<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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POGO PRODUCING COMPANY
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1311 74-1659398
(State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
5 GREENWAY PLAZA, SUITE 2700 GERALD A. MORTON
HOUSTON, TEXAS 77046 VICE PRESIDENT -- LAW
(713) 297-5000 AND CORPORATE SECRETARY
(Address, including zip code, and telephone number, 5 GREENWAY PLAZA, SUITE 2700
including area code, of registrant's principal HOUSTON, TEXAS 77046
executive offices) (713) 297-5000
(Name, Address, including zip code, and telephone
number, including area code, of agent for service)
</TABLE>
Copy to:
STEPHEN A. MASSAD
BAKER & BOTTS, L.L.P.
3000 ONE SHELL PLAZA
HOUSTON, TEXAS 77002
(713) 229-1234
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. [ ]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
==============================================================================================================
Title of each class of Proposed maximum Proposed
securities to be Amount to be offering price per maximum aggregate Amount of
registered registered share (1) offering price (1) registration fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 3/4% Senior Subordinated
Notes due 2007 . . . . . $100,000,000 100% $100,000,000 $30,304
==============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
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> 2
POGO PRODUCING COMPANY
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
Form S-4 Item Number and Heading Location in Prospectus
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<S> <C> <C>
1. Forepart of Registration Statement and Outside Front Cover Page
of Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . Front cover page
2. Inside Front and Outside Bank Cover Pages of Prospectus . . . . Inside front cover page;
"Available Information"; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information . . . . . . . . . . . . . . . . . . . . . . . . . . "Prospectus Summary"
4. Terms of the Transaction . . . . . . . . . . . . . . . . . . . "Prospectus Summary"; "The
Exchange Offer"; "Description of
the Notes"; "Exchange Offer;
Registration Rights"; "Certain
Federal Income Tax Consequences"
5. Pro Forma Financial Information . . . . . . . . . . . . . . . . Not applicable
6. Material Contacts with the Company Being Acquired . . . . . . . Not applicable
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters . . . . . . . . . . . . . . . Not applicable
8. Interests of Named Experts and Counsel . . . . . . . . . . . . "Legal Matters"
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities . . . . . . . . . . . . . . . . . . Not applicable
10. Information with Respect to S-3 Registrants . . . . . . . . . . "Incorporation of Certain
Documents by Reference";
"Prospectus Summary";
"Management's Discussion and
Analysis of Financial Condition
and Results of Operations";
"Business and Properties";
"Management and Board of
Directors"
11. Incorporation of Certain Information by Reference . . . . . . . "Incorporation of Certain
Documents by Reference"
12. Information with Respect to S-2 or S-3 Registrants . . . . . . Not applicable
13. Incorporation of Certain Information by Reference . . . . . . . Not applicable
14. Information with Respect to Registrants Other Than S-2 or S-3
Registrants . . . . . . . . . . . . . . . . . . . . . . . . . Not applicable
15. Information with Respect to S-3 Companies . . . . . . . . . . Not applicable
16. Information with Respect to S-2 or S-3 Companies . . . . . . . Not applicable
17. Information with Respect to Companies Other Than S-2 or S-3
Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . Not applicable
18. Information if Proxies, Consents or Authorizations are to be
Solicited . . . . . . . . . . . . . . . . . . . . . . . . . . . Not applicable
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
19. Information if Proxies, Consents or Authorization are not to be
Solicited or in an Exchange Offer . . . . . . . . . . . . . . . "Incorporation of Certain
Documents by Reference",
"Management and Board of
Directors"
</TABLE>
(ii)
<PAGE> 4
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
July 2, 1997
PROSPECTUS
POGO PRODUCING COMPANY
OFFER TO EXCHANGE
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED
_______________
Pogo Producing Company, a Delaware 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 8 3/4% Senior Subordinated Notes due
2007, 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 8 3/4% Senior
Subordinated Notes due 2007, Series A (the "Old Notes"), of which $100,000,000
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 and registration rights 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 general unsecured senior subordinated obligations of the
Company that are subordinated in right of payment to all existing and future
Senior Indebtedness (as defined herein) of the Company including indebtedness
under the Credit Agreement (as defined herein), pari passu in right of payment
with all future senior subordinated indebtedness of the Company and senior in
right of payment to all existing and future subordinated indebtedness of the
Company.
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; Amendment." Tenders of Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on 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 15 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN
INVESTMENT IN THE EXCHANGE NOTES.
THE NOTES 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> 5
The Exchange Notes will bear interest at the rate of 8 3/4% per annum,
payable semi-annually on May 15 and November 15 of each year, commencing
November 15, 1997. Holders of Exchange Notes of record on November 1, 1997
will receive interest on November 15, 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, May 22, 1997, 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 Notes are general unsecured
senior subordinated obligations of the Company that are subordinated in right
of payment to all existing and future Senior Indebtedness (as defined herein)
of the Company including indebtedness under the Credit Agreement (as defined
herein), pari passu in right of payment with all future senior subordinated
indebtedness of the Company and senior in right of payment to all existing and
future subordinated indebtedness of the Company. The net proceeds of the sale
of the Old Notes by the Company was used to repay outstanding Senior
Indebtedness of the Company. As of March 31, 1997, on a pro forma basis, after
giving effect to the sale of the Old Notes by the Company and the application
of the proceeds therefrom, the Company would have had approximately $9 million
of outstanding Senior Indebtedness, no indebtedness that would rank pari passu
with the Notes, and $201.2 million principal amount of indebtedness that would
rank subordinated to the Notes. On May 31, 1997, the Company had approximately
$33 million of outstanding Senior Indebtedness, no indebtedness that ranked
pari passu with the Old Notes and $201.2 million principal amount of
indebtedness that ranked subordinated to the Old Notes.
The Old Notes were sold by the Company on May 22, 1997 to the Initial
Purchasers (as defined herein) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchasers 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) 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 the
Initial Purchasers in connection with the offering of the Old Notes. See
"Exchange Offer; Registration Rights."
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 has agreed that it will
make this Prospectus and any amendment or supplement to this Prospectus
available to any broker-dealer for use in connection with any such resale for a
period of up to 180 days after consummation of the Exchange Offer. See "Plan
of Distribution."
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.
Merrill Lynch & Co. and Goldman, Sachs & Co. (together, the "Initial
2
<PAGE> 6
Purchasers") have informed the Company that they currently intend to make a
market for the Exchange Notes. However, they are 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.
--------------------------
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS UNDER "PROSPECTUS
SUMMARY," "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS AND PROPERTIES," IN ADDITION
TO CERTAIN STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS, ARE
"FORWARD-LOOKING STATEMENTS" AND ARE THUS PROSPECTIVE. SUCH FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH RISKS,
UNCERTAINTIES AND OTHER FACTORS ARE DISCUSSED UNDER "RISK FACTORS," BEGINNING
ON PAGE 15 OF THIS PROSPECTUS, AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," BEGINNING ON PAGE 30 OF THIS
PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO CAREFULLY CONSIDER SUCH
FACTORS.
3
<PAGE> 7
CERTAIN DEFINITIONS
As used in this Prospectus, "Mcf" means thousand cubic feet, "MMcf"
means million cubic feet, "Bcf" means billion cubic feet, "Bbl" means barrel,
"MBbls" means thousand barrels and "MMBbls" means million barrels. "BOE" means
barrel of oil equivalent, "Mcfe" means thousand cubic feet equivalent, "MMcfe"
means million cubic feet equivalent and "Bcfe" means billion cubic feet
equivalent. Natural gas equivalents and crude oil equivalents are determined
using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate
or natural gas liquids. References to "$" and "dollar" shall, in each instance,
refer to United States dollars. All estimates of reserves contained herein are
set forth on a "net" basis, unless otherwise noted, whereas information
regarding production, acreage and numbers of well are set forth on a gross
basis, unless otherwise noted.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference the following documents
(File No. 1-7792) (collectively, the "Reports"):
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 (the "Annual Report");
(b) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997; and
(c) All other documents filed by the Company pursuant to
Section 13(a), 13(c) 14 or 15(d) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act") subsequent to the date hereof
and prior to the termination of the offering made hereby.
Any statement contained herein or in a document or Report, all or a
portion of which is incorporated by or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this
Prospectus, including the Reports and documents incorporated or deemed to be
incorporated herein by reference, as the same may be amended, supplemented or
otherwise modified from time to time. Statements contained in this Prospectus
as to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document, copies of which are available from the Company as
described below, each such statement being qualified in all respects by such
reference.
This Prospectus incorporates Reports and documents by reference which
are not presented herein or delivered herewith. The Company will furnish
without charge to each person to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any and
all of the Reports and documents referred to above which are incorporated in
this Prospectus by reference, other than exhibits to such Reports and documents
(unless such exhibits are specifically incorporated by reference into such
Reports or documents). Such requests for Reports and documents should be
directed to Pogo Producing Company, 5 Greenway Plaza, Suite 2700, Houston,
Texas 77046-0504, Attention: Corporate Secretary, telephone number (713)
297-5017. In order to ensure timely delivery of such documents prior to the
Expiration Date, any request should be made by , 1997.
4
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus or incorporated by
reference herein. Prospective investors should consider carefully the
information set forth in this Prospectus under the heading "Risk Factors". This
Prospectus contains certain forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors".
THE COMPANY
Pogo Producing Company (the "Company") is an independent oil and gas
exploration and production company, based in Houston, Texas. Incorporated in
1970, the Company has, in recent years, established a record of increasing its
proven hydrocarbon reserves, principally through the exploration, exploitation
and development of its properties and the selective acquisition of additional
interests in producing properties in which the Company already has an interest.
As a reflection of this historical success, in 1992, 1993, 1994, 1995 and 1996,
the Company replaced 143%, 204%, 153%, 305%, and 187%, respectively, of that
year's total production of proven hydrocarbon reserves. Through a portfolio of
domestic and international properties, the Company concentrates its efforts on
a mix of both offshore and onshore opportunities which provide a balanced
exposure to oil and natural gas production. In recent years, the Company has
concentrated its efforts in selected areas where it believes that its
expertise, competitive acreage position, or ability to quickly take advantage
of new opportunities offer the possibility of relatively high rates of return.
Domestically, the Company has an extensive Gulf of Mexico reserve and acreage
position and is also active in the Permian Basin of southeast New Mexico and
west Texas and in other selected areas of Texas and Louisiana. Internationally,
the Company, through its subsidiary Thaipo Limited ("Thaipo"), is the operator
of the 1,300,000 acre Block B8/32 concession license in the Gulf of Thailand
(the "Thailand Concession").
As of December 31, 1996, the Company had estimated net worldwide
proven reserves of 360.9 Bcf of natural gas and 49.6 MMBbls of crude oil, or
approximately 658.6 Bcfe, of which 64% were classified proved developed.
Natural gas accounted for 55% of total net proved reserves at December 31,
1996, and 57% of 1996 production. Based on December 31, 1996, prices of $3.65
per Mcf for natural gas production and $24.14 per Bbl for oil and condensate
production, the discounted future net cash flow before income taxes
attributable to the Company's net proved reserves as of December 31, 1996, was
$954.5 million. The Company has maintained its successful drilling record over
the last five years, having participated in drilling 426 gross wells, of which
386 were completed as producers. During this period, net proved reserves, as
estimated by Ryder Scott Petroleum Engineers ("Ryder Scott") more than doubled,
increasing 109% from December 31, 1991 to December 31, 1996.
STRENGTHS
The Company believes it is well positioned to continue to build upon
its historical success by capitalizing on its strengths, including the
following:
o Diversified Portfolio of Core Properties. The Company benefits from a
portfolio of existing properties which provide geographic
diversification while being of sufficient size and potential to enable
the Company to concentrate its resources and regional expertise. As of
January 1, 1997, seven distinct operating areas in four geographic
regions accounted for approximately 90% of the Company's estimated
proved natural gas reserves and approximately 93% of its proved oil,
condensate and natural gas liquids reserves, and were the principal
areas where the Company achieved the historical reserve replacement
record discussed above. The nature of the Company's existing
properties permit it to maintain a focused exploration and development
program by utilizing the substantial geological and operating
expertise it has gained over years of participation in these areas, as
well as providing a base from which to evaluate new opportunities with
similar characteristics. The Company utilized its offshore expertise
gained primarily in the Gulf of Mexico to develop its Thailand
Concession, which currently represents a substantial portion of the
Company's total reserves and a growing portion of its total
production. Since the Thailand Concession was granted in August 1991,
the Company has discovered 273 Bcfe of proven reserves (as of December
31, 1996) on this acreage net to its interest. Production from the
Tantawan Field, located on a portion of the Thailand Concession
commenced in February, 1997. Production from the Tantawan Field
averaged 88.7 MMcf of natural gas per day and 6,158 Bbls of crude oil
and condensate per day (41.1 MMcf per day and 2,854 Bbls per day net
to the Company's working interest) during the first two weeks of
April, 1997.
5
<PAGE> 9
o Significant Further Potential. The Company believes that its existing
properties continue to hold significant further potential for the
discovery of additional reserves. In addition to capital expenditures
for platforms, equipment, workovers, recompletions and certain land
and lease acquisition costs, the Company has budgeted approximately
$111 million to participate in drilling approximately 148 gross
exploration and development wells during 1997 on its existing
properties.
o Balanced Risk Profile; Prudent Exposure to Higher Return
Opportunities. The Company seeks to manage its risk exposure by
maintaining a prudent level of participation in its projects. The
Company seeks to operate certain of its properties, particularly where
it believes that its working interest percentage, expertise or ability
to control the timing or cost of a project provides a competitive
advantage to it and its partners. The Company is currently the
operator on all or a portion of 27 of the 93 offshore blocks in which
it holds an interest (and will be designated as operator on three of
the five blocks that it still expects to be awarded from the March 1997
Outer Continental Shelf lease sale). The Company is also the operator
of a majority of its domestic onshore wells; and, through its
subsidiary Thaipo, is the operator of its 1.3 million acre Thailand
Concession. In instances where the Company is not the operator, it
seeks to have a meaningful working interest in its projects so that it
can influence decisions regarding their development and operations.
Generally, the Company seeks a higher level of participation in
projects which it views as having a potentially high rate of return and
which have lower anticipated exploration and development costs, such as
its operations in southeastern New Mexico and West Texas, while it
seeks a lower level of participation where drilling or development
costs may be disproportionately high, such as wells in intermediate
water depths (400 to 1,200 feet) in the Gulf of Mexico or wells that
are unusually deep or are considered highly risky.
o Technical Expertise. The Company has an experienced staff of engineers
and geoscientists that comprises over 40% of the Company's total
full-time personnel. The experience of its personnel, augmented by
data from over 426 gross wells drilled over the past five years, more
than 3,500,000 acres of 3-D seismic data and 500,000 miles of 2-D
seismic data, create a knowledge base which the Company utilizes in
establishing its drilling priorities and associated capital budget.
o Strong Financial Position. The Company endeavors to maintain both a
low financial risk profile and sufficient capital resources to augment
internally generated cash flow where necessary to satisfy its capital
budget requirements. On a pro forma basis as of, and for the year
ended, December 31, 1996, after giving effect to the sale of the Old
Notes by the Company, the Company's long term obligations to EBITDA
(as defined) and EBITDA to net interest expense ratios would have been
2.2x and 9.4x, respectively.
BUSINESS STRATEGY
The Company's business strategy is to maximize profitability and
shareholder value by (i) increasing hydrocarbon production levels, leading to
increased revenues, cash flow and earnings, (ii) replacing and expanding its
proven hydrocarbon reserves base, (iii) maintaining appropriate levels of debt
and interest, and controlling overhead and operating costs and (iv) expanding
exploration and production activities into new and promising geographic areas
consistent with Company expertise.
To implement its business strategy, the Company currently is
principally focused in the following four geographic areas:
DOMESTIC
Gulf of Mexico. As of December 31, 1996, approximately 38% of the
Company's total net proved oil and gas equivalent reserves and approximately
66% of the Company's domestic net proved oil and gas equivalent reserves are
located in the Gulf of Mexico, where the Company has been exploring for oil and
gas for over 27 years. Most of these proved reserves are concentrated in four
significant producing areas, including eight fields in the Eugene Island area
located off the Louisiana coast. This concentration allows the Company to
closely manage costs and to develop detailed geologic and other information
relating to its properties. The Company believes that the Gulf of Mexico will
continue to provide the Company with substantial opportunities to expand its
hydrocarbon reserves and increase its deliverability by utilizing its extensive
inventory of 3-D seismic data (covering the equivalent of 550 federal Gulf of
Mexico lease blocks) to locate low risk exploration and development projects,
and by using advanced drilling technology, including horizontal drilling, to
accelerate development of these projects. As operator of its newly constructed
East Cameron Block 334 "E" platform, the Company recently used advanced
drilling and completion technology to drill and complete two deep, high
pressure wells that added significant new reserves in 1996 and which commenced
production in April, 1997. As of April 17, 1997, production from this new field
was approximately 145 MMcf of natural gas per day and
6
<PAGE> 10
approximately 5,000 Bbls of crude oil and condensate per day (approximately
84.5 MMcf per day and approximately 2,900 Bbls per day net to the Company's
working interest).
Permian Basin. As of December 31, 1996, approximately 12% of the
Company's total net proved oil and gas equivalent reserves, and approximately
21% of the Company's domestic net proved oil and gas equivalent reserves are
located in the Permian Basin where the Company has been exploring for oil and
gas for over 19 years. According to the most recent annual figures published by
the State of New Mexico, the Company is recognized as the ninth largest
producer of crude oil in the state. The Company believes that it continues to
be one of the most active companies drilling for oil and gas in the
southeastern New Mexico portion of the Permian Basin, where it has interests in
over 75,000 gross acres. The Company's primary drilling objective in this
region is the Brushy Canyon (Delaware) formation, which produces oil at depths
of approximately 6,000 to 9,000 feet. Commencing in late 1989 and continuing
through March 31, 1997, the Company and its partners have drilled 315 wells in
the Permian Basin, West and Northwest Texas areas, 97% of which were completed
as productive. The Company has achieved rapid cost recovery with respect to its
Permian Basin wells drilled to date because of relatively low capital costs and
high initial rates of production. Due to its historic drilling success, its
current undeveloped acreage position and its significant budgetary commitment
to additional drilling, the Company expects its Permian Basin operations to
continue to be a source of significant oil production.
Onshore Gulf Coast Region. The Company has maintained an active
presence in the Onshore Gulf Coast region for over 19 years. Recently, the
Company has committed considerable resources to increasing its presence in
promising areas where it believes its technological expertise, acreage position
and comparatively low operating costs provide a competitive advantage.
Commencing in 1995, the Company has participated in seven proprietary 3-D
seismic surveys in the Onshore Gulf Coast region. Over sixteen prospects
developed from these surveys are currently budgeted for exploration or
appraisal drilling during 1997. During 1996, the Company participated in the
drilling of seven new wells in the Lopeno Field located in South Texas. The
Company and its partners currently plan to drill an additional seven wells in
this field during 1997. Successful development drilling in the Lopeno Field and
elsewhere in the Gulf Coast Region enabled the Company to double its proven
reserves in this region during 1996 from approximately 25 Bcfe as of December
31, 1995 to approximately 50 Bcfe as of December 31, 1996.
INTERNATIONAL
Gulf of Thailand. In August 1991, the Company and its joint venture
partners were awarded a license to explore for oil and gas on the Thailand
Concession. Through March 31, 1997, the Company and its joint venture partners
have drilled 51 exploratory and development wells on the Thailand Concession
and acquired 3-D seismic surveys covering approximately 452,000 acres of the
Thailand Concession. Significant oil and gas reserves have been discovered on
several areas on the Thailand Concession and accounted, at December 31, 1996,
for approximately 41% of the Company's total net proved oil and gas equivalent
reserves.
The first area of the Thailand Concession to be developed has been
named the Tantawan Field. Production from the Tantawan Field commenced in early
February, 1997, and averaged 88.7 MMcf of natural gas per day and 6,158 Bbls of
crude oil and condensate per day (41.1 MMcf per day and 2,854 Bbls per day net
to the Company's working interest) during the first two weeks of April, 1997.
Exploration efforts also continue on portions of the Thailand Concession
outside the Tantawan Field. Oil and gas accumulations have been identified in
areas designated as the Benchamas Field, the Pakakrong Field, North Benchamas
Field and the Maliwan prospect. In addition, Thaipo and its joint venture
partners have formally requested that the government of Thailand designate
certain portions of the Thailand Concession outside the Tantawan Field as
producing areas, including the Benchamas and Pakakrong fields. The government
is currently considering the request. Thaipo and its joint venture partners
have also identified other potentially promising areas on the Thailand
Concession. Since acquiring their interest in the Thailand Concession, Thaipo
and its joint venture partners have acquired 3-D seismic surveys covering
approximately 452,000 acres of the Thailand Concession and currently plan to
acquire an additional 216,000 acres of 3-D seismic data over other prospective
portions of the Thailand Concession during 1997 while continuing to develop the
Tantawan Field and to carry out an active exploration drilling program.
While continuing the development of the Thailand Concession, the
Company intends to pursue a strategy of evaluating potentially high return
prospects in other areas of the world with a stable political and financial
climate, such as certain European and ASEAN ("Association of Southeast Asian
Nations") countries.
7
<PAGE> 11
THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Company on May 22, 1997 to the Initial
Purchasers and were thereupon offered and sold by the Initial Purchasers only
to certain qualified buyers. The net proceeds received by the Company in
connection with the sale of the Old Notes were used to repay a portion of the
Company's then outstanding Senior Indebtedness. See "Private Placement" and
"Capitalization."
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $100,000,000
principal amount of Exchange Notes for up to $100,000,000 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 the 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, $100,000,000 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.
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."
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 semi-annually
on May 15 and November 15 of
each year, commencing November
15, 1997. Holders of Exchange
Notes of record on November 1,
1997, will receive interest on
November 15, 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, May 22, 1997,
to the date of exchange thereof.
Consequently, assuming the
Exchange Offer is consummated
prior to the record date in
respect of the November 15,
1997, interest payment for the
Old Notes, holders who exchange
their Old Notes for Exchange
Notes will receive the same
interest payment on November 15,
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
8
<PAGE> 12
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 in "The Exchange Offer
-- Guaranteed Delivery
Procedures."
Withdrawal Rights . . . . . . . . . . . . . Tenders of Old Notes may be
withdrawn at any time prior to
5:00 p.m., New York City time,
on 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 -- Registration
Rights; Liquidated Damages."
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 . . . . . . . . . . . . . . State Street Bank & Trust
Company is serving as exchange
agent (the "Exchange Agent") in
connection with the Exchange
Offer. The mailing address of
the Exchange Agent is:
State Street Bank & Trust
Company, Corporate Trust
Department, P.O. Box 778,
Boston, Massachusetts
02102-0078. Hand deliveries and
deliveries by overnight courier
should be addressed to State
Street Bank & Trust Company,
Corporate Trust Department, 4th
Floor, Two International Place,
Boston Massachusetts 02110.
For information with respect to
the Exchange Offer, the
telephone number for the
9
<PAGE> 13
Exchange Agent is (617) 664-5314
and the facsimile number for the
Exchange Agent is 617) 664-5739.
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.
See "Use of Proceeds." For a
discussion of the use of the net
proceeds received by the Company
from the sale of the Old Notes,
see "Private Placement."
SUMMARY TERMS OF THE NOTES
Notes Outstanding . . . . . . . . . . . . . . $100,000,000 aggregate principal
amount of 8 3/4% Senior
Subordinated Notes due 2007.
Maturity Date . . . . . . . . . . . . . . . . May 15, 2007.
Interest Payment Dates . . . . . . . . . . . May 15 and November 15 of each
year, commencing November 15,
1997.
Optional Redemption . . . . . . . . . . . . . The Notes are redeemable at the
option of the Company, in whole
or in part, at any time on or
after May 15, 2002, at the
redemption prices set forth
herein, together with accrued
and unpaid interest, if any, to
the date of redemption. See
"Description of the Notes --
Redemption; Optional Redemption."
Guarantee . . . . . . . . . . . . . . . . . . Under certain circumstances, the
Company's payment obligations
under the Notes will be jointly
and severally guaranteed on
a senior subordinated basis
(the "Subsidiary Guarantees")
by certain of the Company's
existing or future restricted
subsidiaries (the "Subsidiary
Guarantors"). Any Subsidiary
Guarantees will be limited to the
extent of any payment that would
not constitute a fraudulent
transfer or conveyance under
federal or state law. See
"Risk Factors -- Fraudulent
Conveyance Considerations
Relating to Future Subsidiary
Guarantees" and "Description of
the Notes -- Subsidiary
Guarantees of the Notes."
Change of Control . . . . . . . . . . . . . . Upon the occurrence of a Change
of Control, each Holder (as
defined) may require the Company
to purchase all or a portion of
such Holder's 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. See "Description of the
Notes -- Certain Covenants;
Change of Control."
10
<PAGE> 14
Ranking . . . . . . . . . . . . . . . . . . . The Notes are general unsecured
senior subordinated obligations
of the Company that are
subordinated in right of payment
to all existing and future Senior
Indebtedness of the Company, pari
passu with all future senior
subordinated indebtedness of the
Company and senior in right of
payment to all existing and
future subordinated indebtedness
of the Company. As of March 31,
1997, on a pro forma basis after
giving effect to the sale of the
Old Notes, the Company would
have had approximately $9,000,000
principal amount of outstanding
Senior Indebtedness, no
indebtedness that would rank pari
passu with the Old Notes and
$201,230,000 of indebtedness
that would rank subordinated to
the Old Notes. On May 31, 1997,
the Company had approximately $33
million of outstanding Senior
Indebtedness, no indebtedness
that ranked pari passu with the
Old Notes and $201.2 million
principal amount of indebtedness
that ranked subordinated to the
Old Notes. Subject to certain
limitations set forth in the
Indenture, the Company and its
Subsidiaries (as defined) may
incur additional indebtedness.
See "Capitalization,"
"Description of the Notes" and
"Management's Discussion and
Analysis of Financial Condition
and Results of Operations --
Liquidity and Capital Resources."
Certain Covenants . . . . . . . . . . . . . . The Indenture pursuant to which
the Old Notes have been and the
Exchange Notes will be issued
(the "Indenture") will contain
certain covenants, including,
without limitation, covenants
with respect to the following
matters: (i) limitation on
indebtedness; (ii) limitation
on restricted payments; (iii)
limitation on issuances and
sales of Restricted Subsidiary
(as defined) capital stock; (iv)
limitation on transactions with
affiliates; (v) limitation on
liens; (vi) limitation on
disposition of proceeds of asset
sales; (vii) limitation on
non-guarantor Restricted
Subsidiaries; (viii) limitation
on dividends and other payment
restrictions affecting
Restricted Subsidiaries; (ix)
limitation on other senior
subordinated indebtedness; and
(x) limitation on merger,
consolidation and sale of assets.
See "Description of the Notes --
Certain Covenants."
Use of Proceeds . . . . . . . . . . . . . . . The net proceeds to the Company
from the offering of the Old
Notes were used to repay a
portion of the Company's
outstanding Senior Indebtedness.
See "Capitalization."
Exchange Offer;
Registration Rights . . . . . . . . . . . . . Pursuant to a registration rights
agreement relating to the Old
Notes (the "Registration Rights
Agreement") by and among the
Company and the Initial
Purchasers, the Company agreed to
use its reasonable best efforts
to (1) file with the Securities
and Exchange Commission (the
"Commission") a registration
statement (the "Exchange Offer
Registration Statement") with
respect to an offer to exchange
the Old Notes (the "Exchange
Offer") for notes of the Company
having substantially identical
terms as the Old Notes (the "New
Notes") (except that the New
Notes will not contain terms with
respect to transfer restrictions
or interest rate increases) not
later than July 6, 1997, (2)
cause the Exchange Offer
Registration Statement to become
effective not later than
September 4, 1997 and (3) cause
the Exchange Offer to be
consummated not later than
November 18, 1997. The
Registration Statement of which
this Prospectus forms a part
constitutes such Exchange Offer
Registration Statement. In
certain circumstances, the
Company will file a shelf
registration statement (a "Shelf
Registration Statement") with
respect to the Old Notes in lieu
of effecting the Exchange Offer.
11
<PAGE> 15
Absence of a Public
Market for the Exchange Notes . . . . . . . . The Exchange Notes will be a new
issue of securities for which
there is currently no market.
Although the Initial Purchasers
have informed the Company that
they each currently intend to
make a market in the Exchange
Notes, they are not obligated to
do so, and any such market making
may be discontinued at any time
without notice. Accordingly,
there can be no assurance as to
the development or liquidity of
any market for the Exchange
Notes.
RISK FACTORS
See "Risk Factors" beginning on page 15 for a discussion of certain
factors that should be considered by prospective investors in evaluating an
investment in the Notes.
12
<PAGE> 16
SUMMARY FINANCIAL DATA
The Summary Financial Data presented below as of, and for each of the
years in the five-year period ended, December 31, 1996, are derived from the
consolidated financial statements of the Company and its subsidiaries, which
are incorporated by reference herein and which have been audited by independent
public accountants. The financial data as of, and for the three month periods
ended, March 31, 1996 and 1997, are derived from the Company's unaudited
financial statements which, in the opinion of management, include all
adjustments (which consist only of normal recurring adjustments) necessary for
the fair presentation of the financial position and results of operations of the
Company for such interim periods. This data should be read in conjunction with
the consolidated financial statements and related notes thereto incorporated by
reference herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein and in the
Reports.
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
-------- --------- --------- --------- --------- --------- --------
(EXPRESSED IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Total revenues . . . . . . . $140,830 $139,554 $173,608 $157,559 $203,977 $48,052 $61,314
Operating income . . . . . . 47,141 50,533 52,203 23,428 61,108 11,583 21,940
Net interest expense(a) . . . 18,645 10,505 9,365 9,333 8,959 2,186 2,425
Net income . . . . . . . . . 18,495 25,061 27,067 9,230 32,760 6,265 12,818
Other Financial Data:
EBITDA(b) . . . . . . . . . . $98,948 $95,930 $122,652 $98,646 $131,776 $29,861 $41,337
Capital and exploration
expenditures (excluding
interest capitalized) . . . 41,300 74,600 120,800 110,400 206,200 18,800 69,900
Selected Ratios:
EBITDA/Net interest expense . 5.3x 9.1x 13.1x 10.6x 14.7x 13.7x 17.0x
Ratio of earnings to fixed
charges(c) . . . . . . . . 2.5x 4.5x 5.1x 2.1x 4.6x 3.8x 5.0x
Long-term obligations/
EBITDA(d) . . . . . . . . . 1.5x 1.4x 1.2x 1.7x 1.9x n/a n/a
Long-term obligations/Total
proved reserves(BOE)(d) . . $2.52 $1.95 $2.01 $1.63 $2.24 n/a n/a
Pro Forma Selected Ratios(e):
EBITDA/Pro forma net interest
expense . . . . . . . . . . -- -- -- -- 9.4x -- 14.7x
Pro forma ratio of earnings to
fixed charges . . . . . . . -- -- -- -- 3.3x -- 4.4x
Pro forma long-term
obligations/EBITDA . . . . -- -- -- -- 2.2x -- n/a
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
ACTUAL AS ADJUSTED(E)
----------- ----------------
<S> <C> <C>
Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $552,832 $556,832
Long-term obligations, including current portion . . . . . . . . . . . . . . . . 306,230 310,230
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,238 120,238
</TABLE>
- ----------
(a) Net interest expense represents interest charges net of interest
capitalized of $391 in 1992, $451 in 1993, $739 in 1994, $1,834 in
1995, $4,244 in 1996, $826 in the three months ended March 31, 1996,
and $1,870 in the three months ended March 31, 1997.
(b) EBITDA represents income from continuing operations before provision
for income taxes, interest expense, depreciation, depletion and
amortization, and dry hole and impairment costs. EBITDA is presented
as a measure of the Company's debt service ability, and not as an
alternative to (i) operating income (as determined in accordance with
generally accepted accounting principles) as an indicator of the
Company's operating performance, or (ii) cash flows from operating
activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity.
(c) Pre-tax earnings plus total interest charges, including amortization
of debt issue expenses, divided by total interest charges, including
amortization of debt issue expenses.
(d) Long-term obligations include long-term debt and the non-current
portion of the Eugene Island 330 Production Payment obligation until
such obligation was satisfied in 1993.
(e) Adjusted to give effect to the sale of the Old Notes and the
application of the net proceeds therefrom.
13
<PAGE> 17
SUMMARY RESERVE AND OPERATING DATA
The Summary Reserve and Operating Data presented below under the
captions "Production (Sales) Data" as of, and for each of the years in the
five-year period ended, December 31, 1996, and for the three month periods ended
March 31, 1996 and 1997, is unaudited and should be read in conjunction with the
consolidated financial statements and related notes thereto which are
incorporated by reference herein and "Business and Properties -- Exploration and
Production Data; Production and Sales" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The reserve information
presented under the caption "Reserve Data" as of, and for each of the years in
the five-year period ended, December 31, 1996 has been derived from the summary
reserve report prepared by Ryder Scott and attached as an exhibit to the Annual
Report on Form 10-K filed with the Commission for each of the years presented
and should be read in conjunction with the notes to Company's consolidated
financial statements which are incorporated by reference herein and "Business
and Properties -- Exploration and Production Data; Reserves" included elsewhere
herein. The data included in the Reports are incorporated in this Prospectus by
reference.
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C>
Production (Sales) Data:
Net daily average and weighted
average price:
Natural gas:
Mcf per day................... 105,200 91,700 144,800 121,000 107,700 111,200 129,700
Price per Mcf................. $1.75 $1.98 $1.88 $1.63 $2.40 $2.41 $2.67
Crude oil and condensate:
Bbls per day.................. 8,699 9,851 11,100 11,786 11,968 11,889 13,903
Price per Bbl................. $20.17 $17.81 $16.08 $17.80 $22.12 $19.61 $22.29
Natural gas liquids:
Bbls per day.................. 1,181 1,678 2,222 1,998 2,173 1,984 1,312
Price per Bbl................. $13.50 $11.90 $11.33 $11.10 $14.92 $13.52 $15.79
Reserve Data (a):
Estimated proved reserves
Crude oil, condensate and
natural gas liquids (MBbls)..... 22,556 28,268 33,862 45,182 49,602 -- --
Natural gas (MMcf).............. 207,068 232,866 242,890 328,061 360,944 -- --
Natural gas equivalents
(MMcfe)....................... 342,404 402,474 446,062 599,153 658,566 -- --
Estimated future net revenues
before income taxes, discounted
at 10%(b)(c).................... $405,101 $403,840 $382,980 $532,475 $954,545 -- --
Estimated future net revenues
after income taxes, discounted
at 10%(b)...................... $307,657 $300,260 $290,069 $377,145 $686,040 -- --
</TABLE>
- ----------
(a) Proved reserves were estimated in accordance with Commission
guidelines using oil and gas prices and production and development
costs as of December 31 of each such year.
(b) These values were estimated in accordance with Commission guidelines.
See "Business and Properties -- Exploration and Production Data;
Reserves."
(c) Based on assumed Company-wide flat prices of $20.00 per barrel for oil
and condensate and $2.00 per Mcf for gas, the Company's reservoir
engineers estimate that the present value of future net revenues
before income taxes, discounted at 10%, of the Company's proved
reserves would have been approximately $553 million at December 31,
1996. This calculation represents an internal Company estimate, is
presented for information purposes and has not been calculated
entirely in accordance with Commission guidelines.
14
<PAGE> 18
RISK FACTORS
In addition to the other information included elsewhere in this
Prospectus, the following risk factors should be carefully considered in
evaluating an investment in the Exchange Notes offered hereby. This Prospectus
contains certain forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act, which involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
this section.
VOLATILITY OF OIL AND GAS MARKETS
The Company's profitability and cash flow are highly dependent upon
the prices of oil and natural gas, which historically have been seasonal,
cyclical and volatile. In general, prices of oil and gas are dependent upon
numerous factors beyond the control of the Company, including various weather,
economic, political and regulatory conditions. During 1996, the average prices
that the Company received for its crude oil, condensate and natural gas
production were substantially higher than they have been in recent years. In
the first quarter of 1997, the average prices that the Company received for its
production were substantially less than those the Company received in 1996. See
"Selected Reserve and Operating Data." In the past, when natural gas prices in
the United States were lower than they are currently, the Company at times
elected to curtail certain quantities of its production. Should natural gas
prices fall further in the future, the Company may again elect to curtail
certain quantities of its natural gas production. Any significant decline in
oil or gas prices could have a material adverse effect on the Company's
operations and financial condition and could, under certain circumstances,
result in a reduction in funds available under the Company's Credit Agreement.
Because it is impossible to predict future oil and gas price movements
with any certainty, the Company from time to time enters into contracts on a
portion of its production to hedge against the volatility in oil and gas
prices. Such hedging transactions, historically, have never exceeded 50% of
the Company's total oil and gas production on an energy equivalent basis for
any given period. While intended to limit the negative effect of further price
declines, such transactions could effectively limit the Company's participation
in price increases for the covered period, which increases could be
significant. Furthermore, no assurance can be given that such transactions will
reduce risk or mitigate the effect of any substantial declines in oil and gas
prices. As of June 1, 1997, the Company was not a party to any natural gas
futures contracts or crude oil swap agreements. See "Business and Properties --
Miscellaneous; Competition and Market Conditions" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Results of
Operations."
UNCERTAINTIES INHERENT IN ESTIMATES OF RESERVES AND FUTURE NET REVENUES
There are numerous uncertainties in estimating the quantity of proved
reserves and in projecting the future rates of production and timing of
development expenditures. Oil and gas reserve engineering must be recognized as
a subjective process of estimating underground accumulations of oil and gas
that cannot be measured in an exact way, and estimates of other engineers might
differ materially from those of Ryder Scott, the Company's reserve engineers.
The accuracy of any reserve estimate is a function of the quality of available
data and of engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate may
justify revision of such estimate, which revisions may be material.
Accordingly, reserve estimates are often different from the quantities of oil
and gas that are ultimately recovered. In addition, estimates of the Company's
future net revenues from proved reserves and the present value thereof are
based on certain assumptions regarding future oil and gas prices, production
levels and operating and development costs that may not prove to be correct.
Any significant variance in these assumptions could materially affect the
estimates of reserves and future net revenues therefrom set forth in the
Reports. See "Business and Properties -- Exploration and Production Data;
Reserves."
OPERATING AND UNINSURED RISKS
The Company must continually acquire or explore for and develop new
oil and natural gas reserves to replace those produced and sold. Without
successful drilling, acquisition or exploration operations, the Company's
hydrocarbon reserves and revenues would decline. Although the Company has
historically maintained its reserves base primarily through successful
exploration and development operations, there can be no assurance that future
efforts will be similarly successful. The Company's operations are also subject
to risks inherent in the exploration for and production of oil and natural gas,
such as blowouts, cratering, explosions, uncontrollable flows of oil, natural
gas or well fluids, fires, pollution and other environmental risks. Offshore
oil and gas operations are subject to the additional hazards of marine and
helicopter operations, such as capsizing, collision and adverse weather and sea
conditions. These hazards
15
<PAGE> 19
could result in substantial losses to the Company due to injury or loss of
life, severe damage to and destruction of property and equipment, pollution and
other environmental damage and suspension of operations. The Company carries
insurance which it believes is in accordance with customary industry practices,
but is not fully insured against all risks incident to its business.
Drilling activities are subject to numerous risks, including the risk
that no commercially productive hydrocarbon reserves will be encountered. The
cost of drilling, completing and operating wells and of installing production
facilities and pipelines is often uncertain. The Company's drilling operations
may be curtailed, delayed or canceled as a result of numerous factors,
including title problems, weather conditions, compliance with governmental
requirements and shortages or delays in the delivery or availability of
equipment or fabrication yards. The availability of a ready market for the
Company's natural gas production depends on a number of factors, including the
demand for and supply of natural gas, the proximity of natural gas reserves to
pipelines, the available capacity of such pipelines and government regulations.
The marketing of offshore oil and gas production is subject to the availability
of pipelines and other transportation, processing and refining facilities, as
well as the existence of adequate markets. As a result, even if hydrocarbons
are discovered in commercial quantities, a substantial period of time may
elapse before commercial production commences. If pipeline facilities in an
area are insufficient, the Company may have to await the construction or
expansion of pipeline capacity before production from that area can be
marketed. The marketing of domestic onshore oil and gas production is also
subject to the availability of pipelines, crude oil hauling and other
transportation, processing and refining facilities as well as the existence of
adequate markets. See "Business and Properties -- Miscellaneous; Operating and
Uninsured Risks", "Business and Properties -- Miscellaneous; Sales" and "--
Additional Risks Related to the Company's Operations in the Kingdom of
Thailand."
AVAILABILITY OF EQUIPMENT AND PERSONNEL
The recent increase in drilling activity throughout the world has
increased the demand for drilling rigs, drilling vessels, supply boats and
personnel experienced in the oil and gas industry in general, and the offshore
oil and gas industry in particular. The Company has recently experienced
difficulty and delays in consistently obtaining certain services and equipment
from vendors, obtaining drilling rigs and other equipment at favorable rates,
and scheduling equipment fabrication at factories and fabrication yards. In
addition, the Company has noted that the costs of such services, equipment and
personnel have recently risen significantly. No assurance can be given that
such services, equipment and personnel will be available in a timely manner, or
that the cost thereof will not increase significantly. See "Business and
Properties -- Miscellaneous; Operating and Uninsured Risks" and "Management's
Analysis and Discussion of Financial Condition and Results of Operations --
Results of Operations."
DEPENDENCE ON OTHER OPERATORS
A significant percentage of the Company's oil and gas properties are
not operated by the Company. As a result, the Company has limited control over
the manner in which operations are conducted on such non-operated properties,
including the safety and environmental standards used in connection therewith.
Pursuant to the operating agreements governing operations on the properties in
which the Company has an interest, the Company maintains significant influence
or control over the nature and timing of exploration and development activities
on the majority of its properties. Such agreements do not, however, allow the
Company such influence or control with respect to a portion of its properties;
in such cases, the operators of such properties generally have control with
respect to the nature and timing of exploration or development activities. In
such instances, the operators of such properties could refuse to initiate
exploration or development projects, in which case the Company would be
required to propose such activities and may be required to proceed with such
activities without receiving any funding from the operator, or the operators
may initiate exploration or development projects on a slower schedule than that
preferred by the Company. Any of these events could have a significant effect
on the Company's anticipated exploration and development activities.
SUBSTANTIAL CAPITAL REQUIREMENTS
The Company makes, and will continue to make, substantial expenditures
for the acquisition, development, production, exploration and abandonment of
its oil and natural gas reserves. The Company intends to finance such capital
and exploration expenditures primarily with funds provided by operations and
borrowings under the Credit Agreement. The Company increased its capital and
exploration expenditures from $98,560,000 in 1995 (excluding purchased reserves
and interest capitalized) to $206,267,000 in 1996 (excluding purchased reserves
and interest capitalized). The Company has currently budgeted $210,000,000 for
capital and exploration expenditures in 1997. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
16
<PAGE> 20
COMPETITION
The oil and natural gas industry is highly competitive. The Company
competes in the acquisition, development, production and marketing of oil and
natural gas with major oil companies, other independent oil and natural gas
concerns and individual producers and operators. Many of these competitors have
substantially greater financial and other resources than the Company.
Furthermore, the oil and natural gas industry competes with other industries in
supplying the energy and fuel needs of industrial, commercial and other
consumers. See "Business and Properties -- Miscellaneous; Competition and
Market Conditions."
SUBORDINATION OF NOTES; LEVERAGE AND DEBT SERVICE
The Notes are senior subordinated obligations of the Company and, as
such, are subordinated to all of the Company's existing and future Senior
Indebtedness (as defined in the Indenture relating to the Notes), including
indebtedness under the Credit Agreement. The Company expects to incur
additional Senior Indebtedness from time to time in the future under the Credit
Agreement or otherwise, and the Indenture relating to the Notes will limit, but
not prohibit, the incurrence of any other Indebtedness (as defined) by the
Company or its Subsidiaries, including Senior Indebtedness. As of May 31, 1997,
the Company had approximately $33 million principal amount of outstanding Senior
Indebtedness. Upon any distribution of assets, liquidation, dissolution,
reorganization or any similar proceeding by or relating to the Company, the
holders of Senior Indebtedness of the Company would be entitled to receive
payment in full before the holders of the Notes would be entitled to receive any
payment. The terms and conditions of the subordination provisions pertinent to
the Notes are described in more detail in "Description of the Notes --
Subordination."
Further, the Notes are effectively subordinated to claims of holders
of any preferred stock and claims of creditors (other than the Company) of the
Company's Subsidiaries that are not Subsidiary Guarantors, including trade
creditors, secured creditors, taxing authorities, creditors holding guarantees,
and tort claimants. In the event of a liquidation, reorganization, or similar
proceeding relating to a Subsidiary that is not a Subsidiary Guarantor, these
persons generally will have priority as to the assets of such Subsidiary over
the claims and equity interest of the Company and, thereby indirectly, holders
of Indebtedness of the Company, including the Notes. No Subsidiary of the
Company is, as of the date of this Prospectus, a Subsidiary Guarantor. However,
under certain circumstances, the Company's payment obligations under the Notes
may in the future be required to be severally guaranteed by existing or future
Subsidiaries of the Company. See "Description of the Notes -- Subsidiary
Guarantees of the Notes." At March 31, 1997, Subsidiaries of the Company
(principally Thaipo) had total combined assets of $175,267,000 (exclusive of
net receivables from the Company) and liabilities of $16,601,000 (exclusive of
net payables to the Company and assets and liabilities associated with
transactions treated as operating leases in the consolidated financial
statements of the Company). Among other obligations, Thaipo has guaranteed its
pro rata portion of obligations under an eleven and a half year bareboat
charter of a Floating Production, Storage and Offloading system (a "FPSO") used
for development of the Tantawan production area. The portion of the obligations
under the bareboat charter guaranteed by Thaipo is currently estimated at
$11,122,000 per year for the first ten years. The documents governing such
obligations state that the Company has no liability for such obligations. In
addition, other liabilities may be incurred by the Company's subsidiaries in
the future.
The Indenture imposes limits on the ability of the Company and its
Subsidiaries to incur additional indebtedness and liens and to enter into
agreements that would restrict the ability of such Subsidiaries to make
distributions, loans or other payments to the Company. The Indenture also
imposes limits on the ability of the Company to transfer assets to Restricted
Subsidiaries or acquire Restricted Subsidiaries. However, these limitations are
subject to various qualifications. Subject to certain limitations, the Company
and its Subsidiaries may incur secured indebtedness. For additional details of
these provisions and the applicable qualifications, see "Description of the
Notes -- Subordination" and "-- Certain Covenants."
As of March 31, 1997, on a pro forma basis after giving effect to the
sale of the Old Notes and application of proceeds therefrom, the Company's
long-term debt (including the current portion) would have been $309,230,000 and
shareholders' equity would have been $120,238,000, and thus the Company may
continue to be considered highly leveraged. The Company believes that its cash
flow from operations, together with the proceeds from the sale of the Old
Notes, the funds available under the Credit Agreement and its other sources of
liquidity, will be adequate to meet its anticipated requirements for working
capital, capital expenditures, interest payments and scheduled principal
payments. However, the Company's ability to meet its debt service obligations
will be dependent upon its future
17
<PAGE> 21
performance, which, in turn, 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.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
In the event of a Change of Control, holders of the Notes will have
the right to require the Company, subject to certain conditions, to repurchase
all or any part of such holders' Notes at a price equal to 101% of the
principal thereof, plus accrued and unpaid interest, if any, to the date of
repurchase. See "Description of the Notes -- Certain Covenants -- Change of
Control." Existing Senior Indebtedness under the Credit Agreement includes, and
future Indebtedness may include, change of control provisions pursuant to which
the Company would be required to repurchase, or the lender could demand the
repayment of, upon a change of control (as defined thereunder), the
Indebtedness due thereunder. Upon such an occurrence, the Company would be
required to redeem or repay such Senior Indebtedness before repurchasing the
Notes and then outstanding indebtedness pari passu with the Notes that contain
similar change of control provisions. No assurance can be given that the
Company would have sufficient funds available or could obtain the financing
required to repurchase Notes and such other outstanding Indebtedness that is
pari passu with, or senior to, the Notes tendered by holders thereof following
a Change of Control. If a Change of Control occurred and the Company had
inadequate funds or financing available to pay for Notes and such other
Indebtedness that is pari passu with, or senior to, the Notes that are tendered
for repurchase, an Event of Default (as defined) would be triggered under the
indenture and under such other outstanding Indebtedness, each of which could
have a material adverse consequence for the Company and the holders of the
Notes. In addition, the 2004 Notes (as defined) and the 2006 Notes (as
defined), which are contractually subordinated to the Notes, contain change of
control provisions that are similar to the Change of Control provisions
contained in the Notes. Consequently, an event triggering a Change of Control
repurchase obligation under the Notes may also trigger a change of control
repurchase obligation under such subordinated indebtedness, if the then current
market price of the Company's common stock is less than 105% of the respective
conversion prices of such notes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
FRAUDULENT CONVEYANCE CONSIDERATIONS RELATING TO FUTURE SUBSIDIARY GUARANTEES
The Company's obligations under the Notes may under certain
circumstances be guaranteed on an unsecured senior subordinated basis by
existing and future Restricted Subsidiaries. Various fraudulent conveyance laws
have been enacted for the protection of creditors and may be utilized by a
court of competent jurisdiction to subordinate or avoid any Subsidiary
Guarantee issued by a Subsidiary Guarantor. It is also possible that under
certain circumstances a court could hold that the direct obligations of a
Subsidiary Guarantor could be superior to the obligations under the Subsidiary
Guarantee.
To the extent that a court were to find that at the time a Subsidiary
Guarantor entered into a Subsidiary Guarantee either (x) the Subsidiary
Guarantee was incurred by Subsidiary Guarantor with the intent to hinder, delay
or defraud any present or future creditor or that a Subsidiary Guarantor
contemplated insolvency with a design to favor one or more creditors to the
exclusion in whole or in part of others or (y) the Subsidiary Guarantor did not
receive fair consideration or reasonably equivalent value for issuing the
Subsidiary Guarantee and, at the time it issued the Subsidiary Guarantee, the
Subsidiary Guarantor (i) was insolvent or rendered insolvent by reason of the
issuance of the Subsidiary Guarantee, (ii) was engaged or about to engage in a
business or transaction for which the remaining assets of the Subsidiary
Guarantor constituted unreasonably small capital or (iiii) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, the court could avoid or subordinate the Subsidiary Guarantee in
favor of the Subsidiary Guarantor's other debts or liabilities. Among other
things, a legal challenge of a Subsidiary Guarantee issued by a Subsidiary
Guarantor on fraudulent conveyance grounds may focus on the benefits, if any,
realized by the Subsidiary Guarantor as a result of the issuance by the Company
of the Notes. To the extent a Subsidiary Guarantee is avoided as a result of
fraudulent conveyance or held unenforceable for any other reason, the Holders
of the Notes would cease to have any claim in respect of such Subsidiary
Guarantor and would be creditors solely of the Company.
GOVERNMENT REGULATION AND ENVIRONMENTAL RISKS
The Company's business is subject to certain laws and regulations
relating to taxation, exploration for and development and production of oil and
gas, and environmental and safety matters in both the United States and the
foreign countries in which the Company or any of its subsidiaries operates or
owns property. Various laws and regulations often require permits for drilling
wells and also cover spacing of wells, the prevention of waste of oil and gas
including maintenance of certain gas/oil ratios, rates of production and other
matters. The effect of these statutes
18
<PAGE> 22
and regulations, as well as other regulations that could be promulgated by the
jurisdictions in which the Company has production, could be to limit the number
of wells that could be drilled on the Company's properties and to limit the
allowable production from the successful wells completed on the Company's
properties, thereby limiting the Company's revenues.
The discharge of oil, natural gas or other pollutants into the air,
soil or water may give rise to liabilities to the government and third parties
and may require the Company to incur costs to remedy the discharge. Oil or
natural gas may be discharged in many ways, including from a well or drilling
equipment at a drill site, leakage from storage tanks, pipelines or other
gathering and transportation facilities and discharges resulting from damage to
oil or natural gas wells resulting from accidents during normal operations, as
well as blowouts, cratering and explosions. Discharged oil and gas may migrate
through soil to water supplies or adjoining properties, giving rise to
additional liabilities. A variety of laws and regulations govern the
environmental aspects of oil and gas production, transportation and processing
and may, in addition to other laws, impose liability in the event of discharges
(whether or not accidental), for failure to notify the proper authorities of a
discharge and other failures to comply with those laws. Environmental laws may
also affect the costs of the Company's acquisitions of oil and gas properties.
The Company does not believe that its environmental risks are materially
different from those of comparable companies in the oil and gas industry.
Nevertheless, no assurance can be given that environmental laws will not, in
the future, result in a curtailment of production or a material increase in the
costs of production, development or exploration or otherwise adversely affect
the Company's operations and financial condition. Pollution and similar
environmental risks generally are not fully insurable. See "-- Operating and
Uninsured Risks."
RISKS OF FOREIGN OPERATIONS
Ownership of property interests and production operations in Thailand,
and in any other areas outside the United States in which the Company may
choose to do business, are subject to the various risks inherent in foreign
operations. These risks may include, among other things, currency restrictions
and exchange rate fluctuations, loss of revenue, property and equipment as a
result of hazards such as expropriation, nationalization, war, insurrection and
other political risks, risks of increases in taxes and governmental royalties,
renegotiation of contracts with governmental entities and quasi-governmental
agencies, changes in laws and policies governing operations of foreign-based
companies and other uncertainties arising out of foreign government sovereignty
over the Company's international operations. The Company's international
operations may also be adversely affected by laws and policies of the United
States affecting foreign trade, taxation and investment. In addition, in the
event of a dispute arising from foreign operations, the Company may be subject
to the exclusive jurisdiction of foreign courts or may not be successful in
subjecting foreign persons to the jurisdiction of the courts of the United
States. See "Business and Properties -- Miscellaneous; Risks of Foreign
Operations" and "-- International Operations."
ADDITIONAL RISKS RELATED TO THE COMPANY'S OPERATIONS IN THE KINGDOM OF THAILAND
The Company's operations in the Kingdom of Thailand are subject to
additional risks. Among other things, the Company and its joint venture
partners will be required, on August 1, 1997, unless extended, to relinquish
the remaining exploration acreage in the Thailand Concession and may be able to
retain only those areas which have been designated by the Thai government as
production areas, which currently includes only the Tantawan Field. A
substantial portion of the Company's proven reserves in the Kingdom of Thailand
are located in areas not currently designated as production areas. Although an
application has been made to designate additional areas of the Concession as
production areas and to extend the exploratory term on a portion of the
existing exploratory acreage, no assurance can be given that such applications
will be granted. In addition, the marketing and sale of hydrocarbons produced
from the Thailand Concession is subject to numerous risks and uncertainties.
For example, all oil and natural gas produced from the Thailand Concession is
expected to be sold to The Petroleum Authority of Thailand ("PTT"), which
maintains a monopoly over oil and gas transmission and distribution in
Thailand. The Thailand Concession is traversed by two major natural gas
pipelines that are owned and operated by PTT. One of these pipelines is
currently running at or near capacity and the other pipeline may also become
full as a result of production from the Tantawan Field, the Benchamas Field and
other fields in the Gulf of Thailand. There can be no assurance that, even if
the Company is successful in its exploration efforts, it will be able to
successfully, economically and profitably transport, process, refine and market
the oil and gas it produces. PTT has constructed a lateral pipeline from its
main pipeline to the Tantawan production area and has agreed to take the gas
produced therefrom pursuant to a Gas Sales Agreement (the "GSA"). In the event
that the required reserves or production rates of natural gas at a specified
quality level under the GSA are not delivered, then the Company and its joint
venture partners in the Tantawan production area will be obligated to
contribute to PTT's capital costs incurred in the construction of the lateral
pipeline. Also, under the GSA, the Tantawan joint venturers' liability for
failure to deliver the minimum contracted daily rate is limited to PTT's right
to take from subsequent
19
<PAGE> 23
deliveries an amount equal to the quantity of natural gas not delivered at 75%
of the contracted price. Cash flows resulting from operations in Thailand are
subject to Thai governmental royalties, other governmental charges and income
taxes. Since all gas sales under the GSA are expected to be recognized in Baht,
the Thai currency, fluctuations in the exchange rate between Baht and dollars
could have an adverse effect on the anticipated profits of the Company's
operations in Thailand. See "Business and Properties -- International
Operations" and "-- Miscellaneous; Sales."
ABSENCE OF TRADING MARKET; TRANSFER RESTRICTIONS
The Exchange Notes will be new securities for which currently there is
no trading market. The Company does not currently intend to apply for listing
of the Exchange Notes on any securities exchange or stock market. Although the
Initial Purchasers have informed the Company that they currently intend to make
a market in the Exchange Notes, the Initial Purchasers are not obligated to do
so, and any such market making may be discontinued at any time without notice.
The liquidity of any market for the Exchange Notes will depend upon the number
of Holders of such Exchange Notes, the interest of securities dealers in making
a market in such securities and other factors. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes. Historically, the market for noninvestment grade debt has been subject
to disruptions that have caused substantial volatility in the prices of
securities similar to the Exchange Notes. There can be no assurance that the
market, if any, for the Exchange Notes will not be subject to similar
disruptions. Any such disruptions may have an adverse effect on the Holders of
the Exchange Notes.
PRIVATE PLACEMENT
On May 22, 1997, the Company completed the private sale to the Initial
Purchasers of $100,000,000 principal amount of the Old Notes at a price of
97.27% of the principal amount thereof in a transaction not registered under
the Securities Act in reliance upon Section 4(2) of the Securities Act. The
Initial Purchasers thereupon offered and resold the Old Notes only to qualified
institutional buyers and a limited number of institutional accredited investors
at an initial price to such purchasers of 99.77% of the principal amount
thereof. The $97,270,000 million proceeds received by the Company in
connection with the sale of the Old Notes were used to repay a portion of the
Company's outstanding Senior Indebtedness.
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.
20
<PAGE> 24
CAPITALIZATION
The following table sets forth the consolidated debt and
capitalization of the Company and its subsidiaries at March 31, 1997. The table
has also been adjusted to reflect the sale of the Old Notes and the application
of the net proceeds therefrom assuming those transactions occurred on March 31,
1997. This table should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included in the Company's Annual Report
and incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C>
Long-term debt, including current portion
Credit Agreement indebtedness(a) . . . . . . . . . . . . . . . . . . . . . $ 95,000 $ --
Uncommitted credit lines with banks . . . . . . . . . . . . . . . . . . . . 10,000 9,000
8 3/4% Senior Subordinated Notes, due 2007, offered
hereby . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 100,000
5 1/2% Convertible subordinated notes, due 2004 . . . . . . . . . . . . . . 86,230 86,230
5 1/2% Convertible subordinated notes, due 2006 . . . . . . . . . . . . . . 115,000 115,000
---------- ----------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . 306,230 310,230
---------- ----------
Shareholders' equity:
Preferred stock, $1 par value; 2,000,000 shares
authorized; no shares issued and outstanding . . . . . . . . . . . . . . -- --
Common stock, $1 par value; 100,000,000 shares authorized;
33,378,664 shares issued . . . . . . . . . . . . . . . . . . . . . . . . 33,379 33,379
Additional capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,496 140,496
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . (53,258) (53,258)
Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . (55) (55)
Treasury stock, at cost; 15,575 shares . . . . . . . . . . . . . . . . . . . (324) (324)
---------- ----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . 120,238 120,238
---------- ----------
Total capitalization (including current
maturities) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 426,468 $ 430,468
========== ==========
</TABLE>
- ----------
(a) As of May 31, 1997, the outstanding indebtedness under the Credit
Agreement was $25,000,000.
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<PAGE> 25
SELECTED FINANCIAL DATA
The Selected Financial Data presented below as of, and for the years
in the five-year period ended, December 31, 1996, are derived from the
consolidated financial statements of the Company and its subsidiaries, which
are incorporated by reference herein and which have been audited by independent
public accountants. The financial data as of, and for the three month periods
ended, March 31, 1996 and 1997, are derived from the Company's unaudited
financial statements which, in the opinion of management, include all
adjustments (which consists only of normal recurring adjustments) necessary for
a fair presentation of the financial position and results of operations of the
Company for such interim periods. This data should be read in conjunction with
the consolidated financial statements and related notes thereto incorporated by
reference herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein and in the
Reports.
<TABLE>
<CAPTION>
QUARTER
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(EXPRESSED IN THOUSANDS, EXCEPT RATIOS AND UNIT AMOUNTS)
(UNAUDITED)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Crude oil and condensate . $64,224 $64,042 $65,141 $76,557 $96,908 $21,212 $27,886
Natural gas . . . . . . . . 67,366 66,173 99,093 72,032 94,589 24,433 31,154
Natural gas liquids . . . . 5,833 7,288 9,189 8,097 11,867 2,441 1,864
Other, net . . . . . . . . 1,705 (950) 133 773 778 131 410
------- ------- ------- ------ ------- ------ -------
Oil and gas revenues . . . 139,128 136,553 173,556 157,459 204,142 48,217 61,314
Interest on tax refunds . . -- 2,322 -- -- -- -- --
Gains (losses) on sales . . 1,702 679 52 100 (165) (165) --
------- ------- ------- ------ ------- ------ -------
Total . . . . . . . . . 140,830 139,554 173,608 157,559 203,977 48,052 61,314
------- ------- ------- ------ ------- ------ -------
Operating Costs and Expenses:
Lease operating . . . . . . 25,842 26,633 29,768 35,071 37,628 8,875 12,297
General and administrative 13,129 14,550 15,984 16,400 18,028 5,421 5,836
Exploration . . . . . . . . 3,102 2,455 5,257 7,468 16,777 3,910 1,900
Dry hole and impairment . . 9,314 4,690 7,088 6,703 8,579 2,550 921
Depreciation, depletion and
amortization . . . . . 42,302 40,693 63,308 68,489 61,857 15,713 18,420
------- ------- ------- ------ ------- ------ -------
Total . . . . . . . . . 93,689 89,021 121,405 134,131 142,869 36,469 39,374
------- ------- ------- ------ ------- ------ -------
Operating Income 47,141 50,533 52,203 23,428 61,108 11,583 21,940
Interest Charges . . . . . . (19,036) (10,956) (10,104) (11,167) (13,203) (3,012) (4,295)
Interest Income . . . . . . . 191 14 53 26 232 15 56
Interest Capitalized . . . . 391 451 739 1,834 4,244 826 1,870
------- ------- ------- ------ ------- ------ -------
Income Before Taxes and 28,687 40,042 42,891 14,121 52,381 9,412 19,571
Extraordinary Items . . .
Income Tax Expense . . . . . (10,192) (14,981) (15,517) (4,891) (18,800) (3,147) (6,753)
------- ------- ------- ------ ------- ------ -------
Income Before Extraordinary
Items . . . . . . . . . . . . 18,495 25,061 27,374 9,230 33,581 6,265 12,818
Extraordinary Losses on Early
Extinguishments of Debt,
Net of Taxes . . . . . . . -- -- (307) -- (821) -- --
------- ------- ------- ------ ------- ------ -------
Net Income . . . . . . $18,495 $25,061 $27,067 $9,230 $32,760 $6,265 $12,818
======= ======= ======= ====== ======= ====== =======
OTHER FINANCIAL DATA:
EBITDA(a) $98,948 $95,930 $122,652 $98,646 $131,776 $29,861 $41,337
Capital and exploration
expenditures (excluding
interest capitalized) . . . . 41,300 74,600 120,800 110,400 206,200 18,800 69,900
SELECTED RATIOS:
EBITDA/Net interest expense . 5.3x 9.1x 13.1x 10.6x 14.7x 13.7x 17.0x
Ratio of earnings to fixed
charges(b) . . . . . . . . . 2.5x 4.5x 5.1x 2.1x 4.6x 3.8x 5.0x
Long-term
obligations/EBITDA(c) . . . 1.5x 1.4x 1.2x 1.7x 1.9x n/a n/a
Long-term obligations/Total
proved reserves (BOE)(c) . . $2.52 $1.95 $2.01 $1.63 $2.24 n/a n/a
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
ACTUAL AS ADJUSTED (d)
----------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $552,832 $556,832
Long-term obligations, including current portion . . . . . . . . . . . . . . . . 306,230 310,230
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,238 120,238
</TABLE>
- ----------
(a) EBITDA represents income from continuing operations before provision
for income taxes, interest expense, depreciation, depletion and
amortization, and dry hole and impairment costs. EBITDA is presented
as a measure of the Company's debt service ability, and not as an
alternative to (i) operating income (as determined in accordance with
generally accepted accounting principles) as an indicator of the
Company's operating performance, or (ii) cash flows from operating
activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity.
(b) Pre-tax earnings plus total interest charges, including amortization
of debt issue expenses, divided by total interest charges, including
amortization of debt issue expenses. Pro forma after giving effect to
the sale of the Old Notes by the Company and the use of proceeds
therefrom the ratios of earnings to fixed charges for the year ended
December 31, 1996, and the quarter ended March 31, 1997, would have
been 3.3x and 4.4x, respectively.
(c) Long-term obligations include long-term debt and the non-current
portion of the Eugene Island 330 Production Payment obligation until
such obligation was satisfied in 1993.
(d) Adjusted to give effect to the sale of the Old Notes and the
application of the net proceeds therefrom.
22
<PAGE> 26
SELECTED RESERVE AND OPERATING DATA
The Selected Reserve and Operating Data presented below under the
captions "Production (Sales) Data" as of, and for each of the years in the
five-year period ended, December 31, 1996, and for the three month periods
ended March 31, 1996 and 1997, is unaudited and should be read in conjunction
with the consolidated financial statements and related notes thereto which are
incorporated by reference herein and "Business and Properties -- Exploration and
Production Data; Production and Sales" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations". The reserve information
presented under the caption "Reserve Data" as of, and for each of the years in
the five-year period ended, December 31, 1996 has been derived from the summary
reserve report prepared by Ryder Scott and attached as an exhibit to the Annual
Report on Form 10-K filed with the Commission for each of the years presented
and should be read in conjunction with the notes to Company's consolidated
financial statements which are incorporated by reference herein and "Business
and Properties -- Exploration and Production Data; Reserves" included elsewhere
herein. The data included in the Reports are incorporated in this Prospectus by
reference.
<TABLE>
<CAPTION>
QUARTER
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
------------------------------------------------------------ -------------------
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
PRODUCTION (SALES) DATA:
Net daily average and
weighted average price:
Natural gas:
Mcf per day . . . . . . . 105,200 91,700 144,800 121,000 107,700 111,200 129,700
Price per Mcf . . . . . . $1.75 $1.98 $1.88 $1.63 $2.40 $2.41 $2.67
Crude oil and condensate:
Bbls per day . . . . . . 8,699 9,851 11,100 11,786 11,968 11,889 13,903
Price per Bbl . . . . . . $20.17 $17.81 $16.08 $17.80 $22.12 $19.61 $22.29
Natural gas liquids:
Bbls per day . . . . . . 1,181 1,678 2,222 1,998 2,173 1,984 1,312
Price per Bbl . . . . . . $13.50 $11.90 $11.33 $11.10 $14.92 $13.52 $15.79
RESERVE DATA(A):
Estimated proved reserves
Crude oil, condensate and
natural gas liquids . . . 22,556 28,268 33,862 45,182 49,602 -- --
(MBbls) . . . . . . . . . . .
Natural gas (MMcf) . . . . 207,068 232,866 242,890 328,061 360,944 -- --
Natural gas equivalents
(MMcfe) . . . . . . . . . 342,404 402,474 446,062 599,153 658,566 -- --
Estimated future net
revenues before income
taxes, discounted at
10%(b)(c) . . . . . . . . $405,101 $403,840 $382,980 $532,475 $954,545 -- --
Estimated future net
revenues after income
taxes discounted at
10%(b). . . . . . . . . . $307,657 $300,260 $290,069 $377,145 $686,040 -- --
</TABLE>
__________
(a) Proved reserves were estimated in accordance with Commission
guidelines using oil and gas prices and production and development
costs as of December 31 of each such year.
(b) These values were estimated in accordance with Commission guidelines.
See "Business and Properties -- Exploration and Production Data;
Reserves."
(c) Based on assumed Company-wide flat prices of $20.00 per barrel for oil
and condensate and $2.00 per Mcf for gas, the Company's reservoir
engineers estimate that the present value of future net revenues
before income taxes, discounted at 10%, of the Company's proved
reserves would have been approximately $553 million at December 31,
1996. This calculation represents an internal Company estimate, is
presented for information purposes and has not been calculated
entirely in accordance with Commission guidelines.
23
<PAGE> 27
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 "Exchange Offer; 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 must 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 a representation 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 date that is 30 days following the commencement of the
Exchange Offer. 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, $100,000,000 aggregate principal
amount of Old Notes are issued and outstanding. In connection with the
issuance of the Old Notes, the Company arranged for the Old Notes to be
eligible for trading in the Private Offering, Resale and Trading through
Automated Linkages (PORTAL) Market, the National Association of Securities
Dealers' screen based, automated market trading of securities eligible for
resale under Rule 144A.
24
<PAGE> 28
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 make a public 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. 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 semi-annually on May 15
and November 15 of each year, commencing November 15, 1997. Holders of
Exchange Notes of record on November 1, 1997 will receive interest on November
15, 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, May 22, 1997, to the date of exchange thereof. Consequently, assuming
the Exchange Offer is consummated prior to the record date in respect of the
November 15, 1997 interest payment for the Old Notes, holders who exchange
their Old Notes for Exchange Notes will receive the same interest payment on
November 15, 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 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 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
25
<PAGE> 29
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 a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC) 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
26
<PAGE> 30
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) 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.
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,
27
<PAGE> 31
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 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 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.
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
State Street Bank & Trust Company (successor in interest as 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:
28
<PAGE> 32
By Mail: By Hand or Overnight Courier:
State Street Bank & Trust Company State Street Bank & Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 4th Floor
Boston, MA 02102-0078 Two International Place
Boston, MA 02110
Facsimile Transmission: (617) 664-5739
Confirm by Telephone: (617) 664-5314
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 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.
29
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Quarter Ended March 31, 1997, Compared with Quarter Ended March 31, 1996
The Company reported net income for the first quarter of 1997 of
$12,818,000 or $0.38 per share ($0.36 per share on a fully diluted basis)
compared to net income for the first quarter of 1996 of $6,265,000 or $0.19 per
share (on both a primary and a fully diluted basis). Earnings per common share
are based on the weighted average number of common and common equivalent shares
outstanding for the first quarter of 1997 of 34,176,000 (40,789,000 on a fully
diluted basis), compared to 33,834,000 (33,856,000 on a fully diluted basis)
for the first quarter of 1996. The increase in the weighted average number of
common and common equivalent shares outstanding for the first quarter of 1997,
compared to the first quarter of 1996, resulted primarily from the issuance of
shares of common stock upon the exercise of stock options pursuant to the
Company's stock option plans and the conversion of $1,300,000 of the Company's
8% Convertible Subordinated Debentures, due 2005 (the "8% Debentures") in July
1996. The increase in the number of shares used in the fully-diluted
computation of earnings per share primarily reflects additional shares of
common stock issuable upon the assumed conversion of the Company's 2004 Notes
(which were dilutive in both periods) and the 2006 Notes (which were dilutive
during the first quarter of 1997, the only comparative period in which they
were outstanding) and the elimination of related interest requirements, as
adjusted for applicable federal income taxes. Earnings applicable to common
stock, assuming full dilution, for the first quarter of 1997 was $14,617,000,
compared to $6,265,000 for the first quarter of 1996.
The Company's total revenues for the first quarter of 1997 were
$61,314,000, an increase of approximately 28% from total revenues of
$48,052,000 for the first quarter of 1996. The increase in the Company's total
revenues for the first quarter of 1997, compared to the first quarter of 1996,
resulted primarily from increases in the Company's natural gas, crude oil and
condensate production volumes and, to a lesser extent, increases in the average
prices that the Company received for its natural gas and liquid hydrocarbon
(including crude oil, condensate and natural gas liquids ("NGL")) production
volumes, that was only partially offset by a decrease in the Company's NGL
production volumes.
The following table reflects an analysis of differences in the
Company's oil and gas revenues (expressed in thousands of dollars) between the
first quarter of 1997 and the first quarter of 1996:
<TABLE>
<CAPTION>
1ST QUARTER 1997
COMPARED TO
1ST QUARTER 1996
----------------
(IN THOUSANDS)
<S> <C>
Increase (decrease) in oil and gas revenues resulting from
variances in:
Natural Gas --
Price . . . . . . . . . . . . . . . . . . . . . . . . $ 2,581
Production . . . . . . . . . . . . . . . . . . . . . . 4,140
-----
6,721
-----
Crude oil and condensate --
Price . . . . . . . . . . . . . . . . . . . . . . . . 2,900
Production . . . . . . . . . . . . . . . . . . . . . . 3,774
-----
6,674
-----
NGL and other, net . . . . . . . . . . . . . . . . . . . (298)
-----
Increase (decrease) in oil and gas revenues . . . . . . . . $13,097
=======
</TABLE>
Prices that the Company received for its natural gas production during
the first quarter of 1997 averaged $2.67 per Mcf, compared to $2.41 per Mcf for
the first quarter of 1996, an increase of approximately 11%. The average price
that the Company received for its natural gas production includes an average
price of approximately $1.50, or a discount of 25% off of the contract price of
approximately $2.00 that the Company is currently receiving under its long term
gas sales contract governing production from the Tantawan Field in the Gulf of
Thailand. The Company received the discounted price (denominated in Baht as set
forth in the gas sales contract) for its natural gas production from the
Tantawan Field during the startup phase of production from the Tantawan Field,
which period ended on March 15, 1997.
30
<PAGE> 34
The Company's natural gas production during the first quarter of 1997
averaged 129.7 MMcf per day, an increase of approximately 17% from an average
of 111.2 MMcf per day during the first quarter of 1996. The increase in the
Company's natural gas production during the first quarter of 1997, compared to
the first quarter of 1996, was related in large measure to production from the
Tantawan Field (an average over the quarter of 17.6 MMcf per day net to the
Company's working interest) which commenced in early February, 1997. During the
first two weeks of April, production from the Tantawan Field averaged 88.7 MMcf
per day (41.1 MMcf per day net to the Company's working interest). In addition,
production from the Company's new "E" platform on East Cameron Block 334, which
commenced production in early April, 1997, is not included in the results for
the first quarter. As of April 17, 1997, production from the East Cameron Block
334 "E" platform was averaging approximately 145 MMcf per day (approximately
84.5 MMcf per day net to the Company's working interest). As of June 1, 1997,
the Company was not a party to any natural gas futures contracts.
Prices received by the Company for its crude oil and condensate
production during the first quarter of 1997 averaged $22.29 per Bbl, an
increase of approximately 14% from the average price of $19.61 per Bbl that the
Company received for its crude oil and condensate production during the first
quarter of 1996.
The Company's crude oil and condensate production during the first
quarter of 1997 averaged 13,903 Bbls per day, an increase of approximately 17%
from an average of 11,889 Bbls per day during the first quarter of 1996. This
increase resulted primarily from new production from the Tantawan Field which,
during the first two weeks in April 1997, averaged 6,158 Bbls per day (2,854
Bbls net to the Company's working interest) and, to a lesser extent, the
success of the Company's oil well drilling and workover operations in the
offshore Gulf of Mexico. This increased production does not include any crude
oil, condensate or NGL production attributable to the Company's East Cameron
Block 334 "E" platform, from which production commenced in early April, 1997.
As of April 17, 1997, oil and condensate production from this new field was
averaging approximately 5,000 Bbls per day (approximately 2,900 Bbls per day
net to the Company's working interest). As of June 1, 1997, the Company was not
a party to any crude oil swap agreements.
Liquid products are often extracted from natural gas streams and sold
separately as NGL. The prices that the Company receives for its NGL production
is related to crude oil prices. However, because NGL is extracted from liquid
rich natural gas, the Company's NGL production volumes correlate most closely
with increases (or decreases) from certain of the Company's natural gas fields.
Natural gas production from the Company's East Cameron Block 334 "E" platform
is considered to be relatively rich in NGL. Therefore, the Company currently
anticipates that its NGL production volumes should increase in the future as a
result of production from this field. However, the Company can give no
assurances that such increases will not be offset by decreases in NGL
production volumes from other fields where the Company extracts NGL from the
natural gas it produces. In addition, the Company's oil and gas revenues for
the first quarter of 1997 and the first quarter of 1996 also reflect
adjustments for various miscellaneous items. The Company's NGL and other net
revenues for the first quarter of 1997 decreased $298,000 from those reported
in the first quarter of 1996. The decrease in the Company's NGL revenues for
the first quarter of 1997, compared to the first quarter of 1996, primarily
resulted from decreased NGL production volumes that were not entirely offset by
increased prices that the Company received for its NGL production and various
miscellaneous net income items.
The Company's average liquid hydrocarbons (including crude oil,
condensate and NGL) production during the first quarter of 1997 was 15,215 Bbls
per day, an increase of approximately 10% from an average liquid hydrocarbons
production of 13,874 Bbls per day during the first quarter of 1996. The
increase in the Company's average liquid hydrocarbon production during the
first quarter of 1997, compared to the first quarter of 1996, primarily
resulted from an increase in the Company's crude oil and condensate production,
that was only partially offset by a decline in the Company's NGL production.
Lease operating expenses for the first quarter of 1997 were
$12,297,000, an increase of approximately 39% from lease operating expenses of
$8,875,000 for the first quarter of 1996. The increase in lease operating
expenses for the first quarter of 1997, compared to the first quarter of 1996,
resulted primarily from the higher expenses of operating in Thailand, including
expenses related to the leasing of equipment (principally the FPSO); increased
severance taxes resulting from increased production from certain of the
Company's onshore properties that have higher severance tax obligations;
increased operating activity by the Company; and increased costs to the Company
(and the entire offshore oil industry) due to a shortage of qualified offshore
service contractors, which has permitted such contractors to increase the costs
of their services.
General and administrative expenses for the first quarter of 1997 were
$5,836,000, an increase of approximately 8% from general and administrative
expenses of $5,421,000 for the first quarter of 1996. The increase
31
<PAGE> 35
in general and administrative expenses for the first quarter of 1997, compared
to the first quarter of 1996, was related to, among other things, an increase
in the size of the Company's work force and leased office space in the United
States and Bangkok, Thailand and normal salary and concomitant benefit expense
adjustments that were not entirely offset by decreases in various general and
administrative expense items.
Exploration expenses consist primarily of delay rentals and geological
and geophysical costs which are expensed as incurred. Exploration expenses for
the first quarter of 1997 were $1,900,000, a decrease of approximately 51% from
exploration expenses of $3,910,000 for the first quarter of 1996. This decrease
in exploration expenses resulted primarily from the completion of certain
proprietary 3-D seismic surveys on Company leases in South Louisiana and East
Texas incurred in the first quarter of 1996 and for which no comparable expense
was incurred in the first quarter of 1997. This decrease in exploration
expenses was partially offset by ongoing geophysical activity by the Company in
other regions.
Dry hole and impairment expenses relate to costs of unsuccessful wells
drilled, along with impairments due to decreases in expected reserves from
producing wells. The Company's dry hole and impairment expenses for the first
quarter of 1997 were $921,000, a decrease of approximately 64% from dry hole
and impairment expenses of $2,550,000 for the first quarter of 1996.
The Company accounts for its oil and gas activities using the
successful efforts method of accounting. Under the successful efforts method,
lease acquisition costs and all development costs are capitalized. Proved
properties are reviewed whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. Unproved
properties are reviewed quarterly, with any such impairment charged to expense
in the period. Exploratory drilling costs are capitalized until the results
are determined. If proved reserves are not discovered, the exploratory drilling
costs are expensed. Other exploratory costs are expensed as incurred.
The provision for depreciation, depletion and amortization ("DD&A") is
based on the capitalized costs, as determined in the preceding paragraph, plus
future costs to abandon offshore wells and platforms, and is determined on a
cost center by cost center basis using the units of production method. The
Company's DD&A expense for the first quarter of 1997 was $18,420,000, an
increase of approximately 17% from DD&A expense of $15,713,000 for the first
quarter of 1996. The increase in the Company's DD&A expense for the first
quarter of 1997, compared to the first quarter of 1996, resulted primarily from
increased oil and natural gas production from the Company's properties and, to
a lesser extent, from an increase in the Company's DD&A rate. The composite
DD&A rate for all of the Company's producing fields for the first quarter of
1997 was $0.912 per Mcfe ($5.47 per BOE), an increase of approximately 4% from
a composite DD&A rate of $0.877 per Mcfe ($5.26 per BOE) for the first quarter
of 1996.
The increase in the composite DD&A rate for all of the Company's
producing fields for the first quarter of 1997, compared with the first quarter
of 1996, resulted primarily from an increased percentage of the Company's
production coming from certain of the Company's fields that have DD&A rates
that are higher than the Company's recent historical composite rate and a
corresponding decrease in the percentage of the Company's production from
fields that have DD&A rates that are lower than the Company's recent historical
composite DD&A rate. The Company produced 19,888,000 Mcfe (3,315,000 BOE)
during the first quarter of 1997, an increase of approximately 12% from the
17,696,000 Mcfe (2,949,000 BOE) produced by the Company during the first
quarter of 1996.
The Company incurred interest charges of $4,295,000 for the first
quarter of 1997, an increase of approximately 43% from interest charges of
$3,012,000 for the first quarter of 1996. The increase in interest charges for
the first quarter of 1997, compared to the first quarter of 1996, resulted
primarily from an increase in the amount of the Company's outstanding debt and,
to a lesser extent, increased amortization and debt issuance expense resulting
from the issuance of the 2006 Notes, that was partially offset by lower average
interest rate levels on the debt outstanding (resulting primarily from the
retirement of the 8% Debentures which bore interest at an 8% annual rate and
the issuance of the 2006 Notes that bear interest at a 5 1/2% annual rate).
Capitalized interest expense for the first quarter of 1997 was
$1,870,000, an increase of approximately 126% from capitalized interest expense
of $826,000 for the first quarter of 1996. The increase in capitalized interest
expense for the first quarter of 1997, compared to the first quarter of 1996,
resulted primarily from the requirement to capitalize interest expense
attributable to capital expenditures on non-producing properties which, during
portions of the first quarter of 1997 included capital expenditures related to
the Company's development of the Tantawan Field and, during the entire first
quarter of 1997, capital expenditures related to development of the Benchamas
Field in the Gulf of Thailand and construction and installation of the East
Cameron Block 334 "E" platform.
32
<PAGE> 36
As of June 1, 1997, the Company was a party to an interest rate swap
agreement. The swap agreement, which terminates on March 10, 1998, effectively
changes the interest rate paid by the Company on $5,000,000 of debt from a
market based variable rate to a fixed rate of 7.2%.
Income tax expense for the first quarter of 1997 was $6,753,000, an
increase of approximately 115% from income tax expense of $3,147,000 for the
first quarter of 1996. The increase in income tax expense for the first quarter
of 1997, compared to the first quarter of 1996, resulted primarily from
increased pretax income.
Year Ended December 31, 1996, Compared with Years Ended December 31, 1995 and
1994, Respectively
The Company reported net income for 1996 of $32,760,000 or $0.96 per
share ($35,843,000 or $0.94 per share on a fully diluted basis) compared to net
income for 1995 of $9,230,000 or $0.28 per share (on both a primary and a fully
diluted basis) and net income for 1994 of $27,067,000 or $0.81 per share (on
both a primary and a fully diluted basis). The Company recorded extraordinary
losses of $307,000 during the second quarter of 1994 related to the early
retirement of the Company's 10.25% Convertible Subordinated Notes, due 1999
(the "10.25% Notes") with the proceeds from the Company's issuance on March 16,
1994, of its 5 1/2% Convertible Subordinated Notes, due 2004 (the "2004
Notes") and $821,000 during the second quarter of 1996 related to the early
retirement of the Company's 8% Debentures with the proceeds from the Company's
issuance on June 18, 1996, of its 5 1/2% Convertible Subordinated Notes, due
2006 (the "2006 Notes").
Earnings per common share are based on the weighted average number of
common and common equivalent shares outstanding for 1996 of 34,034,000
(37,951,000 on a fully diluted basis), compared to 33,490,000 (on both a
primary and a fully diluted basis) for 1995 and 33,352,000 (36,451,000 on a
fully diluted basis) for 1994. The yearly increases in the weighted average
number of common and common equivalent shares outstanding resulted primarily
from the issuance of shares of common stock upon the exercise of stock options
pursuant to the Company's stock option plans. Earnings per common share
computations on a fully diluted basis primarily reflect additional common
shares issuable upon the assumed conversion of the Company's 2004 Notes in 1994
and 1996 (the only convertible securities of the Company that were dilutive
during the applicable periods) and the elimination of related interest
requirements, as adjusted for applicable federal income taxes. Earnings
applicable to common stock for 1994, assuming full dilution was $29,448,000.
However, the dilution resulting from the assumed conversion of the 2004 Notes
in 1994 was not sufficient to change reported earnings per share in 1994.
The Company's total revenues for 1996 were $203,977,000, an increase
of approximately 29% from total revenues of $157,559,000 for 1995, and an
increase of approximately 17% from total revenues of $173,608,000 for 1994. The
increase in the Company's total revenues for 1996, compared to 1995 and 1994,
resulted primarily from the substantial increase in prices that the Company
received for its NGL production volumes and, to a lesser extent, an increase in
the Company's liquid hydrocarbon production volumes, which was only partially
offset by a decline in the Company's natural gas production volumes.
The Company's oil and gas revenues for 1996 were $204,142,000, an
increase of approximately 30% from oil and gas revenues of $157,459,000 for
1995, and an increase of approximately 18% from oil and gas revenues of
$173,556,000 for 1994. The following table reflects an analysis of variances in
the Company's oil and gas revenues between 1996 and the previous two years:
<TABLE>
<CAPTION>
1996 COMPARED TO
----------------------
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Increase (decrease) in oil and gas revenues resulting from
variances in:
Natural Gas
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,907 $27,685
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,350) (32,189)
-------- -------
22,557 (4,504)
-------- -------
Crude oil and condensate
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,614 24,486
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,737 7,281
-------- -------
20,351 31,767
-------- -------
NGL and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,775 3,323
-------- -------
Increase (decrease) in oil and gas revenues . . . . . . . . . . . . . . . . . . . . $ 46,683 $30,586
======== =======
</TABLE>
33
<PAGE> 37
The average price that the Company received for its natural gas
production during 1996 averaged $2.40 per Mcf. The average price that the
Company received for its natural gas production in 1996 compared favorably with
the average price that the Company had received during the preceding two years
of $1.63 per Mcf for 1995 (an increase of approximately 47%) and $1.88 per Mcf
for 1994 (an increase of approximately 28%). The Company's natural gas
production for 1996 averaged 107.7 MMcf per day, a decrease of approximately
11% from average production of 121 MMcf per day in 1995, and a decrease of
approximately 26% from average production of 144.8 MMcf per day for 1994. The
decrease in the Company's average natural gas production for 1996, compared to
1995, resulted primarily from the difference between the high initial natural
gas production rates from horizontal wells drilled from the Company's Eugene
Island 295 "B" platform which commenced in late February 1994 and the
subsequent natural production decline from those reservoirs, the slowdown of
development drilling, workover and recompletion work on certain of the
Company's non-operated properties in the Gulf of Mexico, largely due to a
decrease in planned drilling by the operators of such properties and production
curtailments due to adverse weather conditions (and drilling and workover
operations on certain of the Company's properties), along with the natural
decline in deliverability from certain of the Company's more mature properties.
Those decreases were only partially offset by new and increased production from
the Company's continued offshore drilling and workover program.
Crude oil and condensate prices received by the Company averaged
$22.12 per barrel in 1996, an increase of approximately 24% compared to an
average of $17.80 per barrel in 1995, and an increase of approximately 38%
compared to an average price of $16.08 per barrel that the Company received in
1994. Crude oil and condensate production for 1996 averaged 11,968 Bbls per
day, an increase of approximately 2% from 11,786 Bbls per day for 1995, and an
increase of approximately 8% from 11,100 Bbls per day for 1994. The increase in
the Company's crude oil and condensate production for 1996, compared to 1995
and 1994, resulted primarily from ongoing development drilling and workover
programs in the Gulf of Mexico and in Lea and Eddy Counties of southeastern New
Mexico, which was only partially offset by the slowdown of development
drilling, workover and recompletion work on certain of the Company's
non-operated properties in the Gulf of Mexico, largely due to a decrease in
planned drilling by the operators of such properties and production
curtailments due to adverse weather conditions (and drilling and workover
operations on certain of the Company's properties), along with the natural
decline in deliverability from certain of the Company's more mature properties.
See "Business and Properties."
The Company's oil and gas revenues for 1996, 1995 and 1994 include
revenue from the sale of NGL, as well as adjustments for various miscellaneous
items. The Company's NGL and other, net revenues for 1996 increased $3,775,000
from those reported in 1995, and $3,323,000 from those reported in 1994. The
increase in NGL and other, net revenues in 1996, compared with 1995 and 1994,
primarily related to an increase in the price that the Company received for its
NGL production volumes and, to a lesser extent, an increase in such production
volumes.
The Company's average liquid hydrocarbon (including crude oil,
condensate and NGL) production during 1996 was 14,141 Bbls per day, an increase
of approximately 3% from an average total liquids production of 13,784 Bbls per
day for 1995, and an increase of approximately 6% from an average total liquids
production of 13,322 Bbls per day for 1994.
Lease operating expenses for 1996 were $37,628,000, an increase of
approximately 7% from lease operating expenses of $35,071,000 for 1995, and an
increase of approximately 26% from lease operating expenses of $29,768,000 for
1994. The increase in lease operating expenses for 1996, compared to 1995 and
1994, resulted primarily from increased costs to the Company (and the entire
offshore oil industry) because of an increasing shortage of qualified offshore
service contractors, which has permitted such contractors to increase the costs
of their services significantly in the last year, a year to year increase in
the level of the Company's operating activities, including increased operating
costs related to additional properties brought on production and an increased
ownership interest in certain properties as a result of the acquisition of such
interests. To a lesser extent, lease operating expenses for 1996, compared to
1995 and 1994, also increased as a result of a general maintenance and repair
program that was undertaken on many of the Company's operated properties, for
which no corresponding offsets of such magnitude existed in the comparable
prior periods.
General and administrative expenses for 1996 were $18,028,000, an
increase of approximately 10% from general and administrative expenses of
$16,400,000 for 1995, and an increase of approximately 13% from general and
administrative expenses of $15,984,000 for 1994. The increase in general and
administrative expenses for 1996, compared to 1995 and 1994, was related to,
among other things, the costs associated with the establishment of a Company
office in Bangkok, Thailand in connection with the Company's development
project and other activities in
34
<PAGE> 38
the Gulf of Thailand, an increase in the number of Company employees resulting
from the Company's increased exploration and production related activities and
to normal salary and concomitant benefit expense adjustments.
Exploration expenses for 1996 were $16,777,000, an increase of
approximately 125% from exploration expenses of $7,468,000 for 1995, and an
increase of approximately 219% from exploration expenses of $5,257,000 for
1994. The increase in exploration expenses for 1996, compared to 1995 and 1994,
resulted primarily from increased geophysical activity by the Company,
including the costs of conducting and processing certain proprietary 3-D
seismic surveys on its domestic onshore and offshore properties, as well as in
the Gulf of Thailand, together with the cost of acquiring several
non-proprietary 3-D seismic surveys in the Gulf of Mexico. In addition, a
portion of the increase in exploration expenses was attributable to increased
delay rental expense resulting from the Company's acquisition of additional
prospective oil and gas acreage. While increases in the Company's exploration
expenses are a component of, and generally correlate fairly closely with,
increases in the Company's capital and exploration budget, the Company does not
currently expect its exploration expenses in 1997 to increase significantly
over those incurred in 1996.
Dry hole and impairment expenses relate to costs of unsuccessful wells
drilled along with impairments due to decreases in expected reserves from
producing wells. The Company's dry hole and impairment expenses for 1996 were
$8,579,000, an increase of approximately 28% from dry hole and impairment costs
of $6,703,000 for 1995, and an increase of approximately 21% from dry hole and
impairment costs of $7,088,000 for 1994.
The Company's DD&A expense for 1996 was $61,857,000, a decrease of
approximately 10% from DD&A expenses of $68,489,000 for 1995, and a decrease of
approximately 2% from DD&A expenses of $63,308,000 for 1994. The decrease in
the Company's DD&A expenses for 1996, compared to 1995, resulted primarily from
a decrease in the Company's composite DD&A rate and from a decrease in the
Company's natural gas production. The decreases in the Company's DD&A expenses
for 1996, compared to 1994, resulted primarily from a decrease in the Company's
natural gas production, partially offset by an increase in the Company's
composite DD&A rate. The composite DD&A rate for all of the Company's producing
fields for 1996 was $0.87 per Mcfe ($5.20 per BOE), a decrease of approximately
4% from a composite DD&A rate of $0.91 per Mcfe ($5.47 per BOE) for 1995, but
an increase of approximately 13% from a composite DD&A rate of $0.77 per Mcfe
($4.59 per BOE) for 1994. The Company produced 70,472,000 Mcfe (11,745,000 BOE)
in 1996, a decrease of approximately 5% from the 74,337,000 Mcfe (12,389,000
BOE) produced in 1995, and a decrease of approximately 14% from the 82,008,000
Mcfe (13,668,000 BOE) produced in 1994. See "Consolidated Financial Statements
- -- Note 1 of Notes to Consolidated Financial Statements" in the Company's
Annual Report incorporated by reference herein.
Interest charges for 1996 were $13,203,000, an increase of
approximately 18% from interest charges of $11,167,000 for 1995, and an
increase of approximately 31% from interest charges of $10,104,000 for 1994.
The increase in the Company's interest charges for 1996, compared to 1995 and
1994, resulted primarily from an increase in the amount of debt outstanding
that was only partially offset by, among other things, a decrease in the
average interest rate paid by the Company on its debt. Capitalized interest for
1996 was $4,244,000, an increase of approximately 131% from capitalized
interest of $1,834,000 for 1995, and an increase of approximately 474% from
capitalized interest of $739,000 for 1994. The increase in the amount of
interest capitalized by the Company in 1996, compared to 1995 and 1994, related
primarily to the capitalization of interest expenses resulting from the
engineering, acquisition and construction of facilities and equipment for the
Company's Tantawan Field and the Company's East Cameron 334/335 "D" platform
(both of which commenced in 1995) and the Company's East Cameron 334/335 "E"
platform (commencing in 1996). See "Business and Properties -- Domestic
Offshore Operations; Significant Domestic Offshore Operating Areas During 1996;
East Cameron."
Income tax expense for 1996 was $18,800,000, an increase of
approximately 284% from income tax expense of $4,891,000 for 1995, and an
increase of approximately 21% from income tax expense of $15,517,000 for 1994.
The increase in income tax expense for 1996, compared to 1995 and 1994,
resulted primarily from increased pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's Consolidated Statement of Cash Flows for the three
months ended March 31, 1997, reflects net cash provided by operating activities
of $45,899,000. In addition to the net cash provided by operating activities,
the Company also received $717,000 from the exercise of stock options. The
Company also had net borrowings of $60,000,000 under its Credit Agreement.
During the first three months of 1997, the Company invested
$70,388,000 of such cash flow in capital projects, purchased proved reserves
for $28,617,000 and paid $1,001,000 ($0.03 per share) in cash dividends to
holders of the Company's common stock. Of the $70,388,000 invested in capital
projects, $49,908,000 was applicable to 1996 capital
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<PAGE> 39
projects and $20,480,000 was applicable to 1997 capital projects. As of March
31, 1997, the Company's cash and cash investments were $9,586,000 and its
long-term debt totaled $306,230,000.
The Company's Consolidated Statement of Cash Flows for the year ended
December 31, 1996, reflects net cash provided by operating activities of
$92,898,000. In addition to the net cash provided by operating activities, the
Company also received $3,378,000 from the exercise of stock options, had net
borrowings of $7,000,000 under its revolving credit agreement and uncommitted
money market credit lines with certain banks and received net proceeds totaling
$111,884,000 from the offering of the 2006 Notes. The Company invested
$172,032,000 of such cash flow in capital projects during 1996, paid
$40,699,000 to redeem its 8% Debentures and paid $3,979,000 ($0.03 per share
for four quarters) in cash dividends to holders of the Company's common stock.
Of the $172,032,000 invested in capital projects, $35,254,000 was applicable to
1995 projects and $136,778,000 was applicable to 1996 capital projects. The
Company's long-term debt at December 31, 1996, was $246,230,000. As of December
31, 1996, the Company had $3,054,000 in cash and cash investments.
The Company's capital and exploration budget for 1997, which does not
include any amounts which may be expended for the purchase of proved reserves
or any interest which may be capitalized resulting from projects in progress,
was established by the Company's Board of Directors at $210,000,000, an
increase of approximately 2% from the Company's capital and exploration
expenditures (excluding purchased reserves and interest capitalized) of
$206,267,000 for 1996, an increase of approximately 113% over capital and
exploration expenditures (excluding purchased reserves and interest
capitalized) of $98,560,000 for 1995, and an increase of approximately 139%
over capital and exploration expenditures (excluding purchased reserves and
interest capitalized) of approximately $88,300,000 for 1994.
In addition to anticipated capital and exploration expenditures, other
material 1997 cash requirements that the Company currently anticipates include
ongoing operating, general and administrative, income tax, interest expense and
payments of dividends on its common stock. The Company currently anticipates
that cash provided by operating activities, funds available under its Credit
Agreement, uncommitted money market credit lines and amounts that the Company
currently believes it can raise from external sources will be sufficient to
fund the Company's ongoing expenses, its 1997 capital and exploration budget
and anticipated future dividend payments. The declaration and payment of future
dividends will depend upon, among other things, the Company's future earnings
and financial condition, liquidity and capital requirements, the general
economic and regulatory climate and other factors deemed relevant by the
Company's Board of Directors.
Effective June 1, 1995, the Company entered into an amended and
restated credit agreement (the "Credit Agreement") with the same banks that
were parties to the credit agreement that it superseded. The Credit Agreement
provides for an unsecured $150,000,000 revolving/term credit facility which
will be fully revolving until January 1, 1998, after which the balance will be
due in eight quarterly term loan installments, commencing April 30, 1998.
However, the Company has established a history or refinancing its bank debt
before scheduled maturity payments commence and expects to do so again before
the amortization of the amounts due under the Credit Agreement which commences
in 1998. The amount that may be borrowed under the Credit Agreement may not
exceed a borrowing base, determined semiannually by the lenders in accordance
with the Credit Agreement, based primarily on the discounted present value of
future net revenues from certain of the Company's oil and gas reserves. As of
June 1, 1997, the borrowing base exceeded $150,000,000. The Credit Agreement is
governed by various financial and other covenants, including requirements to
maintain positive working capital (excluding current maturities of debt) and a
fixed charge coverage ratio, and limitations on indebtedness, creation of
liens, the prepayment of subordinated debt, the payment of dividends, mergers
and consolidations, investments and asset dispositions. See "Market for the
Registrant's Common Stock and Related Security Holder Matters" in the Annual
Report. In addition, the Company is prohibited from pledging borrowing base
properties as security for other debt. Borrowings under the Credit Agreement
currently bear interest at a base (prime) rate, a certificate of deposit rate
plus 1 1/8%, or LIBOR plus 1%, at the Company's option. A commitment fee on the
unborrowed amount under the Credit Agreement is also charged. The commitment
fee is 5/16 of 1% per annum on the unborrowed amount under the Credit Agreement
that is designated as "active" and 1/8 of 1% per annum on the unborrowed amount
under the Credit Agreement that is designated as "inactive." Of the
$150,000,000 that is currently available under the Credit Agreement (subject to
borrowing base limitations), $125,000,000 is designated as "active" and
$25,000,000 is designated as "inactive." The Company is currently discussing
with its lenders an amendment to the Credit Agreement that, if consummated,
will, among other things, extend the maturity of the facility, increase the
maximum commitment amount and expand the borrowing base to include properties
located in the Gulf of Thailand. No assurance can be given that the Company and
its lenders will consummate this transaction and, if such transaction is agreed
to, that it will contain the terms discussed in the preceding sentence.
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<PAGE> 40
The Company has also entered into separate letter agreements with two
banks under which each bank may provide a $10,000,000 uncommitted money market
line of credit. The two lines of credit are on an as available or offered basis
and neither bank has an obligation to make any advances under its respective
line of credit. Although loans made under these letter agreements are for a
maximum term of 30 days, they are reflected as long-term debt on the Company's
balance sheet because the Company currently has the ability and intent to
reborrow such amounts under its Credit Agreement. Both letter agreements permit
either party to terminate such letter agreement at any time. Under its Credit
Agreement, the Company is currently limited to incurring a maximum of
$10,000,000 of additional senior debt, which would include debt incurred under
these lines of credit. As of May 31, 1997, indebtedness in the principal
amount of $33,000,000 was outstanding under the Credit Agreement and the two
letter agreements.
The outstanding principal amount of the 2004 Notes was $86,230,000 as
of May 31, 1997. The 2004 Notes are convertible into Common Stock at $22.188
per share, subject to adjustment upon the occurrence of certain events. The
2004 Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after March 15, 1998, at a redemption price of 103.3%
of their principal amount and decreasing percentages thereafter. No sinking
fund payments are required on the 2004 Notes. The 2004 Notes are redeemable at
the option of the holder, upon the occurrence of a repurchase event (a change
of control and other circumstances as defined in the indenture governing the
2004 Notes), at 100% of the principal amount.
The outstanding principal amount of the 2006 Notes was $115,000,000 as
of May 31, 1997. The 2006 Notes are convertible into Common Stock at $42.185
per share, subject to adjustment upon the occurrence of certain events. The
2006 Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after June 15, 1999, at a redemption price of 103.85%
of their principal amount and decreasing percentages thereafter. No sinking
fund payments are required on the 2006 Notes. The 2006 Notes are redeemable at
the option of the holder, upon the occurrence of a repurchase event (a change
of control and other circumstances as defined in the indenture governing the
2006 Notes), at 100% of the principal amount.
As of February 9, 1996, Tantawan Services, LLC ("TS"), a company that
is currently a wholly owned subsidiary of the Company, entered into a Bareboat
Charter Agreement (the "Charter") with Tantawan Production B.V. for the charter
of a FPSO for use in the Tantawan Field. See "Business and Properties --
International Operations." The term of the Charter is for a period ending July
31, 2008, subject to extension. In addition, TS has a purchase option on the
FPSO throughout the term of the Charter. The Charter currently provides for an
estimated charter hire commitment of $24,000,000 per year ($11,122,000 net to
Thaipo), which commenced upon its installation in the field on January 31,
1997. TS has also contracted with another company, SBM Marine Services
(Thailand) Ltd., to operate the FPSO on a reimbursable basis throughout the
initial term of the Charter. Performance of both the Charter and the agreement
to operate the FPSO are non-recourse to TS and the Company. However,
performance is secured by a lien on any hydrocarbons stored on the FPSO and is
guaranteed by each of the working interest holders in the Tantawan Field,
including Thaipo. Thaipo's guarantee is limited to its percentage interest in
the Tantawan Field (currently 46.34%).
OTHER MATTERS
Publicly held companies are asked to comment on the effects of
inflation on their business. Currently annual inflation in terms of the
decrease in the general purchasing power of the dollar is running much below
the general annual inflation rates experienced in the past. While the Company,
like other companies, continues to be affected by fluctuations in the
purchasing power of the dollar, such effect is not currently considered
significant.
BUSINESS AND PROPERTIES
The Company was incorporated in 1970 and is engaged in oil and gas
exploration, development and production activities on its properties located
offshore in the Gulf of Mexico, onshore in selected areas in New Mexico, Texas
and Louisiana, and internationally in the Gulf of Thailand. As of December 31,
1996, the Company had interests in 86 lease blocks offshore Louisiana and
Texas, approximately 212,000 gross acres onshore in the United States and
approximately 1,300,000 gross acres offshore in the Kingdom of Thailand. Unless
otherwise specifically identified, the information set forth in this
Prospectus, including production rates and the number of wells, platforms and
blocks, is presented on a gross basis, rather than net to the Company.
In recent years, the Company has concentrated its efforts in selected
areas where it believes that its expertise, competitive acreage position, or
ability to quickly take advantage of new opportunities offer the possibility of
superior
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<PAGE> 41
rates of return. As of January 1, 1997, seven significant operating areas, of
which four are located in the Gulf of Mexico and one each in New Mexico, South
Texas and Thailand, accounted for approximately 90% of the estimated proved
natural gas reserves and approximately 93% of the estimated proved oil,
condensate and natural gas liquids reserves of the Company. Six of these
operating areas also accounted for approximately 73% of natural gas production
and 88% of oil, condensate and natural gas liquids production for 1996. The
seventh operating area, the Gulf of Thailand, did not commence production until
February 1, 1997. Reserves, as estimated by Ryder Scott, and production data,
as estimated by the Company, for the seven significant operating areas are
shown in the following table. No other producing area accounted for more than
3% of the Company's estimated proved reserves as of January 1, 1997.
SIGNIFICANT OPERATING AREAS
<TABLE>
<CAPTION>
1996 AVERAGE NET
NET PROVED RESERVES(A) DAILY PRODUCTION
---------------------- ----------------
NATURAL GAS LIQUIDS(B) TOTAL NATURAL GAS LIQUIDS(B)
----------- ---------- ----- ----------- ----------
(MMCF) % (MBBLS) % % (MCF) % (BBLS) %
------ - ------- - - ----- - ------ -
<S> <C> <C> <C> <C> <C> <C> <C>
DOMESTIC OFFSHORE
Eugene Island . . . . 40,911 11.3% 8,378 16.9% 13.8% 27,800 25.7% 4,701 33.2%
East Cameron 44,293 12.3 1,015 2.0 7.7 11,587 10.7 94 0.7
Main Pass 16,970 4.7 4,573 9.2 6.7 7,828 7.2 2,209 15.6
South Pass 16,200 4.5 1,229 2.5 3.6 15,302 14.2 661 4.7
DOMESTIC ONSHORE
New Mexico 21,687 6.0 9,639 19.4 12.1 11,842 11.0 4,752 33.5
South Texas -- Lopeno 40,843 11.3 -- -- 6.2 4,902 4.5 -- --
INTERNATIONAL
Kingdom of Thailand(c) 144,998 40.2 21,332 43.0 41.5 n/a -- n/a --
</TABLE>
__________
(a) Net proved reserves and total net proved reserves are each as of
January 1, 1997. Total net reserves are calculated on an energy
equivalent basis using a ratio of six Mcf equal to one Bbl of oil.
(b) "Liquids," includes oil, condensate and natural gas liquids.
(c) Initial production from the Tantawan Field commenced on February 1,
1997. After giving effect to the Company's March 1997 acquisition of
its proportionate share of the shares of Maersk Oil (Thailand) Ltd.,
the Company's net proved reserves of natural gas and hydrocarbon
liquids located in the Kingdom of Thailand would have been 166,160
MMcf and 26,163 MBbls, respectively, on a pro forma basis on January
1, 1997. This would have equated to 46% of the Company's total net
proved hydrocarbon reserves, 43% of net proved natural gas reserves,
and 48% of net proved liquids on a pro forma basis as of January 1,
1997, while the respective percentages of the Company's domestic
hydrocarbon reserves as a percentage of the Company's total net proved
reserves would have been proportionately reduced.
DOMESTIC OFFSHORE OPERATIONS
Historically, the Company's interests have been concentrated in the
Gulf of Mexico, where approximately 66% of the Company's domestic proved
reserves and 38% of its total proved reserves are now located. During 1996,
approximately 82% of the Company's natural gas production and 67% of its oil
and condensate production was from its domestic offshore properties,
contributing approximately 72% of consolidated oil and gas revenues. Four
offshore producing areas, Eugene Island, East Cameron, Main Pass and South
Pass, account for approximately 33% of the Company's net proved natural gas
reserves and approximately 31% of the Company's proved crude oil, condensate
and natural gas liquids reserves. See "Significant Domestic Offshore Operating
Areas during 1996."
Lease Acquisitions
The Company has participated, either on its own or with other
companies, in bidding on and acquiring interests in federal and state leases
offshore in the Gulf of Mexico since December 1970. As a result of such sales
and subsequent activities, as of June 12, 1997, the Company owned interests in
84 federal leases and 9 state leases offshore Louisiana
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<PAGE> 42
and Texas (and is currently awaiting the award of interests in an additional
five federal lease blocks on which it and its partners were the apparent high
bidders in the March 1997 Outer Continental Shelf lease sale). Federal leases
generally have primary terms of five years and state leases generally have
terms of three years, in each case subject to extension by development and
production operations.
As part of its strategy, the Company intends to continue an active
lease evaluation program in the Gulf of Mexico in order to identify exploration
and exploitation opportunities. During 1996, the Company was successful in
acquiring interests in ten lease blocks through federal Outer Continental Shelf
oil and gas lease sales. The Department of the Interior held one lease sale in
March 1997 (at which the Company and its partners were apparent high bidders on
thirteen blocks, of which it has currently been awarded eight) and has
announced its intention to hold another lease sale during 1997 covering federal
acreage in the Western portions of the Gulf of Mexico; and it is anticipated
that various states will also hold sales covering offshore state acreage from
time to time. As in the case of prior sales, the extent to which the Company
participates in future bidding will depend on the availability of funds and its
estimates of hydrocarbon deposits, operating expenses and future revenues which
reasonably may be expected from available lease blocks. Such estimates
typically take into account, among other things, estimates of future
hydrocarbon prices, federal regulations, and taxation policies applicable to
the petroleum industry. It is also the Company's objective to acquire certain
producing leasehold properties in areas where additional low-risk drilling or
improved production methods by the Company can provide attractive rates of
return.
Exploration and Development
The scope of exploration and development programs relating to the
Company's offshore interests is affected by prices for oil and gas, and by
federal, state and local legislation, regulations and ordinances applicable to
the petroleum industry. The Company's domestic offshore capital and exploration
expenditures for 1996 were approximately $92,400,000 (excluding approximately
$2,000,000 of net property acquisitions), or 144% higher than the Company's
domestic offshore capital and exploration expenditures of approximately
$37,800,000 (excluding approximately $650,000 of net property acquisitions) for
1995 and 91% higher than the Company's domestic offshore capital and
exploration expenditures of approximately $48,400,000 for 1994 (excluding
approximately $32,600,000 of net property acquisitions). The increase in the
Company's domestic offshore capital and exploration expenditures for 1996,
compared to 1995, resulted primarily from increased drilling activity and
increased costs associated with the construction and installation of offshore
platforms, pipelines and other facilities. The increase in the Company's
domestic offshore capital and exploration expenditures for 1996, compared to
1994, resulted primarily from increased costs associated with construction and
installation of offshore platforms, pipelines and other facilities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Leases acquired by the Company and other participants in its bidding
groups are customarily committed, on a block-by-block basis, to separate
operating agreements under which the appointed operator supervises exploration
and development operations for the account and at the expense of the group.
These agreements usually contain terms and conditions which have become
relatively standardized in the industry. Major decisions regarding development
and operations typically require the consent of at least a majority (in working
interest) of the participants. Because the Company generally has a meaningful
working interest position, the Company believes it can significantly influence
(but not always control) decisions regarding development and operations on most
of the leases in which it has a working interest even though it may not be the
operator of a particular lease. The Company is currently the operator on all or
a portion of 27 of the 93 offshore leases in which it has an interest.
Platforms are installed on an offshore lease block when, in the
judgment of the lease interest owners, the necessary capital expenditures are
justified. A decision to install a platform generally is made after the
drilling of one or more exploratory wells with contracted drilling equipment.
Platforms are used to accommodate both development drilling and additional
exploratory drilling. Over the last three years, the gross cost of production
platforms to the joint ventures in which the Company has varying net interests
has averaged approximately $7,000,000. Platform costs vary and more expensive
platforms could be required in the future depending on, among other factors,
the number of slots, water depth, currents, and sea floor conditions. During
1996, the Company installed, or substantially completed construction of, two
new platforms on East Cameron Block 334 and one new platform on Ship Shoal
Block 240. See "Significant Domestic Offshore Operating Areas During 1996."
39
<PAGE> 43
Significant Domestic Offshore Operating Areas During 1996
Eugene Island
A significant portion of the Company's reserves and a substantial part
of its production are located in the Eugene Island area off the Louisiana coast
in the Gulf of Mexico. The Eugene Island area has been an important part of the
Company's operations since the first lease in that area was purchased in 1970
and production began in 1973. The Company currently holds interests in 10
blocks in the Eugene Island area. These blocks comprise eight fields containing
67 oil and gas wells producing from multiple reservoirs and horizons. Through
January 1997, the Company participated in the drilling of six wells in the
Eugene Island operating area, including three highly successful wells in its
Eugene Island 261 field where the Company has a 66.67% working interest that
added new reserves and production capacity, bringing the total number of
productive wells in this field to six.
The Eugene Island Block 330 field is one of the Company's most
significant producing assets. The field, located in 245 feet of water, contains
three drilling and production platforms in which the Company holds a 35%
working interest, as well as an additional platform in which the Company holds
a 30% working interest. There are currently 9 wells producing primarily natural
gas and 34 wells producing primarily oil on the block. Reserves have been added
to this field consistently since production commenced. These increases have
been derived from new exploratory horizons, infill drilling, field expansions
and higher than anticipated recovery efficiencies. The Company and its joint
venture partners currently plan to drill seven wells in this field during 1997.
East Cameron
The first leasehold interest acquired by the Company in the East
Cameron area off the Texas/Louisiana border in the Gulf of Mexico commenced
production in February 1973. Presently, the Company has interests in five
offshore blocks in this area which contain two fields and 15 producing gas
wells.
During 1996, the Company and its partners were active in the East
Cameron Block 334/335 field. In August 1996, the Company and one of its joint
venture partners commenced production from the fourth platform to be installed
in this field. In addition, together with the same partner, the Company drilled
two additional wells and installed a fifth platform. Production from this
platform commenced in April, 1997. Finally, during the fourth quarter of 1996,
the Company and its joint venture partners drilled another exploratory well into
a new untested fault block. As a result of the success of this well, the Company
and its joint venture partners currently intend to set a sixth platform in the
field.
Main Pass
The Company's 14 lease blocks in the Main Pass area, including one
acquired in 1997, are located near the mouth of the Mississippi River in the
Gulf of Mexico and include leases in which the Company has held an interest
since 1974. The Company currently plans an active exploratory drilling program
during 1997 to evaluate the new lease blocks that it acquired in the Main Pass
Area. The majority of the Company's production from the Main Pass area comes
from a field that includes Main Pass Blocks 72, 73 and 72/74 which was unitized
in 1982. The Company's working interest in this field is 35%. This field
contains 26 producing oil wells and 6 producing natural gas wells from three
platforms operated by the Company's joint venture partner. The field is located
in 125 feet of water. The Company plans to continue into 1997 its drilling
program that commenced in 1995 which has been based in part on the analysis of
a recent 3-D seismic survey over the field.
South Pass
The Company acquired its first leasehold interest in the South Pass
area off of the mouth of the Mississippi River in September 1972. In 1996, the
Company acquired an interest in three additional blocks in this area, bringing
the total number of blocks in the South Pass area in which the Company
currently owns an interest to ten, on which four production platforms have been
set that produce oil and gas from 25 wells. One of the Company's fields in the
South Pass area is located on South Pass Blocks 49 and 50. The Company holds a
50% working interest in South Pass Block 50 and a 20% interest in South Pass
Block 49. The Company plans to drill additional wells in this field during
1997. Another field in which the Company has an interest in the South Pass area
is the South Pass Block 78 field. Following analysis of a recently acquired 3-D
seismic survey, the Company and several of its joint venture partners drilled
and completed four highly deviated wells into previously unexplored reservoirs
during late 1995 and 1996. The Company and its joint venture partners currently
plan to drill an additional well or wells in this field during 1997.
40
<PAGE> 44
DOMESTIC ONSHORE OPERATIONS
The Company has onshore division staffs in Houston and Midland, Texas.
Its onshore activities are concentrated in known oil and gas provinces,
principally the Permian Basin area of southeastern New Mexico, West Texas and
Northwest Texas, and in the onshore Gulf Coast areas of South Texas, East Texas
and South Louisiana. See "Significant Domestic Onshore Operating Areas During
1996."
Lease Acquisitions
Commencing in 1995 and continuing in 1996, the Company increased its
activities in the onshore Gulf Coast areas of East Texas and South Louisiana.
In addition to participating in the acquisition of several large 3-D seismic
surveys, the Company acquired an interest in, or the right to acquire an
interest in, 22,395 gross acres in East Texas and South Louisiana. As it has in
recent years, in 1996 the Company also successfully participated in various
onshore federal and state lease sales and acquired interests in prospective
acreage from private individuals. As of December 31, 1996, the Company held
interests in approximately 212,000 gross (103,000 net) acres onshore in the
United States, an increase of approximately 40% (9% net) from year end 1995.
Exploration and Development
The Company's primary drilling objective in the Permian Basin is the
Brushy Canyon (Delaware) formation which generally produces oil from depths of
6,000 to 9,000 feet. Since the Company began exploring in the Brushy Canyon
(Delaware) formation in October 1989, it has participated in drilling 299 wells
in the Permian Basin, West and Northwest Texas areas through December 31, 1996,
including 40 wells in 1996.
The Company is also active in exploring for oil and gas in several
other onshore Gulf Coast areas in Texas and Louisiana. In addition to the wells
drilled in the Permian Basin, during 1996 the Company participated in the
drilling of eight exploratory wells (principally in East Texas and South
Louisiana) and ten development wells (principally in the Lopeno Field in South
Texas). See "Significant Domestic Onshore Operating Areas During 1996." During
1996, approximately 18% of the Company's natural gas production and 33% of its
oil and condensate production was from its domestic onshore properties,
contributing approximately 23% of consolidated oil and gas revenues.
The Company generally conducts its onshore activities through joint
ventures and other interest-sharing arrangements with major and independent oil
companies. The Company operates many of its own onshore properties using
independent contractors.
The Company's domestic onshore capital and exploration expenditures
were approximately $43,000,000 (excluding approximately $3,800,000 of net
property acquisitions) for 1996, or 31% higher than the Company's domestic
onshore capital and exploration expenditures of approximately $32,950,000
(excluding approximately $7,750,000 of net property acquisitions) for 1995 and
34% higher than the Company's domestic onshore capital and exploration
expenditures of approximately $32,000,000 for 1994. The increase in the
Company's domestic onshore capital and exploration expenditures for 1996,
compared to 1995 and 1994, resulted primarily from increased drilling activity
in South Texas, East Texas and South Louisiana, as well as increased
exploration costs associated with conducting, processing and interpreting 3-D
seismic surveys. Onshore reserves as of December 31, 1996, accounted for
approximately 34% of the Company's domestic proved reserves and approximately
20% of its total proved reserves.
Significant Domestic Onshore Operating Areas During 1996
New Mexico
The Company believes that during the past five years it has been one
of the most active companies drilling for oil and natural gas in the
southeastern New Mexico (Lea and Eddy Counties) portion of the Permian Basin
where the Company has interests in over 75,000 gross acres. The Company's
primary drilling objective is the Brushy Canyon (Delaware) formation. Fields in
the Brushy Canyon (Delaware) formation in the southeastern New Mexico portion
of the Permian Basin are generally characterized by production from relatively
shallow depths (6,000 to 9,000 feet), multiple producing zones in most wells
and relatively high initial rates of production (frequently equaling the top
field allowables which typically range from of 142 Bbls to 230 Bbls per day,
depending on the depth of production from the field). The Company has achieved
rapid cost recovery with respect to its New Mexico wells drilled to date
because of relatively low capital costs and high initial rates of production.
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<PAGE> 45
Since the Company began exploring in the Brushy Canyon (Delaware)
formation in the southeastern New Mexico portion of the Permian Basin in
October 1989, it has participated through December 31, 1996, in the drilling
of, among others, 92 wells in the Sand Dunes field where the Company's working
interest ranges from 4% to 100%, 27 wells in the East Loving field where the
Company's working interest ranges from 33% to 98%, 57 wells in the Livingston
Ridge field where the Company's working interest ranges from 25% to 100%, 58
wells in the Red Tank field where the Company's working interest ranges from
89% to 100%, 16 wells in the Cedar Canyon field where the Company's working
interest ranges from 38% to 100% (including nine during 1996), and 3 wells in
the Lost Tank field where the Company's working interest ranges from 50% to
100%. The oil fields in this area are generally developed on a 40 acre spacing
pattern. The Company anticipates drilling many additional locations in these
and other fields in southeastern New Mexico during 1997 including, in
particular, an aggressive drilling program in the Cedar Canyon and Lost Tank
fields.
Lopeno Field
The Lopeno Field is located in south Texas, within 40 miles of the
Mexican border. The Company acquired its initial interest in the Lopeno Field
in 1983. The Company currently has interests in over 7,800 gross acres
containing 23 wells, with working interests generally averaging approximately
50%. The Lopeno Field produces from over 20 upper Wilcox sandstone reservoirs
ranging in depth up to 12,500 feet. Following acquisition, processing and
interpretation of a 3-D seismic survey over the field, the Company and its
joint venture partners commenced an active development drilling program in the
fourth quarter of 1995, including the drilling of seven wells in 1996. The
Company and its joint venture partners currently plan to drill an additional
seven wells in the Lopeno Field during 1997.
INTERNATIONAL OPERATIONS
The Company has conducted international exploration activities since
the late 1970's in numerous oil and gas areas throughout the world. The Company
pursues a strategy of evaluating potentially high return prospects in areas of
the world with a stable political and financial climate such as certain
European and ASEAN countries. Currently, the Company maintains an office in
Bangkok, Thailand from which it directs a field development project in the Gulf
of Thailand on a portion of its Thailand Concession through its wholly owned
subsidiary, Thaipo.
The Company's international capital and exploration expenditures were
approximately $64,400,000 for 1996, or 84% higher than the Company's
international capital and exploration expenditures of approximately $34,950,000
(excluding approximately $4,171,000 of net property acquisitions) for 1995 and
914% higher than the Company's international capital and exploration
expenditures of approximately $6,350,000 for 1994. Substantially all of the
Company's international capital and exploration expenditures for 1996 were
related to the Company's license in the Kingdom of Thailand. In addition, the
Company continues to evaluate other international opportunities that are
consistent with the Company's international exploration strategy.
Platforms are installed on the Thailand Concession in fields where, in
the judgment of Thaipo and its joint venture partners, the necessary capital
expenditures are justified. A decision to install a platform generally is made
after the drilling of one or more exploratory wells with contracted drilling
equipment and the area where the platform would be located has been designated
a production area by the Thai government. See "-- Contractual Terms Governing
the Thailand Concession and Related Production." Platforms are used to
accommodate both development drilling and additional exploratory drilling. Over
the last two years, the gross cost of the first three production platforms in
the Tantawan Field (which includes the "C" platform being set in the first
quarter of 1997) has averaged approximately $20,000,000. Platform costs vary
and more (or less) expensive platforms could be required in the future
depending on, among other factors, the number of slots, water depth, currents,
and sea floor conditions. See "-- Significant International Operating Areas
During 1996; Tantawan Field."
Significant International Operating Areas During 1996
Tantawan Field
In August 1995, at the request of Thaipo and its two joint venture
partners, the government of Thailand designated a portion of the Thailand
Concession comprising approximately 68,000 acres as the Tantawan production
area. The Tantawan production area, of which Thaipo is the operator and has a
46.34% working interest, has been named the Tantawan Field. Through March 1,
1997, eleven exploration and twenty three development wells have been drilled
in the Tantawan Field. Initial production from the Tantawan Field commenced on
February 1, 1997, from wells located on two platforms. Development drilling has
commenced from a third platform that is currently being installed and will
42
<PAGE> 46
commence in the second quarter of 1997. A fourth platform has been announced
for the field and is currently under construction. Production from the Tantawan
Field averaged 88.7 MMcf per day and 6,158 Bbls per day (41.1 MMcf per day and
2,854 Bbls per day net to the Company's working interest) during the first two
weeks of April, 1997. Oil and gas production from the field is gathered through
pipelines from the platforms into a FPSO named the "Tantawan Explorer." The
FPSO Tantawan Explorer is a converted oil tanker with a capacity of slightly
less than 1,000,000 Bbls, that is moored in the Tantawan Field, on which
hydrocarbon processing, separation, dehydration, compression, metering and
other production related equipment is installed. Following processing on board
the FPSO, natural gas produced from the field is delivered to the PTT through
an export pipeline. Oil and condensate produced from the field is stored on
board the FPSO and transferred to shore by oil tanker. The FPSO and its
processing equipment is leased from a third party under a bareboat charter by
Tantawan Services, LLC, an affiliate of Thaipo. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." Thaipo and its joint venture partners pay a processing fee
to Tantawan Services, LLC, to process the production from the Tantawan Field
through the FPSO.
Benchamas and Pakakrong Fields
Exploration efforts also continue on those portions of the Thailand
Concession outside the Tantawan Field. Through March 1, 1997, fourteen
exploration wells have been drilled on the Thailand Concession outside of the
Tantawan Field. This includes nine wells, all of which have encountered
hydrocarbons, in the Benchamas Field and two wells, which also encountered
hydrocarbons, in the Pakakrong Field. In January 1997, Thaipo and its joint
venture partners formally requested that the government of Thailand designate
certain Thailand Concession areas outside the Tantawan Field, including the
Benchamas and Pakakrong fields, as production areas. The government is
currently considering the request. In the interim, Thaipo and its joint
venture partners have commenced preliminary planning for the development of
these fields. In March 1997, the Company and its joint venture partners in the
Tantawan Field or their affiliates, acquired all of the outstanding shares of
Maersk Oil (Thailand) Ltd., a former joint venture partner that owned 31.67% of
those portions of the Thailand Concession not currently a part of the Tantawan
Field, including the Benchamas and Pakakrong Fields. With this acquisition, the
Company now indirectly owns a 46.34% working interest in the entire Thailand
Concession and its subsidiary Thaipo is the operator of the entire Thailand
Concession. Thaipo and its joint venture partners are currently engaged in
additional delineation drilling in the Benchamas Field.
Other Areas on the Thailand Concession
In addition to the above mentioned fields, Thaipo and its joint
venture partners have identified other potentially promising areas on the
Thailand Concession including, among others, the Mailwan prospect where Thaipo
and its joint venture partners recently drilled two successfull wells. Since
acquiring their interest in the Thailand Concession, Thaipo and its joint
venture partners have acquired 3-D seismic surveys covering approximately
452,000 acres of the Thailand Concession and are currently planning to acquire
additional 3-D seismic data over other prospective portions of the Thailand
Concession during 1997.
Contractual Terms Governing the Thailand Concession and Related Production
As set forth in the August 1991 Thailand Concession agreement, the
current exploratory term of the concession agreement expires on July 31, 1997,
subject to further extension as described below. At the end of the concession
agreement's current exploration term on July 31, 1997, Thai petroleum law
permits the government to grant, upon application by a concessionaire, an
additional three year exploration term on up to fifty percent of the Thailand
Concession acreage that has not been previously designated as a production area
or returned to the government, subject to certain terms and conditions
including the agreement to undertake a work program and the payment of
substantial fees and rentals. The Company and its joint venture partners are
currently discussing with the relevant government authorities what the relevant
work program, fees and rentals may be for an extension of the current
exploratory term. Currently, the Company and its joint venture partners intend
to apply to the government for a three year extension of the exploratory term
of the Thailand Concession which would include the maximum amount of acreage
permitted by applicable law. For those portions of the Thailand Concession
designated as production areas, which currently includes the Tantawan Field
and, subject to the governmental approval discussed above, may include other
portions of the Thailand Concession such as the Maliwan, North Benchamas,
Benchamas and Pakakrong fields, the initial production period term is 20 years,
which is also subject to extension. See also "-- Miscellaneous; Sales."
Production resulting from the Thailand Concession (including the
Tantawan production area) is subject to a royalty ranging from 5% to 15% of oil
and gas sales, plus certain fixed dollar amounts payable at specified
cumulative production levels. Revenue from production in Thailand is also
subject to income taxes and other similar governmental charges including a
Special Remuneratory Benefit tax ("SRB").
43
<PAGE> 47
On November 7, 1995, Thaipo and its joint venture partners announced
the signing of a thirty-year gas sales agreement with PTT, initially governing
gas production from the Tantawan Field. Subsequently, Thaipo and its joint
venture partners reached an agreement in principle to amend this gas sales
agreement to include the reserves and anticipated gas production from the
remainder of the Thailand Concession, including the Benchamas Field. Initial
terms of the agreement include an initial minimum daily contract quantity
("DCQ") during the first year of production of 75 MMcf per day with the DCQ
rising to 85 MMcf per day in the following year. The DCQ is the minimum daily
volume that PTT has agreed to take, or pay for if not taken under the
agreement. Mutual agreement on dedicated reserves would be renegotiated as and
when the DCQ exceeds 125 MMcf per day. Initial base gas prices start at
approximately $2.00 per Mcf (payable in Baht), subject to semi-annual
adjustments based upon a formula which takes into account, among other things,
changes in Singapore fuel oil prices, Thai wholesale prices and the U.S./Thai
currency exchange rate. In late 1996, Thaipo and its joint venture partners
signed a memorandum of understanding with PTT providing for the sale of crude
oil and condensate to PTT at prices which fluctuate, based upon posted world
prices, and which take into account the anticipated high quality of the
production from Tantawan Field, and the field's close proximity to Thai
markets.
MISCELLANEOUS
Other Assets
The Company and a subsidiary, Pogo Offshore Pipeline Co., own
interests in seven pipelines (excluding field gathering pipelines) through
which offshore hydrocarbon production is transported. In addition, the Company
owns an approximately 19.3% interest in a cryogenic gas processing plant near
Erath, Louisiana, which entitles it to process up to 186 MMcf of natural gas
and 5,478 Bbls of natural gas liquids per day. The plant is not currently
operating at full capacity.
In 1989, the Company entered into a limited partnership agreement as
general partner of Pogo Gulf Coast, Ltd., a Texas limited partnership ("Pogo
Gulf Coast"). As of December 31, 1996, Pogo Gulf Coast had interests in 5
federal offshore leases. The Company owns 40% of any interest in properties
acquired by the limited partnership. Unless otherwise noted, the statistical
data reported in this Prospectus reflect only the Company's share of Pogo Gulf
Coast's holdings.
Sales
The marketing of offshore oil and gas production is subject to the
availability of pipelines and other transportation, processing and refining
facilities, as well as the existence of adequate markets. As a result, even if
hydrocarbons are discovered in commercial quantities, a substantial period of
time may elapse before commercial production commences. If pipeline facilities
in an area are insufficient, the Company may have to await the construction or
expansion of pipeline capacity before production from that area can be
marketed. The Company's domestic offshore properties are generally located in
areas where a pipeline infrastructure is well developed and there is adequate
availability in such pipelines to handle the Company's current and projected
future production.
The Company's Thailand Concession is traversed by two major (34 inches
and 36 inches in diameter, respectively) natural gas pipelines that are owned
and operated by PTT and which come within approximately 25 miles of the
Tantawan Field (and are slightly closer to the Benchamas and Pakakrong Fields).
Thaipo and its joint venture partners in the Tantawan Field signed a long term
gas sales contract with PTT in November 1995 covering production from the
Tantawan Field. In addition, in November 1996, Thaipo and its joint venture
partners entered into a memorandum of understanding which provides that oil and
condensate production from the Tantawan Field will initially be stored aboard
the FPSO, sold to PTT and transferred to shore by means of oil tankers. See "--
International Operations; Contractual Terms Governing the Thailand Concession
and Related Production."
The marketing of onshore oil and gas production is also subject to the
availability of pipelines, crude oil hauling and other transportation,
processing and refining facilities as well as the existence of adequate
markets. Generally, the Company's onshore domestic oil and gas production is
located in areas where commercial production of economic discoveries can be
rapidly effectuated.
Most of the Company's domestic natural gas sales are currently made in
the "spot market" for no more than one month at a time at then currently
available prices. Prices on the spot market fluctuate with demand. Crude oil
and condensate production is also generally sold one month at a time at the
currently available prices. Other than any futures contracts which may exist
from time to time, and which are referred to in "-- Miscellaneous; Competition
and Market Conditions," and the gas sales contract for production from the
Thailand Concession (see "-- International Operations;
44
<PAGE> 48
Contractual Terms Governing the Thailand Concession and Related Production")
the Company has no existing contracts that require the delivery of fixed
quantities of oil or natural gas other than on a best efforts basis. See also
"Consolidated Financial Statements -- Note 4 to Notes to Consolidated Financial
Statements and -- Unaudited Supplementary Financial Data."
Competition and Market Conditions
The Company experiences competition from other oil and gas companies
in all phases of its operations, as well as competition from other energy
related industries. The Company's profitability and cash flow are highly
dependent upon the prices of oil and natural gas, which historically have been
seasonal, cyclical and volatile. In general, prices of oil and gas are
dependent upon numerous factors beyond the control of the Company, including
various weather, economic, political and regulatory conditions. During 1996,
the average price that the Company received for its crude oil, condensate and
natural gas production was substantially higher than it has been in recent
years. In the first quarter of 1997, the average prices that the Company
received for its production were substantially less than what it received in
1996. See "Selected Reserve and Operating Data." In the past, when natural gas
prices in the United States were lower than they are currently, the Company at
times elected to curtail certain quantities of its production. Should natural
gas prices fall further in the future, the Company may again elect to curtail
certain quantities of its natural gas production. Any significant decline in
oil or gas prices could have a material adverse effect on the Company's
operations and financial condition and could, under certain circumstances,
result in a reduction in funds available under the Company's bank credit
facility.
Because it is impossible to predict future oil and gas price movements
with any certainty, the Company from time to time enters into contracts on a
portion of its production to hedge against the volatility in oil and gas
prices. Such hedging transactions, historically, have never exceeded 50% of
the Company's total oil and gas production on an energy equivalent basis for
any given period. While intended to limit the negative effect of further price
declines, such transactions could effectively limit the Company's participation
in price increases for the covered period, which increases could be
significant. Furthermore, no assurance can be given that such transactions will
reduce risk or mitigate the effect of any substantial decline in oil and gas
prices. As of June 1, 1997, the Company was not a party to any natural gas
futures contracts or crude oil swap agreements. When the Company does engage in
such hedging activities, it may satisfy its obligations with its own production
or by the purchase (or sale) of third party production. The Company may also
cancel all delivery obligations by offsetting such obligations with equivalent
agreements, thereby effecting a purely cash transaction.
Operating and Uninsured Risks
The Company's operations are subject to risks inherent in the
exploration for and production of oil and natural gas, such as blowouts,
cratering, explosions, uncontrollable flows of oil, natural gas or well fluids,
fires, pollution and other environmental risks. Offshore oil and gas operations
are subject to the additional hazards of marine and helicopter operations, such
as capsizing, collision and adverse weather and sea conditions. These hazards
could result in substantial losses to the Company due to injury or loss of
life, severe damage to and destruction of property and equipment, pollution and
other environmental damage and suspension of operations. The Company carries
insurance which it believes is in accordance with customary industry practices,
but is not fully insured against all risks incident to its business.
Drilling activities are subject to numerous risks, including the risk
that no commercially productive hydrocarbon reserves will be encountered. The
cost of drilling, completing and operating wells and of installing production
facilities and pipelines is often uncertain. The Company's drilling operations
may be curtailed, delayed or canceled as a result of numerous factors,
including title problems, weather conditions, compliance with governmental
requirements and shortages or delays in the delivery or availability of
equipment and fabrication yards. The availability of a ready market for the
Company's natural gas production depends on a number of factors, including the
demand for and supply of natural gas, the proximity of natural gas reserves to
pipelines, the capacity of such pipelines and government regulations.
Risks of Foreign Operations
Ownership of property interests and production operations in Thailand,
and in any other areas outside the United States in which the Company may
choose to do business, are subject to the various risks inherent in foreign
operations. These risks may include, among other things, currency restrictions
and exchange rate fluctuations, loss of revenue, property and equipment as a
result of hazards such as expropriation, nationalization, war, insurrection and
other
45
<PAGE> 49
political risks, risks of increases in taxes and governmental royalties,
renegotiation of contracts with governmental entities, changes in laws and
policies governing operations of foreign-based companies and other
uncertainties arising out of foreign government sovereignty over the Company's
international operations. The Company's international operations may also be
adversely affected by laws and policies of the United States affecting foreign
trade, taxation and investment. In addition, in the event of a dispute arising
from foreign operations, the Company may be subject to the exclusive
jurisdiction of foreign courts or may not be successful in subjecting foreign
persons to the jurisdiction of the courts of the United States. The Company
seeks to manage these risks by concentrating its international exploration
efforts in areas where the Company believes that the existing government is
stable and favorably disposed towards United States exploration and production
companies. The Company believes that the Kingdom of Thailand currently presents
favorable conditions in which to conduct international operations.
EXPLORATION AND PRODUCTION DATA
In the following data "gross" refers to the total acres or wells in
which the Company has an interest and "net" refers to gross acres or wells
multiplied by the percentage working interest owned by the Company.
Acreage
The following table shows the Company's interest in developed and
undeveloped oil and gas acreage as of December 31, 1996:
<TABLE>
<CAPTION>
DEVELOPED ACREAGE(A) UNDEVELOPED ACREAGE(B)
-------------------- ----------------------
GROSS NET GROSS NET
------- ------- --------- -------
<S> <C> <C> <C> <C>
Domestic Onshore
Louisiana 869 209 28,072 9,373
New Mexico 21,246 11,882 54,354 39,119
Texas 13,676 4,987 90,597 37,452
Other 3,200 333 238 55
------- ------- --------- -------
Total Domestic 38,991 17,411 173,261 85,999
------- ------- --------- -------
Onshore
Domestic Offshore
Louisiana (State) 8,756 3,326 1,508 753
Louisiana (Federal)(c) 169,625 58,453 117,901 35,797
Texas (Federal) 46,080 11,819 17,280 8,640
------- ------- --------- -------
Total Domestic 224,461 73,598 136,689 45,190
------- ------- --------- -------
Offshore
Total Domestic 263,452 91,009 309,950 131,189
------- ------- --------- -------
International
Thailand (Offshore) 67,995 31,510 1,283,561 406,461
------- ------- --------- -------
TOTAL COMPANY 331,447 122,519 1,593,511 537,650
======= ======= ========= =======
</TABLE>
__________
(a) "Developed acreage" consists of lease acres spaced or assignable to
production on which wells have been drilled or completed to a point
that would permit production of commercial quantities of oil or
natural gas.
(b) "Undeveloped acreage" includes acreage under lease or subject to lease
or purchase options that the Company currently expects to exercise.
Approximately 9% of the Company's total domestic offshore net
undeveloped acreage is under leases that have terms expiring in 1997
(unless otherwise extended) and no domestic offshore undeveloped
acreage will expire in 1998. Approximately 5% of the Company's total
domestic onshore net undeveloped acreage is under leases that have
terms expiring in 1997 (unless otherwise extended) and another
approximately 10% of total domestic onshore net undeveloped acreage
will expire in 1998 (unless otherwise extended). All of the Company's
international undeveloped acreage must be relinquished to the Thai
government in 1997 unless designated as a production area or unless
the exploration term is extended as discussed above. See "Business --
International Operations; Contractual Terms Governing the Thailand
Concession and Related Production."
(c) The Company also owns overriding royalty interests in one federal
lease offshore Louisiana totaling 5,000 gross acres (1,250 net acres).
46
<PAGE> 50
Drilling Activity and Productive Wells
The following table shows the number of successful gross and net
exploratory and development wells in which the Company has participated and the
number of gross and net wells abandoned as dry holes during the periods
indicated. An onshore well is considered successful upon the installation of
permanent equipment for the production of hydrocarbons or when electric logs
run to evaluate such wells indicate the presence of commercial hydrocarbons and
the Company currently intends to complete such wells. Successful offshore wells
consist of exploratory or development wells that have been completed or are
"suspended" pending completion (which has been determined to be feasible and
economic) and exploratory test wells that were not intended to be completed and
that encountered commercially producible hydrocarbons. A well is considered a
dry hole upon reporting of permanent abandonment to the appropriate agency.
<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- --------------
SUCCESSFUL DRY SUCCESSFUL DRY SUCCESSFUL DRY
---------- --- ---------- --- ---------- ---
<S> <C> <C> <C> <C> <C> <C>
GROSS WELLS:
Offshore United States
Exploratory 4.0 2.0 7.0 4.0 2.0 --
Development 17.0 3.0 3.0 1.0 25.0 2.0
Onshore United States
Exploratory 12.0 4.0 8.0 1.0 3.0 6.0
Development 39.0 1.0 47.0 1.0 51.0 3.0
Offshore Kingdom of Thailand
Exploratory 7.0 -- 3.0 -- 5.0 --
Development 16.0 -- 7.0 -- -- --
---- --- ---- --- ---- ---
Total 95.0 10.0 75.0 7.0 86.0 11.0
==== ==== ==== === ==== ====
NET WELLS:
Offshore United States
Exploratory 1.7 1.5 3.0 1.6 0.6 -
Development 4.9 1.5 1.0 0.4 8.4 1.4
Onshore United States
Exploratory 6.5 0.9 4.6 1.0 2.8 3.6
Development 24.4 0.7 31.3 0.1 29.9 0.9
Offshore Kingdom of Thailand
Exploratory 2.4 - 1.1 - 1.6 -
Development 7.4 - 3.2 - - -
---- --- ---- --- ---- ---
Total 47.3 4.6 44.2 3.1 43.3 5.9
==== === ==== === ==== ===
</TABLE>
As of December 31, 1996, the Company was participating in the drilling
of 3 gross (1.3 net) offshore domestic wells, 6 gross (4.2 net) onshore wells
and 1 gross (0.3 net) wells offshore the Kingdom of Thailand.
The following table shows the Company's interest in productive oil and
natural gas wells as of December 31, 1996. Productive wells are producing wells
plus wells "capable of production" (e.g., natural gas wells waiting for
pipeline connections or necessary governmental certification to commence
deliveries and oil wells waiting to be connected to production facilities).
47
<PAGE> 51
<TABLE>
<CAPTION>
NATURAL GAS
OIL WELLS(A) WELLS(A)
------------- --------------
GROSS NET GROSS NET
----- ------ ------ ------
<S> <C> <C> <C> <C>
Offshore United States . . . . . . . . . . . . . . . . . . 180 46.0 178 58.8
Onshore United States . . . . . . . . . . . . . . . . . . . 285 183.4 84 35.2
Kingdom of Thailand(b) . . . . . . . . . . . . . . . . . . -- -- 9 4.2
--- ----- --- ----
Total . . . . . . . . . . . . . . . . . . . . . . 465 229.4 271 98.2
=== ===== === ====
</TABLE>
__________
(a) One or more completions in the same bore hole are counted as one well.
The data in the above table includes 25 gross (6.7 net) oil wells and
14 gross (5.7 net) natural gas wells with multiple completions.
(b) The number of wells set forth in this table as "capable of production"
in Thailand does not include 9 gross (4.2 net) wells that had been
drilled and were awaiting completion and connection at year end. All
of such wells have subsequently been completed as productive wells
during the first two months of 1997.
Production and Sales
The following table summarizes the Company's average daily production,
net of all royalties, overriding royalties and other outstanding interests, for
the periods indicated. Natural gas production refers only to marketable
production of natural gas on an "as sold" basis.
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Production Sales:
Natural Gas (Mcf per day) . . . . . . . . . . . . . . . . . . . . . . 107,700 121,000 144,800
======== ======= =======
Liquid Hydrocarbons (Bbls per day)
Crude Oil and Condensate . . . . . . . . . . . . . . . . . . . . . 11,968 11,786 11,100
Natural Gas Liquids(a) . . . . . . . . . . . . . . . . . . . . . . 2,173 1,998 2,222
-------- ------- -------
Total Liquid Hydrocarbons . . . . . . . . . . . . . . . . . . 14,141 13,784 13,322
======== ======= =======
</TABLE>
__________
(a) Natural Gas Liquids production sales includes sales attributable to
both the Company's leasehold and plant ownership.
The following table shows the average sales prices received by the
Company for its production and the average production (lifting) costs per unit
of production during the periods indicated. See "-- Miscellaneous; Competition
and Market Conditions and Sales."
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
<S> <C>
Sales Prices:
Natural Gas (per Mcf) . . . . . . . . . . . . . . . . . . . . . . . . $2.40 $1.63 $1.88
Crude Oil and Condensate (per Bbl) . . . . . . . . . . . . . . . . . $22.12 $17.80 $16.08
Natural Gas Liquids (per Bbl) . . . . . . . . . . . . . . . . . . . . $14.92 $11.10 $11.33
Production (lifting) Costs(a):
Natural Gas, Crude Oil, Condensate and Natural Gas
Liquids (per Mcf equivalent) . . . . . . . . . . . . . . . . . . . $0.53 $0.47 $0.36
</TABLE>
__________
(a) Production costs were converted to common units of measure on the
basis of relative energy content. Such production costs exclude all
depletion and amortization associated with property and equipment.
48
<PAGE> 52
Reserves
The following table sets forth information as to the Company's net
proved and proved developed reserves as of December 31, 1996, 1995, and 1994,
and the present value as of such dates (based on an annual discount rate of
10%) of the estimated future net revenues from the production and sale of those
reserves, as estimated by Ryder Scott in accordance with criteria prescribed by
the Commission. The summary report of Ryder Scott on the reserve estimates,
which includes definitions and assumptions, is set forth as an exhibit to the
Annual Report, and the definitions, assumptions and descriptions of methodology
following the tables are based upon the Ryder Scott report. See "Incorporation
of Certain Documents by Reference."
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Total Proved Reserves:
Oil, condensate, and natural gas liquids
(MBbls) --
Located in the United States . . . . . . . . . . . . . . . . . . . 28,270 26,185 26,188
Located in the Kingdom of Thailand . . . . . . . . . . . . . . . . 21,332 18,997 7,674
-------- -------- --------
Total Company(a) . . . . . . . . . . . . . . . . . . . . . . 49,602 45,182 33,862
======== ======== ========
Natural Gas (MMcf) --
Located in the United States . . . . . . . . . . . . . . . . . . . 215,946 196,454 186,151
Located in the Kingdom of Thailand(a) . . . . . . . . . . . . . . 144,998 131,607 56,739
-------- -------- --------
Total Company . . . . . . . . . . . . . . . . . . . . . . . . 360,944 328,061 242,890
======== ======== ========
Present value of estimated future net revenues,
before income taxes (in thousands)(b) --
Located in the United States . . . . . . . . . . . . . . . . . . . $773,127 $400,845 $330,868
Located in the Kingdom of Thailand . . . . . . . . . . . . . . . . 181,418 131,630 52,112
-------- -------- --------
Total Company . . . . . . . . . . . . . . . . . . . . . . . . $954,545 $532,475 $382,980
======== ======== ========
Total Developed Reserves:
Oil, condensate, and natural gas liquids
(MBbls) --
Located in the United States . . . . . . . . . . . . . . . . . . . 25,898 22,488 24,670
Located in the Kingdom of Thailand . . . . . . . . . . . . . . . . 5,192 -- --
-------- -------- --------
Total Company . . . . . . . . . . . . . . . . . . . . . . . . 31,090 22,488 24,670
======== ======== ========
Natural Gas (MMcf) --
Located in the United States . . . . . . . . . . . . . . . . . . . 192,034 164,679 178,518
Located in the Kingdom of Thailand . . . . . . . . . . . . . . . . 45,998 -- --
-------- -------- --------
Total Company . . . . . . . . . . . . . . . . . . . . . . . . 238,032 164,679 178,518
======== ======== ========
Present value of estimated future net revenues,
before income taxes (in thousands)(a) --
Located in the United States . . . . . . . . . . . . . . . . . . . $710,871 $359,984 $321,514
Located in the Kingdom of Thailand . . . . . . . . . . . . . . . . 69,062 -- --
-------- -------- --------
Total Company . . . . . . . . . . . . . . . . . . . . . . . . $779,933 $359,984 $321,514
======== ======== ========
</TABLE>
__________
(a) After giving effect to the Company's March 1997 acquisition of its
proportionate share of the shares of Maersk Oil (Thailand) Ltd., the
Company's net proved reserves of natural gas and hydrocarbon liquids
located in the Kingdom of Thailand would have been 166,160 MMcf and
26,163 MBbls, respectively, on a pro forma basis on December 31, 1996.
(b) The Company believes, for the reasons set forth in succeeding
paragraphs, that the present value of estimated future net revenues
set forth in this Prospectus and calculated in accordance with
Commission guidelines are not necessarily indicative of the true
present value of the Company's reserves and, due to the fact that
essentially all of the Company's domestic natural gas production is
currently sold on the spot market, whereas all of the Company's Thai
natural gas production is sold pursuant to a long term gas sales
contract, such estimates of future net revenues from the Company's
domestic and Thai reserves are, accordingly, not useful for
comparative purposes.
49
<PAGE> 53
Natural gas liquids comprise approximately 8% of the Company's total
proved liquids reserves and approximately 12% of the Company's proved developed
liquids reserves. All hydrocarbon liquid reserves are expressed in standard 42
gallon Bbls. All gas volumes and gas sales are expressed in MMcf at the
pressure and temperature bases of the area where the gas reserves are located.
Proved reserves of crude oil, condensate, natural gas, and natural gas
liquids are estimated quantities that geological and engineering data
demonstrate with reasonable certainty to be recoverable in the future from
known reservoirs under existing conditions. Reservoirs are considered proved if
economic producibility is supported by actual production or formation tests. In
certain instances, proved reserves are assigned on the basis of a combination
of core analysis and electrical and other type logs which indicate the
reservoirs are analogous to reservoirs in the same field which are producing or
have demonstrated the ability to produce on a formation test. The area of a
reservoir considered proved includes (i) that portion delineated by drilling
and defined by fluid contacts, if any, and (ii) the adjoining portions not yet
drilled that can be reasonably judged as economically productive on the basis
of available geological and engineering data. In the absence of data on fluid
contacts, the lowest known structural occurrence of hydrocarbons controls the
lower proved limit of the reservoir. Proved reserves are estimates of
hydrocarbons to be recovered from a given date forward. They may be revised as
hydrocarbons are produced and additional data becomes available. Proved natural
gas reserves are comprised of nonassociated, associated and dissolved gas. An
appropriate reduction in gas reserves has been made for the expected removal of
liquids, for lease and plant fuel and the exclusion of non-hydrocarbon gases
if they occur in significant quantities and are removed prior to sale. Reserves
that can be produced economically through the application of established
improved recovery techniques are included in the proved classification when
these qualifications are met: (i) successful testing by a pilot project or the
operation of an installed program in the reservoir provides support for the
engineering analysis on which the project or program was based, and (ii) it is
reasonably certain the project will proceed. Improved recovery includes all
methods for supplementing natural reservoir forces and energy, or otherwise
increasing ultimate recovery from a reservoir, including, (i) pressure
maintenance, (ii) cycling, and (iii) secondary recovery in its original sense.
Improved recovery also includes the enhanced recovery methods of thermal,
chemical flooding, and the use of miscible and immiscible displacement fluids.
Estimates of proved reserves do not include crude oil, condensate, natural gas,
or natural gas liquids being held in underground storage. Depending on the
status of development, these proved reserves are further subdivided into:
(i) "developed reserves" which are those proved reserves
reasonably expected to be recovered through existing wells with
existing equipment and operating methods, including (a) "developed
producing reserves" which are those proved developed reserves
reasonably expected to be produced from existing completion intervals
now open for production in existing wells, and (b) "developed
non-producing reserves" which are those proved developed reserves
which exist behind casing of existing wells which are reasonably
expected to be produced through these wells in the predictable future
where the cost of making such hydrocarbons available for production
should be relatively small compared to the cost of new wells; and
(ii) "undeveloped reserves" which are those proved reserves
reasonably expected to be recovered from new wells on undrilled
acreage, from existing wells where a relatively large expenditure is
required and from acreage for which an application of fluid injection
or other improved recovery technique is contemplated where the
technique has been proved effective by actual tests in the area in the
same reservoir. Reserves from undrilled acreage are limited to those
drilling units offsetting productive units that are reasonably certain
of production when drilled. Proved reserves for other undrilled units
are included only where it can be demonstrated with reasonable
certainty that there is continuity of production from the existing
productive formation.
In computing future revenues from gas reserves attributable to the
Company's domestic interests, prices in effect at December 31, 1996 were used,
including current market prices, contract prices and fixed and determinable
price escalations where applicable. In accordance with Commission guidelines,
the gas prices that were used make no allowances for seasonal variations in gas
prices which are likely to cause future yearly average gas prices to be
somewhat lower than December gas prices. For domestic gas sold under contract,
the contract gas price including fixed and determinable escalations, exclusive
of inflation adjustments, was used until the contract expires and then was
adjusted to the current market price for the area and held at this adjusted
price to depletion of the reserves. In computing future revenues from liquids
attributable to the Company's domestic interests, prices in effect at December
31, 1996 were used and these prices were held constant to depletion of the
properties. The future revenues are adjusted to reflect the Company's net
revenue interest in these reserves as well as any ad valorem and other
severance taxes but do not include, unless otherwise noted, any provisions for
corporate income taxes.
50
<PAGE> 54
In computing future revenues from the Company's gas reserves
attributable to the Company's interests in the Kingdom of Thailand, the current
contract price under the gas sales agreement with PTT was used, without giving
effect to any of the adjustments provided for in the gas sales agreement due to
their indeterminate nature as of December 31, 1996 in accordance with
Commission guidelines. In computing future revenues from liquids attributable
to the Company's interests in the Kingdom of Thailand, a price of $24.56 was
used, which the Company believes approximates the price that the Company would
have received for production from the Thailand Concession under the memorandum
of understanding with PTT on December 31, 1996 if production had been sold to
PTT on that date, and this price was held constant until depletion of the
Company's reserves in the Kingdom of Thailand. The future revenues are adjusted
to reflect the Company's net revenue interest in these reserves and the
Company's obligations under the Thailand Concession, including the payment of
SRB and applicable production bonuses, but does not include, unless otherwise
noted, any provisions for U.S. or Thai corporate income or other taxes.
The estimates of future net revenue from the Company's domestic and
Thailand properties are based on existing law where the properties are located
and are calculated in accordance with Commission guidelines. Operating costs
for the leases and wells include only those costs directly applicable to the
leases or wells. When applicable, the operating costs include a portion of
general and administrative costs allocated directly to the leases and wells
under terms of operating agreements. Development costs are based on
authorization for expenditure for the proposed work or actual costs for similar
projects. The current operating and development costs were held constant
throughout the life of the properties. For properties located onshore, the
estimates of future net revenues and the present value thereof do not consider
the salvage value of the lease equipment or the abandonment cost of the lease
since both are relatively insignificant and tend to offset each other. The
estimated net cost of abandonment after salvage was considered for offshore
properties where such costs net of salvage are significant.
No deduction was made for indirect costs such as general and
administrative and overhead expenses, loan repayments, interest expenses, and
exploration and development prepayments. Accumulated gas production imbalances,
if any, have been taken into account. Production data used to arrive at the
estimates set forth above includes estimated production for the last few months
of 1996.
The future production rates from reservoirs now on production may be
more or less than estimated because of, among other reasons, mechanical
breakdowns and changes in market demand or allowables set by regulatory bodies.
Properties which are not currently producing may start producing earlier or
later than anticipated in the estimates of future production rates.
The future prices received by the Company for the sales of its
production may be higher or lower than the prices used in calculating the
estimates of future net revenues and the present value thereof as set forth
herein, and the operating costs and other costs relating to such production may
also increase or decrease from existing levels; however, such possible changes
in prices and costs were, in accordance with rules adopted by the Commission,
omitted from consideration in arriving at such estimates.
There are numerous uncertainties in estimating the quantity of proved
reserves and in projecting the future rates of production and timing of
development expenditures. Oil and gas reserve engineering must be recognized as
a subjective process of estimating underground accumulations of oil and gas
that cannot be measured in an exact way, and estimates of other engineers might
differ materially from those of Ryder Scott, the Company's reserve engineers.
The accuracy of any reserve estimate is a function of the quality of available
data and of engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate may
justify revision of such estimate, which revisions may be material.
Accordingly, reserve estimates are often different from the quantities of oil
and gas that are ultimately recovered.
The Company is periodically required to file estimates of its oil and
gas reserve data with various U.S. governmental regulatory authorities and
agencies, including the Federal Energy Regulatory Commission ("FERC") and the
Federal Trade Commission and, with respect to reserves located in Thailand, the
Kingdom of Thailand's Department of Mineral Resources. In addition, estimates
are from time to time furnished to governmental agencies in connection with
specific matters pending before such agencies. The basis for reporting reserves
to these agencies, in some cases, is not comparable to that furnished by Ryder
Scott because of the nature of the various reports required. The major
differences generally include differences in the time as of which such
estimates are made, differences in the definition of reserves, requirements to
report in some instances on a gross, net or total operator basis and
requirements to report in terms of smaller geographical units. During 1996, no
estimates by the Company of its total proved net oil and gas reserves were
filed with or included in reports to any governmental authority or agency other
than the Commission and,
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<PAGE> 55
with respect to reserves relating to the Company's properties located in
Thailand, the Kingdom of Thailand's Department of Mineral Resources.
GOVERNMENT REGULATION
The Company's operations are affected from time to time in varying
degrees by political developments and governmental laws and regulations. Rates
of production of oil and gas have for many years been subject to governmental
conservation laws and regulations, and the petroleum industry has been subject
to federal and state tax laws dealing specifically with it.
Federal Income Tax
The Company's operations are significantly affected by certain
provisions of the federal income tax laws applicable to the petroleum industry.
The principal provisions affecting the Company are those that permit the
Company, subject to certain limitations, to deduct as incurred, rather than to
capitalize and amortize, its domestic "intangible drilling and development
costs" and to claim depletion on a portion of its domestic oil and gas
properties based on 15% of its oil and gas gross income from such properties
(up to an aggregate of 1,000 Bbls per day of domestic crude oil and/or
equivalent units of domestic natural gas) even though the Company has little or
no basis in such properties. Under certain circumstances, however, a portion
of such intangible drilling and development costs and the percentage depletion
allowed in excess of basis will be tax preference items that will be taken into
account in computing the Company's alternative minimum tax.
Environmental Matters
Domestic oil and gas operations are subject to extensive federal
regulation and, with respect to federal leases, to interruption or termination
by governmental authorities on account of environmental and other
considerations including the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") also known as the "Superfund Law." The recent
trend towards stricter standards in environmental legislation and regulation
may continue, and this could increase costs to the Company and others in the
industry. Regulations of the Department of the Interior currently impose
absolute liability upon the lessee under a federal lease for the costs of
clean-up of pollution resulting from a lessee's operations, and such lessee may
also be subject to possible legal liability for pollution damages. The Company
maintains insurance against costs of clean-up operations, but is not fully
insured against all such risks. A serious incident of pollution may, as it has
in the past, also result in the Department of the Interior requiring lessees
under federal leases to suspend or cease operation in the affected area.
The operators of the Company's properties have numerous applications
pending before the Environmental Protection Agency (the "EPA") for National
Pollution Discharge Elimination System water discharge permits with respect to
offshore drilling and production operations. The issue generally involved is
whether effluent discharges from each facility or installation comply with the
applicable federal regulations.
The Oil Pollution Act of 1990 (the "OPA") and regulations thereunder
impose a variety of regulations on "responsible parties" related to the
prevention of oil spills and liability for damages resulting from such spills
in United States waters. A "responsible party" includes the owner or operator
of a facility or vessel, or the lessee or permittee of the area in which an
offshore facility is located. The OPA assigns liability to each responsible
party for oil removal costs and a variety of public and private damages. While
liability limits apply in some circumstances, a party cannot take advantage of
liability limits if the spill was caused by gross negligence or willful
misconduct or resulted from violation of a federal safety, construction or
operating regulation. If the party fails to report a spill or cooperate fully
in the cleanup, liability limits likewise do not apply. Few defenses exist to
the liability imposed by the OPA.
The OPA also imposes ongoing requirements on responsible parties,
including proof of financial responsibility to cover at least some costs in a
potential spill. For tank vessels, including mobile offshore drilling rigs, the
OPA imposes on owners, operators and charterers of the vessels, an obligation
to maintain evidence of financial responsibility of up to $10,000,000 depending
on gross tonnage. With respect to offshore facilities, proof of greater levels
of financial responsibility may be applicable. For offshore facilities that
have a worst case oil spill potential of more than 1,000 barrels (which
includes many of the Company's offshore producing facilities), certain
amendments to the OPA that were enacted in 1996 provide that the amount of
financial responsibility that must be demonstrated for most facilities ranging
from $10,000,000 to $35,000,000, depending upon location, with higher amounts,
up to $150,000,000 in certain limited circumstances. The Company believes that
it currently has established adequate proof of financial responsibility for its
offshore facilities at no significant increase in expense over recent prior
years. However, the Company cannot predict
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<PAGE> 56
whether these financial responsibility requirements under the OPA amendments
will result in the imposition of substantial additional annual costs to the
Company in the future or otherwise materially adversely effect the Company.
The impact, however, should not be any more adverse to the Company that it will
be to other similarly situated or less capitalized owners or operators in the
Gulf of Mexico.
The Company's onshore operations are subject to numerous United States
federal, state, and local laws and regulations controlling the discharge of
materials into the environment or otherwise relating to the protection of the
environment including CERCLA. Such laws and regulations, among other things,
impose absolute liability on the lessee under a lease for the cost of clean-up
of pollution resulting from a lessee's operations, subject the lessee to
liability for pollution damages, may require suspension or cessation of
operations in affected areas, and impose restrictions on the injection of
liquids into subsurface aquifers that may contaminate groundwater. Such laws
could have a significant impact on the operating costs of the Company, as well
as the oil and gas industry in general. Federal, state and local initiatives to
further regulate the disposal of oil and gas wastes are also pending in certain
states, and these initiatives could have a similar impact on the Company.
The Company is asked to comment on the costs it incurred during the
prior year on capital expenditures for environmental control facilities and the
amount it anticipates incurring during the coming year. The Company believes
that, in the course of conducting its oil an gas operations, many of the costs
attributable to environmental control facilities would have been incurred
absent environmental regulations as prudent, safe oilfield practice. During
1996, the Company incurred capital expenditures of approximately $1,971,000 for
environmental control facilities, primarily relating to the completion of two
salt water disposal facilities in New Mexico and the installation of certain
environmental control facilities on two platforms installed in the Gulf of
Thailand and on one platform installed in the Gulf of Mexico. The Company
currently has budgeted approximately $1,240,000 for expenditures involving
environmental control facilities during 1997, including, among other things,
two salt water disposal facilities and environmental control equipment for one
platform in the Gulf of Mexico.
Other Laws and Regulations
Various laws and regulations often require permits for drilling wells
and also cover spacing of wells, the prevention of waste of oil and gas
including maintenance of certain gas/oil ratios, rates of production and other
matters. The effect of these laws and regulations, as well as other regulations
that could be promulgated by the jurisdictions in which the Company has
production, could be to limit the number of wells that could be drilled on the
Company's properties and to limit the allowable production from the successful
wells completed on the Company's properties, thereby limiting the Company's
revenues.
The MMS administers the oil and gas leases held by the Company on
federal onshore lands and offshore tracts in the Outer Continental Shelf. The
MMS holds a royalty interest in these federal leases on behalf of the federal
government. While the royalty interest percentage is fixed at the time that the
lease is entered into, from time to time the MMS changes or reinterprets the
applicable regulations governing its royalty interests, and such action can
indirectly affect the actual royalty obligation that the Company is required to
pay. In a letter dated May 3, 1993, the MMS announced a reinterpretation of its
right to collect royalty payments from producers on certain settlements in
which such producers and pipeline companies were involved a number of years
ago. The MMS reinterpretation has been challenged in court by various producers
and trade groups representing them. On August 27, 1996, in Independent
Petroleum Association of America, et al. v. Babbit et al., Nos. 95-5210 etc.,
the United States Court of Appeals for the District of Columbia Circuit held
that the May 3, 1993, reinterpretation was invalid and unenforceable. Unless
and until this or other similar cases are resolved in favor of the MMS'
reinterpretation of its regulations, it is unlikely that the Company or other
producers will be legally required to pay royalties on such settlement
agreements. The Company was involved in several settlement agreements with
pipelines that could be subject to the MMS' new reinterpretation. The MMS has
reviewed the Company's and other producers' settlement agreements, to determine
whether it believes any additional royalty payments may be due and has asserted
that additional royalties may be due in connection with two of the Company's
settlement agreements. Based upon existing case law, the Company has asserted
through the administrative appeals process, and continues to believe, that it
does not owe any additional royalties beyond what it has previously paid.
However, in the event that the MMS is able to successfully assert that
additional royalty is due from the Company in connection with settlement
agreements to which the Company is a party, the Company does not currently
believe that such additional assessment will have a material adverse impact on
the financial position or results of operations of the Company.
The FERC has recently embarked on regulatory initiatives relating to
its jurisdiction over rates for natural gas gathering services provided by
interstate pipelines and to the availability of market-based and other
alternative rate
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mechanisms to such pipelines for transmission and storage services. Among the
FERC initiatives is a policy allowing pipelines and transportation customers to
negotiate rates above the otherwise applicable maximum lawful cost-based rates
on the condition that the pipelines alternatively offer so-called recourse
rates equal to the maximum lawful cost-based rates. This negotiated/recourse
rate policy has been challenged in the United States Court of Appeals for the
District of Columbia, and the appeal remains pending. With respect to gathering
services, the FERC has issued orders declaring that certain facilities owned by
interstate pipelines primarily perform a gathering function, and may be
transferred to affiliated and non- affiliated entities that are not subject to
the FERC's rate jurisdiction. Many of these orders have been challenged on
rehearing to the FERC, and on appeal to the courts. The Company cannot predict
the ultimate outcome of these developments, nor the effect of these developments
on transportation rates. Inasmuch as the rates for these pipeline services can
affect the gas prices received by the Company for the sale of its production,
the FERC's actions may have an impact on the Company. However, the impact should
not be substantially different on the Company than it will on other similarly
situated gas producers and sellers.
EMPLOYEES
As of May 1, 1997, the Company and its subsidiary Thaipo had 150
full-time employees, including sixteen in its Bangkok, Thailand office. None of
the Company's employees are presently represented by a union for collective
bargaining purposes. The Company considers its relations with its employees to
be excellent.
MANAGEMENT AND BOARD OF DIRECTORS
EXECUTIVE OFFICERS
Executive officers of the Company are appointed annually to serve for
the ensuing year or until their successors have been elected or appointed. The
executive officers of the Company, their age as of June 1, 1997, and the year
each was elected to his present position are as follows:
<TABLE>
<CAPTION>
YEAR
EXECUTIVE OFFICER EXECUTIVE OFFICE AGE ELECTED
------------------- --------------------------- --- -------
<S> <C> <C> <C>
Paul G. Van Wagenen . . . . . . . . . . . . . . . . . Chairman of the Board, 51 1991
President and Chief Executive
Officer
Kenneth R. Good . . . . . . . . . . . . . . . . . . . Corporate Senior Vice 59 1996
President
Bruce E. Archinal . . . . . . . . . . . . . . . . . . Vice President and Onshore 44 1997
Division Manager
Stuart P. Burbach . . . . . . . . . . . . . . . . . . Vice President and Offshore 45 1991
Division Manager
Jerry A. Cooper . . . . . . . . . . . . . . . . . . . Vice President and Western 48 1990
Division Manager
John W. Elsenhans . . . . . . . . . . . . . . . . . . Vice President -- Finance and 44 1995
Treasurer
Harvey L. Gold . . . . . . . . . . . . . . . . . . . Vice President -- Engineering 61 1988
Thomas E. Hart . . . . . . . . . . . . . . . . . . . Vice President and Controller 54 1988
R. Phillip Laney . . . . . . . . . . . . . . . . . . Vice President and 56 1991
International Division Manager
John O. McCoy, Jr . . . . . . . . . . . . . . . . . . Vice President and Chief 45 1989
Administrative Officer
J. D. McGregor . . . . . . . . . . . . . . . . . . . Vice President -- Sales 52 1988
Ronald B. Manning . . . . . . . . . . . . . . . . . . Vice President and General 43 1995
Counsel
Gerald A. Morton . . . . . . . . . . . . . . . . . . Vice President -- Law and 38 1997
Corporate Secretary
Sammie M. Shaw . . . . . . . . . . . . . . . . . . . Vice President -- Operations 65 1992
</TABLE>
Prior to assuming their present positions with the Company, the
business experience of each executive officer for more than the last five years
was as follows: Mr. Van Wagenen, who joined the Company in 1979, served as
President and Chief Operating Officer of the Company since 1990; Mr. Good, who
joined the Company in 1977, served as Senior Vice President -- Land and Budgets
since 1991; Mr. Archinal, who joined the Company in 1982, was Onshore Division
Manager since 1994, and prior thereto served as Offshore Division Exploration
Manager since 1991; Mr. Burbach, who rejoined the Company in 1991, was Vice
President of Norfolk Holding Inc. from 1986 until rejoining the
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<PAGE> 58
Company; Mr. Cooper served in various positions since joining the Company in
1979; Mr. Elsenhans was Director, Corporate Finance for the Company since 1991;
Mr. Gold was Manager of Reservoir Engineering for the Company since joining the
Company in 1977; Mr. Hart was Controller for the Company since joining the
Company in 1977; Mr. Laney, who joined the Company in 1977, served as
International Exploration Manager for the Company since 1983; Mr. McCoy served
as Director of Personnel and Administration for the Company since joining the
Company in 1978; Mr. McGregor was Manager of Hydrocarbon Sales and Contracts
for the Company since joining the Company in 1981; Mr. Manning, who joined the
Company in 1987, was Corporate Secretary and an Associate General Counsel for
the Company since 1990; Mr. Morton was Corporate Secretary and Associate
General Counsel for the Company since 1995, an Associate General Counsel since
joining the Company in 1993, and prior thereto was an attorney with the law
firm of Weil, Gotshal & Manges since 1988; Mr. Shaw was Operations Manager for
the Company since joining the Company in 1981.
BOARD OF DIRECTORS
The following is a list of the members of the Company's Board of
Directors and their principal occupations.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
---------------------- ---------------------------------------
<S> <C>
Paul G. Van Wagenen . . . . . Chairman of the Board, President and Chief
Executive Officer of the Company
Tobin Armstrong . . . . . . . Rancher
Jack S. Blanton . . . . . . . President, Eddy Refining Company; Chairman,
Houston Endowment, Inc.
W. M. Brumley, Jr . . . . . . Personal Investments
John B. Carter, Jr . . . . . Chairman of the Board, Houston National Bank
William L. Fisher . . . . . . Barrow Chair and Geological Sciences
Professor University of Texas at Austin
William E. Gipson . . . . . . Independent Petroleum Geologist, President,
Wines of Pheasant Ridge
Gerrit W. Gong . . . . . . . Director, Asian Studies, Center for Strategic
and International Studies
J. Stuart Hunt . . . . . . . Personal Investments
Frederick A. Klingenstein . . Chairman of the Board, Klingenstein, Fields &
Co., L.P.
Nicholas R. Petry . . . . . . Chairman of the Board, Petry Company
Jack A. Vickers . . . . . . . Chairman of the Board, The Vickers Companies
</TABLE>
DESCRIPTION OF THE NOTES
The Exchange Notes will be issued, and the Old Notes were issued,
pursuant to an indenture (the "Indenture") between the Company, as issuer, and
State Street Bank & Trust Company (as successor in interest to Fleet National
Bank under the Indenture), as trustee (the "Trustee"). The terms of the Notes
include those set forth or referred to in the Indenture and those made part of
the Indenture by the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The Notes are subject to all such terms, and prospective
Holders of the Notes are referred to the Indenture, the documents referred to in
the Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of the Indenture, including the definitions of certain terms
contained therein, the documents referred to therein and the Trust Indenture
Act. The definitions of certain capitalized terms used in the following summary
are set forth below under "-- Certain Definitions."
If this Exchange Offer is consummated, Holders of Old Notes who do not
exchange their Old Notes for Exchange Notes will vote together with Holders of
Exchange Notes for all relevant purposes under the Indenture. In that regard,
the Indenture requires that certain actions by the Holders thereunder
(including acceleration following an Event of Default) must be taken, and
certain rights must be exercised, by specified minimum percentages of the
aggregate principal amount of the outstanding securities issued under the
Indenture. In determining whether Holders of the requisite percentage in
principal amount have given any notice, consent or waiver or taken any other
action permitted under the Indenture, any Old Notes that remain outstanding
after the Exchange Offer will be aggregated with the Exchange Notes, and the
Holders of such Old Notes and the Exchange Notes will vote together as a single
series for all such purposes. Accordingly, all references herein to specified
percentages in aggregate principal amount of the outstanding Notes shall be
deemed to mean, at any time after the Exchange Offer is consummated, such
percentages in aggregate principal amount of the Old Notes and the Exchange
Notes then outstanding.
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<PAGE> 59
GENERAL
The Notes are unsecured senior subordinated obligations of the Company
limited to $100,000,000 aggregate principal amount. The Exchange Notes will be
issued, and the Old Notes were issued, only in registered form, without
coupons, in denominations of $1,000 and integral multiples thereof. Principal
of, premium, if any, on and interest on the Notes is payable, and the Notes are
transferable, at the office or agency of the Company in the City of New York
maintained for such purposes, which initially will be the corporate trust
office or agency of the Trustee maintained at New York, New York. In addition,
interest may be paid, at the option of the Company, by check mailed to the
registered Holders of the Notes at their respective addresses as shown on the
Note Register or, upon application to the Trustee by any Holder of an aggregate
principal amount of Notes in excess of $500,000 not later than the applicable
Regular Record Date, by transfer to an account (such transfer to be made only
to a Holder of an aggregate principal amount of Notes in excess of $500,000)
maintained by such Holder with a bank in New York City. No transfer will be
made to any such account unless the Trustee has received written wire
instructions not less than 15 days prior to the relevant payment date. No
service charge will be made for any transfer, exchange or redemption of Notes,
but the Company or the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge that may be payable in connection
therewith. For a discussion of the circumstances in which the interest rate on
the Notes may be temporarily increased, see "Exchange Offer; Registration
Rights."
Any Old 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.
MATURITY, INTEREST AND PRINCIPAL PAYMENTS
The Notes will mature on May 15, 2007. Interest on the Notes will
accrue at the rate of 8 3/4% per annum and will be payable semiannually on May
15 and November 15 of each year (each an "Interest Payment Date"), commencing
November 15, 1997, to the Person in whose name the Note is registered in the
Note Register at the close of business on the May 1, or November 1 next
preceding such interest payment date. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months.
REDEMPTION
Optional Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after May 15, 2002, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on an interest payment date that is on or prior to the
redemption date), if redeemed during the 12-month period beginning on May 15 of
the years indicated below:
<TABLE>
<CAPTION>
YEAR PRICE
---------------- --------
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.375%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.917%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.458%
2005 and thereafter . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
Selection and Notice. In the event that less than all of the Notes are
to be redeemed at any time, selection of such Notes (or any portion thereof
that is an integral multiple of $1,000) for redemption will be made by the
Trustee from the outstanding Notes not previously called for redemption (or
otherwise purchased by the Company) on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided, however, that
no Note with a principal amount of $1,000 or less shall be redeemed in part.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note. On and after the
redemption date, interest will cease to accrue on the Notes or portions thereof
called for redemption and accepted for payment.
Offers to Purchase. As described below, (a) upon the occurrence of a
Change of Control, the Company is 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 the occurrence of an Asset Sale, the Company may be
obligated to make offers to purchase Notes with a portion of the Net Cash
Proceeds of such Asset Sale 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 "-- Certain Covenants -- Change of Control" and "-- Limitation
on Disposition of Proceeds of Asset Sales."
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<PAGE> 60
SUBORDINATION
Payments of and distributions on or with respect to the Note
Obligations is subordinated, to the extent set forth in the Indenture, in right
of payment to the prior payment in full in cash or Cash Equivalents of all
existing and future Senior Indebtedness, which includes, without limitation,
all Credit Agreement Obligations of the Company. The Notes will rank prior in
right of payment only to other Indebtedness of the Company which is, by its
terms, subordinated in right of payment to the Notes. As of June 1, 1997, there
was $201,230,000 of Indebtedness of the Company which would constitute such
Subordinated Indebtedness. In addition, the Note Obligations are effectively
subordinated to all creditors of the Company's Subsidiaries, including trade
creditors. See "Risk Factors -- Subordination of Notes" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
The Indenture provides that in the event of (a) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Company (or its creditors, as such) or its properties and assets, or (b) any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary or (c) any assignment for the benefit of creditors or other
marshaling of assets or liabilities of the Company, all Senior Indebtedness of
the Company must be paid in full in cash or Cash Equivalents before any direct
or indirect payment or distribution, whether in cash, property or securities
(excluding certain permitted equity and subordinated debt securities referred
to in the Indenture as "Permitted Junior Securities"), is made on account of
the Note Obligations. In the event that, notwithstanding the foregoing, the
Trustee or the Holder of any Note receives any payment or distribution of
properties or assets of the Company of any kind or character, whether in cash,
property or securities, by set-off or otherwise, in respect of Note Obligations
before all Senior Indebtedness is paid or provided for in full in cash or Cash
Equivalents, then the Trustee or the Holders of Notes receiving any such
payment or distribution (other than a payment or distribution in the form of
Permitted Junior Securities) will be required to pay or deliver such payment or
distribution forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other person making payment or
distribution of assets of the Company for application to the payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full.
During the continuance of any default in the payment when due (whether
at Stated Maturity, upon scheduled repayment, upon acceleration or otherwise)
of principal of or premium, if any, or interest on, or of unreimbursed amounts
under drawn letters of credit or fees relating to letters of credit
constituting, any Designated Senior Indebtedness (a "Payment Default"), no
direct or indirect payment or distribution by or on behalf of the Company of
any kind or character shall be made on account of the Note Obligations or any
obligation under any Subsidiary Guarantee unless and until such default has
been cured or waived or has ceased to exist or such Designated Senior
Indebtedness shall have been discharged or paid in full in cash or Cash
Equivalents.
In addition, during the continuance of any default other than a
Payment Default with respect to any Designated Senior Indebtedness pursuant to
which the maturity thereof may then be accelerated (a "Non-payment Default"),
after receipt by the Trustee from the holders (or their representative) of such
Designated Senior Indebtedness of a written notice of such Non-payment Default,
no payment or distribution of any kind or character may be made by the Company
on account of the Note Obligations for the period specified below (the "Payment
Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice
of a Non-payment Default by the Trustee from the holders (or their
representative) of Designated Senior Indebtedness stating that such notice is a
payment blockage notice pursuant to the Indenture and shall end on the earliest
to occur of the following events: (a) 179 days shall have elapsed since the
receipt by the Trustee of such notice; (b) the date, as set forth in a written
notice to the Company or the Trustee from the holders (or their representative)
of the Designated Senior Indebtedness initiating such Payment Blockage Period,
on which such default is cured or waived or ceases to exist (provided, that no
other Payment Default or Non-payment Default has occurred or is then continuing
after giving effect to such cure or waiver); (c) the date on which such
Designated Senior Indebtedness is discharged or paid in full in cash or Cash
Equivalents; and (d) the date, as set forth in a written notice to the Company
or the Trustee from the holders (or their representative) of the Designated
Senior Indebtedness initiating such Payment Blockage Period, on which such
Payment Blockage Period shall have been terminated by written notice to the
Company or the Trustee from the holders (or their representative) of Designated
Senior Indebtedness initiating such Payment Blockage Period, after which the
Company, subject to the subordination provisions set forth above and the
existence of another Payment Default, shall promptly resume making any and all
required payments in respect of the Notes, including any missed payments. Only
one Payment Blockage Period with respect to the Notes may be commenced within
any 360 consecutive day period. No Non-payment Default with respect to
Designated Senior Indebtedness that existed or was continuing on the date of
the commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period will be, or can be,
made the basis for the commencement of a second Payment Blockage Period,
whether or not within a period of 360 consecutive days, unless such default has
been cured or waived for a period of not less than 90 consecutive days (it
being acknowledged that any subsequent action, or any breach of any financial
covenant for a period commencing after the date of commencement of such Payment
Blockage Period, that, in either case, would give rise to a Non-payment Default
pursuant to any provision under which a Non-payment Default previously existed
or was continuing shall constitute a new Non-payment Default for this purpose;
provided, however, that, in the case of a breach
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<PAGE> 61
of a particular financial covenant, the Company shall have been in compliance
for at least one full 90 consecutive day period commencing after the date of
commencement of such Payment Blockage Period). In no event will a Payment
Blockage Period extend beyond 179 days from the date of the receipt by the
Trustee of the notice, and there must be a 181 consecutive day period in any
360-day period during which no Payment Blockage Period is in effect. In the
event that, notwithstanding the foregoing, the Company makes any payment or
distribution to the Trustee or the Holder of any Note prohibited by the
subordination provision of the Indenture, then such payment or distribution
will be required to be paid over and delivered forthwith to the holders (or
their representative) of Designated Senior Indebtedness.
If the Company fails to make any payment on the Notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure will constitute an Event of
Default under the Indenture and will enable the Holders of the Notes to
accelerate the maturity thereof. See "-- Events of Default."
By reason of such subordination, in the event of liquidation,
receivership, reorganization or insolvency, creditors of the Company who are
holders of Senior Indebtedness may recover more, ratably, than the Holders of
the Notes, and funds which would be otherwise payable to the Holders of the
Notes will be paid to the holders of the Senior Indebtedness to the extent
necessary to pay the Senior Indebtedness in full, and the Company may be unable
to meet its obligations in full with respect to the Notes.
As of May 31, 1997, the aggregate amount of outstanding Senior
Indebtedness was approximately $33,000,000. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." Although the Indenture contains
limitations on the amount of additional Indebtedness that the Company and the
Restricted Subsidiaries may incur, the amounts of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness or
Indebtedness of Subsidiaries to which the Notes will be subordinated. The
Indenture prohibits the incurrence by the Company of Indebtedness that is
contractually subordinated in right of payment to any Senior Indebtedness of the
Company and senior in right of payment to the Notes. As of June 1, 1997, there
was $201,230,000 of Indebtedness of the Company that was contractually
subordinated in right of payment to the Old Notes and there was no Indebtedness
of the Company which was pari passu in right of payment with the Old Notes.
SUBSIDIARY GUARANTEES OF THE NOTES
Under the circumstances described below, the Company's payment
obligations under the Notes may in the future be jointly and severally
guaranteed by existing and future Restricted Subsidiaries of the Company as
Subsidiary Guarantors. Currently, no Subsidiaries of the Company have executed
or are required to execute and deliver the Indenture as a Subsidiary Guarantor.
Each Subsidiary Guarantor will guarantee, jointly and severally, to each Holder
of Notes and the Trustee, the full and prompt performance of the Company's
obligations under the Indenture and the Notes, including the payment of
principal of (or premium, if any, on) and interest on the Notes pursuant to its
Subsidiary Guarantee. The Subsidiary Guarantees will be subordinated to
Guarantor Senior Indebtedness of the Subsidiary Guarantors to the same extent
and in the same manner as the Notes are subordinated to Senior Indebtedness.
The obligations of each Subsidiary Guarantor will be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities (including, but not limited to, Guarantor Senior Indebtedness) of
such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Subsidiary
Guarantee or pursuant to its contribution obligations under the Indenture,
result in the obligations of such Subsidiary Guarantor under the Subsidiary
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 Subsidiary Guarantee shall be entitled to a contribution
from each other Subsidiary Guarantor (if any) in a pro rata amount based on the
Adjusted Net Assets (as defined in the Indenture) of each Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell,
assign, convey, transfer, lease or otherwise dispose of its properties and
assets substantially as an entirety (or any portion thereof) to the Company or
another Subsidiary Guarantor without limitation, except to the extent any such
transaction is subject to the covenants described below under the caption "--
Merger, Consolidation and Sale of Assets." Each Subsidiary Guarantor may
consolidate with or merge into or sell, assign, convey, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety in
one transaction or series of related transactions to a Person other than the
Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor); provided, that (a) in the case of a merger or
consolidation, if the surviving Person is not the Subsidiary Guarantor, such
surviving Person or, in the case of a sale, assignment, conveyance, transfer,
lease or other disposition, the transferee Person agrees to assume such
Subsidiary Guarantor's Subsidiary Guarantee and all its obligations pursuant to
the Indenture, except to the extent that the following paragraph would result
in the release of such Subsidiary Guarantee and (b) such transaction does not
(i) violate any of the covenants described below under the caption "-- Certain
Covenants" or in the Indenture or (ii) result in a Default or Event of Default
immediately thereafter.
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The Subsidiary Guarantee of any Restricted Subsidiary may be released
upon the terms and subject to the conditions described under paragraph (b) of
the caption "-- Certain Covenants -- Limitation on Non-Guarantor Restricted
Subsidiaries." Each Subsidiary Guarantor that is designated as an Unrestricted
Subsidiary in accordance with the Indenture shall be released from its
Subsidiary Guarantee and related obligations set forth in the Indenture for so
long as it remains an Unrestricted Subsidiary.
Although the Indenture does not contain any requirement that any
Subsidiary execute and deliver a Subsidiary Guarantee, certain covenants
described below require a Restricted Subsidiary in the future to execute and
deliver a Subsidiary Guarantee prior to the guarantee of other Indebtedness.
See "Certain Covenants -- Limitation on Non-Guarantor Restricted Subsidiaries."
CERTAIN COVENANTS
The Indenture contains, among others, the covenants described below.
Limitation on Indebtedness. The Indenture provides that neither the
Company nor any Restricted Subsidiary will create, incur, issue, assume,
guarantee or in any manner become directly or indirectly liable for the payment
of (collectively "incur") any Indebtedness (including any Acquired
Indebtedness), other than Permitted Indebtedness and Permitted Subsidiary
Indebtedness, as the case may be; provided, however, that the Company and its
Restricted Subsidiaries that are Subsidiary Guarantors may incur additional
Indebtedness if (i) the Company's Consolidated Fixed Charge Coverage Ratio for
the four full fiscal quarters immediately preceding the incurrence of such
Indebtedness (and for which financial statements are available), taken as one
period (at the time of such incurrence, after giving pro forma effect to: (A)
the incurrence of such Indebtedness and (if applicable) the application of the
net proceeds therefrom as if such Indebtedness had been incurred and the
application of such proceeds had occurred at the beginning of such four-quarter
period; (B) the incurrence, repayment or retirement of any other Indebtedness
(including Permitted Indebtedness and Permitted Subsidiary Indebtedness) by the
Company or its Restricted Subsidiaries since the first day of such four-quarter
period (including any other Indebtedness to be incurred concurrent with the
incurrence of such Indebtedness) as if such Indebtedness had been incurred,
repaid or retired at the beginning of such four-quarter period; and (C)
notwithstanding clause (d) of the definition of Consolidated Net Income, the
acquisition (whether by purchase, merger or otherwise) or disposition (whether
by sale, merger or otherwise) of any Person acquired or disposed of by the
Company or its Restricted Subsidiaries, as the case may be, since the first day
of such four-quarter period, as if such acquisition or disposition had occurred
at the beginning of such four-quarter period), would have been equal to at
least 2.5 to 1.0 and (ii) no Default or Event of Default would occur or be
continuing.
Limitation on Restricted Payments. (a) The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, take any of the following actions (unless such action constitutes a
Permitted Investment):
(i) declare or pay any dividend on, or make any distribution
to holders of, any shares of the Company's Capital Stock (other than
dividends or distributions payable solely in shares of Qualified
Capital Stock of the Company, options, warrants or other rights to
purchase Qualified Capital Stock of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company or any Affiliate thereof (other than
any Wholly Owned Restricted Subsidiary of the Company) or any options,
warrants or other rights to acquire such Capital Stock; provided,
however, that the Company may make any payment of the applicable
redemption price in connection with a Qualified Redemption
Transaction;
(iii) make any principal payment on or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any
scheduled principal payment, scheduled sinking fund payment or
maturity, any Pari Passu Indebtedness or Subordinated Indebtedness,
except in any case out of a Pari Passu Offer (as defined herein) or a
Net Proceeds Deficiency (as defined herein) pursuant to the provisions
of the Indenture described under the caption "-- Limitation on
Disposition of Proceeds of Asset Sales" and except upon a Change of
Control or similar event required by the indenture or other agreement
or instrument pursuant to which such Pari Passu Indebtedness or
Subordinated Indebtedness was issued, provided the Company is then
obligated to make a Change of Control Offer in compliance with the
covenant described below under "-- Change of Control;" provided,
however, that the Company may make any payment of the applicable
redemption price in connection with a Qualified Redemption
Transaction;
(iv) declare or pay any dividend on, or make any distribution
to the holders of, any shares of Capital Stock of any Restricted
Subsidiary of the Company (other than to the Company or any of its
Wholly Owned Restricted Subsidiaries) or purchase, redeem or otherwise
acquire or retire for value any Capital Stock of any Restricted
Subsidiary (other than a Wholly Owned Restricted Subsidiary) or any
options, warrants or other rights to acquire any such Capital Stock
(other than with respect to any such Capital Stock held by the Company
or any Wholly Owned Restricted Subsidiary of the Company);
(v) make any Investment; or
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<PAGE> 63
(vi) in connection with the acquisition of any property or
asset by the Company or its Restricted Subsidiaries after the date of
the Indenture, which property or asset would secure or be subject to
any Production Payment obligations of the Company or its Restricted
Subsidiaries, make any investment (of cash, property or other assets)
in such property or asset so acquired in addition to the amount of
Indebtedness (including Production Payment obligations) incurred by
the Company or its Restricted Subsidiaries in connection with such
acquisition;
(such payments or other actions described in (but not excluded from) clauses
(i) through (vi) are collectively referred to as "Restricted Payments"), unless
at the time of and after giving effect to the proposed Restricted Payment (with
the amount of any such Restricted Payment, if other than cash, being the amount
determined by the Board of Directors, whose determination shall be conclusive
and evidenced by a resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in accordance with the
covenant described above under the caption " -- Limitation on Indebtedness" and
(3) the aggregate amount of all Restricted Payments declared or made after the
date of the Indenture shall not exceed the sum (without duplication) of the
following:
(A) 50% of the aggregate Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on
the first day of the first month after the date of the Indenture and
ending on the last day of the Company's last fiscal quarter ending
prior to the date of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income shall be a loss, minus
100% of such loss), plus
(B) the aggregate net cash proceeds received after the date of
the Indenture by the Company as capital contributions to the Company
(other than from any Restricted Subsidiary), plus
(C) the aggregate net cash proceeds received after the date of
the Indenture by the Company from the issuance or sale (other than to
any of its Restricted Subsidiaries) of shares of Qualified Capital
Stock of the Company or any options, warrants or rights to purchase
such shares of Qualified Capital Stock of the Company, plus
(D) the aggregate net cash proceeds received after the date of
the Indenture by the Company (other than from any of its Restricted
Subsidiaries) upon the exercise of any options, warrants or rights to
purchase shares of Qualified Capital Stock of the Company, plus
(E) the aggregate net cash proceeds received after the date of
the Indenture by the Company from the issuance or sale (other than to
any of its Restricted Subsidiaries) of debt securities or shares of
Redeemable Capital Stock that have been converted into or exchanged
for Qualified Capital Stock of the Company to the extent such debt
securities were originally sold for cash, together with the aggregate
cash received by the Company at the time of such conversion or
exchange, plus
(F) to the extent not otherwise included in the Company's
Consolidated Net Income, the net reduction in Investments in
Affiliates and Unrestricted Subsidiaries resulting from the payments
of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or
a Restricted Subsidiary after the date of the Indenture from any
Affiliate or Unrestricted Subsidiary or from the redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary (valued in each
case as provided in the definition of "Investment"), not to exceed in
the case of any Affiliate or Unrestricted Subsidiary the total amount
of Investments (other than Permitted Investments) in such Affiliate or
Unrestricted Subsidiary made by the Company and its Restricted
Subsidiaries in such Affiliate or Unrestricted Subsidiary after the
date of the Indenture, plus
(G) $15,000,000.
(b) Notwithstanding paragraph (a) above, the Company and its
Restricted Subsidiaries may take the following actions so long as (in the case
of clauses (ii), (iii) and (iv) below) no Default or Event of Default shall
have occurred and be continuing:
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at such declaration date such declaration
complied with the provisions of paragraph (a) above (and such payment
shall be deemed to have been paid on such date of declaration for
purposes of any calculation required by the provisions of paragraph
(a) above);
(ii) the repurchase, redemption or other acquisition or
retirement of any shares of any class of Capital Stock of the Company
or any Restricted Subsidiary, in exchange for, or out of the aggregate
net cash proceeds of, a substantially concurrent issue and sale (other
than to a Restricted Subsidiary) of shares of Qualified Capital Stock
of the Company;
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<PAGE> 64
(iii) the purchase, redemption, repayment, defeasance or other
acquisition or retirement for value of any Subordinated Indebtedness
(other than Redeemable Capital Stock) in exchange for or out of the
aggregate net cash proceeds of a substantially concurrent issue and
sale (other than to a Restricted Subsidiary) of shares of Qualified
Capital Stock of the Company;
(iv) the purchase, redemption, repayment, defeasance or other
acquisition or retirement for value of Subordinated Indebtedness
(other than Redeemable Capital Stock) in exchange for, or out of the
aggregate net cash proceeds of, a substantially concurrent incurrence
(other than to a Restricted Subsidiary) of Subordinated Indebtedness
of the Company so long as (A) the principal amount of such new
Indebtedness does not exceed the principal amount (or, if such
Subordinated Indebtedness being refinanced provides for an amount less
than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date
of determination) of the Subordinated Indebtedness being so purchased,
redeemed, repaid, defeased, acquired or retired, plus the amount of
any premium required to be paid in connection with such refinancing
pursuant to the terms of the Subordinated Indebtedness refinanced or
the amount of any premium reasonably determined by the Company as
necessary to accomplish such refinancing, plus the amount of fees and
expenses of the Company incurred in connection with such refinancing,
(B) such new Subordinated Indebtedness is subordinated to the Notes at
least to the same extent as such Subordinated Indebtedness so
purchased, redeemed, repaid, defeased, acquired or retired, (C) such
new Subordinated Indebtedness has an Average Life to Stated Maturity
that is longer than the Average Life to Stated Maturity of the Notes
and such new Subordinated Indebtedness has a Stated Maturity for its
final scheduled principal payment that is at least 91 days later than
the Stated Maturity for the final scheduled principal payment of the
Notes; and
(v) repurchases, acquisitions or retirements of shares of
Qualified Capital Stock of the Company deemed to occur upon the
exercise of stock options or similar rights issued under employee
benefit plans of the Company if such shares represent all or a portion
of the exercise price or are surrendered in connection with satisfying
any Federal income tax obligation.
The actions described in clauses (i), (ii) and (iii) of this paragraph
(b) shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a) (provided, that any dividend paid pursuant to clause (i) of this paragraph
(b) shall reduce the amount that would otherwise be available under clause (3)
of paragraph (a) when declared, but not also when subsequently paid pursuant to
such clause (i)), and the actions described in clauses (iv) and (v) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph and shall not reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a).
(c) In computing Consolidated Net Income of the Company under
paragraph (a) above, (i) the Company shall use audited financial statements for
the portions of the relevant period for which audited financial statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Company for
the remaining portion of such period and (ii) the Company shall be permitted to
rely in good faith on the financial statements and other financial data derived
from the books and records of the Company that are available on the date of
determination. If the Company makes a Restricted Payment which, at the time of
the making of such Restricted Payment, would in the good faith determination of
the Company be permitted under the requirements of the Indenture, such
Restricted Payment shall be deemed to have been made in compliance with the
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Consolidated Net Income of the Company
for any period.
Limitation on Issuances and Sales of Restricted Subsidiary Capital
Stock. The Indenture provides that the Company (a) will not permit any
Restricted Subsidiary to issue any Preferred Stock (other than to the Company
or a Wholly Owned Restricted Subsidiary) and (b) will not permit any Person
(other than the Company and/or one or more Wholly Owned Restricted
Subsidiaries) to own any Capital Stock of any Restricted Subsidiary; provided,
however, that this covenant shall not prohibit (i) the issuance and sale of
all, but not less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary owned by the Company or any of its Restricted
Subsidiaries in compliance with the other provisions of the Indenture, (ii) the
ownership by directors of directors' qualifying shares, (iii) the ownership by
any Person of Capital Stock of a Restricted Subsidiary that was owned by a
Person at the time such Restricted Subsidiary became a Restricted Subsidiary or
acquired by a Person in connection with the formation of the Restricted
Subsidiary (including, in each case, any Capital Stock issued as a result of a
stock split, a dividend of shares of Capital Stock to holders of such Capital
Stock, a recapitalization affecting such Capital Stock or similar event) and
(iv) the ownership by any Person of Capital Stock of any Foreign Subsidiary so
long as none of the Capital Stock of that Subsidiary has been issued in a
public offering.
Limitation on Transactions with Affiliates. The Indenture provides
that the Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or the rendering of any services) with, or for the
benefit of, any Affiliate of the Company other than a Restricted Subsidiary
(each, other than a Restricted Subsidiary, being an "Interested Person"),
unless (a) such transaction or series of transactions is on terms that are no
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less favorable to the Company or such Restricted Subsidiary, as the case may
be, than those that would be available in a comparable arm's length transaction
with unrelated third parties who are not Interested Persons, or, in the event
no comparable transaction with an unrelated third party who is not an
Interested Person is available, on terms that are fair from a financial point
of view to the Company or such Restricted Subsidiary, as the case may be, (b)
with respect to any one transaction or series of related transactions involving
aggregate payments in excess of $10,000,000, the Company delivers an Officers'
Certificate to the Trustee certifying that such transaction or series of
transactions complies with clause (a) above and such transaction or series of
transactions has been approved by the Board of Directors and (c) with respect
to any one transaction or series of related transactions involving aggregate
payments in excess of $20,000,000, the Officers' Certificate referred to in
clause (b) above also includes a certification that such transaction or series
of transactions has been approved by a majority of the Disinterested Directors
(either of the full Board of Directors or, in the case of action by a committee
thereof, of such committee) or, in the event there are no such Disinterested
Directors, that the Company has obtained a written opinion from an independent
nationally recognized investment banking firm or appraisal firm, in either case
specializing or having a specialty in the type and subject matter of the
transaction or series of related transactions at issue, which opinion shall be
to the effect set forth in clause (a) above; provided, however, that this
covenant will not restrict the Company from (i) paying reasonable and customary
regular compensation and fees to directors of the Company who are not employees
of the Company or any Restricted Subsidiary, (ii) paying dividends on, or
making distributions with respect to, shares of Capital Stock of the Company on
a pro rata basis to the extent permitted by the covenant described above under
the caption "-- Limitation on Restricted Payments," (iii) making Restricted
Payments that are permitted by the provisions of the Indenture described above
under the caption "-- Limitation on Restricted Payments," (iv) making loans or
advances to officers, directors and employees of the Company or any Restricted
Subsidiary in the ordinary course of business and consistent with customary
practices in the Oil and Gas Business in an aggregate amount not to exceed
$1,000,000 outstanding at any one time, (v) making any indemnification or
similar payment to any director or officer (A) in accordance with the corporate
charter or bylaws of the Company or any Restricted Subsidiary, (B) under any
agreement or (C) under applicable law and (vi) fulfilling obligations of the
Company or any Restricted Subsidiary under employee compensation and other
benefit arrangements entered into or provided for in the ordinary course of
business.
Limitation on Liens. The Indenture provides that the Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly,
create, incur, assume, affirm or suffer to exist or become effective any Lien
of any kind, except for Permitted Liens, on or with respect to any of its
property or assets (including any intercompany notes), whether owned at the
date of the Indenture or thereafter acquired, or any income, profits or
proceeds therefrom, or assign or otherwise convey any right to receive income
thereon, unless (a) in the case of any Lien securing Subordinated Indebtedness,
the Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Lien and (b) in the case of any other Lien, the
Notes are directly secured equally and ratably with the obligation or liability
secured by such Lien. The incurrence of additional secured Indebtedness by the
Company or any Restricted Subsidiary is subject to further limitations on the
incurrence of Indebtedness as described above under the caption "-- Limitation
on Indebtedness."
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 Notes (a "Change of Control Offer"), and shall purchase, on a
business day (the "Change of Control Purchase Date") not more than 75 nor less
than 30 days following 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 Change of Control
Purchase Date.
In order to effect such Change of Control Offer, the Company shall,
not later than the 30th day after the Change of Control, mail to each Holder of
a Note a 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.
If a Change of Control Offer is made, there can be no assurance that
the Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes delivered by Holders of the Notes seeking
to accept the Change of Control Offer. If on a Change of Control Purchase Date
the Company does not have available funds sufficient to pay the Change of
Control Purchase Price or is prohibited from purchasing the Notes, an Event of
Default will occur under the Indenture.
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer at
the same purchase price, at the same times and otherwise in substantial
compliance with the requirements applicable to a Change of Control Offer made
by the Company and purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
The Company intends to comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder, if applicable, in the
event that a Change of Control occurs and the Company is required to purchase
Notes as described above. The existence of a Holder's right to require, subject
to certain conditions, the
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Company to repurchase its Notes upon a Change of Control may deter a third
party from acquiring the Company in a transaction that constitutes, or results
in, a Change of Control.
Limitation on Disposition of Proceeds of Asset Sales. (a) The
Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, engage in any Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets
and properties sold or otherwise disposed of pursuant to the Asset Sale (as
determined by the Board of Directors, whose determination shall be conclusive
and evidenced by a resolution) and (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, in
respect of such Asset Sale consists of cash, Cash Equivalents and/or the
assumption by the purchaser of liabilities of the Company (other than
liabilities of the Company that are by their terms subordinated to the Notes)
or any Restricted Subsidiary as a result of which the Company and its remaining
Restricted Subsidiaries are no longer liable.
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may either (i) apply the Net Cash Proceeds thereof to reduce
Senior Indebtedness, to reduce Guarantor Senior Indebtedness or to reduce
Indebtedness of any Restricted Subsidiary incurred pursuant to clause (m) of
the definition of Permitted Subsidiary Indebtedness, provided, if any such
Senior Indebtedness, Guarantor Senior Indebtedness or Permitted Subsidiary
Indebtedness has been incurred under any revolving credit facility, that the
related commitment to lend or the amount available to be reborrowed under such
facility is also reduced, or (ii) invest all or any part of the Net Cash
Proceeds thereof, within 365 days after such Asset Sale, in properties and
assets which replace the properties and assets that were the subject of the
Asset Sale or in properties and assets that will be used in the business of the
Company or its Restricted Subsidiaries, as the case may be ("Replacement
Assets"). The amount of such Net Cash Proceeds not applied or invested as
provided in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals or exceeds
$15,000,000, the Company shall make an offer to purchase, from all Holders of
the Notes and any then outstanding Pari Passu Indebtedness required to be
repurchased or repaid on a permanent basis in connection with an Asset Sale, an
aggregate principal amount of Notes and any then outstanding Pari Passu
Indebtedness equal to such Excess Proceeds as follows:
(i) (A) the Company shall make an offer to purchase (a "Net
Proceeds Offer") from all Holders of the Notes in accordance with the
procedures set forth in the Indenture the maximum principal amount
(expressed as a multiple of $1,000) of Notes that may be purchased out
of an amount (the "Payment Amount") equal to the product of such
Excess Proceeds, multiplied by a fraction, the numerator of which is
the outstanding principal amount of the Notes and the denominator of
which is the sum of the outstanding principal amount of the Notes and
such Pari Passu Indebtedness, if any (subject to proration in the
event such amount is less than the aggregate Offered Price (as defined
herein) of all Notes tendered), and (B) to the extent required by such
Pari Passu Indebtedness and provided there is a permanent reduction in
the principal amount of such Pari Passu Indebtedness, the Company
shall make an offer to purchase Pari Passu Indebtedness (a "Pari Passu
Offer") in an amount (the "Pari Passu Indebtedness Amount") equal to
the excess of the Excess Proceeds over the Payment Amount.
(ii) The offer price for the Notes shall be payable in cash in
an amount equal to 100% of the principal amount of the Notes tendered
pursuant to a Net Proceeds Offer, plus accrued and unpaid interest, if
any, to the date such Net Proceeds Offer is consummated (the "Offered
Price"), in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate Offered Price of the Notes tendered
pursuant to a Net Proceeds Offer is less than the Payment Amount
relating thereto or the aggregate amount of the Pari Passu
Indebtedness that is purchased or repaid pursuant to the Pari Passu
Offer is less than the Pari Passu Indebtedness Amount (such shortfall
constituting a "Net Proceeds Deficiency"), the Company may use such
Net Proceeds Deficiency for general corporate purposes, subject to the
limitations described above under the caption "-- Limitation on
Restricted Payments."
(iii) If the aggregate Offered Price of Notes validly tendered
and not withdrawn by Holders thereof exceeds the Payment Amount, Notes
to be purchased will be selected on a pro rata basis. Upon completion
of such Net Proceeds Offer and Pari Passu Offer, the amount of Excess
Proceeds shall be reset to zero.
The Company intends to comply with Rule 14e-1 under the Exchange Act, and any
other securities laws and regulations thereunder, if applicable, in the event
that an Asset Sale occurs and the Company is required to purchase Notes as
described above.
The Credit Agreement may prohibit the Company from purchasing any
Notes from Excess Proceeds. Any future credit agreements or other agreements
relating to Senior Indebtedness to which the Company becomes a party may
contain similar restrictions. In the event a Net Proceeds Offer occurs at a
time when the Company is prohibited by the terms of any Senior Indebtedness
from purchasing the Notes, the Company could seek the consent of the holders of
such Senior Indebtedness to the purchase or could attempt to refinance such
Senior Indebtedness. If the Company does not obtain such a consent or repay
such Senior Indebtedness, the Company may remain prohibited from purchasing the
Notes. In such case, the Company's failure to purchase tendered Notes would
constitute an Event of Default under
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the Indenture which would, in turn, constitute a default under the Credit
Agreement and possibly a default under other agreements relating to Senior
Indebtedness. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of the Notes.
Limitation on Non-Guarantor Restricted Subsidiaries. (a) The Indenture
provides that the Company will not permit any Restricted Subsidiary that is not
a Subsidiary Guarantor to guarantee the payment of any Indebtedness of the
Company unless (i)(A) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a Subsidiary
Guarantee of the Notes by such Restricted Subsidiary which Subsidiary Guarantee
will be subordinated to Guarantor Senior Indebtedness (but no other
Indebtedness) to the same extent that the Notes are subordinated to Senior
Indebtedness and (B), with respect to any guarantee of Subordinated
Indebtedness by a Restricted Subsidiary, any such guarantee shall be
subordinated to such Restricted Subsidiary's Subsidiary Guarantee at least to
the same extent as such Subordinated Indebtedness is subordinated to the Notes;
(ii) such Restricted Subsidiary waives, and agrees not in any manner whatsoever
to claim or take the benefit or advantage of, any rights of reimbursement,
indemnity or subrogation or any other rights against the Company or any other
Restricted Subsidiary as a result of any payment by such Restricted Subsidiary
under its Subsidiary Guarantee until such time as the obligations guaranteed
thereby are paid in full; and (iii) such Restricted Subsidiary shall deliver to
the Trustee an Opinion of Counsel to the effect that such Subsidiary Guarantee
has been duly executed and authorized and constitutes a valid, binding and
enforceable obligation of such Restricted Subsidiary, except insofar as
enforcement thereof (A) may be limited by bankruptcy, insolvency or similar
laws (including, without limitation, all laws relating to fraudulent transfers
and fraudulent conveyances), (B) is subject to general principles of equity and
(C) any implied covenant of good faith or fair dealing.
(b) Notwithstanding the foregoing and the other provisions of the
Indenture, each Subsidiary Guarantee shall provide by its terms that it shall
be automatically and unconditionally released and discharged upon (i)(A) any
sale, exchange or transfer of all the Capital Stock in the applicable
Subsidiary Guarantor owned by the Company and any Restricted Subsidiary or (B)
any sale, assignment, conveyance, transfer, lease or other disposition of the
properties and assets of such Subsidiary Guarantor substantially as an
entirety, in each case, in a single transaction or series of related
transactions to any Person that is not a Restricted Subsidiary (provided, that
such transaction or series of transactions is not prohibited by the Indenture),
(ii) the merger or consolidation of such Subsidiary Guarantor with or into the
Company or a Restricted Subsidiary (provided, that, in the case of a merger
into or consolidation with a Restricted Subsidiary that is not then a
Subsidiary Guarantor, the surviving Restricted Subsidiary assumes the
Subsidiary Guarantee and that transaction or series of transactions is not
prohibited by the Indenture) or (iii) the release or discharge of all
guarantees by such Subsidiary Guarantor of Indebtedness other than the Note
Obligations, except a discharge or release by or as a result of the payment of
such Indebtedness by such Subsidiary Guarantor pursuant to its Subsidiary
Guarantee.
Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Indenture provides that the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock to the Company or any
Restricted Subsidiary, (b) pay any Indebtedness owed to the Company or any
Restricted Subsidiary, (c) make an Investment in the Company or any Restricted
Subsidiary or (d) transfer any of its properties or assets to the Company or
any Restricted Subsidiary, except for such encumbrances or restrictions (i)
pursuant to any agreement in effect or entered into on the date of the
Indenture, (ii) pursuant to any agreement or other instrument of a Person
acquired by the Company or any Restricted Subsidiary in existence at the time
of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any other Person, or the
properties or assets of any other Person, other than the Person, or the
property or assets of the Person, so acquired, (iii) by reason of customary
non-assignment provisions in leases and licenses entered into in the ordinary
course of business, (iv) pursuant to capital leases and purchase money
obligations for property leased or acquired in the ordinary course of business
that impose restrictions of the nature described in clause (d) above on the
property so leased or acquired, (v) pursuant to any merger agreements, stock
purchase agreements, asset sale agreements and similar agreements limiting the
transfer of properties and assets pending consummation of the subject
transaction, (vi) pursuant to Permitted Liens which are customary limitations
on the transfer of collateral, (vii) pursuant to applicable law, (viii)
pursuant to agreements among holders of Capital Stock of any Restricted
Subsidiary of the Company requiring distributions in respect of such Capital
Stock to be made pro rata based on the percentage of ownership in and/or
contribution to such Restricted Subsidiary or (ix) existing under any agreement
that extends, renews, refinances or replaces the agreements containing the
restrictions in the foregoing clauses (i) and (ii), provided, that the terms
and conditions of any such restrictions are not materially less favorable to
the Holders of the Notes than those under or pursuant to the agreement
evidencing the Indebtedness so extended, renewed, refinanced or replaced.
Limitation on Other Senior Subordinated Indebtedness. The Indenture
provides that the Company will not incur, directly or indirectly, any
Indebtedness which is expressly subordinate or junior in right of payment in
any respect to Senior Indebtedness unless such Indebtedness ranks pari passu in
right of payment with the Notes, or is expressly subordinated in right of
payment to the Notes.
Reports. The Indenture requires that the Company (and the Subsidiary
Guarantors, if applicable) file on a timely basis with the Commission, to the
extent such filings are accepted by the Commission and whether or not the
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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(d) of the Exchange
Act). The Company (and the Subsidiary Guarantors, if applicable) will also be
required (a) to file with the Trustee, and provide to each holder of Notes,
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 (and the Subsidiary Guarantors,
if applicable) would be required to file such reports and documents if the
Company (and the Subsidiary Guarantors, if applicable) 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 furnish at the Company's
cost copies of such reports and documents to any holder of Notes promptly upon
written request. The Company is obligated to make available, upon request, to
any Holder of Notes the information required by 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.
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 existing or future
Subsidiary of the Company as an Unrestricted Subsidiary. Generally, a
Restricted Subsidiary includes any Subsidiary of the Company, whether existing
on or after the date of the Indenture, unless the Subsidiary of the Company is
designated as an Unrestricted Subsidiary pursuant to the terms of the
Indenture. The definition of "Unrestricted Subsidiary" set forth below 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.
MERGER, CONSOLIDATION AND SALE OF ASSETS, ETC.
The Indenture provides that the Company will not, in any single
transaction or series of related transactions, consolidate or merge with or
into any other Person, or sell, assign, convey, transfer, lease or otherwise
dispose of the properties and assets of the Company and its Restricted
Subsidiaries substantially as an entirety on a consolidated basis to any
Person, and the Company will not permit any Restricted Subsidiary to enter into
any transaction or series of related transactions if such transaction or series
of transactions would result in a sale, assignment, conveyance, transfer, lease
or other disposition of the properties and assets of the Company and its
Restricted Subsidiaries substantially as an entirety on a consolidated basis to
any Person, unless at the time and after giving effect thereto (a) either (i)
if the transaction or series of related transactions is a merger or
consolidation, the Company shall be the surviving Person of such merger or
consolidation, or (ii) the Person (if other than the Company) formed by such
consolidation or into which the Company or such Restricted Subsidiary is merged
or to which the properties and assets of the Company or such Restricted
Subsidiary, as the case may be, are sold, assigned, conveyed, transferred,
leased or otherwise disposed of (any such surviving Person or transferee Person
being the "Surviving Entity") shall be a corporation organized and existing
under the laws of the United States of America, any state thereof or the
District of Columbia and shall, in either case, expressly assume by a
supplemental indenture to the Indenture executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of the Company under
the Notes and the Indenture, and, in each case, the Indenture shall remain in
full force and effect; (b) immediately before and immediately after giving
effect to such transaction or series of transactions on a pro forma basis (and
treating any Indebtedness not previously an obligation of Company or any of its
Restricted Subsidiaries in connection with or as a result of such transaction
or series of transactions as having been incurred at the time of such
transaction or series of transactions), no Default or Event of Default shall
have occurred and be continuing; (c) except in the case of the consolidation or
merger of any Restricted Subsidiary with or into the Company, immediately after
giving effect to such transaction or series of transactions on a pro forma
basis, the Consolidated Net Worth of the Company (or the Surviving Entity if
the Company is not the continuing obligor under the Indenture) is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions; (d) except in the case of the
consolidation or merger of (i) any Restricted Subsidiary with or into the
Company or any Wholly Owned Restricted Subsidiary or (ii) the Company with or
into any Person that has no Indebtedness outstanding, immediately before and
immediately after giving effect to such transaction or series of transactions
on a pro forma basis (on the assumption that the transaction or series of
transactions occurred on the first day of the period of four fiscal quarters
ending immediately prior to the consummation of such transaction or series of
transactions, with the appropriate adjustments with respect to such transaction
or series transactions being included in such pro forma calculation), the
Company (or the Surviving Entity if the Company is not the continuing obligor
under the Indenture) could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the covenant described above under the
caption " -- Limitation on Indebtedness;" (e) each Subsidiary Guarantor, unless
it is the other party to the transactions or series of transactions described
above, shall have by supplemental indenture to the Indenture confirmed that its
Subsidiary Guarantee shall apply to such Person's obligations under the
Indenture and the Notes; and (f) if any of the properties or assets of the
Company or any Restricted Subsidiary would upon such transaction or series of
transactions become subject to any Lien (other than a Permitted Lien), the
creation and imposition of such Lien shall have been in compliance with the
covenant described above under the caption "-- Limitation on Liens."
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate stating that such consolidation, merger,
transfer, lease or other disposition and the
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supplemental indenture in respect thereto comply with the requirements under
the Indenture and an Opinion of Counsel stating that the requirements of clause
(a) of the preceding paragraph have been complied with. Upon any such
consolidation or merger or any such sale, assignment, transfer, lease or other
disposition substantially as an entirety on a consolidated basis of the
properties and assets of the Company in accordance with the foregoing in which
the Company is not the continuing Person, the Surviving Entity shall 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 the Surviving Entity had
been named as the Company therein, and thereafter the Company, except in the
case of a lease, will be discharged from all obligations and covenants under
the Indenture and the Notes.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(a) default in the payment of the principal of or premium, if
any, on any of the Notes, whether such payment is due at maturity,
upon redemption, upon repurchase pursuant to a Change of Control Offer
or a Net Proceeds Offer, upon acceleration or otherwise; or
(b) default in the payment of any installment of interest on
any of the Notes, when it becomes due and payable, and the continuance
of such default for a period of 30 days; or
(c) default in the performance or breach of the provisions of
the "Merger, Consolidation and Sale of Assets" section of the
Indenture, the failure to make or consummate a Change of Control Offer
in accordance with the provisions of the Indenture described under the
caption " -- Change of Control" or the failure to make or consummate a
Net Proceeds Offer in accordance with the provisions of the Indenture
described under the caption " -- Limitation on Disposition of Proceeds
of Asset Sales;" or
(d) the Company or any Subsidiary Guarantor shall fail to
perform or observe any other term, covenant or agreement contained in
the Notes, any Subsidiary Guarantee or the Indenture (other than a
default specified in (a), (b) or (c) above) for a period of 45 days
after written notice of such failure requiring the Company to remedy
the same shall have been given (i) to the Company by the Trustee or
(ii) to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the Notes then outstanding; or
(e) the occurrence and continuation beyond any applicable
grace period of any default in the payment of the principal of (or
premium, if any, on) or interest on any Indebtedness of the Company
(other than the Notes or any Non-Recourse Indebtedness) or any
Restricted Subsidiary for money borrowed when due, or any other
default causing acceleration of any Indebtedness (other than
Non-Recourse Indebtedness) of the Company or any Restricted Subsidiary
for money borrowed, provided, that the aggregate principal amount of
such Indebtedness shall exceed $12,000,000; provided further, that if
any such default is cured or waived or any such acceleration
rescinded, or such Indebtedness is repaid, within a period of 10 days
from the continuation of such default beyond the applicable grace
period or the occurrence of such acceleration, as the case may be,
such Event of Default under the Indenture and any consequential
acceleration of the Notes shall be automatically rescinded, so long as
such rescission does not conflict with any judgment or decree; or
(f) the commencement of proceedings, or the taking of any
enforcement action (including by way of set-off), by any holder of at
least $12,000,000 in aggregate principal amount of Indebtedness (other
than Nonrecourse Indebtedness) of the Company or any Restricted
Subsidiary, after a default under such Indebtedness, to retain in
satisfaction of such Indebtedness or to collect or seize, dispose of
or apply in satisfaction of such Indebtedness, property or assets of
the Company or any Restricted Subsidiary having a fair market value
(as determined by the Board of Directors) in excess of $12,000,000
individually or in the aggregate, provided, that if any such
proceedings or actions are terminated or rescinded, or such
Indebtedness is repaid, such Event of Default under the Indenture and
any consequential acceleration of the Notes shall be automatically
rescinded, so long as (i) such rescission does not conflict with any
judgment or decree and (ii) the holder of such Indebtedness shall not
have applied any such property or assets in satisfaction of such
Indebtedness; or
(g) any Subsidiary Guarantee shall for any reason cease to be,
or be asserted by the Company or any Subsidiary Guarantor, as
applicable, not to be, in full force and effect, enforceable in
accordance with its terms (except pursuant to the release of any such
Subsidiary Guarantee in accordance with the Indenture); or
(h) certain events giving rise to ERISA liability; or
(i) final judgments or orders rendered against the Company or
any Restricted Subsidiary that are unsatisfied and that require the
payment in money, either individually or in an aggregate amount, that
is more than $12,000,000 over the coverage under applicable insurance
policies and either (i) commencement by any creditor of an enforcement
proceeding upon such judgment (other than a judgment that is stayed by
reason of
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pending appeal or otherwise) or (ii) the occurrence of a 60-day period
during which a stay of such judgment or order, by reason of pending
appeal or otherwise, was not in effect; or
(j) the entry of a decree or order by a court having
jurisdiction in the premises (i) for relief in respect of the Company
or any Material Restricted Subsidiary in an involuntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (ii) adjudging the
Company or any Material Restricted Subsidiary bankrupt or insolvent,
or approving a petition seeking reorganization, arrangement,
adjustment or composition of the Company or a Material Restricted
Subsidiary under any applicable federal or state law, or appointing
under any such law a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any
Material Restricted Subsidiary or of a substantial part of their
consolidated assets, or ordering the winding up or liquidation of
their affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(k) the commencement by the Company or any Material Restricted
Subsidiary of a voluntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law or any other case or proceeding to be adjudicated bankrupt
or insolvent, or the consent by the Company or any Material Restricted
Subsidiary to the entry of a decree or order for relief in respect
thereof in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or the filing by the Company or any
Material Restricted Subsidiary of a petition or consent seeking
reorganization or relief under any applicable federal or state law, or
the consent by it under any such law to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or other
similar official) of any of the Company or any Material Restricted
Subsidiary or of any substantial part of their consolidated assets, or
the making by it of an assignment for the benefit of creditors under
any such law.
If an Event of Default (other than as specified in clause (j) or (k)
above) shall occur and be continuing, the Trustee, by written notice to the
Company, or the holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by notice to the Trustee and the Company, may declare
the principal of, premium, if any, and accrued interest on all of the
outstanding Notes due and payable immediately, upon which declaration all
amounts payable in respect of the Notes shall be immediately due and payable.
If an Event of Default specified in clause (j) or (k) above occurs and is
continuing, then the principal of, premium, if any, and accrued and unpaid
interest on all of the outstanding Notes shall ipso facto become and be
immediately due and payable without any declaration, notice or other act on the
part of the Trustee or any Holder of Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may
rescind such declaration if (a) the Company or any Subsidiary Guarantor has
paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or
advanced by the Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all outstanding Notes, (iii) the unpaid principal
of and premium, if any, on any Notes which have become due otherwise than by
such declaration of acceleration, including any securities required to have
been purchased on a Change of Control Date or Net Proceeds Date pursuant to a
Change of Control Offer or a Net Proceeds Offer, as applicable, and interest
thereon at the rate borne by the Notes, and (iv) to the extent that payment of
such interest is lawful, interest upon overdue interest and overdue principal
at the rate borne by the Notes which has become due otherwise than by such
declaration of acceleration; (b) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (c) all Events of
Default, other than the nonpayment of principal of, premium, if any, and
interest on the Notes that has become due solely by such declaration of
acceleration, have been cured or waived.
The Holders of not less than a majority in aggregate principal amount
of the outstanding Notes may on behalf of the Holders of all the Notes waive
any past defaults under the Indenture, except a default in the payment of the
principal of (or premium, if any, on) or interest on any Note or a default in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the Holder of each outstanding Note affected
thereby.
No Holder of any of the Notes has any right to institute any
proceeding with respect to the Indenture or any remedy thereunder, unless such
Holder has previously given written notice to the Trustee of a continuing Event
of Default, the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and offered reasonable indemnity,
to the Trustee to institute such proceeding as Trustee under the Notes and the
Indenture, the Trustee has failed to institute such proceeding within 60 days
after receipt of such notice and offer of indemnity and the Trustee, within
such 60-day period, has not received directions inconsistent with such written
request by Holders of a majority in principal amount of the outstanding Notes.
Such limitations do not apply, however, to a suit instituted by a Holder of a
Note for the enforcement of the payment of the principal of, premium, if any,
or interest on such Note on or after the respective due dates expressed in such
Note.
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During the existence of an Event of Default, the Trustee is required
to exercise such of the rights and powers vested in it under the Indenture, and
use the same degree of care and skill in its exercise, as a prudent Person
would exercise or use under the circumstances in the conduct of such Person's
own affairs. Subject to the provisions of the Indenture relating to the duties
of the Trustee, the Trustee under the Indenture is not under any obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any Holders of the Notes unless such Holders shall have offered to
the Trustee reasonable security or indemnity. Subject to certain provisions in
the Indenture relating to the rights of the Trustee, the Holders of a majority
in aggregate principal amount of the outstanding Notes 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 the
Trustee under the Indenture.
If a Default or an Event of Default occurs and is known to the
Trustee, the Trustee shall mail to each Holder of Notes notice of the Default
or Event of Default within 60 days after the occurrence thereof in the manner
and to the extent provided in Section 313(c) of the Trust Indenture Act. Except
in the case of a Default or an Event of Default in payment of principal of,
premium, if any, or interest on any Notes, the Trustee may withhold the notice
to the Holders of such Notes if and so long as the board of directors, the
executive committee, or a trust committee of directors and/or responsible
officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders of the Notes.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company and the Subsidiary Guarantors
of its obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within ten
days after any Default.
LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the
obligations of the Company and the Subsidiary Guarantors with respect to the
outstanding Notes ("legal defeasance"). Such legal defeasance means that the
Company and the Subsidiary Guarantors shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Notes, except
for (a) the rights of Holders of outstanding Notes to receive payment in
respect of the principal of, premium, if any, on and interest on such Notes
when such payments are due, (b) the Company's obligations to issue temporary
Notes, register the transfer or exchange of any Notes, replace mutilated,
destroyed, lost or stolen Notes and maintain an office or agency for payments
in respect of the Notes, (c) the rights, powers, trusts, duties and immunities
of the Trustee, and (d) the defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company and any Subsidiary Guarantor with respect to
certain covenants that are set forth in the Indenture, some of which are
described above under the caption " -- Certain Covenants," and any omission to
comply with such obligations shall not constitute a Default or an Event of
Default with respect to the Notes ("covenant defeasance").
In order to exercise either legal defeasance or covenant defeasance,
(a) the Company or any Subsidiary Guarantor must irrevocably deposit, with the
Trustee, in trust, for the benefit of the holders of the Notes, cash in United
States dollars, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, on and interest on the outstanding Notes to
redemption or maturity; (b) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such legal defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such legal defeasance or covenant defeasance had
not occurred (in the case of legal defeasance, such opinion must refer to and
be based upon a published ruling of the Internal Revenue Service or a change in
applicable federal income tax laws); (c) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit; (d) such legal
defeasance or covenant defeasance shall not cause the Trustee to have a
conflicting interest under the Indenture or the Trust Indenture Act with
respect to any securities of the Company or any Subsidiary Guarantor; (e) such
legal defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, any material agreement or
instrument to which the Company or any Subsidiary Guarantor is a party or by
which it is bound; and (f) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel satisfactory to the Trustee,
which, taken together, state that all conditions precedent under the Indenture
to either legal defeasance or covenant defeasance, as the case may be, have
been complied with and that no violations under agreements governing any other
outstanding Indebtedness would result therefrom.
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SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further
effect (except as to surviving rights or registration of transfer or exchange
of the Notes, as expressly provided for in the Indenture) as to all outstanding
Notes when (a) either (i) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (ii) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable or will become due and payable at
their Stated Maturity within one year, or are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the serving
of notice of redemption by the Trustee in the name, and at the expense, of the
Company, and the Company has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the entire
indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of (and premium, if any, on) and interest on the
Notes to the date of deposit (in the case of Notes which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be,
together with instructions from the Company irrevocably directing the Trustee
to apply such funds to the payment thereof at maturity or redemption, as the
case may be; (b) the Company has paid all other sums payable under the
Indenture by the Company; and (c) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel satisfactory to the Trustee,
which, taken together, state that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with and that no violations under agreements governing any other outstanding
Indebtedness would result therefrom.
AMENDMENTS AND WAIVERS
From time to time, the Company and the Trustee may, without the
consent of the Holders of the Notes, modify, amend or supplement the Indenture
or the Notes for certain specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies, qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act of 1939, provided
that such change does not adversely affect the rights of any Holder of the
Notes. Other modifications and amendments of the Indenture or the Notes may be
made by the Company, the Subsidiary Guarantors and the Trustee with the consent
of the Holders of not less than a majority of the aggregate principal amount of
the outstanding Notes; provided, however, that no such modification or
amendment may, without the consent of the Holder of each outstanding Note
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of interest on any Note, (b) reduce the principal amount of (or the
premium, if any, on) or interest on any Note, (c) change the place, coin or
currency of payment of principal of (or the premium, if any, on) or interest
on, any Note, (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Note, (e) reduce the above-stated percentage
of aggregate principal amount of outstanding Notes necessary to modify or amend
the Indenture, (f) reduce the percentage of aggregate principal amount of
outstanding Notes necessary for waiver of compliance with certain provisions of
the Indenture or for waiver of certain defaults under the Indenture, (g) modify
or amend any provisions of the Indenture relating to the modification and
amendment of the Indenture or relating to the waiver of past defaults or
covenants, except as otherwise specified, (h) modify or amend any provision of
the Indenture relating to Subsidiary Guarantees in a manner adverse to the
Holders or (i) modify or amend the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control or to
make and consummate the Net Proceeds Offer with respect to any Asset Sale or
modify any of the provisions or definitions with respect thereto.
THE TRUSTEE
Prior to a Default, the Trustee shall not be liable except for the
performance of such duties as are specifically set out in the Indenture. If an
Event of Default has occurred and is continuing, the Trustee will exercise such
rights and powers vested in it under the Indenture, and use the same degree of
care and skill in its exercise, as a prudent Person would exercise or use under
the circumstances in the conduct of such Person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, contains limitations on the rights of the Trustee thereunder, should
it become a creditor of the Company, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect of any such
claims, as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined in the Trust Indenture Act) it must eliminate such conflict or
resign.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Guarantees provide that
they will be governed by the laws of the State of New York, without regard to
the principles of conflicts of law.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Old Notes were issued,
and the Exchange Notes will be issued, in the form of one or more global Notes
(the "Global Notes"). The Global Notes will be deposited on the original date
of issuance of the Notes with, or on behalf of, The Depository Trust Company
("DTC") and registered in the name of
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Cede & Co., as nominee of DTC. The interest of "qualified institutional buyers"
("QIBs") in the Global Notes are represented through financial institutions
acting on their behalf as direct or indirect participants of DTC.
Old Notes (a) originally purchased by or transferred to an
institutional "accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act (each an "Institutional
Accredited Investor") who are not QIBs or (b) held by QIBs who elect to take
physical delivery of their certificates instead of holding their interest the
Global Notes (and which are thus ineligible to trade through DTC) will be
represented by certificates in definitive form registered in the names of such
investors or their nominees ("Certificated Securities"). Upon the transfer of
Certificated Securities to a QIB, such Certificated Securities will, unless the
transferee requests otherwise or the Global Notes have previously been
exchanged in whole for Certificated Securities, be exchanged for an interest in
the Global Notes.
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in the Global
Notes will be shown on, and the transfer of these ownership interests will be
effected only through, records maintained by DTC or its nominee (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. In addition, no beneficial owner of
an interest in a Global Note will be able to transfer that interest except in
accordance with the applicable procedures of DTC (in addition to those under
the Indenture referred to herein).
Payments on Global Notes will be made to DTC or its nominee, as the
registered owner thereof. None of the Company, the Trustee or any paying agent
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests. The Company expects that DTC
or its nominee, upon receipt of any payment in respect of a Global Note
representing any Notes held by it or its nominee, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note for
such Notes as shown on the records of DTC or its nominee. The Company also
expects that payments by participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers registered in the names of nominees for such customers.
Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules. The laws of some states require that certain
persons take physical delivery of securities in definitive form. Consequently,
the ability to transfer beneficial interests in a Global Note to such persons
may be limited. Because DTC can only act on behalf of participants, who in turn
act on behalf of indirect participants (as defined below) and certain banks,
the ability of a person having a beneficial interest in a Global Note to pledge
such interest to persons that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate of such interest.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC holds securities that its participants
deposit with DTC and facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Access to the
DTC system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly
("indirect participants"). The rules applicable to DTC and its participants
are on file with the Commission. Although DTC is expected to follow the
foregoing procedures in order to facilitate transfers of interests in the
Global Notes among participants of DTC it is under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued at
any time. Neither the Company nor the Trustee will have any responsibility for
the performance by DTC or the participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
CERTIFICATED SECURITIES
Subject to certain conditions, any Person having a beneficial interest
in a Global Note may, upon request to the Company or the Trustee, exchange such
beneficial interest for Notes in the form of Certificated Securities. Upon any
such issuance, the Trustee is required to register such Notes in the name of,
and cause the same to be delivered to, such Person or Persons (or the nominee
of any thereof). In addition, if (a) DTC or any successor depositary (the
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"Depositary") notifies the Company in writing that the Depositary is no longer
willing or able to act as a depositary and the Company is unable to locate a
qualified successor within 90 days or (b) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the
form of Certificated Securities under the Indenture, then, upon surrender by
the registered owner or holder of a Global Note (a "Global Note Holder") of its
Global Note, Notes in such form will be issued to each Person that such Global
Note Holder and the Depositary identify as the beneficial owner of the related
Notes.
Neither the Company nor the Trustee will be liable for any delay by
the related Global Note Holder or the Depositary in identifying the beneficial
owners of the related Notes, and each such Person may conclusively rely on, and
will be protected in relying on, instructions from such Global Note Holder or
of the Depositary for all purposes (including with respect to the registration
and delivery, and the respective principal amounts, of the Notes to be issued).
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person, (b) outstanding at the
time such Person becomes a Subsidiary of any other Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a Subsidiary) or (c) any renewals,
extensions, substitutions, refinancings or replacements (each, for purposes of
this clause, a "refinancing") by the Company of any Indebtedness described in
clause (a) or (b) of this definition, including any successive refinancings, so
long as (i) any such new Indebtedness shall be in a principal amount that does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as of
the date of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms
of the Indebtedness refinanced or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refinancing, plus the
amount of expenses of the Company incurred in connection with such refinancing,
(ii) in the case of any refinancing of Subordinated Indebtedness, such new
Indebtedness is made subordinate to the Notes at least to the same extent as
the Indebtedness being refinanced and (iii) such new Indebtedness has an
Average Life longer than the Average Life of the Notes and a final Stated
Maturity later than the final Stated Maturity of the Notes.
"Adjusted Consolidated Net Tangible Assets" means (without
duplication), as of the date of determination, (a) the sum of (i) discounted
future net revenues from proved oil and gas reserves of the Company and its
Restricted Subsidiaries calculated in accordance with SEC guidelines before any
state or federal income taxes, as estimated by a nationally recognized firm of
independent petroleum engineers in a reserve report prepared as of the end of
the Company's most recently completed fiscal year, as increased by, as of the
date of determination, the estimated discounted future net revenues from (A)
estimated proved oil and gas reserves acquired since the date of such year-end
reserve report, and (B) estimated oil and gas reserves attributable to upward
revisions of estimates of proved oil and gas reserves since the date of such
year-end reserve report due to exploration, development or exploitation
activities, in each case calculated in accordance with SEC guidelines
(utilizing the prices utilized in such year-end reserve report), and decreased
by, as of the date of determination, the estimated discounted future net
revenues from (C) estimated proved oil and gas reserves produced or disposed of
since the date of such year-end reserve report and (D) estimated oil and gas
reserves attributable to downward revisions of estimates of proved oil and gas
reserves since the date of such year-end reserve report due to changes in
geological conditions or other factors which would, in accordance with standard
industry practice, cause such revisions, in each case calculated in accordance
with SEC guidelines (utilizing the prices utilized in such year-end reserve
report); provided, that in the case of each of the determinations made pursuant
to clauses (A) through (D), such increases and decreases shall be as estimated
by the Company's petroleum engineers, except that in the event there is a
Material Change as a result of such acquisitions, dispositions or revisions,
then the discounted future net revenues utilized for purposes of this clause
(a)(i) shall be confirmed in writing by a nationally recognized firm of
independent petroleum engineers, (ii) the capitalized costs that are
attributable to oil and gas properties of the Company and its Restricted
Subsidiaries to which no proved oil and gas reserves are attributable, based on
the Company's books and records as of a date no earlier than the date of the
Company's latest annual or quarterly financial statements, (iii) the Net
Working Capital on a date no earlier than the date of the Company's latest
annual or quarterly financial statements and (iv) the greater of (A) the net
book value on a date no earlier than the date of the Company's latest annual or
quarterly financial statements or (B) the appraised value, as estimated by
independent appraisers, of other tangible assets (including, without
duplication, Investments in unconsolidated Restricted Subsidiaries) of the
Company and its Restricted Subsidiaries, as of the date no earlier than the
date of the Company's latest audited financial statements, minus (b) the sum of
(i) minority interests (other than a minority interest in a Subsidiary that is
a business trust or similar entity formed for the primary purpose of issuing
preferred securities the proceeds of which are loaned to the Company or a
Restricted Subsidiary), (ii) any net gas balancing liabilities of the Company
and its Restricted Subsidiaries reflected in the Company's latest audited
financial statements, (iii) to the extent included in (a)(i) above, the
discounted future net revenues, calculated in accordance with SEC guidelines
(utilizing the prices utilized in the Company's year-end reserve report),
attributable to reserves which are required to be delivered to third parties to
fully satisfy the obligations of the Company and its Restricted Subsidiaries
with respect to Volumetric Production Payments on the schedules specified with
respect thereto and (iv) the discounted future net revenues, calculated in
accordance with SEC guidelines, attributable to reserves subject to
Dollar-Denominated Production Payments which, based on the estimates of
production and price assumptions included in determining the discounted
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future net revenues specified in (a)(i) above, would be necessary to fully
satisfy the payment obligations of the Company and its Restricted Subsidiaries
with respect to Dollar-Denominated Production Payments on the schedules
specified with respect thereto. If the Company changes its method of accounting
from the successful efforts method to the full cost method or a similar method
of accounting, "Adjusted Consolidated Net Tangible Assets" will continue to be
calculated as if the Company were still using the successful efforts method of
accounting.
"Affiliate" means, with respect to any specified Person, 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 Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of this definition, beneficial ownership of 10% or more
of the voting common equity (on a fully diluted basis) or options or warrants
to purchase such equity (but only if exercisable at the date of determination
or within 60 days thereof) of a Person shall be deemed to constitute control of
such Person. No Person shall be deemed an Affiliate of an oil and gas royalty
trust solely by virtue of ownership of units of beneficial interest in such
trust.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or any Restricted Subsidiary shall be merged
with or into the Company or any Restricted Subsidiary or (b) the acquisition by
the Company or any Restricted Subsidiary of the properties and assets of any
Person which constitute all or substantially all of the properties and assets
of such Person or any division or line of business of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition to any Person other than the Company or any of its Restricted
Subsidiaries (including by means of a Sale/Leaseback Transaction or by way of
merger or consolidation) (collectively, for purposes of this definition, a
"transfer"), directly or indirectly, in one or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary held by the
Company or any Restricted Subsidiary; (b) the properties and assets of any
division or line of business of the Company or any of its Restricted
Subsidiaries substantially as an entirety; or (c) any other properties or
assets of the Company or any of its Restricted Subsidiaries other than a
disposition of hydrocarbons or other mineral products in the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include (i) any transfer of properties or assets that is governed by, and made
in accordance with, the provisions described under the caption "-- Merger,
Consolidation and Sale of Assets;" (ii) any transfer of properties or assets to
any Person, if permitted under the provisions described under the caption "--
Limitation on Restricted Payments;" (iii) any trade or exchange of properties
and assets used in the Oil and Gas Business of the Company or any Restricted
Subsidiary or shares of Capital Stock in any Person in the Oil and Gas Business
owned by the Company or any Restricted Subsidiary for properties and assets
used in the Oil and Gas Business of any Person or shares of Capital Stock in
any Person owned or held by another Person, provided, that (A) the fair market
value of the properties, assets and shares traded or exchanged by the Company
or such Restricted Subsidiary (including any cash or Cash Equivalents, not to
exceed 15% of such fair market value, to be delivered by the Company or such
Restricted Subsidiary) is reasonably equivalent to the fair market value of the
properties, assets and shares of Capital Stock (together with any cash or Cash
Equivalents, not to exceed 15% of such fair market value) to be received by the
Company or such Restricted Subsidiary as determined in good faith by (x) any
officer of the Company if such fair market value is less than $5,000,000 and
(y) the Board of Directors of the Company as certified by a certified
resolution delivered to the Trustee if such fair market value is equal to or in
excess of $5,000,000; provided, that if such fair market value is equal to or
in excess of $10,000,000 the Company shall deliver a written appraisal by a
nationally recognized investment banking firm or appraisal firm, in each case
specializing or having a speciality in oil and gas properties, and (B) such
exchange is approved by a majority of the Disinterested Directors; or (iv) any
transfer of properties or assets in a single transaction or series of related
transactions having a fair market value of less than $5,000,000.
"Attributable Indebtedness" means, with respect to any particular
lease under which any Person is at the time liable and at any date as of which
the amount thereof is to be determined, the present value of the total net
amount of rent required to be paid by such Person under the lease during the
primary term thereof, without giving effect to any renewals at the option of
the lessee, discounted from the respective due dates thereof to such date of
determination at the rate of interest per annum implicit in the terms of the
lease. As used in the preceding sentence, the "net amount of rent" under any
lease for any such period shall mean the sum of rental and other payments
required to be paid with respect to such period by the lessee thereunder,
excluding any amounts required to be paid by such lessee on account of
maintenance and repairs, insurance, taxes, assessments, water rates or similar
charges. In the case of any lease which is terminable by the lessee upon
payment of a penalty, such net amount of rent shall also include the amount of
such penalty, but no rent shall be considered as required to be paid under such
lease subsequent to the first date upon which it may be so terminated.
"Average Life" means, with respect to any Indebtedness, as at any date
of determination, the quotient obtained by dividing (a) the sum of the products
of (i) the number of years (and any portion thereof) from the date of
determination to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund or mandatory
redemption payment requirements) of such Indebtedness multiplied by (ii) the
amount of each such principal payment by (b) the sum of all such principal
payments.
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"Board of Directors" means, (a) with respect to the Company, either
the board of directors of the Company or any properly constituted committee
thereof that is (i) authorized to take the action in question and (ii)
comprised of members, a majority of whom are not officers or employees of the
Company or any Subsidiary of the Company, and (b) with respect to any
Restricted Subsidiary, the board of directors of that Restricted Subsidiary or
any properly constituted committee thereof that is authorized to take the
action in question.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents in the equity
interests (however designated) in such Person, and any rights (other than debt
securities convertible into an equity interest), warrants or options
exercisable for, exchangeable for or convertible into such an equity interest
in such Person.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purpose of the Indenture, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness with a
maturity of 365 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided, that the full faith and credit of the United States of America is
pledged in support thereof), (b) demand and time deposits and certificates of
deposit or acceptances with a maturity of 365 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $100,000,000 or any
commercial bank organized under the laws of any country other than the United
States of America that is a member of the Organization for Economic Cooperation
and Development ("OECD") and has total assets in excess of $100,000,000, (c)
commercial paper with a maturity of 365 days or less issued by a Person that is
not an Affiliate of the Company and is organized under the laws of any state of
the United States of America or the District of Columbia and rated at least A-1
by S&P or at least P-1 by Moody's (or, if at any time neither S&P nor Moody's
shall be rating such obligations, then from such other rating service as may be
acceptable to the Trustee), (d) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (a)
above entered into with any commercial bank meeting the specifications of
clause (b) above, (e) overnight bank deposits and bankers' acceptances at any
commercial bank meeting the qualifications specified in clause (b) above, and
(f) investments in money market mutual or similar funds which have assets in
excess of $500,000,000.
"Change of Control" means the occurrence of any of the following
events: (a) the Company's properties and assets are sold or otherwise disposed
of substantially as an entirety on a consolidated basis to any Person or
related group of Persons in any one transaction or a series of related
transactions; (b) there shall be consummated any consolidation or merger of the
Company (i) in which the Company is not the continuing or surviving Person
(other than a consolidation or merger with a wholly owned Subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to
the effectiveness thereof are changed into or exchanged for the same number of
shares of Common Stock of such Subsidiary) or (ii) pursuant to which the Common
Stock would be converted into cash, securities or other property, in each case,
other than a consolidation or merger of the Company in which the holders of the
Common Stock immediately prior to the consolidation or merger have, directly or
indirectly, at least a majority of the Common Stock of the continuing or
surviving Person immediately after such consolidation or merger; or (c) any
Person or any Persons acting together which would constitute a "group" for
purposes of Section 13(d) of the Exchange Act (other than the Company, any
Subsidiary of the Company, any employee stock purchase plan, stock option plan
or other stock incentive plan or program, retirement plan or automatic dividend
reinvestment plan or any substantially similar plan of the Company or any
Subsidiary of the Company or any Person holding securities of the Company for
or pursuant to the terms of any such employee benefit plan), together with any
Affiliates thereof, shall acquire beneficial ownership (as defined in Rule
13d-3 under the Exchange Act) of at least 50% of the Voting Stock of the
Company.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to shares of Capital Stock of any other class of such
Person.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the
ratio of (a) the sum of Consolidated Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense and Consolidated Non-cash Charges deducted in
computing Consolidated Net Income, in each case, for such period, of the
Company and its Restricted Subsidiaries on a consolidated basis, all determined
in accordance with GAAP, decreased (to the extent included in determining
Consolidated Net Income) by the sum of (i) the amount of deferred revenues that
are amortized during such period and are attributable to reserves that are
subject to Volumetric Production Payments and (ii) amounts recorded in
accordance with GAAP as repayments of principal and interest pursuant to
Dollar-Denominated Production Payments, to (b) the sum of such Consolidated
Interest Expense for such period; provided, that (A) in making such
computation, the Consolidated Interest Expense attributable to interest on any
Indebtedness required to be computed on a pro forma basis in accordance with
clause (i) of the covenant described under the caption "-- Limitation on
Indebtedness" and bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable rate for the
entire period, (B) in making such computation, the Consolidated Interest
Expense attributable to interest on any Indebtedness under a revolving credit
facility required to be computed on a pro forma basis in
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accordance with clause (i) of the covenant described under the caption "--
Limitation on Indebtedness" shall be computed based upon the average daily
balance of such Indebtedness during the applicable period, provided, that such
average daily balance shall be reduced by the amount of any repayment of
Indebtedness under a revolving credit facility during the applicable period,
which repayment permanently reduced the commitments or amounts available to be
reborrowed under such facility, (C) notwithstanding clauses (A) and (B) of this
proviso, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to have accrued at the rate per annum
resulting after giving effect to the operation of such agreements and (D) in
making such calculation, Consolidated Interest Expense shall exclude interest
attributable to Dollar-Denominated Production Payments.
"Consolidated Income Tax Expense" means, for any period, the provision
for federal, state, local and foreign income taxes of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP, including, without limitation, (i) any amortization of
debt discount, (ii) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts), (iii) the interest portion of any
deferred payment obligation, (iv) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and (v) all accrued interest, in each case to the extent attributable
to such period, (b) to the extent any Indebtedness of any Person (other than
the Company or a Restricted Subsidiary) is guaranteed by the Company or any
Restricted Subsidiary, the aggregate amount of interest paid or accrued by such
other Person during such period attributable to any such Indebtedness, in each
case to the extent attributable to that period, (c) the aggregate amount of the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by the Company and its Restricted Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP and (d) the aggregate amount of dividends paid or accrued on Redeemable
Capital Stock or Preferred Stock of the Company and its Restricted
Subsidiaries, to the extent such Redeemable Capital Stock or Preferred Stock is
owned by Persons other than Restricted Subsidiaries.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
as determined in accordance with GAAP, adjusted by excluding (a) net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto),
(b) net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to Asset Sales, (c) the net income (or net loss) of any Person
(other than the Company or any of its Restricted Subsidiaries), in which the
Company or any of its Restricted Subsidiaries has an ownership interest, except
to the extent of the amount of dividends, interest on indebtedness or other
distributions actually paid to the Company or its Restricted Subsidiaries in
cash by such other Person during such period (regardless of whether such cash
dividends, interest on indebtedness or other distributions is attributable to
net income (or net loss) of such Person during such period or during any prior
period), (d) net income (or net loss) of any Person combined with the Company
or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (e) the net income
of any Restricted Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary is not at the
date of determination permitted, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, (f) income resulting from transfers of assets
received by the Company or any Restricted Subsidiary from an Unrestricted
Subsidiary and (g) any write-downs of non-current assets; provided, however,
that any ceiling limitation write-downs under SEC guidelines shall be treated
as capitalized costs, as if such write-downs had not occurred.
"Consolidated Net Worth" means, at any date, the consolidated
stockholders' equity of the Company less the amount of such stockholders'
equity attributable to Redeemable Capital Stock or treasury stock of the
Company and its Restricted Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization, impairment and other non-cash expenses
of the Company and its Restricted Subsidiaries reducing Consolidated Net Income
for such period, determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge which requires an accrual of or reserve for
cash charges for any future period).
"Credit Agreement" means the Amended and Restated Credit Agreement
dated June 1, 1995 among the Company and Bank of Montreal and Banque Paribas,
as co-agents, and the other banks specified therein, including any notes and
guarantees executed in connection therewith, as such agreement may be amended,
modified, supplemented, extended, restated, replaced (including replacement
after the termination of such agreement), restructured, increased, renewed or
refinanced from time to time in one or more credit agreements, loan agreements,
instruments or similar agreements, whether or not with the same lenders or
agents, as such may be further amended, modified, supplemented, extended,
restated, replaced (including replacement after the termination of such
agreement), restructured, increased, renewed or refinanced from time to time.
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"Credit Agreement Obligations" means all monetary obligations of every
nature of the Company or a Restricted Subsidiary, including without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities, from time to time owed to
the lenders or any agent under or in respect of the Credit Agreement.
"Default" means any event, act or condition that is, or after notice
or passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (a) all Senior Indebtedness
constituting Credit Agreement Obligations and (b) any other Senior Indebtedness
which (i) at the time of incurrence equals or exceeds $10,000,000 in aggregate
principal amount and (ii) is specifically designated by the Company in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" for purpose of the Indenture.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required
to deliver its resolution under the Indenture, a member of the Board of
Directors who does not have any material direct or indirect financial interest
(other than an interest arising solely from the beneficial ownership of Capital
Stock of the Company) in or with respect to such transaction or series of
transactions.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Event of Default" has the meaning set forth above under the caption
"Events of Default."
"Foreign Subsidiary" means (a) any Restricted Subsidiary engaged in
the Oil and Gas Business having the majority of its operations outside the
United States of America, irrespective of its jurisdiction of organization, and
(b) any other Restricted Subsidiary whose assets (excluding any cash and Cash
Equivalents) consist exclusively of Capital Stock or Indebtedness of one or
more Restricted Subsidiaries described in clause (a) of this definition.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States of America, which are applicable as of the date of the Indenture.
"guarantee" means, as applied to any obligation, (a) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. When used as a verb,
"guarantee" shall have a corresponding meaning.
"Guarantor Senior Indebtedness" means all Indebtedness of a Subsidiary
Guarantor created, incurred, assumed or guaranteed by such Subsidiary Guarantor
(and all renewals, substitutions, refinancings or replacements thereof)
(including the principal of, interest on and fees, premiums, expenses
(including costs of collection), indemnities and other amounts payable in
connection with such Indebtedness) (and including, in the case of the Credit
Agreement, interest accruing after the filing of a petition by or against such
Subsidiary Guarantor under any bankruptcy law, in accordance with and at the
rate, including any default rate, specified with respect to such Indebtedness,
whether or not a claim for such interest is allowed as a claim after such
filing in any proceeding under such bankruptcy law), unless the instrument
governing such Indebtedness expressly provides that such Indebtedness is not
senior in right of payment to its Subsidiary Guarantee. Notwithstanding the
foregoing, Guarantor Senior Indebtedness of a Subsidiary Guarantor will not
include (a) Indebtedness of such Subsidiary Guarantor evidenced by its
Subsidiary Guarantee, (b) Indebtedness of such Subsidiary Guarantor that is
expressly subordinated or junior in right of payment to any Guarantor Senior
Indebtedness of such Subsidiary Guarantor or its Subsidiary Guarantee, (c)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11 United States Code, is by its terms without
recourse to such Subsidiary Guarantor or Non-Recourse Indebtedness, (d) any
repurchase, redemption or other obligation in respect of Redeemable Capital
Stock of such Subsidiary Guarantor, (e) to the extent it might constitute
Indebtedness, any liability for federal, state, local or other taxes owed or
owing by such Subsidiary Guarantor, (f) Indebtedness of such Subsidiary
Guarantor to the Company or any of the Company's other Subsidiaries or any
other Affiliate of the Company or any of such Affiliate's Subsidiaries and (g)
that portion of any Indebtedness of such Subsidiary Guarantor which at the time
of issuance is issued in violation of the Indenture (but, as to any such
Indebtedness, no such violation shall be deemed to exist for purposes of this
clause (g) if the holder(s) of such Indebtedness or their representative or
such Subsidiary Guarantor shall have furnished to the Trustee an Opinion of
Counsel, addressed to the Trustee (which counsel may, as to matters of fact,
rely upon a certificate of such Subsidiary Guarantor) to the effect that the
incurrence of such Indebtedness does not violate the provisions of such
Indenture); provided, that the foregoing exclusions shall not affect the
priorities of any Indebtedness arising solely by operation of law in any case
or proceeding or similar event described in clause (a), (b) or (c) of the
second paragraph described under the caption "-- Subordination."
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"Hedging Obligations" means obligations of any Person arising out of
hedging transactions entered into in the ordinary course of business,
including, without limitation, swaps, options, forward sales and futures
contracts entered into in connection with interest rates, currencies and
energy-related commodities.
"Holder" means a Person in whose name a Note is registered in the Note
Register.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade accounts payable
and other accrued current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit, bankers'
acceptance or other similar credit transaction and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock of such Person, or any warrants, rights or options to acquire
such Capital Stock, now or hereafter outstanding, if, and to the extent, any of
the foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (b) all obligations of such Person evidenced
by bonds, notes, debentures or other similar instruments, if, and to the
extent, any of the foregoing would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, (c) all Indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade accounts payable arising in the ordinary course of business, (d) all
Capitalized Lease Obligations of such Person, (e) the Attributable Indebtedness
(in excess of any related Capitalized Lease Obligations) related to any
Sale/Leaseback Transaction of such Person, (f) all Indebtedness referred to in
the preceding clauses of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (g) all guarantees by such Person of Indebtedness
referred to in this definition (including, with respect to any Production
Payment, any warranties or guarantees of production or payment by such Person
with respect to such Production Payment but excluding other contractual
obligations of such Person with respect to such Production Payment), (h) all
Redeemable Capital Stock of such Person valued at the greater of its voluntary
or involuntary maximum fixed repurchase price plus accrued dividends, (i) all
obligations of such Person under or in respect of currency exchange contracts
and Interest Rate Protection Obligations and (j) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of
such Person of the types referred to in clauses (a) through (i) above. For
purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock, provided, however,
that if such Redeemable Capital Stock is not at the date of determination
permitted or required to be repurchased, the "maximum fixed repurchase price"
shall be the book value of such Redeemable Capital Stock. Subject to clause (g)
of the first sentence of this definition, neither Dollar-Denominated Production
Payments nor Volumetric Production Payments shall be deemed to be Indebtedness.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and includes, without limitation, interest rate swaps,
caps, floors, collars and similar agreements or arrangements designed to
protect against or manage such Person's and any of its Subsidiaries' exposure
to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or
capital contribution to (by means of any transfer of cash or other property or
assets to others or any payment for property, assets or services for the
account or use of others), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities (including
derivatives) or evidences of Indebtedness issued by, any other Person. In
addition, the fair market value of the net assets of any Restricted Subsidiary
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary shall be deemed to be an "Investment" made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude (a)
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices and (b) Interest Rate Protection Obligations entered
into in the ordinary course of business or as required by any Permitted
Indebtedness, Permitted Subsidiary Indebtedness or any Indebtedness incurred in
compliance with the covenant described above under the caption "-- Limitation
on Indebtedness," but only to the extent that the notional principal amount of
such Interest Rate Protection Obligations does not exceed 105% of the principal
amount of such Indebtedness to which such Interest Rate Protection Obligations
relate and (c) bonds, notes, debentures or other securities received in
compliance with the covenant described under the caption "-- Limitation on
Disposition of Proceeds of Asset Sales".
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"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
any agreement to give or grant a Lien or any lease, conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing) upon or with respect to any property of any kind; provided,
however, "Lien" shall not include rights created in a third Person in
connection with the creation by the Company or a Subsidiary of a Production
Payment. A Person shall be deemed to own subject to a Lien any property which
such Person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Material Change" means an increase or decrease (excluding changes
that result solely from changes in prices) of more than 50% during a fiscal
quarter in the estimated discounted future net cash flows from proved oil and
gas reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (a) (i) of the definition of Adjusted Consolidated Net
Tangible Assets; provided, however, that the following will be excluded from
the calculation of Material Change: (i) any acquisitions during the quarter of
oil and gas reserves that have been estimated by a nationally recognized firm
of independent petroleum engineers and on which a report or reports exist and
(ii) any disposition of properties held at the beginning of such quarter that
have been disposed of as provided in the covenant described under the caption
"-- Limitation on Disposition of Proceeds of Asset Sales".
"Material Restricted Subsidiary" means, at any particular time, (a)
any Subsidiary Guarantor and (b) any other Restricted Subsidiary that, together
with its Subsidiaries, (i) accounted for more than 5% of the consolidated
revenues of the Company and its Restricted Subsidiaries for the most recently
completed fiscal year of the Company or (ii) was the owner of more than 5% of
the consolidated assets of the Company and its Restricted Subsidiaries at the
end of such fiscal year, all as shown in the case of (i) and (ii) on the
consolidated financial statements of the Company and its Restricted
Subsidiaries for such fiscal year.
"Maturity" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable as provided therein or in the
Indenture, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof received by the Company or any Restricted Subsidiary in the
form of cash or Cash Equivalents (including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(except to the extent that such obligations are financed or sold with recourse
to the Company or any Restricted Subsidiary)), net of (a) brokerage commissions
and other fees and expenses (including fees and expenses of engineers, legal
counsel, accountants and investment banks) related to such Asset Sale, (b)
provisions for all taxes payable as a result of such Asset Sale, (c) amounts
required to be paid (i) to any minority interest holder or other Person (other
than the Company or any Restricted Subsidiary) owning a beneficial interest in
the assets subject to the Asset Sale or (ii) in respect of any Indebtedness
(other than Indebtedness under the Credit Agreement) secured by a Lien on any
of the properties or assets that were the subject of such Asset Sale and (d)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP consistently
applied against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an Officers' Certificate delivered to the Trustee; provided,
however, that any amounts remaining after adjustments, revaluations or
liquidations of such reserves shall constitute Net Cash Proceeds.
"Net Working Capital" means (a) all current assets of the Company and
its Restricted Subsidiaries, minus (b) all current liabilities of the Company
and its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in financial statements of the Company
prepared in accordance with GAAP.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or a Restricted Subsidiary incurred in connection
with the acquisition by the Company or a Restricted Subsidiary of any property
or assets and as to which (a) the holders of such Indebtedness agree that they
will look solely to the property or assets so acquired and securing such
Indebtedness for payment on or in respect of such Indebtedness and (b) no
default with respect to such Indebtedness would permit (after notice or passage
of time or both), according to the terms of any other Indebtedness of the
Company or a Restricted Subsidiary, any holder of such other Indebtedness to
declare a default under such other Indebtedness or cause the payment of such
other Indebtedness to be accelerated or payable prior to its stated maturity.
"Note Obligations" means any principal of, premium, if any, and
interest on, and any other amounts (including, without limitation, any payment
obligations with respect to the Notes as a result of any Asset Sale, Change of
Control or redemption) owing in respect of, the Notes payable pursuant to the
terms of the Notes or the Indenture or upon acceleration of the Notes.
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"Note Register" means the register maintained by or for the Company in
which the Company shall provide for the registration of the Notes and, after
the Exchange Offer, the Exchange Notes and of transfer of the Notes and the
Exchange Notes.
"Officers' Certificate" means a certificate delivered to the Trustee
signed by the Chairman, the President, a Vice President or the Chief Financial
Officer, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company.
"Oil and Gas Business" means (a) the acquisition, exploration,
exploitation, development, operation and disposition of interests in oil, gas
and other hydrocarbon properties, (b) the gathering, marketing, treating,
processing, storage, refining, selling and transporting of any production from
such interests or properties, (c) any business relating to or arising from
exploration for or exploitation, development, production, treatment,
processing, storage, refining, transportation or marketing of oil, gas and
other minerals and products produced in association therewith, (d) any power
generation and electrical transmission business in a jurisdiction outside North
America where fuel required by such business is supplied, directly or
indirectly, from hydrocarbons produced substantially from properties in which
the Company or its Restricted Subsidiaries, directly or indirectly,
participates and (e) any activity necessary, appropriate or incidental to the
activities described in the foregoing clauses (a) through (d) of this
definition.
"Opinion of Counsel" means a written opinion of legal counsel for the
Company (or any Subsidiary Guarantor, if applicable) including an employee of
the Company (or any Subsidiary Guarantor, if applicable), who is reasonably
acceptable to the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company that
is pari passu in right of payment to the Notes.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company under one or more bank credit
or revolving credit facilities in an aggregate principal amount at any
one time outstanding not to exceed (i) the greater of (A) $270,000,000
and (B) an amount equal to the sum of (1) $170,000,000 and (2) 10% of
Adjusted Consolidated Net Tangible Assets determined as of the date of
the most recent quarterly consolidated financial statements of the
Company and its Restricted Subsidiaries, less (ii) the amount of Net
Cash Proceeds applied to reduce Indebtedness pursuant to the covenant
of the Indenture described under the caption "-- Limitation on
Disposition of Proceeds of Asset Sales" (together with interest and
fees under such facilities, the "Maximum Credit Amount," with the
Maximum Credit Amount being an aggregate maximum amount for the
Company and all Guarantor Subsidiaries, pursuant to clause (a) of the
definition of "Permitted Subsidiary Indebtedness"), and any renewals,
amendments, extensions, supplements, modifications, deferrals,
refinancings or replacements (each, for purposes of this clause, a
"refinancing") thereof by the Company, including any successive
refinancings thereof by the Company, so long as the aggregate
principal amount of any such new Indebtedness, together with the
aggregate principal amount of all other Indebtedness outstanding
pursuant to this clause (a) (and clause (a) of the definition of
"Permitted Subsidiary Indebtedness"), shall not at any one time exceed
the Maximum Credit Amount;
(b) Indebtedness of the Company under the Notes;
(c) Indebtedness of the Company outstanding on the date of the
Indenture (and not repaid or defeased with the proceeds of the sale of
the Old Notes by the Company);
(d) obligations of the Company pursuant to Interest Rate
Protection Obligations, but only to the extent such obligations do not
exceed 105% of the aggregate principal amount of the Indebtedness
covered by such Interest Rate Protection Obligations; obligations
under currency exchange contracts entered into in the ordinary course
of business; and Hedging Obligations;
(e) Indebtedness of the Company to any Restricted
Subsidiaries;
(f) in-kind obligations relating to net gas balancing
positions arising in the ordinary course of business and consistent
with past practice;
(g) Indebtedness in respect of bid, performance or surety
bonds issued or other reimbursement obligations for the account of the
Company in the ordinary course of business, including guarantees and
letters of credit supporting such bid, performance, surety bonds or
other reimbursement obligations (in each case other than for an
obligation for money borrowed);
(h) Non-Recourse Indebtedness;
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(i) Indebtedness incurred in respect of any letters of credit
in the ordinary course of business of the Company or reimbursement
obligations in respect thereof;
(j) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by
the Company of any Indebtedness of the Company described in clauses
(b) or (c) above, including any successive refinancings by the
Company, so long as (i) any such new Indebtedness shall be in a
principal amount that does not exceed the principal amount (or, if
such Indebtedness being refinanced provides for an amount less than
the principal amount thereof to be due and payable upon a declaration
of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required
to be paid in connection with such refinancing pursuant to the terms
of the Indebtedness refinanced or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refinancing,
plus the amount of expenses of the Company incurred in connection with
such refinancing, and (ii) in the case of any refinancing of
Subordinated Indebtedness, such new Indebtedness is made subordinate
to the Notes at least to the same extent as the Indebtedness being
refinanced and (iii) such new Indebtedness has an Average Life equal
to or longer than the Average Life of the Indebtedness being
refinanced and a final Stated Maturity equal to or later than the
final Stated Maturity of the Indebtedness being refinanced;
(k) other Indebtedness of the Company in an aggregate
principal amount not in excess of $25,000,000 at any one time
outstanding.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any of its Restricted
Subsidiaries;
(c) Investments by the Company or any of its Restricted
Subsidiaries in another Person, if as a result of such Investment (i)
such other Person becomes a Restricted Subsidiary of the Company or
(ii) such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its properties and
assets to, the Company or a Restricted Subsidiary;
(d) entry into operating agreements, joint ventures,
partnership agreements, working interests, royalty interests, mineral
leases, processing agreements, farm-out agreements, contracts for the
sale, transportation or exchange of oil and natural gas, unitization
agreements, pooling arrangements, area of mutual interest agreements,
development agreements, joint ownership arrangements and other similar
or customary agreements, transactions, properties, interests and
arrangements, whether or not any such Investment involves or results
in the creation of a legal entity, and Investments and expenditures in
connection therewith or pursuant thereto, in each case made or entered
into in the ordinary course of the Company or its Restricted
Subsidiaries' Oil and Gas Business;
(e) entry into any arrangement pursuant to which the Company
or any of its Restricted Subsidiaries may incur Hedging Obligations;
and
(f) other Investments having an aggregate fair market value
(measured on the date each such Investment was made without giving
effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (f) that are at the
time outstanding (net of repayments, dividends and distributions
received with respect to such Investments), not to exceed $25,000,000
at any one time outstanding.
"Permitted Liens" means the following types of Liens:
(a) Liens existing as of the date the Notes are first
issued;
(b) Liens securing the Notes;
(c) Liens in favor of the Company or a Subsidiary
Guarantor;
(d) Liens securing Senior Indebtedness or Guarantor
Senior Indebtedness;
(e) Liens for taxes, assessments and governmental charges
or claims either (i) not delinquent or (ii) contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(f) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums
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not delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP
shall have been made in respect thereof;
(g) Liens incurred and deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, and Liens
incurred and deposits made to secure the payment or performance of
tenders, statutory or regulatory obligations, surety and appeal bonds,
bids, leases, government contracts and leases, trade contracts (other
than to secure an obligation for borrowed money), performance and
return of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money but including lessee and
operator obligations under statutes, governmental regulations or
instruments related to the ownership, exploration and production of
oil, gas and minerals on state, federal or foreign lands or waters);
(h) pre-judgment Liens and judgment Liens not giving rise
to an Event of Default so long as any appropriate legal proceedings
which may have been duly initiated for the review of such judgment
shall not have been finally terminated or the period within which such
proceeding may be initiated shall not have expired;
(i) any interest or title of a lessor under any
Capitalized Lease Obligation or operating lease;
(j) Liens resulting from the deposit of funds or
evidences of Indebtedness in trust for the purpose of defeasing
Indebtedness of the Company or any of the Subsidiaries; customary
Liens for the fees, costs and expenses of trustees and escrow agents
pursuant to the indenture, escrow agreement or other similar agreement
establishing such trust or escrow arrangement; and Liens pursuant to
merger agreements, stock purchase agreements, asset sale agreements
and similar agreements (i) limiting the transfer of properties and
assets pending consummation of the subject transaction or (ii) in
respect of earnest money deposits, good faith deposits, purchase price
adjustment escrows or similar deposits or escrow arrangements made or
established thereunder;
(k) Liens securing any Hedging Obligations of the
Company or any Restricted Subsidiary;
(l) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account of
such Person to facilitate the purchase, shipment or storage of such
inventory or other goods;
(m) Liens securing reimbursement obligations with respect
to commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(n) Liens encumbering property or assets under
construction arising from progress or partial payments by a customer
of the Company or its Restricted Subsidiaries relating to such
property or assets and Liens to secure Indebtedness used to finance
all or a part of the construction of property or assets used by the
Company or any of its Restricted Subsidiaries in the Oil and Gas
Business, provided, that such Liens do not extend to any other
property or assets owned by the Company or its Restricted
Subsidiaries;
(o) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;
(p) Liens securing Interest Rate Protection Obligations
which Interest Rate Protection Obligations relate to Indebtedness that
is secured by Liens otherwise permitted under this Indenture;
(q) Liens on, or related to, properties or assets to
secure all or part of the costs incurred in the ordinary course of
business for the exploration, drilling, development or operation
thereof;
(r) Liens on pipeline or pipeline facilities which arise
out of operation of law;
(s) Liens arising under operating agreements, joint
venture agreements, partnership agreements, oil and gas leases,
farm-out agreements, division orders, contracts for the sale,
purchase, transportation, processing or exchange of oil, gas or other
hydrocarbons, unitization and pooling declarations and agreements,
area of mutual interest agreements, development agreements, joint
ownership arrangements and other agreements which are customary in the
Oil and Gas Business;
(t) Liens reserved in oil and gas mineral leases for
bonus or rental payments and for compliance with the terms of such
leases;
(u) Liens constituting survey exceptions, encumbrances,
easements, or reservations of, or rights to others for, rights-of-way,
zoning, restrictions and other similar charges and encumbrances as to
the use of
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real properties, and minor defects of title which, in the case of any
of the foregoing, were not incurred or created to secure the payment
of borrowed money or the deferred purchase price of property, assets
or services, and in the aggregate do not interfere in any material
respect with the ordinary conduct of the business of the Company or
its Restricted Subsidiaries;
(v) rights reserved to or vested in any municipality or
governmental, statutory or public authority by the terms of any right,
power, franchise, grant, license or permit, or by any provision of
law, to terminate such right, power, franchise, grant, license or
permit or to purchase, condemn, expropriate or recapture or to
designate a purchaser of any of the property of such Person; rights
reserved to or vested in any municipality or governmental, statutory
or public authority to control or regulate any property of such
Person, or to use such property in a manner which does not materially
impair the use of such property for the purposes for which it is held
by such Person; any obligation or duties affecting the property of
such Person to any municipality or governmental, statutory or public
authority with respect to any franchise, grant, license or permit;
(w) Liens securing Non-Recourse Indebtedness; provided,
however, that the related Non-Recourse Indebtedness shall not be
secured by any property or assets of the Company or any Restricted
Subsidiary other than the property and assets acquired by the Company
with the proceeds of such Non-Recourse Indebtedness; and
(x) Liens securing Acquired Indebtedness; provided,
however, that any such lien extends only to the properties or assets
that were subject to such Lien prior to the related acquisition by the
Company or such Restricted Subsidiary and was not created, incurred or
assumed in contemplation of such transaction.
Notwithstanding anything in clauses (a) through (x) of this definition, the
term "Permitted Liens" does not include any Liens resulting from the creation,
incurrence, issuance, assumption or guarantee of any Production Payments other
than Production Payments that are created, incurred, issued, assumed or
guaranteed in connection with the financing of, and within 30 days after, the
acquisition of the properties or assets that are subject thereto.
"Permitted Subsidiary Indebtedness" means any of the following:
(a) Indebtedness of any Guarantor Subsidiary under one or more
bank credit or revolving credit facilities (and "refinancings"
thereof) in an amount at any one time outstanding not to exceed the
Maximum Credit Amount (in the aggregate for all Guarantor Subsidiaries
and the Company, pursuant to clause (a) of the definition of
"Permitted Indebtedness");
(b) Indebtedness of any Restricted Subsidiary outstanding on
the date of the Indenture;
(c) obligations of any Restricted Subsidiary pursuant to
Interest Rate Protection Obligations, but only to the extent such
obligations do not exceed 105% of the aggregate principal amount of
the Indebtedness covered by such Interest Rate Protection Obligations;
and Hedging Obligations of any Restricted Subsidiary;
(d) the Subsidiary Guarantees (and any assumption of the
obligations guaranteed thereby);
(e) Indebtedness of any Restricted Subsidiary relating to
guarantees by such Restricted Subsidiary of Permitted Indebtedness;
(f) in-kind obligations relating to net gas balancing
positions arising in the ordinary course of business and consistent
with past practice;
(g) Indebtedness in respect of bid, performance or surety
bonds or other reimbursement obligations issued for the account of any
Restricted Subsidiary in the ordinary course of business, including
guarantees and letters of credit supporting such bid, performance,
surety bonds or other reimbursement obligations (in each case other
than for an obligation for money borrowed);
(h) Indebtedness of any Restricted Subsidiary to any other
Restricted Subsidiary or to the Company;
(i) Indebtedness relating to guarantees by any Restricted
Subsidiary permitted to be incurred pursuant to paragraph (a) of the
provisions of the Indenture described under the caption "-- Limitation
on Non-Guarantor Restricted Subsidiaries";
(j) Indebtedness incurred in respect of letters of credit in
the ordinary course of business of any Restricted Subsidiary or
reimbursement obligation in respect thereof;
(k) Non-Recourse Indebtedness;
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(l) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by
any Restricted Subsidiary of any Indebtedness of such Restricted
Subsidiary, including any successive refinancings by such Restricted
Subsidiary, so long as (i) any such new Indebtedness shall be in a
principal amount that does not exceed the principal amount (or, if
such Indebtedness being refinanced provides for an amount less than
the principal amount thereof to be due and payable upon a declaration
of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required
to be paid in connection with such refinancing pursuant to the terms
of the Indebtedness refinanced or the amount of any premium reasonably
determined by such Restricted Subsidiary as necessary to accomplish
such refinancing, plus the amount of expenses of such Subsidiary
incurred in connection with such refinancing and (ii) such new
Indebtedness has an Average Life equal to or longer than the Average
Life of the Indebtedness being refinanced and a final Stated Maturity
equal to or later than the final Stated Maturity of the Indebtedness
being refinanced; and
(m) other Indebtedness incurred by one or more Restricted
Subsidiaries that are not Guarantor Subsidiaries in an aggregate
principal amount not to exceed $20,000,000 at any time outstanding.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock, whether now outstanding or issued
after the date of the Indenture, including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Production Payments" means, collectively, Dollar-Denominated
Production Payments and Volumetric Production Payments.
"Public Market" exists at any time with respect to the Qualified
Capital Stock of the Company if such Qualified Capital Stock of the Company is
then (a) registered with the Commission pursuant to Section 12(b) or 12(g) of
the Exchange Act and (b) traded either on a national securities exchange or on
the NASDAQ Stock Market.
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Redeemable Capital Stock.
"Qualified Redemption Transaction" means a call for redemption of any
Capital Stock or Subordinated Indebtedness (including any Subordinated
Indebtedness accounted for as a minority interest of the Company that is held
by a Subsidiary that is a business trust or similar entity formed for the
primary purpose of issuing preferred securities the proceeds of which are
loaned to the Company or a Restricted Subsidiary) that by its terms is
convertible into Common Stock of the Company if on the date of notice of such
call for redemption (a) a Public Market exists in the shares of Common Stock of
the Company and (b) the average closing price on the Public Market for shares
of Common Stock of the Company for the twenty trading days immediately
preceding the date of such notice exceeds 120% of the conversion price per
share (determined by reference to the redemption price) of Common Stock of the
Company issuable upon conversion of the Capital Stock or Subordinated
Indebtedness called for redemption.
"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed
prior to 91 days after the final Stated Maturity of the Notes or is redeemable
at the option of the holder thereof at any time prior to 91 days after such
final Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to 91 days after such final Stated Maturity.
"Regular Record Date" for the interest payable on any Interest Payment
Date means May 1 or November 1 (whether or not a business day, as the case may
be) next preceding each such Interest Payment Date.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of the Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary pursuant to the terms of the Indenture.
"S&P" means Standard and Poor's Rating Group, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale/Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which properties or assets are sold
or transferred by such Person or a Subsidiary of such Person and are thereafter
leased back from the purchaser or transferee thereof by such Person or one of
its Subsidiaries; provided, however, Sale/Leaseback Transactions shall not
include transactions whereby property or assets are sold or transferred by the
Company or any of its Restricted Subsidiaries to any Affiliate of the Company
or pursuant to any Permitted Investment
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constituting a joint ownership arrangement, which property or assets are leased
back, directly or indirectly, to the Company, any Affiliate of the Company or
to the constituent parties to any such joint venture arrangement.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on any Indebtedness of the Company (including, in the case of the
Credit Agreement, interest accruing after the filing of a petition by or
against the Company under any bankruptcy law, in accordance with and at the
rate, including any default rate, specified with respect to such indebtedness,
whether or not a claim for such interest is allowed as a claim after such
filing in any proceeding under such bankruptcy law), whether outstanding on the
date of the Indenture or thereafter created, incurred or assumed, unless, in
the case of any particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (a)
Indebtedness evidenced by the Notes, (b) Indebtedness that is expressly
subordinate or junior in right of payment to any Senior Indebtedness of the
Company, (c) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11 United States Code, is by its terms
without recourse to the Company or which is Non-Recourse Indebtedness, (d) any
repurchase, redemption or other obligation in respect of Redeemable Capital
Stock of the Company, (e) to the extent it might constitute Indebtedness, any
liability for federal, state, local or other taxes owed or owing by the
Company, (f) Indebtedness of the Company to a Subsidiary of the Company or any
other Affiliate of the Company or any of such Affiliate's Subsidiaries and (g)
that portion of any Indebtedness of the Company which at the time of issuance
is issued in violation of the Indenture (but, as to any such Indebtedness, no
such violation shall be deemed to exist for purposes of this clause (g) if the
holder(s) of such Indebtedness or their representative or the Company shall
have furnished to the Trustee an Opinion of Counsel addressed to the Trustee
(which counsel may, as to matters of fact, rely upon a certificate of the
Company) to the effect that the incurrence of such Indebtedness does not
violate the provisions of such Indenture); provided, that the foregoing
exclusions shall not affect the priorities of any Indebtedness arising solely
by operation of law in any case or proceeding or similar event described in
clause (a), (b) or (c) of the second paragraph under the caption "--
Subordination."
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Indebtedness or any
installment of interest thereon, means the date specified in the instrument
evidencing or governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or such installment of interest is due and
payable.
"Subordinated Indebtedness" means (a) the Company's 5 1/2%
Convertible Subordinated Notes due 2006 issued under the Indenture dated as of
June 15, 1996, between the Company and Fleet National Bank, as Trustee, (b) the
Company's 5 1/2% Convertible Subordinated Notes due 2004 issued under the
Indenture dated as of March 23, 1994, between the Company and Fleet National
Bank, as Trustee, and (c) other Indebtedness of the Company which, by its
terms, is subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, a corporation,
partnership, limited liability company, association or other business entity a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof. For purposes of the foregoing definition, an
arrangement by which a Person who owns an interest in an oil and gas property
is subject to a joint operating agreement, processing agreement, net profits
interest, overriding royalty interest, farmout agreement, development
agreement, area of mutual interest agreement, joint bidding agreement,
unitization agreement, pooling arrangement or other similar agreement or
arrangement shall not, in and of itself, be considered a Subsidiary.
"Subsidiary Guarantee" means any guarantee of the Notes by (a) any
Subsidiary Guarantor in accordance with the provisions set forth in "--
Subsidiary Guarantees of the Notes" and (b) any Restricted Subsidiary in
accordance with the provisions set forth in the covenant described under the
caption "-- Limitation on Non-Guarantor Restricted Subsidiaries."
"Subsidiary Guarantor" means each of the Company's Restricted
Subsidiaries that becomes a guarantor of the Notes in compliance with the
provisions described under the caption "-- Subsidiary Guarantees of the Notes"
or the provisions of the covenant described under the caption "-- Limitation on
Non-Guarantor Restricted Subsidiaries" or otherwise executes a supplemental
indenture in which such Subsidiary agrees to be bound by the terms of the
Indenture and to guarantee the payment of the Notes pursuant to the provisions
described under the caption "-- Subsidiary Guarantees of the Notes."
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company that
at the time of determination will be designated an Unrestricted Subsidiary by
the Board of Directors of the Company as provided below and (b) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Subsidiary of the Company as an Unrestricted Subsidiary so long
as (i) neither the Company nor any Restricted Subsidiary is directly or
indirectly liable pursuant to the terms of any Indebtedness of such Subsidiary;
(ii) no default with respect to any Indebtedness of such Subsidiary would
permit (upon notice, lapse of time or otherwise) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default
on such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; (iii) neither the Company nor any
Restricted
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Subsidiary has made an Investment in such Subsidiary unless such Investment was
made pursuant to, and in accordance with, the covenant described under the
caption "-- Limitation on Restricted Payments" (other than Investments of the
type described in clause (d) of the definition of "Permitted Investments"); and
(iv) such designation shall not result in the creation or imposition of any
Lien on any of the Properties of the Company or any Restricted Subsidiary
(other than any Permitted Lien or any Lien the creation or imposition of which
shall have been in compliance with the covenant described under the caption "--
Limitation on Liens"); provided, however, that with respect to clause (i), the
Company or a Restricted Subsidiary may be liable for Indebtedness of an
Unrestricted Subsidiary if (A) such liability constituted a Permitted
Investment or a Restricted Payment permitted by the provisions of the Indenture
described under the caption "-- Limitation on Restricted Payments," in each
case at the time of incurrence, or (B) the liability would be a Permitted
Investment at the time of designation of such Subsidiary as an Unrestricted
Subsidiary. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing a resolution with the Trustee giving effect to such
designation. The Board of Directors may designate any Unrestricted Subsidiary
as a Restricted Subsidiary if, immediately after giving effect to such
designation, (1) no Default or Event of Default shall have occurred and be
continuing, (2) the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the first paragraph of the covenant
described above under the caption "-- Limitation on Indebtedness" and (3) if
any of the Properties of the Company or any of its Restricted Subsidiaries
would upon such designation become subject to any Lien (other than a Permitted
Lien), the creation or imposition of such Lien shall have been in compliance
with the covenant described under the caption "-- Limitations on Liens."
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to vote in the election of the directors, managers or trustees of
any Person (irrespective of whether or not, at the time, Capital Stock of any
other class or classes shall have, or might have, voting power by reason of the
happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
to the extent (a) all of the Capital Stock in such Restricted Subsidiary, other
than any directors qualifying shares mandated by applicable law, is owned
directly or indirectly by the Company or (b) such Restricted Subsidiary is
organized in a foreign jurisdiction and is required by the applicable laws and
regulations of such foreign jurisdiction to be partially owned by the
government of such foreign jurisdiction or individual or corporate citizens of
such foreign jurisdiction in order for such Restricted Subsidiary to transact
business in such foreign jurisdiction, provided, that the Company, directly or
indirectly, owns the remaining Capital Stock or ownership interest in such
Restricted Subsidiary and, by contract or otherwise, controls the management
and business of such Restricted Subsidiary and derives the economic benefits of
ownership of such Restricted Subsidiary to substantially the same extent as if
such Restricted Subsidiary were a wholly owned Subsidiary.
EXCHANGE OFFER; REGISTRATION RIGHTS
In connection with the sale of the Old Notes, the Company entered into
a registration rights agreement with the Initial Purchasers pursuant to which
the Company agreed, for the benefit of the holders of the Old Notes, at the
Company's cost, to use its reasonable best efforts (i) to file with the
Commission the Exchange Offer Registration Statement with respect to the
Exchange Offer of the Exchange Notes not later than July 6, 1997, (ii) to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act not later than September 4, 1997, (iii) to keep the Exchange
Offer Registration Statement effective until the closing of the Exchange Offer,
and (iv) to cause the Exchange Offer to be consummated not later than November
18, 1997. Promptly after the Exchange Offer Registration Statement has been
declared effective, the Company will offer the Exchange Notes in exchange for
surrender of the Old Notes. The Company will keep the Exchange Offer open for
not less than 30 days (or longer if required by applicable law) after the date
notice of the Exchange Offer has been mailed to the holders of the Old Notes.
For each Old Note validly tendered to the Company pursuant to the Exchange
Offer and not withdrawn by the holder thereof, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to the principal
amount of such surrendered Old Note. Interest on each Exchange Note will
accrue from the last interest payment date to which interest was paid on the
Old Note surrendered in exchange therefor or, if no interest has been paid on
such Note, from the date of the original issuance of the Old Note.
Based on existing interpretations of the Securities Act by the staff
of the Commission set forth in several no- action letters to third parties, and
subject to the immediately following sentence, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and transferred by the holders thereof without further compliance with
the registration and prospectus delivery provisions of the Securities Act.
However, any purchaser of Old Notes who is an affiliate of the Company or who
intends to participate in the Exchange Offer for the purpose of distributing
the Exchange Notes, or any broker-dealer who purchased the Old Notes from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act, (i) will not be able to rely on the interpretations by the
staff of the Commission set forth in the above-mentioned no-action letters,
(ii) will not be able to tender its Old Notes in the Exchange Offer and (iii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the Notes unless such
sale or transfer is made pursuant to an exemption from such requirements. The
Company does not intend to seek its own no-action letter and there is no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Notes as it has in such no-action letters to third
parties.
Each holder of Old Notes (other than certain specified holders) who
wishes to exchange Old Notes for Exchange Notes in the Exchange Offer will be
required to represent that (i) it is not 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 were acquired in the
ordinary course of its business and (iii) at the time of the commencement of
the Exchange Offer, 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 who acquired the Old Notes for its own account as a result of
market-making activities or other trading activities (a "Participating
Broker-Dealer") must deliver a prospectus meeting the requirements of the
Securities Act. The staff of the Commission has taken the position 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 the Old Notes) with the prospectus contained in the
Exchange Offer Registration Statement. Under the Registration Rights Agreement,
the Company will be required to allow Participating Broker-Dealers to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of Exchange Notes received in exchange for Old Notes acquired
by such Participating Broker-Dealers for their own account as a result of
market-making or other trading activities.
In the event that any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect the Exchange
Offer, or if for any reason the Exchange Offer Registration Statement is not
declared effective or the Exchange Offer is not consummated by November 18,
1997, or upon the request of the Initial Purchasers in certain circumstances,
the Company will, in lieu of effecting (or, in the case of such a request by
the Initial Purchasers, in addition to effecting) the registration of the
Exchange Notes pursuant to the Exchange Offer Registration Statement (i) as
promptly as practicable, file with the Commission the Shelf Registration
Statement covering sales of the Old Notes, (ii) use its reasonable best efforts
to cause the Shelf Registration Statement to be declared effective under the
Securities Act by (or promptly in the event of a request by the Initial
Purchasers) and (iii) use its reasonable best efforts to keep effective the
Shelf Registration Statement (subject to the Company's right to suspend use of
the Shelf Registration Statement in limited circumstances for no more than 60
days within any twelve month period (a "Shelf Registration Suspension"), as set
forth in the Registration Rights Agreement) until two years after its effective
date (or until one year after such effective date if such Shelf Registration
Statement is filed at the request of the Initial Purchasers) or until all of
the Old Notes covered by such Shelf Registration Statement have been sold. In
the event of the filing of a Shelf Registration Statement, the Company will
provide to each holder of the Old Notes copies of the prospectus which is a
part of the Shelf Registration Statement and notify each such holder when the
Shelf Registration Statement has become effective. A holder of Old Notes that
sells such Old Notes pursuant to the Shelf Registration Statement generally
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 the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification obligations). In addition, each holder of the Old Notes
will be required to deliver information to be used in connection with the Shelf
Registration Statement and in order to have its Old Notes included in the Shelf
Registration Statement and to benefit from the provisions regarding the
increase in the interest rate borne by the Old Notes described in the second
succeeding paragraph.
Each Note will contain a legend to the effect that the holder of such
Notes, by its acceptance thereof, will be deemed to have agreed to be bound by
the provisions of the Registration Rights Agreement. In that regard, each
holder will be deemed to have agreed that, upon receipt of notice from the
Company of the occurrence of any event that makes any statement in the
prospectus that is part of the Shelf Registration Statement (or, in the case of
Participating Broker-Dealers, the prospectus that is a part of the Exchange
Offer Registration Statement) untrue in any material respect or that requires
the making of any changes in such prospectus in order to make the statements
therein not misleading or of certain other events specified in the Registration
Rights Agreement, such holder (or Participating Broker-Dealer, as the case may
be) will suspend the sale of Notes pursuant to such prospectus until the
Company has
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<PAGE> 88
amended or supplemented such prospectus to correct such misstatement or
omission, has furnished copies of the amended or supplemented prospectus to
such holder (or Participating Broker-Dealer, as the case may be) or the Company
has given notice that the sale of the Notes may be resumed, as the case may be.
If the Company shall give such notice to suspend the sale of the Notes, it
shall extend the relevant period referred to above during which it is required
to keep effective the Shelf Registration Statement (or the period during which
Participating Broker-Dealers are entitled to use the prospectus included in the
Exchange Offer Registration Statement in connection with the resale of Exchange
Notes, as the case may be) by the number of days during the period from and
including the date of the giving of such notice to and including the date when
holders shall have received copies of the supplemented or amended prospectus
necessary to permit resales of the Notes or to and including the date on which
the Company has given notice that the sale of Notes may be resumed, as the case
may be.
In the event that (a) the Exchange Offer Registration Statement is not
filed with the Commission on or prior to July 6, 1997, (b) the Exchange Offer
Registration Statement is not declared effective on or prior to September 4,
1997, (c) the Exchange Offer is not consummated or a Shelf Registration
Statement with respect to the Notes is not declared effective on or prior to
November 18, 1997, (d) any required Exchange Offer Registration Statement or
Shelf
85
<PAGE> 89
Registration Statement is filed and declared effective but shall thereafter
either be withdrawn by the Company or becomes subject to an effective stop
order suspending the effectiveness of such registration statement (except as
specifically permitted in the Registration Rights Agreement) without being
succeeded immediately by an additional registration statement filed and
declared effective, or (e) the Company effects a Shelf Registration Suspension
for more than 60 days, whether or not consecutive, within any period of 12
consecutive months (each such event referred to in clauses (a) through (e), a
"Registration Default") then, as liquidated damages for such Registration
Default, subject to certain limitations, special interest ("Special Interest"),
in addition to stated interest on the Notes, shall accrue on the Notes at a per
annum rate of 0.50% from and including the day following such Registration
Default to but excluding the date on which the Registration default is cured or
ceases as described below (such period being the "Registration Default
Period"); provided, that if the Exchange Offer Registration Statement is not
declared effective on or prior to September 4, 1997 and the Company shall
request holders of Notes to provide the information called for by the
Registration Rights Agreement for inclusion in the Shelf Registration
Statement, then Notes owned by holders who do not deliver such information to
the Company when required pursuant to the Registration Rights Agreement will
not be entitled to any such increase in the interest rate for any day after
September 4, 1997. Special Interest will be paid in the same manner as
interest is paid on the Notes pursuant to the Indenture. Upon (1) the filing of
the Exchange Registration Statement after July 6, 1997 as described in clause
(a) above, (2) the effectiveness of the Exchange Registration Statement after
September 4, 1997 as described in clause (b) above, (3) the consummation of the
Exchange Offer or the effectiveness of the Shelf Registration Statement, as the
case may be, after November 18, 1997 as described in clause (c) above, (4)
removal of the suspension or stop order referred to in clause (d) above or the
filing and effectiveness of a new registration statement in respect thereof,
(5) cessation of the Shelf Registration Suspension referred to in clause (e)
above, or (6) expiration of the period for which the Company is obligated to
keep the Shelf Registration Statement effective, Special Interest shall cease
to accrue unless a new Registration Default shall occur.
The Registration Rights Agreement is governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Rights Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement, a form of which is
available upon request to the Company. See "Incorporation of Certain Documents
by Reference." In addition, the information set forth above concerning certain
interpretations of and positions taken by the staff of the Commission is not
intended to constitute legal advice and prospective investors should consult
their own legal advisors with respect to such matters.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service (the "Service") will not
take a contrary view, and no ruling from the Service has been or will be
sought. Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify the statements and conditions set
forth herein. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules not
discussed below. The Company recommends that each holder consult such holder's
own tax advisor as to the particular tax consequences of exchanging such
holder's Old Notes for Exchange Notes, including the applicability and effect
of any state, local or foreign tax laws.
The Company believes that the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for federal
income tax purposes because the Exchange Notes will not be considered to differ
materially in kind or extent from the Old Notes. Rather, the Exchange Notes
received by a holder will be treated as a continuation of the Old Notes in the
hands of such holder. As a result, there will be no federal income tax
consequences to holders exchanging Old Notes for Exchange Notes pursuant to the
Exchange Offer.
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. The Company has agreed
that it will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale for a period of 180
days after consummation of the Exchange Offer, or such shorter period as will
terminate when all Old Notes acquired by broker- dealers for their own accounts
as a result of market-making activities or other trading activities have been
exchanged for Exchange Notes and resold by such broker-dealers. 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).
86
<PAGE> 90
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. For a period of 180 days after
consummation of the Exchange Offer, or such shorter period as will terminate
when all Old Notes acquired by broker-dealers for their own accounts as a
result of market-making activities or other trading activities have been
exchanged for Exchange Notes and resold by such broker-dealers, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed in the Registration
Rights Agreement to indemnify such broker-dealers against certain liabilities,
including liabilities under the Securities Act.
TRANSFER RESTRICTIONS ON OLD NOTES
OFFERS AND SALES BY THE INITIAL PURCHASERS
The Old Notes were not 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 in the United States to QIBs under Rule 144A under the Securities Act
and other Institutional Accredited Investors who, prior to their purchase of
Old Notes, delivered to the Initial Purchasers a letter containing certain
representations and agreements, in a private sale exempt from the registration
requirements of the Securities Act.
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<PAGE> 91
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby is
being passed upon for the Company by Gerald A. Morton, Vice President-Law and
Corporate Secretary of the Company. Mr. Morton owns approximately 1,595 shares
of the Company's Common Stock through the Company's tax advantaged savings plan
and options to purchase an aggregate of 22,000 shares of the Company's common
stock, which are or become exercisable in periodic installments through August
1, 1999.
EXPERTS
The consolidated financial statements of Pogo Producing Company as of
December 31, 1996 and 1995, and for the three years in the period ended December
31, 1996, incorporated by reference in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
The estimates of oil and gas reserves set forth herein and in the
Annual Report, and the related estimates set forth herein and therein of
discounted present values of estimated future net revenues therefrom, are
extracted from the report of Ryder Scott attached as an exhibit to the Annual
Report. Such information is incorporated by reference herein in reliance on
the authority of said firm as experts with respect to matters contained in such
report.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act . In accordance with the Exchange Act, the Company files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
following Regional Offices: New York Regional Office, 7 World Trade Center, New
York, New York 10048; and Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material also may be obtained at prescribed rates from the Public Reference
Branch of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549-1004. The Company's Common Stock is listed on The New
York Stock Exchange and the Pacific Stock Exchange. Consequently, such reports,
proxy statements and other information concerning the Company may be inspected
at the offices of The New York Stock Exchange, 20 Broad Street, New York, New
York 10005 and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104. In addition, the Commission maintains an Internet web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission
(http://www.sec.gov). 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 the
Corporate Secretary of the Company, 5 Greenway Plaza, Suite 2700, Houston,
Texas 77046.
This Prospectus constitutes part of a 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 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.
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<PAGE> 92
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, EXCHANGE AGENT, THE INITIAL PURCHASERS
OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL CONSTITUTES AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION WHERE
SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
--------------
TABLE OF CONTENTS
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PAGE
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<S> <C>
Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Private Placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Selected Reserve and Operating Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 30
Business and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Management and Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Description of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Exchange Offer; Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Transfer Restrictions on Old Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
================================================================================
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$100,000,000
EXCHANGE OFFER
[POGO LOGO]
8 3/4% SENIOR SUBORDINATED
NOTES DUE 2007
---------------
PROSPECTUS
, 1997
================================================================================
<PAGE> 93
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, inter alia,
empowers a Delaware corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding (other than an action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of another corporation or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Similar indemnity is
authorized for such persons against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement
of any such threatened, pending or completed action or suit if such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and provided further that
(unless a court of competent jurisdiction otherwise provides) such person shall
not have been adjudged liable to the corporation. Any such indemnification may
be made only as authorized in each specific case upon a determination by the
shareholders or disinterested directors or by independent legal counsel in a
written opinion that indemnification is proper because the indemnitee has met
the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance 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 or
enterprise, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
The Company maintains policies insuring its and its subsidiaries' officers and
directors against certain liabilities for actions taken in such capacities,
including liabilities under the Securities Act of 1933, as amended.
Article X of the Restated Certificate of Incorporation of the
Registrant eliminates the personal liability of each director of the Registrant
to the Registrant and its stockholders for monetary damages for breach of
fiduciary duty as a director involving any act or omission of any such director
occurring on or after September 30, 1986; provided, however, that such
provision does not eliminate or limit the liability of a director (i) for any
breach of such director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Title 8,
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which such director derived an improper personal benefit.
The Bylaws of the Registrant contain the following provisions:
ARTICLE VII
INDEMNIFICATION
Section 1. Right to Indemnification.
The Corporation shall indemnify and hold harmless, to the fullest
extent permitted by applicable law as it presently exists or may hereafter be
amended, any person who was or is made or is threatened to be made a party or
is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding") by reason of the
fact that he, or a person for whom he is the legal representative, 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, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding
was authorized by the Board of Directors of the Corporation.
Section 2. Prepayment of Expenses.
The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in his capacity as a
director or officer (except with regard to service to an employee benefit plan
or non-profit organizations in advance of the final disposition of the
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<PAGE> 94
proceeding) shall be made only upon receipt of an undertaking by the director
or officer to repay all amounts advanced if it should be ultimately determined
that the director or officer is not entitled to be indemnified under this
Article or otherwise.
Section 3. Claims.
If a claim for indemnification or payment of expenses under this
Article is not paid in full within ninety days after a written claim therefor
has been received by the Corporation the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the Corporation shall have the burden of proving that the claimant was not
entitled to the requested indemnification or payment of expenses under
applicable law.
Section 4. Non-Exclusivity of Rights.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, these Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 5. Amendment or Repeal.
Any repeal or modification of the foregoing provisions of this Article
VII shall not adversely affect any right or protection hereunder of any person
in respect of any act or omission occurring prior to the time of such repeal or
modification.
The Registrant has placed in effect insurance which purports (a) to
insure it against certain costs of indemnification which may be incurred by it
pursuant to the aforementioned Bylaw provision or otherwise and (b) to insure
the officers and directors of the Company and of specified subsidiaries against
certain liabilities incurred by them in the discharge of their functions as
officers and directors except for liabilities arising from their own
malfeasance.
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.
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<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C> <C>
4.1 -- Restated Certificate of Incorporation of Pogo Producing Company (filed as
Exhibit 3(a) to Pogo Producing Company's Annual Report on Form 10-K for
the year ended December 31, 1996 and included herein by reference (File
No. 1-7792))
4.2 -- By-Laws of Pogo Producing Company, as amended and restated through
April 22, 1997 (filed as Exhibit 3(b) to Pogo Producing Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and
included herein by reference (File No. 1-7792))
4.3** -- Indenture dated as of May 15, 1997 between Pogo Producing Company and
Fleet National Bank (now State Street Bank & Trust Company as successor
in interest under the Indenture), as Trustee, which includes the form of
the 8 3/4% Senior Subordinated Note due 2007 as an exhibit thereto
4.4** -- Registration Rights Agreement dated May 22, 1997 among Pogo Producing
Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Goldman Sachs & Co.
5.1** -- Opinion of Gerald A. Morton
23.1** -- Consent of Arthur Andersen LLP
23.2** -- Consent of Ryder Scott Company Petroleum Engineers
</TABLE>
II-2
<PAGE> 95
<TABLE>
<S> <C> <C>
23.3** -- Consent of Gerald A. Morton (contained in his opinion filed as Exhibit 5)
24.1** -- Powers of Attorney
25.1** -- Statement of Eligibility of Trustee
99.1* -- Form of Letter of Transmittal
</TABLE>
- ------------------------
* To be filed by amendment.
** Filed herewith.
ITEM 22. UNDERTAKINGS
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the provisions described under Item 20 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.
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
the State of Texas on July 2, 1997.
POGO PRODUCING COMPANY
By: /s/ Paul G. Van Wagenen
------------------------------------------------
Paul G. Van Wagenen
Chairman of the Board, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Paul G. Van Wagenen Chairman of the Board, President and July 2, 1997
- -------------------------------------- Chief Executive Officer (Principal
Paul G. Van Wagenen Executive Officer and Director)
July 2, 1997
/s/ John W. Elsenhans Vice President and Treasurer
- -------------------------------------- (Principal Financial Officer)
John W. Elsenhans
/s/ Thomas E. Hart Vice President and Controller July 2, 1997
- -------------------------------------- (Principal Accounting Officer)
Thomas E. Hart
* Director July 2, 1997
- --------------------------------------
Tobin Armstrong
* Director July 2, 1997
- --------------------------------------
Jack S. Blanton
* Director July 2, 1997
- --------------------------------------
W. M. Brumley, Jr.
* Director July 2, 1997
- --------------------------------------
John B. Carter, Jr.
* Director July 2, 1997
- --------------------------------------
William L. Fisher
* Director July 2, 1997
- --------------------------------------
William E. Gipson
* Director July 2, 1997
- --------------------------------------
Gerrit W. Gong
* Director July 2, 1997
- --------------------------------------
J. Stuart Hunt
* Director July 2, 1997
- --------------------------------------
Frederick A. Klingenstein
</TABLE>
II-4
<PAGE> 97
<TABLE>
<S> <C> <C>
* Director July 2, 1997
- --------------------------------------
Nicholas R. Petry
* Director July 2, 1997
- --------------------------------------
Jack A. Vickers
*By: /s/ Thomas E. Hart
--------------------------------------
Thomas E. Hart, Attorney-in-Fact
</TABLE>
II-5
<PAGE> 98
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C> <C>
4.1 -- Restated Certificate of Incorporation of Pogo Producing Company (filed as
Exhibit 3(a) to Pogo Producing Company's Annual Report on Form 10-K for
the year ended December 31, 1996 and included herein by reference (File
No. 1-7792))
4.2 -- By-Laws of Pogo Producing Company, as amended and restated through
April 22, 1997 (filed as Exhibit 3(b) to Pogo Producing Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and
included herein by reference (File No. 1-7792))
4.3** -- Indenture dated as of May 15, 1997 between Pogo Producing Company and
Fleet National Bank (now State Street Bank & Trust Company as successor
in interest under the Indenture), as Trustee, which includes the form of
the 8 3/4% Senior Subordinated Note due 2007 as an exhibit thereto
4.4** -- Registration Rights Agreement dated May 22, 1997 among Pogo Producing
Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Goldman Sachs & Co.
5.1** -- Opinion of Gerald A. Morton
23.1** -- Consent of Arthur Andersen LLP
23.2** -- Consent of Ryder Scott Company Petroleum Engineers
23.3** -- Consent of Gerald A. Morton (contained in his opinion filed as Exhibit 5)
24.1** -- Powers of Attorney
25.1** -- Statement of Eligibility of Trustee
99.1* -- Form of Letter of Transmittal
</TABLE>
- ------------------------
* To be filed by amendment.
** Filed herewith.
<PAGE> 1
EXECUTION 4.3
[EXECUTION COPY]
- --------------------------------------------------------------------------------
POGO PRODUCING COMPANY
AND
FLEET NATIONAL BANK
Trustee
---------------------
Indenture
Dated as of May 15, 1997
---------------------
$100,000,000
8 3/4% Series A Senior Subordinated Notes due 2007
and
8 3/4% Series B Senior Subordinated Notes due 2007
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 1.3 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 1.4 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE II
THE SECURITIES
SECTION 2.1 Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.2 Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.3 Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.4 Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.5 Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.6 Security Register and Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.7 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.8 Additional Provisions for Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 2.9 Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 2.10 Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 2.11 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 2.12 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 2.13 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 2.14 CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE III
SATISFACTION AND DISCHARGE
SECTION 3.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 3.2 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
ARTICLE IV
REMEDIES
SECTION 4.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.2 Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.3 Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . 54
SECTION 4.4 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.5 Trustee May Enforce Claims Without Possession of Securities . . . . . . . . . . . . . . . . . 56
SECTION 4.6 Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.7 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.8 Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . . . 57
SECTION 4.9 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.10 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.11 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.12 Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.13 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.14 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.15 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE V
THE TRUSTEE
SECTION 5.1 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 5.2 Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 5.3 Trustee Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . 61
SECTION 5.4 May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.5 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.6 Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.7 Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 5.8 Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 5.9 Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 5.10 Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . 65
SECTION 5.12 Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
ARTICLE VI
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 6.1 Disclosure of Names and Addresses of Holders . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.2 Reports By Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.3 Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE VII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 7.1 Company May Consolidate, etc., Only on Certain Terms . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.2 Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures without Consent of Holders . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.2 Supplemental Indentures with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.3 Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.4 Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.5 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.6 Reference in Securities to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.7 Notice of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE IX
COVENANTS
SECTION 9.1 Payment of Principal, Premium, if any, and Interest . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.3 Money for Security Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.4 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9.5 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9.6 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.8 Statement by Officers as to Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.9 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.10 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.11 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
SECTION 9.12 Limitation on Non-Guarantor Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.13 Limitation on Issuances and Sales of Restricted Subsidiary Capital Stock . . . . . . . . . . 83
SECTION 9.14 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 9.15 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 9.16 Limitation on Disposition of Proceeds of Asset Sales . . . . . . . . . . . . . . . . . . . . 85
SECTION 9.17 Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 9.18 Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 9.19 Limitation on Other Senior Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . 89
SECTION 9.20 Limitation on Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 9.21 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 9.22 Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
ARTICLE X
REDEMPTION OF SECURITIES
SECTION 10.1 Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 10.2 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.3 Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.4 Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.5 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.6 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 10.7 Securities Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 10.8 Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
ARTICLE XI
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 11.1 Company's Option to Effect Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . 93
SECTION 11.2 Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 11.3 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.4 Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.5 Deposited Money and U.S. Government Obligations to Be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 11.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
ARTICLE XII
GUARANTEES
SECTION 12.1 Unconditional Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 12.2 Subsidiary Guarantors May Consolidate, etc. on Certain Terms . . . . . . . . . . . . . . . . 98
SECTION 12.3 Release of a Subsidiary Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 12.4 Limitation of Subsidiary Guarantor's Liability . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 12.5 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 12.6 Execution and Delivery of Notation of Subsidiary Guarantee . . . . . . . . . . . . . . . . . 100
SECTION 12.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 12.8 Subsidiary Guarantees Subordinated to Guarantor Senior Indebtedness . . . . . . . . . . . . . 101
SECTION 12.9 Subsidiary Guarantors Not to Make Payments with Respect to Subsidiary
Guarantees in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 12.10 Subsidiary Guarantees Subordinated to Prior Payment of All Guarantor
Senior Indebtedness upon Dissolution, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 12.11 Holders to be Subrogated to Rights of Holders of Guarantor Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 12.12 Obligations of the Subsidiary Guarantors Unconditional . . . . . . . . . . . . . . . . . . . 105
SECTION 12.13 Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice . . . . . . . . . . . 106
SECTION 12.14 Application by Trustee of Money Deposited with it . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 12.15 Subordination Rights Not Impaired by Acts or Omissions of Subsidiary
Guarantors or Holders of Guarantor Senior Indebtedness . . . . . . . . . . . . . . . . . . . 107
SECTION 12.16 Holders Authorize Trustee to Effectuate Subordination of Subsidiary
Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 12.17 Right of Trustee to Hold Guarantor Senior Indebtedness . . . . . . . . . . . . . . . . . . . 108
SECTION 12.18 Article XII Not to Prevent Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 12.19 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1 Securities Subordinate to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 13.2 Payment Over of Proceeds upon Dissolution, etc . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 13.3 Suspension of Payment When Senior Indebtedness in Default . . . . . . . . . . . . . . . . . . 110
SECTION 13.4 Trustee's Relation to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 13.5 Subrogation to Rights of Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . 112
SECTION 13.6 Provisions Solely To Define Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 13.7 Trustee To Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 13.8 No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 13.9 Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
SECTION 13.10 Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . . . . . . . . . . . 115
SECTION 13.11 Rights of Trustee as Holder of Senior Indebtedness; Preservation of
Trustee's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 13.12 Article Applicable to Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 13.13 No Suspension of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 14.2 Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 14.3 Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 14.4 Notices, etc. to Trustee, Company and Subsidiary Guarantors . . . . . . . . . . . . . . . . . 118
SECTION 14.5 Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
SECTION 14.6 Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . 119
SECTION 14.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
SECTION 14.8 Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 14.9 Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 14.10 Governing Law; Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 14.11 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
SECTION 14.12 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
SECTION 14.13 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
SECTION 14.14 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . 121
</TABLE>
EXHIBIT A FORM OF SECURITY . . . . . . . . . . . . . . . . . . . . . .A-1
EXHIBIT B FORM OF NOTATION RELATING TO SUBSIDIARY GUARANTEES . . . . .B-1
EXHIBIT C CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF SECURITIES . . . . . . . . . . . . . . . . . C-1
EXHIBIT D TRANSFEREE LETTER OF REPRESENTATIONS . . . . . . . . . . . .D-1
NOTE: THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE
DEEMED TO BE A PART OF THE INDENTURE.
vi
<PAGE> 8
Reconciliation and tie between
Trust Indenture Act of 1939 and Indenture
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- -----------
<S> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7, 5.8
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12
Section 312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2, 6.3(c)
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3, 9.9
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8(a)
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14
Section 316(a) (last
sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 ("Outstanding")
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2, 4.12
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.13
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3(d)
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.10(b)
</TABLE>
NOTE: THIS RECONCILIATION AND TIE SHALL NOT, FOR ANY PURPOSE,
BE DEEMED TO BE A PART OF THE INDENTURE.
vii
<PAGE> 9
INDENTURE, dated as of May 15, 1997 between POGO PRODUCING COMPANY, a
Delaware corporation (hereinafter called the "Company") and Fleet National
Bank, trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's 8 3/4% Series A
Senior Subordinated Notes due 2007 (the "Series A Securities") and the
Company's 8 3/4% Series B Senior Subordinated Notes due 2007 (the "Series B
Securities" and, collectively with the Series A Securities, the "Securities" or
each, a "Security").
This Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, that are required to be part of this Indenture and shall,
to the extent applicable, be governed by such provisions.
All things necessary have been done to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company and the Trustee, in accordance with
their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person, (b) outstanding at the
time such Person becomes a Subsidiary of any other Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a Subsidiary) or (c) any renewals,
extensions, substitutions, refinancings or replacements (each, for purposes of
this clause, a "refinancing") by the Company of any Indebtedness described in
clause (a) or (b) of this definition, including any successive refinancings, so
long as (i) any such new Indebtedness shall be in a principal amount that does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
1
<PAGE> 10
payable upon a declaration of acceleration thereof, such lesser amount as of
the date of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms
of the Indebtedness refinanced or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refinancing, plus the
amount of expenses of the Company incurred in connection with such refinancing,
(ii) in the case of any refinancing of Subordinated Indebtedness, such new
Indebtedness is made subordinate to the Securities at least to the same extent
as the Indebtedness being refinanced and (iii) such new Indebtedness has an
Average Life longer than the Average Life of the Securities and a final Stated
Maturity later than the final Stated Maturity of the Securities.
"Act," when used with respect to any Holder, has the meaning specified in
Section 14.3.
"Adjusted Consolidated Net Tangible Assets" means (without duplication),
as of the date of determination, (a) the sum of (i) discounted future net
revenues from proved oil and gas reserves of the Company and its Restricted
Subsidiaries calculated in accordance with SEC guidelines before any state or
federal income taxes, as estimated by a nationally recognized firm of
independent petroleum engineers in a reserve report prepared as of the end of
the Company's most recently completed fiscal year, as increased by, as of the
date of determination, the estimated discounted future net revenues from (A)
estimated proved oil and gas reserves acquired since the date of such year-end
reserve report, and (B) estimated oil and gas reserves attributable to upward
revisions of estimates of proved oil and gas reserves since the date of such
year-end reserve report due to exploration, development or exploitation
activities, in each case calculated in accordance with SEC guidelines
(utilizing the prices utilized in such year-end reserve report), and decreased
by, as of the date of determination, the estimated discounted future net
revenues from (C) estimated proved oil and gas reserves produced or disposed of
since the date of such year-end reserve report and (D) estimated oil and gas
reserves attributable to downward revisions of estimates of proved oil and gas
reserves since the date of such year-end reserve report due to changes in
geological conditions or other factors which would, in accordance with standard
industry practice, cause such revisions, in each case calculated in accordance
with SEC guidelines (utilizing the prices utilized in such year-end reserve
report); provided, that in the case of each of the determinations made pursuant
to clauses (A) through (D), such increases and decreases shall be as estimated
by the Company's petroleum engineers, except that in the event there is a
Material Change as a result of such acquisitions, dispositions or revisions,
then the discounted future net revenues utilized for purposes of this clause
(a)(i) shall be confirmed in writing by a nationally recognized firm of
independent petroleum engineers, (ii) the capitalized costs that are
attributable to oil and gas properties of the Company and its Restricted
Subsidiaries to which no proved oil and gas reserves are attributable, based on
the Company's books and records as of a date no earlier than the date of the
Company's latest annual or quarterly financial statements, (iii) the Net
Working Capital on a date no earlier than the date of the Company's latest
annual or quarterly financial statements and (iv) the greater of (A) the net
book value on a date no earlier than the date of the Company's latest annual or
quarterly financial statements or (B) the appraised value, as estimated by
independent appraisers, of other tangible assets (including, without
duplication, Investments in unconsolidated Restricted Subsidiaries) of the
2
<PAGE> 11
Company and its Restricted Subsidiaries, as of the date no earlier than the
date of the Company's latest audited financial statements, minus (b) the sum of
(i) minority interests (other than a minority interest in a Subsidiary that is
a business trust or similar entity formed for the primary purpose of issuing
preferred securities the proceeds of which are loaned to the Company or a
Restricted Subsidiary), (ii) any net gas balancing liabilities of the Company
and its Restricted Subsidiaries reflected in the Company's latest audited
financial statements, (iii) to the extent included in (a)(i) above, the
discounted future net revenues, calculated in accordance with SEC guidelines
(utilizing the prices utilized in the Company's year-end reserve report),
attributable to reserves which are required to be delivered to third parties to
fully satisfy the obligations of the Company and its Restricted Subsidiaries
with respect to Volumetric Production Payments on the schedules specified with
respect thereto and (iv) the discounted future net revenues, calculated in
accordance with SEC guidelines, attributable to reserves subject to
Dollar-Denominated Production Payments which, based on the estimates of
production and price assumptions included in determining the discounted future
net revenues specified in (a)(i) above, would be necessary to fully satisfy the
payment obligations of the Company and its Restricted Subsidiaries with respect
to Dollar-Denominated Production Payments on the schedules specified with
respect thereto. If the Company changes its method of accounting from the
successful efforts method to the full cost method or a similar method of
accounting, "Adjusted Consolidated Net Tangible Assets" will continue to be
calculated as if the Company were still using the successful efforts method of
accounting.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
(a) the amount by which the fair value of the Properties of such Subsidiary
Guarantor exceeds (b) the total amount of liabilities of such Subsidiary
Guarantor at such date 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 its Subsidiary
Guarantee.
"Affiliate" means, with respect to any specified Person, 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 Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of this definition, beneficial ownership of 10% or more
of the voting common equity (on a fully diluted basis) or options or warrants
to purchase such equity (but only if exercisable at the date of determination
or within 60 days thereof) of a Person shall be deemed to constitute control of
such Person. No Person shall be deemed an Affiliate of an oil and gas royalty
trust solely by virtue of ownership of units of beneficial interest in such
trust.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or any Restricted Subsidiary shall be merged
with or into the Company or any Restricted Subsidiary or (b) the acquisition by
the Company or any Restricted Subsidiary of the Properties of any Person
3
<PAGE> 12
which constitute all or substantially all of the Properties of such Person or
any division or line of business of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition to any Person other than the Company or any of its Restricted
Subsidiaries (including by means of a Sale/Leaseback Transaction or by way of
merger or consolidation) (collectively, for purposes of this definition, a
"transfer"), directly or indirectly, in one or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary held by the
Company or any Restricted Subsidiary; (b) the properties and assets of any
division or line of business of the Company or any of its Restricted
Subsidiaries substantially as an entirety; or (c) any other Properties of the
Company or any of its Restricted Subsidiaries other than a disposition of
hydrocarbons or other mineral products in the ordinary course of business. For
the purposes of this definition, the term "Asset Sale" shall not include (i)
any transfer of Properties that is governed by, and made in accordance with,
the provisions of Article VII hereof; (ii) any transfer of Properties to any
Person, if permitted under Section 9.10 hereof; (iii) any trade or exchange of
properties and assets used in the Oil and Gas Business of the Company or any
Restricted Subsidiary or shares of Capital Stock in any Person in the Oil and
Gas Business owned by the Company or any Restricted Subsidiary for properties
and assets used in the Oil and Gas Business of any Person or shares of Capital
Stock in any Person owned or held by another Person, provided, that (A) the
Fair Market Value of the Properties traded or exchanged by the Company or such
Restricted Subsidiary (including any cash or Cash Equivalents, not to exceed
15% of such Fair Market Value, to be delivered by the Company or such
Restricted Subsidiary) is reasonably equivalent to the Fair Market Value of the
Properties (together with any cash or Cash Equivalents, not to exceed 15% of
such Fair Market Value) to be received by the Company or such Restricted
Subsidiary; provided, that if such Fair Market Value is equal to or in excess
of $10,000,000 the Company shall deliver to the Trustee a written appraisal by
a nationally recognized investment banking firm or appraisal firm, in each case
specializing or having a speciality in oil and gas Properties, and (B) such
exchange is approved by a majority of the Disinterested Directors; or (iv) any
transfer of Properties in a single transaction or series of related
transactions having a Fair Market Value of less than $5,000,000.
"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable and at any date as of which the
amount thereof is to be determined, the present value of the total net amount
of rent required to be paid by such Person under the lease during the primary
term thereof, without giving effect to any renewals at the option of the
lessee, discounted from the respective due dates thereof to such date of
determination at the rate of interest per annum implicit in the terms of the
lease. As used in the preceding sentence, the "net amount of rent" under any
lease for any such period shall mean the sum of rental and other payments
required to be paid with respect to such period by the lessee thereunder,
excluding any amounts required to be paid by such lessee on account of
maintenance and repairs, insurance, taxes, assessments, water rates or similar
charges. In the case of any lease which is terminable by the lessee upon
payment of a penalty, such net amount of rent shall also include the amount
4
<PAGE> 13
of such penalty, but no rent shall be considered as required to be paid under
such lease subsequent to the first date upon which it may be so terminated.
"Average Life" means, with respect to any Indebtedness, as at any date
of determination, the quotient obtained by dividing (a) the sum of the products
of (i) the number of years (and any portion thereof) from the date of
determination to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund or mandatory
redemption payment requirements) of such Indebtedness multiplied by (ii) the
amount of each such principal payment by (b) the sum of all such principal
payments.
"Bank Co-agents" mean Bank of Montreal and Banque Paribas as co-agents,
or any successor or replacement agents, under the Credit Agreement.
"Board of Directors" means, (a) with respect to the Company, either the
board of directors or any properly constituted committee thereof that is (i)
authorized to take the action in question and (ii) comprised of members, a
majority of whom are not Officers or employees of the Company or any Subsidiary
of the Company and (b) with respect to any Restricted Subsidiary, the board of
directors of that Restricted Subsidiary or any properly constituted committee
thereof that is authorized to take the action in question.
"Board Resolution" means, with respect to the Company, a copy of a
resolution certified by the Secretary or an Assistant Secretary of the Company
to have been duly adopted by its Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee, and,
with respect to a Restricted Subsidiary, a copy of a resolution certified by
the Secretary or an Assistant Secretary of such Restricted Subsidiary to have
been duly adopted by its Board of Directors and to be in full force and effect
on the date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, the City of New York, New York, or the city in which the Trustee's
Corporate Trust Office is located, are authorized or obligated by law or
executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents in the equity
interests (however designated) in such Person, and any rights (other than debt
securities convertible into an equity interest), warrants or options
exercisable for, exchangeable for or convertible into such an equity interest
in such Person.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified
and accounted for as a capital lease obligation under
5
<PAGE> 14
GAAP, and, for the purpose of this Indenture, the amount of such obligation at
any date shall be the capitalized amount thereof at such date, determined in
accordance with GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness with a
maturity of 365 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided, that the full faith and credit of the United States of America is
pledged in support thereof), (b) demand and time deposits and certificates of
deposit or acceptances with a maturity of 365 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $100,000,000 or any
commercial bank organized under the laws of any country other than the United
States of America that is a member of the Organization for Economic Cooperation
and Development ("OECD") and has total assets in excess of $100,000,000, (c)
commercial paper with a maturity of 365 days or less issued by a Person that is
not an Affiliate of the Company and is organized under the laws of any state of
the United States of America or the District of Columbia and rated at least A-1
by S&P or at least P-1 by Moody's (or, if at any time neither S&P nor Moody's
shall be rating such obligations, then from such other rating service as may be
acceptable to the Trustee), (d) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (a)
above entered into with any commercial bank meeting the specifications of
clause (b) above, (e) overnight bank deposits and bankers' acceptances at any
commercial bank meeting the qualifications specified in clause (b) above and
(f) investments in money market mutual or similar funds which have assets in
excess of $500,000,000.
"Change of Control" means the occurrence of any of the following events:
(a) the Company's properties and assets are sold or otherwise disposed of
substantially as an entirety on a consolidated basis to any Person or related
group of Persons in any one transaction or a series of related transactions;
(b) there shall be consummated any consolidation or merger of the Company (i)
in which the Company is not the continuing or surviving Person (other than a
consolidation or merger with a wholly owned Subsidiary of the Company in which
all shares of Common Stock outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same number of shares of Common
Stock of such Subsidiary) or (ii) pursuant to which the Common Stock would be
converted into cash, securities or other property, in each case, other than a
consolidation or merger of the Company in which the holders of the Common Stock
immediately prior to the consolidation or merger have, directly or indirectly,
at least a majority of the Common Stock of the continuing or surviving Person
immediately after such consolidation or merger; or (c) any Person or any
Persons acting together which would constitute a "group" for purposes of
Section 13(d) of the Exchange Act (other than the Company, any Subsidiary of
the Company, any employee stock purchase plan, stock option plan or other stock
incentive plan or program, retirement plan or automatic dividend reinvestment
plan or any substantially similar plan of the Company or any Subsidiary of the
Company or any Person holding securities of the Company for or pursuant to the
terms of any such employee benefit plan), together with any Affiliates thereof,
shall acquire beneficial ownership (as defined in Rule 13d-3 under the Exchange
Act) of at least 50% of the Voting Stock of the Company.
6
<PAGE> 15
"Code" shall mean the Internal Revenue Code of 1986, as amended, as now
or hereafter in effect, together with all regulations and rulings thereof or
thereunder issued by the Internal Revenue Service.
"Commission" or "SEC" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to shares of Capital Stock of any other class of such
Person.
"Company" means the Person named as the "Company" in the first paragraph
of this Indenture, until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the
ratio of (a) the sum of Consolidated Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense and Consolidated Non-cash Charges deducted in
computing Consolidated Net Income, in each case, for such period, of the
Company and its Restricted Subsidiaries on a consolidated basis, all determined
in accordance with GAAP, decreased (to the extent included in determining
Consolidated Net Income) by the sum of (i) the amount of deferred revenues that
are amortized during such period and are attributable to reserves that are
subject to Volumetric Production Payments and (ii) amounts recorded in
accordance with GAAP as repayments of principal and interest pursuant to
Dollar-Denominated Production Payments, to (b) the sum of such Consolidated
Interest Expense for such period; provided, that (A) in making such
computation, the Consolidated Interest Expense attributable to interest on any
Indebtedness required to be computed on a pro forma basis in accordance with
clause (i) of Section 9.11 hereof and bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period, (B) in making such computation, the
Consolidated Interest Expense attributable to interest on any Indebtedness
under a revolving credit facility required to be computed on a pro forma basis
in accordance with clause (i) of Section 9.11 hereof shall be computed based
upon the average daily balance of such Indebtedness during the applicable
period, provided, that such average daily balance shall be reduced by the
amount of any repayment of Indebtedness under a revolving credit facility
during the applicable period, which repayment permanently reduced the
commitments or amounts available to be reborrowed under such facility, (C)
notwithstanding clauses (A) and (B) of this proviso, interest on
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<PAGE> 16
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Rate Protection Obligations, shall
be deemed to have accrued at the rate per annum resulting after giving effect
to the operation of such agreements and (D) in making such calculation,
Consolidated Interest Expense shall exclude interest attributable to
Dollar-Denominated Production Payments.
"Consolidated Income Tax Expense" means, for any period, the provision
for federal, state, local and foreign income taxes of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP, including, without limitation, (i) any amortization of
debt discount, (ii) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts), (iii) the interest portion of any
deferred payment obligation, (iv) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and (v) all accrued interest, in each case to the extent attributable
to such period, (b) to the extent any Indebtedness of any Person (other than
the Company or a Restricted Subsidiary) is guaranteed by the Company or any
Restricted Subsidiary, the aggregate amount of interest paid or accrued by such
other Person during such period attributable to any such Indebtedness, in each
case to the extent attributable to that period, (c) the aggregate amount of the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by the Company and its Restricted Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP and (d) the aggregate amount of dividends paid or accrued on Redeemable
Capital Stock or Preferred Stock of the Company and its Restricted
Subsidiaries, to the extent such Redeemable Capital Stock or Preferred Stock is
owned by Persons other than Restricted Subsidiaries.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
as determined in accordance with GAAP, adjusted by excluding (a) net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto),
(b) net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to Asset Sales, (c) the net income (or net loss) of any Person
(other than the Company or any of its Restricted Subsidiaries), in which the
Company or any of its Restricted Subsidiaries has an ownership interest, except
to the extent of the amount of interest on indebtedness, dividends or other
distributions actually paid to the Company or its Restricted Subsidiaries in
cash by such other Person during such period (regardless of whether such cash
interest on indebtedness, dividends or other distributions is attributable to
net income (or net loss) of such Person during such period or during any prior
period), (d) net income (or net loss) of any Person combined with the Company
or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (e) the net income
of any Restricted Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary is not at the
date of determination permitted, directly
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<PAGE> 17
or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (f) income
resulting from transfers of assets received by the Company or any Restricted
Subsidiary from an Unrestricted Subsidiary and (g) any write-downs of
non-current assets; provided, however, that any ceiling limitation write-downs
under SEC guidelines shall be treated as capitalized costs, as if such
write-downs had not occurred.
"Consolidated Net Worth" means, at any date, the consolidated
stockholders' equity of the Company less the amount of such stockholders'
equity attributable to Redeemable Capital Stock or treasury stock of the
Company and its Restricted Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization, impairment and other non-cash expenses
of the Company and its Restricted Subsidiaries reducing Consolidated Net Income
for such period, determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge which requires an accrual of or reserve for
cash charges for any future period).
"Corporate Trust Office" means the principal corporate trust office of
the Trustee, at which at any particular time its corporate trust business shall
be administered, which office at the date of execution of this Indenture is
located at 777 Main Street, Hartford, Connecticut 06115, Attention: Corporate
Trust Administration.
"Credit Agreement" means the Amended and Restated Credit Agreement dated
June 1, 1995 among the Company and Bank of Montreal and Banque Paribas, as
co-agents, and the other banks specified therein, including any notes and
guarantees executed in connection therewith, as such agreement may be amended,
modified, supplemented, extended, restated, replaced (including replacement
after the termination of such agreement), restructured, increased, renewed or
refinanced from time to time in one or more credit agreements, loan agreements,
instruments or similar agreements, whether or not with the same lenders or
agents, as such may be further amended, modified, supplemented, extended,
restated, replaced (including replacement after the termination of such
agreement), restructured, increased, renewed or refinanced from time to time.
"Credit Agreement Obligations" means all monetary obligations of every
nature of the Company or a Restricted Subsidiary, including without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities, from time to time owed to
the lenders or any agent under or in respect of the Credit Agreement.
"Default" means any event, act or condition that is, or after notice or
passage of time or both would be, an Event of Default.
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<PAGE> 18
"Definitive Securities" means Securities that are in the form set forth
in Exhibit A attached hereto (but without including the paragraph referred to
in the footnote on page A-2 thereof).
"Depositary" means with respect to the Securities issuable or issued in
whole or in part in global form, the Person specified in Section 2.6 hereof as
the Depositary with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Designated Guarantor Senior Indebtedness" means, with respect to a
Subsidiary Guarantor, (a) all Guarantor Senior Indebtedness of such Subsidiary
Guarantor under the Credit Agreement Obligations and (b) any other Guarantor
Senior Indebtedness which (i) at the time of incurrence equals or exceeds
$10,000,000 in aggregate principal amount and (ii) is specifically designated
by such Subsidiary Guarantor in the instrument evidencing such Guarantor Senior
Indebtedness as "Designated Guarantor Senior Indebtedness" for purposes of this
Indenture.
"Designated Senior Indebtedness" means (a) all Senior Indebtedness
constituting Credit Agreement Obligations and (b) any other Senior Indebtedness
which (i) at the time of incurrence equals or exceeds $10,000,000 in aggregate
principal amount and (ii) is specifically designated by the Company in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" for purpose of this Indenture.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required
to deliver its resolution under this Indenture, a member of the Board of
Directors who does not have any material direct or indirect financial interest
(other than an interest arising solely from the beneficial ownership of Capital
Stock of the Company) in or with respect to such transaction or series of
transactions.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules, regulations and rulings thereof
issued by the Internal Revenue Service or the Department of Labor thereunder.
"ERISA Affiliate" shall mean any subsidiary or trade or business
(whether or not incorporated) which is a member of a group of which the Company
is a member and which is under common control within the meaning of Section 414
of the Code (such rules and regulations shall also be deemed to apply to
foreign corporations and entities).
"Event of Default" has the meaning specified in Section 4.1 hereto.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor act thereto.
"Exchange Offer" means the offer by the Company to the Holders of all
outstanding Transfer Restricted Securities to exchange all such outstanding
Transfer Restricted Securities held by such Holders for Series B Securities, in
an aggregate principal amount equal to the aggregate principal amount of the
Transfer Restricted Securities tendered in such exchange offer by such Holders.
"Fair Market Value" means the fair market value of any Property as
determined in good faith (a) by the Board of Directors if the fair market value
of such Property, as evidenced by a Board Resolution, is $5 million or more, or
(b) by an Officer of the Company if the fair market value of such Property, as
evidenced by an Officers' Certificate, is less than $5 million which
determination shall be conclusive for purposes of this Indenture. Unless
specifically required by the terms of this Indenture, no valuation or
assessment from any investment banker, appraiser or other third party shall be
required to be obtained in connection with either determination contemplated by
the first sentence of this definition of Fair Market Value.
"Federal Bankruptcy Code" means the United States Bankruptcy Code of
Title 11 of the United States Code, as amended from time to time.
"Foreign Subsidiary" means (a) any Restricted Subsidiary engaged in the
Oil and Gas Business having the majority of its operations outside the United
States of America, irrespective of its jurisdiction of organization, and (b)
any other Restricted Subsidiary whose assets (excluding any cash and Cash
Equivalents) consist exclusively of Capital Stock or Indebtedness of one or
more Restricted Subsidiaries described in clause (a) of this definition.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States of America, which are applicable as of the date of this Indenture.
"Global Security" means a Security that is issued in global form in the
name of Cede & Co. or such other name as may be requested by an authorized
representative of the Depositary and that contains the paragraph referred to in
the footnote on page A-2 of, and the additional schedule referred to in, the
form of Security attached hereto as Exhibit A.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
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<PAGE> 20
performance (or payment of damages in the event of nonperformance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. When used as a verb,
"guarantee" shall have a corresponding meaning.
"Guarantor Senior Indebtedness" means all Indebtedness of a Subsidiary
Guarantor created, incurred, assumed or guaranteed by such Subsidiary Guarantor
(and all renewals, substitutions, refinancings or replacements thereof)
(including the principal of, interest on and fees, premiums, expenses
(including costs of collection), indemnities and other amounts payable in
connection with such Indebtedness) (and including, in the case of the Credit
Agreement, interest accruing after the filing of a petition by or against such
Subsidiary Guarantor under any bankruptcy law, in accordance with and at the
rate, including any default rate, specified with respect to such Indebtedness,
whether or not a claim for such interest is allowed as a claim after such
filing in any proceeding under such bankruptcy law), unless the instrument
governing such Indebtedness expressly provides that such Indebtedness is not
senior in right of payment to its Subsidiary Guarantee. Notwithstanding the
foregoing, Guarantor Senior Indebtedness of a Subsidiary Guarantor will not
include (a) Indebtedness of such Subsidiary Guarantor evidenced by its
Subsidiary Guarantee, (b) Indebtedness of such Subsidiary Guarantor that is
expressly subordinated or junior in right of payment to any Guarantor Senior
Indebtedness of such Subsidiary Guarantor or its Subsidiary Guarantee, (c)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11 United States Code, is by its terms without
recourse to such Subsidiary Guarantor or Non-Recourse Indebtedness, (d) any
repurchase, redemption or other obligation in respect of Redeemable Capital
Stock of such Subsidiary Guarantor, (e) to the extent it might constitute
Indebtedness, any liability for federal, state, local or other taxes owed or
owing by such Subsidiary Guarantor, (f) Indebtedness of such Subsidiary
Guarantor to the Company or any of the Company's other Subsidiaries or any
other Affiliate of the Company or any of such Affiliate's Subsidiaries, and (g)
that portion of any Indebtedness of such Subsidiary Guarantor which at the time
of issuance is issued in violation of this Indenture (but, as to any such
Indebtedness, no such violation shall be deemed to exist for purposes of this
clause (g) if the holder(s) of such Indebtedness or their representative or
such Subsidiary Guarantor shall have furnished to the Trustee an Opinion of
Counsel, addressed to the Trustee (which counsel may, as to matters of fact,
rely upon a certificate of such Subsidiary Guarantor) to the effect that the
incurrence of such Indebtedness does not violate the provisions of such
Indenture); provided, that the foregoing exclusions shall not affect the
priorities of any Indebtedness arising solely by operation of law in any case
or proceeding or similar event described in clause (a), (b) or (c) of the
definition of "Insolvency or Liquidation Proceedings."
"Hedging Obligations" means obligations of any Person arising out of
hedging transactions entered into in the ordinary course of business,
including, without limitation, swaps, options, forward sales and futures
contracts entered into in connection with interest rates, currencies and
energy-related commodities.
"Holder" or "Noteholder" means a Person in whose name a Security is
registered in the Security Register.
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<PAGE> 21
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade accounts payable
and other accrued current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit, bankers'
acceptance or other similar credit transaction and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock of such Person, or any warrants, rights or options to acquire
such Capital Stock, now or hereafter outstanding, if, and to the extent, any of
the foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (b) all obligations of such Person evidenced
by bonds, notes, debentures or other similar instruments, if, and to the
extent, any of the foregoing would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, (c) all Indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade accounts payable arising in the ordinary course of business, (d) all
Capitalized Lease Obligations of such Person, (e) the Attributable Indebtedness
(in excess of any related Capitalized Lease Obligations) related to any
Sale/Leaseback Transaction of such Person, (f) all Indebtedness referred to in
the preceding clauses of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (g) all guarantees by such Person of Indebtedness
referred to in this definition (including, with respect to any Production
Payment, any warranties or guarantees of production or payment by such Person
with respect to such Production Payment but excluding other contractual
obligations of such Person with respect to such Production Payment), (h) all
Redeemable Capital Stock of such Person valued at the greater of its voluntary
or involuntary maximum fixed repurchase price plus accrued dividends, (i) all
obligations of such Person under or in respect of currency exchange contracts
and Interest Rate Protection Obligations and (j) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of
such Person of the types referred to in clauses (a) through (i) above. For
purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock, provided, however,
that if such Redeemable Capital Stock is not at the date of determination
permitted or required to be repurchased, the "maximum fixed repurchase price"
shall be the book value of such Redeemable Capital Stock. Subject to clause
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<PAGE> 22
(g) of the first sentence of this definition, neither Dollar-Denominated
Production Payments nor Volumetric Production Payments shall be deemed to be
Indebtedness.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Goldman Sachs & Co., as initial purchasers in the Offering.
"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 in connection therewith, relating to such Person or to its
creditors, as such, or its assets, (b) any liquidation, dissolution or other
winding-up of such Person, whether voluntary or involuntary, or (c) any
assignment for the benefit of creditors or any other marshaling of assets and
liabilities of such Person.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and includes, without limitation, interest rate swaps,
caps, floors, collars and similar agreements or arrangements designed to
protect against or manage such Person's and any of its Subsidiaries' exposure
to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or
capital contribution to (by means of any transfer of cash or other property or
assets to others or any payment for property, assets or services for the
account or use of others), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities (including
derivatives) or evidences of Indebtedness issued by, any other Person. In
addition, the Fair Market Value of the net assets of any Restricted Subsidiary
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary shall be deemed to be an "Investment" made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude (a)
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices and (b) Interest Rate Protection Obligations entered
into in the ordinary course of business or as required by any Permitted
Indebtedness, Permitted Subsidiary Indebtedness or any Indebtedness incurred in
compliance with Section 9.11 hereof, but only to the extent that the notional
principal amount of such Interest Rate Protection Obligations does not exceed
105% of the principal amount of
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<PAGE> 23
such Indebtedness to which such Interest Rate Protection Obligations relate and
(c) bonds, notes, debentures or other securities received as a result of Asset
Sales permitted under Section 9.16 hereof.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
any agreement to give or grant a Lien or any lease, conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing) upon or with respect to any property of any kind; provided,
however, "Lien" shall not include rights created in a third Person in
connection with the creation by the Company or a Subsidiary of a Production
Payment. A Person shall be deemed to own subject to a Lien any property which
such Person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than 50% during a fiscal quarter
in the estimated discounted future net cash flows from proved oil and gas
reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (a) (i) of the definition of Adjusted Consolidated Net
Tangible Assets; provided, however, that the following will be excluded from
the calculation of Material Change: (i) any acquisitions during the quarter of
oil and gas reserves that have been estimated by a nationally recognized firm
of independent petroleum engineers and on which a report or reports exist and
(ii) any disposition of properties held at the beginning of such quarter that
have been disposed of as provided in Section 9.16 hereof.
"Material Restricted Subsidiary" means, at any particular time, (a) any
Subsidiary Guarantor and (b) any other Restricted Subsidiary that, together
with its Subsidiaries, (i) accounted for more than 5% of the consolidated
revenues of the Company and its Restricted Subsidiaries for the most recently
completed fiscal year of the Company or (ii) was the owner of more than 5% of
the consolidated assets of the Company and its Restricted Subsidiaries at the
end of such fiscal year, all as shown in the case of (i) and (ii) on the
consolidated financial statements of the Company and its Restricted
Subsidiaries for such fiscal year.
"Maturity" means, with respect to any Security, the date on which any
principal of such Security becomes due and payable as provided therein or
herein, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, Section 414 of the Code or Section 3(37) of ERISA,
subject to Title IV of ERISA,
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<PAGE> 24
to which the Company or any ERISA Affiliate is making or accruing or has made or
accrued an obligation to make contributions.
"Multiple Employer Plan" shall mean any employee benefit plan within the
meaning of Section 3(3) of ERISA, other than a Multiemployer Plan, subject to
Title IV of ERISA, to which the Company or any ERISA Affiliate and an employer
other than an ERISA Affiliate or the Company contribute and which is subject
to Section 4064 of ERISA.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof received by the Company or any Restricted Subsidiary in the form of
cash or Cash Equivalents (including payments in respect of deferred payment
obligations when received in the form of cash or Cash Equivalents (except to
the extent that such obligations are financed or sold with recourse to the
Company or any Restricted Subsidiary)), net of (a) brokerage commissions and
other fees and expenses (including fees and expenses of engineers, legal
counsel, accountants and investment banks) related to such Asset Sale, (b)
provisions for all taxes payable as a result of such Asset Sale, (c) amounts
required to be paid (i) to any minority interest holder or other Person (other
than the Company or any Restricted Subsidiary) owning a beneficial interest in
the assets subject to the Asset Sale or (ii) in respect of any Indebtedness
(other than Indebtedness under the Credit Agreement) secured by a Lien on any
of the Properties that were the subject of such Asset Sale and (d) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve required in accordance with GAAP consistently applied
against any liabilities associated with such Asset Sale and retained by the
Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an Officers' Certificate delivered to the Trustee; provided,
however, that any amounts remaining after adjustments, revaluations or
liquidations of such reserves shall constitute Net Cash Proceeds.
"Net Working Capital" means (a) all current assets of the Company and
its Restricted Subsidiaries, minus (b) all current liabilities of the Company
and its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in financial statements of the Company
prepared in accordance with GAAP.
"Non-payment Default" means, for purposes of Article XIII hereof, any
event (other than a Payment Default) the occurrence of which entitles one or
more Persons to act to accelerate the maturity of any Designated Senior
Indebtedness.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or a Restricted Subsidiary incurred in connection
with the acquisition by the Company or a Restricted Subsidiary of any property
or assets and as to which (a) the holders of such Indebtedness agree that they
will look solely to the property or assets so acquired and securing such
Indebtedness for payment on or in respect of such Indebtedness and (b) no
default with
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<PAGE> 25
respect to such Indebtedness would permit (after notice or passage of time or
both), according to the terms of any other Indebtedness of the Company or a
Restricted Subsidiary, any holder of such other Indebtedness to declare a
default under such other Indebtedness or cause the payment of such other
Indebtedness to be accelerated or payable prior to its stated maturity.
"Note Obligations" means any principal of, premium, if any, and interest
on, and any other amounts (including, without limitation, any payment
obligations with respect to the Securities as a result of any Asset Sale,
Change of Control or redemption) owing in respect of, the Securities payable
pursuant to the terms of the Securities or this Indenture or upon acceleration
of the Securities.
"Offering" means the Offering of the Series A Securities pursuant to the
Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum of the Company,
dated May 15, 1997, relating to the Offering.
"Officer" means, with respect to any Person, the Chairman of the Board,
the President, a Vice President, the Chief Financial Officer, the Treasurer or
an Assistant Treasurer of such Person or any individual holding a similar or
greater position of authority within the organization of such Person or, if
such Person is a limited partnership, within the organization of the general
partner of such limited partnership, including, without limitation, the manager
or managing member of a limited liability company or a director or managing
director of a foreign subsidiary.
"Officers' Certificate" means a certificate delivered to the Trustee
signed by the Chairman, the President, a Vice President or the Chief Financial
Officer, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company.
"Oil and Gas Business" means (a) the acquisition, exploration,
exploitation, development, operation and disposition of interests in oil, gas
and other hydrocarbon properties, (b) the gathering, marketing, treating,
processing, storage, refining, selling and transporting of any production from
such interests or properties, (c) any business relating to or arising from
exploration for or exploitation, development, production, treatment,
processing, storage, refining, transportation or marketing of oil, gas and
other minerals and products produced in association therewith, (d) any power
generation and electrical transmission business in a jurisdiction outside North
America where fuel required by such business is supplied, directly or
indirectly, from hydrocarbons produced substantially from properties in which
the Company or its Restricted Subsidiaries, directly or indirectly,
participates and (e) any activity necessary, appropriate or incidental to the
activities described in the foregoing clauses (a) through (d) of this
definition.
"Opinion of Counsel" means a written opinion of legal counsel for the
Company (or any Subsidiary Guarantor, if applicable), including an employee of
the Company (or any Subsidiary Guarantor, if applicable), who is reasonably
acceptable to the Trustee.
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"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Securities or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited with
the Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided, that if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee
has been made;
(c) Securities, except to the extent provided in
Sections 11.2 and 11.3 hereof, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article XI hereof; and
(d) Securities which have been paid pursuant to Section
2.9 hereof or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands the Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities
owned by the Company, any Subsidiary Guarantor or any other obligor upon the
Securities, or any Affiliate of the Company, any Subsidiary Guarantor or such
other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in making such
calculation or in relying upon any such request, demand, authorization,
direction, consent, notice or waiver, only Securities which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company, any Subsidiary Guarantor or any other obligor upon the
Securities, or any Affiliate of the Company, any Subsidiary Guarantor, or such
other obligor.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is
pari passu in right of payment to the Securities.
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"Paying Agent" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of (and premium, if any,
on) or interest on any Securities on behalf of the Company.
"Payment Default" means any default in the payment when due (whether at
Stated Maturity, upon scheduled repayment, upon acceleration or otherwise) of
principal of (or premium, if any, on) or interest on, or of unreimbursed
amounts under any drawn letter of credit or fees relating to any letter of
credit constituting, any Designated Senior Indebtedness.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PBGC Plan" shall mean any employee pension benefit plan as defined in
Section 3(2) of ERISA sponsored by the Company or an ERISA Affiliate (excluding
any Multiemployer Plan and any Multiple Employer Plan) and which is subject to
Title IV of ERISA or Section 412 of the Code.
"Permitted Guarantor Junior Securities" means, with respect to any
Subsidiary Guarantor, debt or equity securities of such Subsidiary Guarantor or
any successor corporation provided for or by a plan of reorganization or
readjustment that are subordinated at least to the same extent that such
Subsidiary Guarantee is subordinated to the payment of all Guarantor Senior
Indebtedness of such Subsidiary Guarantor when outstanding, so long as the
effect of any exclusion employing this definition is not to cause such
Subsidiary Guarantee to be treated in any case or proceeding or similar event
described in clause (a), (b) or (c) of the definition of Insolvency or
Liquidation Proceeding as part of the same class of claims as Guarantor Senior
Indebtedness of such Subsidiary Guarantor or any class of claims pari passu
with, or senior to, Guarantor Senior Indebtedness of such Subsidiary Guarantor,
for any payment or distribution; provided, that (a) if a new corporation
results from such reorganization or readjustment, such corporation assumes any
Guarantor Senior Indebtedness of such Subsidiary Guarantor not paid in full in
cash or Cash Equivalents in connection with such reorganization or readjustment
and (b) the rights of the holders of such Guarantor Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company under one or more bank
credit or revolving credit facilities in an aggregate principal amount
at any one time outstanding not to exceed (i) the greater of (A)
$270,000,000 and (B) an amount equal to the sum of (1) $170,000,000
and (2) 10% of Adjusted Consolidated Net Tangible Assets determined as
of the date of the most recent quarterly consolidated financial
statements of the Company and its Restricted Subsidiaries, less (ii)
the amount of Net Cash Proceeds applied to reduce Indebtedness
pursuant to Section 9.16 hereof (together with interest and fees under
such facilities, the "Maximum Credit Amount," with the Maximum Credit
Amount being an aggregate maximum amount for the Company and all
Guarantor Subsidiaries,
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pursuant to clause (a) of the definition of "Permitted Subsidiary
Indebtedness"), and any renewals, amendments, extensions, supplements,
modifications, deferrals, refinancings or replacements (each, for
purposes of this clause, a "refinancing") thereof by the Company,
including any successive refinancings thereof by the Company, so long
as the aggregate principal amount of any such new Indebtedness,
together with the aggregate principal amount of all other Indebtedness
outstanding pursuant to this clause (a) (and clause (a) of the
definition of "Permitted Subsidiary Indebtedness"), shall not at any
one time exceed the Maximum Credit Amount;
(b) Indebtedness of the Company under the Securities;
(c) Indebtedness of the Company outstanding on the date
of this Indenture (and not repaid or defeased with the proceeds of the
Offering);
(d) obligations of the Company pursuant to Interest Rate
Protection Obligations, but only to the extent such obligations do not
exceed 105% of the aggregate principal amount of the Indebtedness
covered by such Interest Rate Protection Obligations; obligations
under currency exchange contracts entered into in the ordinary course
of business; and Hedging Obligations;
(e) Indebtedness of the Company to any Restricted
Subsidiaries;
(f) in-kind obligations relating to net gas balancing
positions arising in the ordinary course of business and consistent
with past practice;
(g) Indebtedness in respect of bid, performance or surety
bonds issued or other reimbursement obligations for the account of the
Company in the ordinary course of business, including guarantees and
letters of credit supporting such bid, performance, surety bonds or
other reimbursement obligations (in each case other than for an
obligation for money borrowed);
(h) Non-Recourse Indebtedness;
(i) Indebtedness incurred in respect of any letters of
credit in the ordinary course of business of the Company or
reimbursement obligations in respect thereof;
(j) any renewals, extensions, substitutions, refinancings
or replacements (each, for purposes of this clause, a "refinancing")
by the Company of any Indebtedness of the Company described in clause
(b) or (c) above, including any successive refinancings by the
Company, so long as (i) any such new Indebtedness shall be in a
principal amount that does not exceed the principal amount (or, if
such Indebtedness being refinanced provides for an amount less than
the principal amount thereof to be due and payable upon a declaration
of acceleration thereof, such lesser amount as of the date
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<PAGE> 29
of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to
the terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, and (ii) in the case of any
refinancing of Subordinated Indebtedness, such new Indebtedness is
made subordinate to the Securities at least to the same extent as the
Indebtedness being refinanced and (iii) such new Indebtedness has an
Average Life equal to or longer than the Average Life of the
Indebtedness being refinanced and a final Stated Maturity equal to or
later than the final Stated Maturity of the Indebtedness being
refinanced;
(k) other Indebtedness of the Company in an aggregate
principal amount not in excess of $25,000,000 at any one time
outstanding.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any of its Restricted
Subsidiaries;
(c) Investments by the Company or any of its Restricted
Subsidiaries in another Person, if as a result of such Investment (i)
such other Person becomes a Restricted Subsidiary of the Company or
(ii) such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its properties and
assets to, the Company or a Restricted Subsidiary;
(d) entry into operating agreements, joint ventures,
partnership agreements, working interests, royalty interests, mineral
leases, processing agreements, farm-out agreements, contracts for the
sale, transportation or exchange of oil and natural gas, unitization
agreements, pooling arrangements, area of mutual interest agreements,
development agreements, joint ownership arrangements and other similar
or customary agreements, transactions, properties, interests, and
arrangements, whether or not any such Investment involves or results
in the creation of a legal entity, and Investments and expenditures in
connection therewith or pursuant thereto, in each case made or entered
into in the ordinary course of the Company or its Restricted
Subsidiaries' Oil and Gas Business;
(e) entry into any arrangement pursuant to which the
Company or any of its Restricted Subsidiaries may incur Hedging
Obligations; and
(f) other Investments having an aggregate fair market
value (measured on the date each such Investment was made without
giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (f)
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that are at the time outstanding (net of repayments, dividends and
distributions received with respect to such Investments), not to
exceed $25,000,000 at any one time outstanding.
"Permitted Junior Securities" means debt or equity securities of the
Company or any successor corporation provided for or by a plan of
reorganization or readjustment that are subordinated at least to the same
extent that the Securities are subordinated to the payment of all Senior
Indebtedness when outstanding, so long as the effect of any exclusion employing
this definition is not to cause the Securities to be treated in any case or
proceeding or similar event described in clause (a), (b) or (c) of the
definition of Insolvency or Liquidation Proceeding as part of the same class of
claims as Senior Indebtedness or any class of claims pari passu with, or senior
to, Senior Indebtedness, for any payment or distribution; provided, that (a) if
a new corporation results from such reorganization or readjustment, such
corporation assumes any Senior Indebtedness not paid in full in cash or Cash
Equivalents in connection with such reorganization or readjustment and (b) the
rights of the holders of such Senior Indebtedness are not, without the consent
of such holders, altered by such reorganization or readjustment.
"Permitted Liens" means the following types of Liens:
(a) Liens existing as of the date the Securities are
first issued;
(b) Liens securing the Securities;
(c) Liens in favor of the Company or a Subsidiary
Guarantor;
(d) Liens securing any Senior Indebtedness or Guarantor
Senior Indebtedness;
(e) Liens for taxes, assessments and governmental charges
or claims either (i) not delinquent or (ii) contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(f) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(g) Liens incurred and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security and Liens incurred and deposits
made to secure the payment or performance of tenders, statutory or regulatory
obligations, surety and appeal bonds, bids, leases, government contracts and
leases, trade contracts (other than to secure an obligation for borrowed
money), performance and return of money bonds and other similar obligations
(exclusive of obligations for the
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payment of borrowed money but including lessee and operator obligations under
statutes, governmental regulations or instruments related to the ownership,
exploration and production of oil, gas and minerals on state, federal or
foreign lands or waters);
(h) pre-judgment Liens and judgment Liens not giving rise
to an Event of Default so long as any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceeding may be initiated
shall not have expired;
(i) any interest or title of a lessor under any
Capitalized Lease Obligation or operating lease;
(j) Liens resulting from the deposit of funds or
evidences of Indebtedness in trust for the purpose of defeasing Indebtedness of
the Company or any of the Subsidiaries; customary Liens for the fees, costs and
expenses of trustees and escrow agents pursuant to the indenture, escrow
agreement or other similar agreement establishing such trust or escrow
arrangement; and Liens pursuant to merger agreements, stock purchase
agreements, asset sale agreements and similar agreements (i) limiting the
transfer of properties and assets pending consummation of the subject
transaction and (ii) in respect of earnest money deposits, good faith deposits,
purchase price adjustment escrows or similar deposits or escrow arrangements
made or established thereunder;
(k) Liens securing any Hedging Obligations of the Company
or any Restricted Subsidiary;
(l) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods;
(m) Liens securing reimbursement obligations with respect
to commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(n) Liens encumbering property or assets under
construction arising from progress or partial payments by a customer of the
Company or its Restricted Subsidiaries relating to such property or assets and
Liens to secure Indebtedness used to finance all or a part of the construction
of property or assets used by the Company or any of its Restricted Subsidiaries
in the Oil and Gas Business, provided, that such Liens do not extend to any
other property or assets owned by the Company or its Restricted Subsidiaries;
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(o) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(p) Liens securing Interest Rate Protection Obligations
which Interest Rate Protection Obligations relate to Indebtedness that is
secured by Liens otherwise permitted under this Indenture;
(q) Liens on, or related to, properties or assets to
secure all or part of the costs incurred in the ordinary course of business for
the exploration, drilling, development or operation thereof;
(r) Liens on pipeline or pipeline facilities which arise
out of operation of law;
(s) Liens arising under operating agreements, joint
venture agreements, partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, purchase, transportation,
processing or exchange of oil, gas or other hydrocarbons, unitization and
pooling declarations and agreements, area of mutual interest agreements,
development agreements, joint ownership arrangements and other agreements which
are customary in the Oil and Gas Business;
(t) Liens reserved in oil and gas mineral leases for
bonus or rental payments and for compliance with the terms of such leases;
(u) Liens constituting survey exceptions, encumbrances,
easements, or reservations of, or rights to others for, rights-of-way, zoning,
restrictions and other similar charges and encumbrances as to the use of real
properties, and minor defects of title which, in the case of any of the
foregoing, were not incurred or created to secure the payment of borrowed money
or the deferred purchase price of Property or services, and in the aggregate do
not interfere in any material respect with the ordinary conduct of the business
of the Company or its Restricted Subsidiaries;
(v) rights reserved to or vested in any municipality or
governmental, statutory or public authority by the terms of any right, power,
franchise, grant, license or permit, or by any provision of law, to terminate
such right, power, franchise, grant, license or permit or to purchase, condemn,
expropriate or recapture or to designate a purchaser of any of the property of
such Person; rights reserved to or vested in any municipality or governmental,
statutory or public authority to control or regulate any property of such
Person, or to use such property in a manner which does not materially impair
the use of such property for the purposes for which it is held by such Person;
any obligation or duties affecting the property of such Person to any
municipality or governmental, statutory or public authority with respect to any
franchise, grant, license or permit;
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(w) Liens securing Non-Recourse Indebtedness; provided,
however, that the related Non-Recourse Indebtedness shall not be secured by any
property or assets of the Company or any Restricted Subsidiary other than the
property and assets acquired by the Company with the proceeds of such
Non-Recourse Indebtedness; and
(x) Liens securing Acquired Indebtedness; provided,
however, that any such lien extends only to the properties or assets that were
subject to such Lien prior to the related acquisition by the Company or such
Restricted Subsidiary and was not created, incurred or assumed in contemplation
of such transaction.
Notwithstanding anything in clauses (a) through (x) of this definition, the
term "Permitted Liens" does not include any Liens resulting from the creation,
incurrence, issuance, assumption or guarantee of any Production Payments other
than Production Payments that are created, incurred, issued, assumed or
guaranteed in connection with the financing of, and within 30 days after, the
acquisition of the Properties are subject thereto.
"Permitted Subsidiary Indebtedness" means any of the following:
(a) Indebtedness of any Guarantor Subsidiary under one or more
bank credit or revolving credit facilities (and "refinancings" thereof) in an
amount at any one time outstanding not to exceed the Maximum Credit Amount (in
the aggregate for all Guarantor Subsidiaries and the Company, pursuant to
clause (a) of the definition of "Permitted Indebtedness");
(b) Indebtedness of any Restricted Subsidiary outstanding on the
date of this Indenture;
(c) obligations of any Restricted Subsidiary pursuant to Interest
Rate Protection Obligations, but only to the extent such obligations do not
exceed 105% of the aggregate principal amount of the Indebtedness covered by
such Interest Rate Protection Obligations; and Hedging Obligations of any
Restricted Subsidiary;
(d) the Subsidiary Guarantees (and any assumption of the
obligations guaranteed thereby);
(e) Indebtedness of any Restricted Subsidiary relating to
guarantees by such Restricted Subsidiary of Permitted Indebtedness;
(f) in-kind obligations relating to net gas balancing positions
arising in the ordinary course of business and consistent with past practice;
(g) Indebtedness in respect of bid, performance or surety bonds or
other reimbursement obligations issued for the account of any Restricted
Subsidiary in the ordinary
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<PAGE> 34
course of business, including guarantees and letters of credit supporting such
bid, performance, surety bonds or other reimbursement obligations (in each case
other than for an obligation for money borrowed);
(h) Indebtedness of any Restricted Subsidiary to any other
Restricted Subsidiary or to the Company;
(i) Indebtedness relating to guarantees by any Restricted
Subsidiary permitted to be incurred pursuant to Section 9.12(a) hereof;
(j) Indebtedness incurred in respect of letters of credit in the
ordinary course of business of any Restricted Subsidiary or reimbursement
obligation in respect thereof;
(k) Non-Recourse Indebtedness;
(l) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by any
Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary,
including any successive refinancings by such Restricted Subsidiary, so long as
(i) any such new Indebtedness shall be in a principal amount that does not
exceed the principal amount (or, if such Indebtedness being refinanced provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required to be paid
in connection with such refinancing pursuant to the terms of the Indebtedness
refinanced or the amount of any premium reasonably determined by such
Restricted Subsidiary as necessary to accomplish such refinancing, plus the
amount of expenses of such Subsidiary incurred in connection with such
refinancing and (ii) such new Indebtedness has an Average Life equal to or
longer than the Average Life of the Indebtedness being refinanced and a final
Stated Maturity equal to or later than the final Stated Maturity of the
Indebtedness being refinanced; and
(m) other Indebtedness incurred by one or more Restricted
Subsidiaries that are not Guarantor Subsidiaries in an aggregate principal
amount not to exceed $20,000,000 at any time outstanding.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.9 hereof in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
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"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock, whether now outstanding or issued
after the date of this Indenture, including, without limitation, all classes
and series of preferred or preference stock of such Person.
"Production Payments" means, collectively, Dollar-Denominated
Production Payments and Volumetric Production Payments.
"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 in any
other Person.
"Public Market" exists at any time with respect to the Qualified
Capital Stock of the Company if such Qualified Capital Stock of the Company is
then (a) registered with the Commission pursuant to Section 12(b) or 12(g) of
the Exchange Act and (b) traded either on a national securities exchange or on
the NASDAQ Stock Market.
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Redeemable Capital Stock.
"Qualified Redemption Transaction" means a call for redemption of any
Capital Stock or Subordinated Indebtedness (including any Subordinated
Indebtedness accounted for as a minority interest of the Company that is held
by a Subsidiary that is a business trust or similar entity formed for the
primary purpose of issuing preferred securities the proceeds of which are
loaned to the Company or a Restricted Subsidiary) that by its terms is
convertible into Common Stock of the Company if on the date of notice of such
call for redemption (a) a Public Market exists in the shares of Common Stock of
the Company and (b) the average closing price on the Public Market for shares
of Common Stock of the Company for the twenty trading days immediately
preceding the date of such notice exceeds 120% of the conversion price per
share (determined by reference to the redemption price) of Common Stock of the
Company issuable upon conversion of the Capital Stock or Subordinated
Indebtedness called for redemption.
"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed
prior to 91 days after the final Stated Maturity of the Securities or is
redeemable at the option of the holder thereof at any time prior to 91 days
after such final Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to 91 days after such final Stated Maturity.
"Redemption Date," when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
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<PAGE> 36
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrable Securities" shall have the meaning assigned to such term
in the Registration Rights Agreement.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of May 22, 1997, among the Company and the Initial
Purchasers.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the May 1 or November 1 (whether or not a Business Day, as the case
may be), next preceding each such Interest Payment Date.
"Reportable Event" shall mean any event described in Section 4043
(excluding subsections (b)(7) and (b)(9)) of ERISA and the regulations issued
thereunder (other than a Reportable Event not subject to the provision for
thirty-day notice to the PBGC under such regulations).
"Responsible Officer," when used with respect to the Trustee, means
any officer in the corporate trust department of the Trustee and also means,
with respect to a particular corporate trust matter, any other officer of the
Trustee to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of this Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary pursuant to the terms of this Indenture.
"S&P" means Standard and Poor's Rating Group, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale/Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which properties or assets are sold
or transferred by such Person or a Subsidiary of such Person and are thereafter
leased back from the purchaser or transferee thereof by such Person or one of
its Subsidiaries; provided, however, Sale/Leaseback Transactions shall not
include transactions whereby property or assets are sold or transferred by the
Company or any of its Restricted Subsidiaries to any Affiliate of the Company
or pursuant to any Permitted Investment constituting a joint ownership
arrangement, which property or assets are leased back, directly or indirectly,
to the Company, any Affiliate of the Company or to the constituent parties to
any such joint venture arrangement.
"Securities" means the Series A Securities and the Series B Securities
treated as a single class of Securities. For purposes of this Indenture, the
term "Securities" shall, except where the context otherwise requires, include
the Subsidiary Guarantees, if any.
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"Securities Act" means the Securities of 1933, as amended, or any
successor statute.
"Security Custodian" means the Trustee, as custodian with respect to
the Global Securities, or any successor entity thereto.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on any Indebtedness of the Company (including, in the case of the
Credit Agreement, interest accruing after the filing of a petition by or
against the Company under any bankruptcy law, in accordance with and at the
rate, including any default rate, specified with respect to such indebtedness,
whether or not a claim for such interest is allowed as a claim after such
filing in any proceeding under such bankruptcy law), whether outstanding on the
date of this Indenture or thereafter created, incurred or assumed, unless, in
the case of any particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the Securities.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (a)
Indebtedness evidenced by the Securities, (b) Indebtedness that is expressly
subordinate or junior in right of payment to any Senior Indebtedness of the
Company, (c) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11 United States Code, is by its terms
without recourse to the Company or which is Non-Recourse Indebtedness, (d) any
repurchase, redemption or other obligation in respect of Redeemable Capital
Stock of the Company, (e) to the extent it might constitute Indebtedness, any
liability for federal, state, local or other taxes owed or owing by the
Company, (f) Indebtedness of the Company to a Subsidiary of the Company or any
other Affiliate of the Company or any of such Affiliate's Subsidiaries, and (g)
that portion of any Indebtedness of the Company which at the time of issuance
is issued in violation of this Indenture (but, as to any such Indebtedness, no
such violation shall be deemed to exist for purposes of this clause (g) if the
holder(s) of such Indebtedness or their representative or the Company shall
have furnished to the Trustee an Opinion of Counsel addressed to the Trustee
(which counsel may, as to matters of fact, rely upon a certificate of the
Company) to the effect that the incurrence of such Indebtedness does not
violate the provisions of such Indenture); provided, that the foregoing
exclusions shall not affect the priorities of any Indebtedness arising solely
by operation of law in any case or proceeding or similar event described in
clause (a), (b) or (c) of the definition of "Insolvency or Liquidation
Proceeding."
"Senior Representative" means the Bank Co-agents or any other
representatives designated in writing to the Trustee of the holders of any
class or issue of Designated Senior Indebtedness; provided, in the absence of a
representative of the type described above, any holder or holders of a majority
of the principal amount outstanding of any class or issue of Designated Senior
Indebtedness may collectively act as Senior Representative for such class or
issue, subject to the provisions of any agreements relating to such Designated
Senior Indebtedness.
"Series A Securities" means the Company's 8 3/4% Series A Senior
Notes due 2007 to be issued pursuant to this Indenture.
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"Series B Securities" means the Company's 8 3/4% Series B Senior
Notes due 2007 to be issued pursuant to this Indenture in the Exchange Offer.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 2.10 hereof.
"Stated Maturity" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable and, when used with respect to any other
Indebtedness or any installment of interest thereon, means the date specified
in the instrument evidencing or governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or such installment of interest is
due and payable.
"Subordinated Indebtedness" means (a) the Company's 5 1/2% Convertible
Subordinated Notes due 2006 issued under the Indenture dated as of June 15,
1996 between the Company and Fleet National Bank, as Trustee, (b) the Company's
5 1/2% Convertible Subordinated Notes due 2004 issued under the Indenture dated
as of March 23, 1994 between the Company and Fleet National Bank, as Trustee,
and (c) other Indebtedness of the Company which, by its terms, is subordinated
in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, a corporation,
partnership, limited liability company, association or other business entity a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof. For purposes of the foregoing definition, an
arrangement by which a Person who owns an interest in an oil and gas property
is subject to a joint operating agreement, processing agreement, net profits
interest, overriding royalty interest, farmout agreement, development
agreement, area of mutual interest agreement, joint bidding agreement,
unitization agreement, pooling arrangement or other similar agreement or
arrangement shall not, in and of itself, be considered a Subsidiary.
"Subsidiary Guarantee" means any guarantee of the Securities by (a)
any Subsidiary Guarantor in accordance with the provisions of Section 12.1
hereof and (b) any Restricted Subsidiary in accordance with Section 9.12
hereof.
"Subsidiary Guarantor" means each of the Company's Restricted
Subsidiaries that becomes a guarantor of the Securities in compliance with the
provisions of Section 9.12 or Section 12.1 hereof or otherwise executes a
supplemental indenture in which such Subsidiary agrees to be bound by the terms
of this Indenture and to guarantee on an unsubordinated basis the payment of
the Securities pursuant to the provisions of Article XII hereof.
"Transfer Restricted Securities" means the Registrable Securities
under the Registration Rights Agreement.
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<PAGE> 39
"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,
except as provided in Section 8.5 hereof.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture, and its successors and assigns, until a successor
Trustee shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company that
at the time of determination will be designated an Unrestricted Subsidiary by
the Board of Directors as provided below and (b) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company as an Unrestricted Subsidiary so long as (i) neither the Company
nor any Restricted Subsidiary is directly or indirectly liable pursuant to the
terms of any Indebtedness of such Subsidiary, (ii) no default with respect to
any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity,
(iii) neither the Company nor any Restricted Subsidiary has made an Investment
in such Subsidiary unless such Investment was made pursuant to, and in
accordance with, Section 9.10 hereof (other than Investments of the type
described in clause (d) of the definition of "Permitted Investments"), and (iv)
such designation shall not result in the creation or imposition of any Lien on
any of the Properties of the Company or any Restricted Subsidiary (other than
any Permitted Lien or any Lien the creation or imposition of which shall have
been in compliance with Section 9.14 hereof); provided, however, that with
respect to clause (i), the Company or a Restricted Subsidiary may be liable for
Indebtedness of an Unrestricted Subsidiary if (A) such liability constituted a
Permitted Investment or a Restricted Payment permitted by Section 9.10 hereof,
in each case at the time of incurrence, or (B) the liability would be a
Permitted Investment at the time of designation of such Subsidiary as an
Unrestricted Subsidiary. Any such designation by the Board of Directors shall
be evidenced to the Trustee by filing a Board Resolution of the Company with
the Trustee giving effect to such designation. The Board of Directors may
designate any Unrestricted Subsidiary as a Restricted Subsidiary if,
immediately after giving effect to such designation, (1) no Default or Event of
Default shall have occurred and be continuing, (2) the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under
Section 9.11 hereof and (3) if any of the Properties of the Company or any of
its Restricted Subsidiaries would upon such designation become subject to any
Lien (other than a Permitted Lien), the creation or imposition of such Lien
shall have been in compliance with Section 9.14 hereof.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
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<PAGE> 40
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to vote in the election of the board of directors, managers or
trustees of any Person (irrespective of whether or not, at the time, Capital
Stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
to the extent (a) all of the Capital Stock in such Restricted Subsidiary, other
than any directors qualifying shares mandated by applicable law, is owned
directly or indirectly by the Company or (b) such Restricted Subsidiary is
organized in a foreign jurisdiction and is required by the applicable laws and
regulations of such foreign jurisdiction to be partially owned by the
government of such foreign jurisdiction or individual or corporate citizens in
order for such Restricted Subsidiary to transact business in such foreign
jurisdiction, provided, that the Company, directly or indirectly, owns the
remaining Capital Stock or ownership interest in such Restricted Subsidiary
and, by contract or otherwise, controls the management and business of such
Restricted Subsidiary and derives the economic benefits of ownership of such
Restricted Subsidiary to substantially the same extent as if such Restricted
Subsidiary were a wholly owned Subsidiary.
SECTION 1.2 Other Definitions.
<TABLE>
<CAPTION>
Defined
Term in Section
- ---- ----------
<S> <C>
"Agent Members" . . . . . . . . . . . . . . . . . . . . . . . . 2.8(b)
"Change of Control Notice" . . . . . . . . . . . . . . . . . . 9.15(c)
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . 9.15(a)
"Change of Control Purchase Date" . . . . . . . . . . . . . . . 9.15(c)
"Change of Control Purchase Price" . . . . . . . . . . . . . . 9.15(a)
"Defaulted Interest" . . . . . . . . . . . . . . . . . . . . . 2.10
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . 9.16(b)
"Funding Guarantor" . . . . . . . . . . . . . . . . . . . . . . 12.5
"Net Proceeds Deficiency" . . . . . . . . . . . . . . . . . . . 9.16(c)
"Net Proceeds Offer" . . . . . . . . . . . . . . . . . . . . . 9.16(c)
"Net Proceeds Payment Date" . . . . . . . . . . . . . . . . . . 9.16(c)
"Offered Price" . . . . . . . . . . . . . . . . . . . . . . . . 9.16(c)
"Pari Passu Indebtedness Amount" . . . . . . . . . . . . . . . 9.16(c)
"Pari Passu Offer" . . . . . . . . . . . . . . . . . . . . . . 9.16(c)
"Payment Amount" . . . . . . . . . . . . . . . . . . . . . . . 9.16(b)
"Payment Blockage Notice" . . . . . . . . . . . . . . . . . . . 13.3(b)
</TABLE>
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<PAGE> 41
<TABLE>
<S> <C>
"Payment Blockage Period" . . . . . . . . . . . . . . . . . . 13.3(b)
"Purchase Notice" . . . . . . . . . . . . . . . . . . . . . . . 9.16(c)
"Restricted Payment" . . . . . . . . . . . . . . . . . . . . . 9.10(a)
"Security Register" . . . . . . . . . . . . . . . . . . . . . . 2.6
"Security Registrar" . . . . . . . . . . . . . . . . . . . . . 2.6
"Subsidiary Guarantor Non-payment Default" . . . . . . . . . . 12.9(b)
"Subsidiary Guarantor Payment Default" . . . . . . . . . . . . 12.9(a)
"Subsidiary Guarantor Payment Notice" . . . . . . . . . . . . . 12.9(b)
"Surviving Entity" . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
"Trigger Date" . . . . . . . . . . . . . . . . . . . . . . . . 9.16(c)
"U.S. Government Obligations" . . . . . . . . . . . . . . . . . 11.4(a)
</TABLE>
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 used in this Indenture have the following meanings:
"indenture securities" means the Securities,
"indenture security holder" means a Holder,
"indenture to be qualified" means this Indenture,
"indenture trustee" or "institutional trustee" means the Trustee, and
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.4 Rules of Construction.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) The terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP;
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<PAGE> 42
(c) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(d) unless the context otherwise requires, the word "or"
is not exclusive;
(e) the word "including" (and, with correlative meaning,
the word "include") means including, without limiting the generality of any
description preceding such word;
(f) provisions apply to successive events and
transactions; and
(g) references to agreements and other instruments
include subsequent amendments and waivers but only to the extent not prohibited
by this Indenture.
ARTICLE II
THE SECURITIES
SECTION 2.1 Forms Generally.
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 Subsidiary
Guarantees, as the case may be, as evidenced by their execution of such
Securities or notations of Subsidiary Guarantees, as the case may be.
Securities (including the notations thereon relating to the Subsidiary
Guarantees and the Trustees certificate of authentication) bought and sold in
reliance on Rule 144A shall be issued initially in the form of one or more
permanent Global Securities substantially in the form set forth in Exhibit A
attached hereto deposited with the Trustee, as custodian for the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. Subject to the limitation set forth in Section 2.2, the principal
amount 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 the
Depositary, as hereinafter provided.
Securities (including the notations thereon relating to any Subsidiary
Guarantees and the Trustees certificate of authentication) offered and sold
other than as described in the preceding paragraph shall be issued in the form
of Definitive Securities in registered form in substantially the form set forth
in Exhibit A.
The Securities, the notations thereon relating to any Subsidiary
Guarantees and the Trustee's certificate of authentication shall be in
substantially the forms set forth in Exhibit A attached hereto, with such
appropriate insertions, omissions, substitutions and other variations
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<PAGE> 43
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Securities or notations of Subsidiary Guarantees, as the case
may be, as evidenced by their execution of the Securities or notations of
Subsidiary Guarantees, as the case may be. Any portion of the text of any
Security may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Security. The Securities may also have set forth on
the reverse side thereof a form of assignment and forms to elect purchase by
the Company pursuant to Sections 9.15 and 9.16 hereof.
SECTION 2.2 Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $100,000,000
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
2.5, 2.7, 2.9, 8.6, 9.15, 9.16 or 10.8 hereof.
The Securities shall be known and designated as the "8 3/4% Series A
Senior Subordinated Notes due 2007" and the "8 3/4% Series B Senior
Subordinated Notes due 2007" of the Company. Their Stated Maturity shall be
May 15, 2007, and they shall bear interest at the rate of 8 3/4% per annum
from May 22, 1997, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable semiannually on May 15 and
November 15 in each year, commencing November 15, 1997, and at said Stated
Maturity, until the principal thereof is paid or duly provided for.
The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in the City of New York; provided, however, interest may be
paid, at the option of the Company, by check mailed to the Persons entitled
thereto at their respective addresses as shown on the Security Register or,
upon application to the Trustee by any Holder of an aggregate principal amount
of Securities in excess of $500,000 not later than the applicable Regular
Record Date, by transfer to an account (such transfer to be made only to a
Holder of an aggregate principal amount of Securities in excess of $500,000)
maintained by such Holder with a bank in the City of New York. No transfer
will be made to any such account unless the Trustee has received written wire
instructions not less than 15 days prior to the relevant payment date.
The Securities shall be redeemable as provided in Article X hereof.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article XI hereof.
The Securities shall be guaranteed by the Subsidiary Guarantors as
provided in Article XII hereof.
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<PAGE> 44
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XIII hereof.
SECTION 2.3 Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.4 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile signatures of the present or any future such authorized
officer and may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company and,
if guaranteed by a Subsidiary Guarantor, having the notation of Subsidiary
Guarantees executed by the Subsidiary Guarantors to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities with the notation of
Subsidiary Guarantees, if any, thereon as provided in this Indenture.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature of an authorized signatory,
and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to and in compliance with Article VII
hereof, shall be consolidated or merged with or into any other Person or shall
convey, transfer, lease or otherwise dispose of its Properties substantially as
an entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other
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<PAGE> 45
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article VII hereof, any of the Securities
authenticated or delivered prior to such consolidation, merger, conveyance,
transfer, lease or other disposition may, from time to time, at the request of
the successor Person, be exchanged for other Securities executed in the name of
the successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of
a successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
SECTION 2.5 Temporary Securities.
Pending the preparation of Definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the Definitive Securities in lieu of which they are issued and having
the notations of Subsidiary Guarantees, if any, thereon and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities and notations of Subsidiary Guarantees may
determine, as conclusively evidenced by their execution of such Securities and
notations of Subsidiary Guarantees.
If temporary Securities are issued, the Company will cause Definitive
Securities to be prepared without unreasonable delay. After the preparation of
Definitive Securities, the temporary Securities shall be exchangeable for
Definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 9.2
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
Definitive Securities of authorized denominations having notations of
Subsidiary Guarantees, if any, thereon. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as Definitive Securities.
SECTION 2.6 Security Register and Depositary.
The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency designated pursuant to Section 9.2 hereof being herein sometimes
referred to as 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
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<PAGE> 46
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. The Trustee is hereby
initially appointed as security registrar (the "Security Registrar") for the
purpose of registering Securities and transfers of Securities as herein
provided.
The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Global Security.
SECTION 2.7 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Securities. When
Definitive Securities are presented to the Securities Registrar with the
request:
(x) to register the transfer of the Definitive
Securities, or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other
authorized denominations,
the Securities Registrar shall register the transfer or make the exchange as
requested if its requirement for such transactions are met; provided, however,
that the Definitive Securities presented or surrendered for registration of
transfer or exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form satisfactory to the Securities
Registrar duly executed by the Holder thereof or by his attorney, duly
authorized in writing; and
(ii) in the case of Transfer Restricted Securities
that are Definitive Securities, shall be accompanied by the following
additional information and documents, as applicable, upon which the
Securities Registrar may conclusively rely:
(A) if such Transfer Restricted
Securities are 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 C hereto); or
(B) if such Transfer Restricted
Securities are being transferred (1) to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the
Securities Act or (2) pursuant to an exemption from
registration in accordance with Rule 144 under the Securities
Act (and based upon an opinion of counsel if the Company or
the Trustee so requests) or (3) pursuant to an effective
registration statement under
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<PAGE> 47
the Securities Act, a certification to that effect from such
Holder (in substantially the form of Exhibit C hereto); or
(C) if such Transfer Restricted
Securities are being transferred to an institutional
"accredited investor," within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act pursuant to a private
placement exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the
Company or the Trustee so requests), a certification to that
effect from such Holder (in substantially the form of Exhibit
C hereto) and a certification from the applicable transferee
(in substantially the form of Exhibit D hereto); or
(D) if such Transfer Restricted
Securities are being transferred in reliance on another
exemption from the registration requirements of the Securities
Act (and based upon an opinion of counsel if the Company or
the Trustee so requests), a certification to that effect from
such Holder (in substantially the form of Exhibit C hereto).
(b) Restriction on Transfer of a Definitive Security for
a Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer
Restricted Security, certification, substantially in the form of
Exhibit C hereto, upon which the Trustee may conclusively rely, that
such Definitive Security 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
(ii) whether or not such Definitive Security is a
Transfer Restricted Security, written instructions directing the
Trustee to make, or direct the Security Custodian to make, an
endorsement on the Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security;
then the Trustee shall cancel such Definitive Security in accordance with
Section 2.12 hereof and cause, or direct the Security Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Security Custodian, the aggregate principal amount of
Securities represented by the Global Security to be increased accordingly. If
no Global Securities are then outstanding, the Company shall issue and the
Trustee shall authenticate a new Global Security in the appropriate principal
amount.
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<PAGE> 48
(c) Transfer and Exchange of Global Securities. The
transfer and exchange of Global Securities or beneficial interests therein
shall be effected through the Depositary, in accordance with this Indenture
(including the restrictions on transfer set forth herein) and the procedures of
the Depositary therefor, which shall include restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act.
(d) Transfer of a Beneficial Interest in a Global
Security for a Definitive Security.
(i) Any Person having a beneficial interest in a
Global Security may upon request exchange such beneficial interest for
a Definitive Security. Upon receipt by the Trustee of written
instructions or such other form of 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 Security, and in the
case of a Transfer Restricted Security, the following additional
information and documents (all of which may be submitted by
facsimile), upon which the Trustee may conclusively rely:
(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 C
hereto); or
(B) if such beneficial interest is being
transferred (1) to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act or (2) pursuant to an
exemption from registration in accordance with Rule 144 under
the Securities Act (and based upon an opinion of counsel if
the Company or the Trustee so requests) or (3) pursuant to an
effective registration statement under the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit C hereto); or
(C) if such beneficial interest is being
transferred to an institutional "accredited investor," within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private placement exemption from
the registration requirements of the Securities Act (and based
upon an opinion of counsel if the Company or the Trustee so
requests), a certification to that effect from such transferor
(in substantially the form of Exhibit C hereto) and a
certification from the applicable transferee (in substantially
the form of Exhibit D hereto); or
(D) if such beneficial interest is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act (and based
upon an opinion of counsel if the Company or the Trustee so
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requests), a certification to that effect from such transferor
(in substantially the form of Exhibit C hereto);
the Trustee or the Security Custodian, at the direction of the Trustee, shall,
in accordance with the standing instructions and procedures existing between
the Depositary and the Security Custodian, cause the aggregate principal amount
of Global Securities to be reduced accordingly and, following such reduction,
the Company shall execute and the Trustee shall authenticate and deliver to the
transferee a Definitive Security in the appropriate principal amount.
(ii) Definitive Securities issued in exchange for
a beneficial interest in a Global Security pursuant to this Section
2.7(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
Trustee. The Trustee shall deliver such Definitive Securities to the
Persons in whose names such Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture (other than
the provisions set forth in subsection (f) of this Section 2.7), a Global
Security 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 Securities in Absence of
Depositary. If at any time:
(i) the Depositary for the Securities notifies
the Company that the Depositary is unwilling or unable to continue as
Depositary for the Global Securities and a successor Depositary for
the Global Securities is not appointed by the Company within 90 days
after delivery of such notice;
(ii) an Event of Default has occurred and is
continuing and the Security Registrar has received a request from the
Depositary to issue Definitive Securities in lieu of all or a portion
of the Global Security (in which case the Company shall deliver
Definitive Securities within 30 days of such request); or
(iii) the Company, at its sole discretion, notifies
the Trustee in writing that it elects to cause the issuance of
Definitive Securities under this Indenture,
then the Company will execute, and the Trustee will authenticate and deliver
Definitive Securities, in an aggregate principal amount equal to the principal
amount of the Global Securities, in exchange for such Global Securities and
registered in such names as the Depositary shall instruct the Trustee or the
Company in writing.
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(g) Legends.
(i) Except as permitted by the following
paragraphs (ii) and (iii) immediately below, each Security certificate
evidencing the Global Securities and the Definitive Securities (and
all Securities issued in exchange therefor or substitution thereof)
shall bear a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DAY ON WHICH POGO PRODUCING COMPANY
(THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION
DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A THAT IS ACQUIRING SUCH SECURITY FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT ("INSTITUTIONAL ACCREDITED INVESTOR")
THAT IS ACQUIRING SUCH SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, 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, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE. THIS
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LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
Each Security certificate evidencing the Global Securities also shall bear the
paragraph referred to in the first footnote on page A-2 of the form of Security
attached hereto as Exhibit A.
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted Security
represented by a Global Security) pursuant to Rule 144 under the
Securities Act or an effective registration statement under the
Securities Act:
(A) in the case of any Transfer
Restricted Security that is a Definitive Security, the
Registrar shall permit the Holder thereof to exchange such
Transfer Restricted Security for a Definitive Security that
does not bear the legend set forth in (i) above and rescind
any restriction on the transfer of such Transfer Restricted
Security; and
(B) in the case of any Transfer
Restricted Security represented by a Global Security, such
Transfer Restricted Security shall not be required to bear the
legend set forth in (i) above if all other interests in such
Global Security have been or are concurrently being sold or
transferred pursuant to Rule 144 under the Securities Act or
pursuant to an effective registration statement under the
Securities Act, but such Transfer Restricted Security shall
continue to be subject to the provisions of Section 2.7(c)
hereof; provided, however, that with respect to any request
for an exchange of a Transfer Restricted Security that is
represented by a Global Security for a Definitive Security
that does not bear a legend set forth in (i) above, which
request is made in reliance upon Rule 144 under the Securities
Act, the Holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to Rule 144
under the Securities Act (such certification to be
substantially in the form of Exhibit C hereto).
(iii) Notwithstanding the foregoing, upon
consummation of the Exchange Offer, the Company shall issue and, upon
receipt of an authentication order in accordance with Section 2.4
hereof, the Trustee shall authenticate Series B Securities in exchange
for Series A Securities accepted for exchange in the Exchange Offer,
which Series B Securities shall not bear the legend set forth in (i)
above, and the Registrar shall rescind any restriction on the transfer
of such Securities, in each case unless the Holder of such Series A
Securities is either (A) a broker-dealer, (B) a Person participating
in the distribution of the Series A Securities or (C) a Person who is
an affiliate (as defined in Rule 144 under the Securities Act) of the
Company. The Company shall identify to the Trustee such Holders of
the Securities in a written certification signed by an Officer of
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the Company and, absent certification from the Company to such effect,
the Trustee shall assume that there are no such Holders.
(h) Cancellation and/or Adjustment of Global Security.
At such time as all beneficial interests in a Global Security have either been
exchanged for Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to or retained and canceled by the Trustee.
At any time prior to such cancellation, if any beneficial interest in a Global
Security is exchanged for Definitive Securities, redeemed, repurchased or
canceled, the principal amount of Securities represented by such Global
Security shall be reduced and an endorsement shall be made on such Global
Security, by the Trustee or the Security Custodian, at the direction of the
Trustee to reflect such reduction.
(i) General Provisions with respect to Transfer and
Exchanges.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall
authenticate Definitive Securities and Global Securities at the
Registrar's request.
(ii) No service charge shall be made to a Holder
for any registration of transfer or exchange or redemption of
Securities (except as otherwise permitted herein), but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other
than such transfer tax or similar governmental charge payable upon
exchanges pursuant to the last paragraph of Section 2.4 or Sections
2.5, 8.6 or 10.8 hereof).
(iii) The Trustee shall authenticate Definitive
Securities and Global Securities in accordance with the provisions of
Section 2.4 hereof.
(iv) Notwithstanding any other provisions of this
Indenture to the contrary, the Company shall not be required to
register the transfer or exchange of a Security between a Regular
Record Date and the next succeeding Interest Payment Date.
(v) Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating
to, or payments made on account of, Securities by the Depositary, or
for maintaining, supervising or reviewing any records of the
Depositary relating to such Securities. Neither the Company nor the
Trustee shall be liable for any delay by the related Global Security
Holder or the Depositary in identifying the beneficial owners of the
related Securities and each such Person may conclusively rely on, and
shall be protected in relying on, instructions from such Global
Security Holder or the Depositary for all purposes (including with
respect to the registration and delivery, and the respective principal
amounts, of the Securities to be issued).
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(vi) Neither the Trustee, the Security Registrar
nor the Company shall be required (A) to issue, register the transfer
of or exchange any Security during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of
Securities selected for redemption under Section 10.4 hereof and
ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (B) to register the transfer of or
exchange any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part.
(vii) All Securities and the Subsidiaries
Guarantees, if any, 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, if any,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of
transfer or exchange.
(viii) Each Holder of a Security agrees to indemnify
the Company and the Trustee against any liability that may result from
the transfer, exchange or assignment of such Holder's Security in
violation of any provision of this Indenture and/or applicable federal
or state securities law.
(ix) The Trustee shall have no obligation or duty
to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under
applicable law with respect to any transfer of any interest in any
Security other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so
if and when expressly required by the terms of, this Indenture, and to
examine the same to determine substantial compliance as to form with
the express requirements hereof.
SECTION 2.8 Additional Provisions for Global Securities.
(a) The Global Security initially shall be registered in
the name of the Depositary for such Global Security or the nominee of such
Depositary and be delivered to the Trustee as custodian for such Depositary.
(b) Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Indenture with respect to any
Global Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under the Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company 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
Trustee or any agent of the Company or the Trustee, from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or shall impair, as between the Depositary and its Agent Members, the operation
of customary practices governing the exercise of the rights of a Holder of any
Security.
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(c) The registered Holder of the 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.
SECTION 2.9 Mutilated, Destroyed, Lost and Stolen Securities.
If (a) any mutilated Security is surrendered to the Trustee or (b) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Company or
the Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute, any Subsidiary Guarantors shall execute the notations of
Subsidiary Guarantees, and upon Company Order the Trustee shall authenticate
and deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount, having the notations of Subsidiary Guarantees, if any, thereon bearing
a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company and the respective Subsidiary
Guarantors, if any, whether or not the mutilated, destroyed, lost or stolen
Security shall be at any time enforceable by anyone, and shall be entitled to
all benefits of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.10 Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date
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for such interest at the office or agency of the Company maintained for such
purpose pursuant to Section 9.2 hereof.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease
to be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(a) or (b) below:
(a) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in writing
of the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited shall be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the proposed payment and not less than
10 days after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record Date, and
in the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be given in the manner provided for in Section 14.5 hereof, not
less than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor having
been so given, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
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SECTION 2.11 Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Subsidiary Guarantors, if any, the Security
Registrar, the Trustee and any agent of the Company, the Subsidiary Guarantors
or the Trustee may treat the Person in whose name such Security is registered
as the owner of such Security for the purpose of receiving payment of principal
of (and premium, if any, on) and interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and none of the
Company, the Subsidiary Guarantors, if any, the Security Registrar, the Trustee
or any agent of the Company, the Subsidiary Guarantors or the Trustee shall be
affected by notice to the contrary.
SECTION 2.12 Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly canceled by it. The
Company may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as permitted by this Indenture. All canceled Securities held by the
Trustee shall be delivered to the Company.
SECTION 2.13 Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
SECTION 2.14 CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided, that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
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ARTICLE III
SATISFACTION AND DISCHARGE
SECTION 3.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon a Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of Securities, as expressly provided for in this Indenture) as to all
Outstanding Securities, and the Trustee, at the expense of the Company, shall,
upon payment of all amounts due the Trustee under Section 5.6 hereof, execute
proper instruments acknowledging satisfaction and discharge of this Indenture
when
(a) either
(i) all Securities theretofore authenticated and
delivered (other than (A) Securities which have been mutilated,
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 2.9 hereof and (B) Securities for whose payment
money or United States governmental obligations of the type described
in clause (a) of the definition of Cash Equivalents has theretofore
been deposited in trust with the Trustee or any Paying Agent or
segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust as provided in Section 9.3
hereof) have been delivered to the Trustee for cancellation, or
(ii) all such Securities not theretofore delivered
to the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their
Stated Maturity within one year, or
(C) are to be called for redemption
within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption by
the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (ii)(A), (ii)(B) or (ii)(C) above, has
irrevocably deposited or caused to be deposited with the Trustee as trust funds
in trust for the purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest to the date of
such deposit (in the case of Securities which have become due and payable) or
to the Stated Maturity or Redemption Date, as the case may be, together with
instructions from the Company irrevocably directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be;
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(b) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each satisfactory in form to the Trustee,
which, taken together, state that all conditions precedent herein relating to
the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 5.6 hereof and, if
money shall have been deposited with the Trustee pursuant to subclause (B) of
clause (a)(i) of this Section, the obligations of the Trustee under Section 3.2
hereof and the last paragraph of Section 9.3 hereof shall survive.
SECTION 3.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 9.3 hereof,
all money deposited with the Trustee pursuant to Section 3.1 hereof shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been deposited
with the Trustee.
ARTICLE IV
REMEDIES
SECTION 4.1 Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of the principal of or
premium, if any, on any of the Securities, whether such payment is due at
maturity, upon redemption, upon repurchase pursuant to a Change of Control
Offer or a Net Proceeds Offer, upon acceleration or otherwise; or
(b) default in the payment of any installment of interest
on any of the Securities, when it becomes due and payable, and the continuance
of such default for a period of 30 days; or
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(c) default in the performance or breach of the
provisions of Article VII hereof, the failure to make or consummate a Change of
Control Offer in accordance with Section 9.15 hereof or the failure to make or
consummate a Net Proceeds Offer in accordance with the provisions of Section
9.16 hereof; or
(d) the Company or any Subsidiary Guarantor shall fail to
perform or observe any other term, covenant or agreement contained in the
Securities, any Subsidiary Guarantee or this Indenture (other than a default
specified in (a), (b) or (c) above) for a period of 45 days after written
notice of such failure requiring the Company to remedy the same shall have been
given (i) to the Company by the Trustee or (ii) to the Company and the Trustee
by the holders of at least 25% in aggregate principal amount of the Securities
then outstanding; or
(e) the occurrence and continuation beyond any applicable
grace period of any default in the payment of the principal of (or premium, if
any, on) or interest on any Indebtedness of the Company (other than the
Securities or any Non-Recourse Indebtedness) or any Restricted Subsidiary for
money borrowed when due, or any other default causing acceleration of any
Indebtedness (other than Non-Recourse Indebtedness) of the Company or any
Restricted Subsidiary for money borrowed; provided, that the aggregate
principal amount of such Indebtedness shall exceed $12,000,000; provided
further, that if any such default is cured or waived or any such acceleration
rescinded, or such Indebtedness is repaid, within a period of 10 days from the
continuation of such default beyond the applicable grace period or the
occurrence of such acceleration, as the case may be, such Event of Default
under this Indenture and any consequential acceleration of the Securities shall
be automatically rescinded, so long as such rescission does not conflict with
any judgment or decree; or
(f) the commencement of proceedings, or the taking of any
enforcement action (including by way of set-off), by any holder of at least
$12,000,000 in aggregate principal amount of Indebtedness (other than
Non-Recourse Indebtedness) of the Company or any Restricted Subsidiary, after a
default under such Indebtedness, to retain in satisfaction of such Indebtedness
or to collect or seize, dispose of or apply in satisfaction of such
Indebtedness, Property of the Company or any Restricted Subsidiary having a
Fair Market Value in excess of $12,000,000 individually or in the aggregate;
provided, that if any such proceedings or actions are terminated or rescinded,
or such Indebtedness is repaid, such Event of Default under this Indenture and
any consequential acceleration of the Securities shall be automatically
rescinded, so long as (i) such rescission does not conflict with any judgment
or decree and (ii) the holder of such Indebtedness shall not have applied any
such Property in satisfaction of such Indebtedness; or
(g) any Subsidiary Guarantee shall for any reason cease
to be, or be asserted by the Company or any Subsidiary Guarantor, as
applicable, not to be, in full force and effect, enforceable in accordance with
its terms (except pursuant to the release of any such Subsidiary Guarantee in
accordance with this Indenture); or
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(h) if (i) any material "accumulated funding deficiency"
(as defined in Section 302 of ERISA or Section 412 of the Code), shall exist
with respect to any PBGC Plan or Multiple Employer Plan (unless a waiver or
extension is obtained under Section 412(d) or (e) of the Code and Sections 303
and 304 of ERISA), if such accumulated funding deficiency would give rise to a
material liability of the Company, (ii) a Reportable Event shall occur with
respect to any PBGC Plan or Multiple Employer Plan, which Reportable Event is
likely to result in the termination of such PBGC Plan or Multiple Employer Plan
for purposes of Title IV of ERISA and to give rise to a material liability of
the Company, (iii) proceedings to have a trustee appointed shall commence, or a
trustee shall be appointed to terminate or administer a PBGC Plan or Multiple
Employer Plan, which proceeding is likely to result in the termination of such
PBGC Plan or Multiple Employer Plan and to give rise to a material liability of
the Company with respect to such termination, (iv) a notice of intent to
terminate a PBGC Plan or Multiple Employer Plan in a distress termination under
Section 4041(c) of ERISA is furnished to participants, (v) any Multiemployer
Plan is in reorganization or is insolvent and the circumstances are such that
such reorganization or insolvency will likely result in a material liability to
the Company, (vi) there is a complete or partial withdrawal from a
Multiemployer Plan under circumstances that would likely subject the Company to
material liability, or (vii) any event or condition described in (i) through
(vi) above (determined without regard to whether the event or condition taken
alone would or could result in a material liability) shall occur or exist with
respect to a PBGC Plan, Multiple Employer Plan or Multiemployer Plan which in
combination with one or more of any events described in (i) through (vi) above
(determined without regard to whether the event or condition taken alone would
or could result in a material liability) that has occurred or exists, would
likely subject the Company, any Subsidiary Guarantor or any other Restricted
Subsidiary to any material tax, penalty or other liability (for purposes of
this paragraph (i) the term "material" and "material liability" shall mean any
tax, penalty or liability in excess of $12,000,000); or
(i) final judgments or orders rendered against the
Company or any Restricted Subsidiary that are unsatisfied and that require the
payment in money, either individually or in an aggregate amount, that is more
than $12,000,000 over the coverage under applicable insurance policies and
either (i) commencement by any creditor of an enforcement proceeding upon such
judgment (other than a judgment that is stayed by reason of pending appeal or
otherwise) or (ii) the occurrence of a 60-day period during which a stay of
such judgment or order, by reason of pending appeal or otherwise, was not in
effect; or
(j) the entry of a decree or order by a court having
jurisdiction in the premises (i) for relief in respect of the Company or any
Material Restricted Subsidiary in an involuntary case or proceeding under the
Federal Bankruptcy Code or any other applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (ii) adjudging the Company
or any Material Restricted Subsidiary bankrupt or insolvent, or approving a
petition seeking reorganization, arrangement, adjustment or composition of the
Company or a Material Restricted Subsidiary under the Federal Bankruptcy Code
or any other applicable federal or state law, or appointing under any such law
a custodian, receiver, liquidator, assignee, trustee, sequestrator
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or other similar official of the Company or any Material Restricted Subsidiary
or of a substantial part of their consolidated assets, or ordering the winding
up or liquidation of their affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(k) the commencement by the Company or any Material
Restricted Subsidiary of a voluntary case or proceeding under the Federal
Bankruptcy Code or any other applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or proceeding
to be adjudicated bankrupt or insolvent, or the consent by the Company or any
Material Restricted Subsidiary to the entry of a decree or order for relief in
respect thereof in an involuntary case or proceeding under the Federal
Bankruptcy Code or any other applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by the
Company or any Material Restricted Subsidiary of a petition or consent seeking
reorganization or relief under any applicable federal or state law, or the
consent by it under any such law to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of any of the
Company or any Material Restricted Subsidiary or of any substantial part of
their consolidated assets, or the making by it of an assignment for the benefit
of creditors under any such law.
SECTION 4.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 4.1(j) or (k) hereof) shall occur and be continuing, the Trustee, by
written notice to the Company, or the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities, by notice to the Trustee and
the Company, may declare all unpaid principal of (premium, if any, on), and
accrued and unpaid interest on all of the Securities to be due and payable
immediately, upon which declaration all amounts payable in respect of the
Securities shall be immediately due and payable. If an Event of Default
specified in Section 4.1(j) or (k) occurs and is continuing, then the principal
of (premium, if any, on), and accrued and unpaid interest on all of the
Securities shall ipso facto become and be immediately due and payable without
any declaration, notice or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Outstanding Securities, by written notice
to the Company and the Trustee, may rescind such declaration and its
consequences if:
(a) the Company or any Subsidiary Guarantor has paid or
deposited with the Trustee a sum sufficient to pay
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(i) all sums paid or advanced by the Trustee
under this Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Outstanding
Securities,
(iii) all unpaid principal of (and premium, if any,
on) any Outstanding Securities which has become due otherwise than by
such declaration of acceleration, including any Securities required to
have been purchased on a Change of Control Date or Net Proceeds
Payment Date pursuant to a Change of Control Offer or a Net Proceeds
Offer, as applicable, and interest on such unpaid principal at the
rate borne by the Securities, and
(iv) to the extent that payment of such interest
is lawful, interest upon overdue interest and overdue principal at the
rate borne by the Securities which has become due otherwise than by
such declaration of acceleration (without duplication of any amount
deposited pursuant to clauses (ii) and (iii) above);
(b) the rescission would not conflict with any judgment
or decree of a court of competent jurisdiction; and
(c) all Events of Default, other than the nonpayment of
principal of (or premium, if any, on) and interest on Securities that has
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 4.13 hereof.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
SECTION 4.3 Collection of Indebtedness and Suits for Enforcement by
Trustee.
Subject to Article XIII, the Company covenants that if
(a) default is made in the payment of any installment of
interest on any Security when such interest becomes due and payable and such
default continues for a period of 30 days or
(b) default is made in the payment of the principal of
(or premium, if any, on) any Security at the Maturity thereof or with respect
to any Security required to have been purchased by the Company on the Change of
Control Purchase Date or the Net Proceeds Payment Date pursuant to a Change of
Control Offer or a Net Proceeds Offer, as applicable, the Company will, upon
demand of the Trustee, pay to the Trustee for the benefit of the Holders of
such Securities, the whole amount then due and payable on such Securities for
principal (and premium, if any) and interest and interest on any overdue
principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue
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installment of interest at the rate borne by the Securities and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the Property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in any provision of the Securities,
this Indenture or the Registration Rights Agreement in aid of the exercise of
any power granted therein or herein, or to enforce any other proper remedy.
SECTION 4.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, any Subsidiary Guarantor or any
other obligor upon the Securities or the Property of the Company, any
Subsidiary Guarantor or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company, any Subsidiary
Guarantor or such other obligor for the payment of overdue principal, premium,
if any, or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(a) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents and take any other
actions including participation as a full member of any creditor or other
committee as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding and
(b) to collect and receive any moneys or other Property
payable or deliverable on any such claims and to distribute the same,
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the
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Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 5.6 hereof.
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 any Subsidiary Guarantees 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 4.5 Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
or any Subsidiary Guarantees may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name and as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
SECTION 4.6 Application of Money Collected.
Subject to Sections 12.8, 12.9 and 12.10 and Article XIII, any money
collected by the Trustee pursuant to this Article shall be applied in the
following order at the date or dates fixed by the Trustee and, in the case of
the distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
5.6 hereof;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any, on) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal (and premium, if any) and
interest, respectively; and
THIRD: The balance, if any, to the Company.
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SECTION 4.7 Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(a) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount
of the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(d) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 4.8 Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article XI
hereof) and in such Security of the principal of (and premium, if any, on) and
(subject to Section 2.10 hereof) interest on, such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
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SECTION 4.9 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Subsidiary Guarantors, the
Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereunder and all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 4.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 2.9 hereof, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 4.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 4.12 Control by Holders.
The Holders of not less than a majority in principal amount of the
Outstanding Securities shall 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 the Trustee; provided, that:
(a) such direction shall not be in conflict with any rule
of law or with this Indenture;
(b) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction; and
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(c) the Trustee need not take any action which might
involve it in personal liability or be unduly prejudicial to the Holders not
joining therein.
SECTION 4.13 Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount
of the outstanding Securities may on behalf of the Holders of all the
Securities waive any existing Default or Event of Default hereunder and its
consequences, except a Default or Event of Default:
(a) in respect of the payment of the principal of
(premium, if any, on), or interest on any Security; or
(b) in respect of a covenant or provision hereof which
under Article VIII hereof cannot be modified or amended without the consent of
the Holder of each Outstanding Security affected thereby.
Upon any such waiver, such Default or Event of Default shall cease to
exist for every purpose under this Indenture, but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 4.14 Waiver of Stay, Extension or Usury Laws.
The Company covenants, and each Subsidiary Guarantor shall covenant,
(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, which would
prohibit or forgive the Company or any Subsidiary Guarantor from paying all or
any portion of the principal of (premium, if any, on) and/or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) the Company
hereby expressly waives, and each Subsidiary Guarantor shall expressly waive
all benefit or advantage of any such law, and the Company covenants and each
Subsidiary Guarantor shall covenant 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.
SECTION 4.15 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 a 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 and expenses, against any party litigant in the suit, having
due regard to the merits and good faith
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of the claims or defenses made by the party litigant. This Section 4.15 does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 4.8
hereof or a suit by Holders of more than 10% in principal amount of the then
Outstanding Securities.
ARTICLE V
THE TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION 5.1 Notice of Defaults.
If a Default or Event of Default occurs and is known to the Trustee,
the Trustee shall mail to each Holder notice of the Default or Event of Default
within 60 days after the occurrence thereof in the manner and to the extent
provided in TIA Section 313(c), provided, however, that, except in the case of
a Default or Event of Default in the payment of the principal of (or premium,
if any, on) or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or Responsible Officers, of
the Trustee in good faith determine that the withholding of such notice is in
the interests of the Holders.
SECTION 5.2 Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through 315(d):
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its
selection, and the advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection
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in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) 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, note, other evidence of indebtedness 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;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Indenture;
and
(i) the Trustee shall not be deemed to know or otherwise
have notice of any Default or Event of Default unless a Responsible Officer of
the Trustee has actual knowledge thereof or unless written notice of any event
which is in fact a Default or Event of Default is received by a Responsible
Officer of the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture.
The Trustee shall not be required to advance, expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
SECTION 5.3 Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities and the notations
of Subsidiary Guarantees thereon, except for the Trustee's certificates of
authentication, shall be taken as the statements of the Company or the
Subsidiary Guarantors, as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the
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validity or sufficiency of this Indenture or of the Securities, except that the
Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Securities and perform its obligations hereunder,
and that the statements made by it in a Statement of Eligibility on Form T-1
supplied to the Company are true and accurate, subject to the qualifications
set forth herein. The Trustee shall not be accountable for the use or
application by the Company of the Securities or the proceeds thereof.
SECTION 5.4 May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company, any Subsidiary Guarantor or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to TIA Sections 310(b) and 311, may otherwise deal with the
Company and any Subsidiary Guarantor with the same rights it would have if it
were not the Trustee, Paying Agent, Security Registrar or such other agent.
SECTION 5.5 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company or any Subsidiary Guarantor.
SECTION 5.6 Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Trustee from time to time such
compensation as shall be agreed in writing from time to time between the
Company and the Trustee for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel, except any such expense,
disbursement or advance as may be attributable to the Trustee's negligence or
bad faith); and
(c) to indemnify the Trustee or any predecessor Trustee
for, and to hold it harmless against, any and all loss, liability, damage,
claim or expense, including taxes (other than taxes based on the income of the
Trustee) incurred without negligence or bad faith on its part, (i) arising out
of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim or
liability in connection with the
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exercise or performance of any of its powers or duties hereunder or (ii) in
connection with enforcing this indemnification provision.
The obligations of the Company under this Section 5.6 to compensate
the Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture or any other termination under any Insolvency or
Liquidation Proceeding. As security for the performance of such obligations of
the Company, the Trustee shall have a claim and lien prior to the Securities
upon all Property and funds held or collected by the Trustee as such, except
funds held in trust for payment of principal of (and premium, if any, on) or
interest on particular Securities. Such lien shall survive the satisfaction
and discharge of this Indenture or any other termination under any Insolvency
or Liquidation Proceeding.
When the Trustee incurs expenses or renders services after the
occurrence of a Default or an Event of Default specified in paragraphs (j) or
(k) of Section 4.1 of this Indenture, such expenses and the compensation for
such services are intended to constitute expenses of administration under any
Insolvency or Liquidation Proceeding.
SECTION 5.7 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section 5.7, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 5.8 Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act.
SECTION 5.9 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 5.10 hereof.
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(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 5.10 hereof shall not have been delivered to the
Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition, at the expense of the Company, any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of not less than a majority in principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company. If the instrument of
acceptance by a successor Trustee required by Section 5.10 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
removal, the Trustee being removed may petition, at the expense of the Company,
any court of competent jurisdiction for the appointment of a successor Trustee.
(d) If at any time
(i) the Trustee shall fail to comply with the
provisions of TIA Section 310(b) after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Security
for at least six months, or
(ii) the Trustee shall cease to be eligible under
Section 5.7 hereof and shall fail to resign after written request
therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(iii) the Trustee shall become incapable of acting
or shall be adjudged a bankrupt or insolvent or a receiver of the
Trustee or of its property shall be appointed or any public officer
shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (A) the Company, by a Board Resolution, may remove the
Trustee, or (B) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six
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months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
Such successorship may, but need not be, evidenced by a supplemental indenture.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 14.5 hereof. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
SECTION 5.10 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of all amounts
due it under Section 5.6 hereof, execute and deliver an instrument transferring
to such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder. Upon request
of any such successor Trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Securities or in this Indenture; provided, however, that the
right to adopt the certificate of authentication of any
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predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
SECTION 5.12 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor under the Securities), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company or any such other obligor.
ARTICLE VI
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 6.1 Disclosure of Names and Addresses of Holders.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company, the Subsidiary Guarantors, if any, the Security Registrar and
the Trustee that none of the Company, the Subsidiary Guarantors, the Security
Registrar or the Trustee, or any agent of either of them, shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Holders in accordance with TIA Section 312, regardless of
the source from which such information was derived, and that the Trustee shall
not be held accountable by reason of mailing any material pursuant to a request
made under TIA Section 312(b).
SECTION 6.2 Reports By Trustee.
Within 60 days after May 15 of each year commencing with May 15, 1998,
the Trustee shall transmit by mail to the Holders, as their names and addresses
appear in the Security Register, a brief report dated as of such May 15 in
accordance with and to the extent required under TIA Section 313(a). The
Trustee shall also comply with TIA Sections 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each Trustee's report, at the time of its mailing to Holders
of Securities, shall be mailed to the Company and filed with the Commission and
each stock exchange, if any, on which the Securities are listed.
SECTION 6.3 Reports by Company.
The Company (and any Subsidiary Guarantor, if applicable) shall:
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(a) file with the Trustee, and provide to each Holder,
without cost to such Holder, within 15 days after the Company (and any
Subsidiary Guarantor, if applicable) is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which the
Company (and any Subsidiary Guarantor, if applicable) may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the Exchange
Act; or, if the Company (and any Subsidiary Guarantor, if applicable) is not
required to file information, documents or reports pursuant to either of said
Sections, then it shall file with the Trustee and the Commission, in accordance
with the rules and regulations prescribed from time to time by the Commission,
such of the supplementary and periodic information, documents and reports which
may be required pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with respect to
compliance by the Company (and any Subsidiary Guarantor, if applicable) with
the conditions and covenants of this Indenture as may be required from time to
time by such rules and regulations; and
(c) transmit by mail to all Holders, in the manner and to
the extent provided in TIA Section 313(c), within 30 days after the filing
thereof with Trustee, such summaries of any information, documents and reports
required to be filed by the Company (and any Subsidiary Guarantor, if
applicable) pursuant to paragraphs (a) and (b) of this Section as may be
required by rules and regulations prescribed from time to time by the
Commission. Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE VII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR
LEASE
SECTION 7.1 Company May Consolidate, etc., Only on Certain Terms.
The Company shall not, in any single transaction or a series of
related transactions, merge or consolidate with or into any other Person, or
sell, assign, convey, transfer or lease or otherwise dispose of the Property of
the Company and its Restricted Subsidiaries substantially as an entirety on a
consolidated basis to any Person, and the Company shall not permit any
Restricted
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Subsidiary to enter into any transaction or series of related transactions if
such transaction or series of transactions would result in a sale, assignment,
conveyance, transfer, lease or other disposition of the Properties of the
Company and its Restricted Subsidiaries substantially as an entirety on a
consolidated basis to any Person, unless at the time and after giving affect
thereto:
(a) either (i) if the transaction or series of related
transactions is a merger or consolidation, the Company shall be the surviving
Person of such merger or consolidation, or (ii) the Person (if other than the
Company) formed by such consolidation or into which the Company or such
Restricted Subsidiary is merged or to which the Properties of the Company or
such Restricted Subsidiary, as the case may be, are sold, assigned, conveyed,
transferred, leased or otherwise disposed of (any such surviving Person or
transferee Person being the "Surviving Entity") shall be a corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and shall, in either case, expressly
assume by a supplemental indenture to this Indenture executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the obligations of the
Company for the due and punctual payment of the principal of (and premium, if
any, on) and interest on all the Securities and the performance and observance
of every covenant of this Indenture on the part of the Company to be performed
or observed, and this Indenture shall remain in full force and effect;
(b) immediately before and immediately after giving
effect to such transaction or series of transactions on a pro forma basis (and
treating any Indebtedness not previously an obligation of the Company or any of
its Restricted Subsidiaries which becomes the obligation of the Company or any
of its Restricted Subsidiaries in connection with or as a result of such
transaction or series of transactions as having been incurred at the time of
such transaction or series of transactions), no Default or Event of Default
shall have occurred and be continuing;
(c) except in the case of the consolidation or merger of
any Restricted Subsidiary with or into the Company, immediately after giving
effect to such transaction or series of transactions on a pro forma basis, the
Consolidated Net Worth of the Company (or the Surviving Entity if the Company
is not the continuing obligor under this Indenture) is at least equal to the
Consolidated Net Worth of the Company immediately before such transaction or
series of transactions;
(d) except in the case of the consolidation or merger of
(i) any Restricted Subsidiary with or into the Company or any Wholly Owned
Restricted Subsidiary or (ii) the Company with or into any Person that has no
Indebtedness outstanding, immediately before and after giving effect to such
transaction or series of transactions on a pro forma basis (on the assumption
that the transaction or series of transactions occurred on the first day of the
period of four full fiscal quarters ending immediately prior to the
consummation of such transaction or series of transactions, with the
appropriate adjustments with respect to such transaction or series of
transactions being included in such pro forma calculation) the Company (or the
Surviving Entity if the Company is not the continuing obligor under this
Indenture) could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 9.11 hereof;
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(e) each Subsidiary Guarantor, unless it is the party to
the transactions or series of transactions described above, shall have by
supplemental indenture confirmed that its Subsidiary Guarantee shall apply to
such Person's obligations under this Indenture and the Securities;
(f) if any of the Properties of the Company or any
Restricted Subsidiary would upon such transaction or series of transactions
become subject to any Lien (other than a Permitted Lien), the creation or
imposition of such Lien shall have been in compliance with Section 9.14 hereof;
and
(g) the Company or such Person shall have delivered to
the Trustee (i) an Officers' Certificate in form and substance reasonably
acceptable to the Trustee, stating that such consolidation, merger, conveyance,
transfer, lease or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
complies with this Indenture and that all conditions precedent herein relating
to such transaction or transactions have been satisfied and (ii) an Opinion of
Counsel stating that the requirements of Section 7.1(a) hereof have been
complied with.
SECTION 7.2 Successor Substituted.
Upon any consolidation of the Company with or merger of the Company
into any other corporation or any sale, assignment, lease, conveyance, transfer
or other disposition substantially as an entirety on a consolidated basis of
the Properties of the Company to any Person in accordance with Section 7.1
hereof, the Surviving Entity formed by such consolidation or into which the
Company is merged or to which such sale, assignment, conveyance, transfer or
other disposition (other than by lease) 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 Surviving Entity had been named
as the Company herein, and in the event of any such sale, assignment, lease,
conveyance, transfer or other disposition, the Company (which term shall for
this purpose mean the Person named as the "Company" in the first paragraph of
this Indenture or any Surviving Entity which shall theretofore become such in
the manner described in Section 7.1 hereof), except in the case of a lease,
shall be discharged of all obligations and covenants under this Indenture and
the Securities and the Company may be dissolved and liquidated and such
dissolution and liquidation shall not cause a Change of Control under clause
(e) of the definition thereof to occur unless the merger, or the sale,
assignment, lease, conveyance, transfer or other disposition substantially as
an entirety of the Properties of the Company to any Person otherwise results in
a Change of Control.
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ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, any Subsidiary Guarantors, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of the
Company contained herein and in the Securities; or
(b) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power herein conferred upon
the Company; or
(c) to add any additional Events of Default; or
(d) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee pursuant to the requirements of
Sections 5.9 and 5.10 hereof; or
(e) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to qualify, or maintain the qualification of, the
Indenture under the TIA or to make any other provisions with respect to matters
or questions arising under this Indenture or the Registration Rights Agreement;
provided, that such action shall not adversely affect the interests of the
Holders; or
(f) to secure the Securities pursuant to the requirements
of Section 9.14 hereof or otherwise; or
(g) to add any Person as a Subsidiary Guarantor as
provided in Section 12.1 hereof to evidence the succession of another Person to
any Subsidiary Guarantor and the assumption by any such successor of the
covenants and agreements of such Subsidiary Guarantor contained herein, in the
Securities and in the Subsidiary Guarantee; or
(h) to release a Subsidiary Guarantor from its Subsidiary
Guarantee pursuant to Section 9.12 hereof; or
(i) to provide for uncertificated Securities in addition
to or in place of certificated Securities.
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SECTION 8.2 Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, any Subsidiary Guarantors, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or
any installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment of any Security, or change
the coin or currency in which any Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement
of any such payment after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date); or
(b) reduce the percentage of aggregate principal amount
of the Outstanding Securities, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required for
any waiver of compliance with certain provisions of this Indenture or certain
Defaults or Events of Default hereunder and their consequences provided for in
this Indenture; or
(c) modify any of the provisions of this Section or
Section 4.13 or 9.22 hereof, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security affected
thereby;
(d) modify Section 9.12 hereof or any provisions of this
Indenture relating to any Subsidiary Guarantees in a manner adverse to the
Holders thereof; or
(e) amend or modify the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of Control,
or to make and consummate a Net Proceeds Offer with respect to any Asset Sale
or modify any of the provisions or definitions with respect thereto.
It shall not be necessary for any Act of the Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
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SECTION 8.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 8.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 8.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 8.6 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company, with the notations of Subsidiary Guarantees thereon
executed by the Subsidiary Guarantors, if any, and authenticated and delivered
by the Trustee in exchange for Outstanding Securities.
SECTION 8.7 Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 8.2 hereof, the
Company shall give notice thereof to the Holders of each Outstanding Security
affected, in the manner provided for in Section 14.5 hereof, setting forth in
general terms the substance of such supplemental indenture.
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ARTICLE IX
COVENANTS
SECTION 9.1 Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders that
it will duly and punctually pay the principal of (and premium, if any, on) and
interest on the Securities in accordance with the terms of the Securities and
this Indenture. The Company shall pay interest (including post-petition
interest in any proceeding under the Federal Bankruptcy Code or any similar
state bankruptcy law) on overdue principal, and premium, if any, at the rate
borne by the Securities to the extent lawful; and it shall pay interest
(including post-petition interest in any proceeding under the Federal
Bankruptcy Code or any similar state bankruptcy law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to
the extent lawful.
SECTION 9.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company in respect of
the Securities, the Subsidiary Guarantees and this Indenture may be served.
The office of Fleet National Bank, c/o First Chicago, 14 Wall Street, 8th Floor
- -- Window No. 2, New York, New York 10005 shall be such office or agency of the
Company, unless the Company shall designate and maintain some other office or
agency for one or more of such purposes. The Company will give prompt written
notice to the Trustee of any change in the location of any 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 aforementioned office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of the City of New York) where the
Securities may be presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, 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 any change in
the location of any such other office or agency.
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SECTION 9.3 Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
shall, on or before each due date of the principal of (and premium, if any, on)
or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or before 11:00 A.M., New York City time, on each due
date of the principal of (and premium, if any, on), or interest on, any
Securities, deposit with a Paying Agent a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due, such sum to be held in trust
for the benefit of the Persons entitled to such principal, premium or interest,
and (unless such Paying Agent is the Trustee) the Company shall promptly notify
the Trustee of such action or any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the
principal of (and premium, if any, on) or interest on Securities in trust for
the benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company
(or any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(c) at any time during the continuance of any such
Default, upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any, on) or interest on any Security and remaining unclaimed for two years or
such lesser period of time as may be required
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by applicable escheat laws after such principal (and premium, if any) or
interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, 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; 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 published in the English language, customarily published
on each Business Day and of general circulation in the Borough of Manhattan,
the City of New York, 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, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 9.4 Corporate Existence.
Except as permitted by Article VII hereof, Section 9.16 hereof or
other provisions of this Indenture, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Restricted Subsidiary; provided, however, that the Company
shall not be required to preserve any such existence of its Restricted
Subsidiaries, right or franchise, if the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole, and that the
loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 9.5 Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or Property of the Company or any
Restricted Subsidiary and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, could by law become a Lien upon the Property of the
Company or any Restricted Subsidiary; provided, however, that the Company shall
not be required to pay or discharge or cause to be paid or discharged 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.
SECTION 9.6 Maintenance of Properties.
The Company shall cause all material Properties owned by the Company
or any Restricted Subsidiary and used or held for use in the conduct of its
business or the business of any Restricted Subsidiary to be maintained and kept
in good condition, repair and working order (ordinary wear and tear excepted);
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the maintenance of any of such Properties if such
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discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Restricted Subsidiary and not
disadvantageous in any material respect to the Holders. Notwithstanding the
foregoing, nothing contained in this Section 9.6 shall limit or impair in any
way the right of the Company and its Restricted Subsidiaries to sell, divest
and otherwise to engage in transactions that are otherwise permitted by this
Indenture.
SECTION 9.7 Insurance.
The Company shall at all times keep all of its and its Restricted
Subsidiaries' Properties which are of an insurable nature insured with
insurers, believed by the Company to be responsible, against loss or damage to
the extent that Property of similar character is usually so insured by
corporations similarly situated and owning like Properties.
The Company may adopt such other plan or method of protection, in lieu
of or supplemental to insurance with insurers, whether by the establishment of
an insurance fund or reserve to be held and applied to make good losses from
casualties, or otherwise, conforming to the systems of self-insurance
maintained by corporations similarly situated and owning like Properties, as
may be determined by the Company.
SECTION 9.8 Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 90
days after the end of each fiscal year of the Company and within 45 days of the
end of each of the first, second and third quarters of each fiscal year of the
Company, in each case ending after the date hereof, an Officers' Certificate
stating that a review of the activities of the Company during the preceding
fiscal quarter or fiscal year, as applicable, 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 his knowledge the Company 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 he may have knowledge and that to
the best of his 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 or if such event has occurred, a description of
the event. Such Officers' Certificate shall comply with TIA Section 314(a)(4).
For purposes of this Section 9.8(a), such compliance shall be determined
without regard to any period of grace or requirement of notice under this
Indenture.
(b) The Company and any Subsidiary Guarantors shall, 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, an
Officers' Certificate specifying such Default or Event of Default and what
action the Company or any Subsidiary Guarantor proposes to take with respect
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thereto within 10 days after its becoming aware of the occurrence of such
Default or Event of Default.
SECTION 9.9 Reports.
The Company and any Subsidiary Guarantors shall 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(d)
of the Exchange Act). The Company (and the Subsidiary Guarantors, if
applicable) will also be required (a) to file with the Trustee, and provide to
each Holder of Securities, 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 (and
the Subsidiary Guarantors, if applicable) would be required to file such
reports and documents if the Company (and the Subsidiary Guarantors, if
applicable) 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 furnish at the Company's cost copies of such reports and
documents to any Holder of Securities promptly upon written request. The
Company is obligated to make available, upon request, to any Holder of
Securities the information required by 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 and, for so long as any Transfer Restricted
Securities remain outstanding, the Company shall furnish to all Holders and
prospective purchasers of the Securities designated by the Holders of Transfer
Restricted Securities, promptly upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) of the Securities Act. The Company
and each Subsidiary Guarantor also shall comply with the other provisions of
TIA Section 314(a).
SECTION 9.10 Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, take any of the following
actions (unless such action constitutes a Permitted Investment):
(i) declare or pay any dividend on, or make any
distribution to holders of, any shares of the Company's Capital Stock
(other than dividends or distributions payable solely in shares of
Qualified Capital Stock of the Company, options, warrants or other
rights to purchase Qualified Capital Stock of the Company);
(ii) purchase, redeem or otherwise acquire or
retire for value any Capital Stock of the Company or any Affiliate
thereof (other than any Wholly Owned Restricted Subsidiary of the
Company) or any options, warrants or other rights to acquire such
Capital Stock; provided, however, that the Company may make any
payment of the applicable redemption price in connection with a
Qualified Redemption Transaction;
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(iii) make any principal payment on or repurchase,
redeem, defease or otherwise acquire or retire for value, prior to any
scheduled principal payment, scheduled sinking fund payment or
maturity, any Pari Passu Indebtedness or Subordinated Indebtedness,
except in any case out of a Pari Passu Offer or a Net Proceeds
Deficiency pursuant to the provisions of Section 9.16 hereof and
except upon a Change of Control or similar event required by the
indenture or other agreement or instrument pursuant to which such Pari
Passu Indebtedness or Subordinated Indebtedness was issued, provided
the Company is then obligated to make a Change of Control Offer in
compliance with Section 9.15 hereof; provided, however, that the
Company may make any payment of the applicable redemption price in
connection with a Qualified Redemption Transaction;
(iv) declare or pay any dividend on, or make any
distribution to the holders of, any shares of Capital Stock of any
Restricted Subsidiary of the Company (other than to the Company or any
of its Wholly Owned Restricted Subsidiaries) or purchase, redeem or
otherwise acquire or retire for value any Capital Stock of any
Restricted Subsidiary (other than a Wholly Owned Restricted
Subsidiary) or any options, warrants or other rights to acquire any
such Capital Stock (other than with respect to any such Capital Stock
held by the Company or any Wholly Owned Restricted Subsidiary of the
Company);
(v) make any Investment; or
(vi) in connection with the acquisition of any
property or asset by the Company or its Restricted Subsidiaries after
the date of this Indenture, which property or asset would secure or be
subject to any Production Payment obligations of the Company or its
Restricted Subsidiaries, make any investment (of cash, property or
other assets) in such property or asset so acquired in addition to the
amount of Indebtedness (including Production Payment obligations)
incurred by the Company or its Restricted Subsidiaries in connection
with such acquisition;
(such payments or other actions described in (but not excluded from)
clauses (i) through (vi) are collectively referred to as "Restricted
Payments"), unless at the time of and after giving effect to the
proposed Restricted Payment (with the amount of any such Restricted
Payment, if other than cash, being the amount determined by the Board
of Directors, whose determination shall be conclusive and evidenced by
a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in
accordance with Section 9.11 hereof and (3) the aggregate amount of
all Restricted Payments declared or made after the date of this
Indenture shall not exceed the sum (without duplication) of the
following:
(I) 50% of the aggregate Consolidated Net Income
of the Company accrued on a cumulative basis during the
period beginning on the first
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day of the first month after the date of this Indenture and
ending on the last day of the Company's last fiscal quarter
ending prior to the date of such proposed Restricted Payment
(or, if such aggregate cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss), plus
(II) the aggregate net cash proceeds received
after the date of this Indenture by the Company as capital
contributions to the Company (other than from any Restricted
Subsidiary), plus
(III) the aggregate net cash proceeds received
after the date of this Indenture by the Company from the
issuance or sale (other than to any of its Restricted
Subsidiaries) of shares of Qualified Capital Stock of the
Company or any options, warrants or rights to purchase such
shares of Qualified Capital Stock of the Company, plus
(IV) the aggregate net cash proceeds received
after the date of this Indenture by the Company (other than
from any of its Restricted Subsidiaries) upon the exercise
of any options, warrants or rights to purchase shares of
Qualified Capital Stock of the Company, plus
(V) the aggregate net cash proceeds received
after the date of this Indenture by the Company from the
issuance or sale (other than to any of its Restricted
Subsidiaries) of debt securities or shares of Redeemable
Capital Stock that have been converted into or exchanged for
Qualified Capital Stock of the Company to the extent such
debt securities were originally sold for cash, together with
the aggregate cash received by the Company at the time of
such conversion or exchange, plus
(VI) to the extent not otherwise included in the
Company's Consolidated Net Income, the net reduction in
Investments in Affiliates and Unrestricted Subsidiaries
resulting from the payments of interest on Indebtedness,
dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or a
Restricted Subsidiary after the date of this Indenture from
any Affiliate or Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary (valued in each case as provided in the
definition of "Investment"), not to exceed in the case of
any Affiliate or Unrestricted Subsidiary the total amount of
Investments (other than Permitted Investments) in such
Affiliate or Unrestricted Subsidiary made by the Company and
its Restricted Subsidiaries in such Affiliate or
Unrestricted Subsidiary after the date of this Indenture,
plus
(VII) $15,000,000.
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(b) Notwithstanding paragraph (a) above, the Company and
its Restricted Subsidiaries may take the following actions so long as (in the
case of clauses (ii), (iii) and (iv) below) no Default or Event of Default
shall have occurred and be continuing:
(i) the payment of any dividend within 60 days
after the date of declaration thereof, if at such declaration date
such declaration complied with the provisions of paragraph (a) above
(and such payment shall be deemed to have been paid on such date of
declaration for purposes of any calculation required by the provisions
of paragraph (a) above);
(ii) the repurchase, redemption or other
acquisition or retirement of any shares of any class of Capital Stock
of the Company or any Restricted Subsidiary, in exchange for, or out
of the aggregate net cash proceeds of, a substantially concurrent
issue and sale (other than to a Restricted Subsidiary) of shares of
Qualified Capital Stock of the Company;
(iii) the purchase, redemption, repayment,
defeasance or other acquisition or retirement for value of any
Subordinated Indebtedness (other than Redeemable Capital Stock) in
exchange for or out of the aggregate net cash proceeds of a
substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of shares of Qualified Capital Stock of the Company;
(iv) the purchase, redemption, repayment,
defeasance or other acquisition or retirement for value of
Subordinated Indebtedness (other than Redeemable Capital Stock) in
exchange for, or out of the aggregate net cash proceeds of, a
substantially concurrent incurrence (other than to a Restricted
Subsidiary) of Subordinated Indebtedness of the Company so long as (A)
the principal amount of such new Indebtedness does not exceed the
principal amount (or, if such Subordinated Indebtedness being
refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) of the
Subordinated Indebtedness being so purchased, redeemed, repaid,
defeased, acquired or retired, plus the amount of any premium required
to be paid in connection with such refinancing pursuant to the terms
of the Subordinated Indebtedness refinanced or the amount of any
premium reasonably determined by the Company as necessary to
accomplish such refinancing, plus the amount of fees and expenses of
the Company incurred in connection with such refinancing, (B) such new
Subordinated Indebtedness is subordinated to the Securities at least
to the same extent as such Subordinated Indebtedness so purchased,
redeemed, repaid, defeased, acquired or retired, (C) such new
Subordinated Indebtedness has an Average Life to Stated Maturity that
is longer than the Average Life to Stated Maturity of the Securities
and such new Subordinated Indebtedness has a Stated Maturity for its
final scheduled principal payment that is at least 91 days later than
the Stated Maturity for the final scheduled principal payment of the
Securities; and
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(v) repurchases, acquisitions or retirements of
shares of Qualified Capital Stock of the Company deemed to occur upon
the exercise of stock options or similar rights issued under employee
benefit plans of the Company if such shares represent all or a portion
of the exercise price or are surrendered in connection with satisfying
any Federal income tax obligation.
The actions described in clauses (i), (ii) and (iii) of this paragraph
(b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that
would otherwise be available for Restricted Payments under clause (3)
of paragraph (a) (provided, that any dividend paid pursuant to clause
(i) of this paragraph (b) shall reduce the amount that would otherwise
be available under clause (3) of paragraph (a) when declared, but not
also when subsequently paid pursuant to such clause (i)), and the
actions described in clauses (iv) and (v) of this paragraph (b) shall
be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph and shall not reduce the amount that
would otherwise be available for Restricted Payments under clause (3)
of paragraph (a).
(c) In computing Consolidated Net Income of the Company
under paragraph (a) above, (i) the Company shall use audited financial
statements for the portions of the relevant period for which audited financial
statements are available on the date of determination and unaudited financial
statements and other current financial data based on the books and records of
the Company for the remaining portion of such period and (ii) the Company shall
be permitted to rely in good faith on the financial statements and other
financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment, would in
the good faith determination of the Company be permitted under the requirements
of this Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company's financial statements affecting Consolidated Net
Income of the Company for any period.
SECTION 9.11 Limitation on Indebtedness.
The Company shall not, and shall not permit any Restricted Subsidiary
to, create, incur, issue, assume, guarantee or in any manner become directly or
indirectly liable for the payment of (collectively "incur") any Indebtedness
(including any Acquired Indebtedness), other than Permitted Indebtedness and
Permitted Subsidiary Indebtedness, as the case may be; provided, however, that
the Company and its Restricted Subsidiaries that are Subsidiary Guarantors may
incur additional Indebtedness if (i) the Company's Consolidated Fixed Charge
Coverage Ratio for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness (and for which financial statements are
available), taken as one period (at the time of such incurrence, after giving
pro forma effect to: (A) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom as if such
Indebtedness had been incurred and the application of such proceeds had
occurred at the beginning of such four-quarter period; (B) the
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incurrence, repayment or retirement of any other Indebtedness (including
Permitted Indebtedness and Permitted Subsidiary Indebtedness) by the Company or
its Restricted Subsidiaries since the first day of such four-quarter period
(including any other Indebtedness to be incurred concurrent with the incurrence
of such Indebtedness) as if such Indebtedness had been incurred, repaid or
retired at the beginning of such four-quarter period; and (C) notwithstanding
clause (d) of the definition of Consolidated Net Income, the acquisition
(whether by purchase, merger or otherwise) or disposition (whether by sale,
merger or otherwise) of any Person acquired or disposed of by the Company or
its Restricted Subsidiaries, as the case may be, since the first day of such
four-quarter period, as if such acquisition or disposition had occurred at the
beginning of such four-quarter period), would have been equal to at least 2.5
to 1.0 and (ii) no Default or Event of Default would occur or be continuing.
SECTION 9.12 Limitation on Non-Guarantor Restricted Subsidiaries.
(a) The Company shall not permit any Restricted
Subsidiary that is not a Subsidiary Guarantor to guarantee the payment of any
Indebtedness of the Company unless (i)(A) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to this Indenture
providing for a Subsidiary Guarantee of the Securities by such Restricted
Subsidiary which Subsidiary Guarantee will be subordinated to Guarantor Senior
Indebtedness (but no other Indebtedness) to the same extent that the Securities
are subordinated to Senior Indebtedness and (B), with respect to any guarantee
of Subordinated Indebtedness by a Restricted Subsidiary, any such guarantee
shall be subordinated to such Restricted Subsidiary's Subsidiary Guarantee at
least to the same extent as such Subordinated Indebtedness is subordinated to
the Securities; (ii) such Restricted Subsidiary waives, and agrees not in any
manner whatsoever to claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Subsidiary Guarantee until such time as the
obligations guaranteed thereby are paid in full; and (iii) such Restricted
Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect
that such Subsidiary Guarantee has been duly executed and authorized and
constitutes a valid, binding and enforceable obligation of such Restricted
Subsidiary, except insofar as enforcement thereof (A) may be limited by
bankruptcy, insolvency or similar laws (including, without limitation, all laws
relating to fraudulent transfers and fraudulent conveyances), (B) is subject to
general principles of equity and (C) any implied covenant of good faith or fair
dealing.
(b) Notwithstanding the foregoing and the other
provisions of this Indenture, each Subsidiary Guarantee shall provide by its
terms that it shall be automatically and unconditionally released and
discharged upon (i)(A) any sale, exchange or transfer of all the Capital Stock
in the applicable Subsidiary Guarantor owned by the Company and any Restricted
Subsidiary or (B) any sale, assignment, conveyance, transfer, lease or other
disposition of the properties and assets of such Subsidiary Guarantor
substantially as an entirety, in each case, in a single transaction or series
of related transactions to any Person that is not a Restricted Subsidiary
(provided, that such transaction or series of transactions is not prohibited by
the
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Indenture), (ii) the merger or consolidation of such Subsidiary Guarantor with
or into the Company or a Restricted Subsidiary (provided, that, in the case of
a merger into or consolidation with a Restricted Subsidiary that is not then a
Subsidiary Guarantor, the surviving Restricted Subsidiary assumes the
Subsidiary Guarantee and such transaction or series of transactions is not
prohibited by this Indenture) or (iii) the release or discharge of all
guarantees by such Subsidiary Guarantor of Indebtedness other than the Note
Obligations, except a discharge or release by or as a result of the payment of
such Indebtedness by such Subsidiary Guarantor pursuant to its Subsidiary
Guarantee.
SECTION 9.13 Limitation on Issuances and Sales of Restricted Subsidiary
Capital Stock.
The Company (a) shall not permit any Restricted Subsidiary to issue
any Preferred Stock (other than to the Company or a Wholly Owned Restricted
Subsidiary) and (b) shall not permit any Person (other than the Company and/or
one or more Wholly Owned Restricted Subsidiaries) to own any Capital Stock of
any Restricted Subsidiary; provided, however, that this covenant shall not
prohibit (i) the issuance and sale of all, but not less than all, of the issued
and outstanding Capital Stock of any Restricted Subsidiary owned by the Company
or any of its Restricted Subsidiaries in compliance with the other provisions
of this Indenture, (ii) the ownership by directors of directors' qualifying
shares, (iii) the ownership by any Person of Capital Stock of a Restricted
Subsidiary that was owned by a Person at the time such Restricted Subsidiary
became a Restricted Subsidiary or acquired by a Person in connection with the
formation of the Restricted Subsidiary (including, in each case, any Capital
Stock issued as a result of a stock split, a dividend of shares of Capital
Stock to holders of such Capital Stock, a recapitalization affecting such
Capital Stock or similar event) and (iv) the ownership by any Person of Capital
Stock of any Foreign Subsidiary so long as none of the Capital Stock of that
Subsidiary has been issued in a public offering.
SECTION 9.14 Limitation on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume, affirm or suffer to exist or
become effective any Lien of any kind, except for Permitted Liens, on or with
respect to any of its Property (including any intercompany notes), whether
owned at the date of this Indenture or thereafter acquired, or any income,
profits or proceeds therefrom, or assign or otherwise convey any right to
receive income thereon, unless (a) in the case of any Lien securing
Subordinated Indebtedness, the Securities are secured by a Lien on such
Property or proceeds that is senior in priority to such Lien and (b) in the
case of any other Lien, the Securities are directly secured equally and ratably
with the obligation or liability secured by such Lien.
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SECTION 9.15 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, in whole or in part, from the
Holders of such Securities in integral multiples of $1,000, 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. The
Company shall, subject to the provisions described below, be required to
purchase all Securities properly tendered into the Change of Control Offer and
not withdrawn. The Company will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer at the same purchase price, at the same times and otherwise in
substantial compliance with the requirements applicable to a Change of Control
Offer made by the Company and purchases all Securities validly tendered and not
withdrawn under such Change of Control Offer.
(b) The Change of Control Offer is required to remain
open for at least 20 Business Days and until the close of business on the
Change of Control Purchase Date (as defined below).
(c) Not later than the 30th day following any Change of
Control, the Company shall give to the Trustee in the manner provided in
Section 14.4 and each Holder of the Securities in the manner provided in
Section 14.5, a notice (the "Change of Control Notice") stating:
(i) 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;
(ii) any information regarding such
Change of Control required to be furnished pursuant to Rule
14e-1 under the Exchange Act and any other securities laws
and regulations thereunder;
(iii) 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 75 days from the date
the Change of Control occurred;
(iv) that any Security, or portion
thereof, not tendered or accepted for payment will continue
to accrue interest;
(v) that unless the Company
defaults in depositing money with the Paying Agent in
accordance with clause (e) of this Section 9.15, or payment
is otherwise prevented, any Security, or portion thereof,
accepted
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for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control
Purchase Date; and
(vi) the instructions a Holder must
follow in order to have its Securities repurchased in
accordance with paragraph (e) of this Section.
(d) Holders electing to have Securities purchased will be
required to surrender such Securities to the Company at the address specified
in the Change of Control Notice on or prior to the Change of Control Purchase
Date. Holders will be entitled to withdraw their election if the Company
receives, not later than one Business Day prior to the Change of Control
Purchase Date, a facsimile transmission or letter setting forth the name of the
Holder, the certificate number(s) and principal amount of the Securities
delivered for purchase by the Holder as to which his election is to be
withdrawn and a statement that such Holder is withdrawing his election to have
such Securities purchased. Holders whose Securities are purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
(e) On the Change of Control Payment Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant
to a Change of Control Offer, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Securities or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee the
Securities so accepted. The Paying Agent shall promptly mail or deliver to
Holders of the Securities so accepted payment in an amount equal to the
purchase price, and the Company shall execute and the Trustee will promptly
authenticate and mail or make available for delivery to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
which any such Holder did not surrender for purchase. Any Securities not so
accepted will be promptly mailed or delivered to the Holder thereof. The
Company shall announce the results of a Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date. For purposes of this
Section 9.15, the Trustee will act as the Paying Agent.
SECTION 9.16 Limitation on Disposition of Proceeds of Asset Sales.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, engage in any Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the
Properties sold or otherwise disposed of pursuant to the Asset Sale and (ii) at
least 75% of the consideration received by the Company or the Restricted
Subsidiary, as the case may be, in respect of such Asset Sale consists of cash,
Cash Equivalents and/or the assumption by the purchaser of liabilities of the
Company (other than liabilities of the Company that are by their terms
subordinated to the Securities) or any Restricted Subsidiary as a result of
which the Company and its remaining Restricted Subsidiaries are no longer
liable.
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(b) If the Company or any Restricted Subsidiary engages
in an Asset Sale, the Company may either (i) apply the Net Cash Proceeds
thereof to reduce Senior Indebtedness, to reduce Guarantor Senior Indebtedness
or to reduce Indebtedness of any Restricted Subsidiary incurred pursuant to
clause (m) of the definition of Permitted Subsidiary Indebtedness, provided, if
any such Senior Indebtedness, Guarantor Senior Indebtedness or Permitted
Subsidiary Indebtedness has been incurred under any revolving credit facility,
that the related commitment to lend or the amount available to be reborrowed
under such facility is also reduced, or (ii) invest all or any part of the Net
Cash Proceeds thereof, within 365 days after such Asset Sale, in Properties
which replace the Properties that were the subject of the Asset Sale or in
Properties that will be used in the business of the Company or its Restricted
Subsidiaries, as the case may be ("Replacement Assets"). The amount of such Net
Cash Proceeds not applied or invested as provided in this paragraph constitutes
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals
or exceeds $15,000,000 (the "Trigger Date") the Company shall make an offer to
purchase, from all Holders of the Securities and any then outstanding Pari
Passu Indebtedness required to be repurchased or repaid on a permanent basis in
connection with an Asset Sale, an aggregate principal amount of Securities and
any then outstanding Pari Passu Indebtedness equal to such Excess Proceeds as
follows:
(i) (A) No later than the 30th day following the
Trigger Date, the Company shall give to the Trustee in the manner
provided in Section 14.4 hereof and each Holder of the Securities in
the manner provided in Section 14.5 hereof, notice (a "Purchase
Notice") offering to purchase (a "Net Proceeds Offer") from all
Holders of the Securities the maximum principal amount (expressed as a
multiple of $1,000) of Securities that may be purchased out of an
amount (the "Payment Amount") equal to the product of such Excess
Proceeds multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Securities and the denominator of
which is the sum of the outstanding principal amount of the Securities
and such Pari Passu Indebtedness, if any (subject to proration in the
event such amount is less than the aggregate Offered Price (as defined
herein) of all Securities tendered), and (B) to the extent required by
such Pari Passu Indebtedness and provided there is a permanent
reduction in the principal amount of such Pari Passu Indebtedness, the
Company shall make an offer to purchase Pari Passu Indebtedness (a
"Pari Passu Offer") in an amount (the "Pari Passu Indebtedness
Amount") equal to the excess of the Excess Proceeds over the Payment
Amount.
(ii) The offer price for the Securities shall be
payable in cash in an amount equal to 100% of the principal amount of
the Securities tendered pursuant to a Net Proceeds Offer, plus accrued
and unpaid interest, if any, to the date such Net Proceeds Offer is
consummated (the "Offered Price"), in accordance with paragraph (e) of
this Section. To the extent that the aggregate Offered Price of the
Securities tendered pursuant to a Net Proceeds Offer is less than the
Payment Amount relating thereto or the
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aggregate amount of the Pari Passu Indebtedness that is purchased or
repaid pursuant to the Pari Passu Offer is less than the Pari Passu
Indebtedness Amount (such shortfall constituting a "Net Proceeds
Deficiency"), the Company may use such Net Proceeds Deficiency for
general corporate purposes, subject to the limitations of Section 9.10
hereof.
(iii) If the aggregate Offered Price of Securities
validly tendered and not withdrawn by Holders thereof exceeds the
Payment Amount, Securities to be purchased will be selected on a pro
rata basis. Upon completion of such Net Proceeds Offer and Pari Passu
Offer, the amount of Excess Proceeds shall be reset to zero.
(iv) The Purchase Notice shall set forth a
purchase date (the "Net Proceeds Payment Date"), which shall be on a
Business Day no earlier than 30 days nor later than 75 days from the
Trigger Date. The Purchase Notice shall also state (A) that a Trigger
Date with respect to one or more Asset Sales has occurred and that
such Holder has the right to require the Company to repurchase such
Holder's Securities at the Offered Price, subject to the limitations
described in the forgoing paragraph (iii), (B) any information
regarding such Net Proceeds Offer required to be furnished pursuant to
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder, (C) that any Security, or portion thereof, not
tendered or accepted for payment will continue to accrue interest, (D)
that, unless the Company defaults in depositing money with the Paying
Agent in accordance with clause (e) of this Section 9.16, or payment
is otherwise prevented, any Security, or portion thereof, accepted for
payment pursuant to the Net Proceeds Offer shall cease to accrue
interest after the Net Proceeds Payment Date and (E) the instructions
a Holder must follow in order to have its Securities repurchased in
accordance with paragraph (e) of this Section.
(d) Holders electing to have Securities purchased will be
required to surrender such Securities to the Company at the address specified
in the Purchase Notice at least one Business Day prior to the Net Proceeds
Payment Date. Holders will be entitled to withdraw their election if the
Company receives, not later than one Business Day prior to the Net Proceeds
Payment Date, a facsimile transmission or letter setting forth the name of the
Holder, the certificate number(s) and principal amount of the Securities
delivered for purchase by the Holder as to which his election is to be
withdrawn and a statement that such Holder is withdrawing his election to have
such Securities purchased. Holders whose Securities are purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
(e) On the Net Proceeds Payment Date, the Company shall
(i) accept for payment Securities or portions thereof tendered pursuant to a
Net Proceeds Offer in an aggregate principal amount equal to the Payment 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
Payment
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Amount or such lesser amount and (iii) deliver or cause to be delivered to the
Trustee the Securities so accepted. The Paying Agent shall promptly mail or
deliver to Holders of the Securities so accepted payment in an amount equal to
the purchase price, and the Company shall execute and the Trustee will promptly
authenticate and mail or make available for delivery to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
which any such Holder did not surrender for purchase. Any Securities not so
accepted will be promptly mailed or delivered to the Holder thereof. The
Company shall announce the results of a Net Proceeds Offer on or as soon as
practicable after the Net Proceeds Payment Date. For purposes of this Section
9.16, the Trustee will act as the Paying Agent.
SECTION 9.17 Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or the rendering of any services) with, or for the
benefit of, any Affiliate of the Company other than a Restricted Subsidiary
(each, other than a Restricted Subsidiary, being an "Interested Person"),
unless (a) such transaction or series of transactions is on terms that are no
less favorable to the Company or such Restricted Subsidiary, as the case may
be, than those that would be available in a comparable arm's length transaction
with unrelated third parties who are not Interested Persons, or, in the event
no comparable transaction with an unrelated third party who is not an
Interested Person is available, on terms that are fair from a financial point
of view to the Company or such Restricted Subsidiary, as the case may be, (b)
with respect to any one transaction or series of related transactions involving
aggregate payments in excess of $10,000,000, the Company delivers an Officers'
Certificate to the Trustee certifying that such transaction or series of
transactions complies with clause (a) above and such transaction or series of
transactions has been approved by the Board of Directors and (c) with respect
to any one transaction or series of related transactions involving aggregate
payments in excess of $20,000,000, the Officers' Certificate referred to in
clause (b) above also includes a certification that such transaction or series
of transactions has been approved by a majority of the Disinterested Directors
(either of the full Board of Directors or, in the case of action by a committee
thereof, of such committee) or, in the event there are no such Disinterested
Directors, that the Company has obtained a written opinion from an independent
nationally recognized investment banking firm or appraisal firm, in either case
specializing or having a specialty in the type and subject matter of the
transaction or series of related transactions at issue, which opinion shall be
to the effect set forth in clause (a) above; provided, however, that this
covenant will not restrict the Company from (i) paying reasonable and customary
regular compensation and fees to directors of the Company who are not employees
of the Company or any Restricted Subsidiary, (ii) paying dividends on, or
making distributions with respect to, shares of Capital Stock of the Company on
a pro rata basis to the extent permitted by Section 9.10 hereof, (iii)
Restricted Payments that are permitted by Section 9.10 hereof, (iv) making
loans or advances to officers, directors and employees of the Company or any
Restricted Subsidiary made in the ordinary course of business and consistent
with customary practices in the Oil and Gas Business in an aggregate amount not
to exceed
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$1,000,000 outstanding at any one time, (v) making any indemnification or
similar payment to any director or officer (A) in accordance with the corporate
charter or bylaws of the Company or any Restricted Subsidiary, (B) under any
agreement or (C) under applicable law and (vi) fulfilling obligations of the
Company or any Restricted Subsidiary under employee compensation and other
benefit arrangements entered into or provided for in the ordinary course of
business.
SECTION 9.18 Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock to the Company or any Restricted Subsidiary, (b) pay any Indebtedness
owed to the Company or any Restricted Subsidiary, (c) make an Investment in the
Company or any Restricted Subsidiary or (d) transfer any of its properties or
assets to the Company or any Restricted Subsidiary, except for such
encumbrances or restrictions (i) pursuant to any agreement in effect or entered
into on the date of this Indenture, (ii) pursuant to any agreement or other
instrument of a Person acquired by the Company or any Restricted Subsidiary in
existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any other
Person, or the properties or assets of any other Person, other than the Person,
or the property or assets of the Person, so acquired, (iii) by reason of
customary non-assignment provisions in leases and licenses entered into in the
ordinary course of business, (iv) pursuant to capital leases and purchase money
obligations for property leased or acquired in the ordinary course of business
that impose restrictions of the nature described in clause (d) above on the
property so leased or acquired, (v) pursuant to any merger agreements, stock
purchase agreements, asset sale agreements and similar agreements limiting the
transfer of properties and assets pending consummation of the subject
transaction, (vi) pursuant to Permitted Liens which are customary limitations
on the transfer of collateral, (vii) pursuant to applicable law, (viii)
pursuant to agreements among holders of Capital Stock of any Restricted
Subsidiary of the Company requiring distributions in respect of such Capital
Stock to be made pro rata based on the percentage of ownership in and/or
contribution to such Restricted Subsidiary or (ix) existing under any agreement
that extends, renews, refinances or replaces the agreements containing the
restrictions in the foregoing clauses (i) and (ii), provided, that the terms
and conditions of any such restrictions are not materially less favorable to
the Holders of the Securities than those under or pursuant to the agreement
evidencing the Indebtedness so extended, renewed, refinanced or replaced.
SECTION 9.19 Limitation on Other Senior Subordinated Indebtedness.
The Company shall not incur, directly or indirectly, any Indebtedness
which is expressly subordinate or junior in right of payment in any respect to
Senior Indebtedness unless such
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Indebtedness ranks pari passu in right of payment with the Securities, or is
expressly subordinated in right of payment to the Securities.
SECTION 9.20 Limitation on Conduct of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in the conduct of any business other than the Oil and
Gas Business, except that the Company and the Restricted Subsidiaries may
engage in any business other than the Oil and Gas Business; provided, that the
consolidated assets of the Company and the Restricted Subsidiaries used in such
business shall not exceed, at any time, 10% of Adjusted Consolidated Net
Tangible Assets.
SECTION 9.21 Registration Rights Agreement.
The Company shall perform its obligations under the Registration
Rights Agreement and shall comply in all material respects with the terms and
conditions contained therein including, without limitation, the payment of
additional interest as described in Section 2(d) of the Registration Rights
Agreement.
SECTION 9.22 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 9.5 through 9.11, Sections
9.13 and 9.14 and Sections 9.17 through 9.20 hereof if, before or after the
time for such compliance, the Holders of at least a majority in principal
amount of the Outstanding Securities and the Subsidiary Guarantors, by Act of
such Holders and written agreement of the Subsidiary Guarantors, waive such
compliance in such instance with such term, provision or condition, but no such
waiver shall extend to or affect such term, provision or condition except to
the extent so expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force and effect.
ARTICLE X
REDEMPTION OF SECURITIES
SECTION 10.1 Right of Redemption.
The Securities may be redeemed, at the option of the Company, in whole
or in part, at any time on or after May 15, 2002, upon not less than 30 or more
than 60 days' notice to each Holder of Securities to be redeemed, subject to
the conditions and at the Redemption Prices (expressed as percentages of
principal amount) specified in the form of Security, together with accrued and
unpaid interest, if any, to the Redemption Date.
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SECTION 10.2 Applicability of Article.
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 10.3 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 10.1 hereof shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the principal amount of Securities to be redeemed and shall deliver
to the Trustee such documentation and records as shall enable the Trustee to
select the Securities to be redeemed pursuant to Section 10.4 hereof. Any
election to redeem Securities shall be revocable until the Company gives a
notice of redemption pursuant to Section 10.5 hereof to the Holders of
Securities to be redeemed.
SECTION 10.4 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not less than 30 days nor more than
60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities not previously called for redemption, pro rata, by lot or by any
other method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions of the principal of
Securities; provided, however, that any such partial redemption shall be in
integral multiples of $1,000.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 10.5 Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 14.5 hereof not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed.
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All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number) and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial redemption, the
principal amounts) of the particular Securities to be redeemed;
(d) that on the Redemption Date the Redemption Price
(together with accrued interest, if any, to the Redemption Date payable as
provided in Section 10.7 hereof) will become due and payable upon each such
Security, or the portion thereof, to be redeemed, and that, unless the Company
shall default in the payment of the Redemption Price and any applicable accrued
interest, interest thereon will cease to accrue on and after said date; and
(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. Failure to give such
notice by mailing to any Holder of Securities or any defect therein shall not
affect the validity of any proceedings for the redemption of other Securities.
SECTION 10.6 Deposit of Redemption Price.
On or before 11:00 A.M., New York City time, on any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 9.3 hereof) an amount of money sufficient to pay the
Redemption Price of, and accrued and unpaid interest on, all the Securities
which are to be redeemed on such Redemption Date.
SECTION 10.7 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued and unpaid interest,
if any, to the Redemption Date), and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued and
unpaid interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued and unpaid interest, if any, to the
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Redemption Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such
at the close of business on the relevant Record Dates according to their terms
and the provisions of Section 2.10 hereof.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Securities.
SECTION 10.8 Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at the office or agency of the Company maintained for such purpose pursuant to
Section 9.2 hereof (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal amount of the Security so
surrendered.
ARTICLE XI
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 11.1 Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 11.2 or Section 11.3
hereof be applied to all Outstanding Securities upon compliance with the
conditions set forth below in this Article XI.
SECTION 11.2 Defeasance and Discharge.
Upon the Company's exercise under Section 11.1 hereof of the option
applicable to this Section 11.2, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Securities on
the date the conditions set forth in Section 11.4 hereof are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance
means that the Company and the Subsidiary Guarantors shall be deemed (a) to
have paid and discharged their respective obligations under the Outstanding
Securities; provided, however, that the Securities shall continue to be deemed
to be "Outstanding" for purposes of Section 11.5 hereof and the other Sections
of this Indenture referred to in clauses (i) and (ii) below, and (b) to have
satisfied all their other obligations under such Securities and this Indenture
insofar as such
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Securities are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (i)
the rights of Holders of Outstanding Securities to receive, solely from the
trust fund described in Section 11.4 hereof and as more fully set forth in such
Section, payments in respect of the principal of (and premium, if any, on) and
interest on such Securities when such payments are due (or at such time as the
Securities would be subject to redemption at the option of the Company in
accordance with this Indenture), (ii) the respective obligations of the Company
and any Subsidiary Guarantors under Sections 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 4.8,
5.6, 5.9, 5.10, 9.1, 9.2, 9.3, 9.4, 12.1 (to the extent it relates to the
foregoing Sections and Article XI hereof), 12.4 and 12.5 hereof, (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder, and
(iv) the obligations of the Company and any Subsidiary Guarantors under this
Article XI. Subject to compliance with this Article XI, the Company may
exercise its option under this Section 11.2 notwithstanding the prior exercise
of its option under Section 11.3 hereof with respect to the Securities.
SECTION 11.3 Covenant Defeasance.
Upon the Company's exercise under Section 11.1 hereof of the option
applicable to this Section 11.3, the Company shall be released from its
obligations under any covenant contained in Article VII and in Sections 9.6
through 9.20 hereof with respect to the Outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the Outstanding Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Sections 4.1(c) or 4.1(d) hereof, but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 11.4 Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
11.2 or Section 11.3 hereof to the Outstanding Securities:
(a) The Company or any Subsidiary Guarantor shall
irrevocably have deposited or caused to be deposited with the Trustee (or
another trustee satisfying the requirements of Section 5.7 hereof who shall
agree to comply with the provisions of this Article XI applicable to it) as
trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the benefit of
the Holders of such
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Securities, (i) cash in U.S. Dollars in an amount, or (ii) U.S. Government
Obligations which through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (iii) a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying trustee) to pay and discharge, the principal
of (and premium, if any, on) and interest on the Outstanding Securities on the
Stated Maturity (or Redemption Date, if applicable) of such principal (and
premium, if any) or installment of interest; provided, that the Trustee shall
have been irrevocably instructed in writing by the Company to apply such money
or the proceeds of such U.S. Government Obligations to said payments with
respect to the Securities. Before such a deposit, the Company may give to the
Trustee, in accordance with Section 10.3 hereof, a notice of its election to
redeem all of the Outstanding Securities at a future date in accordance with
Article X hereof, which notice shall be irrevocable. Such irrevocable
redemption notice, if given, shall be given effect in applying the foregoing.
For this purpose, "U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a
bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with
respect to any such U.S. Government Obligation or a specific payment of
principal of or interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depository receipt, provided,
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(b) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such deposit.
(c) Such legal defeasance or covenant defeasance shall
not cause the Trustee to have a conflicting interest under this Indenture or
the Trust Indenture Act with respect to any securities of the Company.
(d) Such legal defeasance or covenant defeasance shall
not result in a breach or violation of, or constitute a default under any other
material agreement or instrument to which the Company or any Subsidiary
Guarantor is a party or by which it is bound, as evidenced to the Trustee in an
Officers' Certificate delivered to the Trustee concurrently with such deposit.
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(e) In the case of an election under Section 11.2 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel stating
that (i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this Indenture
there has been a change in the applicable Federal income tax laws; in either
case providing that the Holders of the Outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such legal defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such legal defeasance had not occurred (it being understood that (A) such
Opinion of Counsel shall also state that such ruling or applicable law 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).
(f) In the case of an election under Section 11.3 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the Outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such covenant defeasance had not occurred.
(g) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the legal defeasance under
Section 11.2 hereof or the covenant defeasance under Section 11.3 (as the case
may be) have been complied with and that no violation under agreements
governing any other outstanding Indebtedness would result therefrom.
SECTION 11.5 Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 9.3 hereof,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 11.5, the "Trustee") pursuant to Section 11.4 hereof
in respect of the Outstanding Securities shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 11.4 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the Outstanding
Securities.
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Anything in this Article XI to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 11.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent legal defeasance or
covenant defeasance, as applicable, in accordance with this Article.
SECTION 11.6 Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 11.5 hereof by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's and any Subsidiary Guarantors' obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to Section 11.2 or 11.3 hereof, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 11.5 hereof; provided, however,
that if the Company or any Subsidiary Guarantor makes any payment of principal
of (or premium, if any, on) or interest on any Security following 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 held by the Trustee or Paying Agent.
ARTICLE XII
GUARANTEES
SECTION 12.1 Unconditional Guarantee.
Each Restricted Subsidiary that hereafter becomes a Subsidiary
Guarantor shall unconditionally, jointly and severally, guarantee (each such
guarantee to be referred to herein as a "Subsidiary Guarantee," with all such
guarantees being referred to herein as the "Subsidiary Guarantees") 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:
(a) the principal of (or premium, if any, on) 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 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
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(b) in case of any extension of time of payment or
renewal of any Securities or of any 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;
subject, however, in the case of clauses (a) and (b) above, to the limitations
set forth in Section 12.4 hereof.
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. The
obligations of each Subsidiary Guarantor 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 shall waive 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
and all demands whatsoever and shall covenant that its Subsidiary Guarantee
will not be discharged except by complete performance of the obligations
contained in the Securities, this Indenture and in the Subsidiary 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, the Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. No Subsidiary
Guarantor shall be entitled to any right of subrogation in relation to the
Holders in respect of any obligations guaranteed by the Subsidiary Guarantee
until payment in full of all obligations guaranteed thereby. Each Subsidiary
Guarantor shall further agree that, as between each Subsidiary Guarantor, on
the one hand, and the Holders and the Trustee, on the other hand, (i) the
maturity of the obligations guaranteed by the Subsidiary Guarantee may be
accelerated as provided in Article IV hereof for the purposes of the Subsidiary
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed by the Subsidiary
Guarantee, and (ii) in the event of any acceleration of such obligations as
provided in Article IV hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by each Subsidiary Guarantor
for the purpose of the Subsidiary Guarantee.
SECTION 12.2 Subsidiary Guarantors May Consolidate, etc. on Certain
Terms.
(a) Except as set forth in Articles VII and IX hereof,
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
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or conveyance of the assets of a Subsidiary Guarantor substantially as an
entirety to the Company or another Subsidiary Guarantor.
(b) Except as set forth in Articles VII and IX hereof,
nothing contained in this Indenture or in any of the Securities shall prevent
any consolidation or merger of a Subsidiary Guarantor with or into any Person
or Persons 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 Properties
of a Subsidiary Guarantor substantially as an entirety, to a Person 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 Sections 12.2(a) and 12.3 hereof, (A) 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
and (B) each Subsidiary Guarantor shall covenant and agree that, upon any such
consolidation, merger, sale or conveyance, such Subsidiary Guarantor's
Subsidiary Guarantee set forth in this Article XII and in a notation to the
Securities, 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 Person in the merger), by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee, by
such Person formed by such consolidation, or into which the Subsidiary
Guarantor shall have merged, or by the Person that shall have acquired such
Property (except to the extent the following Section 12.3 would result in the
release of such Subsidiary Guarantee in which case such surviving Person does
not have to execute any such supplemental indenture). In the case of any such
consolidation, merger, sale or conveyance and upon the assumption by the
successor Person, 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 Person 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 12.3 Release of a Subsidiary Guarantor.
The Subsidiary Guarantee of any Restricted Subsidiary shall be
released upon the terms and subject to the conditions set forth in Section 9.12
(b) hereof. Each Subsidiary Guarantor that is designated as an Unrestricted
Subsidiary in accordance with the provisions of this Indenture shall be
released from all of its Subsidiary 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 Company Request 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 premium, if any, on) and interest on the Securities as
provided in this Article XII.
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SECTION 12.4 Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor shall confirm, 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 Subsidiary Guarantee
not constitute a fraudulent transfer or conveyance for purposes of any federal
or state law. To effectuate the foregoing intention, the Holders hereby
irrevocably agree, and each Subsidiary Guarantor shall irrevocably agree, that
the obligations of each Subsidiary Guarantor under its Subsidiary Guarantee
shall be limited to the maximum amount as will, after giving effect to all
other contingent and fixed liabilities (including, but not limited to,
Guarantor Senior Indebtedness) of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Subsidiary Guarantee or pursuant to Section 12.5 hereof,
result in the obligations of such Subsidiary Guarantor under its Subsidiary
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. This Section 12.4 is for the benefit of the creditors of
each Subsidiary Guarantor.
SECTION 12.5 Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors shall agree, inter se, that in
the event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under its Subsidiary Guarantee, such Funding Guarantor
shall be entitled to a contribution from each other Subsidiary Guarantor (if
any) 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 its Subsidiary Guarantee.
SECTION 12.6 Execution and Delivery of Notation of Subsidiary Guarantee.
To evidence the Subsidiary Guarantee set forth in Section 12.1 hereof,
the Company shall cause each Subsidiary Guarantor to execute the notation of
Subsidiary Guarantee in substantially the form set forth in Exhibit B attached
hereto to be endorsed on each Security ordered to be authenticated and
delivered by the Trustee, and shall cause this Indenture or a supplemental
indenture to be executed on behalf of each Subsidiary Guarantor by its
President or one of its Vice Presidents and attested to by one of its
Secretaries or Assistant Secretaries. Each Subsidiary Guarantor shall agree
that its Subsidiary Guarantee set forth in Section 12.1 hereof shall remain in
full force and effect notwithstanding any failure to endorse on each Security a
notation of such Subsidiary Guarantee. Each such notation of Subsidiary
Guarantee shall be signed on behalf of each Subsidiary Guarantor by two
Officers, or an Officer and an Assistant Secretary or one Officer shall sign
and one Officer or an Assistant Secretary (each of whom shall, in each case,
have been duly authorized by all requisite corporate actions) shall attest to
such notation of Subsidiary Guarantee prior to the authentication of the
Security on which it is endorsed, and the
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delivery of such Security by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth
in this Indenture on behalf of the Subsidiary Guarantors. Such signatures upon
the notation of Subsidiary Guarantee may be by manual or facsimile signature of
such Officers and may be imprinted or otherwise reproduced on the Subsidiary
Guarantee, and in case any such Officer who shall have signed the notation of
Subsidiary Guarantee shall cease to be such Officer before the Security on
which such notation of Subsidiary 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 notation of Subsidiary Guarantee had not
ceased to be such Officer of the Subsidiary Guarantor.
SECTION 12.7 Severability.
In case any provision of the Subsidiary 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.
SECTION 12.8 Subsidiary Guarantees Subordinated to Guarantor Senior
Indebtedness.
Each Subsidiary Guarantor shall covenant and agree, and each Holder of
a Security, by his acceptance of the Subsidiary Guarantees, covenants and
agrees, for the benefit of the holders, from time to time, of Guarantor Senior
Indebtedness, that the payments by such Subsidiary Guarantor in respect of its
Subsidiary Guarantee are subordinated and subject in right of payment, to the
extent and in the manner provided in this Article XII, to the prior payment in
full in cash or Cash Equivalents of all Guarantor Senior Indebtedness of such
Subsidiary Guarantor, whether outstanding on the date of this Indenture or
thereafter created, incurred, assumed or guaranteed; provided, however, that
the Subsidiary Guarantees of the Subsidiary Guarantors, the Indebtedness
represented thereby and the payment of the principal of (and premium, if any,
on) and the interest on the Securities pursuant to the Subsidiary Guarantees in
all respects shall rank pari passu with, or prior to, all existing and future
unsecured indebtedness (including, without limitation, Indebtedness) of the
Subsidiary Guarantors that is subordinated to the Guarantor Senior
Indebtedness.
This Article XII shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Guarantor Senior Indebtedness, and such provisions are made for the benefit of
the holders of Guarantor Senior Indebtedness, and such holders are made
obligees hereunder and any of them may enforce such provisions.
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SECTION 12.9 Subsidiary Guarantors Not to Make Payments with Respect to
Subsidiary Guarantees in Certain Circumstances.
(a) No payment or distribution of any Property of any
Subsidiary Guarantor of any kind or character (other than Permitted Guarantor
Junior Securities) may be made by such Subsidiary Guarantor in respect of its
Subsidiary Guarantee upon the happening of any default in respect of the
payment or required prepayment of any of its Guarantor Senior Indebtedness when
the same becomes due and payable (a "Subsidiary Guarantor Payment Default"),
unless and until such Subsidiary Guarantor Payment Default shall have been
cured or waived in writing or shall have ceased to exist or such Guarantor
Senior Indebtedness shall have been paid in full or otherwise discharged, after
which such Subsidiary Guarantor shall resume making any and all required
payments in respect of its Subsidiary Guarantee, including any missed payments.
(b) Upon the happening of any event (other than a
Subsidiary Guarantor Payment Default) that entitles one or more Persons to
accelerate the maturity of any Designated Guarantor Senior Indebtedness (a
"Subsidiary Guarantor Non-payment Default"), and receipt by the applicable
Subsidiary Guarantor and a Responsible Officer of the Trustee, on behalf of the
Trustee, of written notice thereof from one or more of the holders of such
Designated Guarantor Senior Indebtedness or their representative (a "Subsidiary
Guarantor Payment Notice"), then, unless and until such Subsidiary Guarantor
Non-payment Default shall have been cured or waived in writing or shall have
ceased to exist or such Designated Guarantor Senior Indebtedness is paid in
full or otherwise discharged or the holders (or a representative of the
holders) of such Designated Guarantor Senior Indebtedness give their written
approval, no payment or distribution shall be made by such Subsidiary Guarantor
in respect of its Subsidiary Guarantee (other than Permitted Guarantor Junior
Securities); provided, however, that these provisions will not prevent the
making of any payment for more than 179 days after a Subsidiary Guarantor
Payment Notice shall have been given after which, subject to Section 12.9(a),
such Subsidiary Guarantor will resume making any and all required payments in
respect of its Subsidiary Guarantee, including any missed payments.
Notwithstanding any other provision of this Indenture, only one Subsidiary
Guarantor Payment Notice shall be given with respect to any Subsidiary
Guarantee within any 360 consecutive day period. No Subsidiary Guarantor
Non-payment Default with respect to Designated Guarantor Senior Indebtedness
that existed or was continuing on the date of any Subsidiary Guarantor Payment
Notice with respect to the Designated Guarantor Senior Indebtedness initiating
such Subsidiary Guarantor Payment Notice shall be, or can be, made the basis
for the commencement of a subsequent Subsidiary Guarantor Payment Notice with
respect to such Subsidiary Guarantee, whether or not within a period of 360
consecutive days, unless such default shall have been cured or waived for a
period of not less than 90 consecutive days (it being acknowledged that any
subsequent event, or any breach of any financial covenant for a period
commencing after the date of commencement of such Subsidiary Guarantor Payment
Notice, that, in either case, would give rise to a Subsidiary Guarantor
Non-payment Default pursuant to any provision under which a Subsidiary
Guarantor Non-payment Default previously existed or was continuing shall
constitute a new Subsidiary Guarantor Non-payment Default for this purpose;
provided, that, in the case of a breach of a
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particular financial covenant, such Subsidiary Guarantor shall have been in
compliance for at least one full 90 consecutive day period commencing after the
date of commencement of such Subsidiary Guarantor Payment Notice). In no event
shall a Subsidiary Guarantor Payment Notice extend beyond 179 days from the
date of its receipt and there must be a 181 consecutive day period in any 360
consecutive day period during which no Subsidiary Guarantor Payment Notice is
in effect with respect to such Subsidiary Guarantee.
(c) In the event that, notwithstanding the foregoing, a
Subsidiary Guarantor shall make any payment in respect of its Subsidiary
Guarantee to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 12.9, then and in such event such payment
shall be paid over and delivered forthwith to the Company. In the event that a
Subsidiary Guarantor shall make any payment in respect of its Subsidiary
Guarantee to the Trustee and a Responsible Officer of the Trustee, on behalf of
the Trustee, shall receive written notice of a Subsidiary Guarantor Payment
Default or a Subsidiary Guarantor Non-payment Default from one or more of the
Holders of Guarantor Senior Indebtedness (or their representative) prior to
making any payment to Holders in respect of the Subsidiary Guarantee and prior
to 11:00 a.m. Eastern Time on the date which is two Business Days prior to the
date upon which by the terms hereof any money may become payable for any
purpose, such payments shall be paid over by the Trustee and delivered
forthwith to the Company. Each Subsidiary Guarantor shall give prompt written
notice to the Trustee of any default under any of its Guarantor Senior
Indebtedness or under any agreement pursuant to which its Guarantor Senior
Indebtedness may have been issued.
SECTION 12.10 Subsidiary Guarantees Subordinated to Prior Payment of All
Guarantor Senior Indebtedness upon Dissolution, etc.
Upon any distribution of Properties of any Subsidiary Guarantor or
payment on behalf of a Subsidiary Guarantor in the event of any Insolvency or
Liquidation Proceeding with respect to such Subsidiary Guarantor:
(a) the holders of such Subsidiary Guarantor's Guarantor
Senior Indebtedness shall be entitled to receive payment in full in cash or
Cash Equivalents of such Guarantor Senior Indebtedness (including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Indebtedness, whether or not a claim for such interest would
be allowed in such a proceeding) before the Holders are entitled to receive any
direct or indirect payment or distribution of any kind or character, whether in
cash, property or securities (other than Permitted Guarantor Junior
Securities), on account of any payment in respect of such Subsidiary
Guarantor's Subsidiary Guarantee;
(b) any direct or indirect payment or distribution of
Properties of such Subsidiary Guarantor of any kind or character, whether in
cash, property or securities (other than a payment or distribution in the form
of Permitted Guarantor Junior Securities), by set-off or otherwise, to which
the Holders or the Trustee, on behalf of the Holders, would be entitled except
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for the provisions of this Article XII, shall be paid by the Subsidiary
Guarantor or by any liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of such Guarantor
Senior Indebtedness or their representative or representatives or to the
trustee or trustees under any indenture under which any instruments evidencing
any of such Senior Guarantor Indebtedness may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of such
Guarantor Senior Indebtedness held or represented by each, to the extent
necessary to make payment in full in cash or Cash Equivalents of all such
Guarantor Senior Indebtedness, after giving effect to any concurrent payment or
distribution to the holders of such Guarantor Senior Indebtedness;
(c) in the event that, notwithstanding the foregoing
provisions of this Section 12.10, any direct or indirect payment or
distribution of Properties of such Subsidiary Guarantor of any kind or
character, whether in cash, property or securities (other than a payment or
distribution in the form of Permitted Guarantor Junior Securities), shall be
received by the Trustee or the Holders before all such Guarantor Senior
Indebtedness is paid in full or otherwise discharged, such Properties shall be
received and held in trust for and shall be paid over to the holders of such
Guarantor Senior Indebtedness remaining unpaid or their representatives, for
application to the payment of such Guarantor Senior Indebtedness until all such
Guarantor Senior Indebtedness shall have been paid or provided for in full in
cash or Cash Equivalents, after giving effect to any concurrent payment or
distribution to the holders of such Guarantor Senior Indebtedness;
(d) to the extent any payment of or distribution in
respect of Guarantor Senior Indebtedness (whether by or on behalf of the
Company or any Subsidiary Guarantor, as proceeds of security or enforcement of
any right of setoff or otherwise) is declared to be fraudulent or preferential,
set aside or required to be paid to any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person under any bankruptcy,
insolvency, receivership, fraudulent conveyance, fraudulent transfer or similar
law, then if such payment or distribution is recovered by, or paid over to,
such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar person, the Guarantor Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payments had not occurred; and
(e) to the extent that the obligation to repay any
Guarantor Senior Indebtedness is declared to be fraudulent, invalid or
otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent
conveyance, fraudulent transfer or similar law, then the obligation so declared
fraudulent, invalid or otherwise set aside (and all other amounts that would
come due with respect thereto had such obligation not been so affected) shall
be deemed to be reinstated and outstanding as Guarantor Senior Indebtedness for
all purposes hereof as if such declaration, invalidity or setting aside had not
occurred.
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The Company or a Subsidiary Guarantor shall give prompt written notice
to a Responsible Officer of the Trustee, on behalf of the Trustee, of the
occurrence of any Insolvency or Liquidation Proceeding with respect to such
Subsidiary Guarantor.
SECTION 12.11 Holders to be Subrogated to Rights of Holders of Guarantor
Senior Indebtedness.
After the payment in full in cash or Cash Equivalents of all Guarantor
Senior Indebtedness of a Subsidiary Guarantor, the Holders shall be subrogated
(equally and ratably with the holders of all other Indebtedness of such
Subsidiary Guarantor which by its express terms is subordinated to such
Guarantor Senior Indebtedness to substantially the same extent as such
Subsidiary Guarantee is so subordinated and which is entitled to like rights of
subrogation as a result of payments made to the holders of such Guarantor
Senior Indebtedness) to the rights of the holders of such Guarantor Senior
Indebtedness to receive payments or distributions of cash, property and
securities of such Subsidiary Guarantor applicable to such Guarantor Senior
Indebtedness until all amounts owing on the Securities shall be paid in full in
cash or Cash Equivalents, and for the purpose of such subrogation no payments
or distributions to the holders of such Guarantor Senior Indebtedness by or on
behalf of such Subsidiary Guarantor or by or on behalf of the Holders by virtue
of this Article XII which otherwise would have been made to the Holders shall,
as between such Subsidiary Guarantor, its creditors other than the holders of
Guarantor Senior Indebtedness, and the Holders of the Securities, be deemed to
be a payment or distribution by such Subsidiary Guarantor to or on account of
such Guarantor Senior Indebtedness, it being understood that the subordination
provisions of this Article XII are, and are intended solely for, the purpose of
defining the relative rights of the Holders, on the one hand, and the holders
of Guarantor Senior Indebtedness, on the other hand.
SECTION 12.12 Obligations of the Subsidiary Guarantors Unconditional.
Nothing contained in this Article XII or elsewhere in this Indenture
or in any Security is intended to or shall impair, as between Subsidiary
Guarantors and the Holders, the obligation of the Subsidiary Guarantors under
the Subsidiary Guarantees, or is intended to or shall affect the relative
rights of the Holders and creditors of the Subsidiary Guarantors, nor shall
anything herein or therein prevent the Trustee or any Holder from exercising
all remedies otherwise permitted by applicable law upon Default under this
Indenture subject to the rights, if any, under this Article XII of the holders
of Guarantor Senior Indebtedness in respect of cash, property or securities of
any Subsidiary Guarantor received upon the exercise of any such remedy. Upon
any distribution of Properties of a Subsidiary Guarantor referred to in this
Article XII, the Trustee, subject to the provisions of Section 5.2 hereof, and
the Holders of the Securities shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of a trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, or agent or other person
making any distribution to the Trustee or to the Holders of the Securities, for
the purpose of ascertaining the persons entitled to participate in such
distribution,
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the holders of the related Guarantor Senior Indebtedness and other indebtedness
of such Subsidiary Guarantor, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article XII.
SECTION 12.13 Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts (other than the existence of a Payment Default or a
Payment Blockage Period) that would prohibit the making of any payment to or by
the Trustee, unless a Responsible Officer of the Trustee, on behalf of the
Trustee, shall have received at the Corporate Trust Office written notice
thereof from a Subsidiary Guarantor or from one or more holders of Guarantor
Senior Indebtedness or Designated Guarantor Senior Indebtedness, in the case of
a Subsidiary Guarantor Non-payment Default, or from any representative thereof;
and, prior to the receipt of any such written notice, the Trustee, subject to
TIA Sections 315(a) through 315(d), shall be entitled to assume conclusively
that no such facts exist. The Trustee shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself to be a
holder of Guarantor Senior Indebtedness or Designated Guarantor Senior
Indebtedness, in the case of a Subsidiary Guarantor Non-payment Default (or a
representative on behalf of such holder), to establish that such notice has
been given by a holder of Guarantor Senior Indebtedness or Designated Guarantor
Senior Indebtedness, in the case of a Subsidiary Guarantor Non-payment
Default, or a representative on behalf of any such holder or holders.
SECTION 12.14 Application by Trustee of Money Deposited with it.
Except as provided in Article XIV, any deposit of money by a
Subsidiary Guarantor with the Trustee or any Paying Agent (whether or not in
trust) for any payment in respect of the related Subsidiary Guarantee shall be
subject to the provisions of Sections 12.8, 12.9, 12.10 and 12.11 hereof except
that, if a Payment Default does not exist, a Payment Blockage Period is not in
effect and if prior to 11:00 a.m. Eastern time on the date which is one
Business Day prior to the date on which by the terms of this Indenture any such
money may become payable for any purpose, the Trustee or, in the case of any
such deposit of money with a Paying Agent, the Paying Agent shall not have
received with respect to such money the notice provided for in Section 12.13
hereof, then the Trustee or such Paying Agent, as the case may be, shall have
full power and authority to receive such money and to apply the same to the
purpose for which it was received, and shall not be affected by any notice to
the contrary which may be received by it on or after 11:00 a.m., Eastern time,
one Business Day prior to such payment date. In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Guarantor Senior Indebtedness to participate
in any payment or distribution pursuant to this Article XII, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Guarantor Senior Indebtedness held by such Person,
the extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article XII,
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and if such evidence is not furnished, the Trustee may defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment.
The Trustee, however, shall not be deemed to owe any fiduciary duty to
the holders of Guarantor Senior Indebtedness but shall have only such
obligations to such holders as are expressly set forth in this Article XII.
SECTION 12.15 Subordination Rights Not Impaired by Acts or Omissions of
Subsidiary Guarantors or Holders of Guarantor Senior
Indebtedness.
No right of any present or future holders of any Guarantor Senior
Indebtedness of a Subsidiary Guarantor to enforce subordination as provided
herein shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of such Subsidiary Guarantor or by any act or
failure to act by any such holder, or by any noncompliance by such Subsidiary
Guarantor with the terms of this Indenture, regardless of any knowledge thereof
which any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the preceding paragraph
of this Section, the holders of Guarantor Senior Indebtedness may, at any time
and from time to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility to the Holders of
the Securities and without impairing or releasing the subordination or other
benefits provided in this Article, or the obligations hereunder of the Holders
of the Securities to the holders of Guarantor Senior Indebtedness, do any one
or more of the following: (a) change the manner, place or terms of payment or
extend the time of payment of, or renew, exchange, amend, increase or alter,
Guarantor Senior Indebtedness or the term of any instrument evidencing the same
or any agreement under which Guarantor Senior Indebtedness is outstanding or
any liability of any obligor thereon (unless such change, extension or
alteration results in such Indebtedness no longer being Guarantor Senior
Indebtedness as defined in this Indenture); (b) sell, exchange, release or
otherwise deal with any Property pledged, mortgaged or otherwise securing
Guarantor Senior Indebtedness; (c) settle or compromise any Guarantor Senior
Indebtedness or any liability of any obligor thereon or release any Person
liable in any manner for the collection of Guarantor Senior Indebtedness; and
(d) exercise or refrain from exercising any rights against the Company and any
other Person.
SECTION 12.16 Holders Authorize Trustee to Effectuate Subordination of
Subsidiary Guarantees.
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 XII and
appoints the Trustee as his attorney-in-fact for such purpose, including, in
the event of any Insolvency or Liquidation Proceeding with respect to any
Subsidiary Guarantor, the immediate filing of a claim for the unpaid balance of
his Securities
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pursuant to the related Subsidiary Guarantee in the form required in said
proceedings and the causing of said claim to be approved.
SECTION 12.17 Right of Trustee to Hold Guarantor Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article XII in respect of any Guarantor Senior Indebtedness at any time held by
it to the same extent as any other holder of Guarantor Senior Indebtedness, and
nothing in this Indenture shall be construed to deprive the Trustee of any of
its rights as such holder.
SECTION 12.18 Article XII Not to Prevent Events of Default.
The failure to make a payment on account of the Subsidiary Guarantees
by reason of any provision in this Article XII shall not be construed as
preventing the occurrence of an Event of Default under this Indenture.
SECTION 12.19 Payment.
For purposes of this Article XII, a payment with respect to any
Subsidiary Guarantee or with respect to principal of or interest on any
Security or any Subsidiary Guarantee shall include, without limitation, payment
of principal of and interest on any Security, any depositing of funds under
Article IV hereof, any payment on account of any repurchase or redemption of
any Security and any payment or recovery on any claim (whether for rescission
or damages and whether based on contract, tort, duty imposed by law, or any
other theory of liability) relating to or arising out of the offer, sale or
purchase of any Security.
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1 Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees for the benefit of the
holders, from time to time, of Senior Indebtedness, that, to the extent and in
the manner hereinafter set forth in this Article XIII, the Indebtedness
represented by the Securities and the payment of and distributions of or with
respect to the Note Obligations are hereby expressly made subordinate and
subject in right of payment as provided in this Article XIII to the prior
payment in full in cash or Cash Equivalents of all amounts payable under all
existing and future Senior Indebtedness which includes, without limitation, all
Credit Agreement Obligations of the Company.
This Article XIII shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become Holders of, or continue to hold
Senior Indebtedness; and such
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provisions are made for the benefit of the holders of Senior Indebtedness; and
the holders of Senior Indebtedness are made obligees hereunder and they or each
of them may enforce such provisions.
SECTION 13.2 Payment Over of Proceeds upon Dissolution, etc.
In the event of an Insolvency or Liquidation Proceeding with respect
to the Company:
(i) the holders of all Senior Indebtedness shall
be entitled to receive payment in full in cash or Cash Equivalents of
all Senior Indebtedness (including interest after the commencement of
such proceeding at the rate specified in the applicable Senior
Indebtedness, whether or not a claim for such interest would be
allowed in such proceeding) before the Holders of the Securities are
entitled to receive any direct or indirect payment or distribution
whether in cash, property or securities (excluding Permitted Junior
Securities of the Company) on account of the Note Obligations;
(ii) any direct or indirect payment or
distribution of Properties of the Company of any kind or character,
whether in cash, property or securities (excluding Permitted Junior
Securities of the Company), by set-off or otherwise, to which the
Holders or the Trustee would be entitled but for the provisions of
this Article XIII shall be paid by the liquidating trustee or agent or
other Person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly
to the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture
under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full
in cash or Cash Equivalents of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution
to the holders of such Senior Indebtedness;
(iii) in the event that, notwithstanding the
foregoing provisions of this Section 13.2, the Trustee or the Holder
of any Security shall have received any payment or distribution of
Properties of the Company of any kind or character, whether in cash,
property or securities, by set off or otherwise, in respect of any
Note Obligations before all Senior Indebtedness is paid or provided
for in full in cash or Cash Equivalents, then and in such event such
payment or distribution (excluding Permitted Junior Securities of the
Company) shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other person making payment or distribution of assets of the
Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full in cash or Cash Equivalents, after giving effect
to any concurrent payment or distribution to or for the holders of
Senior Indebtedness;
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(iv) to the extent any payment of or distribution
in respect of Senior Indebtedness (whether by or on behalf of the
Company or any Subsidiary Guarantor, as proceeds of security or
enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to any
receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance, fraudulent transfer or similar law, then if
such payment or distribution is recovered by, or paid over to, such
receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payments had not occurred; and
(v) to the extent that the obligation to repay
any Senior Indebtedness is declared to be fraudulent, invalid or
otherwise set aside under any bankruptcy, insolvency, receivership,
fraudulent conveyance, fraudulent transfer or similar law, then the
obligation so declared fraudulent, invalid or otherwise set aside (and
all other amounts that would come due with respect thereto had such
obligation not been so affected) shall be deemed to be reinstated and
outstanding as Senior Indebtedness for all purposes hereof as if such
declaration, invalidity or setting aside had not occurred.
The consolidation of the Company with, or the merger of the Company
with or into, another Person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its Properties substantially as
an entirety to another corporation upon the terms and conditions set forth in
Article VII hereof shall not be deemed a dissolution, winding-up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of assets
and liabilities of the Company for the purposes of this Article if the
corporation formed by such consolidation or the surviving entity of such merger
or the corporation which acquires by conveyance, transfer or lease such
Properties substantially as an entirety, as the case may be, shall, as a part
of such consolidation, merger, conveyance, transfer or lease, comply with the
conditions set forth in such Article VII hereof to the extent applicable.
SECTION 13.3 Suspension of Payment When Senior Indebtedness in Default.
(a) Unless Section 13.2 hereof shall be applicable, upon
the occurrence of a Payment Default, no direct or indirect payment or
distribution of any Property of the Company of any kind or character shall be
made by or on behalf of the Company on account of the Note Obligations or on
account of the purchase or redemption or other acquisition of any Note
Obligations unless and until such Payment Default shall have been cured or
waived or shall have ceased to exist or such Designated Senior Indebtedness
shall have been discharged or paid in full in cash or Cash Equivalents, after
which, subject to Section 13.2 hereof (if applicable), the Company shall resume
making any and all required payments in respect of the Securities and the other
Note Obligations, including any missed payments.
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(b) Unless Section 13.2 hereof shall be applicable, upon
(i) the occurrence of a Non-payment Default and (ii) receipt by the Trustee
from a Senior Representative of written notice (a "Payment Blockage Notice") of
such occurrence stating that such notice is a Payment Blockage Notice pursuant
to this Section 13.3(b) of this Indenture, no payment or distribution of any
Property of the Company of any kind or character shall be made by or on behalf
of the Company on account of any Note Obligations or on account of the purchase
or redemption or other acquisition of Note Obligations for a period ("Payment
Blockage Period") commencing on the date of receipt by the Trustee of such
notice unless and until the earliest to occur of the following events (subject
to any blockage of payments that may then be in effect under Section 13.2
hereof or subsection (a) of this Section 13.3 hereof) (A) 179 days shall have
elapsed since receipt of such written notice by the Trustee, (B) the date, as
set forth in a written notice to the Company or the Trustee from the Senior
Representative initiating such Payment Blockage Period, on which such
Non-payment Default shall have been cured or waived or shall have ceased to
exist (provided, that no other Payment Default or Non-payment Default has
occurred and is then continuing after giving effect to such cure or waiver),
(C) the date on which such Designated Senior Indebtedness shall have been
discharged or paid in full in cash or Cash Equivalents and (D) the date on
which such Payment Blockage Period shall have been terminated by written notice
to the Company or the Trustee from the Senior Representative initiating such
Payment Blockage Period, after which, subject to Sections 13.2 and 13.3(a)
hereof (if applicable), the Company shall promptly resume making any and all
required payments in respect of the Note Obligations, including any missed
payments. Notwithstanding any other provision of this Indenture, only one
Payment Blockage Period may be commenced within any 360 consecutive day period.
No Non-payment Default with respect to Designated Senior Indebtedness that
existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or can be, made the basis for the
commencement of a second Payment Blockage Period, whether or not within a
period of 360 consecutive days, unless such default shall have been cured or
waived for a period of not less than 90 consecutive days (it being acknowledged
that any subsequent event, or any breach of any financial covenant for a period
commencing after the date of commencement of such Payment Blockage Period,
that, in either case, would give rise to a Non-payment Default pursuant to any
provision under which a Non-payment Default previously existed or was
continuing shall constitute a new Non-payment Default for this purpose;
provided, however, that, in the case of a breach of a particular financial
covenant, the Company shall have been in compliance for at least one full 90
consecutive day period commencing after the date of commencement of such
Payment Blockage Period). In no event shall a Payment Blockage Period extend
beyond 179 days from the date of the receipt of the notice referred to in
clause (ii) hereof and there must be a 181 consecutive day period in any 360
consecutive day period during which no Payment Blockage Period is in effect
pursuant to this Section 13.3(b).
(c) In the event that, notwithstanding the foregoing,
the Trustee or the Holder of any Security shall have received any payment or
distribution prohibited by the foregoing provisions of this Section 13.3, then
and in such event such payment or distribution shall be paid
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over and delivered forthwith to the Senior Representatives or as a court of
competent jurisdiction shall direct for application to the payment of any due
and unpaid Senior Indebtedness, to the extent necessary to pay all such due and
unpaid Senior Indebtedness in cash or Cash Equivalents, after giving effect to
any concurrent payment to or for the holders of Senior Indebtedness.
SECTION 13.4 Trustee's Relation to Senior Indebtedness.
With respect to the holders of Senior Indebtedness, notwithstanding
any other provisions of this Indenture, the Trustee undertakes to perform or to
observe only such of its covenants and obligations as are specifically set
forth in this Article XIII, and no implied covenants or obligations with
respect to the holders of Senior Indebtedness shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Indebtedness and the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall mistakenly (but not as a result
of willful misconduct or gross negligence of the Trustee) pay over or deliver
to Holders, the Company or any other Person moneys or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Article XIII
or otherwise.
SECTION 13.5 Subrogation to Rights of Holders of Senior Indebtedness.
Upon the payment in full of cash or Cash Equivalents of all Senior
Indebtedness, the Holders of the Securities shall be subrogated (equally and
ratably with the holders of all indebtedness of the Company which by its
express terms is subordinated to Senior Indebtedness to substantially the same
extent as the Securities are so subordinated and which is entitled to like
rights of subrogation as a result of the payments made to the holders of Senior
Indebtedness) to the rights of the holders of such Senior Indebtedness to
receive payments and distributions of cash, property and securities applicable
to the Senior Indebtedness until the principal of, premium, if any, and
interest on the Securities shall be paid in full in cash or Cash Equivalents.
For purposes of such subrogation, no payments or distributions to the holders
of Senior Indebtedness of any cash, property or securities to which the Holders
of the Securities or the Trustee would be entitled except for the provisions of
this Article XIII, and no payments over pursuant to the provisions of this
Article XIII to the holders of Senior Indebtedness by Holders of the Securities
or the Trustee shall, as among the Company, its creditors other than holders of
Senior Indebtedness, and the Holders of the Securities, be deemed to be payment
or distribution by the Company to or on account of the Senior Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article XIII shall have been
applied, pursuant to the provisions of this Article XIII, to the payment of all
amounts payable under the Senior Indebtedness of the Company and such payments
or distributions received by such holders of such Senior Indebtedness shall be
in excess of the amount sufficient to pay all amounts payable under or in
respect of such Senior Indebtedness in full in cash or Cash Equivalents, then
and in such case the Holders shall be entitled to receive the amount of such
excess from the Company upon and to the extent of any return of such excess by
the holders of such Senior Indebtedness.
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SECTION 13.6 Provisions Solely To Define Relative Rights.
The provisions of this Article XIII are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article XIII or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of, premium, if any, and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other
than the holders of the Senior Indebtedness; or (c) prevent the Trustee or the
Holder of any Security from exercising all remedies otherwise permitted by
applicable law upon a Default or an Event of Default under this Indenture,
subject to the rights, if any, under this Article XIII of the holders of Senior
Indebtedness.
The failure of the Company to make a payment on account of any Note
Obligations by reason of any provision of this Article XIII shall not be
construed as preventing the occurrence of a Default or an Event of Default
hereunder.
SECTION 13.7 Trustee To Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XIII and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the Indebtedness of the Company owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file such a claim prior to 30 days before the expiration of the time
to file such a claim, the holders of Senior Indebtedness, or any Senior
Representative, may file such a claim on behalf of Holders of the Securities.
SECTION 13.8 No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any
Senior Indebtedness to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act, in good faith, by any such
holder, or by any non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
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(b) Without limiting the generality of subsection (a) of
this Section 13.8, the holders of Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee or the Holders of
the Securities, without incurring responsibility to the Holders of the
Securities and without impairing or releasing the subordination provided in
this Article XIII or the obligations hereunder of the Holders of the Securities
to the holders of Senior Indebtedness, do any one or more of the following:
(i) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, Senior Indebtedness or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding or any
liability of any obligor thereon; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) settle or compromise any Senior Indebtedness or any
liability of any obligor thereon or release any Person liable in any manner for
the collection or payment of Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person; provided,
however, that in no event shall any such actions limit the right of the Holders
of the Securities to take any action to accelerate the maturity of the
Securities pursuant to Article IV hereof or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Indenture.
SECTION 13.9 Notice to Trustee.
(a) The Company shall give prompt written notice to the
Trustee of any fact (other than the existence of a Payment Default or a Payment
Blockage Period) known to the Company which would prohibit the making of any
payment to or by the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article XIII or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts
(other than the existence of a Payment Default or a Payment Blockage Period)
which would prohibit the making of any payment to or by the Trustee in respect
of the Securities, unless and until a Responsible Officer of the Trustee, on
behalf of the Trustee, shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee, fiduciary or
agent therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of this Section 13.9, shall be entitled in
all respects to assume that no such facts exist; provided, however, that if a
Payment Default does not exist, a Payment Blockage Period is not in effect and
the Trustee shall not have received the notice provided for in this Section
13.9 at least one Business Day prior to the date upon which by the terms hereof
any money may become payable for any purpose under this Indenture (including,
without limitation, the payment of the principal of, premium, if any, or
interest on any Security), then, anything herein contained to the contrary
notwithstanding but without limiting the rights and remedies of the holders of
Senior Indebtedness or any trustee, fiduciary or agent thereof, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purpose for which such money was received and shall not be affected by
any notice to the contrary which may be received by it within one Business Day
prior to such date; nor shall the Trustee be charged with knowledge of the
curing of any such default or the elimination of the act or condition
preventing any such payment unless and until the Trustee shall have received an
Officers' Certificate to such effect.
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(b) Subject to TIA Sections 315(a) through 315(d), the
Trustee shall be entitled to rely on the delivery to it of a written notice to
a Responsible Officer of the Trustee, on behalf of the Trustee, by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article XIII, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article XIII, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 13.10 Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article XIII, the Trustee, subject to TIA Sections 315(a) through
315(d), and the Holders, shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and other Indebtedness of the Company, the amount thereof
or payable thereof, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article XIII.
SECTION 13.11 Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XIII with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder. Nothing in this Article XIII shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 5.6 hereof.
SECTION 13.12 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article XIII shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such
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Paying Agent were named in this Article XIII in addition to or in place of the
Trustee; provided, however, that Section 13.11 hereof shall not apply to the
Company or any Affiliate of the Company if it or such Affiliate acts as Paying
Agent.
SECTION 13.13 No Suspension of Remedies.
Nothing contained in this Article XIII shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article IV hereof or to pursue any
rights or remedies hereunder or under applicable law, subject to the rights, if
any, under this Article XIII of the holders, from time to time, of Senior
Indebtedness.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Compliance Certificates and Opinions.
Upon any application or request by the Company and/or any Subsidiary
Guarantor to the Trustee to take any action under any provision of this
Indenture, the Company and/or such Subsidiary Guarantor, as the case may be,
shall furnish to the Trustee such certificates and opinions as may be required
under the Trust Indenture Act or this Indenture. Each such certificate and
each such opinion shall be in the form of an Officers' Certificate or an
Opinion of Counsel, as applicable, and shall comply with the requirements of
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) 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;
(c) a statement that, in the opinion of each such
individual, 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
(d) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
The certificates and opinions provided pursuant to this Section 14.1
and the statements required by this Section 14.1 shall comply in all respects
with TIA Sections 314(c) and (e).
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SECTION 14.2 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such Opinion of Counsel may be based, insofar as it relates to
factual matters, upon an Officers' Certificate of an Officer or Officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate with respect to such matters
is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 14.3 Acts of Holders.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be given
or taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by agents
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than
his individual capacity, such certificate or affidavit shall also constitute
sufficient proof of authority. The fact and date of the
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execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(c) The ownership, principal amount and serial numbers of
Securities held by any Person, and the date of holding the same, shall be
proved by the Security Register.
(d) If the Company shall solicit from the Holders of
Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, by or pursuant to a Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do
so. Notwithstanding TIA Section 316(c), such record date shall be the record
date specified in or pursuant to such Board Resolution, which shall be a date
not earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close
of business on such record date shall be deemed to be Holders for the purposes
of determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date;
provided, that no such authorization, agreement or consent by the Holders on
such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other Act of the Holder of any Security shall bind
every future Holder of the same Security and the Holder of every Security
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
SECTION 14.4 Notices, etc. to Trustee, Company and Subsidiary Guarantors.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company or any
Subsidiary Guarantor shall be sufficient for every purpose hereunder if made,
given, furnished or filed in writing and delivered in person or mailed by
certified or registered mail (return receipt requested) to the Trustee at its
Corporate Trust Office; or
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(b) the Company or any Subsidiary Guarantor by the
Trustee or by any Holder shall be sufficient for every purpose hereunder
(unless otherwise herein expressly provided) if in writing and delivered in
person or mailed by certified or registered mail (return receipt requested) to
the Company addressed to it or a Subsidiary Guarantor, as applicable, at the
Company's principal office located at 5 Greenway Plaza, Suite 2700, Houston,
Texas 77046-2504, or at any other address otherwise furnished in writing to the
Trustee by the Company.
SECTION 14.5 Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders. Any
notice mailed to a Holder in the manner herein prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder
actually receives such notice. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 14.6 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 14.7 Successors and Assigns.
All covenants and agreements in this Indenture by the Company and any
Subsidiary Guarantors shall bind their respective successors and assigns,
whether so expressed or not. All agreements of the Trustee in this Indenture
shall bind its successor.
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SECTION 14.8 Separability Clause.
In case any provision in this Indenture or in the Securities or the
Subsidiary Guarantees 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 therefore
against any party hereto.
SECTION 14.9 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person (other than the parties hereto, any Paying Agent, any
Securities Registrar and their successors hereunder, the Holders, the holders
of Senior Indebtedness, the holders of Guarantor Senior Indebtedness and, to
the extent set forth in Section 12.4 hereof, creditors of Subsidiary
Guarantors) any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 14.10 Governing Law; Trust Indenture Act Controls.
(a) THIS INDENTURE, THE SUBSIDIARY GUARANTEES, IF ANY,
AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS. THE COMPANY IRREVOCABLY SUBMITS AND WILL CAUSE EACH SUBSIDIARY GUARANTOR
TO IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY
OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE, THE SECURITIES OR A SUBSIDIARY GUARANTEE, AND THE COMPANY
IRREVOCABLY AGREES AND WILL CAUSE EACH SUBSIDIARY GUARANTOR TO IRREVOCABLY
AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED BY ANY SUCH COURT.
(b) This Indenture is subject to the provisions of the
Trust Indenture Act of 1939, as amended, that are required to be part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
If and to the extent that any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by Sections 310 and 318, inclusive, of the
Trust Indenture Act, or conflicts with any provision (an "incorporated
provision") required by or deemed to be included in this Indenture by operation
of such Trust Indenture Act sections, such imposed duties or incorporated
provision shall control. If any provision of this Indenture modifies or
excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or excluded, as the case may be.
120
<PAGE> 129
SECTION 14.11 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, or
Stated Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities or
any Subsidiary Guarantees) payment of interest or principal (and premium, if
any) need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date or at the Stated Maturity or Maturity; provided, that no
additional interest shall accrue for the period from and after such Interest
Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be,
by reason of such delay.
SECTION 14.12 No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder, by accepting any of
the Securities, waives and releases all such liability to the extent permitted
by applicable law.
SECTION 14.13 Duplicate Originals.
The parties may sign any number of copies or counterparts of this
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
SECTION 14.14 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
121
<PAGE> 130
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
ISSUER:
POGO PRODUCING COMPANY
a Delaware corporation
By: /s/ JOHN W. ELSENHANS
--------------------------------------
Name: John W. Elsenhans
-------------------------------
Title: VICE PRESIDENT-FINANCE AND
TREASURER
------------------------------
TRUSTEE:
FLEET NATIONAL BANK
as Trustee
By: /s/ PHILIP G. KANE, JR.
--------------------------------------
Name: Philip G. Kane, Jr.
-------------------------------
Title: Vice President
------------------------------
122
<PAGE> 131
EXHIBIT A
FORM OF SECURITY
POGO PRODUCING COMPANY
8 3/4% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
[FORM OF FACE]
No. _____ $__________
Cusip No. [Series A: 730 448 AF4]*
[Series B: __________]
Pogo Producing Company, a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
________________________ or registered assigns the principal sum of
_______________ Dollars on May 15, 2007, at the office or agency of the Company
referred to below, and to pay interest thereon, commencing on November 15, 1997
and continuing semiannually thereafter, on May 15 and November 15 of each
year, from May 22, 1997, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, at the rate of 8 3/4% per annum,
until the principal hereof is paid or duly provided for, and (to the extent
lawful) to pay on demand, interest on any overdue interest at the rate borne by
the Securities from the date on which such overdue interest becomes payable to
the date payment of such interest has been made or duly provided for. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest, which
shall be the May 1 or November 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and such defaulted interest, and (to the
extent lawful) interest on such defaulted interest at the rate borne by the
Securities, may be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or may be paid at any time in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture. Interest on the Securities shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
- --------------------------------
* So long as the restrictive legend is included on a Definitive
Security, a CUSIP number is not needed for a Definitive Security
transferred to an institutional accredited investor (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933).
A-1
<PAGE> 132
The principal of (and premium, if any, on) and interest on the Securities
shall be payable at the office or agency of the Company maintained for such
purpose in the City of New York, or at such other office or agency of the
Company as may be maintained for such purpose; provided, however, at the option
of the Company, interest may be paid (i) by check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Security
Register, or (ii) with respect to any Holder owning Securities in the aggregate
principal amount of $500,000 or more, by wire transfer to an account maintained
by the Holder located in the City of New York, as specified in a written notice
to the Trustee, received prior to the relevant Regular Record Date, by any such
Holder requesting payment by wire transfer and specifying the account to which
transfer is requested.
[Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security 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. The Depository Trust Company shall act as the Depositary until a
successor shall be appointed by the Company and the Registrar. Unless this
certificate is presented by an authorized representative of The Depository
Trust Company (55 Water Street, New York, New York) ("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 may be requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as may be 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.]*
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DAY ON WHICH POGO PRODUCING COMPANY
(THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION
DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER
- --------------------------
*This paragraph should be included only if the Security is issued in
global form.
A-2
<PAGE> 133
THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT IS ACQUIRING SUCH SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT ("INSTITUTIONAL ACCREDITED INVESTOR") THAT IS
ACQUIRING SUCH SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF ANOTHER
INSTITUTIONAL ACCREDITED INVESTOR, 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, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT
TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii)
IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
A-3
<PAGE> 134
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
POGO PRODUCING COMPANY
[SEAL]
By:
-------------------------------
Name:
Title:
Attest:
------------------------------
Secretary
Dated:
-----------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Fleet National Bank, as Trustee, Certifies that this is one of the 8 3/4%
Series [A/B] Senior Subordinated Notes due 2007 referred to in the
within-mentioned Indenture.
FLEET NATIONAL BANK
By:
--------------------------------
Authorized Signatory
A-4
<PAGE> 135
FORM OF REVERSE OF SECURITY
POGO PRODUCING COMPANY
8 3/4% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
This Security is one of a duly authorized issue of securities of the
Company designated as its 8 3/4% [Series A/B] Senior Subordinated Notes due
2007 (herein called the "Securities"), limited (except as otherwise provided in
the Indenture referred to below) in aggregate principal amount to $100,000,000,
which may be issued under an indenture (herein called the "Indenture") dated as
of May 15, 1997, between the Company and Fleet National Bank, as trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties, obligations and immunities thereunder of the Company, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The Indebtedness evidenced by the Securities is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture) and this Security is issued subject to such provisions. Each
Holder of this Security, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee on his behalf
to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee as his
attorney-in-fact for such purpose.
The Securities are subject to redemption at the option of the Company,
in whole or in part, at any time on or after May 15, 2002, upon not less than
30 or more than 60 days notice at the following Redemption Prices (expressed as
percentages of principal amount) set forth below, if redeemed during the
12-month period beginning on May 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PRICE
---- -----
<S> <C>
2002 . . . . . . . . . . 104.375%
2003 . . . . . . . . . . 102.917%
2004 . . . . . . . . . . 101.458%
2005 and thereafter . . 100%
</TABLE>
together in the case of any such redemption with accrued and unpaid interest,
if any, to the Redemption Date (subject to the right of Holders of record on
the relevant Regular Record Date to receive interest due on an Interest Payment
Date that is on or prior to the Redemption Date), all as provided in the
Indenture.
In the case of any redemption of Securities, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Holders of such Securities, or one
A-5
<PAGE> 136
or more Predecessor 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 Redemption Date.
In the event of redemption or purchase of this Security in part only, a new
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.
In the event of a Change of Control of the Company, and subject to certain
conditions and limitations provided in the Indenture, the Company will be
obligated to make an offer to purchase, on a Business Day not more than 75 or
less than 30 days following the occurrence of a Change of Control of the
Company, all of the then outstanding Securities validly tendered at a purchase
price equal to 101% of the principal amount thereof, together with accrued and
unpaid interest to the Change of Control Purchase Date, all as provided in the
Indenture.
In the event of Asset Sales, under certain circumstances, the Company will
be obligated to make a Net Proceeds Offer to purchase all or a specified
portion of each Holder's Securities at a purchase price equal to 100% of the
principal amount of the Securities, together with accrued and unpaid interest
to the Net Proceeds Payment Date.
As set forth in the Indenture, an Event of Default is generally (a)
failure to pay principal upon maturity, redemption or otherwise (including
pursuant to a Change of Control Offer or a Net Proceeds Offer); (b) default
for 30 days in payment of interest on any of the Securities; (c) default in
the performance of agreements relating to mergers, consolidations and sales of
all or substantially all assets or the failure to make or consummate a Change
of Control Offer or a Net Proceeds Offer; (d) failure for 45 days after notice
to comply with any other covenants in the Indenture or the Securities; (e)
certain payment defaults under, the acceleration prior to the maturity of, and
the exercise of certain enforcement rights with respect to, certain
Indebtedness of the Company or any Restricted Subsidiary in an aggregate
principal amount in excess of $12,000,000; (f) the failure of any Subsidiary
Guarantee to be in full force and effect or otherwise to be enforceable (except
as permitted by the Indenture); (g) certain events giving rise to ERISA
liability; (h) certain final judgments against any Restricted Subsidiary in an
aggregate amount of $12,000,000 or more which remain unsatisfied and either
become subject to commencement or enforcement proceedings or remain unstayed
for a period of 60 days; and (i) certain events of bankruptcy, insolvency or
reorganization of the Company or any Material Restricted Subsidiary. If any
Event of Default occurs and is continuing, the Trustee or the holders of at
least 25% in aggregate principal amount of the Outstanding Securities may
declare the principal amount of all the Securities to be due and payable
immediately, except that (i) in the case of an Event of Default arising from
certain events of bankruptcy, insolvency or reorganization of the Company or
any Restricted Subsidiary, the principal amount of the Securities will become
due and payable immediately without further action or notice, and (ii) in the
case of an Event of Default which relates to certain payment defaults,
acceleration or the
A-6
<PAGE> 137
exercise of certain enforcement rights with respect to certain Indebtedness,
any acceleration of the Securities will be automatically rescinded if any such
Indebtedness is repaid or if the default relating to such Indebtedness is cured
or waived and if the holders thereof have accelerated such Indebtedness then
such holders have rescinded their declaration of acceleration or if in certain
circumstances the proceedings or enforcement action with respect to the
Indebtedness that is the subject of such Event of Default is terminated or
rescinded. No Holder may pursue any remedy under the Indenture unless the
Trustee shall have failed to act after notice of an Event of Default and
written request by Holders of at least 25% in principal amount of the
Outstanding Securities, and the offer to the Trustee of indemnity reasonably
satisfactory to it; provided, however, such provision does not affect the right
to sue for enforcement of any overdue payment on a Security by the Holder
thereof. Subject to certain limitations, Holders of a majority in principal
amount of the Outstanding Securities may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders notice of any
continuing default (except default in payment of principal, premium or
interest) if it determines in good faith that withholding the notice is in the
interest of the Holders. The Company is required to file quarterly reports
with the Trustee as to the absence or existence of defaults.
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of the Company on this Security and (ii) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Security.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and any Subsidiary Guarantors and the rights of the Holders under the
Indenture at any time by the Company, any Subsidiary Guarantors and the Trustee
with the consent of the Holders of a majority in aggregate principal amount of
the Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount
of the Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by or on behalf of the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof whether or not notation of such consent
or waiver is made upon this Security. Without the consent of any Holder, the
Company, any Subsidiary Guarantors and the Trustee may amend or supplement the
Indenture or the Securities to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Securities in addition to or in place of Definitive
Securities and to make certain other specified changes and other changes that
do not adversely affect the rights of any Holder.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay
A-7
<PAGE> 138
the principal of (and premium, if any, on) and interest on this Security at the
times, place, and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable on the Security
Register of the Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for such purpose in
the City of New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
A director, officer, incorporator, or stockholder of the Company or any
Subsidiary Guarantor, as such, shall not have any personal liability under this
Security or the Indenture by reason of his or its status as such director,
officer, incorporator or stockholder. Each Holder, by accepting this Security
with or without the notation of Subsidiary Guarantee endorsed hereon, waives
and releases all such liability. Such waiver and release are part of the
consideration for the issuance of this Security with the notation of Subsidiary
Guarantee endorsed hereon.
Prior to the time of due presentment of this Security for registration of
transfer, the Company, any Subsidiary Guarantors, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this Security
is overdue, and neither the Company, the Subsidiary Guarantors, if any, the
Trustee nor any agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Company will furnish
to any Holder upon written request and without charge a copy of the Indenture.
Requests may be made to the Company, Attention: Corporate Secretary, at 5
Greenway Plaza, Suite 2700, Houston, Texas 77046-2504.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders thereof. No
representation is made as to the accuracy
A-8
<PAGE> 139
of such numbers as printed on the Securities and reliance may be placed only on
the other identifying information printed hereon.
This Security shall be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of law principles.
A-9
<PAGE> 140
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we)
assign and transfer this Security to ___________________________________________
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
as agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
------------------------- --------------------------------
(Sign exactly as your name
appears on the face of this
Security)
Signature Guarantee:
-----------------------------------------------------------
(Participant in a Recognized Signature
Guaranty Medallion Program)
A-10
<PAGE> 141
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 9.15 or Section 9.16 of the Indenture, check the
appropriate box:
Section 9.15 [ ] Section 9.16 [ ]
If you want to have only part of this Security purchased by the Company
pursuant to Section 9.15 or Section 9.16 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:
--------------------------------------------------------------------
(Participant in a Recognized Signature
Guaranty Medallion Program)
A-11
<PAGE> 142
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITY*
The following exchanges of a part of this Global Security for Definitive
Securities have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of of this Global Signature of
decrease in increase in Security following authorized signatory
Principal Amount Principal Amount such decrease of Trustee or
Date of Exchange of this Global Security of this Global Security (or increase) Security Custodian
- ---------------- ----------------------- ----------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------------------------------
* This should be included only if the Security is issued in global form.
A-12
<PAGE> 143
EXHIBIT B
FORM OF NOTATION RELATING TO SUBSIDIARY GUARANTEES
The form of notation to be set forth on each Security relating to the
Subsidiary Guarantees shall be in substantially the following form:
SUBSIDIARY 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, jointly and severally, unconditionally
guaranteed (a) the due and punctual payment of the principal (and premium, if
any) 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.
The obligations of each Subsidiary Guarantor are limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities and after giving effect to any collections from or payments made by
or on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
its contribution obligations under the Indenture, result in the obligations of
such Subsidiary Guarantor under the Subsidiary 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 Subsidiary
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.
The obligations of the Subsidiary Guarantors to the Holders or the
Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly
subordinate to all Guarantor Senior Indebtedness to the extent set forth in
Article XII of the Indenture and reference is made to such Indenture for the
precise terms of such subordination.
No stockholder, officer, director or incorporator, as such, past,
present or future, of the Subsidiary Guarantors shall have any personal
liability under the Subsidiary Guarantee by reason of his or its status as such
stockholder, officer, director or incorporator.
B-1
<PAGE> 144
Any Subsidiary Guarantor may be released from its Subsidiary Guarantee
upon the terms and subject to the conditions provided in the Indenture.
All terms used in this notation of Subsidiary Guarantee which are
defined in the Indenture referred to in this Security upon which this notation
of Subsidiary Guarantee is endorsed shall have the meanings assigned to them in
such Indenture.
The Subsidiary Guarantee shall be binding upon each Subsidiary
Guarantor and its successors and assigns and shall inure to the benefit 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.
The Subsidiary Guarantee shall not be valid or obligatory for any
purpose until it has been executed by the manual or facsimile signature of an
authorized officer of each Subsidiary Guarantor and the certificate of
authentication on the Security upon which this Subsidiary Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
[SUBSIDIARY GUARANTOR]
Date: By:
---------------------------- --------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
-----------------------------
Secretary
B-2
<PAGE> 145
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 8 3/4% Series [A/B] Senior Subordinated Notes due 2007 of Pogo
Producing Company (the "Company")
This Certificate relates to $_____ principal amount of
Securities held in *______ book-entry or *______ definitive form by
_____________________ (the "Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Securities held by the
Depositary, a Security or Securities in definitive registered form equal to its
beneficial interest in such Global Securities (or the portion thereof indicated
above); or
[ ] has requested the Trustee by written order to exchange or
register the transfer of a Security or 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 relative to the above captioned Securities and that the
transfer of this Security does not require registration under the Securities
Act (as defined below) because:*
[ ] Such Security is being acquired for the Transferor's own
account without transfer (in satisfaction of Section 2.07(a)(ii)(A) or Section
2.07(d)(i)(A) of the Indenture).
[ ] Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")), in reliance on Rule 144A under the
Securities Act.
[ ] Such Security is being transferred (i) in accordance with Rule
144 under the Securities Act (and based on an opinion of counsel if the Company
so requests) or (ii) pursuant to an effective registration statement under the
Securities Act.
- ------------------------
*Check appropriate box.
C-1
<PAGE> 146
[ ] Such Security is being transferred to an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (and based on an opinion of
counsel if the Company so requests) together with a certification in
substantially the form of Exhibit D to the Indenture and, to the knowledge of
the Transferor, such institutional accredited investor to whom such Security is
to be transferred is not an "affiliate" (as defined in Rule 144 under the
Securities Act) of the Company.
[ ] Such Security is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
---------------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------------
Name:
Title:
Address:
Date:
-----------------------------
C-2
<PAGE> 147
EXHIBIT D
TRANSFEREE LETTER OF REPRESENTATIONS
Pogo Producing Company
c/o Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust Administration
Dear Sirs and Madams:
In connection with our proposed purchase of $_________ aggregate
principal amount of 8 3/4% Senior Subordinated Notes due 2007 (the
"Securities") of Pogo Producing Company, a Delaware corporation (the
"Company"):
1. We understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or under
any other applicable securities laws, and 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 the 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 that has been declared
effective by the Securities and Exchange Commission (the "SEC"), (c) for 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 to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities
Act (an "Institutional Accredited Investor") that is acquiring the Securities
for its own account or for the account of another Institutional Accredited
Investor for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution thereof in violation of the regulations of the
Securities Act and any other applicable securities laws or (e) 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 and the property of such investor account or
accounts be at all times within our or their control. 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 (d) 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 Trustee, which shall provide,
D-1
<PAGE> 148
among other things, that the transferee is an Institutional Accredited Investor
and that it is acquiring such Securities for investment purposes and not for
distribution in violation of the Securities Act. We acknowledge that the
Company and the Trustee reserve the right prior to any offer, sale or other
transfer pursuant to clauses (d) or (e) prior to the Resale Restriction
Termination Date of the Securities to require the delivery of an opinion of
counsel, certifications and/or other information satisfactory to the Company
and the Trustee.
2. We are an Institutional Accredited Investor purchasing for our
own account or for the account of another Institutional Accredited Investor.
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, 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. We have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of investment in the
Securities, we invest in securities similar to the Securities in the normal
course of our business and we, and all accounts for which we are acting, are
able to bear the economic risks of investment in the Securities.
4. You are entitled to rely upon this letter and you 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.
Very truly yours,
By:
------------------------------------
(Name of Purchaser)
Upon transfer, the Securities should be registered in the name of the
new beneficial owner as follows:
Name:
--------------------------------------------------
Address:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
Taxpayer ID No:
--------------------------------------------
D-2
<PAGE> 1
EXHIBIT 4.4
POGO PRODUCING COMPANY
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of May 22, 1997, among Pogo
Producing Company, a Delaware corporation (the "Company"), Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
Goldman, Sachs & Co., as representatives of the purchasers (the "Initial
Purchasers"), identified on Schedule I to the Purchase Agreement (as defined
herein), of the 8 3/4% Senior Subordinated Notes due 2007, of the Company.
The Company proposes to issue and sell to the Initial Purchasers upon
the terms set forth in the Purchase Agreement the Securities (as defined
herein). As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Company agrees with the Initial Purchasers for the
benefit of holders (as defined herein) from time to time of the Registrable
Securities (as defined herein) as follows:
1. Certain Definitions.
For purposes of this Registration Rights Agreement, the following
terms shall have the following respective meanings:
"Base Interest" shall mean the interest that would otherwise
accrue on the Securities under the terms thereof and the Indenture,
without giving effect to the provisions of this Agreement.
"broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing Time" shall have the meaning set forth in the
Purchase Agreement.
"Commission" shall mean the United States Securities and
Exchange Commission, or any other federal agency at the time
administering the Exchange Act or the Securities Act, whichever is the
relevant statute for the particular purpose.
"Effective Time," in the case of (i) an Exchange Registration,
shall mean the time and date as of which the Commission declares the
Exchange Registration Statement effective or as of which the Exchange
Registration Statement otherwise becomes effective and (ii) a Shelf
Registration, shall mean the time and date as of which the Commission
declares the Shelf Registration Statement effective or as of which the
Shelf Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable
Securities that has returned a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(d)(ii) or
3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
or any successor thereto, as the same shall be amended from time to
time.
"Exchange Offer" shall have the meaning assigned thereto in
Section 2(a) hereof.
<PAGE> 2
"Exchange Registration" shall have the meaning assigned
thereto in Section 3(c) hereof.
"Exchange Registration Statement" shall have the meaning
assigned thereto in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto
in Section 2(a) hereof.
"holder" shall mean each of the Initial Purchasers and other
persons who acquire Registrable Securities from time to time
(including any successors or assigns), in each case for so long as
such person owns any Registrable Securities.
"Indenture" shall mean the Indenture, dated as of May 15,
1997, among the Company and Fleet National Bank, as Trustee, as the
same shall be amended from time to time.
"Purchase Agreement" shall mean the Purchase Agreement, dated
as of May 15, 1997, between the Initial Purchasers and the Company
relating to the Securities.
"Notice and Questionnaire" means a Notice of Registration
Statement and Selling Securityholder Questionnaire substantially in
the form of Exhibit A hereto.
The term "person" shall mean a corporation, association,
partnership, limited liability company, organization, business,
individual, government or political subdivision thereof or
governmental agency.
"Registrable Securities" shall mean the Securities; provided,
however, that a Security shall cease to be a Registrable Security when
(i) in the circumstances contemplated by Section 2(a) hereof, the
Security has been exchanged for an Exchange Security in an Exchange
Offer as contemplated in Section 2(a) hereof (provided that any
Exchange Security received by a broker-dealer in an Exchange Offer in
exchange for a Registrable Security that was not acquired by the
broker-dealer directly from the Company will also be a Registrable
Security through and including the earlier of the 90th day after the
Exchange Offer is completed or such time as such broker-dealer no
longer owns such Security); (ii) in the circumstances contemplated by
Section 2(b) hereof, a Shelf Registration Statement registering such
Security under the Securities Act has been declared or becomes
effective and such Security has been sold or otherwise transferred by
the holder thereof pursuant to and in a manner contemplated by such
effective Shelf Registration Statement; (iii) such Security is sold
pursuant to Rule 144 (or any similar provisions then in force, but not
Rule 144A) under circumstances in which any legend borne by such
Security relating to restrictions on transferability thereof, under
the Securities Act or otherwise, is removed by the Company or pursuant
to the Indenture; (iv) such Security is eligible to be sold pursuant
to paragraph (k) of Rule 144; or (v) such Security shall cease to be
outstanding.
"Registration Default" shall have the meaning assigned
thereto in Section 2(d) hereof.
"Registration Expenses" shall have the meaning assigned
thereto in Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in
Section 2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an
affiliate of the Company within the meaning of Rule 405, (ii) a holder
who acquires Exchange Securities outside the ordinary course of
2
<PAGE> 3
such holder's business, (iii) a holder who has arrangements or
understandings with any person to participate in the Exchange Offer
for the purpose of distributing Exchange Securities and (iv) a holder
that is a broker- dealer, but only with respect to Exchange Securities
received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Securities acquired by the broker-dealer
directly from the Company.
"Rule 144," "Rule 144A," "Rule 405" and "Rule 415" shall mean,
in each case, such rule promulgated under the Securities Act (or any
successor provision), as the same shall be amended from time to time.
"Securities" shall mean, collectively, the 8 3/4% Senior
Subordinated Notes due 2007 of the Company to be issued and sold to
the Initial Purchasers, and securities issued in exchange therefor or
in lieu thereof pursuant to the Indenture. Under certain
circumstances specified in the Indenture, each Security will entitled
to the benefit of certain guarantees by one or more subsidiaries of
the Company (the "Guarantees") and, unless the context otherwise
requires, any reference herein to a "Security," an "Exchange Security"
or a "Registrable Security" shall include a reference to any such
related Guarantees.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto
in Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned
thereto in Section 2(b) hereof.
"Shelf Registration Suspension" shall have the meaning
assigned thereto in Section 2(c) hereof.
"Special Interest" shall have the meaning assigned thereto in
Section 2(d) hereof.
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, or any successor thereto, and the rules, regulations and forms
promulgated thereunder, all as the same shall be amended from time to
time.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of
this Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Registration Rights
Agreement as a whole and not to any particular Section or other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees
to use its reasonable best efforts to file under the Securities Act, no later
than 45 days after the Closing Time, a registration statement relating to an
offer to exchange (such registration statement, the "Exchange Registration
Statement", and such offer, the "Exchange Offer") any and all of the then
outstanding Registrable Securities (except Registrable Securities held by an
Initial Purchaser and acquired directly from the Company if such Initial
Purchaser is not permitted, in the reasonable opinion of counsel to the Initial
Purchasers, pursuant to applicable law or Commission interpretation, to
participate in the Exchange Offer) for a like aggregate
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<PAGE> 4
principal amount of debt securities issued by the Company (and, if applicable,
guarantees issued by subsidiaries of the Company as may be required pursuant to
the Indenture), which are substantially identical to the Securities (and are
entitled to the benefits of a trust indenture which is substantially identical
to the Indenture or is the Indenture and which has been qualified under the
Trust Indenture Act), except that (i) they have been registered pursuant to an
effective registration statement under the Securities Act, (ii) interest
thereon shall accrue from the last date on which interest was paid or duly
provided for on the Securities in exchange for which such new debt securities
are issued in the Exchange Offer, or, if no interest has been paid, from May
22, 1997, and (iii) they do not contain provisions for the additional interest
contemplated in Section 2(d) below (such new debt securities, together with any
guarantees thereof, as applicable, are hereinafter called "Exchange
Securities"). The Company agrees to use its reasonable best efforts to cause
the Exchange Registration Statement to become effective under the Securities
Act no later than 105 days after the Closing Time. The Exchange Offer will be
registered under the Securities Act on an appropriate form and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Company further agrees to use its reasonable best efforts to commence and
complete the Exchange Offer no later than 180 days after the Closing Time, hold
the Exchange Offer open for at least 30 days (or longer if required by law)
after notice of the Exchange Offer is sent to holders of Registrable
Securities, and issue Exchange Securities for all Registrable Securities that
have been properly tendered and not withdrawn on or prior to the expiration of
the Exchange Offer. The Exchange Offer will be deemed to have been "completed"
only if the debt securities and related guarantees received by holders other
than Restricted Holders in the Exchange Offer for Registrable Securities are,
upon receipt, transferable by each such holder without need for further
compliance with Section 5 of the Securities Act and the Exchange Act (except
for the requirement to deliver a prospectus included in the Exchange
Registration Statement applicable to resales by broker- dealers of Exchange
Securities received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Securities other than those acquired by the
broker-dealer directly from the Company), and without material restrictions
under the blue sky or securities laws of a substantial majority of the States
of the United States of America. The Exchange Offer shall be deemed to have
been completed upon the Company having exchanged, pursuant to the Exchange
Offer, Exchange Securities for all Registrable Securities that may legally be
exchanged in the Exchange Offer and that have been properly tendered and not
withdrawn before the expiration of the Exchange Offer, which shall be on a date
that is at least 30 days following the commencement of the Exchange Offer. The
Company agrees (x) to include in the Exchange Registration Statement a
prospectus for use in connection with any resales of Exchange Securities by a
broker-dealer, other than resales of Exchange Securities received by a
broker-dealer pursuant to an Exchange Offer in exchange for Registrable
Securities acquired by the broker-dealer directly from the Company, and (y) to
keep such Exchange Registration Statement effective for a period (the "Resale
Period") beginning when Exchange Securities are first issued in the Exchange
Offer and ending upon the earlier of the expiration of the 90th day after the
Exchange Offer has been completed or such time as such broker-dealers no longer
own any Registrable Securities. With respect to such Exchange Registration
Statement, each broker-dealer that holds Exchange Securities received in an
Exchange Offer in exchange for Registerable Securities not acquired by it
directly from the Company shall have the benefit of the rights of
indemnification and contribution set forth in Section 6 hereof.
(b) Subject to Section 2(c), (i) if, prior to the time the
Exchange Offer is completed, existing Commission interpretations are changed
such that the Exchange Offer cannot be completed as contemplated by Section
2(a), (ii) if the Exchange Registration Statement is not declared effective
under the Securities Act within 105 days after the Closing Time, or (iii) if,
for any other reason the Exchange Offer is not consummated within 180 days of
the Closing Time, then in lieu of conducting the Exchange Offer contemplated by
Section 2(a) the Company shall use its reasonable best efforts to file under
the Securities Act as soon as practicable, but no later than 30 days after the
time such obligation to file arises, a registration statement providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of,
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<PAGE> 5
all of the Registrable Securities, pursuant to Rule 415 or any similar rule
that may be adopted by the Commission (such filing, the "Shelf Registration"
and such registration statement, the "Shelf Registration Statement"). In
addition, in the event that the Initial Purchasers shall not have resold all of
the Registrable Securities initially purchased by them from the Company
pursuant to the Purchase Agreement prior to the consummation of the Exchange
Offer, the Company shall use its reasonable best efforts to file under the
Securities Act as soon as practicable after a request therefor a Shelf
Registration Statement. The Company agrees to use its reasonable best efforts
(i) to cause the Shelf Registration Statement to become or be declared
effective no later than 180 days after the Closing Time (or promptly in the
event of a Shelf Registration effected at the request of the Initial Purchasers
pursuant to the preceding sentence) and, subject to Section 2(c), to keep such
Shelf Registration Statement continuously effective in order to permit the
prospectus forming a part thereof to be usable by holders for resales of
Registrable Securities for a period (the "Effective Period") ending on the
earlier of the second anniversary of the Effective Time (or one year in the
case of a Shelf Registration Statement filed at the request of an Initial
Purchaser) or such time as there are no longer any Registrable Securities
outstanding, provided, however, that no holder shall be entitled to be named as
a selling securityholder in the Shelf Registration Statement or to use the
prospectus forming a part thereof for resales of Registrable Securities unless
such holder is an Electing Holder, and (ii) after the Effective Time of the
Shelf Registration Statement, promptly upon the request of any holder of
Registrable Securities that is not then an Electing Holder, to take any action
reasonably necessary to enable such holder to use the prospectus forming a part
thereof for resales of Registrable Securities, including, without limitation,
any action necessary to identify such holder as a selling securityholder in the
Shelf Registration Statement, provided, however, that nothing in this clause
(ii) shall relieve any such holder of the obligation to return a completed and
signed Notice and Questionnaire to the Company in accordance with Section
3(d)(iii) hereof. The Company further agrees to supplement or make amendments
to the Shelf Registration Statement, as and when required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the Securities Act or rules
and regulations thereunder for shelf registration, and the Company agrees to
furnish to each Electing Holder copies of any such supplement or amendment
prior to its being used or promptly following its filing with the Commission.
(c) Notwithstanding anything in Section 2(b) or 3(d) to the contrary,
if the Company determines in its good faith judgment that the filing of any
supplement or amendment to the Shelf Registration Statement to keep such Shelf
Registration Statement continuously effective under the Securities Act and
usable by Electing Holders for resales of Registrable Securities on a
particular date would require the disclosure of material information that the
Company has a bona fide business purpose for preserving as confidential, or the
disclosure of which would materially adversely affect the Company's ability to
consummate a significant transaction, then upon written notice of such
determination by the Company to the Electing Holders, the obligation of the
Company to supplement or amend the Shelf Registration Statement (including any
action with respect thereto contemplated by Section 3(d) hereof) will be
suspended until the Company notifies the Electing Holders in writing that the
reasons for suspension of such obligations on the part of the Company as set
forth in Section 2(b) no longer exist and the Company amends or supplements the
Shelf Registration Statement as may be required (such suspension, a "Shelf
Registration Suspension"); provided that the aggregate number of days (whether
or not consecutive) during which the Company may delay the filing of any such
supplement or amendment shall in no event exceed 60 days during any period of
12 consecutive months and the right of the Company to suspend its obligation to
supplement or amend the Shelf Registration Statement under the preceding
sentence shall not limit any obligation of the Company to pay Special Interest
pursuant to Section 2(d).
(d) In the event that (i) the Exchange Registration Statement is
not filed with the Commission on or prior to the 45th day following the Closing
Time, (ii) the Exchange Registration Statement is not declared effective on or
prior to the 105th day following the Closing Time or (iii) the Exchange Offer
(if then
5
<PAGE> 6
required to be made) is not consummated or a Shelf Registration Statement (if
required pursuant to Section 2(b)) with respect to the Notes is not declared
effective on or prior to the 180th day following the Closing Time, (iv) any
Exchange Registration Statement or Shelf Registration Statement required by
Section 2(a) or 2(b) hereof is filed and declared effective but shall
thereafter either be withdrawn by the Company or shall become subject to an
effective stop order issued pursuant to Section 8(d) of the Securities Act
suspending the effectiveness of such registration statement (except as
specifically permitted herein) without being succeeded immediately by an
additional registration statement filed and declared effective, or (v) the
Company effects a Shelf Registration Suspension for more than 60 days, whether
or not consecutive, within any period of 12 consecutive months (each such event
referred to in clauses (i) through (v), a "Registration Default") then, as
liquidated damages for such Registration Default, subject to the provisions of
Section 9(b), special interest ("Special Interest"), in addition to the Base
Interest, shall accrue on the Securities at a per annum rate of 0.50% from and
including the day following such Registration Default to but excluding the date
on which the Registration default is cured or ceases as described below (such
period being the "Registration Default Period"); provided, that if the Exchange
Registration Statement is not declared effective on or prior to the 105th day
after the Closing Time and the Company sends the Notice and Questionnaire to
holders of Registrable Securities in accordance with Section 3(d)(ii), then no
holder who is not an Electing Holder shall be entitled to Special Interest
after the 180th day after the Closing Time. Special Interest shall be paid in
the same manner as interest is paid on the Securities pursuant to the
Indenture. Upon (A) the filing of the Exchange Registration Statement after
the 45th day described in clause (i) above, (B) the effectiveness of the
Exchange Registration Statement after the 105th day described in clause (ii)
above, (C) the consummation of the Exchange Offer or the effectiveness of the
Shelf Registration Statement, as the case may be, after the 180th day described
in clause (iii) above, (D) removal of the suspension or stop order referred to
in clause (iv) above or the filing and effectiveness of a new registration
statement in respect thereof, (E) cessation of the Shelf Registration
Suspension referred to in clause (v) above or (F) expiration of the Effective
Period, Special Interest shall cease to accrue unless a new Registration
Default shall occur.
(e) The Company shall take all reasonable actions necessary or
advisable to be taken by it to ensure that the transactions contemplated herein
are effected as so contemplated.
(f) Any reference herein to a registration statement as of any
time shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time and any reference herein to
any post-effective amendment to a registration statement as of any time shall
be deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a)
or Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the
Shelf Registration, as the case may be, the Company shall qualify the Indenture
under the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.
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<PAGE> 7
(c) In connection with the Company's obligations with respect to
the registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) use its reasonable best efforts to prepare and file
with the Commission, no later than 45 days after the Closing Time, an
Exchange Registration Statement on any form which may be utilized by
the Company and which shall permit the Exchange Offer and resales of
Exchange Securities by broker-dealers during the Resale Period to be
effected as contemplated by Section 2(a), and use its reasonable best
efforts to cause such Exchange Registration Statement to become
effective as soon as practicable thereafter, but no later than 105
days after the Closing Time;
(ii) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Exchange
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Exchange
Registration Statement for the periods and purposes contemplated in
Section 2(a) hereof and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the
form of such Exchange Registration Statement, and promptly provide
each broker-dealer holding Exchange Securities with such number of
copies of the prospectus included therein (as then amended or
supplemented), in conformity in all material respects with the
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, as such
broker-dealer reasonably may request prior to the expiration of the
Resale Period, for use in connection with resales of Exchange
Securities;
(iii) promptly notify each broker-dealer that has requested
or received copies of the prospectus included in such registration
statement, and confirm such advice in writing, (A) when such Exchange
Registration Statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has
been filed, and, with respect to such Exchange Registration Statement
or any post-effective amendment, when the same has become effective,
(B) of any comments are made to the Company or its counsel by the
Commission and by the blue sky or securities commissioner or regulator
of any state with respect thereto or any request is made to the
Company or its counsel by the Commission for amendments or supplements
to such Exchange Registration Statement or prospectus or for
additional information, (C) of the issuance by the Commission of any
stop order suspending the effectiveness of such Exchange Registration
Statement or the initiation or threatening of any proceedings for that
purpose, (D) if at any time the Company becomes aware that the
representations and warranties of the Company contemplated by Section
5 cease to be true and correct in all material respects, (E) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Exchange Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding
for such purpose, or (F) at any time during the Resale Period when a
prospectus is required to be delivered under the Securities Act, that
such Exchange Registration Statement, prospectus, prospectus amendment
or supplement or post-effective amendment does not conform in all
material respects to the applicable requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the
Commission thereunder or contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(iv) in the event that the Company would be required,
pursuant to Section 3(c)(iii)(F) above, to notify any broker-dealers
holding Exchange Securities, without unreasonable delay prepare and
furnish to each such holder a reasonable number of copies of a
prospectus supplemented or
7
<PAGE> 8
amended so that, as thereafter delivered to purchasers of such
Exchange Securities during the Resale Period, such prospectus shall
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(v) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of such Exchange
Registration Statement or any post-effective amendment thereto at the
earliest practicable date;
(vi) use its reasonable best efforts to (A) register or
qualify the Exchange Securities under the securities laws or blue sky
laws of such jurisdictions as are contemplated by Section 2(a) no
later than the commencement of the Exchange Offer, (B) keep such
registrations or qualifications in effect and comply with such laws so
as to permit the continuance of offers, sales and dealings therein in
such jurisdictions until the expiration of the Resale Period and (C)
take any and all other actions as may be reasonably necessary or
advisable to enable each broker-dealer holding Exchange Securities to
consummate the disposition thereof in such jurisdictions; provided,
however, that the Company shall not be required for any such purpose
to (1) qualify as a foreign corporation or as a dealer in securities
in any jurisdiction wherein it would not otherwise be required to
qualify but for the requirements of this Section 3(c)(vi), (2) consent
to general service of process, or take any action that would subject
it to general service of process or taxation, in any such jurisdiction
if it is not then so subject or (3) make any changes to its
certificate of incorporation or by-laws or any agreement between it
and its stockholders;
(vii) use its reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether federal,
state or local, which may be required to effect the Exchange
Registration, the Exchange Offer and the offering and sale of Exchange
Securities by broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Securities,
not later than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of
the Commission, and make generally available to its securityholders as
soon as practicable but no later than eighteen months after the
effective date of such Exchange Registration Statement, an earning
statement complying with Section 11(a) of the Securities Act
(including, at the option of the Company, Rule 158 thereunder).
(d) In connection with the Company's obligations with respect to
the Shelf Registration, if applicable, the Company shall, subject to Section
2(c), as soon as practicable (or as otherwise specified):
(i) use its reasonable best efforts to prepare and file
with the Commission, as soon as practicable but in any case within the
time periods specified in Section 2(b), a Shelf Registration Statement
on any form which may be utilized by the Company and which shall
register all of the Registrable Securities for resale by the holders
thereof in accordance with such method or methods of disposition as
may be specified by such of the holders as, from time to time, may be
Electing Holders and use its reasonable best efforts to cause such
Shelf Registration Statement to become effective as soon as
practicable but in any case within the time periods specified in
Section 2(b);
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(ii) not less than 30 calendar days prior to the Effective
Time of the Shelf Registration Statement, mail the Notice and
Questionnaire to the holders of Registrable Securities; no holder
shall be entitled to be named as a selling securityholder in the Shelf
Registration Statement as of the Effective Time, and no holder shall
be entitled to use the prospectus forming a part thereof for resales
of Registrable Securities at any time, unless such holder has returned
a completed and signed Notice and Questionnaire to the Company by the
deadline for response set forth therein; provided, however, holders of
Registrable Securities shall have at least 28 calendar days from the
date on which the Notice and Questionnaire is first mailed to such
holders to return a completed and signed Notice and Questionnaire to
the Company;
(iii) after the Effective Time of the Shelf Registration
Statement, upon the request of any holder of Registrable Securities
that is not then an Electing Holder, promptly send a Notice and
Questionnaire to such holder; provided that the Company shall not be
required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed and
signed Notice and Questionnaire to the Company;
(iv) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Shelf Registration
Statement and the prospectus included therein as may be necessary to
effect and maintain the effectiveness of such Shelf Registration
Statement for the period specified in Section 2(b) hereof and as may
be required by the applicable rules and regulations of the Commission
and the instructions applicable to the form of such Shelf Registration
Statement, and furnish to the Electing Holders copies of any such
supplement or amendment simultaneously with or prior to its being used
or filed with the Commission;
(v) comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities
covered by such Shelf Registration Statement in accordance with the
intended methods of disposition by the Electing Holders provided for
in such Shelf Registration Statement;
(vi) provide (A) the Electing Holders, (B) the
underwriters (which term, for purposes of this Registration Rights
Agreement, shall include a person deemed to be an underwriter within
the meaning of Section 2(11) of the Securities Act), if any, thereof,
(C) any sales or placement agent therefor, (D) not more than one
counsel for all such underwriters and agents and (E) not more than one
counsel for all the Electing Holders the opportunity to participate in
the preparation of such Shelf Registration Statement, each prospectus
included therein or filed with the Commission and each amendment or
supplement thereto;
(vii) for a reasonable period prior to the filing of such
Shelf Registration Statement, and throughout the period specified in
Section 2(b), make available (solely for the purpose of verifying the
accuracy of information contained in the Shelf Registration Statement)
at reasonable times at the Company's principal place of business or
such other reasonable place as the Company shall determine for
inspection by the persons referred to in Section 3(d)(vi) who shall
certify to the Company that they have a current intention to sell the
Registrable Securities pursuant to the Shelf Registration such
relevant financial and other information and books and records of the
Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such
inquiries, as shall be
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<PAGE> 10
reasonably necessary, in the judgment of the respective counsel
referred to in such Section, to conduct a reasonable investigation
within the meaning of Section 11 of the Securities Act; provided,
however, that each such party shall be required to maintain in
confidence and not to disclose to any other person any information or
records reasonably designated by the Company as being confidential,
until such time as (A) such information becomes a matter of public
record (whether by virtue of its inclusion in such registration
statement or otherwise), or (B) such person shall be required so to
disclose such information pursuant to a subpoena or order of any court
or other governmental agency or body having jurisdiction over the
matter (subject to the requirements of such order, and only after such
person shall have given the Company prompt prior written notice of
such requirement);
(viii) promptly notify each of the Electing Holders, any
sales or placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose) and confirm such
advice in writing, (A) when such Shelf Registration Statement or the
prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
Shelf Registration Statement or any post-effective amendment, when the
same has become effective, (B) of any comments made to the Company or
its counsel by the Commission and by the blue sky or securities
commissioner or regulator of any state with respect thereto or any
request made to the Company or its counsel by the Commission for
amendments or supplements to such Shelf Registration Statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such
Shelf Registration Statement or the initiation or threatening of any
proceedings for that purpose, (D) if at any time the Company becomes
aware that representations and warranties of the Company contemplated
by Section 3(d)(xvii) or Section 5 cease to be true and correct in all
material respects, (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, or (F)
if at any time when a prospectus is required to be delivered under the
Securities Act, such Shelf Registration Statement, prospectus,
prospectus amendment or supplement or post-effective amendment does
not conform in all material respects to the applicable requirements of
the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(ix) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto at the
earliest practicable date;
(x) if requested by any managing underwriter or
underwriters, any placement or sales agent or any Electing Holder,
promptly incorporate in a prospectus supplement or post-effective
amendment such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent or such Electing Holder specifies should be
included therein relating to the terms of the sale of such Registrable
Securities, including information with respect to the principal amount
of Registrable Securities being sold by such Electing Holder or agent
or to any underwriters, the name and description of such Electing
Holder, agent or underwriter, the offering price of such Registrable
Securities and any discount, commission or other compensation payable
in respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of
the Registrable Securities to be sold by such Electing Holder or agent
or to such underwriters; and make all required filings of such
prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
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<PAGE> 11
(xi) furnish to each Electing Holder, each placement or
sales agent, if any, therefor, each underwriter, if any, thereof and
the respective counsel referred to in Section 3(d)(vi) a copy of such
Shelf Registration Statement, each such amendment and supplement
thereto (in each case including all exhibits thereto (in the case of
an Electing Holder of Registrable Securities, upon request) and
documents incorporated by reference therein) and such number of copies
of such Shelf Registration Statement (excluding exhibits thereto and
documents incorporated by reference therein unless specifically so
requested by such Electing Holder, agent or underwriter, as the case
may be) and of the prospectus included in such Shelf Registration
Statement (including each preliminary prospectus and any summary
prospectus), in conformity in all material respects with the
applicable requirements of the Securities Act and the Trust Indenture
Act and the rules and regulations of the Commission thereunder, and
such other documents, as such Electing Holder, agent, if any, and
underwriter, if any, may reasonably request in order to facilitate the
offering and disposition of the Registrable Securities owned by such
Electing Holder, offered or sold by such agent or underwritten by such
underwriter and to permit such Electing Holder, agent and underwriter
to satisfy the prospectus delivery requirements of the Securities Act;
and the Company hereby consents to the use of such prospectus
(including such preliminary and summary prospectus) and any amendment
or supplement thereto by each such Electing Holder and by any such
agent and underwriter, in each case in the form most recently provided
to such person by the Company, in connection with the offering and
sale of the Registrable Securities covered by the prospectus
(including such preliminary and summary prospectus) or any supplement
or amendment thereto;
(xii) use its reasonable best efforts to (A) register or
qualify the Registrable Securities to be included in such Shelf
Registration Statement under such securities laws or blue sky laws of
such jurisdictions as any Electing Holder and each placement or sales
agent, if any, therefor and underwriter, if any, thereof shall
reasonably request, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions during the
period the Shelf Registration is required to remain effective under
Section 2(b) above and for so long as may be necessary to enable any
such Electing Holder, agent or underwriter to complete its
distribution of Securities pursuant to such Shelf Registration
Statement and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such Electing Holder, agent, if
any, and underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that
the Company shall not be required for any such purpose to (1) qualify
as a foreign corporation or as a dealer in securities in any
jurisdiction wherein it would not otherwise be required to qualify but
for the requirements of this Section 3(d)(xii), (2) consent to general
service of process or take any action that would subject it to general
service of process or taxation, in any such jurisdiction if it is not
then so subject or (3) make any changes to its certificate of
incorporation or by-laws or any agreement between it and its
stockholders;
(xiii) use its reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether federal,
state or local, which may be required to effect the Shelf Registration
or the offering or sale in connection therewith or to enable the
selling holder or holders to offer, or to consummate the disposition
of, their Registrable Securities;
(xiv) cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold, which certificates shall be printed, lithographed or engraved,
or produced by any combination of such methods, and which shall not
bear any restrictive legends; and, in the case of an underwritten
offering, enable such Registrable Securities to be in such
denominations and
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<PAGE> 12
registered in such names as the managing underwriters may request at
least two business days prior to any sale of the Registrable
Securities;
(xv) provide a CUSIP number for all Registrable
Securities, not later than the applicable Effective Time;
(xvi) enter into one or more underwriting agreements,
engagement letters, agency agreements, "best efforts" underwriting
agreements or similar agreements, as appropriate, in each case, that
are satisfactory to the Company, including customary provisions
relating to indemnification and contribution, and take such other
actions in connection therewith as any Electing Holders shall
reasonably request and as are customarily taken in order to expedite
or facilitate the disposition of such Registrable Securities;
(xvii) whether or not an agreement of the type referred to
in Section 3(d)(xvi) hereof is entered into and whether or not any
portion of the offering contemplated by the Shelf Registration is an
underwritten offering or is made through a placement or sales agent or
any other entity, (A) make such representations and warranties to the
Electing Holders and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof in form, substance and scope as
are customarily made in connection with a similar offering of debt
securities pursuant to any appropriate agreement or to a registration
statement filed on the form applicable to the Shelf Registration; (B)
obtain an opinion of counsel to the Company in customary form and
covering such matters, of the type customarily covered by such an
opinion, as the managing underwriters, if any, or as any Electing
Holders may reasonably request, addressed to such Electing Holder or
Electing Holders and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof, dated the effective date of
such Shelf Registration Statement (and if such Shelf Registration
Statement contemplates an underwritten offering of a part or all of
the Registrable Securities, dated the date of the closing under the
underwriting agreement relating thereto) (it being agreed that the
matters to be covered by such opinion shall include the due
incorporation and good standing of the Company and its significant
subsidiaries; the qualification of the Company and its significant
subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the
type referred to in Section 3(d)(xvi) hereof; the due authorization,
execution, authentication and issuance, and the validity and
enforceability, of the Securities; the absence of material legal or
governmental proceedings involving the Company; the absence of
governmental approvals required to be obtained in connection with the
Shelf Registration, the offering and sale of the Registrable
Securities, this Registration Rights Agreement or any agreement of the
type referred to in Section 3(d)(xvi) hereof, except such approvals as
may be required under state securities or blue sky laws; the material
compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indenture with
the requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder, respectively;
and, as of the date of the opinion and of the Shelf Registration
Statement or most recent post-effective amendment thereto, as the case
may be, the absence from such Shelf Registration Statement and the
prospectus included therein, as then amended or supplemented, and from
the documents incorporated by reference therein (in each case other
than the financial statements and other financial information
contained therein) of an untrue statement of a material fact or the
omission to state therein a material fact necessary to make the
statements therein not misleading (in the case of such documents, in
the light of the circumstances existing at the time that such
documents were filed with the Commission under the Exchange Act)); (C)
obtain a "cold comfort" letter or letters from the independent
certified public accountants of the Company addressed to the placement
or sales agent, if any, or the underwriters, if any, and use its
reasonable
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<PAGE> 13
best efforts to have such letter also addressed to the selling
Electing Holders (provided, however, that such letter need not be
addressed to any person to whom, in the reasonable opinion of the
Company's public accountants, addressing such letter is not
permissible under applicable accounting standards) dated (i) the
effective date of such Shelf Registration Statement and (ii) the
effective date of any prospectus supplement to the prospectus included
in such Shelf Registration Statement or post-effective amendment to
such Shelf Registration Statement which includes unaudited or audited
financial statements as of a date or for a period subsequent to that
of the latest such statements included in such prospectus (and, if
such Shelf Registration Statement contemplates an underwritten
offering pursuant to any prospectus supplement to the prospectus
included in such Shelf Registration Statement or post-effective
amendment to such Shelf Registration Statement which includes
unaudited or audited financial statements as of a date or for a period
subsequent to that of the latest such statements included in such
prospectus, dated the date of the closing under the underwriting
agreement relating thereto), such letter or letters to be in customary
form and covering such matters of the type customarily covered by
letters of such type; (D) deliver such documents and certificates,
including officers' certificates, as may be reasonably requested by
any Electing Holders or the placement or sales agent, if any, therefor
and the managing underwriters, if any, thereof to evidence the
accuracy of the representations and warranties made pursuant to clause
(A) above or those contained in Section 5(a) hereof and the compliance
with or satisfaction of any agreements or conditions contained in the
underwriting agreement or other agreement entered into by the Company;
and (E) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Section 6 hereof;
(xviii) notify in writing each holder of Registrable
Securities of any proposal by the Company to amend or waive any
provision of this Registration Rights Agreement pursuant to Section
9(h) hereof and of any amendment or waiver effected pursuant thereto,
each of which notices shall contain the text of the amendment or
waiver proposed or effected, as the case may be;
(xix) in the event that any broker-dealer registered under
the Exchange Act shall underwrite any Registrable Securities or
participate as a member of an underwriting syndicate or selling group
or "assist in the distribution" (within the meaning of the Rules of
Fair Practice and the By-Laws of the National Association of
Securities Dealers, Inc. ("NASD") or any successor thereto, as amended
from time to time) thereof, whether as a holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, assist such
broker-dealer in complying with the requirements of such Rules and
By-Laws, including by (A) if such Rules or By-Laws shall so require,
engaging a "qualified independent underwriter" (as defined in such
Schedule (or any successor thereto)) to participate in the preparation
of the Shelf Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such Shelf
Registration Statement is an underwritten offering or is made through
a placement or sales agent, to recommend the yield of such Registrable
Securities, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 6 hereof, and (C) providing such information to
such broker-dealer as may be required in order for such broker-dealer
to comply with the requirements of the Rules of Fair Practice of the
NASD; and
(xx) comply with all applicable rules and regulations of
the Commission, and make generally available to its securityholders as
soon as practicable but in any event not later than eighteen months
after the effective date of such Shelf Registration Statement, an
earning statement complying with Section 11(a) of the Securities Act
(including, at the option of the Company, Rule 158 thereunder).
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<PAGE> 14
(e) In the event that the Company would be required, pursuant to
Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement or
sales agent, if any, therefor and the managing underwriters, if any, thereof,
the Company shall without delay prepare and furnish to each of the Electing
Holders, to each placement or sales agent, if any, and to each such
underwriter, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to purchasers of Registrable
Securities, such prospectus shall conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing. Each Electing Holder agrees that
upon receipt of any notice from the Company pursuant to Section 3(d)(viii)(F)
hereof, such Electing Holder shall forthwith discontinue the disposition of
Registrable Securities pursuant to the Shelf Registration Statement applicable
to such Registrable Securities until such Electing Holder shall have received
copies of such amended or supplemented prospectus, and if so directed by the
Company, such Electing Holder shall deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Electing
Holder's possession of the prospectus covering such Registrable Securities at
the time of receipt of such notice.
(f) In the event of a Shelf Registration, in addition to the
information required to be provided by each Electing Holder in its Notice
Questionnaire, the Company may require such Electing Holder to furnish to the
Company such additional information regarding such Electing Holder and such
Electing Holder's intended method of distribution of Registrable Securities as
may be required in order to comply with the Securities Act. Each such Electing
Holder agrees to notify the Company as promptly as practicable of any
inaccuracy or change in information previously furnished by such Electing
Holder to the Company or of the occurrence of any event in either case as a
result of which any prospectus relating to such Shelf Registration contains or
would contain an untrue statement of a material fact regarding such Electing
Holder or such Electing Holder's intended method of disposition of such
Registrable Securities or omits to state any material fact regarding such
Electing Holder or such Electing Holder's intended method of disposition of
such Registrable Securities required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading, and promptly to furnish to the Company any additional
information required to correct and update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Electing Holder or the disposition of such Registrable Securities, 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 in which they are made, not misleading.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly
upon request being made therefor all expenses incident to the Company's
performance of or compliance with this Registration Rights Agreement, including
(a) all Commission and any NASD registration, filing and review fees and
expenses including fees and disbursements of counsel for the placement or sales
agent or underwriters in connection with such registration, filing and review,
(b) all fees and expenses in connection with the qualification of the
Securities for offering and sale under the State securities and blue sky laws
referred to in Section 3(d)(xii) hereof and determination of their eligibility
for investment under the laws of such jurisdictions as any managing
underwriters or the Electing Holders may designate, including any fees and
disbursements of counsel for the Electing Holders (subject to the limitations
of Clause (i) below) or underwriters in connection with such qualification and
determination, (c) all expenses relating to the preparation, printing,
production, distribution and reproduction of each registration statement
required to be filed hereunder, each prospectus
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<PAGE> 15
included therein or prepared for distribution pursuant hereto, each amendment
or supplement to the foregoing, the expenses of preparing the Securities for
delivery and preparation and printing of certificates representing the
Securities or delivery of Securities to be disposed of (including certificates
representing the Securities), (d) messenger, telephone and delivery expenses
relating to the offering, sale or delivery of Securities and the preparation of
documents referred in clause (c) above, (e) fees and expenses of the Trustee
under the Indenture, any agent of the Trustee and any counsel for the Trustee
and of any collateral agent or custodian, (f) internal expenses (including all
salaries and expenses of the Company's officers and employees performing legal
or accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any opinions or "cold comfort" letters required by or incident to such
performance and compliance), (h) fees, disbursements and expenses of one
counsel for the Electing Holders retained in connection with a Shelf
Registration, as selected by the Electing Holders of at least a majority in
aggregate principal amount of the Registrable Securities held by Electing
Holders (which counsel shall be reasonably satisfactory to the Company), (i)
any fees charged by securities rating services for rating the Securities, and
(j) fees, expenses and disbursements of any other persons, including special
experts, retained by the Company in connection with such registration
(collectively, the "Registration Expenses"). To the extent that any
Registration Expenses are incurred, assumed or paid by any holder of
Registrable Securities or any placement or sales agent therefor or underwriter
thereof, the Company shall reimburse such person for the full amount of the
Registration Expenses so incurred, assumed or paid promptly after receipt of a
request therefor. Notwithstanding the foregoing, the holders of the Registrable
Securities being registered shall pay all agency fees and commissions and
underwriting discounts and commissions attributable to the sale of such
Registrable Securities and the fees and disbursements of any counsel, any
"qualified independent underwriter" engaged pursuant to Section 3(d)(xix)
hereof, or other advisors or experts retained by such holders (severally or
jointly), other than the counsel and experts specifically referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each
Purchaser and each of the holders from time to time of Registrable Securities
that:
(a) Each registration statement covering Registrable
Securities and each prospectus (including any preliminary or summary
prospectus) contained therein or furnished pursuant to Section 3(d) or
Section 3(c) hereof and any further amendments or supplements to any
such registration statement or prospectus, when it becomes effective
or is filed with the Commission, as the case may be, and, in the case
of an underwritten offering of Registrable Securities, at the time of
the closing under the underwriting agreement relating thereto, will
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and 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
15
<PAGE> 16
the statements therein not misleading; and at all times subsequent to
the Effective Time when a prospectus would be required to be delivered
under the Securities Act, other than from (i) such time as a notice
has been given to holders of Registrable Securities pursuant to
Section 3(d)(viii)(F) or Section 3(c)(iii)(F) hereof until (ii) such
time as the Company furnishes an amended or supplemented prospectus
pursuant to Section 3(e) or Section 3(c)(iv) hereof, each such
registration statement, and each prospectus (including any summary
prospectus) contained therein or furnished pursuant to Section 3(d) or
Section 3(c) hereof, as then amended or supplemented, will conform in
all material respects to the applicable requirements of the Securities
Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and 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 in which they were made not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a holder of
Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any
prospectus referred to in Section 5(a) hereof, when they become or
became effective or are or were filed with the Commission, as the case
may be, will conform or conformed in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable,
and none of such documents will contain or contained an untrue
statement of a material fact or will omit or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by a holder of Registrable Securities expressly for use therein.
(c) The compliance by the Company with all of the
provisions of this Registration Rights Agreement and the consummation
of the transactions herein contemplated will not conflict with or
result in a breach of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any
subsidiary of the Company is a party or by which the Company or any
subsidiary of the Company is bound or to which any of the property or
assets of the Company or any subsidiary of the Company is subject, nor
will such action result in any violation of the provisions of the
certificate of incorporation, as amended, or the by-laws of the
Company or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or
any subsidiary of the Company or any of their properties; and no
consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required
for the consummation by the Company of the transactions contemplated
by this Registration Rights Agreement, except the registration under
the Securities Act of the Securities, qualification of the Indenture
under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under State securities or blue sky laws in connection with the
offering and distribution of the Securities.
(d) This Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify
and hold harmless each of the holders of Registrable Securities included in an
Exchange Registration Statement, each of the Electing Holders of Registrable
Securities included in a Shelf Registration Statement and each person who
participates as a placement or sales agent or as an underwriter in any offering
or sale of such Registrable Securities as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Exchange Registration Statement or Shelf Registration Statement,
as the case may be, under which such Registrable Securities were
registered under the Securities Act, or any preliminary, final or
summary prospectus contained therein or furnished by the Company to
any such holder, Electing Holder, agent or underwriter, or any
amendment or supplement thereto, or the omission or alleged
16
<PAGE> 17
omission therefrom of a material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the holders
of Registrable Securities), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that the Company shall not be liable to any such person in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, or
preliminary, final or summary prospectus, or amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to the
Company by such person expressly for use therein;
(b) Indemnification by the Holders and any Agents and
Underwriters. The Company may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to Section
2(b) hereof and to entering into any underwriting agreement with respect
thereto, that the Company shall have received an undertaking reasonably
satisfactory to it from the Electing Holder of such Registrable Securities and
from each underwriter named in any such underwriting agreement, severally and
not jointly, to (i) indemnify and hold harmless the Company, and all other
holders of Registrable Securities, against any losses, claims, damages or
liabilities to which the Company or such other holders of Registrable
Securities may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such registration statement, or any
preliminary, final or summary prospectus contained therein or furnished by the
Company to any such Electing Holder, agent or underwriter, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Electing Holder or underwriter expressly for use therein, and (ii)
reimburse the Company for any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that no such Electing
Holder shall be required to undertake liability to any person under this
Section 6(b) for any amounts in excess of the dollar amount of the proceeds to
be received by such Electing Holder from the sale of such Electing Holder's
Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party under subsection (a) or (b) above of written notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party pursuant to the
indemnification provisions of
17
<PAGE> 18
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In the case of parties
indemnified pursuant to Section 6(a) above, counsel to the indemnified parties
shall be selected by the holders of a majority of the Registrable Securities
held by Electing Holders, and, in the case of parties indemnified pursuant to
Section 6(b) above, counsel to the indemnified parties shall be selected by the
Company. In case any such action shall be brought against any indemnified
party and it shall notify an indemnifying party of the commencement thereof,
such indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory
to such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, such indemnifying party shall not be liable to such
indemnified party for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement. Notwithstanding the immediately preceding
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, an indemnifying party shall not be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with
such request to the extent the indemnifying party considers such request to be
reasonable and (ii) provided written notice to the indemnified party
substantiating the unpaid balance as unreasonable, in each case prior to the
date of such settlement.
(e) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and the indemnified party in
connection with the statements or omissions which 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 such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified
party, and the parties' relative
18
<PAGE> 19
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 6(e) were determined by
pro rata allocation (even if the holders or any agents or underwriters or all
of them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(e). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(e), no holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such holder from the sale of any Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) exceeds the
amount of any damages which such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission, and no underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter 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. The holders' and any underwriters' obligations in this
Section 6(e) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may
be, by them and not joint.
(f) The obligations of the Company under this Section 6 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director and
partner of each holder, agent and underwriter and each person, if any, who
controls any holder, agent or underwriter within the meaning of the Securities
Act; and the obligations of the holders and any agents or underwriters
contemplated by this Section 6 shall be in addition to any liability which the
respective holder, agent or underwriter may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the Company
(including any person who, with his consent, is named in any registration
statement as about to become a director of the Company) and to each person, if
any, who controls the Company within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Right to Effect Underwritten Offering. The holders of
Registrable Securities covered by a Shelf Registration Statement filed pursuant
to this Registration Rights Agreement may sell such Registrable Securities in
an underwritten offering, provided that the holders of at least 20% in the
aggregate principal amount of the Registrable Securities initially outstanding
elect to participate in such offering and except that any such underwritten
offering shall be suspended during any Shelf Registration Suspension.
(b) Selection of Underwriters. If any of the Registrable
Securities covered by the Shelf Registration are to be sold pursuant to an
underwritten offering, the managing underwriter or underwriters thereof shall
be designated by Electing Holders holding at least a majority in aggregate
principal amount of the Registrable Securities to be included in such offering,
provided that such designated managing underwriter or underwriters is or are
reasonably acceptable to the Company.
(c) Participation by Holders. Each holder of Registrable
Securities hereby agrees with each other such holder that no such holder may
participate in any underwritten offering hereunder unless such holder (i)
agrees to sell such holder's Registrable Securities on the basis provided in
any underwriting
19
<PAGE> 20
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to
the extent it shall be required to do so under the Exchange Act, the Company
shall timely file the reports required to be filed by it under the Exchange Act
or the Securities Act (including the reports under Section 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations adopted by
the Commission thereunder, and shall take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar or successor rule or regulation hereafter adopted
by the Commission. Upon the request of any holder of Registrable Securities in
connection with that holder's sale pursuant to Rule 144, the Company shall
deliver to such holder a written statement as to whether it has complied with
such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant, registration
rights with respect to Registrable Securities or any other securities which
prevents the exercise of or otherwise conflicts with the terms contained in
this Registration Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if the Company fails to perform any of
its obligations hereunder and that the Initial Purchasers and the holders from
time to time of the Registrable Securities may be irreparably harmed by any
such failure, and accordingly agree that the Initial Purchasers and such
holders, in addition to any other remedy to which they may be entitled at law
or in equity, shall be entitled to compel specific performance of the
respective obligations of the Company under this Registration Rights Agreement
in accordance with the terms and conditions of this Registration Rights
Agreement, in any court of the United States or any State thereof having
jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, if delivered personally or by courier,
or three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at Pogo Producing Company, 5 Greenway Plaza, Suite 2700, Houston, Texas
77046-0504, attention Corporate Secretary, and if to a holder, to the address
of such holder set forth in the security register or other records of the
Company, or to such other address as the Company or any such holder may have
furnished to the other in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt. For purposes of any
notice to holders required hereunder, the Company, absent knowledge to the
contrary, may presume that all holders are listed in the security register.
(d) Parties in Interest. All the terms and provisions of this
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and the holders from time to
time of the Registrable Securities and the respective successors and assigns of
the parties hereto
20
<PAGE> 21
and such holders. In the event that any transferee of any holder of Registrable
Securities shall acquire Registrable Securities, in any manner, whether by
gift, bequest, purchase, operation of law or otherwise, such transferee shall,
without any further writing or action of any kind, be deemed a beneficiary
hereof for all purposes and such Registrable Securities shall be held subject
to all of the terms of this Registration Rights Agreement, and by taking and
holding such Registrable Securities such transferee shall be entitled to
receive the benefits of, and be conclusively deemed to have agreed to be bound
by all of the applicable terms and provisions of this Registration Rights
Agreement. If the Company shall so request, any such successor, assign or
transferee shall agree in writing to acquire and hold the Registrable
Securities subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements,
representations, warranties and each other provision set forth in this
Registration Rights Agreement or made pursuant hereto shall remain in full
force and effect regardless of any investigation (or statement as to the
results thereof) made by or on behalf of any holder of Registrable Securities,
any director, officer or partner of such holder, any agent or underwriter or
any director, officer or partner thereof, or any controlling person of any of
the foregoing, and shall survive delivery of and payment for the Registrable
Securities pursuant to the Purchase Agreement and the transfer and registration
of Registrable Securities by such holder and the consummation of an Exchange
Offer.
(f) LAW GOVERNING. THIS REGISTRATION RIGHTS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Registration Rights Agreement are inserted for convenience
only, do not constitute a part of this Registration Rights Agreement and shall
not affect in any way the meaning or interpretation of this Registration Rights
Agreement.
(h) Entire Agreement; Amendments. This Registration Rights
Agreement and the other writings referred to herein (including the Indenture
and the form of Securities) or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Registration Rights Agreement may be amended and the observance of
any term of this Registration Rights Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only by
a written instrument duly executed by the Company and the holders of at least a
majority in aggregate principal amount of the Registrable Securities at the
time outstanding. Each holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any amendment or waiver effected
pursuant to this Section 9(h), whether or not any notice, writing or marking
indicating such amendment or waiver appears on such Registrable Securities or
is delivered to such holder.
(i) Inspection. For so long as this Registration Rights Agreement
shall be in effect, this Registration Rights Agreement and a complete list of
the names and addresses of all the holders of Registrable Securities shall be
made available upon reasonable prior written notice for inspection and copying
on any business day by any holder of Registrable Securities for proper purposes
only (which shall include any purpose related to the rights of the holders of
Registrable Securities under the Securities, the Indenture and this Agreement)
at the offices of the Company at the address thereof set forth in Section 9(c)
above and at the office of the Trustee under the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
21
<PAGE> 22
Agreed to and accepted as of the date referred to above.
POGO PRODUCING COMPANY
By: /s/ JOHN W. ELSENHANS
--------------------------------------
Name: John W. Elsenhans
Title: Vice President-Finance and
Treasurer
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
By: MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By: [ILLEGIBLE]
-----------------------------------
Authorized signatory
On behalf of each of the Initial
Purchasers
22
<PAGE> 23
Exhibit A
POGO PRODUCING COMPANY.
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]1/
The Depository Trust Company ("DTC") has identified you as a
DTC Participant through which beneficial interests in the Pogo Producing
Company (the "Company") 8 3/4% Senior Subordinated Notes due 2007 (the
"Securities") are held.
The Company is in the process of registering the Securities
under the Securities Act of 1933 for resale by the beneficial owners thereof.
In order to have their Securities included in the registration statement,
beneficial owners must complete and return the enclosed Notice of Registration
Statement and Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities
receive a copy of the enclosed materials as soon as possible as their rights to
have the Securities included in the registration statement depend upon their
returning the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please
forward a copy of the enclosed documents to each beneficial owner that holds
interests in the Securities through you. If you require more copies of the
enclosed materials or have any questions pertaining to this matter, please
contact Pogo Producing Company, 5 Greenway Plaza, Suite 2700, Houston, Texas
77046-0504, attention Corporate Secretary, (713) 297-5017.
- ----------------------
1) Not less than 28 calendar days from date of mailing.
A-1
<PAGE> 24
Pogo Producing Company
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Reference is hereby made to the Registration Rights Agreement (the
"Registration Rights Agreement") between Pogo Producing Company (the "Company")
and the Initial Purchasers named therein. Pursuant to the Registration Rights
Agreement, the Company has filed with the United States Securities and Exchange
Commission (the "Commission") a registration statement on Form [___] (the
"Shelf Registration Statement") for the registration and resale under Rule 415
of the Securities Act of 1933, as amended (the "Securities Act"), of the
Company's 8 3/4% Senior Subordinated Notes due 2007 (the "Securities"). A
copy of the Registration Rights Agreement is attached hereto. All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is
entitled to have the Registrable Securities beneficially owned by it included
in the Shelf Registration Statement. In order to have Registrable Securities
included in the Shelf Registration Statement, this Notice of Registration
Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire")
must be completed, executed and delivered to the Company's counsel at the
address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE].
Beneficial owners of Registrable Securities who do not complete, execute and
return this Notice and Questionnaire by such date (i) will not be named as
selling securityholders in the Shelf Registration Statement and (ii) may not
use the Prospectus forming a part thereof for resales of Registrable
Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus.
The term "Registrable Securities" is defined in the Registration
Rights Agreement.
A-2
<PAGE> 25
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3).
The undersigned, by signing and returning this Notice and Questionnaire, agrees
to be bound with respect to such Registrable Securities by the terms and
conditions of this Notice and Questionnaire and the Registration Rights
Agreement, including, without limitation, Section 6 of the Registration Rights
Agreement, as if the undersigned Selling Securityholder were an original party
thereto.
Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and Trustee the Notice of Transfer set forth in Appendix A to
the Prospectus and as Exhibit B to the Registration Rights Agreement.
The Selling Securityholder hereby provides the following information
to the Company and represents and warrants that such information is accurate
and complete:
A-3
<PAGE> 26
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
---------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as in
(a) above) of Registrable Securities Listed in Item (3) below:
---------------------------------------------------------------
(c) Full Legal Name of DTC Participant (if applicable and if not
the same as (b) above) Through Which Registrable Securities
Listed in Item (3) below are Held:
---------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Telephone:
------------------------
Fax:
------------------------
Contact Person:
------------------------
(3) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities.
(a) Principal amount of Registrable Securities beneficially
owned:
---------------------------------------------------------
CUSIP No(s). of such Registrable Securities:
-------------------
(b) Principal amount of Securities other than Registrable
Securities beneficially owned:
---------------------------------
CUSIP No(s). of such other Securities:
-------------------------
A-4
<PAGE> 27
(c) Principal amount of Registrable Securities which the
undersigned wishes to be included in the Shelf Registration
Statement:
-----------------------------------------------------
CUSIP No(s). of such Registrable Securities to be
included in the Shelf Registration Statement:
------------------
(4) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other
securities of the Company, other than the Securities listed above in Item (3).
State any exceptions here:
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any
of its affiliates, officers, directors or principal equity holders (5% or more)
has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item (3) only
as follows (if at all): Such Registrable Securities may be sold from time to
time directly by the undersigned Selling Securityholder or, alternatively,
through underwriters, broker-dealers or agents. Such Registrable Securities
may be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of sale, at varying prices determined at the time of sale,
or at negotiated prices. Such sales may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Registered Securities may be listed or quoted
at the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or services or in the
over-the-counter market, or (iv) through the writing of options. In connection
with sales of the Registrable Securities or otherwise, the Selling
Securityholder may enter into hedging transactions with broker-dealers, which
may in turn engage in short sales of the Registrable Securities in the course
of hedging the positions they assume. The Selling Securityholder may also sell
Registrable Securities short and deliver Registrable Securities to close out
such short positions, or loan or pledge Registrable Securities to
broker-dealers that in turn may sell such securities.
A-5
<PAGE> 28
State any exceptions here:
(7) Specify the number of copies of the prospectus needed:
-----------------
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations thereunder,
particularly Regulation M thereunder.
In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above after the date
on which such information is provided to the Company, the Selling
Securityholder agrees to notify the transferee(s) at the time of the transfer
of its rights and obligations under this Notice and Questionnaire and the
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the
disclosure of the information contained herein in its answers to Items (1)
through (7) above and the inclusion of such information in the Shelf
Registration Statement and related Prospectus. The Selling Securityholder
understands that such information will be relied upon by the Company in
connection with the preparation of the Shelf Registration Statement and related
Prospectus.
In accordance with the Selling Securityholder's obligation under
Section 3(d) of the Registration Rights Agreement to provide such information
as may be required by law for inclusion in the Shelf Registration Statement,
the Selling Securityholder agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration
Statement remains in effect. All notices hereunder and pursuant to the
Exchange and Registration Rights Agreement shall be made in writing, by
hand-delivery, first-class mail, or air courier guaranteeing overnight delivery
to the Company as follows:
Pogo Producing Company
5 Greenway Plaza, Suite 2700
Houston, Texas 77046-0504
Attention: Corporate Secretary
(713) 297-5017
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above. This Agreement shall be governed in all respects by the laws of the
State of New York.
A-6
<PAGE> 29
IN WITNESS WHEREOF, the undersigned, by authority duly given,
has caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.
Dated:
---------------
---------------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial
owner of Registrable Securities)
By:
------------------------------------------
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT
ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY AT
Pogo Producing Company
5 Greenway Plaza, Suite 2700
Houston, Texas 77046-0504
Attention: Corporate Secretary
(713) 297-5017
A-7
<PAGE> 30
Exhibit B
[FORM OF REPRESENTATION LETTER TO TRANSFER
NOTES TO UNRESTRICTED CUSIP]
[DATE]
Pogo Producing Company
5 Greenway Plaza, Suite 2700
Houston, TX 77046-0504
(713) 297-4970 (fax)
Attention: Gerald Morton
Fleet National Bank, as Trustee
777 Main St.
Mail Stop 238
Hartford, CT 06115
(860) 986-7920 (fax)
Attention: Phillip Kane
Re: Pogo Producing Company 8 3/4% Senior Subordinated Notes due 2007
Gentlemen:
We hereby certify that Pogo Producing Company (the "Company") and to
Fleet National Bank, as Trustee, that [NAME OF SELLER] (the "Seller") sold
$[AMOUNT SOLD] of the Company's 8 3/4% Senior Subordinated Notes due 2007 (the
"Notes") held on behalf of the Seller in the name of [DTC NOMINEE'S NAME] with
the Depository Trust Company as a portion of the unregistered Global Security
and representing a portion of the Series A Securities (CUSIP No. _________).
The Notes sold by the undersigned were sold pursuant to a prospectus for the
Notes dated [DATE OF PROSPECTUS, AS SUPPLEMENTED] (the "Prospectus"). In
connection with the sale of the Notes, Seller hereby represents and warrants to
the Company and the Trustee that: (i) such Notes were sold in accordance with
the section of the Prospectus entitled "Plan of Distribution", (ii) a copy of
the Prospectus was delivered in connection with the sale, (iii) to Seller's
knowledge, the purchaser was not an Affiliate (as such term is defined in the
Securities Act of 1933, as amended (the "Act")) of the Company, and (iv) that
all of the provisions of the Act were complied with in connection with such
sale. The amount of Notes sold, and their trade date(s) is a follows:
Trade Date Amount of Notes Sold
---------- --------------------
[INSERT TRADE DATE] [AMOUNT SOLD]
The undersigned represents and warrants that he is a duly authorized
officer or representative of Seller, with the full power and authority to make
the representations and statements contained herein,
B-1
<PAGE> 31
and that such representations and statements are for the benefit of the Company
and Trustee and may be relied upon by them in effecting the transfer of the
amount of Notes sold from the Global Security representing the Series A
Securities (CUSIP No. __________) to the Global Security representing the
Series B Securities (CUSIP No. __________).
[SELLER]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
B-2
<PAGE> 1
EXHIBIT 5.1
July 2, 1997
Pogo Producing Company
5 Greenway Plaza
Suite 2700
Houston, Texas 77046
Ladies and Gentlemen:
As set forth in the Registration Statement on Form S-4 ("Registration
Statement"), filed by Pogo Producing Company, a Delaware corporation (the
"Company"), under the Securities Act of 1933, as amended (the "Act"), relating
to $100,000,000 aggregate principal amount of 8-3/4% Senior Subordinated Notes
due 2004 of the Company (the "Notes"), certain legal matters in connection with
the Notes are being passed upon for you by me. The Notes are to be issued under
an indenture (the "Indenture") between the Company and State Street Bank and
Trust Company, as succesor in iterest to Fleet National Bank, as trustee (the
"Trustee"). At your request, this opinion is being furnished to you for filing
as Exhibit 5 to the Registration Statement.
I have acted as counsel for the Company in connection with the
registration and sale of the Notes. In such capacity, I have examined the
Company's Restated Certificate of Incorporation and Bylaws, each as amended to
date, and have examined the originals, or copies certified or otherwise
identified, of corporate records of the Company, certificates of public
officials and of representatives of the Company, statutes and other records,
instruments and documents as a basis for the opinions hereinafter expressed.
Based upon our examination as aforesaid, and subject to the
assumptions, qualifications, limitations and exceptions set forth herein, I am
of the opinion that:
1. The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware.
<PAGE> 2
Pogo Producing Company July 2, 1997
2. The Indenture constitutes a legal, valid and binding instrument of
the Company, enforceable against the Company in accordance with its terms.
3. The Notes constitute legal,
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms.
The opinions as to enforceability of obligations set forth in
paragraphs 2 and 3 above are each subject to the effect on such enforceability
of (i) bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting creditors' rights and (ii) general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters."
Very truly yours,
/s/ GERALD A. MORTON
Gerald A. Morton
-2-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our report dated
February 3, 1997 included in Pogo Producing Company's Annual Report on Form 10-K
for the year ended December 31, 1996, and to all references to our Firm included
in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Houston, Texas
July 2, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name in this Registration
Statement on Form S-4 under the heading "Experts". We further consent to the
incorporation by reference of our estimates of reserves and present value of
future net reserves in such Registration Statement.
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
/s/ Ryder Scott Company
Petroleum Engineers
Houston, Texas
July 2, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I Tobin Armstrong, in my capacity as a director of
the Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W. ELSENHANS, and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ TOBIN ARMSTRONG
Tobin Armstrong
<PAGE> 2
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I Jack S. Blanton, in my capacity as a director of
the Company, do hereby appoint PAUL G. VAN WAGENEN, STEPHEN SLACK, and THOMAS
E. HART, and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ JACK S. BLANTON
Jack S. Blanton
<PAGE> 3
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I W. M. Brumley, Jr., in my capacity as a director of
the Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W. ELSENHANS, and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ W. M. BRUMLEY, JR.
W. M. Brumley, Jr.
<PAGE> 4
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I John B. Carter, Jr., in my capacity as a director
of the Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W. ELSENHANS, and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ JOHN B. CARTER, JR.
John B. Carter, Jr.
<PAGE> 5
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I William L. Fisher, in my capacity as a director of
the Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W. ELSENHANS, and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ WILLIAM L. FISHER
William L. Fisher
<PAGE> 6
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I William E. Gipson, in my capacity as a director of
the Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W. ELSENHANS, and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ WILLIAM E. GIPSON
William E. Gipson
<PAGE> 7
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I Gerrit W. Gong, in my capacity as a director of the
Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W. ELSENHANS, and THOMAS
E. HART, and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ GERRIT W. GONG
Gerrit W. Gong
<PAGE> 8
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I J. Stuart Hunt, in my capacity as a director of the
Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W. ELSENHANS, and THOMAS
E. HART, and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ J. STUART HUNT
J. Stuart Hunt
<PAGE> 9
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I Frederick A. Klingenstein, in my capacity as a
director of the Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W.
ELSENHANS, and THOMAS E. HART, and each of them severally, my true and lawful
attorney or attorneys with power to act with or without the others, and with
full power of substitution and resubstitution, to execute in my name, place and
stead in my capacity as a director of the Company, said Registration Statement,
any and all amendments to said Registration Statement and all instruments as
said attorneys or any of them shall deem necessary or incidental in connection
therewith and to file the same with the Commission. Each of said attorneys
shall have full power and authority to do and perform in my name and on my
behalf in my capacity as a director any act whatsoever that is necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ FREDERICK A. KLINGENSTEIN
Frederick A. Klingenstein
<PAGE> 10
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I Nicholas R. Petry, in my capacity as a director of
the Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W. ELSENHANS, and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ NICHOLAS R. PETRY
Nicholas R. Petry
<PAGE> 11
POWER OF ATTORNEY
WHEREAS, POGO PRODUCING COMPANY, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4 (the "Registration Statement") in order to
register certain securities pursuant to the Act as have been approved by the
Board of Directors pursuant to resolutions adopted thereby, and also to file
any and all exhibits and other documents relating to said Registration
Statement that are necessary or advisable;
NOW, THEREFORE, I Jack A. Vickers, in my capacity as a director of
the Company, do hereby appoint PAUL G. VAN WAGENEN, JOHN W. ELSENHANS, and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in my name, place and stead in my
capacity as a director of the Company, said Registration Statement, any and all
amendments to said Registration Statement and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in my name and on my behalf in my
capacity as a director any act whatsoever that is necessary or desirable to be
done in the premises as fully and to all intents and purposes as I might or
could do in person, and by my signature hereto, I hereby ratify and approve all
of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 30th day of June, 1997.
/s/ JACK A. VICKERS
Jack A. Vickers
<PAGE> 1
EXHIBIT 25.1
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) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
</TABLE>
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
_____________________
POGO PRODUCING COMPANY
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 74-1659398
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
5 GREENWAY PLAZA,
SUITE 2700
HOUSTON, TEXAS 77046-0504
(Address of principal executive offices) (Zip Code)
____________________
8 3/4% SENIOR SUBORDINATED NOTES DUE 5/15/2007
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Boston Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS
IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and
made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates
to matters peculiarly within the knowledge of the obligor or any underwriter
for the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 30th day of June, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /S/ PAUL D. ALLEN
------------------------------
PAUL D. ALLEN
VICE PRESIDENT
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EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by POGO
PRODUCING COMPANY of its 8 3/4% SENIOR SUBORDINATED NOTES DUE 5/15/2007, 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.
STATE STREET BANK AND TRUST COMPANY
By: /S/ PAUL D. ALLEN
---------------------------------
PAUL D. ALLEN
VICE PRESIDENT
DATED: JUNE 30, 1997
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EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this commonwealth
and a member of the Federal Reserve System, at the close of business March 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act and in
accordance with a call made by the Commissioner of Banks under General Laws,
Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ......................................... 1,665,142
Interest-bearing balances .................................................................. 8,193,292
Securities........................................................................................... 10,238,113
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ........................................................ 5,853,144
Loans and lease financing receivables:
Loans and leases, net of unearned income ......................... 4,936,454
Allowance for loan and lease losses .............................. 70,307
Allocated transfer risk reserve................................... 0
Loans and leases, net of unearned income and allowances .................................... 4,866,147
Assets held in trading
accounts............................................................................................. 957,478
Premises and fixed
assets............................................................................................... 380,117
Other real estate owned
...................................................................................................... 884
Investments in unconsolidated subsidiaries ........................................................... 25,835
Customers' liability to this bank on acceptances outstanding ......................................... 45,548
Intangible assets..................................................................................... 158,080
Other
assets................................................................................................ 1,066,957
-----------
Total assets.......................................................................................... 33,450,737
===========
LIABILITIES
Deposits:
In domestic offices
...................................................................................................... 8,270,845
Noninterest-bearing ..................................... 6,318,360
Interest-bearing ........................................ 1,952,485
In foreign offices and Edge subsidiary ...................................................... 12,760,086
Noninterest-bearing ..................................... 53,052
Interest-bearing ........................................ 12,707,034
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary.......................................................... 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities ..................................... 926,821
Other borrowed money ................................................................................. 671,164
Subordinated notes and debentures .................................................................... 0
Bank's liability on acceptances executed and outstanding ............................................. 46,137
Other liabilities .................................................................................... 745,529
Total liabilities .................................................................................... 31,637,223
------------
EQUITY CAPITAL
Perpetual preferred stock and related surplus......................................................... 0
Common stock ......................................................................................... 29,931
Surplus .............................................................................................. 360,717
Undivided profits and capital reserves/Net unrealized holding gains (losses) ......................... 1,426,881
Cumulative foreign currency translation adjustments ................................................. (4,015)
-
Total equity capital ................................................................................. 1,813,514
------------
Total liabilities and equity capital.................................................................. 33,450,737
============
</TABLE>
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I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
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