Applicable Period, the officers
and directors of each such Person, and each Person, if any, who controls any
such Person within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "Participant"), from and against any and
all losses, claims, damages and liabilities (including, without limitation, the
reasonable legal fees and other reasonable expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (as amended
or supplemented if the Issuer shall have furnished any amendments or supplements
thereto) or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if the Issuer shall have furnished any
amendments or supplements thereto) or caused by, arising out of or based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Issuer
in writing by or on behalf of such Participant expressly for use therein;
provided, however, that the Issuer will not be liable if such untrue statement
or omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus or any amendment or
supplement thereto and the Prospectus does not contain any other untrue
statement or omission or alleged untrue statement or omission of a material fact
that was the subject matter of the related proceeding and any such loss,
liability, claim, damage or expense suffered or incurred by the Participants
resulted from any action, claim or suit by any Person who purchased Registrable
Securities, Registrable Notes or Exchange Notes which are the subject thereof
from such Participant and it is established in the related proceeding that such
Participant failed to deliver or provide a copy of the Prospectus (as amended or
supplemented) to such Person with or prior to the confirmation of the sale of
such Registrable Securities, Registrable Notes or Exchange Notes sold to such
Person if required by applicable law, unless such failure to deliver or provide
a copy of the Prospectus (as amended or supplemented) was a result of
noncompliance by the Issuer with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify and
hold harmless the Issuer, its directors and officers and each Person who
controls the Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Issuer to each Participant, but only with reference to information
relating to such Participant furnished to the Issuer in writing by such
Participant expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto, or any preliminary prospectus. The liability
of any Participant under this paragraph shall in no event
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exceed the proceeds received by such Participant from sales of Registrable
Securities, Registrable Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any material rights or defenses by
the Indemnifying Person and the Indemnifying Person was not otherwise aware of
such action or claim). In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed in
writing to the contrary, (ii) the Indemnifying Person has failed within a
reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that, unless there is a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed promptly after
receipt of the invoice therefor as they are incurred. Any such separate firm for
the Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of the securities sold
by all such Participants and any such separate firm for the Issuer, its
directors, its officers and such control Persons of the Issuer shall be
designated in writing by the Issuer. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its prior written
consent, but if settled with such consent or if there is a final non-appealable
judgment for the plaintiff for which the Indemnified Person is entitled to
indemnification pursuant to this Agreement, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for reasonable fees and expenses actually
incurred by counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its prior written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement; provided, however,
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that the Indemnifying Person shall not be liable for any settlement effected
without its consent pursuant to this sentence if the Indemnifying Person is
contesting, in good faith, the request for reimbursement. No Indemnifying Person
shall, without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement (A) includes
an unconditional release of such indemnified Person, in form and substance
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of an
Indemnified Person.
(d) If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable (other than by reason of the exceptions
specifically provided therein) to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Registrable
Securities, Registrable Notes or Exchange Notes, as the case may be, or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other in connection with the statements or omissions (or alleged
statements or omissions) that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuers on the one hand or
by the Participants or such other Indemnified Person, as the case may be, on the
other, such Persons' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission and any other
equitable considerations appropriate under the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable
Securities, Registrable Notes or Exchange Notes, as the case may be, exceeds the
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amount of any damages that such Participant has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Issuer covenants that it will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder in a timely manner and, if at any time it is not
required to file such reports, it will, upon the request of any Holder of
Registrable Securities or Registrable Notes, make publicly available other
information so long as necessary to permit sales pursuant to Rule 144 and Rule
144A. The Issuer further covenants, for so long as any Registrable Securities
or Registrable Notes remain outstanding, to make available to any Holder or
beneficial owner thereof in connection with any sale thereof and any prospective
purchaser of such Registrable Securities or Registrable Notes from such Holder
or beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Securities or
Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations of Registrable Notes
If any of the Registrable Notes covered by any Shelf Registration is to be
sold in an underwritten offering, the investment banker or investment bankers
and manager or managers that will manage the offering will be selected by the
Holders of a majority in aggregate principal amount of such Registrable Notes
included in such offering and reasonably acceptable to the Issuer.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Registration of Registrable Securities
(a) Shelf Registration of Registrable Securities. The Company shall,
within 90 days after the effectiveness date (the "IPO Effectiveness Date") of a
registration statement filed with the Commission in connection with an initial
public offering of the Common Stock, use its best efforts to (a) file a shelf
registration statement covering resales of the Warrant Shares (the
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"Warrant Shares Shelf Registration Statement"), (b) cause the Warrant Shares
Shelf Registration Statement to be declared effective under Securities Act and
(c) keep effective the Warrant Shares Shelf Registration Statement until the
earlier of one year after the IPO Effectiveness Date (or such earlier date as
may be authorized under Rule 144(k), as it may be amended from time to time) or
such time as all of the applicable Warrant Shares have been sold thereunder or
are otherwise eligible for sale under Rule 144 under the Securities Act. The
Company shall, in the event that a Warrant Shares Shelf Registration Statement
is filed, provide to each Holder copies of the prospectus that is a part of the
Warrant Shares Shelf Registration Statement, notify each such Holder when the
Warrant Shares Shelf Registration Statement for the Warrant Shares has become
effective and take certain other actions as are required to permit unrestricted
resales of the Warrant Shares. The Company shall require a Holder that sells
Warrant Shares pursuant to the Warrant Shares Shelf Registration Statement to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, and any such Holder shall be bound by the provisions
of this Agreement that are applicable to such a Holder (including certain
indemnification rights and obligations). Each holder of the Warrant Shares shall
deliver information to be used in connection with the Warrant Shares Shelf
Registration Statement and provide comments on the Warrant Shares Shelf
Registration Statement within the time periods set forth in this Agreement in
order to have its Warrant Shares included in the Warrant Shares Shelf
Registration Statement.
(b) Piggy-Back Registration of Registrable Securities. If at any time
after the Issue Date the Issuer proposes to file a registration statement under
the Securities Act with respect to an offering by the Issuer for its own account
or for the account of any holders of its Common Stock (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC), (ii) a registration statement filed in connection with an
exchange offer or offering of securities solely to the Issuer's existing
securityholders or (iii) any Notes Registration Statement), then the Issuer
shall give written notice of such proposed filing to the Holders of Registrable
Securities as soon as practicable (but in no event fewer than 20 days before the
anticipated filing date), and such notice shall offer such Holders the
opportunity to register such number of Registrable Securities as each Holder may
request in writing within 20 days after receipt of such written notice from the
Issuer (which request shall specify the Registrable Securities intended to be
disposed of by such Selling Holder and the intended method of distribution
thereof) (a "Piggy-Back Registration"). The Issuer shall use its best efforts
to keep such Piggy-Back Registration continuously effective under the Securities
Act until at least the earlier of (A) an aggregate of 180 days after the
effective date thereof or (B) the consummation of the distribution by the
Holders of all of the Registrable Securities covered thereby. The Issuer shall
use its best efforts to cause the managing underwriter or underwriters, if any,
of such proposed offering to permit the Registrable Securities requested to be
included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Issuer or any other security holder
included therein and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof. Any
Selling Holder shall have the right to withdraw its request for inclusion of its
Registrable Securities in any Registration Statement pursuant to this Section 10
by giving written notice to the Issuer of its request to withdraw at any time
prior to the filing of such Registration Statement with the SEC.
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<PAGE>
The Issuer will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 10,
and each Holder of Registrable Securities shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of such Holder's Registrable Securities pursuant to a Piggy-Back Registration
effected pursuant to this Section 10.
No registration effected under this Section 10, and no failure to
effect a registration under this Section 10, shall relieve the Issuer of its
obligation to effect a registration upon the request of Holders of Registrable
Notes pursuant to Section 2 or 3 hereof, and no failure to effect a registration
under this Section 10 and to complete the sale of securities registered
thereunder in connection therewith shall relieve the Issuer of any other
obligation under this Agreement.
(c) Priority in Piggy-Back Registration. In a registration pursuant to
this Section 10 involving an underwritten offering, if the managing underwriter
or underwriters of such underwritten offering have informed, in writing, the
Issuer and the Selling Holders requesting inclusion in such offering that in
such underwriter's or underwriters' opinion the total number of securities which
the Issuer, the Selling Holders and any other Persons desiring to participate in
such registration intend to include in such offering is such as to adversely
affect the success of such offering, including the price at which such
securities can be sold, then the Issuer will be required to include in such
registration only the amount of securities which it is so advised should be
included in such registration. In such event: (x) in cases initially involving
the registration for sale of securities for the Issuer's own account, securities
shall be registered in such offering in the following order of priority: (i)
first, the securities which the Issuer proposes to register, (ii) second,
provided that no securities proposed to be registered by the Issuer have been
excluded from such registration, the securities which have been requested to be
included in such registration by the Selling Holders and by Persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments to
"piggy-back" registration rights of the Issuer entered into prior to, and in
existence on, the date hereof (pro rata based on the amount of securities sought
to be registered by such Persons), and (iii) third, provided that no securities
sought to be included by the Selling Holders or such Persons have been excluded
from such registration, the securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Issuer entered into subsequent to the date hereof (pro rata based on the amount
of securities sought to be registered by such Persons); and (y) in cases not
initially involving the registration for sale of securities for the Issuer's own
account, securities shall be registered in such offering in the following order
of priority: (i) first, the securities of any Person whose exercise of a
"demand" registration right pursuant to a contractual commitment of the Issuer
is the basis for the registration, (ii) second, provided that no securities of
any Person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Issuer is the basis for such registration have
been excluded from such registration, the securities requested to be included in
such registration by the Selling Holders pursuant to this Agreement and by
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments to "piggy-back" registration rights of the Issuer
entered into prior to, and in existence on, the date hereof (pro rata based on
the total amount of securities sought to be included by such Persons), (iii)
third, provided that no securities sought to be included by the Selling Holders
or such Persons have been excluded
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<PAGE>
from such registration, securities of other Persons entitled to exercise "piggy-
back" registration rights pursuant to contractual commitments entered into
subsequent to the date hereof (pro rata based on the amount of securities sought
to be registered by such Persons) and (iv) fourth, provided that no securities
sought to be included by other Persons entitled to exercise "piggy-back"
registration rights pursuant to such contractual commitments have been excluded
from such registration, any securities which the Issuer proposes to register.
(d) Suspension of Sales, etc. Subject to the next sentence of this
paragraph, the Issuer shall be entitled to postpone, for a reasonable period of
time, the effectiveness of, or suspend the rights of any Holders to make sales
pursuant to any Warrants Registration Statement otherwise required to be
prepared, filed and made and kept effective by it under this Section 10;
provided, however, that the duration of such postponement or suspension may not
exceed the earlier to occur of (A) 15 days after the cessation of the
circumstances described in the next sentence of this paragraph on which such
postponement or suspension is based or (B) 120 days after the date of the
determination of the Board of Directors referred to in the next sentence. Such
postponement or suspension may only be effected if the Board of Directors of the
Issuer determines in good faith that the effectiveness of, or sales pursuant to,
such Warrants Registration Statement would materially impede, delay or interfere
with any financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction involving the Issuer or any of
its affiliates or require disclosure of material information which the Issuer
has a bona fide business purpose for preserving as confidential. If the Issuer
shall so postpone the effectiveness of, or suspend the rights of any Holders to
make sales pursuant to, a Warrants Registration Statement, it shall, as promptly
as possible, notify any Selling Holders of such determination, and the Selling
Holders shall (y) have the right, in the case of a postponement of the
effectiveness of a Warrants Registration Statement, upon the affirmative vote of
Selling Holders of not less than a majority of the Registerable Securities to be
included in such Warrants Registration Statement, to withdraw the request for
registration by giving written notice to the Issuer within 10 days after receipt
of such notice or (z) in the case of a suspension of the right to make sales,
receive an extension of the registration period referred to in Section 10(a)
hereof equal to the number of days of the suspension.
(e) Exclusion of Registrable Securities. The Issuer shall not be required
by this Section 10 to include Registrable Securities in a Piggy-Back
Registration if (i) in the written opinion of counsel to the Issuer, addressed
to the Holders of Registrable Securities and delivered to them, the Holders of
such Registrable Securities seeking registration would be free to sell all such
Registrable Securities within the current calendar quarter without registration
under Rule 144, which opinion may be based in part upon the representation by
the Holders of such Registrable Securities seeking registration, which
representation shall not be unreasonably withheld, that each such Holder is not
an affiliate of the Issuer within the meaning of the Securities Act, and (ii)
all requirements under the Securities Act for effecting such sales are satisfied
at such time.
(f) Obligations of Selling Holders. The Issuer's obligations under this
Section 10 shall be subject to the obligations of the Selling Holders, which the
Selling Holders acknowledge, to
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<PAGE>
furnish all information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations to
permit the Issuer to comply with all applicable requirements of the SEC and to
obtain any acceleration of the effective date of a Warrants Registration
Statement.
(g) No Special Audit. The Issuer shall not be obligated to cause any
special audit to be undertaken in connection with any Piggy-Back Registration
unless such audit is requested by the underwriters with respect to such Piggy-
Back Registration.
11. Miscellaneous
(a) No Inconsistent Agreements. The Issuer has not entered, as of the
date hereof, and the Issuer shall not enter, after the date of this Agreement,
into any agreement with respect to any of its securities that is inconsistent
with the rights granted to the Holders of Registrable Securities or Registrable
Notes in this Agreement or otherwise conflicts with the provisions hereof. The
Issuer has not entered and will not enter into any agreement with respect to any
of its securities which will grant to any Person piggy-back rights with respect
to a Notes Registration Statement.
(b) Adjustments Affecting Registrable Securities or Registrable Notes.
The Issuer shall not, directly or indirectly, take any action with respect to
the Registrable Securities or Registrable Notes as a class that would adversely
affect the ability of the Holders to include such Registrable Securities or
Registrable Notes in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) in circumstances that would adversely affect any Holders of
Registrable Securities or Registrable Notes, the Holders of a majority of the
Registrable Securities or the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable Notes, as the case may be,
and (B) in circumstances that would adversely affect Participating Broker-
Dealers, the Participating Broker-Dealers holding not less than a majority in
aggregate principal amount of the Exchange Notes held by all Participating
Broker-Dealers; provided, however, that Section 7 and this Section 11(c) may not
be amended, modified or supplemented without the prior written consent of each
Holder and each Participating Broker-Dealer (including any Person who was a
Holder or Participating Broker-Dealer of Registrable Securities or Registrable
Notes or Exchange Notes, as the case may be, disposed of pursuant to any
Registration Statement). Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Notes whose securities are
being tendered pursuant to the Exchange Offer or sold pursuant to a Notes
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being tendered or being sold by such Holders pursuant to such
Notes Registration Statement.
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<PAGE>
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:
1. if to a Holder of Registrable Securities or Registrable Notes or
to any Participating Broker-Dealer, at the most current address of such
Holder or Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar of the Warrants or the Notes, with a copy in like
manner to the Initial Purchaser as follows:
JEFFERIES & COMPANY, INC.
Two Houston Center
909 Fannin St., Suite 3100
Houston, Texas 77010
Facsimile No.: (713) 650-8730
Attention: Robert W. Carington
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Facsimile No.: (713) 651-5246
Attention: Charles L. Strauss
2. if to the Initial Purchaser, at the address specified in Section
11(d)(1);
3. if to the Issuer, as follows:
Forman Petroleum Corporation
650 Poydras Street, Suite 2200
New Orleans, Louisiana 70130-6101
Facsimile No.: (504) 522-1796
Attention: President
with copies to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Facsimile No.: (713) 615-5437
Attention: Alan P. Baden
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<PAGE>
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the United States mail, postage prepaid, if mailed, one
business day after being timely delivered to a next-day air courier guaranteeing
overnight delivery; and when receipt is acknowledged by the addressee, if
telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto and
the Holders; provided, however, that the provisions of this Agreement relating
to registration rights shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless such successor or assign holds
Registrable Securities or Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE NON-
EXCLUSIVE JURISDICTION OF THE COMPETENT COURTS OF THE STATE OF NEW YORK SITTING
IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) Notes Held by the Issuer or Its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities or
Registrable Notes is required
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<PAGE>
hereunder, Registrable Securities or Registrable Notes, as the case may be, held
by the Issuer or its affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(k) Third Party Beneficiaries. Holders and Participating Broker-Dealers
are intended third party beneficiaries of this Agreement and this Agreement may
be enforced by such Persons.
(1) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Indenture and the Security Documents, is intended by the parties
as a final and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein and
any and all prior oral or written agreements, representations, or warranties,
contracts, understandings, correspondence, conversations and memoranda between
the Initial Purchaser on the one hand and the Issuer on the other, or between or
among any agents, representatives, parents, subsidiaries, affiliates,
predecessors in interest or successors in interest with respect to the subject
matter hereof and thereof are merged herein and replaced hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
FORMAN PETROLEUM CORPORATION
By: /s/ McLain J. Forman
________________________________
McLain J. Forman
Chairman of the Board,
Chief Executive Officer and President
JEFFERIES & COMPANY, INC.
By: /s/ Robert W. Carington
________________________________
Robert W. Carington
Senior Vice President
VEHOU05:54283.1
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<PAGE>
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
Dated as of June 3, 1997
by and between
FORMAN PETROLEUM CORPORATION
and
JEFFERIES & COMPANY, INC.
--------------------------------------
SERIES A CUMULATIVE PREFERRED STOCK
and
200,000 COMMON STOCK PURCHASE WARRANTS
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. Definitions......................................................................... 1
-----------
2. Shelf Registration................................................................... 4
------------------
3. Shelf Registration Procedures........................................................ 5
-----------------------------
4. Shelf Registration Expenses.......................................................... 10
---------------------------
5. Indemnification...................................................................... 10
---------------
6. Rules 144 and 144A................................................................... 13
------------------
7. Underwritten Registrations of Registrable Securities................................. 13
----------------------------------------------------
8. Registration of Registrable Securities............................................... 14
--------------------------------------
9. Miscellaneous........................................................................ 16
-------------
(a) No Inconsistent Agreements.................................................... 16
--------------------------
(b) Adjustments Affecting Registrable Shelf Securities or Registrable Securities.. 17
----------------------------------------------------------------------------
(c) Amendments and Waivers........................................................ 17
----------------------
(d) Notices....................................................................... 17
-------
(e) Successors and Assigns........................................................ 18
----------------------
(f) Counterparts.................................................................. 18
------------
(g) Headings...................................................................... 18
--------
(h) Governing Law................................................................. 18
-------------
(i) Severability.................................................................. 18
------------
(j) Securities Held by the Issuer or Its Affiliates............................... 19
-----------------------------------------------
(k) Third Party Beneficiaries..................................................... 19
-------------------------
(1) Entire Agreement.............................................................. 19
----------------
</TABLE>
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of June 3, 1997, by and between Forman Petroleum Corporation, a
Louisiana corporation (the "Company" or the "Issuer"), and Jefferies & Company,
Inc. (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase Agreement,
dated June 3, 1997, by and between the Company and the Initial Purchaser (the
"Purchase Agreement") which provides for, among other things, the issuance and
sale to the Initial Purchaser of 200,000 units (the "Units"), each consisting of
one share of the Company's Series A Cumulative Preferred Stock, par value $.01
per share ("Series A Preferred Stock"), and one warrant (collectively, the
"Warrants") to purchase 0.07267 shares of common stock, no par value, of the
Company (the "Common Stock"). In order to induce the Initial Purchaser to enter
into the Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement for the benefit of the Initial Purchaser and
its direct and indirect transferees and assigns. The execution and delivery of
this Agreement is a condition to the Initial Purchaser's obligation to purchase
the Units under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the term "day", unless otherwise expressly
provided, shall mean a calendar day and following terms shall have the following
meanings:
Advice: See the last paragraph of Section 5.
Agreement: See the first introductory paragraph to this Agreement.
Series A Preferred Stock: See the second introductory paragraph to this
Agreement.
Business Day: A day that is not a Saturday, a Sunday, or a day on which
banking institutions in New York, New York or Hartford, Connecticut are required
to be closed.
Common Stock: See the second introductory paragraph to this Agreement.
Company: See the first introductory paragraph to this Agreement.
Effectiveness Period: See Section 2(a).
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Holder: Any registered holder of Registrable Shelf Securities or
Registrable Securities.
Indemnified Person: See Section 5(c).
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<PAGE>
Indemnifying Person: See Section 5(c).
Initial Purchaser: See the first introductory paragraph to this Agreement.
Initial Shelf Registration: See Section 2(a).
Inspectors: See Section 3(o).
IPO Effectiveness Date: See Section 8(a).
Issue Date: The date on which the Units were sold to the Initial Purchaser
pursuant to the Purchase Agreement.
Issuer: See the first introductory paragraph to this Agreement.
NASD: National Association of Securities Dealers, Inc.
Participant: See Section 5(a).
Person: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Piggy-Back Registration: See Section 8(a).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Shelf Securities or the Registrable Securities covered by
such Registration Statement, and all other amendments and supplements to such
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
Purchase Agreement: See the second introductory paragraph to this
Agreement.
Records: See Section 3(o).
Registrable Shelf Securities: Any of (i) the shares of Series A Preferred
Stock included in the Units and (ii) any other securities issued or issuable
with respect to any such Series A Preferred Stock by way of stock dividends or
stock splits or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.
Registrable Securities: Any of (i) the Warrant Shares (whether or not the
related Warrants have been exercised) and (ii) any other securities issued or
issuable with respect to any Warrant Shares by way of stock dividends or stock
splits or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (i) a Registration Statement with respect to the
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<PAGE>
offering of such securities by the Holder thereof shall have been declared
effective under the Securities Act and such securities shall have been disposed
of by such Holder pursuant to such Registration Statement, (ii) such securities
are eligible for sale to the public pursuant to Rule 144(k) (or an similar
provision then in force, but not Rule 144A) or are all otherwise eligible for
sale under Rule 144 by such Holder in the current calendar quarter, (iii) such
securities shall have been otherwise transferred by such Holder and new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company or its transfer agent and
subsequent disposition of such securities shall not require registration or
qualification under the Securities Act or any similar state law then in force or
(iv) such securities shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's performance
of or compliance with Section 8 of this Agreement, including, without
limitation, all SEC and stock exchange or NASD registration and filing fees and
expenses, fees and expenses of compliance with securities or blue sky laws
(including, without limitation, reasonable fees and disbursements of counsel for
any underwriters in connection with blue sky qualifications of the Registrable
Securities), preparing, printing, filing, duplicating and distributing a
Warrants Registration Statement and the related Prospectus, the cost of printing
stock certificates, the cost and charges of any transfer agent, rating agency
fees, printing expenses, messenger, telephone and delivery expenses, fees and
disbursements of any counsel for the Company and all independent certified
public accountants, the fees and disbursements of underwriters customarily paid
by issuers or sellers or securities (but not including any underwriting
discounts or commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Selling Holders), fees and expenses of one counsel for
the Selling Holders and other reasonable out-of-pocket expenses of the Selling
Holders.
Registration Statement: Any appropriate registration statement of the
Issuer filed with the SEC under the Securities Act that covers any of the
Registrable Shelf Securities or the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
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<PAGE>
Selling Holder: A Holder who is selling Registrable Securities in
accordance with Section 8 hereof.
Shelf Registration: See Section 2(b).
Subsequent Shelf Registration: See Section 2(b).
Underwritten registration or underwritten offering: A registration in
which securities of one or more of the issuers are sold to an underwriter for
reoffering to the public.
Units: See the second introductory paragraph to this Agreement.
Warrants: See the second introductory paragraph to this Agreement.
Warrant Shares: The shares of Common Stock issuable upon exercise of the
Warrants.
2. Shelf Registration
------------------
(a) Shelf Registration. The Issuer shall use its best efforts to file with
the SEC, within 60 days after the Issue Date, a "Shelf" Registration Statement
for an offering to be made on a continuous basis pursuant to Rule 415 covering
all of the Registrable Shelf Securities (the "Initial Shelf Registration"), and
shall use its best efforts to cause such Initial Shelf Registration to be
declared effective under the Securities Act within 120 days after the Issue
Date. The Initial Shelf Registration shall be on Form S-l or another
appropriate form permitting registration of such Registrable Shelf Securities
for resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuer shall not
permit any securities other than the Registrable Shelf Securities to be included
in any Shelf Registration (as defined below). The Issuer shall use its best
efforts to keep the Initial Shelf Registration continuously effective under the
Securities Act until the date which is two years from the Issue Date or such
earlier date as may be then authorized under Rule 144(k) under the Securities
Act (the "Effectiveness Period"), or such shorter period ending when (i) all
Registrable Shelf Securities covered by the Initial Shelf Registration have been
sold in the manner set forth and as contemplated in the Initial Shelf
Registration or are otherwise eligible for sale under Rule 144 by the Holders
without restriction by virtue of the operation of the volume limitations set
forth in such Rule or (ii) a Subsequent Shelf Registration (as defined below)
covering all of the Registrable Shelf Securities has been declared effective
under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (other than because of the sale of all of
the securities registered thereunder), the Issuer shall use its best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within 45 days of such cessation of effectiveness amend
such Shelf Registration in a manner to obtain the withdrawal of the order
suspending the effectiveness thereof, or file (and cause any then existing
Subsidiary Guarantor to file) an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Shelf Securities (a
"Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed,
the Issuer shall use its best efforts to cause the Subsequent Shelf Registration
to be declared effective as soon as practicable after such filing and to keep
such Subsequent Shelf Registration continuously effective for a period equal to
the number of days in the Effectiveness Period less the aggregate number of days
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<PAGE>
during which the Initial Shelf Registration or any Subsequent Shelf
Registrations was previously continuously effective. As used herein the term
"Shelf Registration" means the Initial Shelf Registration and any Subsequent
Shelf Registration.
(c) Supplements and Amendments. The Issuer shall promptly supplement and
amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate liquidation amount of the shares of
Series A Preferred Stock covered by such Shelf Registration (or, if no such
shares are so covered, then by the Holders of a majority of the other securities
covered thereby) or by any underwriter of such securities.
3. Shelf Registration Procedures
-----------------------------
In connection with the filing of any Registration Statement pursuant to
Section 2 hereof, the Issuer shall effect such registration to permit the sale
of such securities covered thereby in accordance with the intended method or
methods of disposition thereof, and pursuant thereto and in connection with any
such Registration Statement filed by the Issuer hereunder, the Issuer shall:
(a) Before filing any Registration Statement, the Issuer shall, if
requested, furnish to and afford the Holders of the Registrable Shelf
Securities, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (in each case at least five business
days prior to such filing). The Issuer shall not file any such
Registration Statement or any amendments or supplements thereto if the
Holders of a majority in aggregate liquidation amount of the shares of
Series A Preferred Stock covered by such Registration Statement (or, if no
such shares are so covered, then by the Holders of a majority of the other
securities covered thereby), their counsel, or the managing underwriters,
if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period;
cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; and comply with the provisions of the Securities
Act and the Exchange Act applicable to it with respect to the disposition
of all securities covered by such Registration Statement as so amended or
in such Prospectus as so supplemented.
(c) Notify the selling Holders of Registrable Shelf Securities, their
counsel and the managing underwriters, if any, promptly (but in any event
within two business days), (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
a Registration Statement or any post-effective amendment, when the same has
become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of
such Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of any
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Prospectus or the initiation of any proceedings for that purpose, (iii) if
at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Shelf Securities the
representations and warranties of the Issuer contained in any agreement
(including any underwriting agreement) contemplated by Section 3(n) hereof
cease to be true and correct, (iv) of the receipt by the Issuer of any
notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Shelf Securities for offer or sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose, (v) of the happening of
any event, the existence of any condition or any information becoming known
that makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the
making of any changes in, or amendments or supplements to, such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (vi) of
any of the Issuer's reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate.
(d) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Shelf Securities for sale in any jurisdiction, and, if any such order is
issued, to use its best efforts to obtain the withdrawal of any such order
at the earliest possible date.
(e) If requested by the managing underwriters, if any, or the Holders
of a majority in aggregate liquidation amount of the shares of Series A
Preferred Stock being sold in connection with an underwritten offering (or,
if no such shares are being so sold, then by the Holders of a majority of
the other securities being so sold), (i) promptly as practicable
incorporate in a prospectus supplement or post-effective amendment such
information or revisions to information therein relating to such
underwriters or selling Holders as the managing underwriters, if any, or
such Holders or their counsel reasonably request to be included or made
therein and (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the Issuer has
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment.
(f) Furnish to each selling Holder of Registrable Shelf Securities who
so requests and to counsel and each managing underwriter, if any, without
charge, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) Deliver to each selling Holder of Registrable Shelf Securities,
their respective counsel, and the underwriters, if any, without charge, as
many copies of the Prospectus and each amendment or supplement thereto and
any documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this Section 5,
the Issuer
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hereby consents to the use of such Prospectus and each amendment
or supplement thereto by each of the selling Holders of Registrable Shelf
Securities, and the underwriters or agents, if any, and dealers (if any),
in connection with the offering and sale of the Registrable Shelf
Securities covered by such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Shelf Securities, to
use its best efforts to register or qualify, and to cooperate with the
selling Holders of Registrable Shelf Securities, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Shelf Securities for offer and sale under the securities
or Blue Sky laws of such jurisdictions within the United States as any
selling Holder, or the managing underwriter or underwriters, if any,
reasonably request in writing; provided that where Registrable Shelf
Securities are offered other than through an underwritten offering, the
Issuer agrees to cause its counsel to perform Blue Sky investigations and
file any registrations and qualifications required to be filed pursuant to
this Section 5(h); keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be kept effective and do any and all other acts or
things reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Shelf Securities covered by the applicable
Registration Statement; provided that the Issuer shall not be required to
(A) qualify generally to do business in any jurisdiction where it is not
then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject
or (C) subject itself to taxation in excess of a nominal dollar amount in
any such jurisdiction where it is not then so subject.
(i) Cooperate with the selling Holders of Registrable Shelf Securities
and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Registrable
Shelf Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable Shelf Securities to
be in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may reasonably request.
(j) Use its best efforts to cause the Registrable Shelf Securities
covered by any Registration Statement to be registered with or approved by
such governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Shelf Securities, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case the Issuer will cooperate in all reasonable respects with the
filing of such Registration Statement and the granting of such approvals.
(k) Upon the occurrence of any event contemplated by paragraph 3(c)(v)
or 3(c)(vi) hereof, as promptly as practicable prepare and (subject to
Section 3(a) hereof) file with the SEC, at the expense of the Issuer, a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Shelf Securities being sold thereunder, any such Prospectus
will not contain an untrue statement of a material fact or omit to state a
material fact
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required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(1) Use its best efforts to cause any Series A Preferred Stock covered
by a Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
liquidation amount of the shares of Series A Preferred Stock covered by
such Registration Statement or the managing underwriter or underwriters, if
any.
(m) [Intentionally omitted]
(n) In connection with an underwritten offering of Registrable Shelf
Securities pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of securities similar
to the Registrable Shelf Securities and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in order
to expedite or facilitate the registration or the disposition of such
Registrable Shelf Securities and, in such connection, (i) make such
representations, warranties to, and covenants with, the underwriters, with
respect to the business of the Issuer and its subsidiaries and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings of
securities similar to the Registrable Shelf Securities, and confirm the
same in writing if and when requested; (ii) obtain the opinion of counsel
to the Issuer and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
underwriters covering the matters customarily covered in opinions requested
in underwritten offerings of securities similar to the Registrable Shelf
Securities and such other matters as may be reasonably requested by
underwriters; (iii) obtain copies of "cold comfort" letters and updates
thereof in form and substance reasonably satisfactory to the managing
underwriter or underwriters from the independent certified public
accountants of the Issuer (and, if necessary, any other independent
certified public accountants of any subsidiary of the Issuer or of any
business acquired by the Issuer for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings of
securities similar to the Registrable Shelf Securities and such other
matters as reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 5 hereof with respect to all
parties to be indemnified pursuant to said Section. The above shall be
done at each closing under such underwriting agreement, or as and to the
extent required thereunder.
(o) Make available for inspection by any selling Holder of such
Registrable Shelf Securities being sold, any underwriter participating in
any such disposition of Registrable Shelf Securities, if any, and any
attorney, accountant or other agent retained by any such selling Holder, or
underwriter (collectively, the "Inspectors"), at the offices where normally
kept, during reasonable business hours, all financial and other records and
pertinent corporate documents of the Issuers and their respective
subsidiaries (collectively, the "Records") as shall be reasonably necessary
to enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Issuer and its
subsidiaries to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement. Such
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Records shall be kept confidential by each Inspector and shall not be
disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) the information in such Records is public or has been
made generally available to the public other than as a result of a
disclosure or failure to safeguard by such Inspector or (iv) disclosure of
such information is, in the opinion of counsel for any Inspector, necessary
or advisable in connection with any action, claim, suit or proceeding,
directly or indirectly, involving or potentially involving such Inspector
and arising out of, based upon, related to, or involving this Agreement, or
any transactions contemplated hereby or arising hereunder. Each selling
Holder of such Registrable Shelf Securities will be required to agree that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Issuers unless and until such is made
generally available to the public. Each selling Holder of such Registrable
Shelf Securities will be required to further agree that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Issuer and allow the Issuer to undertake
appropriate action to prevent disclosure of the Records deemed confidential
at their expense.
(p) [Intentionally omitted.]
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to the securityholders of the Company earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Shelf Securities are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(r) [Intentionally omitted.]
(s) [Intentionally omitted.]
(t) Cooperate with each seller of Registrable Shelf Securities covered
by any Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Shelf Securities and their
respective counsel in connection with any filings required to be made with
the NASD.
(u) Use its best efforts to take all other steps reasonably necessary
to effect the registration of the Registrable Shelf Securities covered by a
Registration Statement contemplated hereby.
The Issuer may require each seller of Registrable Shelf Securities as to
which any registration is being effected to furnish to the Issuer such
information regarding such seller and the distribution of such Registrable Shelf
Securities as the Issuers may, from time to time, reasonably request. The
Issuer may exclude from such registration the Registrable Shelf Securities of
any seller who fails to furnish such
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information within a reasonable time (which time in no event shall exceed 30
days) after receiving such request. Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to the Issuer all
information required to be disclosed in order to make the information previously
furnished to the Issuer by such seller not materially misleading.
Each Holder of Registrable Shelf Securities agrees by acquisition of such
Registrable Shelf Securities that, upon receipt of any notice from the Issuer of
the happening of any event of the kind described in Section 3(c)(ii), 3(c)(iv),
3(c)(v), or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Shelf Securities covered by a Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the "Advice")
by the Issuer that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto and, if so directed by
the Issuer, such Holder will deliver to the Issuer all copies, other than
permanent file copies, then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of the receipt of such
notice.
4. Shelf Registration Expenses
---------------------------
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Issuer (other than Registration Expenses, which are dealt
with exclusively in Section 8 hereof) shall be borne by the Issuer, whether or
not a Shelf Registration is filed or becomes effective, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws as provided in Section 3(h) hereof, (ii) printing
expenses, including, without limitation, expenses of printing prospectuses if
the printing of prospectuses is requested by the managing underwriter or
underwriters, if any, or by the Holders of a majority in aggregate liquidation
amount of the shares of Series A Preferred Stock included in any Registration
Statement (or, if no such shares are so included, then by the Holders of a
majority of the other securities included therein), as the case may be, (iii)
reasonable messenger, telephone and delivery expenses incurred in connection
with any Shelf Registration, (iv) fees and disbursements of counsel for the
Issuer and reasonable fees and disbursements of special counsel for the sellers
of Registrable Shelf Securities (subject to the provisions of Section 4(b)), (v)
fees and disbursements of all independent certified public accountants referred
to in Section 3(n)(iii) (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, (vii) Securities Act liability insurance,
if the Issuer desires such insurance, (viii) fees and expenses of all other
Persons retained by the Issuers, (ix) internal expenses of the Issuer
(including, without limitation, all salaries and expenses of officers and
employees of the Issuer performing legal or accounting duties), (x) the expense
of any annual audit, (xi) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange and (xii)
the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuer shall
reimburse the Holders of the Registrable Shelf Securities being registered in
such registration for the fees and disbursements, not to exceed $25,000, of not
more than one counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate liquidation amount of the shares of Series A
Preferred Stock to be included in such Shelf Registration (or, if no such shares
are so included, then by the Holders of a majority
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of the other securities included therein) and other out-of-pocket expenses of
Holders of Registrable Shelf Securities incurred in connection with the
registration and sale of Registrable Shelf Securities.
5. Indemnification
---------------
(a) The Issuer agrees to indemnify and hold harmless each Holder of
Registrable Shelf Securities and each Holder of Registrable Securities, the
officers and directors of each such Person, and each Person, if any, who
controls any such Person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other reasonable expenses
actually incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (as amended or supplemented if the Issuer shall have furnished any
amendments or supplements thereto) or caused by, arising out of or based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if the Issuer shall have
furnished any amendments or supplements thereto) or caused by, arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Participant furnished to
the Issuer in writing by or on behalf of such Participant expressly for use
therein; provided, however, that the Company will not be liable if such untrue
statement or omission or alleged untrue statement or omission was contained or
made in any preliminary prospectus and corrected in the Prospectus or any
amendment or supplement thereto and the Prospectus does not contain any other
untrue statement or omission or alleged untrue statement or omission of a
material fact that was the subject matter of the related proceeding and any such
loss, liability, claim, damage or expense suffered or incurred by the
Participants resulted from any action, claim or suit by any Person who purchased
Registrable Shelf Securities or Registrable Securities which are the subject
thereof from such Participant and it is established in the related proceeding
that such Participant failed to deliver or provide a copy of the Prospectus (as
amended or supplemented) to such Person with or prior to the confirmation of the
sale of such Registrable Shelf Securities or Registrable Securities sold to such
Person if required by applicable law, unless such failure to deliver or provide
a copy of the Prospectus (as amended or supplemented) was a result of
noncompliance by the Issuer with Section 3 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify and
hold harmless the Issuer, its directors and officers and each Person who
controls the Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Issuer to each Participant, but only with reference to information
relating to such Participant furnished to the Issuer in writing by such
Participant expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto, or any preliminary prospectus. The liability
of any Participant under this paragraph shall in no event exceed the proceeds
received by such Participant from sales of Registrable Shelf Securities or
Registrable Securities giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be
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sought pursuant to either of the two preceding paragraphs, such Person (the
"Indemnified Person") shall promptly notify the Person against whom such
indemnity may be sought (the "Indemnifying Person") in writing, and the
Indemnifying Person, upon request of the Indemnified Person, shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may reasonably
designate in such proceeding and shall pay the reasonable fees and expenses
actually incurred by such counsel related to such proceeding; provided, however,
that the failure to so notify the Indemnifying Person shall not relieve it of
any obligation or liability which it may have hereunder or otherwise (unless and
only to the extent that such failure directly results in the loss or compromise
of any material rights or defenses by the Indemnifying Person and the
Indemnifying Person was not otherwise aware of such action or claim). In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that, unless there is a
conflict among Indemnified Persons, the Indemnifying Person shall not, in
connection with any proceeding or related proceeding in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly after receipt of the invoice therefor as
they are incurred. Any such separate firm for the Participants and such control
Persons of Participants shall be designated in writing by Participants who sold
a majority in interest of the securities sold by all such Participants and any
such separate firm for the Issuer, its directors, its officers and such control
Persons of the Issuer shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its prior written consent, but if settled with such consent or
if there is a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
the Indemnifying Person agrees to indemnify any Indemnified Person from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for reasonable fees and expenses actually incurred by counsel as contemplated by
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its prior
written consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; provided,
however, that the Indemnifying Person shall not be liable for any settlement
effected without its consent pursuant to this sentence if the Indemnifying
Person is contesting, in good faith, the request for reimbursement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement (A) includes an unconditional release of such indemnified Person, in
form and substance satisfactory to such Indemnified Person, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of an Indemnified Person.
(d) If the indemnification provided for in the first and second paragraphs
of this Section 5 is unavailable (other than by reason of the exceptions
specifically provided therein) to, or insufficient to hold
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harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Registrable Shelf Securities or Registrable Securities, as the case may be,
or (ii) if the allocation provided by the foregoing clause (i) is not permitted
by applicable law, not only such relative benefits but also the relative fault
of the Indemnifying Person or Persons on the one hand and the Indemnified Person
or Persons on the other in connection with the statements or omissions (or
alleged statements or omissions) that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuers on the one hand or
by the Participants or such other Indemnified Person, as the case may be, on the
other, such Persons' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission and any other
equitable considerations appropriate under the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Shelf
Securities or Registrable Securities, as the case may be, exceeds the amount of
any damages that such Participant has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this Section 5
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
6. Rules 144 and 144A
------------------
The Issuer covenants that it will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder in a timely manner and, if at any time it is not
required to file such reports, it will, upon the request of any Holder of
Registrable Shelf Securities or Registrable Securities, make publicly available
other information so long as necessary to permit sales pursuant to Rule 144 and
Rule 144A. The Issuer further covenants, for so long as any Registrable Shelf
Securities or Registrable Securities remain outstanding, to make available to
any Holder or beneficial owner thereof in connection with any sale thereof and
any prospective purchaser of such Registrable Shelf Securities or Registrable
Securities from such Holder or beneficial owner, the information
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required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Registrable Shelf Securities or Registrable Securities pursuant to Rule
144A.
7. Underwritten Registrations of Registrable Securities
----------------------------------------------------
If any of the Registrable Shelf Securities covered by any Shelf
Registration is to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate liquidation amount of the
shares of Series A Preferred Stock included in such offering (or, if no such
shares are so included, then by the Holders of a majority of the other
securities included therein) and reasonably acceptable to the Issuer.
No Holder of Registrable Shelf Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Shelf Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
8. Registration of Registrable Securities
--------------------------------------
(a) Shelf Registration of Registrable Securities. The Company shall,
within 90 days after the effectiveness date (the "IPO Effectiveness Date") of a
registration statement filed with the Commission in connection with an initial
public offering of the Common Stock, use its best efforts to (a) file a shelf
registration statement covering resales of the Registrable Securities (the
"Warrant Shares Shelf Registration Statement"), (b) cause the Warrant Shares
Shelf Registration Statement to be declared effective under Securities Act and
(c) keep effective the Warrant Shares Shelf Registration Statement until the
earlier of one year after the IPO Effectiveness Date (or such earlier date as
may be authorized under Rule 144(k), as it may be amended from time to time) or
such time as all of the applicable Registrable Securities have been sold
thereunder or are otherwise eligible for sale under Rule 144 under the
Securities Act. The Company shall, in the event that a Warrant Shares Shelf
Registration Statement is filed, provide to each Holder copies of the prospectus
that is a part of the Warrant Shares Shelf Registration Statement, notify each
such Holder when the Warrant Shares Shelf Registration Statement for the
Registrable Securities has become effective and take certain other actions as
are required to permit unrestricted resales of the Registrable Securities. The
Company shall require a Holder that sells Registrable Securities pursuant to the
Warrant Shares Shelf Registration Statement to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers, and
any such Holder shall be bound by the provisions of this Agreement that are
applicable to such a Holder (including certain indemnification rights and
obligations). Each holder of the Registrable Securities shall deliver
information to be used in connection with the Warrant Shares Shelf Registration
Statement and provide comments on the Warrant Shares Shelf Registration
Statement within the time periods set forth in this Agreement in order to have
its Registrable Securities included in the Warrant Shares Shelf Registration
Statement.
(b) Piggy-Back Registration of Registrable Securities. If at any time
after the Issue Date the Company proposes to file a registration statement under
the Securities Act with respect to an offering by the Company for its own
account or for the account of any holders of its Common Stock (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC), (ii) a registration statement filed in connection with an
exchange offer or offering of securities solely to the
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Company's existing securityholders or (iii) any Registration Statement pursuant
to Section 2 hereof), then the Company shall give written notice of such
proposed filing to the Holders of Registrable Securities as soon as practicable
(but in no event fewer than 20 days before the anticipated filing date), and
such notice shall offer such Holders the opportunity to register such number of
Registrable Securities as each Holder may request in writing within 20 days
after receipt of such written notice from the Company (which request shall
specify the Registrable Securities intended to be disposed of by such Selling
Holder and the intended method of distribution thereof) (a "Piggy-Back
Registration"). The Company shall use its best efforts to keep such Piggy-Back
Registration continuously effective under the Securities Act until at least the
earlier of (A) an aggregate of 180 days after the effective date thereof or (B)
the consummation of the distribution by the Holders of all of the Registrable
Securities covered thereby. The Company shall use its best efforts to cause the
managing underwriter or underwriters, if any, of such proposed offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of the Company or any other security holder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. Any Selling Holder
shall have the right to withdraw its request for inclusion of its Registrable
Securities in any Registration Statement pursuant to this Section 8 by giving
written notice to the Company of its request to withdraw at any time prior to
the filing of such Registration Statement with the SEC. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 8, and each Holder of Registrable
Securities shall pay all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to a Piggy-Back Registration effected pursuant to this
Section 8.
No registration effected under this Section 8, and no failure to
effect a registration under this Section 8, shall relieve the Company of its
obligation to effect a registration pursuant to Section 2 hereof, and no failure
to effect a registration under this Section 8 and to complete the sale of
securities registered thereunder in connection therewith shall relieve the
Company of any other obligation under this Agreement.
(b) Priority in Piggy-Back Registration. In a registration pursuant to
this Section 8 involving an underwritten offering, if the managing underwriter
or underwriters of such underwritten offering have informed, in writing, the
Company and the Selling Holders requesting inclusion in such offering that in
such underwriter's or underwriters' opinion the total number of securities which
the Company, the Selling Holders and any other Persons desiring to participate
in such registration intend to include in such offering is such as to adversely
affect the success of such offering, including the price at which such
securities can be sold, then the Company will be required to include in such
registration only the amount of securities which it is so advised should be
included in such registration. In such event: (x) in cases initially involving
the registration for sale of securities for the Company's own account,
securities shall be registered in such offering in the following order of
priority: (i) first, the securities which the Company proposes to register, (ii)
second, provided that no securities proposed to be registered by the Company
have been excluded from such registration, the securities which have been
requested to be included in such registration by the Selling Holders and by
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments to "piggy-back" registration rights of the Company
entered into prior to, and in existence on, the date hereof (pro rata based on
the amount of securities sought to be registered by such Persons), and (iii)
third, provided that no securities sought to be included by the Selling Holders
or such Persons have been excluded from such registration, the securities of
other Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments of the Company entered into subsequent to the date
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hereof (pro rata based on the amount of securities sought to be registered by
such Persons); and (y) in cases not initially involving the registration for
sale of securities for the Company's own account, securities shall be registered
in such offering in the following order of priority: (i) first, the securities
of any Person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Company is the basis for the registration, (ii)
second, provided that no securities of any Person whose exercise of a "demand"
registration right pursuant to a contractual commitment of the Company is the
basis for such registration have been excluded from such registration, the
securities requested to be included in such registration by the Selling Holders
pursuant to this Agreement and by Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments to "piggy-back"
registration rights of the Company entered into prior to, and in existence on,
the date hereof (pro rata based on the total amount of securities sought to be
included by such Persons), (iii) third, provided that no securities sought to be
included by the Selling Holders or such Persons have been excluded from such
registration, securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments entered into subsequent
to the date hereof (pro rata based on the amount of securities sought to be
registered by such Persons) and (iv) fourth, provided that no securities sought
to be included by other Persons entitled to exercise "piggy-back" registration
rights pursuant to such contractual commitments have been excluded from such
registration, any securities which the Company proposes to register.
(c) Suspension of Sales, etc. Subject to the next sentence of this
paragraph, the Company shall be entitled to postpone, for a reasonable period of
time, the effectiveness of, or suspend the rights of any Holders to make sales
purchase to any Registration Statement otherwise required to be prepared, filed
and made and kept effective by it under this Section 8; provided, however, that
the duration of such postponement or suspension may not exceed the earlier to
occur of (A) 15 days after the cessation of the circumstances described in the
next sentence of this paragraph on which such postponement or suspension is
based or (B) 120 days after the date of the determination of the Board of
Directors referred to in the next sentence. Such postponement or suspension may
only be effected if the Board of Directors of the Company determines in good
faith that the effectiveness of, or sales pursuant to, such Registration
Statement would materially impede, delay or interfere with any financing, offer
or sale of securities, acquisition, corporate reorganization or other
significant transaction involving the Company or any of its affiliates or
require disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential. If the Company shall so
postpone the effectiveness of, or suspend the rights of any Holders of
Registrable Securities to make sales pursuant to, a Registration Statement, it
shall, as promptly as possible, notify any Selling Holders of such
determination, and the Selling Holders shall (y) have the right, in the case of
a postponement of the effectiveness of a Registration Statement, upon the
affirmative vote of Selling Holders of not less than a majority of the
Registerable Securities to be included in such Registration Statement, to
withdraw the request for registration by giving written notice to the Company
within 10 days after receipt of such notice or (z) in the case of a suspension
of the right to make sales, receive an extension of the registration period
referred to in Section 8(a) hereof equal to the number of days of the
suspension.
(d) Exclusion of Registrable Securities. The Company shall not be required
by this Section 8 to include Registrable Securities in a Piggy-Back Registration
if (i) in the written opinion of counsel to the Company, addressed to the
Holders of Registrable Securities and delivered to them, the Holders of such
Registrable Securities seeking registration would be free to sell all such
Registrable Securities within the current calendar quarter without registration
under Rule 144, which opinion may be based in part upon the representation by
the Holders of such Registrable Securities seeking registration, which
representation shall not be unreasonably withheld, that each such Holder is not
an affiliate of the Company within the meaning
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of the Securities Act, and (ii) all requirements under the Securities Act for
effecting such sales are satisfied at such time.
(e) Obligations of Selling Holders. The Company's obligations under this
Section 8 shall be subject to the obligations of the Selling Holders, which the
Selling Holders acknowledge, to furnish all information and materials and to
take any and all actions as may be required under applicable federal and state
securities laws and regulations to permit the Company to comply with all
applicable requirements of the SEC and to obtain any acceleration of the
effective date of a Registration Statement.
(f) No Special Audit. The Company shall not be obligated to cause any
special audit to be undertaken in connection with any registration pursuant to
this Section 8 or Section 2 unless such audit is requested by the underwriters
with respect to such registration.
9. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Issuer has not entered, as of the
date hereof, and the Issuer shall not enter, after the date of this Agreement,
into any agreement with respect to any of its securities that is inconsistent
with the rights granted to the Holders of Registrable Shelf Securities or
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Issuer has not entered and will not enter into any
agreement with respect to any of its securities which will grant to any Person
piggy-back rights with respect to a Shelf Registration.
(b) Adjustments Affecting Registrable Shelf Securities or Registrable
Securities. The Company shall not, directly or indirectly, take any action with
respect to the Registrable Shelf Securities or Registrable Securities as a class
that would adversely affect the ability of the Holders to include such
Registrable Shelf Securities or Registrable Securities in a registration
undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of in circumstances that would adversely affect any Holders of
Registrable Shelf Securities or Registrable Securities, the Holders of a
majority in interest of the Registrable Shelf Securities or Registrable
Securities, as the case may be; provided, however, that Section 5 and this
Section 9(c) may not be amended, modified or supplemented without the prior
written consent of each Holder (including any Person who was a Holder of
Registrable Shelf Securities or Registrable Securities, as the case may be,
disposed of pursuant to any Registration Statement).
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:
1. if to a Holder of Registrable Shelf Securities or Registrable
Securities, at the most current address of such Holder set forth on the
records of the registrar of the Warrants or the Series A Preferred Stock,
with a copy in like manner to the Initial Purchaser as follows:
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JEFFERIES & COMPANY, INC.
Two Houston Center
909 Fannin St., Suite 3100
Houston, Texas 77010
Facsimile No.: (713) 650-8730
Attention: Robert W. Carington
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Facsimile No.: (713) 651-5246
Attention: Charles L. Strauss
2. if to the Initial Purchaser, at the address specified in Section
11(d)(1):
3. if to the Issuer, as follows:
Forman Petroleum Corporation
650 Poydras Street, Suite 2200
New Orleans, Louisiana 70130-6101
Facsimile No.: (504) 522-1796
Attention: President
with copies to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Facsimile No.: (713) 615-5437
Attention: Alan P. Baden
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the United States mail, postage prepaid, if mailed, one
business day after being timely delivered to a next-day air courier guaranteeing
overnight delivery; and when receipt is acknowledged by the addressee, if
telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto and
the Holders; provided, however, that the provisions of this Agreement relating
to registration rights shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless such successor or assign holds
Registrable Shelf Securities or Registrable Securities.
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(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE NON-
EXCLUSIVE JURISDICTION OF THE COMPETENT COURTS OF THE STATE OF NEW YORK SITTING
IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Issuer or Its Affiliates. Whenever the consent
or approval of Holders of a specified percentage of Registrable Shelf Securities
or Registrable Securities is required hereunder, Registrable Shelf Securities or
Registrable Securities, as the case may be, held by the Issuer or its affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
(k) Third Party Beneficiaries. Holders are intended third party
beneficiaries of this Agreement and this Agreement may be enforced by such
Persons.
(1) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein and any and all prior oral or written
agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchaser on the
one hand and the Issuer on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
FORMAN PETROLEUM CORPORATION
By: /s/ McLain J. Forman
-------------------------------------------------
McLain J. Forman
Chairman of the Board,
Chief Executive Officer and President
JEFFERIES & COMPANY, INC.
By: /s/ Robert W. Carington
-------------------------------------------------
Robert W. Carington
Senior Vice President
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EXHIBIT 10.3
================================================================================
WARRANT AGREEMENT
Dated as of June 3, 1997
Of
FORMAN PETROLEUM CORPORATION
------------------------
---------
Warrants to Purchase Shares of Common Stock,
No Par Value
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES........................... 1
<S> <C> <C>
SECTION 1.01. Issuance of Warrants................................................. 1
SECTION 1.02. Form of Warrant Certificates......................................... 1
SECTION 1.03. Execution of Warrant Certificates.................................... 2
SECTION 1.04. Authentication and Delivery.......................................... 2
SECTION 1.05. Temporary Warrant Certificates....................................... 3
SECTION 1.06. Separation of Warrants and Notes..................................... 3
SECTION 1.07. Registration......................................................... 3
SECTION 1.08. Registration of Transfers and Exchanges.............................. 4
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant Certificates... 10
SECTION 1.10. Offices for Exercise, etc............................................ 11
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE..................... 11
SECTION 2.01. Duration of Warrants................................................. 11
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery.................... 11
SECTION 2.03. Cancellation of Warrant Certificates................................. 13
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS.............................. 13
SECTION 3.01. Enforcement of Rights................................................ 13
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY............................ 13
SECTION 4.01. Payment of Taxes..................................................... 13
ARTICLE V
ADJUSTMENTS....................................... 14
SECTION 5.01. Adjustment of Exercise Price and Number of Shares Issuable........... 14
SECTION 5.02. Fractional Interest.................................................. 17
SECTION 5.03. When Adjustment Not Required......................................... 18
SECTION 5.04. Challenge to Good Faith Determination................................ 18
SECTION 5.05. Treasury Stock....................................................... 18
SECTION 5.06. Notices to Warrant Holders........................................... 18
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE VI
<S> <C> <C>
CONCERNING THE WARRANT AGENT................................ 19
SECTION 6.01. Warrant Agent........................................................ 19
SECTION 6.02. Conditions of Warrant Agent's Obligations............................ 19
SECTION 6.03. Resignation and Appointment of Successor............................. 23
ARTICLE VII
MISCELLANEOUS...................................... 24
SECTION 7.01. Amendment............................................................ 24
SECTION 7.02. Notices and Demands to the Company and Warrant Agent................. 25
SECTION 7.03. Address for Notices to Parties and for Transmission of Documents..... 25
SECTION 7.04. Notices to Holders................................................... 25
SECTION 7.05. APPLICABLE LAW....................................................... 26
SECTION 7.06. Obtaining of Governmental Approvals.................................. 26
SECTION 7.07. Persons Having Rights Under Agreement................................ 26
SECTION 7.08. Headings............................................................. 26
SECTION 7.09. Counterparts......................................................... 26
SECTION 7.10. Inspection of Agreement.............................................. 26
SECTION 7.11. Successors........................................................... 26
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate to be Delivered Upon
Exchange or Registration of
Transfer of Warrants
EXHIBIT C - Transferee Letter of Representation
</TABLE>
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INDEX OF DEFINED TERMS
Defined Term Section
Additional Warrants.............................................. Recitals
Agreement........................................................ Recitals
Amended Series A Preferred Stock................................. 5.01(g)
Business Day..................................................... 2.01
Common Stock..................................................... Recitals
Company.......................................................... Recitals
Conversions...................................................... 5.01 (g)
Convertible Securities........................................... 5.01(c)
Definitive Warrants.............................................. 1.02
Depository....................................................... 1.02
Distribution..................................................... 5.01(c)
Election to Exercise............................................. 2.02(b)
Exercisability Date.............................................. 2.02(a)
Exercise Date.................................................... 2.02(d)
Exercise Price................................................... 2.02(a)
Expiration Date.................................................. 2.01
Expiration Time.................................................. 5.01(e)
Global Warrants.................................................. 1.02
Indenture........................................................ Recitals
Initial Purchasers............................................... Recital
Issue Date....................................................... 2.02(g)
Majority Holders................................................. 5.04
Notes............................................................ Recitals
Note Warrants.................................................... Recitals
Officers' Certificate............................................ 1.08(f)
Options.......................................................... 5.01(c)
Purchased Shares................................................. 5.01(e)
Registrar........................................................ 1.07
Registration Rights Agreement.................................... 7.06
Redemption Warrants.............................................. Recitals
Related Parties.................................................. 6.02(e)
Resale Restriction Termination Date.............................. 1.08(a)
Securities Act................................................... 1.08(a)
Separability Date................................................ 1.06
Shares........................................................... 1.01
Time of Determination............................................ 5.01(g)
Trustee.......................................................... Recitals
Units............................................................ Recitals
Warrant Agent.................................................... Recitals
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Warrant Agent Office............................................. 1.10
Warrant Certificates............................................. Recitals
Warrant Register................................................. 1.07
Warrants......................................................... Recitals
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<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT ("Agreement"), dated as of June 3, 1997, by and
between Forman Petroleum Corporation, a Louisiana corporation (together with any
successor thereto, the "Company"), and U.S. Trust Company of Texas, N.A. (the
"Warrant Agent") for the benefit of the holders from time to time of the Warrant
Certificates (as hereinafter defined).
WHEREAS, the Company has entered into a purchase agreement dated June 3,
1997 (the "Purchase Agreement") with Jefferies & Company, Inc. (the "Initial
Purchaser") in which the Company has agreed, among other things, to sell to the
Initial Purchaser 200,000 units (the "Units"), each consisting of one share of
Series A Cumulative Preferred Stock, par value $.01 per share, of the Company
("Series A Preferred Stock") and one warrant (collectively, the "Warrants", and
the certificates evidencing the Warrants being hereinafter referred to as
"Warrant Certificates") to purchase initially 0.07267 shares of the Company's
common stock, no par value (the "Common Stock"), at an initial purchase price of
$1.00 per share), in each case subject to adjustment in accordance with the
terms hereof; and
WHEREAS, the Warrants and the Series A Preferred Stock comprising part of
the Units shall be separately transferable immediately upon issuance; and
WHEREAS, in connection with the issuance, exchange, cancellation,
replacement and exercise of the Warrants, the Company wishes to set forth in
this Agreement, among other things, the terms and conditions on which the
Warrants may be issued, exchanged, canceled, replaced and exercised;
NOW, THEREFORE, in consideration of the purchase of the Units by the
Initial Purchaser, the Company executes and delivers this Agreement for the
benefit of the holders from time to time of the Warrant Certificates.
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants. Each Warrant Certificate shall
evidence the number of Warrants specified therein, and each Warrant evidenced
thereby shall represent the right, subject to the provisions contained herein
and therein, to purchase from the Company (and the Company shall issue and sell
to such holder of the Warrant) 0.07267 fully paid and non-assessable shares of
the Company's Common Stock (the shares of Common Stock purchasable upon exercise
of a Warrant being hereinafter referred to as the "Shares" and, where
appropriate, such term shall also mean the other securities or property
purchasable and deliverable upon exercise of a Warrant as provided in Article V)
at the price specified herein and therein, in each case subject to adjustment as
provided herein and therein.
SECTION 1.02. Form of Warrant Certificates. The Warrant Certificates
will initially be issued either in global form (the "Global Warrants"),
substantially in the form of Exhibit A hereto (including
<PAGE>
footnote 1 thereto), or in registered form as definitive Warrant certificates
(the "Definitive Warrants"). The Warrant Certificates evidencing the Global
Warrants or the Definitive Warrants to be delivered pursuant to this Agreement
shall be substantially in the form set forth in Exhibit A attached hereto. Such
Global Warrants shall represent such of the outstanding Warrants as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding Warrants from time to time endorsed thereon and that the
aggregate amount of outstanding Warrants represented thereby may from time to
time be reduced or increased, as appropriate. Any endorsement of a Global
Warrant to reflect the amount of any increase or decrease in the amount of
outstanding Warrants represented thereby shall be made by the Warrant Agent and
Depositary (as defined below) in accordance with written instructions given by
the holder thereof. The Depository Trust Company shall act as the depositary
with respect to the Global Warrants (the "Depositary") until a successor shall
be appointed by the Company. Upon written request, a Warrant holder may receive
from the Warrant Agent Definitive Warrants as set forth in Section 1.08 hereof.
SECTION 1.03. Execution of Warrant Certificates. The Warrant
Certificates shall be executed on behalf of the Company by the chairman of its
Board of Directors, its president or any vice president and attested by its
secretary or assistant secretary, under its corporate seal. Such signatures may
be the manual or facsimile signatures of the present or any future such
officers. The seal of the Company may be in the form of a facsimile hereof and
may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificate so
signed shall be countersigned and delivered by the Warrant Agent or disposed of
by the Company, such Warrant Certificate nevertheless may be coun tersigned and
delivered or disposed of as though the person who signed such Warrant
Certificate had not ceased to be such officer of the Company; and any Warrant
Certificate may be signed on behalf of the Company by such persons as, at the
actual date of the execution of such Warrant Certificate, shall be the proper
officers of the Company, although at the date of the execution and delivery of
this Agreement any such person was not such an officer.
SECTION 1.04. Authentication and Delivery. Subject to the immediately
following paragraph, Warrant Certificates shall be authenticated by manual
signature and dated the date of authentication by the Warrant Agent and shall
not be valid for any purpose unless so authenticated and dated. The Warrant
Certificates shall be numbered and shall be registered in the Warrant Register
(as defined in Section 1.07 hereof).
Upon the receipt by the Warrant Agent of a written order of the Company,
which order shall be signed by the chairman of its Board of Directors, its
president or any vice president and attested by its secretary or assistant
secretary, and shall specify the amount of Warrants to be authenticated, whether
the Warrants are to be Global Warrants or Definitive Warrants, the date of such
Warrants and such other information as the Warrant Agent may reasonably request,
without any further action by the Company, the Warrant Agent is authorized, upon
receipt from the Company at any time and from time to time of the
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Warrant Certificates, duly executed as provided in Section 1.03 hereof, to
authenticate the Warrant Certificates and deliver them. Such authentication
shall be by a duly authorized signatory of the Warrant Agent (although it shall
not be necessary for the same signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who authenticated such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
authenticated on behalf of the Warrant Agent by such persons as, at the actual
time of authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not such an
authorized signatory.
The Warrant Agent's authentication on all Warrant Certificates shall be in
substantially the form set forth in Exhibit A hereto.
SECTION 1.05. Temporary Warrant Certificates. Pending the preparation of
definitive Warrant Certificates, the Company may execute, and the Warrant Agent
shall, upon written request of the Company, authenticate and deliver, temporary
Warrant Certificates, which are printed, lithographed, typewritten or otherwise
produced, substantially of the tenor of the definitive Warrant Certificates in
lieu of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers of the Company executing such
Warrant Certificates may determine, as evidenced by their execution of such
Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 1.10 hereof.
Subject to the provisions of Section 4.01 hereof, such exchange shall be without
charge to the holder. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute, and the Warrant Agent
shall, upon written request of the Company, authenticate and deliver in exchange
therefor, one or more definitive Warrant Certificates representing in the
aggregate a like number of Warrants. Until so exchanged, the holder of a
temporary Warrant Certificate shall in all respects be entitled to the same
benefits under this Agreement as a holder of a definitive Warrant Certificate.
SECTION 1.06. Separation of Warrants and Notes. The Notes and Warrants
will be separately transferable immediately upon issuance of the Units.
SECTION 1.07. Registration. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Warrants as provided in this Article. Each person designated by the Company
from time to time as a person authorized to register the transfer and exchange
of the Warrants is hereinafter called, individually
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and collectively, the "Registrar". Initially, the Warrant Agent shall act as
Registrar. Upon written notice to the Warrant Agent and any acting Registrar,
the Company may appoint a successor Registrar for such purposes.
The Company will at all times designate one person (who may be the Company
and who need not be a Registrar) to act as repository of a master list of names
and addresses of the holders of Warrants (the "Warrant Register"). The Company
will act as such repository unless and until some other person is, by written
notice from the Company to the Warrant Agent and the Registrar, designated by
the Company to act as such. The Company shall cause each Registrar to furnish
to such repository, on a current basis, such information as to all registrations
of transfer and exchanges effected by such Registrar, as may be necessary to
enable such repository to maintain the Warrant Register on as current a basis as
is practicable.
SECTION 1.08. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants. When Definitive
Warrants are presented to the Warrant Agent with a written request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants, the Warrant Agent shall register the
transfer or make the exchange as requested if the
requirements under this Warrant Agreement as set forth in
this Section 1.08 for such transactions are met; provided,
however, that the Definitive Warrants presented or
surrendered for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the
holder thereof or by its attorney, duly authorized in
writing; and
(y) in the case of Warrants the offer and sale of which has
not been registered under the Securities Act of 1933, as
amended, (the "Securities Act"), and are presented for
transfer or exchange prior to (x) the date which is two
years after the later of the date of original issue (the
"Issue Date") and the last date on which the Company or
any affiliate of the Company was the owner of such
Warrant, or any predecessor thereto and (y) such later
date, if any, as may be required by any subsequent
change in applicable law (the "Resale Restriction
Termination Date"), such Warrants shall be accompanied,
in the sole discretion of the Company, by the following
additional information and documents, as applicable:
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(A) if such Warrant is being delivered to the Warrant
Agent by a holder for registration in the name of
such holder, without transfer, a certification from
such holder to that effect (in substantially the
form of Exhibit B hereto); or
(B) if such Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an
exemption from registration in accordance with Rule
144 or Regulation S under the Securities Act, a
certification to that effect (in substantially the
form of Exhibit B hereto); or
(C) if such Warrant is being transferred to an
institutional "accredited investor" within the
meaning of subparagraph (a)(l), (a)(2), (a)(3) or
(a)(7) of Rule 501 under the Securities Act,
delivery of a certification to that effect (in
substantially the form of Exhibit B hereto) and a
letter of representation from the transferee in
substantially the form of Exhibit C hereto; or
(D) if such Warrant is being transferred in reliance on
another exemption from the registration
requirements of the Securities Act, a certification
to that effect (in substantially the form of
Exhibit B hereto) and an opinion of counsel
reasonably acceptable to the Company to the effect
that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
Interest in a Global Warrant. A Definitive Warrant may not be transferred for a
beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate written instruments of
transfer, in form satisfactory to the Warrant Agent, together with:
(A) certification, substantially in the form of Exhibit B hereto,
that such Definitive Warrant is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities Act; and
(B) written instructions directing the Warrant Agent to make, or
to direct the Depositary to make, an endorsement on the
Global Warrant to reflect an increase in the aggregate amount
of the Warrants represented by the Global Warrant
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then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue and the Warrant
Agent shall, upon written request of the Company, authenticate a new Global
Warrant in the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Section 1.08 and the procedures
of the Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Warrant for a
Definitive Warrant.
(i) Any person having a beneficial interest in a Global Warrant
may upon request transfer such beneficial interest for a
Definitive Warrant. Upon receipt by the Warrant Agent of
written instructions or such other form of written
instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any person having a
beneficial interest in a Global Warrant and upon receipt by
the Warrant Agent of a written order or such other form of
written instructions as is customary for the Depositary or
the person designated by the Depositary as having such a
beneficial interest containing registration instructions and,
in the case of any such transfer or exchange prior to the
Resale Restriction Termination Date, the following additional
information and documents:
(A) if such beneficial interest is being transferred to the
person designated by the Depositary as being the
beneficial owner, a certification from such person to
that effect (in substantially the form of Exhibit B
hereto); or
(B) if such beneficial interest is being transferred to a
qualified institutional buyer (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S
under the Securities Act, a certification to that effect
from the transferee or transferor (in substantially the
form of Exhibit B hereto); or
(C) if such beneficial interest is being transferred to an
institutional "accredited investor" within the meaning of
subparagraph (a)(l), (a)(2), (a)(3) or (a)(7) of Rule 501
under the Securities Act, delivery of a certification to
that effect (in substantially the form of Exhibit B
hereto), a letter of representation from the transferee
in substantially the form of Exhibit C hereto and an
opinion of
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counsel reasonably acceptable to the Company to the
effect that such transfer is in compliance with the
Securities Act; or
(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (in substantially the form of Exhibit B
hereto) and an opinion of counsel reasonably acceptable
to the Company to the effect that such transfer is in
compliance with the Securities Act
then the aggregate amount of the Global Warrant will be reduced
by the Depositary or its custodian and, following such reduction,
the Company will execute and, upon receipt of an authentication
order in the form of an Officers' Certificate (as defined), the
Warrant Agent will authenticate and deliver to the transferee a
Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section
1.08(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent in writing. The
Warrant Agent shall deliver such Definitive Warrants to the
persons in whose names such Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary.
If at any time:
(i) the Depositary for the Warrants notifies the Company that
the Depositary is unwilling or unable to continue as
Depositary for the Global Warrant and a successor Depositary
for the Global Warrant is not appointed by the Company
within 90 days after delivery of such notice or
(ii) the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of
Definitive Warrants under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must be
the principal executive officer, principal financial
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officer or principal accounting officer) (an "Officers' Certificate") requesting
the authentication and delivery of Definitive Warrants, will authenticate and
deliver Definitive Warrants, in an aggregate number equal to the aggregate
number of warrants represented by the Global Warrant, in exchange for such
Global Warrant.
(g) Legends.
(i) Except to the extent permitted by the following paragraph
(ii), each Warrant Certificate evidencing the Global Warrants
and the Definitive Warrants (and all Warrants issued in
exchange therefor or substitution thereof) shall bear a
legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT" ) AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904 UNDER THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
FORMAN PETROLEUM CORPORATION (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE COMPANY AND
THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE WARRANT AGENT AND THE COMPANY SUCH CERTIFICATIONS, WRITTEN
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
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REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION, "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED AS OF
JUNE 3, 1997 BETWEEN THE COMPANY AND JEFFERIES & COMPANY, INC., A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
To the extent a Warrant Certificate evidences a Global Warrant, such
Warrant Certificate shall also bear the legend with respect thereto
substantially in the form set forth on Exhibit A hereto.
(ii) Upon any sale or transfer of a Warrant pursuant to Rule 144
under the Securities Act in accordance with this Section
1.08 or an effective registration statement under the
Securities Act:
(A) in the case of any Warrant that is a Definitive Warrant, the
Warrant Agent shall, upon written instructions from the
Company, permit the holder thereof to exchange such Warrant
for a Definitive Warrant that does not bear the first
paragraph of the legend set forth above and rescind any
related restriction on the transfer of such Warrant; and
(B) any such Warrant represented by a Global Warrant shall not
be subject to the provisions set forth in (i) above (such
sales or transfers being subject only to the provisions of
Section 1.08(c) hereof); provided, however, that with
respect to any request for an exchange of a Warrant that is
represented by a Global Warrant for a Definitive Warrant
that does not bear the first paragraph of the legend set
forth above, which request is made in reliance upon Rule 144
under the Securities Act, the holder thereof shall certify
in writing to the Warrant Agent that such request is being
made pursuant to Rule 144 under the Securities Act (such
certification to be substantially in the form of Exhibit B
hereto).
(h) Cancellation and/or Adjustment of a Global Warrant. At such time
as all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to or retained and canceled by the Warrant Agent. At any time
prior to such cancellation, if any beneficial interest in a Global Warrant is
exchanged for Definitive Warrants, redeemed, repurchased or canceled, the number
of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant by the Warrant Agent or the
Depositary to reflect such reduction.
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(i) Obligations with Respect to Transfers and Exchanges of Definitive
Warrants.
(i) To permit registrations of transfers and exchanges, the
Company shall execute, at the Warrant Agent's request, and
the Warrant Agent shall authenticate Definitive Warrants
and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration of transfer or exchange of Definitive Warrants
or Global Warrants shall be the valid obligations of the
Company, entitled to the same benefits under this Warrant
Agreement as the Definitive Warrants or Global Warrants
surrendered upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of
any Warrant, the Warrant Agent and the Company may deem and
treat the person in whose name any Warrant is registered as
the absolute owner of such Warrant, and neither the Warrant
Agent nor the Company shall be affected by notice to the
contrary.
(j) Payment of Taxes. The Company or the Warrant Agent may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any exchange or transfer pursuant to this
Section 1.08.
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent
of the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity reasonably satisfactory to them and,
in the case of mutilation or defacement, upon surrender thereof to the Warrant
Agent for cancellation, then, in the absence of written notice to the Company or
the Warrant Agent that such Warrant Certificate has been acquired by a bona fide
purchaser or holder in due course, the Company shall execute, and an authorized
signatory of the Warrant Agent shall manually authenticate and deliver, in
exchange for or in lieu of the lost, stolen, destroyed, defaced or mutilated
Warrant Certificate, a new Warrant Certificate representing a like number of
Warrants, bearing a number or other distinguishing symbol not contemporaneously
outstanding. Upon the issuance of any new Warrant Certificate under this
Section, the Company may require the payment from the holder of such Warrant
Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefits of (but shall be subject to all the limitations of rights set forth
in) this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 1.09 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all
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other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of lost,
stolen, destroyed, defaced or mutilated Warrant Certificates.
The Warrant Agent is hereby authorized to authenticate and deliver the new
Warrant Certificates required pursuant to the provisions of this Section.
SECTION 1.10. Offices for Exercise, etc. So long as any of the Warrants
remain outstanding, the Company will designate and maintain in the continental
United States: (a) an office or agency where the Warrant Certificates may be
presented for exercise, (b) an office or agency where the Warrant Certificates
may be presented for registration of transfer and for exchange (including the
exchange of temporary Warrant Certificates for definitive Warrant Certificates
pursuant to Section 1.05 hereof), and (c) an office or agency where notices and
demands to or upon the Company in respect of the Warrants or of this Agreement
may be served. The Company may from time to time change or rescind such
designation, as it may deem desirable or expedient. The Company will give to
the Warrant Agent written notice of the location of any such office or agency
and of any change of location thereof. The Company hereby designates the
corporate trust office of the Warrant Agent in New York, New York (the "Warrant
Agent Office"), as the initial agency maintained for each such purpose.
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants. Subject to the terms and conditions
established herein, the Warrants shall expire at 5:00 p.m., New York City time,
on June 1, 2004 (the "Expiration Date"). Each Warrant may be exercised on any
Business Day (as defined below) on or after the Exercisability Date (as defined
below) and on or prior to the Expiration Date.
Any Warrant not exercised before the close of business on the Expiration
Date relating to such Warrant shall become void, and all rights of the holder
under the Warrant Certificate evidencing such Warrant and under this Agreement
shall cease.
"Business Day" shall mean any day on which (i) banks in New York City or
the City of Houston, Texas, (ii) the principal national securities exchange or
market, if any, on which the Common Stock is listed or admitted to trading and
(iii) the principal national securities exchange or market, if any, on which the
Warrants are listed or admitted to trading are open for business.
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery. (a)
Subject to the provisions of this Agreement, a holder of Warrants shall have the
right to purchase from the Company on or after the date hereof (the
"Exercisability Date") and on or prior to the Expiration Date 0.07267 fully paid
and non-assessable Shares per each Warrant such holder owns, subject to
adjustment in accordance with Article V hereof, at the initial purchase price of
$1.00 for each Share purchased subject to adjustment in accordance with Article
V hereof (the "Exercise Price").
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(b) Warrants may be exercised on or after the Exercisability Date by
(i) surrendering at any Warrant Agent Office the Warrant Certificate evidencing
such Warrants with the form of election to purchase Shares set forth on the
reverse side of the Warrant Certificate (the "Election to Exercise") duly
completed and signed by the registered holder or holders thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney, and
(ii) paying in full the Exercise Price for each such Share purchased and any
other amounts required to be paid pursuant to Section 4.01 hereof.
(c) Simultaneously with the exercise of each Warrant, payment in full
of the Exercise Price shall be made in cash or by certified or official bank
check payable to the order of the Company, delivered to the office or agency
where the Warrant Certificate is being surrendered. No payment or adjustment
shall be made on account of any dividends on the Shares issued upon exercise of
a Warrant.
(d) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Agent Office (other than any
Warrant Agent Office that also is an office of the Warrant Agent), such Warrant
Certificate and payment shall be promptly delivered to the Warrant Agent. The
"Exercise Date" for a Warrant shall be the date when all of the items referred
to in the first sentence of paragraphs (b) and (c) of this Section 2.02 are
received by the Warrant Agent at or prior to 2:00 p.m., New York City time, on a
Business Day and the exercise of the Warrants will be effective as of such
Exercise Date. If any items referred to in the first sentence of paragraphs (b)
and (c) are received after 2:00 p.m., New York City time, on a Business Day, the
exercise of the Warrants to which such item relates will be effective on the
next succeeding Business Day. Notwithstanding the foregoing, in the case of an
exercise of Warrants on the Expiration Date (as defined in Section 2.01), if all
of the items referred to in the first sentence of paragraphs (b) and (c) are
received by the Warrant Agent at or prior to 5:00 p.m., New York City time, on
such Expiration Date, the exercise of the Warrants to which such items relate
will be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price,
the Warrant Agent shall: (i) cause an amount equal to the Exercise Price to be
paid to the Company by crediting the same to the account designated by the
Company in writing to the Warrant Agent for that purpose; (ii) advise the
Company within one Business Day by telephone of the amount so deposited to the
Company's account and promptly confirm such telephonic advice in writing; and
(iii) as soon as practicable, advise the Company in writing of the number of
Warrants (giving effect to Section 5.01(i) below) exercised in accordance with
the terms and conditions of this Agreement and the Warrant Certificates, the
instructions of each exercising holder of the Warrant Certificates with respect
to delivery of the Shares to which such holder is entitled upon such exercise,
and such other information as the Company shall reasonably request.
(f) Subject to Section 5.02 hereof, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, the
Company shall issue or cause to be issued to or upon the written order of the
registered holder of the Warrant Certificate evidencing such exercised Warrant
or Warrants, a certificate or certificates evidencing the Shares to which such
holder is entitled, in fully registered form, registered in such name or names
as may be directed by such holder pursuant to the Election to Exercise, as set
forth on the reverse of the Warrant Certificate. The Warrant Agent shall have
no obligation to ascertain the number of Shares to be issued with respect to the
exercised Warrant or
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Warrants. Such certificate or certificates evidencing the Shares shall be deemed
to have been issued and any persons who are designated to be named therein shall
be deemed to have become the holder of record of such Shares as of the close of
business on the Exercise Date. After such exercise of any Warrant or Warrants,
the Company shall also issue or cause to be issued to or upon the written order
of the registered holder of such Warrant Certificate, a new Warrant Certificate,
countersigned by the Warrant Agent pursuant to the Company's written
instruction, evidencing the number of Warrants, if any, remaining unexercised
unless such Warrants shall have expired.
SECTION 2.03. Cancellation of Warrant Certificates. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall be canceled by it and retired. The Warrant Agent shall
cancel all Warrant Certificates surrendered for exchange, substitution, transfer
or exercise in accordance with the terms of this Agreement. The Warrant Agent
shall destroy canceled Warrant Certificates held by it and deliver a certificate
of destruction to the Company. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and pay to the Company within one
Business Day all money received by the Warrant Agent for the purchase of Warrant
Shares through the exercise of such Warrants.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights. (a) Notwithstanding any of the
other provisions of this Agreement, any holder of any Warrant Certificate,
without the consent of the Warrant Agent, the holder of any Shares or the holder
of any other Warrant Certificate, may, in and for its own behalf, enforce, and
may institute and maintain any suit, action or proceeding against the Company
suitable to enforce, its right to exercise the Warrant or Warrants evidenced by
its Warrant Certificate as provided in such Warrant Certificate and in this
Agreement.
(b) Neither the Warrants nor any Warrant Certificate shall entitle the
holders thereof to any of the rights of a holder of Shares, including, without
limitation, the right to vote or to receive any dividends or other payments or
to consent or to receive notice as stockholders in respect of the meetings of
stockholders or for the election of directors of the Company or to share in the
assets of the Company in the event of the liquidation, dissolution or winding up
of the Company's affairs or any other matter, or any rights whatsoever as
stockholders of the Company.
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ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of the Shares
upon the exercise of Warrants or to the separation of the Note Warrants and
Notes; provided, however, that the Company shall not be required to pay any tax
or other governmental charge which may be payable in respect of any transfer
involved in the issue of any Warrant Certificates or any certificates for Shares
in a name other than the registered holder of a Warrant Certificate surrendered
upon the exercise of a Warrant. In any such case, the Company shall not be
required to issue or deliver such Warrant Certificate or certificate for Shares
unless or until the person or persons requesting issuance thereof shall have
paid to the Company the amount of such tax or other governmental charge or shall
have established to the satisfaction of the Company that such tax or other
governmental charge has been paid or an exemption is available therefrom.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number of Shares Issuable.
The number and kind of Shares purchasable upon the exercise of Warrants and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Stock Splits, Combinations, etc. In case the Company shall hereafter
(i) pay a dividend or make a distribution on its Common Stock in shares of its
capital stock (whether shares of Common Stock or of capital stock of any other
class), (ii) subdivide its outstanding shares of Common Stock or (iii) combine
its outstanding shares of Common Stock into a smaller number of shares, the
number of Shares purchasable upon exercise of each Warrant immediately prior
thereto shall be adjusted so that the holder of any Warrant thereafter exercised
shall be entitled to receive the number of Shares which such holder would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this paragraph shall
become effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this paragraph, the holder of any Warrant thereafter exercised
shall become entitled to receive shares of two or more classes of capital stock
of the Company, the Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such classes of capital stock.
(b) Reclassification, Combinations, Mergers, etc. In case of any
reclassification or change of outstanding shares of Common Stock (other than as
set forth in Section 5.01(a) above and other than a change in par value, or from
par value to no par value, or from no par value to par value, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger in which the Company is the continuing corporation and which does
not result in any reclassification or
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change of the then outstanding shares of Common Stock or other capital stock of
the Company (other than a change in par value, or from par value to no par
value, or from no par value to par value or as a result of a subdivision or
combination)) or in case of any sale or conveyance to another corporation of all
or substantially all of the assets of the Company, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the Company
or such a successor or purchasing corporation, as the case may be, shall
forthwith make lawful and adequate provision whereby the holder of such Warrant
then outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock issuable upon
exercise of such Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and enter into a supplemental warrant
agreement so providing. Such provisions shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article V. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental warrant agreement is an affiliate of
the formed, surviving or transferee corporation, that issuer shall join in the
supplemental warrant agreement. The above provisions of this paragraph (b) shall
similarly apply to successive reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales or conveyances.
In case of any such reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant Agreement to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Article V. The foregoing provisions of this Section 5.01(b) shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
(c) Issuance of Common Stock, Options or Convertible Securities. For the
purposes of this Warrant Agreement, "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued or deemed to be issued by the Company
after the Effective Date, other than Excluded Shares (as defined below).
In the event the Company shall, at any time or from time to time after the
Effective Date, issue, sell, distribute or otherwise grant in any manner
(including by assumption) shares of Common Stock or any rights to subscribe for
or to purchase, or any warrants or options for the purchase of, Common Stock or
any stock or securities convertible into or exchangeable for Common Stock (any
such rights, warrants or options being herein called "Options" and any such
convertible or exchangeable stock or securities being herein called "Convertible
Securities") or any Convertible Securities (other than upon exercise of any
Option), whether or not such Options or the rights to convert or exchange such
Convertible Securities are immediately exercisable, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise and/or conversion of such Options or
Convertible Securities, shall be deemed to be Additional Shares of Common Stock.
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For purposes of this Warrant Agreement, the term "Issuance Date" shall mean
(i) with respect to Additional Shares of Common Stock deemed to have been issued
in connection with the issuance of an Option or Convertible Security, the date
such Option or Convertible Security is issued and (ii) in all other cases, the
actual date Additional Shares of Common Stock are issued.
For the purposes of this Warrant Agreement, "Excluded Shares" shall mean:
(i) shares for which the consideration per share as determined pursuant to
paragraph (d) below would be equal to or more than the Current Market Value
determined on the day prior to the Issuance Date; (ii) shares of Common Stock
issuable upon the exercise of Options or conversion of Convertible Securities
existing as of the Effective Date; and (iii) shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes) issued pursuant to any
stock options granted or obtained after the Effective Date pursuant to any stock
option plan adopted by the Company's Board of Directors for the benefit of
employees of the Company. The issuance of Excluded Shares shall not be an
issuance of Additional Shares of Common Stock, and shall not give rise to a
right to purchase the securities pursuant to paragraph (d) below.
In any such case in which the Additional Shares of Common Stock are deemed
to be issued, no right to purchase securities under Section 5.01(d) below will
accrue upon the subsequent issue of shares of Common Stock upon the exercise
and/or conversion or exchange of such Option or Convertible Security unless such
Option or Convertible Security shall have been amended or modified prior to
exercise or conversion or exchange so as to increase the number of Additional
Shares of Common Stock deemed to have been issued thereunder or decrease the
exercise and/or conversion or exchange price payable thereunder to an amount
less than Current Market Value as of the Issuance Date thereof.
(d) If the price per share at which Common Stock is issued or Common Stock
is issuable upon the exercise of such Options or upon the conversion or exchange
of such Convertible Securities (determined by dividing (i) the aggregate amount,
if any, received or receivable by the Company as consideration for the issuance,
sale, distribution or granting of such Common Stock or Options or any such
Convertible Security, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance of Common Stock
or the exercise of all such Options or upon conversion or exchange of all such
Convertible Securities, plus, in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the conversion or exchange of all such Convertible Securities, by
(ii) the total maximum number of shares of Common Stock to be issued or issuable
upon the exercise of all such Options or upon the conversion or exchange of all
such Convertible Securities or upon the conversion or exchange of all
Convertible Securities issuable upon the exercise of all Options) shall be less
than the Current Market Value per share of Common Stock (determined pursuant to
Section 5.01(e)) on the record date for the issuance, sale, distribution or
granting of such Options (any such event being herein called a "Distribution")
then, the Company shall offer to sell to each holder of Warrants, at the same
price and on the same terms offered to all other prospective buyers (provided
that the holders of Warrants shall not be required to buy any other securities
in order to buy such Common Stock or Convertible Securities), a portion of such
Common Stock or Convertible Securities that is equal to such holder's portion of
the Common Stock then outstanding if immediately prior thereto all the Warrants
had been exercised. Each such holder may elect to buy all or any portion of the
Common Stock or Convertible Securities offered or may decline to purchase any
such securities.
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(e) Current Market Value. As used herein, the term "Current Market Value"
per share of Common Stock or any other security at any date means, on any date
of determination (a) the average of the daily closing sale prices for each of 15
business days immediately preceding such date (or such shorter number of days
during which such security has been listed or traded), if the security has been
listed on the New York Stock Exchange, the American Stock Exchange or other
national securities exchanges or the NASDAQ National Market for at least 10
business days prior to such date, (b) if such security is not so listed or
traded, the average of the daily closing bid prices for each of the 15 business
days immediately preceding such date (or such shorter number of days during
which such security had been quoted), if the security has been quoted on a
national over-the-counter market for at least 10 business days, and (c)
otherwise, the value of the security most recently determined as of a date
within the six months preceding such day by the Company's Board of Directors.
(f) Consideration Received. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by the
Company in respect thereof shall be deemed to be the then fair market value of
such consideration (as determined in good faith by the Board of Directors of the
Company). If any Options shall be issued in connection with the issuance and
sale of other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued without
consideration; provided, however, that if such Options have an exercise price
equal to or greater than the Current Market Value of the Common Stock on the
date of issuance of such Options, then such Options shall be deemed to have been
issued for consideration equal to such exercise price.
(g) Changes in Options and Convertible Securities. If the exercise price
provided for in any Options referred to in Section 5.01(d) above, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section 5.01(d) above, or the rate at
which any Convertible Securities referred to in Section 5.01(d) above are
convertible into or exchangeable for Common Stock shall change at any time to a
price which is less than the Current Market Value thereof as of the Issuance
Date, then the Company shall make the offer to holders of the Warrants as
required by Section 5.01(d) above.
(h) Other Action Affecting Common Stock. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action described in this Article V, then the number of Shares for which
this Warrant is exercisable shall be adjusted in such manner as may be equitable
in the circumstances. If the Company shall at any time and from time to time
issue or sell (i) any shares of any class of common stock other than Common
Stock, (ii) any evidences of its indebtedness, shares of stock or other
securities which are convertible into or exchangeable for such shares of common
stock, with or without the payment of additional consideration in cash or
property or (iii) any warrants or other rights to subscribe for or purchase any
such shares of common stock or any such evidences, shares of stock or other
securities, then in each such case such issuance shall be deemed to be of, or in
respect of, Common Stock for purposes of this Article V; provided, however,
that, without limiting the generality of the foregoing, if the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution of, common stock
other than Common Stock, including shares of non-voting common stock, then the
number of Shares
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for which this Warrant is exercisable immediately after the occurrence of any
such event shall be adjusted to equal the aggregate number of shares of such
common stock and of Common Stock which a record holder of the same number of
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event.
(i) Statement of Warrants. Irrespective of any adjustment in the number or
kind of Shares issuable upon the exercise of the Warrants, Warrants theretofore
or thereafter issued shall continue to express the same number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
SECTION 5.02. Fractional Interest. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same holder, the number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
shares of Common Stock acquirable on exercise of the Warrants so presented. If
any fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall direct the transfer agent for the Common Stock to
pay an amount in cash calculated by the Company to equal the then Current Market
Value per share (determined pursuant to Section 5.01(e)) multiplied by such
fraction computed to the nearest whole cent. Holders of Warrants, by their
acceptances of the Warrant Certificates, expressly waive any and all rights to
receive any fraction of a share of Common Stock or a stock certificate
representing a fraction of a share of Common Stock.
SECTION 5.03. When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
SECTION 5.04. Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Article V, such determination may
be challenged in good faith by holders holding a majority of the outstanding
Warrants (the "Majority Holders"), and any dispute shall be resolved by an
investment banking firm of national standing selected by the Company. The fee
of such investment banking firm shall be paid by the Company, unless such fair
market value as determined by the investment banking firm is more than 95% of
the fair market value determined by the Board of Directors of the Company, in
which case the challenging holders shall be jointly and severally liable for
such fee.
SECTION 5.05. Treasury Stock. The sale or other disposition of any
issued shares of Common Stock owned or held by or for the account of the Company
shall be deemed an issuance thereof and a repurchase thereof and designation of
such shares as treasury stock shall be deemed to be a redemption thereof for the
purposes of this Agreement.
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SECTION 5.06. Notices to Warrant Holders. In connection with any
adjustment pursuant to this Article V, the Company shall (i) promptly after such
adjustment or, if earlier, at least five (5) days prior to the date on which
notice of such adjustment is required to be given, if at all, to The Depository
Trust Company cause to be filed with the Warrant Agent a certificate of an
officer of the Company setting forth the number of shares (or portion thereof)
issuable after such adjustment, upon exercise of a Warrant, which certificate
shall be conclusive evidence of the correctness of the matters set forth
therein, and (ii) promptly after such adjustment cause to be given to each of
the registered holders of the Warrant Certificates at his address appearing on
the Warrant Register written notice of such adjustments by first-class mail,
postage prepaid. The Warrant Agent shall be entitled to conclusively rely on
the above-referenced officer's certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same
from time to time to any holder desiring an inspection thereof during normal
business hours upon reasonable notice. The Warrant Agent shall not at any time
be under any duty or responsibility to any holder to determine whether any facts
exist that may require any adjustment of the number of Shares issuable on
exercise of the Warrants or the Exercise Price, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment or the validity or value (or the kind or amount) of
any Shares which may be issuable on exercise of the Warrants. The Warrant Agent
shall not be responsible for any failure of the Company to make any cash payment
or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other common stock or property upon the exercise of any Warrant.
The Company shall, in addition, promptly notify the holders of the Warrants
of any determination of its Board of Directors pursuant to Section 5.01(i) that
any actions affecting its Common Stock will not require an adjustment to the
number of Shares for which a Warrant is exercisable, and shall specify in such
notice the reasons for such determination. In the event that the Majority
holders shall challenge any of the calculations set forth in such notice within
20 days after the Company's delivery thereof, the Company shall retain a firm of
independent certified public accountants or law firm of national standing
selected by the Company to prepare and execute a certificate verifying that no
adjustment is required. The Company shall promptly cause a signed copy of any
certificate prepared pursuant to this Section 5.06 to be delivered to each
holder at his address appearing in the Warrant Register. The Company shall keep
at its office or agency designated pursuant to Section 1.10 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours upon reasonable notice by any holder or any
prospective purchaser of a Warrant designated by a holder thereof.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent. The Company hereby appoints U.S. Trust
Company of Texas, N.A. as warrant agent (and in all capacities in this
Agreement, the "Warrant Agent") of the Company in respect of the Warrants and
the Warrant Certificates upon the terms and subject to the conditions herein and
in the Warrant Certificates set forth; and U.S. Trust Company of Texas, N.A.
hereby accepts such appointment. The Warrant Agent shall have the powers and
authority specifically granted to and conferred upon it in the Warrant
Certificates and this Agreement and such further powers and authority to act on
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behalf of the Company as the Company may hereafter grant to or confer upon it
and it shall accept in writing. All of the terms and provisions with respect to
such powers and authority contained in the Warrant Certificates are subject to
and governed by the terms and provisions hereof.
SECTION 6.02. Conditions of Warrant Agent's Obligations. The Warrant
Agent accepts its obligations herein set forth upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of which
the Company agrees and to all of which the rights hereunder of the holders from
time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be agreed
upon with the Company in writing for all services rendered by it and the Company
agrees promptly to pay such compensation and to reimburse the Warrant Agent for
its reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred without gross negligence or willful misconduct on its part in
connection with the services rendered by it hereunder. The Company also agrees
to indemnify the Warrant Agent, each predecessor Warrant Agent, and their
respective directors, officers, affiliates, agents and employees for, and to
hold it and its directors, officers, affiliates, agents and employees harmless
against, any loss, liability or expense of any nature whatsoever (including,
without limitation, fees and expenses of counsel) incurred without gross
negligence or willful misconduct on the part of the Warrant Agent or predecessor
Warrant Agent, arising out of or in connection with its acting as such Warrant
Agent hereunder and its exercise or failure to exercise of its rights and
performance of its obligations hereunder. The obligations of the Company under
this Section 6.02 shall survive the exercise and the expiration of the Warrant
Certificates and the resignation and removal of the Warrant Agent.
(b) In acting under this Agreement and in connection with the Warrant
Certificates, the Warrant Agent is acting solely as agent of the Company and
does not assume any obligation or relationship of agency or trust for or with
any of the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel and any advice or
written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion.
(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or thing
suffered by it in reliance upon any Warrant Certificate, notice, direction,
consent, certificate, affidavit, opinion of counsel, instruction, statement or
other paper or document reasonably believed by it to be genuine and to have been
presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("Related Parties"), may become the owners of, or acquire any interest
in, Warrant Certificates, shares or other obligations of the Company with the
same rights that it or they would have it if were not the Warrant Agent
hereunder and, to the extent permitted by applicable law, it or they may engage
or be interested in any financial or other transaction with the Company and may
act on, or as depositary, trustee or agent for, any committee or body of holders
of shares or other obligations of the Company as freely as if it were not the
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Warrant Agent hereunder. Nothing in this Agreement shall be deemed to prevent
the Warrant Agent or such Related Parties from acting in any other capacity for
the Company.
(f) The Warrant Agent shall not be under any liability for interest
on, and shall not be required to invest, any money at any time received by it
pursuant to any of the provisions of this Agreement or of the Warrant
Certificates.
(g) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement (or any term or provision hereof) or the
execution and delivery hereof or in respect of the validity or execution of any
Warrant Certificate (except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication thereon)
shall be taken as the statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of the same. The Warrant Agent does not make
any representation as to the validity or sufficiency of this Agreement or the
Warrant Certificates; provided, however, that the Warrant Agent shall not be
relieved of its duty to authenticate the Warrant Certificates as authorized by
this Agreement. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with respect
to any matter contemplated by this Warrant Agreement, it may require:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Warrant Agreement relating to the proposed action have been complied
with; and
(2) if reasonably necessary in the sole judgment of the Warrant
Agent, an opinion of counsel for the Company stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
Each Officers' Certificate or, if requested, an opinion of counsel
with respect to compliance with a condition or covenant provided for in this
Warrant Agreement shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
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(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
(j) The Warrant Agent shall be obligated to perform only such duties
as are herein and in the Warrant Certificates specifically set forth and no
implied duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant Agent and delivered
by it to the Company pursuant to this Agreement. The Warrant Agent shall have
no duty or responsibility in case of any default by the Company in the
performance of its covenants or agreements contained in the Warrant Certificates
or in the case of the receipt of any written demand from a holder of a Warrant
Certificate with respect to such default, including, without limiting the
generality of the foregoing, any duty or responsibility to initiate or attempt
to initiate any proceedings at law or otherwise or, except as provided in
Section 7.02 hereof, to make any demand upon the Company. The Warrant Agent
shall not be obligated to perform any duty to the extent prohibited by law.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if in
writing and signed by its chairman of the Board of Directors, its president, its
treasurer, its controller or any vice president or its secretary or any
assistant secretary.
(1) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the chairman of the Board of Directors, the president, the
treasurer, the controller, any vice president or the secretary of the Company or
any other officer or official of the Company reasonably believed to be
authorized to give such instructions and to apply to such officers or officials
for advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions with respect to any matter arising in connection
with the Warrant Agent's duties and obligations arising under this Agreement.
Such application by the Warrant Agent for written instructions from the Company
may, at the option of the Warrant Agent, set forth in writing any action
proposed to be taken or omitted by the Warrant Agent with respect to its duties
or obligations under this Agreement and the date on or after which such action
shall be taken and the Warrant Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein (which date shall be not less than ten Business
Days after the Company receives such application unless the Company consents to
a shorter period), provided that (i) such application includes a statement to
the effect that it is being made pursuant to this paragraph (n) and that unless
objected to prior
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to such date specified in the application, the Warrant Agent will not be liable
for any such action or omission to the extent set forth in such application and
(ii) prior to taking or omitting any such action, the Warrant Agent has not
received written instructions objecting to such proposed action or omission.
(o) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the chairman of the Board of
Directors, the president, the treasurer, the controller, any vice president or
the secretary of the Company or any other officer or official of the Company
reasonably believed to be authorized to give such instructions and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(p) The Warrant Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder.
SECTION 6.03. Resignation and Appointment of Successor. (a) The
Company agrees, for the benefit of the holders from time to time of the Warrant
Certificates, that there shall at all times be a Warrant Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective, provided that
such date shall be at least 30 days after the date on which such notice is given
unless the Company agrees to accept less notice. Upon receiving such notice of
resignation, or in the event the Company shall determine not to continue to act
as its own Warrant Agent, the Company shall promptly appoint a successor Warrant
Agent, qualified as provided in Section 6.03(d) hereof, by written instrument in
duplicate signed on behalf of the Company, one copy of which shall be delivered
to the resigning Warrant Agent and one copy to the successor Warrant Agent. As
provided in Section 6.03(d) hereof, such resignation shall become effective upon
the earlier of (x) the acceptance of the appointment by the successor Warrant
Agent or (y) 30 days after receipt by the Company of notice of such resignation.
The Company may, at any time and for any reason, and shall, upon any event set
forth in the next succeeding sentence, remove the Warrant Agent and appoint a
successor Warrant Agent by written instrument in duplicate, specifying such
removal and the date on which it is intended to become effective, signed on
behalf of the Company, one copy of which shall be delivered to the Warrant Agent
being removed and one copy to the successor Warrant Agent. The Warrant Agent
shall be removed as aforesaid if it shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or a receiver of the Warrant Agent or of
its property shall be appointed, or any public officer shall take charge or
control of it or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation. Any removal of the Warrant Agent and any
appointment of a successor Warrant Agent shall become effective upon acceptance
of appointment by the successor Warrant Agent as provided in Section 6.03(d).
Upon effectiveness of the resignation or removal of the Warrant Agent in
accordance with this Section 6.03(b), the Warrant Agent shall have no further
obligation or duties under this Agreement. As soon as practicable after
appointment of the successor Warrant Agent, the Company shall cause written
notice of the change
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<PAGE>
in the Warrant Agent to be given to each of the registered holders of the
Warrants in the manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant Agent, if the Company
shall fail to appoint a successor Warrant Agent within a period of 30 days after
receipt of such notice of resignation or removal, then the holder of any Warrant
Certificate or the Warrant Agent may apply to a court of competent jurisdiction
for the appointment of a successor to the Warrant Agent. Pending appointment of
a successor to the Warrant Agent, either by the Company or by such a court, the
duties of the Warrant Agent shall be carried out by the Company.
(d) Any successor Warrant Agent, whether appointed by the Company or
by a court, shall be a bank or trust company in good standing, incorporated
under the laws of the United States of America or any State thereof and having,
at the time of its appointment, a combined capital surplus of at least $50
million. Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder and all the provisions of this Agreement, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Warrant Agent hereunder,
and such predecessor shall thereupon become obligated to (i) transfer and
deliver, and such successor Warrant Agent shall be entitled to receive, all
securities, records or other property on deposit with or held by such
predecessor as Warrant Agent hereunder and (ii) upon payment of the amounts then
due it pursuant to Section 6.02(a) hereof, pay over, and such successor Warrant
Agent shall be entitled to receive, all money deposited with or held by any
predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder may
be merged or converted, or any corporation or bank with which the Warrant Agent
may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or otherwise transfer
all or substantially all of its corporate trust business, shall be the successor
to the Warrant Agent under this Agreement (provided that such corporation or
bank shall be qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties hereto.
(f) No Warrant Agent under this Warrant Agreement shall be personally
liable for any action or omission of any successor Warrant Agent or of the
Company.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment. This Agreement and the terms of the Warrants
may be amended by the Company and the Warrant Agent, without the consent of the
holder of any Warrant Certificate, for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective or inconsistent provision
contained herein or therein or in any other manner which the Company may deem
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<PAGE>
necessary or desirable and which shall not adversely affect in any material
respect the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement and the terms
of the Warrants with the consent of holders of not less than a majority in
number of the then outstanding Warrants for the purpose of adding any provision
to or changing in any manner or eliminating any of the provisions of this
Agreement or modifying in any manner the rights of the holders of the
outstanding Warrants; provided, however, that no such modification that
increases the Exercise Price, reduces the period of time during which the
Warrants are exercisable hereunder, otherwise materially and adversely affects
the exercise rights of the holders of the Warrants, reduces the percentage
required for modification, or effects any change to this Section 7.01 may be
made with respect to an outstanding Warrant without the consent of the holder of
such Warrant.
Any modification or amendment made in accordance with this Agreement will
be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and Warrant Agent. If
the Warrant Agent shall receive any notice or demand addressed to the Company by
the holder of a Warrant Certificate pursuant to the provisions hereof or of the
Warrant Certificates, the Warrant Agent shall promptly forward such notice or
demand to the Company.
SECTION 7.03. Address for Notices to Parties and for Transmission of
Documents. All notices hereunder to the parties hereto shall be deemed to have
been given when sent by certified or registered mail, postage prepaid, or by
telecopy, confirmed by first class mail, postage prepaid, addressed to a party
hereto as follows:
To the Company:
Forman Petroleum Corporation
650 Poydras Street, Suite 2200
New Orleans, Louisiana 70130-6101
(Telecopy no. (504) 522-1796)
Attention: President
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<PAGE>
with copies to:
Vinson & Elkins L.L.P.
1001 Fannin Street, Suite 2300
Houston, Texas 77002-6760
Attention: Alan P. Baden
Facsimile: (713) 615-5437
Telephone: (713) 758-2430
To the Warrant Agent:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust Department
SECTION 7.04. Notices to Holders. Notices to holders of Warrants shall
be mailed to such holders at the addresses of such holders as they appear in the
Warrant Register. Any such notice shall be sufficiently given if sent by first-
class mail, postage prepaid.
SECTION 7.05. APPLICABLE LAW. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT ISSUED HEREUNDER AND OF THE
RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
SECTION 7.06. Obtaining of Governmental Approvals. The Company will
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and Securities Acts filings
under United States Federal and State laws, and the rules and regulations of all
stock exchanges on which the Warrants may be listed, which may be or become
requisite in connection with the issuance, sale, transfer, and delivery of the
Warrant Certificates, the exercise of the Warrants or the issuance, sale,
transfer and delivery of the shares issued upon exercise of the Warrants, it
being understood, however, that the only contractual registration rights of the
holders of the Warrant Certificates are those set forth in the Registration
Rights Agreement dated as of June 3, 1997 (the "Registration Rights Agreement")
between the Company and the Initial Purchaser.
SECTION 7.07. Persons Having Rights Under Agreement. Nothing in this
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person other than the Company, the Warrant Agent and the holders from
time to time of the Warrant Certificates any right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation, promise or
agreement hereof; and all covenants,
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<PAGE>
conditions, stipulations, promises and agreements in this Agreement contained
shall be for the sole and exclusive benefit of the Company and the Warrant Agent
and their successors and of the holders from time to time of the Warrant
Certificates.
SECTION 7.08. Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 7.09. Counterparts. This Agreement may be executed in any number
of Counterparts, each of which so executed shall be deemed to be an original;
but such Counterparts shall together constitute but one and the same instrument.
SECTION 7.10. Inspection of Agreement. A copy of this Agreement shall be
available at all reasonable times at the Warrant Agent Office, for inspection by
the holder of any Warrant Certificate. The Warrant Agent may require such
holder to submit his Warrant Certificate for inspection by it.
SECTION 7.11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Company as
of the day and year first above written.
FORMAN PETROLEUM CORPORATION
By: /s/ McLain J. Forman
---------------------------------------
Name: McLain J. Forman
Title: Chairman of the Board, Chief
Executive Officer and President
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Warrant Agent
By: /s/ J. Stohlmann
---------------------------------------
Name: John C. Stohlmann
Title: Vice President
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<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR WARRANTS IN
CERTIFICATED FORM, THIS WARRANT MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.]/1/
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT ASSET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1)REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" ( AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT)(AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO FORMAN PETROLEUM CORPORATION (THE "COMPANY") OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR FURNISHES ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE COMPANY AND THE
WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
- ---------------------
/1/ This paragraph is to be included only if the Warrant Certificate is in
global form.
-1-
<PAGE>
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF
THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND THE COMPANY SUCH
CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED AS OF
JUNE 3, 1997 BETWEEN THE COMPANY AND JEFFERIES & COMPANY, INC., A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
CUSIP #[ ]
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
FORMAN PETROLEUM CORPORATION
This Warrant Certificate certifies that [ ], or registered assigns, is
the registered holder of [ ] Warrants (the "Warrants") to purchase shares of
Common Stock, no par value (the "Common Stock"), of Forman Petroleum
Corporation, a Louisiana corporation (the "Company"). Each Warrant entitles the
holder to purchase from the Company at any time on or after June 3, 1997 and
until 5:00 p.m., New York City time, on June 1, 2004 (the "Expiration Date"),
0.07267 fully paid and non-assessable shares of Common Stock (as such number may
be adjusted from time to time, the "Shares", which may also include any other
securities or property purchasable upon exercise of a Warrant, such adjustment
and inclusion each as provided in the Warrant Agreement) at the exercise price
(the "Exercise Price") of $1.00 per Share upon surrender of this Warrant
Certificate and payment of the Exercise Price at any office or agency maintained
for that purpose by the Company (the "Warrant Agent Office"), subject to the
conditions set forth herein and in the Warrant Agreement.
The Exercise Price shall be payable in cash or by certified or official
bank check in the lawful currency of the United States of America which as of
the time of payment is legal tender for payment of public or private debts. The
Company has initially designated the office of United States Trust Company, an
affiliate of the Warrant Agent, at its agent's office in the Borough of
Manhattan, the City of New York, as the initial Warrant Agent Office. The
number of Shares issuable upon exercise of the Warrants
-2-
<PAGE>
("Exercise Rate") is subject to adjustment upon the occurrence of certain events
set forth in the Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City time, on
June 1, 2004 shall thereafter be void.
Reference is hereby made to the further provisions on the reverse hereof,
which provisions shall for all purposes have the same effect as though fully set
forth at this place. Capitalized terms used in this Warrant Certificate but not
defined herein shall have the meanings ascribed thereto in the Warrant
Agreement.
This Warrant Certificate shall not be valid unless authenticated by the
Warrant Agent, as such term is used in the Warrant Agreement.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
WITNESS the corporate seal of the Company and the signatures of its duly
authorized officers.
Dated: _________________, 19__
FORMAN PETROLEUM CORPORATION
By:___________________________________
Name:____________________________
Title:___________________________
Attest:
By:_____________________________
Name:______________________
Title:_____________________
Certificate of Authentication:
This is one of the Warrants
referred to in the within-
mentioned Warrant Agreement:
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Warrant Agent
By:_____________________________
Authorized Signatory
-3-
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
FORMAN PETROLEUM CORPORATION
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, each of which represents the right to purchase at
any time on or after June 3, 1997, and until 5:00 p.m., New York City time, on
June 1, 2004, 0.07267 Shares, subject to adjustment as set forth in the Warrant
Agreement. The Warrants are issued pursuant to a Warrant Agreement dated as of
June 3, 1997 (the "Warrant Agreement"), duly executed and delivered by the
Company for the benefit of the holders from time to time of the Warrant
Certificates, which Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Warrant Agent, the Company and the holders (the words "holders" or
holder" meaning the registered holders or registered holder) of the Warrant
Certificates. Warrants may be exercised by (i) surrendering at any Warrant
Agent Office this Warrant Certificate with the form of Election to Exercise set
forth hereon duly completed and executed and (ii) paying in full the Warrant
Exercise Price for each such Warrant exercised and any other amounts required to
be paid pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrant to which such items
relate will be effective on such Business Day. If any items referred to in the
last sentence of the preceding paragraph are received after 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrants to which such item
relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on the
Expiration Date, if all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to 5:00 p.m.,
New York City time, on such Expiration Date, the exercise of the Warrants to
which such items relate will be effective on the Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as practicable after
the exercise of any Warrant or Warrants, the Company shall issue or cause to be
issued to or upon the written order of the registered holder of this Warrant
Certificate, a certificate or certificates evidencing the Share or Shares to
which such holder is entitled, in fully registered form, registered in such name
or names as may be directed by such holder pursuant to the Election to Exercise,
as set forth on the reverse of this Warrant Certificate. Such certificate or
certificates evidencing the Share or Shares shall be deemed to have been issued
and any persons who are designated to be named therein shall be deemed to have
become the holder of record of such Share or Shares as of the close of business
on the date upon which the exercise of this Warrant was deemed to be effective
as provided in the preceding paragraph.
The Company will not be required to issue fractional shares of Common Stock
upon exercise of the Warrants or distribute Share certificates that evidence
fractional shares of Common Stock. In lieu of fractional shares of Common
Stock, there shall be paid to the registered Holder of this Warrant Certificate
-4-
<PAGE>
at the time such Warrant Certificate is exercised an amount in cash equal to the
same fraction of the current market price per share of Common Stock as
determined in accordance with the Warrant Agreement.
Warrant Certificates, when surrendered at any Warrant Agent Office by the
holder thereof in person or by legal representative or attorney duly authorized
in writing, may be exchanged for a new Warrant Certificate or new Warrant
Certificates evidencing in the aggregate a like number of Warrants, in the
manner and subject to the limitations provided in the Warrant Agreement, without
charge except for any tax or other governmental charge imposed in connection
therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered holder
hereof as the absolute owner of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone) for the purpose of
any exercise hereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in New York
City or the City of Houston, Texas, (ii) the principal national securities
exchange or market, if any, on which the Common Stock is listed or admitted to
trading and (iii) the principal national securities exchange or market, if any,
on which the Warrants are listed or admitted to trading are open for business.
-5-
<PAGE>
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise _______________ of
the Warrants represented by this Warrant Certificate and purchase the whole
number of Shares issuable upon the exercise of such Warrants and herewith
tenders payment for such Shares in the amount of $_____in cash or by certified
or official bank check, in accordance with the terms hereof. The undersigned
requests that a certificate representing such Shares be registered in the name
of _________________, whose address is _____________, and that such certificate
be delivered to ____________, whose address is ____________________. Any cash
payments to be paid in lieu of a fractional Share should be made to __________,
whose address is _____________________, and the check representing payment
thereof should be delivered to _______________, whose address is
_______________________.
Name of holder of
Warrant Certificate: _________________________________
(Please Print)
Tax Identification or
Social Security Number: _____________________________
Signature: _________________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
Dated ______________ , ___
-6-
<PAGE>
ASSIGNMENT
For value received, _________________________________ hereby sells, assigns
and transfers unto _________________________________ the within Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint _________________________________
attorney, to transfer said Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Dated _________________ , ____
Signature:_________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
-7-
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS/2/
The following exchanges of a part of this Global Warrant for Definitive Warrants
have been made:
Number of
Warrants of
Amount of Amount of this Global Signature of
decrease in increase in Warrant authorized
Number of Number of following signatory of
Date of Warrants of this Warrants of this such decrease Warrant Agent
Exchange Global Warrant Global Warrant (or increase) or Depositary
- --------------------------------------------------------------------------------
- ---------------
/2/ This is to be included only if the Warrant Certificate is in global form.
-8-
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Forman Petroleum
Corporation
This Certificate relates to _____ Warrants held in* _____ book-entry or
*_____ certificated form by _________________ (the "Transferor").
The Transferor:*
[ ] has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Warrant (or the portion thereof indicated above) or
[ ] has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant, the
Transferor does hereby certify that the Transferor is familiar with the Warrant
Agreement relating to the above captioned Warrants and the restrictions on
transfers thereof as provided in Section 1.08 of such Warrant Agreement, and
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Act") because[*]:
[ ] Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 1.08(a)(ii)(y)(A) or Section
1.08(d)(i)(A) of the Warrant Agreement).
[ ] Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Act), in reliance on Rule 144A or in
accordance with Regulation S under the Act.
[ ] Such Warrant is being transferred in accordance with Rule 144 under
the Act.
[ ] Such Warrant is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act, other than Rule
144A or Rule 144 or Regulation S under the Act. An opinion of counsel to the
effect that such transfer does not require registration under the Act
accompanies this Certificate.
[INSERT NAME OF TRANSFEROR]
By: _____________________________
Date: _________________
*Check applicable box.
<PAGE>
EXHIBIT C
Transferee Letter of Representation
Forman Petroleum Corporation
650 Poydras Street, Suite 2200
New Orleans, Louisiana 70130-6101
Ladies and Gentlemen:
In connection with our proposed purchase of warrants ("Warrants") to
purchase Common Stock, no par value (the "Common Stock"; together with the
Warrants, the "Securities"), of Forman Petroleum Corporation (the "Company") we
confirm that:
1. We understand that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and, unless so
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Securities to offer, sell or otherwise transfer such Securities
prior to the date which is two years after the later of the date of original
issue and the last date on which the Company or any affiliate of the Company
was the owner of such Securities, or any predecessor thereto (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) so long as the Securities are eligible for resale pursuant to Rule
144A, under the Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act that is purchasing for his own account or for the account of
such an institutional "accredited investor," or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and to compliance with
any applicable state securities laws. The foregoing restrictions on resale
will not apply subsequent to the Resale Restriction Termination Date. If any
resale or other transfer of the Securities is proposed to be made pursuant to
clause (e) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the
form of this letter to the warrant agent under the Warrant Agreement pursuant
to which the Securities were issued (the "Warrant Agent") which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of subparagraph (a)(l), (2), (3) or (7) of Rule
501 under the Securities Act and that it is acquiring such Securities for
investment purposes and not for distribution in violation of the Securities
Act. The Warrant Agent and the Company reserve the right prior to any offer,
sale or other transfer prior to the Resale Restriction Termination Date of the
Securities pursuant to
<PAGE>
clause (e) or (f) above to require the delivery of a written opinion of
counsel, certifications, and or other information satisfactory to the Company
and the Warrant Agent.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Securities for investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act and we have such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of our investment in the Securities, and we and any
accounts for which we are acting are each able to bear the economic risk of
our or its investment for an indefinite period.
3. We are acquiring the Securities purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. You, the Warrant Agent and your respective counsel are entitled to
rely upon this letter and you are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
_______________________________
(Name of Purchaser)
By: ___________________________
Date:__________________________
Upon transfer the Securities would be registered in the name of the new
beneficial owner as follows:
Name: ______________________________
Address: ___________________________
Taxpayer ID Number: ________________
C-2
<PAGE>
EXHIBIT 10.4
================================================================================
WARRANT AGREEMENT
Dated as of June 3, 1997
Of
FORMAN PETROLEUM CORPORATION
------------------------
---------
Warrants to Purchase Shares of Common Stock,
No Par Value
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES................... 1
SECTION 1.01. Issuance of Warrants........................................ 1
SECTION 1.02. Form of Warrant Certificates................................ 2
SECTION 1.03. Execution of Warrant Certificates........................... 2
SECTION 1.04. Authentication and Delivery................................. 2
SECTION 1.05. Temporary Warrant Certificates.............................. 3
SECTION 1.06. Separation of Warrants and Notes............................ 3
SECTION 1.07. Registration................................................ 3
SECTION 1.08. Registration of Transfers and Exchanges..................... 4
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated
Warrant Certificates........................................ 10
SECTION 1.10. Offices for Exercise, etc................................... 11
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE............ 11
SECTION 2.01. Duration of Warrants........................................ 11
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery........... 11
SECTION 2.03. Cancellation of Warrant Certificates........................ 13
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS...................... 13
SECTION 3.01. Enforcement of Rights....................................... 13
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY..................... 13
SECTION 4.01. Payment of Taxes............................................ 13
ARTICLE V
ADJUSTMENTS............................... 14
SECTION 5.01. Adjustment of Exercise Price and Number of
Shares Issuable............................................. 14
SECTION 5.02. Fractional Interest......................................... 17
SECTION 5.03. When Adjustment Not Required................................ 18
SECTION 5.04. Challenge to Good Faith Determination....................... 18
SECTION 5.05. Treasury Stock.............................................. 18
-i-
<PAGE>
SECTION 5.06. Notices to Warrant Holders.................................. 18
ARTICLE VI
CONCERNING THE WARRANT AGENT....................... 19
SECTION 6.01. Warrant Agent............................................... 19
SECTION 6.02. Conditions of Warrant Agent's Obligations................... 19
SECTION 6.03. Resignation and Appointment of Successor.................... 23
ARTICLE VII
MISCELLANEOUS.............................. 24
SECTION 7.01. Amendment................................................... 24
SECTION 7.02. Notices and Demands to the Company and
Warrant Agent............................................... 25
SECTION 7.03. Address for Notices to Parties and for
Transmission of Documents................................... 25
SECTION 7.04. Notices to Holders.......................................... 25
SECTION 7.05. APPLICABLE LAW.............................................. 26
SECTION 7.06. Obtaining of Governmental Approvals......................... 26
SECTION 7.07. Persons Having Rights Under Agreement....................... 26
SECTION 7.08. Headings.................................................... 26
SECTION 7.09. Counterparts................................................ 26
SECTION 7.10. Inspection of Agreement..................................... 26
SECTION 7.11. Successors.................................................. 26
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate to be Delivered Upon
Exchange or Registration of
Transfer of Warrants
EXHIBIT C - Transferee Letter of Representation
-ii-
<PAGE>
INDEX OF DEFINED TERMS
Defined Term Section
Additional Warrants............................................ Recitals
Agreement...................................................... Recitals
Amended Series A Preferred Stock............................... 5.01(g)
Business Day................................................... 2.01
Common Stock................................................... Recitals
Company........................................................ Recitals
Conversions.................................................... 5.01 (g)
Convertible Securities......................................... 5.01(c)
Definitive Warrants............................................ 1.02
Depository..................................................... 1.02
Distribution................................................... 5.01(c)
Election to Exercise........................................... 2.02(b)
Exercisability Date............................................ 2.02(a)
Exercise Date.................................................. 2.02(d)
Exercise Price................................................. 2.02(a)
Expiration Date................................................ 2.01
Expiration Time................................................ 5.01(e)
Global Warrants................................................ 1.02
Indenture...................................................... Recitals
Initial Purchasers............................................. Recital
Issue Date..................................................... 2.02(g)
Majority Holders............................................... 5.04
Notes.......................................................... Recitals
Note Warrants.................................................. Recitals
Officers' Certificate.......................................... 1.08(f)
Options........................................................ 5.01(c)
Purchased Shares............................................... 5.01(e)
Registrar...................................................... 1.07
Registration Rights Agreement.................................. 7.06
Redemption Warrants............................................ Recitals
Related Parties................................................ 6.02(e)
Resale Restriction Termination Date............................ 1.08(a)
Securities Act................................................. 1.08(a)
Separability Date.............................................. 1.06
Shares......................................................... 1.01
Time of Determination.......................................... 5.01(g)
Trustee........................................................ Recitals
Units.......................................................... Recitals
Warrant Agent.................................................. Recitals
-iii-
<PAGE>
Warrant Agent Office........................................... 1.10
Warrant Certificates........................................... Recitals
Warrant Register............................................... 1.07
Warrants....................................................... Recitals
-iv-
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT ("Agreement"), dated as of June 3, 1997, by and
between Forman Petroleum Corporation, a Louisiana corporation (together with any
successor thereto, the "Company"), and U.S. Trust Company of Texas, N.A. (the
"Warrant Agent") for the benefit of the holders from time to time of the Warrant
Certificates (as hereinafter defined).
WHEREAS, the Company has entered into a purchase agreement dated June 3,
1997 (the "Purchase Agreement") with Jefferies & Company, Inc. (the "Initial
Purchaser") in which the Company has agreed, among other things, to sell to the
Initial Purchaser 70,000 units (the "Units") consisting in the aggregate of (i)
$70,000,000 aggregate principal amount of 13.5% Senior Secured Notes due June
1, 2004 (the "Notes") of the Company to be issued under an indenture dated as of
June 3, 1997 (the "Indenture"), between the Company and U.S. Trust Company of
Texas, N.A., as trustee (the "Trustee"), and (ii) 70,000 warrants to purchase an
aggregate of 29,067 shares of common stock, no par value (the "Common Stock"),
of the Company (the "Note Warrants"). In addition, the Company has agreed to
issue to the Initial Purchaser 11,666 warrants to purchase an additional 4,844
shares of Common Stock (the "Additional Warrants" and, together with the Note
Warrants, the "Warrants", and the certificates evidencing the Warrants being
hereinafter referred to as "Warrant Certificates"), in each case subject to
adjustment in accordance with the terms hereof; and
WHEREAS, the Note Warrants and the Notes comprising part of the Units shall
be separately transferable immediately upon issuance; and
WHEREAS, in connection with the issuance, exchange, cancellation,
replacement and exercise of the Warrants, the Company wishes to set forth in
this Agreement, among other things, the terms and conditions on which the
Warrants may be issued, exchanged, canceled, replaced and exercised;
NOW, THEREFORE, in consideration of the purchase of the Units by the
Initial Purchaser, the Company executes and delivers this Agreement for the
benefit of the holders from time to time of the Warrant Certificates.
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants. Each Warrant Certificate shall
evidence the number of Warrants specified therein, and each Warrant evidenced
thereby shall represent the right, subject to the provisions contained herein
and therein, to purchase from the Company (and the Company shall issue and sell
to such holder of the Warrant) 0.41524 fully paid and non-assessable shares of
the Company's Common Stock (the shares of Common Stock purchasable upon exercise
of a Warrant being hereinafter referred to as the "Shares" and, where
appropriate, such term shall also mean the other securities or
<PAGE>
property purchasable and deliverable upon exercise of a Warrant as provided in
Article V) at the price specified herein and therein, in each case subject to
adjustment as provided herein and therein.
SECTION 1.02. Form of Warrant Certificates. The Warrant Certificates
will initially be issued either in global form (the "Global Warrants"),
substantially in the form of Exhibit A hereto (including footnote 1 thereto), or
in registered form as definitive Warrant certificates (the "Definitive
Warrants"). The Warrant Certificates evidencing the Global Warrants or the
Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto. Such Global
Warrants shall represent such of the outstanding Warrants as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that the aggregate
amount of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a Global Warrant to
reflect the amount of any increase or decrease in the amount of outstanding
Warrants represented thereby shall be made by the Warrant Agent and Depositary
(as defined below) in accordance with written instructions given by the holder
thereof. The Depository Trust Company shall act as the depositary with respect
to the Global Warrants (the "Depositary") until a successor shall be appointed
by the Company. Upon written request, a Warrant holder may receive from the
Warrant Agent Definitive Warrants as set forth in Section 1.08 hereof.
SECTION 1.03. Execution of Warrant Certificates. The Warrant
Certificates shall be executed on behalf of the Company by the chairman of its
Board of Directors, its president or any vice president and attested by its
secretary or assistant secretary, under its corporate seal. Such signatures may
be the manual or facsimile signatures of the present or any future such
officers. The seal of the Company may be in the form of a facsimile hereof and
may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificate so
signed shall be countersigned and delivered by the Warrant Agent or disposed of
by the Company, such Warrant Certificate nevertheless may be coun tersigned and
delivered or disposed of as though the person who signed such Warrant
Certificate had not ceased to be such officer of the Company; and any Warrant
Certificate may be signed on behalf of the Company by such persons as, at the
actual date of the execution of such Warrant Certificate, shall be the proper
officers of the Company, although at the date of the execution and delivery of
this Agreement any such person was not such an officer.
SECTION 1.04. Authentication and Delivery. Subject to the immediately
following paragraph, Warrant Certificates shall be authenticated by manual
signature and dated the date of authentication by the Warrant Agent and shall
not be valid for any purpose unless so authenticated and dated. The Warrant
Certificates shall be numbered and shall be registered in the Warrant Register
(as defined in Section 1.07 hereof).
-2-
<PAGE>
Upon the receipt by the Warrant Agent of a written order of the Company,
which order shall be signed by the chairman of its Board of Directors, its
president or any vice president and attested by its secretary or assistant
secretary, and shall specify the amount of Warrants to be authenticated, whether
the Warrants are to be Global Warrants or Definitive Warrants, the date of such
Warrants and such other information as the Warrant Agent may reasonably request,
without any further action by the Company, the Warrant Agent is authorized, upon
receipt from the Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 1.03 hereof, to authenticate
the Warrant Certificates and deliver them. Such authentication shall be by a
duly authorized signatory of the Warrant Agent (although it shall not be
necessary for the same signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who authenticated such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
authenticated on behalf of the Warrant Agent by such persons as, at the actual
time of authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not such an
authorized signatory.
The Warrant Agent's authentication on all Warrant Certificates shall be in
substantially the form set forth in Exhibit A hereto.
SECTION 1.05. Temporary Warrant Certificates. Pending the preparation of
definitive Warrant Certificates, the Company may execute, and the Warrant Agent
shall, upon written request of the Company, authenticate and deliver, temporary
Warrant Certificates, which are printed, lithographed, typewritten or otherwise
produced, substantially of the tenor of the definitive Warrant Certificates in
lieu of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers of the Company executing such
Warrant Certificates may determine, as evidenced by their execution of such
Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 1.10 hereof.
Subject to the provisions of Section 4.01 hereof, such exchange shall be without
charge to the holder. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute, and the Warrant Agent
shall, upon written request of the Company, authenticate and deliver in exchange
therefor, one or more definitive Warrant Certificates representing in the
aggregate a like number of Warrants. Until so exchanged, the holder of a
temporary Warrant Certificate shall in all respects be entitled to the same
benefits under this Agreement as a holder of a definitive Warrant Certificate.
SECTION 1.06. Separation of Warrants and Notes. The Notes and Warrants
will be separately transferable immediately upon issuance of the Units.
-3-
<PAGE>
SECTION 1.07. Registration. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Warrants as provided in this Article. Each person designated by the Company
from time to time as a person authorized to register the transfer and exchange
of the Warrants is hereinafter called, individually and collectively, the
"Registrar". Initially, the Warrant Agent shall act as Registrar. Upon written
notice to the Warrant Agent and any acting Registrar, the Company may appoint a
successor Registrar for such purposes.
The Company will at all times designate one person (who may be the Company
and who need not be a Registrar) to act as repository of a master list of names
and addresses of the holders of Warrants (the "Warrant Register"). The Company
will act as such repository unless and until some other person is, by written
notice from the Company to the Warrant Agent and the Registrar, designated by
the Company to act as such. The Company shall cause each Registrar to furnish
to such repository, on a current basis, such information as to all registrations
of transfer and exchanges effected by such Registrar, as may be necessary to
enable such repository to maintain the Warrant Register on as current a basis as
is practicable.
SECTION 1.08. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants. When Definitive
Warrants are presented to the Warrant Agent with a written request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants, the Warrant Agent shall register the
transfer or make the exchange as requested if the
requirements under this Warrant Agreement as set forth in
this Section 1.08 for such transactions are met; provided,
however, that the Definitive Warrants presented or
surrendered for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the
holder thereof or by its attorney, duly authorized in
writing; and
(y) in the case of Warrants the offer and sale of which has
not been registered under the Securities Act of 1933, as
amended, (the "Securities Act"), and are presented for
transfer or exchange prior to (x) the date which is two
years after the later of the date of original issue (the
"Issue Date") and the last date on which the Company or
any affiliate of the Company was the owner of such
Warrant, or any predecessor thereto and (y) such later
date, if any, as may be required by any subsequent
change in applicable
-4-
<PAGE>
law (the "Resale Restriction Termination Date"), such
Warrants shall be accompanied, in the sole discretion of
the Company, by the following additional information and
documents, as applicable:
(A) if such Warrant is being delivered to the Warrant
Agent by a holder for registration in the name of
such holder, without transfer, a certification from
such holder to that effect (in substantially the
form of Exhibit B hereto); or
(B) if such Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an exemption
from registration in accordance with Rule 144 or
Regulation S under the Securities Act, a
certification to that effect (in substantially the
form of Exhibit B hereto); or
(C) if such Warrant is being transferred to an
institutional "accredited investor" within the
meaning of subparagraph (a)(l), (a)(2), (a)(3) or
(a)(7) of Rule 501 under the Securities Act,
delivery of a certification to that effect (in
substantially the form of Exhibit B hereto) and a
letter of representation from the transferee in
substantially the form of Exhibit C hereto; or
(D) if such Warrant is being transferred in reliance on
another exemption from the registration requirements
of the Securities Act, a certification to that
effect (in substantially the form of Exhibit B
hereto) and an opinion of counsel reasonably
acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
Interest in a Global Warrant. A Definitive Warrant may not be transferred for a
beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate written instruments of
transfer, in form satisfactory to the Warrant Agent, together with:
(A) certification, substantially in the form of Exhibit B hereto,
that such Definitive Warrant is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities Act; and
-5-
<PAGE>
(B) written instructions directing the Warrant Agent to make, or
to direct the Depositary to make, an endorsement on the
Global Warrant to reflect an increase in the aggregate amount
of the Warrants represented by the Global Warrant
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue and the Warrant
Agent shall, upon written request of the Company, authenticate a new Global
Warrant in the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Section 1.08 and the procedures
of the Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Warrant for a
Definitive Warrant.
(i) Any person having a beneficial interest in a Global Warrant
may upon request transfer such beneficial interest for a
Definitive Warrant. Upon receipt by the Warrant Agent of
written instructions or such other form of written
instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any person having a
beneficial interest in a Global Warrant and upon receipt by
the Warrant Agent of a written order or such other form of
written instructions as is customary for the Depositary or the
person designated by the Depositary as having such a
beneficial interest containing registration instructions and,
in the case of any such transfer or exchange prior to the
Resale Restriction Termination Date, the following additional
information and documents:
(A) if such beneficial interest is being transferred to the
person designated by the Depositary as being the
beneficial owner, a certification from such person to that
effect (in substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred to a
qualified institutional buyer (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S
under the Securities Act, a certification to that effect
from the transferee or transferor (in substantially the
form of Exhibit B hereto); or
(C) if such beneficial interest is being transferred to an
institutional "accredited investor" within the meaning of
subparagraph (a)(l),
-6-
<PAGE>
(a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities
Act, delivery of a certification to that effect (in
substantially the form of Exhibit B hereto), a letter of
representation from the transferee in substantially the
form of Exhibit C hereto and an opinion of counsel
reasonably acceptable to the Company to the effect that
such transfer is in compliance with the Securities Act; or
(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (in substantially the form of Exhibit B
hereto) and an opinion of counsel reasonably acceptable to
the Company to the effect that such transfer is in
compliance with the Securities Act
then the aggregate amount of the Global Warrant will be reduced
by the Depositary or its custodian and, following such reduction,
the Company will execute and, upon receipt of an authentication
order in the form of an Officers' Certificate (as defined), the
Warrant Agent will authenticate and deliver to the transferee a
Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section
1.08(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent in writing. The
Warrant Agent shall deliver such Definitive Warrants to the
persons in whose names such Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary.
If at any time:
(i) the Depositary for the Warrants notifies the Company that the
Depositary is unwilling or unable to continue as Depositary
for the Global Warrant and a successor Depositary for the
Global Warrant is not appointed by the Company within 90 days
after delivery of such notice or
-7-
<PAGE>
(ii) the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of
Definitive Warrants under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must be
the principal executive officer, principal financial officer or principal
accounting officer) (an "Officers' Certificate") requesting the authentication
and delivery of Definitive Warrants, will authenticate and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of warrants
represented by the Global Warrant, in exchange for such Global Warrant.
(g) Legends.
(i) Except to the extent permitted by the following paragraph
(ii), each Warrant Certificate evidencing the Global Warrants
and the Definitive Warrants (and all Warrants issued in
exchange therefor or substitution thereof) shall bear a
legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT" ) AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904 UNDER THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
FORMAN PETROLEUM CORPORATION (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE COMPANY AND
THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
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EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND THE COMPANY
SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION, "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED AS OF
JUNE 3, 1997 BETWEEN THE COMPANY AND JEFFERIES & COMPANY, INC., A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
To the extent a Warrant Certificate evidences a Global Warrant, such
Warrant Certificate shall also bear the legend with respect thereto
substantially in the form set forth on Exhibit A hereto.
(ii) Upon any sale or transfer of a Warrant pursuant to Rule 144
under the Securities Act in accordance with this Section
1.08 or an effective registration statement under the
Securities Act:
(A) in the case of any Warrant that is a Definitive Warrant, the
Warrant Agent shall, upon written instructions from the
Company, permit the holder thereof to exchange such Warrant
for a Definitive Warrant that does not bear the first
paragraph of the legend set forth above and rescind any
related restriction on the transfer of such Warrant; and
(B) any such Warrant represented by a Global Warrant shall not
be subject to the provisions set forth in (i) above (such
sales or transfers being subject only to the provisions of
Section 1.08(c) hereof); provided, however, that with
respect to any request for an exchange of a Warrant that is
represented by a Global Warrant for a Definitive Warrant
that does not bear the first paragraph of the legend set
forth above, which request is made in reliance upon Rule 144
under the Securities Act, the holder thereof shall certify
in writing to the Warrant Agent that such request is being
made pursuant to Rule 144 under the Securities Act (such
certification to be substantially in the form of Exhibit B
hereto).
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(h) Cancellation and/or Adjustment of a Global Warrant. At such time
as all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to or retained and canceled by the Warrant Agent. At any time
prior to such cancellation, if any beneficial interest in a Global Warrant is
exchanged for Definitive Warrants, redeemed, repurchased or canceled, the number
of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant by the Warrant Agent or the
Depositary to reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of Definitive
Warrants.
(i) To permit registrations of transfers and exchanges, the
Company shall execute, at the Warrant Agent's request, and
the Warrant Agent shall authenticate Definitive Warrants and
Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration of transfer or exchange of Definitive Warrants
or Global Warrants shall be the valid obligations of the
Company, entitled to the same benefits under this Warrant
Agreement as the Definitive Warrants or Global Warrants
surrendered upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and
treat the person in whose name any Warrant is registered as
the absolute owner of such Warrant, and neither the Warrant
Agent nor the Company shall be affected by notice to the
contrary.
(j) Payment of Taxes. The Company or the Warrant Agent may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any exchange or transfer pursuant to this
Section 1.08.
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent
of the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity reasonably satisfactory to them and,
in the case of mutilation or defacement, upon surrender thereof to the Warrant
Agent for cancellation, then, in the absence of written notice to the Company or
the Warrant Agent that such Warrant Certificate has been acquired by a bona fide
purchaser or holder in due course, the Company shall execute, and an authorized
signatory of the Warrant Agent shall manually authenticate and deliver, in
exchange for or in lieu of the lost, stolen, destroyed, defaced or mutilated
Warrant Certificate, a new Warrant Certificate representing a like number of
Warrants, bearing a number or other distinguishing symbol not contemporaneously
outstanding. Upon the issuance of any new Warrant Certificate under this
Section, the Company may require the payment from the holder of such Warrant
Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute
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Warrant Certificate executed and delivered pursuant to this Section in lieu of
any lost, stolen or destroyed Warrant Certificate shall constitute an additional
contractual obligation of the Company, whether or not the lost, stolen or
destroyed Warrant Certificate shall be at any time enforceable by anyone, and
shall be entitled to the benefits of (but shall be subject to all the
limitations of rights set forth in) this Agreement equally and proportionately
with any and all other Warrant Certificates duly executed and delivered
hereunder. The provisions of this Section 1.09 are exclusive with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates and shall preclude (to the extent lawful) any and all other rights
or remedies notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement of lost, stolen, destroyed, defaced
or mutilated Warrant Certificates.
The Warrant Agent is hereby authorized to authenticate and deliver the new
Warrant Certificates required pursuant to the provisions of this Section.
SECTION 1.10. Offices for Exercise, etc. So long as any of the Warrants
remain outstanding, the Company will designate and maintain in the continental
United States: (a) an office or agency where the Warrant Certificates may be
presented for exercise, (b) an office or agency where the Warrant Certificates
may be presented for registration of transfer and for exchange (including the
exchange of temporary Warrant Certificates for definitive Warrant Certificates
pursuant to Section 1.05 hereof), and (c) an office or agency where notices and
demands to or upon the Company in respect of the Warrants or of this Agreement
may be served. The Company may from time to time change or rescind such
designation, as it may deem desirable or expedient. The Company will give to
the Warrant Agent written notice of the location of any such office or agency
and of any change of location thereof. The Company hereby designates the
corporate trust office of the Warrant Agent in New York, New York (the "Warrant
Agent Office"), as the initial agency maintained for each such purpose.
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants. Subject to the terms and conditions
established herein, the Warrants shall expire at 5:00 p.m., New York City time,
on June 1, 2004 (the "Expiration Date"). Each Warrant may be exercised on any
Business Day (as defined below) on or after the Exercisability Date (as defined
below) and on or prior to the Expiration Date.
Any Warrant not exercised before the close of business on the Expiration
Date relating to such Warrant shall become void, and all rights of the holder
under the Warrant Certificate evidencing such Warrant and under this Agreement
shall cease.
"Business Day" shall mean any day on which (i) banks in New York City or
the City of Houston, Texas, (ii) the principal national securities exchange or
market, if any, on which the Common Stock is listed or admitted to trading and
(iii) the principal national securities exchange or market, if any, on which the
Warrants are listed or admitted to trading are open for business.
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SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery. (a)
Subject to the provisions of this Agreement, a holder of Warrants shall have the
right to purchase from the Company on or after the date hereof (the
"Exercisability Date") and on or prior to the Expiration Date 0.41524 fully paid
and non-assessable Shares per each Warrant such holder owns, subject to
adjustment in accordance with Article V hereof, at the initial purchase price of
$1.00 for each Share purchased subject to adjustment in accordance with Article
V hereof (the "Exercise Price").
(b) Warrants may be exercised on or after the Exercisability Date by
(i) surrendering at any Warrant Agent Office the Warrant Certificate evidencing
such Warrants with the form of election to purchase Shares set forth on the
reverse side of the Warrant Certificate (the "Election to Exercise") duly
completed and signed by the registered holder or holders thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney, and
(ii) paying in full the Exercise Price for each such Share purchased and any
other amounts required to be paid pursuant to Section 4.01 hereof.
(c) Simultaneously with the exercise of each Warrant, payment in full
of the Exercise Price shall be made in cash or by certified or official bank
check payable to the order of the Company, delivered to the office or agency
where the Warrant Certificate is being surrendered. No payment or adjustment
shall be made on account of any dividends on the Shares issued upon exercise of
a Warrant.
(d) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Agent Office (other than any
Warrant Agent Office that also is an office of the Warrant Agent), such Warrant
Certificate and payment shall be promptly delivered to the Warrant Agent. The
"Exercise Date" for a Warrant shall be the date when all of the items referred
to in the first sentence of paragraphs (b) and (c) of this Section 2.02 are
received by the Warrant Agent at or prior to 2:00 p.m., New York City time, on a
Business Day and the exercise of the Warrants will be effective as of such
Exercise Date. If any items referred to in the first sentence of paragraphs (b)
and (c) are received after 2:00 p.m., New York City time, on a Business Day, the
exercise of the Warrants to which such item relates will be effective on the
next succeeding Business Day. Notwithstanding the foregoing, in the case of an
exercise of Warrants on the Expiration Date (as defined in Section 2.01), if all
of the items referred to in the first sentence of paragraphs (b) and (c) are
received by the Warrant Agent at or prior to 5:00 p.m., New York City time, on
such Expiration Date, the exercise of the Warrants to which such items relate
will be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price,
the Warrant Agent shall: (i) cause an amount equal to the Exercise Price to be
paid to the Company by crediting the same to the account designated by the
Company in writing to the Warrant Agent for that purpose; (ii) advise the
Company within one Business Day by telephone of the amount so deposited to the
Company's account and promptly confirm such telephonic advice in writing; and
(iii) as soon as practicable, advise the Company in writing of the number of
Warrants (giving effect to Section 5.01(i) below) exercised in accordance with
the terms and conditions of this Agreement and the Warrant Certificates, the
instructions of each exercising holder of the Warrant Certificates with respect
to delivery of the Shares to which such holder is entitled upon such exercise,
and such other information as the Company shall reasonably request.
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(f) Subject to Section 5.02 hereof, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, the
Company shall issue or cause to be issued to or upon the written order of the
registered holder of the Warrant Certificate evidencing such exercised Warrant
or Warrants, a certificate or certificates evidencing the Shares to which such
holder is entitled, in fully registered form, registered in such name or names
as may be directed by such holder pursuant to the Election to Exercise, as set
forth on the reverse of the Warrant Certificate. The Warrant Agent shall have
no obligation to ascertain the number of Shares to be issued with respect to the
exercised Warrant or Warrants. Such certificate or certificates evidencing the
Shares shall be deemed to have been issued and any persons who are designated to
be named therein shall be deemed to have become the holder of record of such
Shares as of the close of business on the Exercise Date. After such exercise of
any Warrant or Warrants, the Company shall also issue or cause to be issued to
or upon the written order of the registered holder of such Warrant Certificate,
a new Warrant Certificate, countersigned by the Warrant Agent pursuant to the
Company's written instruction, evidencing the number of Warrants, if any,
remaining unexercised unless such Warrants shall have expired.
SECTION 2.03. Cancellation of Warrant Certificates. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall be canceled by it and retired. The Warrant Agent shall
cancel all Warrant Certificates surrendered for exchange, substitution, transfer
or exercise in accordance with the terms of this Agreement. The Warrant Agent
shall destroy canceled Warrant Certificates held by it and deliver a certificate
of destruction to the Company. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and pay to the Company within one
Business Day all money received by the Warrant Agent for the purchase of Warrant
Shares through the exercise of such Warrants.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights. (a) Notwithstanding any of the
other provisions of this Agreement, any holder of any Warrant Certificate,
without the consent of the Warrant Agent, the holder of any Shares or the holder
of any other Warrant Certificate, may, in and for its own behalf, enforce, and
may institute and maintain any suit, action or proceeding against the Company
suitable to enforce, its right to exercise the Warrant or Warrants evidenced by
its Warrant Certificate as provided in such Warrant Certificate and in this
Agreement.
(b) Neither the Warrants nor any Warrant Certificate shall entitle the
holders thereof to any of the rights of a holder of Shares, including, without
limitation, the right to vote or to receive any dividends or other payments or
to consent or to receive notice as stockholders in respect of the meetings of
stockholders or for the election of directors of the Company or to share in the
assets of the Company in the event of the liquidation, dissolution or winding up
of the Company's affairs or any other matter, or any rights whatsoever as
stockholders of the Company.
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ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of the Shares
upon the exercise of Warrants or to the separation of the Note Warrants and
Notes; provided, however, that the Company shall not be required to pay any tax
or other governmental charge which may be payable in respect of any transfer
involved in the issue of any Warrant Certificates or any certificates for Shares
in a name other than the registered holder of a Warrant Certificate surrendered
upon the exercise of a Warrant. In any such case, the Company shall not be
required to issue or deliver such Warrant Certificate or certificate for Shares
unless or until the person or persons requesting issuance thereof shall have
paid to the Company the amount of such tax or other governmental charge or shall
have established to the satisfaction of the Company that such tax or other
governmental charge has been paid or an exemption is available therefrom.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number of Shares Issuable.
The number and kind of Shares purchasable upon the exercise of Warrants and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Stock Splits, Combinations, etc. In case the Company shall hereafter
(i) pay a dividend or make a distribution on its Common Stock in shares of its
capital stock (whether shares of Common Stock or of capital stock of any other
class), (ii) subdivide its outstanding shares of Common Stock or (iii) combine
its outstanding shares of Common Stock into a smaller number of shares, the
number of Shares purchasable upon exercise of each Warrant immediately prior
thereto shall be adjusted so that the holder of any Warrant thereafter exercised
shall be entitled to receive the number of Shares which such holder would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this paragraph shall
become effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this paragraph, the holder of any Warrant thereafter exercised
shall become entitled to receive shares of two or more classes of capital stock
of the Company, the Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such classes of capital stock.
(b) Reclassification, Combinations, Mergers, etc. In case of any
reclassification or change of outstanding shares of Common Stock (other than as
set forth in Section 5.01(a) above and other than a change in par value, or from
par value to no par value, or from no par value to par value, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger in
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which the Company is the continuing corporation and which does not result in any
reclassification or change of the then outstanding shares of Common Stock or
other capital stock of the Company (other than a change in par value, or from
par value to no par value, or from no par value to par value or as a result of a
subdivision or combination)) or in case of any sale or conveyance to another
corporation of all or substantially all of the assets of the Company, then, as a
condition of such reclassification, change, consolidation, merger, sale or
conveyance, the Company or such a successor or purchasing corporation, as the
case may be, shall forthwith make lawful and adequate provision whereby the
holder of such Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and enter
into a supplemental warrant agreement so providing. Such provisions shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article V. If the issuer of
securities deliverable upon exercise of Warrants under the supplemental warrant
agreement is an affiliate of the formed, surviving or transferee corporation,
that issuer shall join in the supplemental warrant agreement. The above
provisions of this paragraph (b) shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
In case of any such reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant Agreement to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Article V. The foregoing provisions of this Section 5.01(b) shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
(c) Issuance of Common Stock, Options or Convertible Securities. For the
purposes of this Warrant Agreement, "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued or deemed to be issued by the Company
after the Effective Date, other than Excluded Shares (as defined below).
In the event the Company shall, at any time or from time to time after the
Effective Date, issue, sell, distribute or otherwise grant in any manner
(including by assumption) shares of Common Stock or any rights to subscribe for
or to purchase, or any warrants or options for the purchase of, Common Stock or
any stock or securities convertible into or exchangeable for Common Stock (any
such rights, warrants or options being herein called "Options" and any such
convertible or exchangeable stock or securities being herein called "Convertible
Securities") or any Convertible Securities (other than upon exercise of any
Option), whether or not such Options or the rights to convert or exchange such
Convertible Securities are immediately exercisable, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment
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of such number) issuable upon the exercise and/or conversion of such Options or
Convertible Securities, shall be deemed to be Additional Shares of Common Stock.
For purposes of this Warrant Agreement, the term "Issuance Date" shall mean
(i) with respect to Additional Shares of Common Stock deemed to have been issued
in connection with the issuance of an Option or Convertible Security, the date
such Option or Convertible Security is issued and (ii) in all other cases, the
actual date Additional Shares of Common Stock are issued.
For the purposes of this Warrant Agreement, "Excluded Shares" shall mean:
(i) shares for which the consideration per share as determined pursuant to
paragraph (d) below would be equal to or more than the Current Market Value
determined on the day prior to the Issuance Date; (ii) shares of Common Stock
issuable upon the exercise of Options or conversion of Convertible Securities
existing as of the Effective Date; and (iii) shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes) issued pursuant to any
stock options granted or obtained after the Effective Date pursuant to any stock
option plan adopted by the Company's Board of Directors for the benefit of
employees of the Company. The issuance of Excluded Shares shall not be an
issuance of Additional Shares of Common Stock, and shall not give rise to a
right to purchase the securities pursuant to paragraph (d) below.
In any such case in which the Additional Shares of Common Stock are deemed
to be issued, no right to purchase securities under Section 5.01(d) below will
accrue upon the subsequent issue of shares of Common Stock upon the exercise
and/or conversion or exchange of such Option or Convertible Security unless such
Option or Convertible Security shall have been amended or modified prior to
exercise or conversion or exchange so as to increase the number of Additional
Shares of Common Stock deemed to have been issued thereunder or decrease the
exercise and/or conversion or exchange price payable thereunder to an amount
less than Current Market Value as of the Issuance Date thereof.
(d) If the price per share at which Common Stock is issued or Common Stock
is issuable upon the exercise of such Options or upon the conversion or exchange
of such Convertible Securities (determined by dividing (i) the aggregate amount,
if any, received or receivable by the Company as consideration for the issuance,
sale, distribution or granting of such Common Stock or Options or any such
Convertible Security, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance of Common Stock
or the exercise of all such Options or upon conversion or exchange of all such
Convertible Securities, plus, in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the conversion or exchange of all such Convertible Securities, by
(ii) the total maximum number of shares of Common Stock to be issued or issuable
upon the exercise of all such Options or upon the conversion or exchange of all
such Convertible Securities or upon the conversion or exchange of all
Convertible Securities issuable upon the exercise of all Options) shall be less
than the Current Market Value per share of Common Stock (determined pursuant to
Section 5.01(e)) on the record date for the issuance, sale, distribution or
granting of such Options (any such event being herein called a "Distribution")
then, the Company shall offer to sell to each holder of Warrants, at the same
price and on the same terms offered to all other prospective buyers (provided
that the holders of Warrants shall not be required to buy any other securities
in order to buy such Common Stock or Convertible Securities), a portion of such
Common Stock or Convertible Securities that
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is equal to such holder's portion of the Common Stock then outstanding if
immediately prior thereto all the Warrants had been exercised. Each such holder
may elect to buy all or any portion of the Common Stock or Convertible
Securities offered or may decline to purchase any such securities.
(e) Current Market Value. As used herein, the term "Current Market Value"
per share of Common Stock or any other security at any date means, on any date
of determination (a) the average of the daily closing sale prices for each of 15
business days immediately preceding such date (or such shorter number of days
during which such security has been listed or traded), if the security has been
listed on the New York Stock Exchange, the American Stock Exchange or other
national securities exchanges or the NASDAQ National Market for at least 10
business days prior to such date, (b) if such security is not so listed or
traded, the average of the daily closing bid prices for each of the 15 business
days immediately preceding such date (or such shorter number of days during
which such security had been quoted), if the security has been quoted on a
national over-the-counter market for at least 10 business days, and (c)
otherwise, the value of the security most recently determined as of a date
within the six months preceding such day by the Company's Board of Directors.
(f) Consideration Received. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by the
Company in respect thereof shall be deemed to be the then fair market value of
such consideration (as determined in good faith by the Board of Directors of the
Company). If any Options shall be issued in connection with the issuance and
sale of other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued without
consideration; provided, however, that if such Options have an exercise price
equal to or greater than the Current Market Value of the Common Stock on the
date of issuance of such Options, then such Options shall be deemed to have been
issued for consideration equal to such exercise price.
(g) Changes in Options and Convertible Securities. If the exercise price
provided for in any Options referred to in Section 5.01(d) above, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section 5.01(d) above, or the rate at
which any Convertible Securities referred to in Section 5.01(d) above are
convertible into or exchangeable for Common Stock shall change at any time to a
price which is less than the Current Market Value thereof as of the Issuance
Date, then the Company shall make the offer to holders of the Warrants as
required by Section 5.01(d) above.
(h) Other Action Affecting Common Stock. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action described in this Article V, then the number of Shares for which
this Warrant is exercisable shall be adjusted in such manner as may be equitable
in the circumstances. If the Company shall at any time and from time to time
issue or sell (i) any shares of any class of common stock other than Common
Stock, (ii) any evidences of its indebtedness, shares of stock or other
securities which are convertible into or exchangeable for such shares of common
stock, with or without the payment of additional consideration in cash or
property or (iii) any warrants or other rights to subscribe for or purchase any
such shares of common stock or any such evidences, shares of stock or other
securities, then in each such case such issuance shall be deemed to be
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of, or in respect of, Common Stock for purposes of this Article V; provided,
however, that, without limiting the generality of the foregoing, if the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
common stock other than Common Stock, including shares of non-voting common
stock, then the number of Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the aggregate number of shares of such common stock and of Common Stock which a
record holder of the same number of Shares for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event.
(i) Statement of Warrants. Irrespective of any adjustment in the number or
kind of Shares issuable upon the exercise of the Warrants, Warrants theretofore
or thereafter issued shall continue to express the same number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
SECTION 5.02. Fractional Interest. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same holder, the number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
shares of Common Stock acquirable on exercise of the Warrants so presented. If
any fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall direct the transfer agent for the Common Stock to
pay an amount in cash calculated by the Company to equal the then Current Market
Value per share (determined pursuant to Section 5.01(e)) multiplied by such
fraction computed to the nearest whole cent. Holders of Warrants, by their
acceptances of the Warrant Certificates, expressly waive any and all rights to
receive any fraction of a share of Common Stock or a stock certificate
representing a fraction of a share of Common Stock.
SECTION 5.03. When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
SECTION 5.04. Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Article V, such determination may
be challenged in good faith by holders holding a majority of the outstanding
Warrants (the "Majority Holders"), and any dispute shall be resolved by an
investment banking firm of national standing selected by the Company. The fee
of such investment banking firm shall be paid by the Company, unless such fair
market value as determined by the investment banking firm is more than 95% of
the fair market value determined by the Board of Directors of the Company, in
which case the challenging holders shall be jointly and severally liable for
such fee.
SECTION 5.05. Treasury Stock. The sale or other disposition of any
issued shares of Common Stock owned or held by or for the account of the Company
shall be deemed an issuance thereof and a
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repurchase thereof and designation of such shares as treasury stock shall be
deemed to be a redemption thereof for the purposes of this Agreement.
SECTION 5.06. Notices to Warrant Holders. In connection with any
adjustment pursuant to this Article V, the Company shall (i) promptly after such
adjustment or, if earlier, at least five (5) days prior to the date on which
notice of such adjustment is required to be given, if at all, to The Depository
Trust Company cause to be filed with the Warrant Agent a certificate of an
officer of the Company setting forth the number of shares (or portion thereof)
issuable after such adjustment, upon exercise of a Warrant, which certificate
shall be conclusive evidence of the correctness of the matters set forth
therein, and (ii) promptly after such adjustment cause to be given to each of
the registered holders of the Warrant Certificates at his address appearing on
the Warrant Register written notice of such adjustments by first-class mail,
postage prepaid. The Warrant Agent shall be entitled to conclusively rely on
the above-referenced officer's certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same
from time to time to any holder desiring an inspection thereof during normal
business hours upon reasonable notice. The Warrant Agent shall not at any time
be under any duty or responsibility to any holder to determine whether any facts
exist that may require any adjustment of the number of Shares issuable on
exercise of the Warrants or the Exercise Price, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment or the validity or value (or the kind or amount) of
any Shares which may be issuable on exercise of the Warrants. The Warrant Agent
shall not be responsible for any failure of the Company to make any cash payment
or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other common stock or property upon the exercise of any Warrant.
The Company shall, in addition, promptly notify the holders of the Warrants
of any determination of its Board of Directors pursuant to Section 5.01(i) that
any actions affecting its Common Stock will not require an adjustment to the
number of Shares for which a Warrant is exercisable, and shall specify in such
notice the reasons for such determination. In the event that the Majority
holders shall challenge any of the calculations set forth in such notice within
20 days after the Company's delivery thereof, the Company shall retain a firm of
independent certified public accountants or law firm of national standing
selected by the Company to prepare and execute a certificate verifying that no
adjustment is required. The Company shall promptly cause a signed copy of any
certificate prepared pursuant to this Section 5.06 to be delivered to each
holder at his address appearing in the Warrant Register. The Company shall keep
at its office or agency designated pursuant to Section 1.10 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours upon reasonable notice by any holder or any
prospective purchaser of a Warrant designated by a holder thereof.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent. The Company hereby appoints U.S. Trust
Company of Texas, N.A. as warrant agent (and in all capacities in this
Agreement, the "Warrant Agent") of the Company in respect of the Warrants and
the Warrant Certificates upon the terms and subject to the conditions herein
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and in the Warrant Certificates set forth; and U.S. Trust Company of Texas, N.A.
hereby accepts such appointment. The Warrant Agent shall have the powers and
authority specifically granted to and conferred upon it in the Warrant
Certificates and this Agreement and such further powers and authority to act on
behalf of the Company as the Company may hereafter grant to or confer upon it
and it shall accept in writing. All of the terms and provisions with respect to
such powers and authority contained in the Warrant Certificates are subject to
and governed by the terms and provisions hereof.
SECTION 6.02. Conditions of Warrant Agent's Obligations. The Warrant
Agent accepts its obligations herein set forth upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of which
the Company agrees and to all of which the rights hereunder of the holders from
time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be agreed
upon with the Company in writing for all services rendered by it and the Company
agrees promptly to pay such compensation and to reimburse the Warrant Agent for
its reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred without gross negligence or willful misconduct on its part in
connection with the services rendered by it hereunder. The Company also agrees
to indemnify the Warrant Agent, each predecessor Warrant Agent, and their
respective directors, officers, affiliates, agents and employees for, and to
hold it and its directors, officers, affiliates, agents and employees harmless
against, any loss, liability or expense of any nature whatsoever (including,
without limitation, fees and expenses of counsel) incurred without gross
negligence or willful misconduct on the part of the Warrant Agent or predecessor
Warrant Agent, arising out of or in connection with its acting as such Warrant
Agent hereunder and its exercise or failure to exercise of its rights and
performance of its obligations hereunder. The obligations of the Company under
this Section 6.02 shall survive the exercise and the expiration of the Warrant
Certificates and the resignation and removal of the Warrant Agent.
(b) In acting under this Agreement and in connection with the Warrant
Certificates, the Warrant Agent is acting solely as agent of the Company and
does not assume any obligation or relationship of agency or trust for or with
any of the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel and any advice or
written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion.
(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or thing
suffered by it in reliance upon any Warrant Certificate, notice, direction,
consent, certificate, affidavit, opinion of counsel, instruction, statement or
other paper or document reasonably believed by it to be genuine and to have been
presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("Related Parties"), may become the owners of, or acquire any interest
in, Warrant Certificates, shares or other obligations of the Company with the
same rights that it or they would have it if were not the Warrant Agent
hereunder and, to the extent permitted by applicable law, it or they may engage
or be interested in any
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financial or other transaction with the Company and may act on, or as
depositary, trustee or agent for, any committee or body of holders of shares or
other obligations of the Company as freely as if it were not the Warrant Agent
hereunder. Nothing in this Agreement shall be deemed to prevent the Warrant
Agent or such Related Parties from acting in any other capacity for the Company.
(f) The Warrant Agent shall not be under any liability for interest
on, and shall not be required to invest, any money at any time received by it
pursuant to any of the provisions of this Agreement or of the Warrant
Certificates.
(g) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement (or any term or provision hereof) or the
execution and delivery hereof or in respect of the validity or execution of any
Warrant Certificate (except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication thereon)
shall be taken as the statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of the same. The Warrant Agent does not make
any representation as to the validity or sufficiency of this Agreement or the
Warrant Certificates; provided, however, that the Warrant Agent shall not be
relieved of its duty to authenticate the Warrant Certificates as authorized by
this Agreement. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with respect
to any matter contemplated by this Warrant Agreement, it may require:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Warrant
Agreement relating to the proposed action have been complied with; and
(2) if reasonably necessary in the sole judgment of the Warrant
Agent, an opinion of counsel for the Company stating that, in the opinion
of such counsel, all such conditions precedent have been complied with.
Each Officers' Certificate or, if requested, an opinion of counsel
with respect to compliance with a condition or covenant provided for in this
Warrant Agreement shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
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(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
(j) The Warrant Agent shall be obligated to perform only such duties
as are herein and in the Warrant Certificates specifically set forth and no
implied duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant Agent and delivered
by it to the Company pursuant to this Agreement. The Warrant Agent shall have
no duty or responsibility in case of any default by the Company in the
performance of its covenants or agreements contained in the Warrant Certificates
or in the case of the receipt of any written demand from a holder of a Warrant
Certificate with respect to such default, including, without limiting the
generality of the foregoing, any duty or responsibility to initiate or attempt
to initiate any proceedings at law or otherwise or, except as provided in
Section 7.02 hereof, to make any demand upon the Company. The Warrant Agent
shall not be obligated to perform any duty to the extent prohibited by law.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if in
writing and signed by its chairman of the Board of Directors, its president, its
treasurer, its controller or any vice president or its secretary or any
assistant secretary.
(1) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the chairman of the Board of Directors, the president, the
treasurer, the controller, any vice president or the secretary of the Company or
any other officer or official of the Company reasonably believed to be
authorized to give such instructions and to apply to such officers or officials
for advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions with respect to any matter arising in connection
with the Warrant Agent's duties and obligations arising under this Agreement.
Such application by the Warrant Agent for written instructions from the Company
may, at the option of the Warrant Agent, set forth in writing any action
proposed to be taken or omitted by the Warrant Agent with respect to its duties
or obligations under this Agreement and the date on or after which such action
shall be taken and the Warrant Agent shall not be liable for any
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action taken or omitted in accordance with a proposal included in any such
application on or after the date specified therein (which date shall be not less
than ten Business Days after the Company receives such application unless the
Company consents to a shorter period), provided that (i) such application
includes a statement to the effect that it is being made pursuant to this
paragraph (n) and that unless objected to prior to such date specified in the
application, the Warrant Agent will not be liable for any such action or
omission to the extent set forth in such application and (ii) prior to taking or
omitting any such action, the Warrant Agent has not received written
instructions objecting to such proposed action or omission.
(o) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the chairman of the Board of
Directors, the president, the treasurer, the controller, any vice president or
the secretary of the Company or any other officer or official of the Company
reasonably believed to be authorized to give such instructions and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(p) The Warrant Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder.
SECTION 6.03. Resignation and Appointment of Successor. (a) The
Company agrees, for the benefit of the holders from time to time of the Warrant
Certificates, that there shall at all times be a Warrant Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective, provided that
such date shall be at least 30 days after the date on which such notice is given
unless the Company agrees to accept less notice. Upon receiving such notice of
resignation, or in the event the Company shall determine not to continue to act
as its own Warrant Agent, the Company shall promptly appoint a successor Warrant
Agent, qualified as provided in Section 6.03(d) hereof, by written instrument in
duplicate signed on behalf of the Company, one copy of which shall be delivered
to the resigning Warrant Agent and one copy to the successor Warrant Agent. As
provided in Section 6.03(d) hereof, such resignation shall become effective upon
the earlier of (x) the acceptance of the appointment by the successor Warrant
Agent or (y) 30 days after receipt by the Company of notice of such resignation.
The Company may, at any time and for any reason, and shall, upon any event set
forth in the next succeeding sentence, remove the Warrant Agent and appoint a
successor Warrant Agent by written instrument in duplicate, specifying such
removal and the date on which it is intended to become effective, signed on
behalf of the Company, one copy of which shall be delivered to the Warrant Agent
being removed and one copy to the successor Warrant Agent. The Warrant Agent
shall be removed as aforesaid if it shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or a receiver of the Warrant Agent or of
its property shall be appointed, or any public officer shall take charge or
control of it or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation. Any removal of the Warrant Agent and any
appointment of a successor Warrant Agent shall become effective upon
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acceptance of appointment by the successor Warrant Agent as provided in Section
6.03(d). Upon effectiveness of the resignation or removal of the Warrant Agent
in accordance with this Section 6.03(b), the Warrant Agent shall have no further
obligation or duties under this Agreement. As soon as practicable after
appointment of the successor Warrant Agent, the Company shall cause written
notice of the change in the Warrant Agent to be given to each of the registered
holders of the Warrants in the manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant Agent, if the Company
shall fail to appoint a successor Warrant Agent within a period of 30 days after
receipt of such notice of resignation or removal, then the holder of any Warrant
Certificate or the Warrant Agent may apply to a court of competent jurisdiction
for the appointment of a successor to the Warrant Agent. Pending appointment of
a successor to the Warrant Agent, either by the Company or by such a court, the
duties of the Warrant Agent shall be carried out by the Company.
(d) Any successor Warrant Agent, whether appointed by the Company or
by a court, shall be a bank or trust company in good standing, incorporated
under the laws of the United States of America or any State thereof and having,
at the time of its appointment, a combined capital surplus of at least $50
million. Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder and all the provisions of this Agreement, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Warrant Agent hereunder,
and such predecessor shall thereupon become obligated to (i) transfer and
deliver, and such successor Warrant Agent shall be entitled to receive, all
securities, records or other property on deposit with or held by such
predecessor as Warrant Agent hereunder and (ii) upon payment of the amounts then
due it pursuant to Section 6.02(a) hereof, pay over, and such successor Warrant
Agent shall be entitled to receive, all money deposited with or held by any
predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder may
be merged or converted, or any corporation or bank with which the Warrant Agent
may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or otherwise transfer
all or substantially all of its corporate trust business, shall be the successor
to the Warrant Agent under this Agreement (provided that such corporation or
bank shall be qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties hereto.
(f) No Warrant Agent under this Warrant Agreement shall be personally
liable for any action or omission of any successor Warrant Agent or of the
Company.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment. This Agreement and the terms of the Warrants
may be amended by the Company and the Warrant Agent, without the consent of the
holder of any Warrant Certificate, for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective or inconsistent provision
contained herein or therein or in any other manner which the Company may deem
necessary or desirable and which shall not adversely affect in any material
respect the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement and the terms
of the Warrants with the consent of holders of not less than a majority in
number of the then outstanding Warrants for the purpose of adding any provision
to or changing in any manner or eliminating any of the provisions of this
Agreement or modifying in any manner the rights of the holders of the
outstanding Warrants; provided, however, that no such modification that
increases the Exercise Price, reduces the period of time during which the
Warrants are exercisable hereunder, otherwise materially and adversely affects
the exercise rights of the holders of the Warrants, reduces the percentage
required for modification, or effects any change to this Section 7.01 may be
made with respect to an outstanding Warrant without the consent of the holder of
such Warrant.
Any modification or amendment made in accordance with this Agreement will
be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and Warrant Agent. If
the Warrant Agent shall receive any notice or demand addressed to the Company by
the holder of a Warrant Certificate pursuant to the provisions hereof or of the
Warrant Certificates, the Warrant Agent shall promptly forward such notice or
demand to the Company.
SECTION 7.03. Address for Notices to Parties and for Transmission of
Documents. All notices hereunder to the parties hereto shall be deemed to have
been given when sent by certified or registered mail, postage prepaid, or by
telecopy, confirmed by first class mail, postage prepaid, addressed to a party
hereto as follows:
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To the Company:
Forman Petroleum Corporation
650 Poydras Street, Suite 2200
New Orleans, Louisiana 70130-6101
(Telecopy no. (504) 522-1796)
Attention: President
with copies to:
Vinson & Elkins L.L.P.
1001 Fannin Street, Suite 2300
Houston, Texas 77002-6760
Attention: Alan P. Baden
Facsimile: (713) 615-5437
Telephone: (713) 758-2430
To the Warrant Agent:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust Department
SECTION 7.04. Notices to Holders. Notices to holders of Warrants shall
be mailed to such holders at the addresses of such holders as they appear in the
Warrant Register. Any such notice shall be sufficiently given if sent by first-
class mail, postage prepaid.
SECTION 7.05. APPLICABLE LAW. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT ISSUED HEREUNDER AND OF THE
RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
SECTION 7.06. Obtaining of Governmental Approvals. The Company will
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and Securities Acts filings
under United States Federal and State laws, and the rules and regulations of all
stock exchanges on which the Warrants may be listed, which may be or become
requisite in connection with the issuance, sale, transfer, and delivery of the
Warrant Certificates, the exercise of the Warrants or the issuance, sale,
transfer and delivery of the shares issued upon exercise of the Warrants, it
being understood, however, that the only
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contractual registration rights of the holders of the Warrant Certificates are
those set forth in the Registration Rights Agreement dated as of June 3, 1997
(the "Registration Rights Agreement") between the Company and the Initial
Purchaser.
SECTION 7.07. Persons Having Rights Under Agreement. Nothing in this
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person other than the Company, the Warrant Agent and the holders from
time to time of the Warrant Certificates any right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation, promise or
agreement hereof; and all covenants, conditions, stipulations, promises and
agreements in this Agreement contained shall be for the sole and exclusive
benefit of the Company and the Warrant Agent and their successors and of the
holders from time to time of the Warrant Certificates.
SECTION 7.08. Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 7.09. Counterparts. This Agreement may be executed in any number
of Counterparts, each of which so executed shall be deemed to be an original;
but such Counterparts shall together constitute but one and the same instrument.
SECTION 7.10. Inspection of Agreement. A copy of this Agreement shall be
available at all reasonable times at the Warrant Agent Office, for inspection by
the holder of any Warrant Certificate. The Warrant Agent may require such
holder to submit his Warrant Certificate for inspection by it.
SECTION 7.11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Company as
of the day and year first above written.
FORMAN PETROLEUM CORPORATION
By: /s/ McLain J. Forman
-------------------------------------------
Name: McLain J. Forman
Title: Chairman of the Board, Chief
Executive Officer and President
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U.S. TRUST COMPANY OF TEXAS, N.A.,
as Warrant Agent
By: /s/ J. Stohlmann
-------------------------------------------
Name: John C. Stohlmann
Title: Vice President
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EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR WARRANTS IN
CERTIFICATED FORM, THIS WARRANT MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.]/1/
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT ASSET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1)REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" ( AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT)(AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO FORMAN PETROLEUM CORPORATION (THE "COMPANY") OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR FURNISHES ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE COMPANY AND THE
WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
- ---------------------------
/1/ This paragraph is to be included only if the Warrant Certificate is in
global form.
-1-
<PAGE>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND THE COMPANY SUCH CERTIFICATIONS,
WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED AS OF
JUNE 3, 1997 BETWEEN THE COMPANY AND JEFFERIES & COMPANY, INC., A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
CUSIP #[ ]
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
FORMAN PETROLEUM CORPORATION
This Warrant Certificate certifies that [ ], or registered assigns, is
the registered holder of [ ] Warrants (the "Warrants") to purchase shares of
Common Stock, no par value (the "Common Stock"), of Forman Petroleum
Corporation, a Louisiana corporation (the "Company"). Each Warrant entitles the
holder to purchase from the Company at any time on or after June 3, 1997 and
until 5:00 p.m., New York City time, on June 1, 2004 (the "Expiration Date"),
0.41524 fully paid and non-assessable shares of Common Stock (as such number may
be adjusted from time to time, the "Shares", which may also include any other
securities or property purchasable upon exercise of a Warrant, such adjustment
and inclusion each as provided in the Warrant Agreement) at the exercise price
(the "Exercise Price") of $1.00 per Share upon surrender of this Warrant
Certificate and payment of the Exercise Price at any office or agency maintained
for that purpose by the Company (the "Warrant Agent Office"), subject to the
conditions set forth herein and in the Warrant Agreement.
The Exercise Price shall be payable in cash or by certified or official
bank check in the lawful currency of the United States of America which as of
the time of payment is legal tender for payment of public or private debts. The
Company has initially designated the office of United States Trust Company, an
affiliate of the Warrant Agent, at its agent's office in the Borough of
Manhattan, the City of New York,
-2-
<PAGE>
as the initial Warrant Agent Office. The number of Shares issuable upon exercise
of the Warrants ("Exercise Rate") is subject to adjustment upon the occurrence
of certain events set forth in the Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City time, on
June 1, 2004 shall thereafter be void.
Reference is hereby made to the further provisions on the reverse hereof,
which provisions shall for all purposes have the same effect as though fully set
forth at this place. Capitalized terms used in this Warrant Certificate but not
defined herein shall have the meanings ascribed thereto in the Warrant
Agreement.
This Warrant Certificate shall not be valid unless authenticated by the
Warrant Agent, as such term is used in the Warrant Agreement.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
WITNESS the corporate seal of the Company and the signatures of its duly
authorized officers.
Dated: _________________, 19__
FORMAN PETROLEUM CORPORATION
By:____________________________________
Name:____________________________
Title:___________________________
Attest:
By:_______________________________
Name:________________________
Title:_______________________
Certificate of Authentication:
This is one of the Warrants
referred to in the within-
mentioned Warrant Agreement:
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Warrant Agent
By:_____________________________
Authorized Signatory
-3-
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
FORMAN PETROLEUM CORPORATION
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, each of which represents the right to purchase at
any time on or after June 3, 1997, and until 5:00 p.m., New York City time, on
June 1, 2004, 0.41524 Shares, subject to adjustment as set forth in the Warrant
Agreement. The Warrants are issued pursuant to a Warrant Agreement dated as of
June 3, 1997 (the "Warrant Agreement"), duly executed and delivered by the
Company for the benefit of the holders from time to time of the Warrant
Certificates, which Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Warrant Agent, the Company and the holders (the words "holders" or
holder" meaning the registered holders or registered holder) of the Warrant
Certificates. Warrants may be exercised by (i) surrendering at any Warrant
Agent Office this Warrant Certificate with the form of Election to Exercise set
forth hereon duly completed and executed and (ii) paying in full the Warrant
Exercise Price for each such Warrant exercised and any other amounts required to
be paid pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrant to which such items
relate will be effective on such Business Day. If any items referred to in the
last sentence of the preceding paragraph are received after 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrants to which such item
relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on the
Expiration Date, if all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to 5:00 p.m.,
New York City time, on such Expiration Date, the exercise of the Warrants to
which such items relate will be effective on the Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as practicable after
the exercise of any Warrant or Warrants, the Company shall issue or cause to be
issued to or upon the written order of the registered holder of this Warrant
Certificate, a certificate or certificates evidencing the Share or Shares to
which such holder is entitled, in fully registered form, registered in such name
or names as may be directed by such holder pursuant to the Election to Exercise,
as set forth on the reverse of this Warrant Certificate. Such certificate or
certificates evidencing the Share or Shares shall be deemed to have been issued
and any persons who are designated to be named therein shall be deemed to have
become the holder of record of such Share or Shares as of the close of business
on the date upon which the exercise of this Warrant was deemed to be effective
as provided in the preceding paragraph.
The Company will not be required to issue fractional shares of Common Stock
upon exercise of the Warrants or distribute Share certificates that evidence
fractional shares of Common Stock. In lieu of fractional shares of Common
Stock, there shall be paid to the registered Holder of this Warrant Certificate
-4-
<PAGE>
at the time such Warrant Certificate is exercised an amount in cash equal to the
same fraction of the current market price per share of Common Stock as
determined in accordance with the Warrant Agreement.
Warrant Certificates, when surrendered at any Warrant Agent Office by the
holder thereof in person or by legal representative or attorney duly authorized
in writing, may be exchanged for a new Warrant Certificate or new Warrant
Certificates evidencing in the aggregate a like number of Warrants, in the
manner and subject to the limitations provided in the Warrant Agreement, without
charge except for any tax or other governmental charge imposed in connection
therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered holder
hereof as the absolute owner of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone) for the purpose of
any exercise hereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in New York
City or the City of Houston, Texas, (ii) the principal national securities
exchange or market, if any, on which the Common Stock is listed or admitted to
trading and (iii) the principal national securities exchange or market, if any,
on which the Warrants are listed or admitted to trading are open for business.
-5-
<PAGE>
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise _______________ of
the Warrants represented by this Warrant Certificate and purchase the whole
number of Shares issuable upon the exercise of such Warrants and herewith
tenders payment for such Shares in the amount of $_____in cash or by certified
or official bank check, in accordance with the terms hereof. The undersigned
requests that a certificate representing such Shares be registered in the name
of _________________, whose address is _____________, and that such certificate
be delivered to ____________, whose address is ____________________. Any cash
payments to be paid in lieu of a fractional Share should be made to __________,
whose address is _____________________, and the check representing payment
thereof should be delivered to _______________, whose address is
_______________________.
Name of holder of
Warrant Certificate: _________________________________
(Please Print)
Tax Identification or
Social Security Number: ______________________________
Signature: ___________________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
Dated ______________ , ___
-6-
<PAGE>
ASSIGNMENT
For value received, _________________________________ hereby sells, assigns
and transfers unto _________________________________ the within Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint _________________________________
attorney, to transfer said Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Dated _________________ , ____
Signature:_________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
-7-
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS/2/
The following exchanges of a part of this Global Warrant for Definitive Warrants
have been made:
Number of
Warrants of
Amount of Amount of this Global Signature of
decrease in increase in Warrant authorized
Number of Number of following signatory of
Date of Warrants of this Warrants of this such decrease Warrant Agent
Exchange Global Warrant Global Warrant (or increase) or Depositary
- --------------------------------------------------------------------------------
- ---------------
/2/ This is to be included only if the Warrant Certificate is in global form.
-8-
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Forman Petroleum
Corporation
This Certificate relates to _____ Warrants held in* _____ book-entry or
*_____ certificated form by _________________ (the "Transferor").
The Transferor:*
[ ] has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Warrant (or the portion thereof indicated above) or
[ ] has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant, the
Transferor does hereby certify that the Transferor is familiar with the Warrant
Agreement relating to the above captioned Warrants and the restrictions on
transfers thereof as provided in Section 1.08 of such Warrant Agreement, and
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Act") because[*]:
[ ] Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 1.08(a)(ii)(y)(A) or Section
1.08(d)(i)(A) of the Warrant Agreement).
[ ] Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Act), in reliance on Rule 144A or in
accordance with Regulation S under the Act.
[ ] Such Warrant is being transferred in accordance with Rule 144 under
the Act.
[ ] Such Warrant is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act, other than Rule
144A or Rule 144 or Regulation S under the Act. An opinion of counsel to the
effect that such transfer does not require registration under the Act
accompanies this Certificate.
[INSERT NAME OF TRANSFEROR]
By: _______________________________________________
Date: _________________
*Check applicable box.
<PAGE>
EXHIBIT C
Transferee Letter of Representation
Forman Petroleum Corporation
650 Poydras Street, Suite 2200
New Orleans, Louisiana 70130-6101
Ladies and Gentlemen:
In connection with our proposed purchase of warrants ("Warrants") to
purchase Common Stock, no par value (the "Common Stock"; together with the
Warrants, the "Securities"), of Forman Petroleum Corporation (the "Company") we
confirm that:
1. We understand that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and, unless so
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Securities to offer, sell or otherwise transfer such Securities
prior to the date which is two years after the later of the date of original
issue and the last date on which the Company or any affiliate of the Company
was the owner of such Securities, or any predecessor thereto (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) so long as the Securities are eligible for resale pursuant to Rule
144A, under the Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act that is purchasing for his own account or for the account of
such an institutional "accredited investor," or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and to compliance with
any applicable state securities laws. The foregoing restrictions on resale
will not apply subsequent to the Resale Restriction Termination Date. If any
resale or other transfer of the Securities is proposed to be made pursuant to
clause (e) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the
form of this letter to the warrant agent under the Warrant Agreement pursuant
to which the Securities were issued (the "Warrant Agent") which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of subparagraph (a)(l), (2), (3) or (7) of Rule
501 under the Securities Act and that it is acquiring such Securities for
investment purposes and not for distribution in violation of the Securities
Act. The Warrant Agent and the Company reserve the right prior to any offer,
sale or other transfer prior to the Resale Restriction Termination Date of the
Securities pursuant to
<PAGE>
clause (e) or (f) above to require the delivery of a written opinion of
counsel, certifications, and or other information satisfactory to the Company
and the Warrant Agent.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Securities for investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act and we have such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of our investment in the Securities, and we and any
accounts for which we are acting are each able to bear the economic risk of
our or its investment for an indefinite period.
3. We are acquiring the Securities purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. You, the Warrant Agent and your respective counsel are entitled to
rely upon this letter and you are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
________________________________
(Name of Purchaser)
By: ____________________________
Date:___________________________
Upon transfer the Securities would be registered in the name of the new
beneficial owner as follows:
Name: _____________________________
Address: __________________________
Taxpayer ID Number: _______________
C-2
<PAGE>
EXHIBIT 12
Forman Petroleum Corporation
Computation of the Ratio of Earnings
to Combined Fixed Charges and Preferred Stock Dividends
<TABLE>
<CAPTION>
Year Ended December 31, Period Ended March 31,
------------------------------------------------------------ ------------------------------------
Pro forma
Pro forma ----------
1994 1995 1996 1996(1) 1996 1997 1997(1)
---------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Pre tax income (loss) $ 457,438 $(3,552,645) $(1,774,549) $(1,546,549) $ (838,721) $ (63,489) $ 55,397
Add:
Interest Expense 2,121,115 3,522,285 3,982,797 4,333,797 900,818 1,184,243 1,271,993
Amortization of Debt Costs 314,493 304,260 565,643 565,643 90,516 230,475 230,475
Rental Expense Factor (2) 26,316 48,212 48,158 48,158 12,040 12,753 12,753
Earnings available for
fixed charges
$2,919,362 $ 322,112 $ 2,822,049 $ 3,401,049 $ 164,653 $1,363,982 $1,570,618
========== =========== =========== =========== ========== ========== ==========
Interest Expense 2,121,115 3,522,285 3,982,797 4,333,797 900,818 1,184,243 1,271,993
Amortization of Debt Costs 314,493 304,260 565,643 565,643 90,516 230,475 230,475
Rental Expense Factor (2) 26,316 48,212 48,158 48,158 12,040 12,753 12,753
Preferred Stock Dividends (3) - - - - - - -
---------- ----------- ----------- ----------- ---------- ---------- ----------
Total Fixed Charges $2,461,924 $ 3,874,757 $ 4,596,598 $ 4,947,598 $1,003,374 $1,427,471 $1,515,221
========== =========== =========== =========== ========== ========== ==========
Ratio of earnings to
fixed charges
1.19X 1.04X
========== ==========
Deficiency of earnings
to cover fixed charges $ 3,552,645 $ 1,774,549 $ 1,546,549 $ 838,721 $ 63,489
=========== =========== =========== ========== ==========
</TABLE>
(1) The pro forma 1996 and 1997 columns reflect adjustments to pre tax income
(loss) for the incremental revenue and expense that would have been reported
had the acquisition of certain overriding royalty interests occurred on the
last day of the period prior to the period presented. As adjusted for the
issuance of the Notes and Equity Units, earnings would not have covered
fixed charges by $8,816,000 and $1,484,000, respectively for the pro forma
1996 and 1997 periods.
(2) Portion of rent which is deemed to be representative of interest.
(3) There was no preferred stock outstanding during any of the historical
periods presented.
<PAGE>
EXHIBIT 23(i)
CONSENT OF RYDER SCOTT COMPANY
To the Board of Directors of Forman Petroleum Corporation:
We hereby consent to the use of our report dated March 10, 1997 (the
"Report") entitled "Estimated Future Reserves and Income Attributable to Certain
Leasehold and Royalty Interests Owned by Forman Petroleum Corporaiton as of
January 1, 1997" and of the estimates of net proved oil and natural gas reserves
of Forman Petroleum Corporation, and their present values, as of January 1, 1997
in this Form S-4 Registration Statement and the prospectus incorporated therein,
and all references to our firm therein, subject to the conditions in the text of
the "Report".
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
June 25, 1997
<PAGE>
EXHIBIT 23(ii)
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the use in this
registration statement (file # 333-_____) of our report dual dated March 26,
1997 and June 3, 1997 included herein and to all references to our Firm included
in this registration statement.
ARTHUR ANDERSEN L.L.P.
New Orleans, Louisiana
July 15, 1997
<PAGE>
EXHIBIT 24
FORM OF POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints ____________________________________ and
___________________________________, and each of them (with full power to each
of them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign on his behalf individually and in each
capacity stated below any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents and either of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
<PAGE>
EXHIBIT 25
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) [X]
_________________
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Avenue, Suite 2700 75201-2936
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
(214) 754-1200
(Name, address and telephone number of agent for service)
_________________
Forman Petroleum Corporation
(Exact name of obligor as specified in its charter)
Louisiana 72-0954774
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
650 Poydras Street, Suite 2200
New Orleans, LA 70130
(Address of principal executive offices) (Zip Code)
_________________
13.5% Senior Secured Notes Due 2004
(Title of the indenture securities)
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
GENERAL
1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of Dallas (11th District), Dallas,
Texas (Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency, Dallas,
Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust
powers.
2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of the
Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting securities of
the Trustee:
As of June 27, 1997
................................................................................
Col A. Col B.
................................................................................
Title of Class Amount Outstanding
................................................................................
Capital Stock - par value $100 per share 5,000 shares
4. Trusteeships under Other Indentures.
Not Applicable
5. Interlocking Directorates and Similar Relationships with the Obligor or
Underwriters.
Not Applicable
<PAGE>
6. Voting Securities of the Trustee Owned by the Obligor or its Officials.
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their Officials.
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person Owning
50 Percent or More of the Voting Securities of the Obligor.
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
Not Applicable
13. Defaults by the Obligor.
Not Applicable
14. Affiliations with the Underwriters.
Not Applicable
15. Foreign Trustee.
Not Applicable
16. List of Exhibits.
T-1.1 - A copy of the Articles of Association of U.S. Trust Company of
Texas, N.A.; incorporated herein by reference to Exhibit T-1.1 filed
with Form T-1 Statement, Registration No. 22-21897.
<PAGE>
16. (Con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business;
incorporated herein by reference to Exhibit T-1.2 filed
with Form T-1 Statement, Registration No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise
corporate trust powers; incorporated herein by reference to Exhibit
T-1.3 filed with Form T-1 Statement, Registration No. 22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas,
N.A., as amended to date; incorporated herein by reference to Exhibit
T-1.4 filed with Form T-1 Statement, Registration No. 22-21897.
T-1.5 - The consent of the Trustee required by Section 321(b) of
the Trust Indenture Act of 1939.
T-1.6 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of June 27, 1997, the Trustee had 5,000 shares of Capital Stock outstanding,
all of which are owned by U.S. T.L.P.O. Corp. As of June 27, 1997, U.S.
T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all of which are
owned by U.S. Trust Corporation. U.S. Trust Corporation had outstanding
19,591,502 shares of $5 par value Common Stock as of June 27, 1997.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10 and
11, the answers to said Items are based upon incomplete information. Items 2,
5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by an
amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the Trustee
disclaims responsibility for the accuracy or completeness of such information.
_________________
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, U.S
Trust Company of Texas, N.A., a national banking association organized under the
laws of the United States of America, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
27th day of June, 1997.
U.S. Trust Company of Texas, N.A.,
Trustee
By: /s/ Bill Barber
-------------------------------------
Bill Barber
Vice President
<PAGE>
Exhibit T-1.5
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of Forman Petroleum
Corporation 13.5% Senior Secured Notes Due 2004, we hereby consent that reports
of examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
U.S. Trust Company of Texas, N.A.
By: /s/ Bill Barber
------------------------------------
Bill Barber
Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 DEC-31-1996
<CASH> 693,135 130,551
<SECURITIES> 0 0
<RECEIVABLES> 559,165 500,602
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,831,068 3,207,276
<PP&E> 53,148,624 49,785,341
<DEPRECIATION> 13,745,887 12,433,801
<TOTAL-ASSETS> 43,992,502 42,376,665
<CURRENT-LIABILITIES> 8,537,024 8,387,746
<BONDS> 0 0
0 0
0 0
<COMMON> 1,000 1,000
<OTHER-SE> (5,097,047) (5,033,558)
<TOTAL-LIABILITY-AND-EQUITY> 43,992,502 42,376,665
<SALES> 3,736,526 10,891,640
<TOTAL-REVENUES> 3,777,824 11,118,103
<CGS> 685,861 3,111,198
<TOTAL-COSTS> 3,841,313 12,892,652
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,184,243 3,982,797
<INCOME-PRETAX> (63,489) (1,774,549)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (63,489) (1,774,549)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (63,489) (1,774,549)
<EPS-PRIMARY> (.44) (12.42)
<EPS-DILUTED> (.44) (12.42)
</TABLE>
<PAGE>
EXHIBIT 99
FORMAN PETROLEUM CORPORATION
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
13.5% SENIOR SECURED NOTES DUE 2004, SERIES A
IN EXCHANGE FOR
13.5% SENIOR SECURED NOTES DUE 2004, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE")
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE
DELIVER TO THE EXCHANGE AGENT:
U. S. TRUST COMPANY OF TEXAS, N.A.
<TABLE>
<CAPTION>
By Hand Delivery: By Overnight Courier: By Mail:
<S> <C> <C>
U. S. Trust Company of Texas, N.A. U. S. Trust Company of Texas, N.A. U. S. Trust Company of Texas, N.A.
Attention: Corporate Trust 770 Broadway - 13th Floor P. O. Box 841
111 Broadway - Lower Level Corporate Trust Operations Cooper Station
New York, New York 10006-1906 New York, New York 10003-9598 New York, New York 10276-0841
By Facsimile:
(212) 420-6504
Confirm by Telephone:
(800) 225-2398
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus dated
___________________, 1997 (the "Prospectus") of Forman Petroleum Corporation, a
Louisiana corporation (the "Company"), and this Letter of Transmittal (the
"Letter of Transmittal"), which together describe the Company's offer (the
"Exchange Offer") to exchange its 13.5% Senior Secured Notes due 2004, Series B
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement of
which the Prospectus is a part, for a like principal amount of its issued and
outstanding 13.5% Senior Secured Notes due 2004, Series A (the "Old Notes").
Capitalized terms used but not defined herein have the respective meaning given
to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended. The Company
shall notify the holders of the Old Notes of any extension by oral or written
notice and will mail to the record holders of Old Notes an announcement thereof,
each prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a holder of Old Notes if original
Old Notes, if available, are to be forwarded herewith or an Agent's Message is
to be used if delivery of Old Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Procedures for Tendering"
and "Book-Entry Transfer." Holders of Old Notes whose Old Notes are not
immediately available, or who are unable to deliver their Old Notes and all
other documents required by this Letter of Transmittal to the Exchange Agent on
or prior to the Expiration Date, or who are unable to complete the procedure for
book-entry transfer on a timely basis, must tender their Old Notes according to
the guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery
<PAGE>
Procedures." See Instruction 1. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder.
The undersigned has completed, executed and delivered this Letter of Transmittal
to indicate the action the undersigned desires to take with respect to the
Exchange Offer. Holders who wish to tender their Old Notes must complete this
Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If the
space below is inadequate, list the registered numbers and principal amounts on
a separate signed schedule and affix the list to this Letter of Transmittal.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES TENDERED
Name(s) and Address(es) of Registered
Holder(s) Exactly as Name(s)
Appear(s) on Old Notes
(Please Fill In, If Blank) Old Note(s) Tendered
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Registered Aggregate Principal Principal
Number(s)* Amount Represented by Amount
Note(s) Tendered**
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be deemed to have tendered the entire aggregate principal
amount represented by such Old Notes. All tenders must be in integral multiples of $1,000.
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering Institution: -------------------------------------------------
Account Number: ----------------------------------------------------------------
Transaction Code Number: -------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered holder(s) of Old Notes: ----------------------------------
Date of Execution of Notice of Guaranteed Delivery: ----------------------------
<PAGE>
Window Ticket Number (if available): -------------------------------------------
Name of Eligible Institution that Guaranteed Delivery: -------------------------
Account Number (if delivered by book-entry transfer): --------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:ss
Name: --------------------------------------------------------------------------
Address: -----------------------------------------------------------------------
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and transfers to the
Company all right, title and interest in and to the Old Notes tendered for
exchange hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent, the agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver such Old Notes, or transfer ownership
of such Old Notes on the account books maintained by the Book-Entry Transfer
Facility, to the Company and deliver all accompanying evidences of transfer and
authenticity, and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms of the Exchange
Offer. The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June
5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-
Action Letter (available June 5, 1991), that the Exchange Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than (i) a
broker-dealer who purchased Old Notes exchanged for such Exchange Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act), without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders are not participating in, and have no arrangement with any person
to participate in, the distribution of such Exchange Notes. The undersigned
specifically represent(s) to the Company that (i) any Exchange Notes acquired in
exchange for Old Notes tendered hereby are being acquired in the ordinary course
of business of the person receiving such Exchange Notes, whether or not the
undersigned, (ii) the undersigned is not participating in, and has no
arrangement with any person to participate in, the distribution of Exchange
Notes, and (iii) neither the undersigned nor any such other person is an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Company or
a broker-dealer tendering Old Notes acquired directly from the Company for its
own account.
If the undersigned or the person receiving the Exchange Notes is a broker-
dealer that is receiving Exchange Notes for its own account pursuant to the
Exchange Offer, the undersigned acknowledges that it or such other person will
deliver a prospectus in connection with any resale of such Exchange Notes. The
undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the SEC in the Morgan
Stanley Letter and similar SEC no-action letters, and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes, in which case the registration statement must
contain the selling security holder information required by Item 507 or Item
508, as applicable, of Regulation S-K of the SEC, and (ii) a broker-dealer that
delivers such a prospectus to purchasers in connection with such resales will be
subject to certain of the civil liability provisions under the
<PAGE>
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please issue
the Exchange Notes issued in exchange for the Old Notes accepted for exchange
and return any Old Notes not tendered or not exchanged, in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail or deliver the Exchange Notes issued in exchange for
the Old Notes accepted for exchange and any Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature(s). In the event that both
"Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the Exchange Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged to, the person(s) so indicated. The undersigned recognizes
that the Company has no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Old Notes from
the name of the registered holder(s) thereof if the Company does not accept for
exchange any of the Old Notes so tendered for exchange.
<TABLE>
<CAPTION>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6) (SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old Notes in a principal To be completed ONLY if Old Notes in a principal
amount not tendered, or Exchange Notes issued in exchange amount not tendered, or Exchange Notes issued in exchange
for Old Notes accepted for exchange, are to be issued in the for Old Notes accepted for exchange, are to be mailed or
name of someone other than the undersigned, or (ii) if Old delivered to someone other than the undersigned, or to the
Notes tendered by book-entry transfer which are not undersigned at an address other than that shown below the
exchanged are to be returned by credit to an account undersigned's signature.
maintained at the Book-Entry Transfer Facility. Issue
Exchange Notes and/or Old Notes to: Mail or deliver Exchange Notes and/or Old Notes to:
Name: ------------------------------------------------------- Name: ----------------------------------------------------
(Please Type or Print) (Please Type or Print)
- ------------------------------------------------------------- -----------------------------------------------------------
Address: ---------------------------------------------------- Address: --------------------------------------------------
- ------------------------------------------------------------- -----------------------------------------------------------
(include Zip Code) (include Zip Code)
- ------------------------------------------------------------- -----------------------------------------------------------
(Tax Identification or Social Security Number) (Tax Identification or Social Security Number)
(Complete Substitute Form W-9)
</TABLE>
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:
<PAGE>
Book-Entry Transfer Facility Account Number:
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
X-----------------------------------------------------------------------------
X-----------------------------------------------------------------------------
(Signature(s) of Registered Holders or Old Notes)
Dated , 1997
---------------------------------------------
(The above lines must be signed by the registered holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed
bond power from the registered holder(s), a copy of which must be transmitted
with this Letter of Transmittal. If Old Notes to which this Letter of
Transmittal relate are held of record by two or more joint holders, then all
such holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding the completion of
this Letter of Transmittal, printed below.)
Name(s): -----------------------------------------------------------------------
(Please Type or Print)
Capacity: ----------------------------------------------------------------------
Address: -----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number: ------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:-----------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address, Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: -------------------------------------------------------------------, 1997
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or Agent's Message or facsimile hereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. The method of delivery of the tendered Old Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the holder and, except as otherwise
provided below, the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. Instead of delivery by mail, it is recommended
that the holder 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 Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old Notes
and whose Old Notes are not immediately available or who cannot deliver their
Old Notes, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date or who cannot complete the
procedure for book-entry transfer on a time basis and deliver an Agent's
Message, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedures: (1) such
tender must be made by or through a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers Inc., a commercial bank or a 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");
(ii) prior to the Expiration Date, the Exchange Agent must have received from
the 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 of the Old Notes, the registration
number(s) of such Old Notes and the total principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that,
within five business days after the Expiration Date, this Letter of Transmittal
(or facsimile hereof) together with the Old Notes in proper form for transfer
(or a Book-Entry Confirmation) and any other documents required hereby, must be
deposited by the Eligible Institution with the Exchange Agent within five
business days after the Expiration Date; and (iii) the certificates for all
physically tendered shares of Old Notes, in proper form for transfer (or Book-
Entry Confirmation, as the case may be) and all other documents required hereby
are received by the Exchange Agent within five business days after the
Expiration Date.
Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of 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.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a holder of Old Notes may tender such Old Notes in
the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
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.
4. Partial Tenders. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering holder should fill in the principal amount tendered
in the third column of the box entitled "Description of Old Notes Tendered"
above. The entire principal amount of Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Old Notes is not tendered, then Old Notes for the
principal amount of Old Notes not tendered and Exchange Notes issued in exchange
for any Old Notes accepted will be sent to the holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Old Notes are accepted for exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Medallion Guarantee of Signatures. If this Letter of Transmittal (or facsimile
hereof) is signed by the record holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever. If this Letter
of Transmittal (or facsimile hereof) is signed by a participant in the Book-
Entry Transfer Facility, the signature must correspond with the name as it
appears on the security position listing as the holder of the Old Notes.
<PAGE>
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered holder, the
said holder need not and should not endorse any tendered Old Notes, nor provide
a separate bond power. In any other case, such holder must either properly
endorse the Old Notes tendered or transmit a properly completed separate bond
power with this Letter of Transmittal, with the signatures on the endorsement or
bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered holder or holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) 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 Company, evidence satisfactory to the Company of their
authority to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the tendered Old
Notes) and the Exchange Notes are to be issued directly to such registered
holder(s) (or, if signed by a participant in the Book-Entry Transfer Facility,
deposited to such participant's account at such Book-Entry Transfer Facility)
and neither the box entitled "Special Delivery Instructions" nor the box
entitled "Special Registration Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all other
cases, all signatures on this Letter of Transmittal (or facsimile hereof) must
be guaranteed by an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address (or account at
the Book-Entry Transfer Facility) to which Exchange Notes or substitute Old
Notes for principal amounts not tendered or not accepted for exchange are to be
issued or sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered hereby, or if tendered Old Notes are registered in the name of any
person other than the person signing this 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 this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a holder
of any Old Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual is his or her social security number. If
the Company is not provided with the correct TIN, the holder may be subject to a
$50 penalty imposed by Internal Revenue Service. (If withholding results in an
over-payment of taxes, a refund may be obtained). Certain holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9" for information on which TIN to
report.
<PAGE>
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligations regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject
any and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any conditions
of the Exchange Offer or defects or irregularities in tenders as to particular
Old Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (includes this Letter of Transmittal and the instructions hereto)
shall 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 Company shall determine. Neither the Company, the Exchange Agent
nor any person shall be under any duty to give notification of defects or
irregularities with regard to tenders of Old Notes nor shall any of them incur
any liability for failure to give such notification.
10. Waiver of Conditions. The Company reserves the absolute right to waive,
in whole or part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance or
for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR Social Security Number
TIN IN THE BOX AT RIGHT AND OR Employer Identification Number
FORM W-9 CERTIFY BY SIGNING AND DATING BELOW ______________________________
DEPARTMENT OF THE TREASURY PART 2 -- Certification -- Under penalties of perjury, I PART 3 --
INTERNAL REVENUE SERVICE certify that:
(1) The number shown on this form is my correct Taxpayer Awaiting TIN [_]
PAYER'S REQUEST FOR Identification Number (or I am waiting for a number to be
TAXPAYER issued to me) and
IDENTIFICATION NUMBER (TIN)
(2) I am not subject to backup withholding either because I Please complete the Certificate of
have not been notified by the Internal Revenue Service Awaiting Taxpayer Identification
("IRS") that I am subject to backup withholding as a result Number below.
of failure to report all interest or dividends, or the IRS
has notified me that I am no longer subject to backup
withholding.
Certificate Instructions -- You must cross out item (2) in Part 2 above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting interest or dividends on
your tax return. However, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS stating that you are no longer subject to
backup withholding, do not cross out item (2).
SIGNATURE DATE , 1997
------------------------------------------------------- -----------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number to the payor within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
- ---------------------------------- -----------------------------, 1997
Signature Date
<PAGE>
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States citizen or
resident (or I am signing for a foreign corporation, partnership, estate or
trust).
- ---------------------------------- ------------------------------, 1997
Signature Date
<PAGE>
FORMAN PETROLEUM CORPORATION
LETTER TO CLIENTS
FOR
TENDER OF ALL OUTSTANDING
13.5% SENIOR SECURED NOTES DUE 2004, SERIES A
IN EXCHANGE FOR
13.5% SENIOR SECURED NOTES DUE 2004, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated ____________________, 1997,
of Forman Petroleum Corporation, a Louisiana corporation (the "Company"), and a
related Letter of Transmittal, which together constitute the "Exchange Offer"
relating to the offer by the Company, to exchange its 13.5% Senior Secured Notes
due 2004, Series B (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act") for a like principal
amount of its issued and outstanding 13.5% Senior Secured Notes due 2004, Series
A (the "Old Notes"), upon the terms and subject to the conditions set forth in
the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the holder of record of Old Notes held by us for your own account.
A tender of such Old Notes can be made only by us as the record holder and
pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used by you to tender Old Notes held by
us for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account pursuant to the terms and conditions of
the Exchange Offer. We also request that you confirm that we may on your behalf
make the representations and warranties contained in the Letter of Transmittal.
Very truly yours,
<PAGE>
PLEASE RETURN YOUR INSTRUCTIONS TO US IN THE ENCLOSED ENVELOPE WITHIN AMPLE
TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION
DATE.
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK
ENTRY TRANSFER PARTICIPANT
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
____________________, 1997 (the "Prospectus") of Forman Petroleum Corporation, a
Louisiana corporation (the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer") to exchange its 13.5% Senior Secured
Notes due 2004, Series B (the "Exchange Notes"), for all of its outstanding
13.5% Senior Secured Notes due 2004, Series A (the "Old Notes"). Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$____________________ of the 13.5% Senior Secured Notes due 2004, Series A.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] To TENDER the following Old Notes held by your for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED) (IF
ANY): $_______________________.
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
Exchange Notes acquired in exchange for Old Notes pursuant to the Exchange Offer
are being acquired in the ordinary course of business of the person receiving
such Exchange Notes, whether or not undersigned, (ii) the undersigned is not
participating in, and has no arrangement with any person to participate in, the
distribution within the meaning of the Securities Act of 1933, as amended (the
"Securities Act") and (iii) neither the undersigned nor any such other person is
an "affiliate" (within the meaning of Rule 405 under the Securities Act) of the
Company or a broker-dealer tendering Old Notes acquired directly from the
Company. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Old Notes, it acknowledges that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
SIGN HERE
Name of beneficial owner(s):______________________________________________
Signature(s):_____________________________________________________________
Name(s) (please print):___________________________________________________
Address:__________________________________________________________________
Telephone Number:_________________________________________________________
Taxpayer Identification or Social Security Number:________________________
Date:_____________________________________________________________________
<PAGE>
FORMAN PETROLEUM CORPORATION
LETTER TO REGISTERED HOLDERS AND
DEPOSITORY TRUST COMPANY PARTICIPANTS
FOR
TENDER OF ALL OUTSTANDING 13.5% SENIOR SECURED NOTES DUE 2004, SERIES A
IN EXCHANGE FOR
13.5% SENIOR SECURED NOTES DUE 2004, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ______________, 1997. UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer
by Forman Petroleum Corporation, a Louisiana corporation (the "Company"), to
exchange its 13.5% Senior Secured Notes due 2004, Series B (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of its issued and
outstanding 13.5% Senior Secured Notes due 2004, Series A (the "Old Notes") upon
the terms and subject to the conditions set forth in the Company's Prospectus,
dated ________________, 1997, and the related Letter of Transmittal (which
together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated ________________________, 1997;
2. Letter of Transmittal (together with accompanying Substitute Form
W-9 Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter which may be sent to your clients for whose account you
hold Old Notes in your name or in the name of your nominee; and
5. Letter which may be sent from your clients to you with such
client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the Exchange Notes acquired in exchange for
Old Notes pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
the holder, (ii) the holder is not participating in, and has no arrangement with
any person to participate in, the distribution of Exchange Notes within the
meaning of the Securities Act, and (iii) neither the holder nor any such other
person is an "affiliate" (within the meaning of Rule 405 under the Securities
Act) of the Company or a broker-dealer tendering Old Notes acquired directly
from the Company. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
The enclosed Letter to Clients contains an authorization by the beneficial
owners of the Old Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Old Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
FORMAN PETROLEUM CORPORATION
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
13.5% SENIOR SECURED NOTES DUE 2004, SERIES A
IN EXCHANGE FOR
13.5% SENIOR SECURED NOTES DUE 2004, SERIES B
This form, or one substantially equivalent hereto, must be used by a holder
to accept the Exchange Offer of Forman Petroleum Corporation, a Louisiana
corporation (the "Company"), and to tender 13.5% Senior Secured Notes due 2004,
Series A (the "Old Notes") to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer--Guaranteed Delivery
Procedures" of the Company's Prospectus, dated ___________________, 1997 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Old Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
U. S. TRUST COMPANY OF TEXAS, N.A.
<TABLE>
<S> <C> <C>
By Hand Delivery: By Overnight Courier: By Mail:
U. S. Trust Company of Texas, N.A. U. S. Trust Company of Texas, N.A. U. S. Trust Company of Texas, N.A.
Attention: Corporate Trust 770 Broadway - 13th Floor Attention: Corporate Trust
111 Broadway - Lower Level Corporate Trust Operations P.O. Box 841
New York, New York 10006-1906 New York, New York 10003-9598 Cooper Station
New York, New York 10276-0841
</TABLE>
By Facsimile:
(212) 420-6504
Confirm by Telephone:
(800) 225-2398
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE IN THE BOX PROVIDED ON
THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD NOTES AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
OR ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- --------------------------------------------- ------------------- -------------------
<S> <C> <C>
</TABLE>
PLEASE SIGN AND COMPLETE
Names of Record Holders:______________________ Signatures:____________________
Address:______________________________________ _______________________________
______________________________________________ Dated:____________________, 1997
Area Code and Telephone Numbers:______________
______________________________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Capacity:
_______________________________________________________________________________
Address(es):
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17 Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility described in
the Prospectus under the caption "The Exchange Offer--Book-Entry Transfer" and
in the Letter of Transmittal) and any other required documents, all by 5:00
p.m., New York City time, within three business days following the Expiration
Date.
Name of Firm:___________________________ __________________________________
(AUTHORIZED SIGNATURE)
Address:________________________________
(INCLUDE ZIP CODE) Name:_____________________________
Area Code and Tel. Number:______________ Title:____________________________
(PLEASE TYPE OR PRINT)
________________________________________
Date:________________________, 1997
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date.
The method of delivery of this Notice of Guaranteed Delivery and any other
required documents to the Exchange Agent is at the election and sole risk of the
holder, and the delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. As an alternative to delivery by
mail, the holders may wish to consider using an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Old Notes or signed as the name of the participant shown on the Book-
Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
