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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1999
REGISTRATION NO. 333-
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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)
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DELAWARE 1311 74-1659398
(State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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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 executive offices) HOUSTON, TEXAS 77046
(713) 297-5000
(Name, Address, including zip code, and telephone number,
including area code, of agent for service)
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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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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======================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE (1) OFFERING PRICE (1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
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10 3/8% Senior Subordinated $150,000,000 100% $150,000,000 $41,700
Notes due 2009...............
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
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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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated
February 10, 1999
PROSPECTUS
POGO PRODUCING COMPANY
$150,000,000
OFFER TO EXCHANGE
10 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
FOR ALL OUTSTANDING 10 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2009
THE NEW NOTES
o will be freely tradeable and otherwise substantially identical to the
outstanding notes
o will accrue interest from January 15, 1999 at the rate of 10 3/8% per
annum, payable semi-annually in arrears on each February 15 and August 15,
beginning August 15, 1999.
o will be unsecured and will rank equally with the outstanding notes and our
other unsecured senior subordinated indebtedness.
o will not be listed on any securities exchange or on any automated dealer
quotation system
THE EXCHANGE OFFER
o expires at 5:00 p.m., New York City time, on , 1999, unless extended
o is not conditioned upon any minimum aggregate principal amount of
outstanding notes being tendered
IN ADDITION, YOU SHOULD NOTE THAT
o all outstanding notes that are validly tendered and not validly withdrawn
will be exchanged for an equal principal amount of new notes that are
registered under the Securities Act of 1933
o tenders of outstanding notes may be withdrawn any time prior to the
expiration of the exchange offer
o the exchange of outstanding notes for new notes in the exchange offer will
not be a taxable event for U.S. federal income tax purposes
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 14 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NEW NOTES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1999.
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TABLE OF CONTENTS
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Forward-Looking Statements.....................................................2
Where You Can Find More Information............................................3
Incorporation of Certain Documents by Reference................................3
Certain Definitions............................................................4
Prospectus Summary.............................................................5
Risk Factors..................................................................14
Private Placement.............................................................24
Use of Proceeds...............................................................24
Capitalization................................................................24
Selected Financial Data.......................................................25
Selected Reserve and Operating Data...........................................27
Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................29
Business and Properties.......................................................45
Management and Board of Directors.............................................66
The Exchange Offer............................................................68
Description of the Notes......................................................78
Outstanding Notes Registration Rights Agreement..............................121
Book Entry; Delivery and Form................................................122
Certain Federal Income Tax Consequences......................................124
Plan of Distribution.........................................................125
Transfer Restrictions on Outstanding Notes...................................126
Legal Matters................................................................126
Experts......................................................................126
Index to Consolidated Financial Statements...................................F-1
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This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission. You should rely only on the information or
representations provided in this prospectus. We have not authorized any person
to provide information other than that provided in this prospectus. We have not
authorized anyone to provide you with different information. We are not making
an offer of these securities in any jurisdiction where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this document.
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FORWARD-LOOKING STATEMENTS
Certain of the statements contained or incorporated by reference in this
prospectus are forward-looking statements. The use of any of the words
"anticipate," "estimate," "expect," "may," "project," "believe" and similar
expressions are intended to identify uncertainties. Although we believe the
expectations reflected in those forward- looking statements are reasonable,
they do involve certain assumptions, risks and uncertainties, and we cannot
assure that those expectations will prove to have been correct. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of the risk factors set forth below and other factors
set forth in or incorporated by reference in this prospectus. These factors
include:
o the cyclical nature of the oil and natural gas industries
o uncertainties associated with the United States and worldwide
economies
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o current and potential governmental regulatory actions in countries
where we own an interest
o substantial competitor production increases resulting in oversupply
and declining prices
o our ability to implement cost reductions
o our ability to raise additional capital or sell assets
o operating interruptions (including leaks, explosions, fires,
mechanical failure, unscheduled downtime, transportation
interruptions, and spills and releases and other environmental risks)
o fluctuations in foreign currency exchange rates in areas of the world
where we own an interest, particularly Southeast Asia
o covenant restrictions in our indebtedness
o the impact of the Year 2000 problem
Many of those factors are beyond our ability to control or predict.
Management cautions against putting undue reliance on forward-looking
statements or projecting any future results based on such statements or present
or prior earnings levels.
All subsequent written and oral forward-looking statements
attributable to us and persons acting on our behalf are qualified in their
entirety by the cautionary statements contained in this section and elsewhere
in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus incorporates important business and financial
information about us that we have not included in or delivered with this
prospectus. This information is available without charge upon written or oral
request. You should make any request to Gerald A. Morton, Pogo Producing
Company, 5 Greenway Plaza, Suite 2700, Houston, Texas 77046-0504, telephone
number: (713) 297-5000. To ensure timely delivery, you should request the
information no later than , 1999. See "Incorporation of Certain
Documents by Reference."
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). Our
SEC filings are available to the public over the Internet at the SEC's web site
at http://www.sec.gov. You may also read and copy any document we file with the
SEC at its public reference facilities at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can also obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities. You can also
obtain information about us at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We "incorporate by reference" into this prospectus certain information
we file with the SEC, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is an important part of this prospectus and information that we
subsequently file with the SEC will automatically update this prospectus. We
incorporate by reference the documents listed below (collectively, the
"Reports") and any filings we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this prospectus and before the
termination of the offering made under this prospectus:
o Our Annual Report on Form 10-K for the year ended December 31, 1997
(the "Annual Report")
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o Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998, and September 30, 1998, as amended
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing to or telephoning us at the following address:
Pogo Producing Company
Corporate Secretary
5 Greenway Plaza, Suite 2700
Houston, Texas 77046-0504
(713) 297-5017
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 of natural gas
equivalent, "MMcfe" means million cubic feet of natural gas equivalent and
"Bcfe" means billion cubic feet of natural gas 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
("NGL"). "EBITDA" means income from continuing operations before provision for
income taxes, interest expense, depreciation, depletion and amortization, and
dry hole and impairment costs. References to "$" and "dollars" refer to United
States dollars. All estimates of reserves contained in this prospectus, unless
otherwise noted, are reported on a "net" basis. Information regarding
production, acreage and numbers of wells are set forth on a gross basis, unless
otherwise noted.
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PROSPECTUS SUMMARY
This summary may not contain all the information that is important to
you. You should read the entire prospectus, including the financial data and
related notes, before making an investment decision. The terms "the Company",
"we", "our", "ours" and "us" as used in this prospectus refer to "Pogo
Producing Company" and its subsidiaries and predecessors as a combined entity.
We acquired Arch Petroleum Inc. and its subsidiaries ("Arch") on
August 17, 1998, in a stock-for-stock, tax-free merger which was accounted for
using the purchase method of accounting. Company financial and operating data
as of dates and for periods after August 17, 1998, include financial and
operating data for Arch.
You should carefully consider the information set forth under the
heading "Risk Factors." This prospectus contains certain forward-looking
statements which involve risks and uncertainties. Our actual results may differ
significantly from the results discussed in the forward-looking statements. See
"Forward-Looking Statements."
The term "outstanding notes" refers to the 10 3/8% Series A Senior
Subordinated Notes due 2009 that were issued January 15, 1999. The term "new
notes" refers to the 10 3/8% Series B Senior Subordinated Notes due 2009
issuable in the exchange offer. The term "notes" refers to the outstanding
notes and the new notes collectively.
POGO PRODUCING COMPANY
We are an independent oil and gas exploration and production company
with a well balanced portfolio of domestic and international properties. Our
properties produced approximately 60% natural gas and 40% oil over the nine
months ended September 30, 1998. As of December 31, 1997, approximately 52% of
our proved reserves were located in the United States where we currently own
interests in 105 lease blocks (comprising 455,600 gross acres) in the offshore
Gulf of Mexico and approximately 378,000 gross acres onshore, primarily in
Texas, New Mexico and Louisiana. Our remaining proved reserves, as of December
31, 1997, were located in the Gulf of Thailand where we currently own interests
in 734,000 gross acres. We also own interests in approximately 150,000 gross
acres in Western Canada, and we were recently awarded a license on 113,000 gross
acres in the U.K. sector of the North Sea. Our 1997 year-end worldwide proved
reserves totaled 64,045 MBbls of liquid hydrocarbons and 478,373 MMcf of natural
gas or 862,643 MMcfe (including reserves we acquired in the Arch acquisition).
For the twelve months ended September 30, 1998, our total revenues were
$230,641,000 and EBITDA was $126,171,000.
Our exploration strategy is to concentrate our efforts on selected
areas where we believe that our expertise, competitive acreage position, or
ability to quickly take advantage of new opportunities offers the potential for
achieving a significant return on our investment. We have established a record
of increasing our proven hydrocarbon reserves over the last seven years,
principally through the exploration, exploitation and development of our
properties and, to a lesser extent, the selective acquisition of additional
interests in producing properties in which we already have an interest. An
important measure of our success is our record for replacing the oil and gas
which we produce each year. From 1993 through 1997, we replaced each year's
production with new proved reserves at the following rates:
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PERCENTAGE OF
PRODUCTION
YEAR REPLACED
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1993............................................ 204%
1994............................................ 153%
1995............................................ 305%
1996............................................ 187%
1997............................................ 188%
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Our cost for replacing these reserves averaged $5.43 per BOE over the
five year period. As a result of our continuing successful exploration,
exploitation and development activities, we currently believe that we have
replaced our 1998 worldwide production (excluding the reserves we acquired in
the Arch acquisition). We believe that another measure of our success is the
number of successful wells that we have participated in drilling. Since
December 31, 1993, we have participated in drilling 508 gross wells, 89% of
which were successful.
COMPETITIVE STRENGTHS
We believe we are well positioned to continue to build upon our
historical success by capitalizing on our strengths, including the following:
o Diversified Portfolio of Core Properties. We benefit from a portfolio
of existing properties which provide geographic diversification while
being of sufficient size and potential to enable us to concentrate
our resources and regional expertise. For example, as of December 31,
1997, 90% of our proved liquid hydrocarbon reserves and 82% of our
proved natural gas reserves were located in six operating areas in
four geographic regions. This concentration of core properties
permits us to maintain a focused exploration and development program
by using the substantial geological and operating expertise that we
have gained over years of participating in these areas. We also use
the experience that we gain in our core areas to evaluate new
opportunities in areas with similar characteristics. For example, we
used the experience we gained in the Gulf of Mexico to develop our
concession in the Gulf of Thailand. Since our Thailand concession was
granted in August 1991, we have discovered over 375 Bcfe of proven
reserves (as of December 31, 1997) on this acreage net to our
interest.
o Significant Further Potential From Existing Properties. We believe
that our existing properties continue to hold significant further
potential for increased production and the discovery of additional
reserves. For example, we expect a significant increase in our
production rates when the Benchamas Field comes onstream in the third
quarter of 1999. In addition, we currently expect to spend
approximately $170,000,000 during 1999 to develop our existing
properties, including drilling approximately 110 gross wells.
o Balanced Risk Profile; Prudent Exposure to Higher Return
Opportunities. We seek to manage our risk exposure by maintaining a
prudent level of participation in our projects. We seek to operate
properties where we believe that our working interest percentage,
expertise or ability to control the timing or cost of a project
provides a competitive advantage to us and our partners. On
properties where we are not the operator, we try to have a meaningful
working interest so that we can influence operating and development
decisions regarding them. Generally, we seek a higher level of
participation in projects which we view as having potentially high
rates of return and relatively low anticipated exploration and
development costs, such as our operations in southeastern New Mexico
and West Texas. Conversely, we will generally seek a lower level of
participation in projects that have high drilling costs, a long lead
time until production can come onstream, or where development costs
may be disproportionately high, such as wells in intermediate water
depths (600 to 4,400 feet) in the Gulf of Mexico or wells that are
unusually deep or are considered highly risky. We currently operate
all or a portion of 27 of the 105 lease blocks in which we own
interests in the Gulf of Mexico.
o Technical Expertise. We have an experienced staff of engineers and
geoscientists that comprise over 40% of our total full-time
personnel. Our personnel's expertise, augmented by data from over 500
gross wells drilled since December 31, 1993, more than 4,800,000
acres of 3-D seismic data and 112,700 miles of 2-D seismic data,
create a knowledge base which we use to establish our drilling
priorities and associated capital budget.
BUSINESS STRATEGY
Our business strategy is to maximize profitability and shareholder
value by:
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o increasing hydrocarbon production levels, leading to increased
revenues, cash flow and earnings
o replacing and expanding our proven hydrocarbon reserves base
o maintaining appropriate levels of debt and interest, and controlling
overhead and operating costs
o expanding exploration and production activities into new and
promising geographic areas consistent with our expertise
To implement our business strategy, we currently are principally
focused in the following four geographic areas:
DOMESTIC OPERATIONAL AREAS
Gulf of Mexico. As of December 31, 1997, approximately 31% of our
total proved oil and gas reserves and approximately 59% of our domestic proved
oil and gas reserves were located in the Gulf of Mexico, where we have explored
for nearly 30 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 us to closely manage
costs and to develop detailed geologic and other information relating to these
areas. We believe that the Gulf of Mexico will continue to provide us with
substantial opportunities to expand our hydrocarbon reserves and increase our
deliverability by using our extensive inventory of 3-D seismic data (covering
the equivalent of 600 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. For example, within the last several years we have acquired interests
in 15 lease blocks in intermediate water depths (ranging from 600 feet to 4,400
feet). We have participated in drilling six wells on these lease blocks, all of
which have been successful. Together with our partners, we are currently
developing three projects on these blocks, two of which should commence
producing during the first quarter of 1999, and the other should come onstream
in the first quarter of 2000.
Permian Basin. As of December 31, 1997, approximately 12% of our total
proved oil and gas reserves, and approximately 24% of our domestic proved oil
and gas reserves were located in the Permian Basin where we have explored for
over 20 years. According to the most recently published annual figures, we are
the ninth largest producer of crude oil in New Mexico. We believe that we will
continue to be one of the most active companies drilling for oil and gas in the
southeastern New Mexico portion of the Permian Basin, where we have interests
in over 101,000 gross acres. Our 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 December 31, 1998, we (excluding Arch) and our partners drilled 389
wells in the Permian Basin area, of which 96% were completed as productive. We
generally achieve rapid cost recovery on our Permian Basin wells because of
relatively low capital costs and high initial rates of production. We currently
expect our Permian Basin operations to continue to be a source of significant
future oil production.
Onshore Gulf Coast Region. We have maintained an active presence in
the Onshore Gulf Coast region for over 20 years. Over the last several years,
we have committed considerable resources to increasing our presence in
promising areas where we believe that our technological expertise, acreage
position and comparatively low operating costs provide a competitive advantage.
Commencing in 1994, we have participated in nine proprietary and several
speculative 3-D seismic surveys in the Onshore Gulf Coast region. Since that
time, we have participated in the drilling of 58 new wells based in part on
prospects developed from those surveys. Successful drilling, based in large
part on these surveys, has enabled us to more than double our proven reserves
in this region from approximately 25 Bcfe as of December 31, 1995, to
approximately 68 Bcfe as of December 31, 1997.
INTERNATIONAL OPERATIONAL AREAS
Gulf of Thailand. In August 1991, together with our joint venture
partners, we were awarded a license to explore for oil and gas on the Kingdom
of Thailand's Block B8/32 Concession in the Gulf of Thailand. Through
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December 31, 1998, we have drilled 108 exploratory and development wells and
acquired 3-D seismic surveys covering approximately 673,650 acres. At December
31, 1997, approximately 48% of the Company's total proved oil and gas reserves
were located on the concession.
The first portion of the concession that we developed was the Tantawan
Field. Through December 31, 1998, we have drilled 19 exploration wells and 31
development wells in the Tantawan Field. Production from the Tantawan Field
began in early February 1997. During the third quarter of 1998, production
averaged 76.2 MMcf of natural gas per day and 5,605 Bbls of crude oil and
condensate per day (35.3 MMcf per day and 2,598 Bbls per day net to our working
interest). We plan to drill additional development wells in the Tantawan Field
during the first quarter of 1999. We are currently developing a second field on
the concession that is known as the Benchamas Field. The Benchamas Field does
not appear to be as highly faulted and the depositional environment of the
reservoir rock appears to be different from what we found in the Tantawan
Field. We currently believe this means the reservoirs in the Benchamas Field
will be larger and more contiguous than those in the Tantawan Field. Through
December 31, 1998, we have drilled 21 exploration wells and 28 development
wells in the Benchamas Field. Recently we announced the results of three wells
in this field, the Benchamas 22, 19 and A-7 wells. The Benchamas 22 well
contained 278 feet of hydrocarbon bearing sands. The Benchamas 19 well
contained 257 feet of hydrocarbon bearing sands, and the Benchamas A-7
contained 435 feet of hydrocarbon bearing sands. Drilling and platform
construction continue in the Benchamas Field, where we currently expect to
begin producing in the third quarter of 1999. The government of the Kingdom of
Thailand has also granted us a production license to develop a third field on
the concession known as the Maliwan Field. We have also started exploring in
another part of the concession known as the Jarmjuree area, where we drilled
three wells which located hydrocarbons during the third quarter of 1998. We
currently plan to drill additional appraisal wells in the Maliwan Field during
1999, as well as more exploratory wells on other parts of the concession that
have not yet been designated as production licenses.
Rutherford-Moran Oil Corporation, the parent company of Thai Romo Ltd.,
one of our partners in our Thailand concession, has recently announced that it
has agreed to be acquired by Chevron Corporation. The acquisition is subject to
conditions, several of which are outside of Rutherford-Moran's control. One of
these conditions is that Chevron reach agreement with us on a new joint
operating agreement that would include the transfer of operatorship on the
Thailand concession from our subsidiary to a subsidiary of Chevron. Although we
have held discussions with Chevron on this subject, we do not know whether we
can reach a mutually satisfactory agreement with Chevron.
In addition to developing our concession in the Gulf of Thailand, we
continue to actively evaluate potentially high return projects in other areas
of the world with relatively stable political and financial climates, such as
Canada and certain European and ASEAN ("Association of Southeast Asian
Nations") countries. As a result of our acquisition of Arch in August 1998, we
own interests in approximately 150,000 gross acres located primarily in Alberta
and British Columbia. In another promising development, in December 1998, the
United Kingdom's Department of Trade and Industry announced that we, together
with two partners, had been awarded two blocks in the Central Graben area of
the North Sea covering approximately 113,000 gross acres. The license to
explore these two blocks is for an initial six-year term.
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Our principal executive offices are located at 5 Greenway Plaza, Suite
2700, Houston, Texas 77046, telephone (713) 297-5000.
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SUMMARY OF THE EXCHANGE OFFER
On January 15, 1999, we completed the private offering of the
outstanding notes.
We entered into a registration rights agreement with the initial
purchasers in the private offering in which we agreed to deliver to you this
prospectus and to complete the exchange offer within 180 days after the date we
issued the outstanding notes. You are entitled to exchange in the exchange
offer your outstanding notes for new notes with substantially identical terms.
You should read the discussion under the headings "--Summary of the
Terms of the New Notes" beginning on page 12 and "Description of the Notes"
beginning on page 78 for further information regarding the new notes.
We summarize the terms of the exchange offer below. You should read
the discussion under the headings "The Exchange Offer" beginning on page 68 for
further information regarding the exchange offer and resale of the new notes.
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The Exchange Offer......................... We are offering to exchange up to $150 million aggregate principal
amount of new notes for up to $150 million aggregate principal
amount of the outstanding notes. Outstanding notes may be
exchanged only in integral multiples of $1,000.
Expiration Date............................ The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1999, or such later date and time to which we extend it.
Withdrawal of Tenders...................... You may withdraw your tender of outstanding notes at any time prior
to the expiration date, unless previously accepted for exchange. We
will return to you, without charge, promptly after the expiration or
termination of the exchange offer any outstanding notes that you
tendered but that were not accepted for exchange.
Conditions to the Exchange Offer........... We will not be required to accept outstanding notes for exchange if the
exchange offer would be unlawful or would violate any interpretation
of the staff of the SEC. The exchange offer is not conditioned upon
any minimum aggregate principal amount of outstanding notes being
tendered. Please read the section "The Exchange Offer--Conditions
to the Exchange Offer" beginning on page 70 for more information
regarding the conditions to the exchange offer.
Procedures for Tendering
Outstanding Notes....................... If your outstanding notes are held through The Depositary Trust
Company and you wish to participate in the exchange offer, you may
do so through the automated tender offer program of The Depositary
Trust Company. If you tender under this program, you will agree to
be bound by the letter of transmittal that we are providing with this
prospectus as though you had signed the letter of transmittal. By
signing or agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:
o any new notes that you receive will be acquired in the ordinary
course of your business
o you have no arrangement or understanding with any person or
entity to participate in the distribution of the new notes
o if you are not a broker-dealer, you are not engaged in and do not
intend to engage in the distribution of the new notes
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o if you are a broker-dealer that will receive new notes for your own
account in exchange for outstanding notes that were acquired as a
result of market-making activities, you will deliver a prospectus, as
required by law, in connection with any resale of such new notes
o you are not our "affiliate," as defined in Rule 405 of the Securities Act
of 1933, or, if you are our affiliate, you will comply with any
applicable registration and prospectus delivery requirements of the
Securities Act of 1933
Special Procedures for
Beneficial Owners......................... If you own a beneficial interest in outstanding notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee, and you
wish to tender the outstanding notes in the exchange offer, you should contact
the registered holder promptly and instruct the registered holder to tender on
your behalf.
Guaranteed Delivery Procedures............. If you wish to tender your outstanding notes and cannot comply, prior
to the expiration date, with the applicable procedures under the
automated tender program of The Depositary Trust Company, you
must tender your outstanding notes according to the guaranteed
delivery procedures described in "The Exchange Offer--Guaranteed
Delivery Procedures" beginning on page 74.
Certain U.S. Federal Income
Tax Considerations...................... The exchange of outstanding notes for new notes in the exchange offer
will not be a taxable event for U.S. federal income tax purposes.
Please read "Certain Federal Income Tax Consequences" beginning on page
124.
Use of Proceeds............................ We will not receive any cash proceeds from the issuance of new notes.
</TABLE>
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<PAGE> 12
THE EXCHANGE AGENT
We have appointed State Street Bank and Trust Company as exchange
agent for the exchange offer. You should direct questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for the notice of guaranteed delivery to the
exchange agent addressed as follows:
FOR DELIVERY BY MAIL: FOR OVERNIGHT DELIVERY ONLY OR BY HAND:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 4th Floor, Two International Place
Boston, MA 02102-0078 Boston, MA 02110
FOR FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY):
(617) 664-5739
To Confirm Receipt:
(617) 664-5314
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<PAGE> 13
SUMMARY OF TERMS OF THE NEW NOTES
The new notes will be freely tradeable and otherwise substantially
identical to the outstanding notes. The new notes will not have registration
rights or provisions for additional interest. The new notes will evidence the
same debt as the outstanding notes, and the outstanding notes are and the new
notes will be governed by the same indenture.
<TABLE>
<CAPTION>
<S> <C>
Notes Offered............................ $150,000,000 aggregate principal amount of 10 3/8% Series B
Senior Subordinated Notes due 2009.
Maturity Date............................ February 15, 2009.
Interest Payment Dates................... February 15 and August 15 of each year, commencing August 15, 1999.
Optional Redemption...................... We may redeem any or all of the new notes at any time on or after
February 15, 2004. We will pay a redemption price equal to the principal
amount of the notes we redeem plus a make-whole premium, which is
described under "Description of the Notes -- Redemption; Optional
Redemption" on page 79. We will also pay accrued and unpaid interest.
Possible Subsidiary
Guarantees............................... None of our subsidiaries will guarantee the new notes initially. If our
existing or future restricted subsidiaries guarantee any of our other
indebtedness, however, they will be required by the indenture governing
the new notes to jointly and severally guarantee the new notes on a senior
subordinated basis. We do not intend to cause any subsidiary to take any
action that would require it to guarantee the new notes. Any subsidiary
guarantees of the new notes that may be issued 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 -- Future
subsidiary guarantees may be affected by fraudulent conveyance laws"
on page 22 and "Description of the Notes -- Possible Subsidiary
Guarantees of the Notes" beginning on page 82.
Change of Control........................ Upon certain change of control events, each holder of notes may require
us to purchase all or a portion of its notes at a purchase price equal to
101% of the principal amount of those notes, together with accrued and
unpaid interest, if any, to the date of purchase. See "Description of the
Notes -- Certain Covenants; Change of Control" beginning on page 88.
Ranking.................................. The new notes will be our general unsecured senior subordinated
obligations. They will be subordinated in right of payment to all our
existing and future Senior Indebtedness. The new notes will rank equally
with all our existing and future senior subordinated indebtedness and
senior in right of payment to all our existing and future Subordinated
Indebtedness. The terms "Senior Indebtedness" and "Subordinated
Indebtedness" are defined with respect to the notes in "Description of the
Notes -- Certain Definitions" which begins on page 99.
Certain Covenants........................ The indenture governing the outstanding notes and the new notes
contains covenants that, among other things, limit our ability, and the
ability of our restricted subsidiaries to:
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C>
o incur additional indebtedness
o make certain investments
o pay dividends on, redeem or repurchase our capital stock
o issue and sell our restricted subsidiaries' capital stock
o engage in transactions with affiliates
o create certain liens
o dispose of asset sales proceeds
o guarantee indebtedness
o incur senior subordinated indebtedness that does not
rank equal to the notes
o merge, consolidate and sell assets
These covenants have various
exceptions and qualifications, which
are described under "Description of
the Notes -- Certain Covenants" which
begins on page 83.
Right under Registration
Rights Agreement......................... If we fail to complete the exchange offer as required by the registration
rights agreement, we will be obligated to pay additional interest to
holders of the outstanding notes.
Please read "Outstanding Notes Registration Rights Agreement" beginning on page
121 for more information regarding your rights as a holder of outstanding notes.
Absence of a Public Market
for the Notes............................ The new notes will be a new issue of securities for which there is
currently no market. Although the initial purchasers of the outstanding
notes have informed us that they each currently intend to make a market
in the new notes issued in the exchange offer, they are not obligated to do so.
Any such market making may be discontinued at any time without notice. Accordingly,
we cannot assure you as to the development or liquidity of any market for the notes.
Risk Factors............................. You should consider carefully the risks described in "Risk Factors,"
beginning on page 14.
</TABLE>
SELECTED FINANCIAL DATA
Please read "Selected Financial Data" beginning on page 25 for our selected
financial date for the five-year period ended December 31, 1997, and the nine
month periods ended September 30, 1998 and 1997.
SELECTED RESERVE AND OPERATING DATA
Please read "Selected Reserve and Operating Data" beginning on page 27 for
our selected reserve and operating data for the five-year period ended December
31, 1997, and the nine month periods ended September 30, 1998 and 1997.
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<PAGE> 15
RISK FACTORS
Your investment in the notes involves certain risks. You should carefully
consider the following Risk Factors before making an investment decision.
VOLATILITY OF OIL AND GAS MARKETS AFFECTS US
Market prices are volatile
Our profitability and cash flow depend greatly on the market prices of oil
and natural gas. Those market prices have historically been seasonal, cyclical
and volatile. They depend on many factors, including weather, economic,
political and regulatory conditions that we cannot control. Commencing in 1997,
the average prices for our production have generally declined. Oil prices have
reached lows that, on a historic inflation adjusted basis, are almost
unprecedented. In the past, we have at times curtailed production to mitigate
the effects of low market prices. We may do so again. The significant drop in
oil or gas prices has had a serious adverse effect on our cash flow and
continued low prices could seriously affect our operations and financial
condition and could in some cases result in a further reduction in funds
available under our bank credit agreement.
Hedging transactions may not prevent losses
We cannot predict future oil and gas prices with certainty. Accordingly, we
sometimes execute contracts on a portion of our production to hedge against
market price changes. In the past, we have not entered hedging transactions
exceeding 50% of our total oil and gas production on an energy equivalent basis
for any given period. Hedging transactions are intended to limit the negative
effect of further price declines, but could also limit our participation in
significant price increases for the covered period. We cannot be certain that
hedging transactions will reduce the effect of any substantial declines in oil
and gas prices. As of December 31, 1998, we were not a party to any natural gas
futures contracts, crude oil swap agreements or other commodity hedging
agreements.
WE ARE SUBJECT TO UNCERTAINTIES IN RESERVE ESTIMATES AND FUTURE NET REVENUES
There is substantial uncertainty in estimating quantities of proved
reserves and projecting future production rates and the timing of development
expenditures. No one can measure underground accumulations of oil and gas in an
exact way. Accordingly, oil and gas reserve engineering requires subjective
estimations of those accumulations. Estimates of other engineers might differ
widely from those of our reserve engineers, Ryder Scott. Accuracy of reserve
estimates depends on the quality of available data and on engineering and
geological interpretation and judgment. Ryder Scott may make material changes
to reserve estimates based on the results of actual drilling, testing, and
production. As a result, our reserve estimates often differ from the quantities
of oil and gas we ultimately recover. Also, we make certain assumptions
regarding future oil and gas prices, production levels, and operating and
development costs that may prove incorrect. Any significant variance from these
assumptions could greatly affect our estimates of reserves and future net
revenues. The reserve estimates and estimates of future net income included in
this prospectus were prepared as of December 31, 1997. See "Business and
Properties -- Exploration and Production Data; Reserves." As a result of
current low oil and natural gas prices, estimates of our future net revenues,
as of December 31, 1998, will be significantly lower than they were at year-end
1997. See "Selected Reserve and Operating Data."
WE ARE SUBJECT TO OPERATING AND UNINSURED RISKS
We must continually acquire or explore for and develop new oil and natural
gas reserves to replace those produced and sold. Our hydrocarbon reserves and
revenues will decline if we are not successful in our drilling, acquisition or
exploration activities. Although we have historically maintained our reserves
base primarily through successful exploration and development operations, we
cannot assure that future efforts will be similarly successful. Casualty risks
and other operating risks could cause reserves and revenues to decline.
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<PAGE> 16
We are subject to various casualty risks
Our onshore and offshore operations are subject to the following
inherent casualty risks:
o blowouts, cratering, and explosions
o uncontrollable flows of oil, natural gas or well fluids
o fires
o pollution and other environmental risks
o hazards of marine and helicopter operations (capsizing, collision
and adverse weather and sea conditions)
We could suffer substantial financial losses due to any of the
following:
o injury or loss of life
o severe damage to and destruction of property and equipment
o pollution and other environmental damage
o suspension of operations
We may not have enough insurance to cover some operating risks
We carry insurance which we believe is in accordance with customary
industry practices, but we are not fully insured against all casualty risks
incident to our business.
We are subject to various other operating risks
Numerous risks affect drilling our activities, including the risk of
drilling non-productive wells or dry holes. The cost of drilling, completing
and operating wells and of installing production facilities and pipelines is
often uncertain. Also, our drilling operations could diminish or cease because
of any of the following:
o title problems
o weather conditions
o noncompliance with governmental requirements
o shortages or delays in the delivery or availability of equipment or
fabrication yards
Moreover, effective marketing of our natural gas production depends on a number
of factors, such as the following:
o existing market supply of and demand for natural gas
o the proximity of our reserves to pipelines
o the available capacity of such pipelines
o government regulations
The marketing of oil and gas production similarly depends on the availability
of pipelines and other transportation, processing and refining facilities, and
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, we may have to wait for the construction or expansion of pipeline
capacity before we can market production from that area. See "-- We face
additional risks related to our operations in the Kingdom of Thailand" and
"Business and Properties -- Miscellaneous" and "-- Government Regulation."
WE DEPEND ON OTHER OPERATORS
Even on properties we do not operate, we try to maintain significant
influence over the nature and timing of exploration and development activities
to the extent we can. However, we have limited influence over operations on
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<PAGE> 17
a significant percentage of our oil and gas properties, including control over
the maintenance of safety and environmental standards. For those properties:
o operators could refuse to initiate exploration or development
projects (in which case we may propose desired exploration or
development activities)
o if we proceed with any of those projects the operator has refused to
initiate, we may not receive any funding from the operator with
respect to that project
o the operators may initiate exploration or development projects on a
slower schedule than we prefer
o the operator may propose to drill more wells or build more
facilities on a project than we have funds for, which may mean that
we cannot participate in those projects or share in a substantial
share of the revenues from those projects
Any of these events could significantly affect our anticipated exploration and
development activities. See "Business and Properties -- Miscellaneous."
WE HAVE SUBSTANTIAL CAPITAL REQUIREMENTS
We have substantial anticipated capital requirements. Our ongoing capital
requirements consist primarily of the following items:
o funding the remainder of our 1998 capital and exploration budget
o the capital and exploration budget for 1999
o other allocations for acquisition, development, production,
exploration and abandonment of oil and gas reserves
o costs associated with our Thailand operations
o future dividend payments
From 1996 to 1997, we increased our capital and exploration expenditures from
$206.2 million to $229.5 million (excluding purchased reserves and interest
capitalized). We budgeted $230 million for capital and exploration expenditures
in 1998 (excluding purchased reserves and interest capitalized). Substantially
all of our 1998 capital and exploration budget has been spent or incurred. Our
1999 capital and exploration budget has been established by our Board of
Directors at $170 million (excluding purchased reserves and interest
capitalized).
We plan to finance anticipated ongoing expenses and capital requirements
with funds generated from the following sources:
o available cash and cash investments
o cash provided by operating activities
o funds available under our bank credit agreement after the
application of proceeds from the notes offering
o our uncommitted bank line of credit and banker's acceptances
o capital we believe we can raise through debt and convertible
preferred equity offerings
o asset sales
We believe the funds provided by these sources will be sufficient to meet our
1999 cash requirements. However, the uncertainties and risks associated with
future performance and revenues, as described in this section, will ultimately
determine our liquidity and ability to meet our anticipated capital
requirements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources; Capital
Structure; Credit Agreement and Uncommitted Credit Line."
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<PAGE> 18
WE FACE SIGNIFICANT COMPETITION
The oil and gas industry is highly competitive. We compete with major oil
companies, other independent oil and gas concerns and individual producers and
operators. Many of these competitors have much greater financial and other
resources than us. Moreover, the oil and gas industry competes with other
industries in supplying the energy and fuel needs of industrial, commercial and
other consumers. Increased competition causing oversupply or depressed prices
could greatly affect our operations revenues.
THE RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR SENIOR DEBT; THE
NOTES ARE STRUCTURALLY SUBORDINATED TO OBLIGATIONS OF OUR SUBSIDIARIES
The notes are senior subordinated obligations. Accordingly, the notes are
subordinated to all of our existing and future senior indebtedness, including
indebtedness under our bank credit agreement. We expect to incur additional
senior indebtedness from time to time in the future under our bank credit
agreement or otherwise. The indenture governing the notes limits, but does not
prohibit, the incurrence of any other indebtedness by us or our subsidiaries,
including senior indebtedness. The terms "senior indebtedness" and
"indebtedness" are defined in the "Description of the Notes -- Certain
Definitions" section of this prospectus.
Assuming we had issued the outstanding notes and applied the proceeds on
September 30, 1998, we would have had approximately $23,179,000 principal
amount of outstanding senior indebtedness. Upon any distribution of assets,
liquidation, dissolution, reorganization or any similar proceeding by or
relating to us, the holders of our senior indebtedness 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."
The notes are effectively subordinated to claims of creditors of our
subsidiaries (other than us) that are not guarantors of the notes, including
lessors, trade 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 guarantor of the notes, these
persons generally will have priority as to the assets of that subsidiary over
our claims and equity interest and, thereby indirectly, holders of our
indebtedness, including the notes. Currently, none of our subsidiaries
guarantee the notes. However, under certain circumstances, our payment
obligations under the notes may in the future be required to be jointly and
severally guaranteed by our existing or future subsidiaries. See "Description
of the Notes -- Possible Subsidiary Guarantees of the Notes."
THE NOTES ARE UNSECURED
In addition to being subordinate to all of our senior indebtedness, the
notes are not secured by any of our assets. Under certain circumstances, our
obligations under our bank credit agreement may become secured by some of our
oil and gas properties. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources; Capital
Structure." If the bank obligations become secured, and then we become
insolvent, are liquidated, or payment under our bank credit agreement is
accelerated, the lenders under our bank credit agreement would be entitled to
exercise the remedies available to a secured lender under applicable law. Under
these circumstances our bank lenders would have a secured claim on some of our
assets before the holders of these notes. Because the notes are unsecured,
there could be no assets remaining for the holders of the notes or any
remaining assets could be insufficient to pay off the notes.
OUR SUBSIDIARIES HAVE INDEBTEDNESS AND MAY INCUR ADDITIONAL INDEBTEDNESS
At September 30, 1998, our subsidiaries (principally Thaipo Ltd. ("Thaipo")
and Arch) had total combined assets of $370,029,000 (exclusive of net
receivables to us) and liabilities of $39,313,000 (exclusive of net payables to
us). Both the combined assets and liabilities are exclusive of assets and
liabilities associated with transactions treated as operating leases in our
consolidated financial statements. 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
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<PAGE> 19
Offloading system 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. Thaipo has
also entered into a ten year bareboat charter of a Floating Storage and
Offloading system for the Benchamas Field at an estimated annual cost of
approximately $5,215,000, commencing in mid-1999. The documents governing such
obligations state that we have no liability for those obligations. In addition,
our subsidiaries may incur other liabilities in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources; Other Material Long-Term Commitments."
The indenture governing the notes limits our and our subsidiaries' ability
to incur additional indebtedness and liens and to enter into agreements that
would restrict the ability of our subsidiaries to make distributions, loans or
other payments to us. That indenture will also impose limits on our ability to
transfer assets to unrestricted subsidiaries or acquire unrestricted
subsidiaries. However, these limitations are subject to various qualifications.
Subject to certain limitations, we and our subsidiaries may incur secured
indebtedness. For additional details of these provisions and the applicable
qualifications, see "Description of the Notes -- Subordination" and " --
Certain Covenants."
WE ARE HIGHLY LEVERAGED
Assuming we had issued the outstanding notes and applied the proceeds on
September 30, 1998, our long-term debt (including the current portion) would
have been $388,179,000 and shareholders' equity would have been $283,824,000.
We believe that our cash flow from operations, together with funds available
under our bank credit agreement after it is paid down with the net proceeds we
receive from these notes, and other anticipated sources of liquidity, including
additional debt and convertible preferred securities that we may offer in the
future and proceeds from asset sales, will be adequate to meet our anticipated
requirements for working capital, capital expenditures, interest payments and
scheduled principal payments. However, our ability to meet our debt service
obligations will be dependent upon our future performance. Our future
performance, in turn, will be subject to general economic conditions and to
financial, business and other factors affecting our operations, many of which
are beyond our control.
WE ARE SUBJECT TO VARIOUS COVENANT RESTRICTIONS
We and our subsidiaries will be subject to significant operating and
financial restrictions contained in the instruments governing the notes and our
other indebtedness. Such restrictions will affect, and in many respects
significantly limit or prohibit, among other things, our ability to:
o incur additional indebtedness
o make various investments
o pay dividends on, redeem or repurchase our capital stock
o issue and sell our restricted subsidiaries' capital stock
o engage in transactions with affiliates
o create certain liens
o dispose of asset sales proceeds
o guarantee indebtedness
o incur senior subordinated indebtedness that does not rank equal to
the notes
o merge, consolidate and sell assets
In addition, our bank credit agreement requires us to maintain various
financial ratios. These restrictions could also limit our ability to obtain
financing in the future, make needed capital expenditures, withstand a future
downturn in our business or the economy in general or conduct necessary
corporate activities. If we or our subsidiaries fail to comply with these
restrictions, we may be in default under the terms of such indebtedness, even
if we are otherwise able to meet our debt service obligations. In the event of
a default, the holders of such indebtedness could elect to declare all such
indebtedness, together with accrued interest, to be due and payable and a
significant portion of our other indebtedness (including the notes) may become
immediately due and payable. We cannot assure you that we
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would be able to make such payments or borrow sufficient funds from alternative
sources to make such payments. Even if we were to obtain additional financing,
such financing may be on terms unfavorable to us.
WE ARE SUBJECT TO VARIOUS GOVERNMENT REGULATIONS AND ENVIRONMENTAL RISKS
We are subject to various legal limitations
We and our subsidiaries are subject to various foreign and domestic
laws and regulations on taxation, exploration and development, and
environmental and safety matters in countries where we own or operate
properties. Many laws and regulations require drilling permits and govern the
spacing of wells, the prevention of waste, rates of production and other
matters. These statutes and regulations, and any others that are passed by the
jurisdictions where we have production could limit the total number of wells
drilled or the total allowable production from successful wells, which could
limit revenues.
We are subject to various environmental liabilities
We could incur liability to governments or third parties for any
unlawful discharge of oil, gas or other pollutants into the air, soil or water,
including responsibility for remedial costs. We could potentially discharge oil
or natural gas into the environment in any of the following ways:
o from a well or drilling equipment at a drill site
o leakage from storage tanks, pipelines or other gathering and
transportation facilities
o damage to oil or natural gas wells resulting from accidents during
normal operations
o blowouts, cratering or explosions
Environmental discharges may move through soil to water supplies or adjoining
properties, giving rise to additional liabilities. Some laws and regulations
could impose liability 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 our acquisitions of properties. We do not believe that
its environmental risks are materially different from those of comparable
companies in the oil and gas industry. However, we cannot assure that
environmental laws will not, in the future, result in decreased production,
substantially increased costs of operations or other adverse effects to our
combined operations and financial condition. Pollution and similar
environmental risks generally are not fully insurable. See "Business and
Properties -- Government Regulations."
OUR FOREIGN OPERATIONS SUBJECT US TO ADDITIONAL RISKS
Our ownership and operations in Thailand, Canada, and any other foreign
areas where we may choose to do business, are subject to the various risks
inherent in foreign operations. These risks may include the following:
o currency restrictions and exchange rate fluctuations
o loss of revenue, property and equipment due to expropriation,
nationalization, war, insurrection and other political risks
o risks of increases in taxes and governmental royalties
o renegotiation of contracts with governmental entities and
quasi-governmental agencies
o changes in laws and policies governing operations of foreign-based
companies
o other uncertainties arising out of foreign government sovereignty
o inability to fund foreign operations from the United States
United States laws and policies on foreign trade, taxation and investment may
also adversely affect international operations. In addition, if a dispute
arises from foreign operations, foreign courts may have exclusive jurisdiction
over the dispute, or we may not be able to subject foreign persons to the
jurisdiction of United States courts. We seek to manage these risks by
concentrating our international operations in areas where we believe that the
existing government is stable and favorably disposed towards United States oil
and gas companies.
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WE FACE ADDITIONAL RISKS RELATED TO OUR OPERATIONS IN THE KINGDOM OF THAILAND
Additional risks and uncertainties affect the marketing and sales of
hydrocarbons from our Block B8/32 Concession located in the Gulf of Thailand
(the "Thailand Concession"). We expect that all the natural gas we produce from
the Thailand Concession will be sold to The Petroleum Authority of Thailand
("PTT"), which maintains a monopoly over gas transmission and distribution in
Thailand. Two major natural gas pipelines owned and operated by PTT cross the
Thailand Concession. These pipelines may become full due to production from the
Tantawan Field, the Benchamas Field and other fields in the Gulf of Thailand.
We cannot assure, even if we are successful in exploration efforts, that we
will be able to successfully and profitably transport, process, refine and
market the oil and gas we produce.
PTT has constructed a lateral pipeline from its main pipeline to the
Tantawan production area and has agreed to take the gas produced from that area
pursuant to a gas sales agreement (the "Gas Sales Agreement"). If the Company
and our joint venture partners in the Tantawan Field fail to deliver the
required reserves or production rates of natural gas at a specified quality
level under the Gas Sales Agreement, we may be obligated to contribute to PTT's
costs for the construction of the lateral pipeline. Also, if the Tantawan joint
venturers fail to deliver the minimum daily rates under the Gas Sales
Agreement, PTT has the right to take from subsequent deliveries an amount equal
to the quantity of undelivered gas at 75% of the contract price. Commencing on
October 1, 1998, we and our joint venture partners have been delivering less
natural gas than is being nominated by PTT under the Gas Sales Agreement. We
have not been able to meet our contractual minimum delivery obligations for a
number of reasons, including declining production from existing wells, the need
to shut-in existing wells while drilling or working over additional wells from
the same platform and our decision to emphasize oil and condensate production
from the Tantawan Field. We anticipate that we will suffer a penalty on a
portion of our future production. Thai governmental royalties, other
governmental charges and income taxes also affect our operations cash flow. We
expect all gas sales to be carried out in Baht, the Thai currency. Fluctuations
in the exchange rate between Baht and dollars could also adversely affect the
anticipated profits of our operations in Thailand.
SOUTHEAST ASIA ECONOMIC ISSUES AFFECT US
We conduct a substantial portion of our oil and gas production and sales in
Southeast Asia. In recent months, Southeast Asia in general, and the Kingdom of
Thailand in particular, have experienced severe economic difficulties,
including sharply reduced economic activity, illiquidity, highly volatile
foreign currency exchange rates and unstable stock markets. The Thailand
government and other governments in the region are currently acting to address
these issues. However, the economic difficulties in Thailand and the volatility
of the Thai Baht against the U.S. dollar will continue to have a material
impact on our Thailand operations and the prices we receive for our oil and gas
production there. In early July 1997, the government of the Kingdom of Thailand
announced that the value of the Baht would be set against the dollar and other
currencies under a "managed float" program arrangement. This led to a
substantial decline in value of the Thai Baht compared to the U.S. dollar,
resulting in our experiencing foreign currency transaction losses during 1997.
During 1998, the value of the Thai Baht has generally strengthened against the
U.S. dollar, resulting in our experiencing foreign currency transaction gains.
However, we cannot predict what the Thai Baht to dollar exchange rate may be in
the future. Moreover, we anticipate that this exchange rate will remain
volatile.
LIQUIDITY AND CASH FLOW PROBLEMS OF OUR PARTNERS MAY AFFECT US
Due to the recent decline in oil and gas prices, many of our partners,
particularly the smaller ones, are experiencing liquidity and cash flow
problems. These problems may lead to their attempting to delay or slow down the
pace of drilling or project development in order to conserve cash, to a point
that we believe is detrimental to the project. In most cases, we have the
ability to influence the pace of development through our joint operating
agreements. Some partners may be unwilling or unable to pay their share of the
costs of projects as they become due. At worst, a partner may declare
bankruptcy and refuse or be unable to pay its share of the costs of a project.
We would then be required to pay this partner's share of the project costs. In
most instances, we believe that we are contractually protected from such an
event through our ability to take over the non-paying partner's share of the
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project and by applicable oil and gas lien laws and bankruptcy laws. We believe
that we would ultimately recover any sums that we are owed by non-paying
partners that do not meet their share of the costs of a project in a timely
fashion.
Rutherford-Moran Oil Corporation ("RMOC"), the parent company of Thai Romo
Ltd., one of the partners in our Thailand Concession, has been actively seeking
a sale or merger for some time. RMOC recently announced that it has agreed to be
acquired by Chevron Corporation ("Chevron"). The acquisition is subject to
conditions, several of which are outside of RMOC's control. One of these
conditions is that Chevron reach agreement with us on a new joint operating
agreement that would include the transfer of operatorship on the Thailand
concession from our subsidiary Thaipo to a subsidiary of Chevron. Although we
have held discussions with Chevron on this subject, we do not know whether we
can reach a mutually satisfactory agreement with Chevron. RMOC has also stated
that its financial resources will be exhausted in February 1999, and that its
banks have currently refused to lend it any additional funds. Chevron has agreed
to lend additional funds to RMOC if most of the conditions to the acquisition
have been satisfied, including Chevron's reaching agreement with us on a new
joint operating agreement. Thai Romo's failure to pay its share of the expenses
of our projects in the Gulf of Thailand could have a material adverse effect on
us, due to the increased capital requirements that funding Thai Romo's share of
the project development costs could have on us.
WE HAVE YEAR 2000 RISKS
Many existing computer programs and components were designed and developed
to use a two-digit field to indicate the year in an applicable date field,
which could result from the improper processing of dates for years after 1999.
This issue is commonly known as the "Year 2000 Issue." The Year 2000 Issue is a
broad business issue, which could effect financial and business applications as
well as automated systems and instrumentation of ours and third parties with
whom we do business. There can be no guarantee that third parties of business
importance to us will successfully reprogram or replace, and test, all of their
own computer hardware, software and process control systems to ensure such
systems are Year 2000 ready. Failure by us, third parties of business
importance to us and/or other constituents such as governments to become Year
2000 ready on a timely basis could have a material adverse effect on our
financial position and results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources; Other Matters; Year 2000 Readiness Disclosure."
WE MAY NOT HAVE SUFFICIENT FUNDS TO REPURCHASE THE NOTES UPON A CHANGE OF
CONTROL
Should certain change of control events occur, each holder of the notes
will have the right to require us, subject to certain conditions, to repurchase
all or any part of that holder's notes at a price equal to 101% of the
principal of those notes, 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 our bank credit agreement and
certain other of our indebtedness include, and future indebtedness may include,
change of control provisions. Under those provisions, should a specified change
of control event occur, we would be required to repurchase, or the lender could
demand the repayment of, that indebtedness. We would be required to make that
repurchase or repayment of senior indebtedness before repurchasing the notes
(or then outstanding indebtedness ranking equally with the notes that contains
similar change of control provisions). The term "Change of Control" with
respect to the notes is defined in the "Description of the Notes -- Certain
Definitions" section of this prospectus.
We cannot assure you that we will have sufficient funds available or could
obtain the financing necessary to repurchase the notes and any other
outstanding indebtedness that rank equally with or senior to the notes tendered
by holders of those obligations following a change of control. If a change of
control occurred and we did not have the funds or financing available to pay
for the notes and any other indebtedness ranking equally with, or senior to,
the notes that are tendered for repurchase, an event of default would be
triggered under the indenture governing the notes and under such other
outstanding indebtedness. Each of these defaults could have a material adverse
consequence for us and the holders of the notes.
21
<PAGE> 23
In addition, we have two other series of notes outstanding that 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 those other series of notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Also, the definition of change of control includes a phrase relating to the
sale or other disposition of the our properties and assets "substantially as an
entirety." Although there is a developing body of case law interpreting phrases
such as "substantially as an entirety," there is no precise established
definition of such phrases under applicable law. Accordingly, the ability of a
holder of the notes to require us to repurchase its notes as a result of our
sale or other disposition of less than all our properties and assets on a
consolidated basis to another person or related group of persons may be
uncertain. See "Description of the Notes -- Certain Covenants; Change of
Control."
FUTURE SUBSIDIARY GUARANTEES MAY BE AFFECTED BY FRAUDULENT CONVEYANCE LAWS
None of our subsidiaries currently guarantee the notes. If our existing or
future restricted subsidiaries guarantee any of our other indebtedness, they
will be required by the terms of the indenture governing the notes to jointly
and severally guarantee the notes on a senior subordinated basis. We do not
intend to cause any of our subsidiaries to take any action that would require
it to issue a guarantee of the notes. Various applicable fraudulent conveyance
laws have been enacted for the protection of creditors. A court may use those
laws to subordinate or avoid any guarantee of the notes issued by any of our
subsidiaries. It is also possible that under certain circumstances a court
could hold that the direct obligations of a subsidiary guaranteeing the notes
could be superior to the obligations under that guarantee.
A court could avoid or subordinate the guarantee of the notes by any of our
subsidiaries in favor of that subsidiary's other debts or liabilities to the
extent that the court determined either of the following were true at the time
the subsidiary issued the guarantee:
o that subsidiary incurred the guarantee with the intent to hinder,
delay or defraud any of its present or future creditors or that such
subsidiary contemplated insolvency with a design to favor one or
more creditors to the total or partial exclusion of others; or
o that subsidiary did not receive fair consideration or reasonably
equivalent value for issuing the guarantee and, at the time it
issued the guarantee, that subsidiary:
-- was insolvent or rendered insolvent by reason of the issuance
of the guarantee,
-- was engaged or about to engage in a business or transaction for
which the remaining assets of that subsidiary constituted
unreasonably small capital, or
-- intended to incur, or believed that it would incur, debts beyond
its ability to pay such debts as they matured.
Among other things, a legal challenge of a subsidiary's guarantee of the notes
on fraudulent conveyance grounds may focus on the benefits, if any, realized by
that subsidiary as a result of our issuance of the notes. To the extent a
subsidiary's guarantee of the notes is avoided as a result of fraudulent
conveyance or held unenforceable for any other reason, the note holders would
cease to have any claim in respect of that guarantee and would be creditors
solely of ours.
THE ABSENCE OF A TRADING MARKET AND OTHER FACTORS MAY AFFECT THE LIQUIDITY OF
THE NOTES
The new notes will be new securities for which currently there is no
trading market. We do not currently intend to apply for listing of the new
notes on any securities exchange or stock market. Although the initial
purchasers of the new notes have informed us that they currently intend to make
a market in the new notes, they are not obligated to do so. Any such market
making may be discontinued at any time without notice. The liquidity of any
market for the new notes will depend on the number of holders of those notes,
the interest of securities dealers in making a market in those securities and
other factors. Accordingly, we cannot assure you as to the development or
liquidity of
22
<PAGE> 24
any market for the new 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 new notes. We cannot assure you that
the market, if any, for the new notes will be free from similar disruptions.
Any such disruptions may adversely effect the new note holders.
23
<PAGE> 25
PRIVATE PLACEMENT
On January 15, 1999, the Company issued $150,000,000 principal amount of
the outstanding notes to the initial purchasers of those notes (the "Initial
Purchasers") at a price of 95.95% of the principal amount of those notes in a
private transaction not registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon Section 4(2) of the Securities Act.
The Initial Purchasers then offered and resold the outstanding notes only to
qualified institutional buyers at an initial price to such purchasers of 97.70%
of the principal amount of those notes. We used the approximately $143,675,000
of proceeds (after deducting the Initial Purchasers' discounts and the expenses
of that offering) to repay a portion of our outstanding Senior Indebtedness.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the new
notes. In consideration for issuing the new notes, the Company will receive in
exchange a like principal amount of outstanding notes. The outstanding notes
surrendered in exchange for the new notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the new notes will not result in
any change in the Company's capitalization.
CAPITALIZATION
The following table sets forth the unaudited consolidated debt and
capitalization of the Company and its subsidiaries at September 30, 1998. The
table has also been adjusted to reflect the issuance of the outstanding notes
and the application of the net proceeds therefrom as described under "Use of
Proceeds" assuming the outstanding notes sale had occurred on September 30,
1998. This table should be read in conjunction with the consolidated financial
statements and related notes thereto included in the Company's Reports and
incorporated by reference in this prospectus. See "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion:
Credit Agreement indebtedness(a) $154,000 $ 10,325
Uncommitted credit line with bank 2,000 2,000
Banker's acceptance loans 10,854 10,854
10 3/8% Senior Subordinated Notes, due 2009 -- 150,000
8 3/4% Senior Subordinated Notes, due 2007 100,000 100,000
5 1/2% Convertible subordinated notes, due 2006 115,000 115,000
-------- --------
Total long-term debt 381,854 388,179
-------- --------
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;
40,119,250 shares issued 40,119 40,119
Additional capital 290,133 290,133
Retained earnings (deficit) (46,104) (46,104)
Treasury stock, at cost; 15,575 shares; and other (324) (324)
-------- --------
Total shareholders' equity 283,824 283,824
-------- --------
Total capitalization $665,678 $672,003
======== ========
</TABLE>
- ----------------
(a) As of December 31, 1998, the outstanding indebtedness under the Credit
Agreement was $205,000,000.
24
<PAGE> 26
SELECTED FINANCIAL DATA
The selected financial data presented below as of, and for each of the
years in the five-year period ended December 31, 1997, are derived from the
consolidated financial statements of the Company and its subsidiaries, which
have been audited by independent public accountants. The financial data as of,
and for the nine month periods ended September 30, 1997 and 1998, 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 a fair presentation of the financial position and
results of operations of the Company for each such interim period. This data
should be read in conjunction with the consolidated financial statements and
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
Year Ended December 31, SEPTEMBER 30,
----------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998(e)
---- ---- ---- ---- ---- ---- -------
(IN THOUSANDS, EXCEPT RATIOS AND UNIT AMOUNTS)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Crude oil and condensate $ 64,042 $ 65,141 $ 76,557 $ 96,908 $ 112,603 $ 84,776 $ 59,276
Natural gas 66,173 99,093 72,032 94,589 158,500 116,117 91,411
Natural gas liquids 7,288 9,189 8,097 11,867 13,748 11,746 8,149
--------- --------- --------- --------- --------- --------- ---------
Oil and gas revenues 137,503 173,423 156,686 203,364 284,851 212,639 158,836
Pipeline and other, net (950) 133 773 778 349 1,274 842
Interest on tax refund 2,322 -- -- -- -- -- --
Gains (losses) on sales 679 52 100 (165) 1,100 1,318 (106)
--------- --------- --------- --------- --------- --------- ---------
Total 139,554 173,608 157,559 203,977 286,300 215,231 159,572
--------- --------- --------- --------- --------- --------- ---------
Operating costs and expenses:
Lease operating 26,633 29,768 35,071 37,628 63,501 45,116 51,196
General and administrative 14,550 15,984 16,400 18,028 21,412 15,746 19,843
Exploration 2,455 5,257 7,468 16,777 10,530 7,823 7,260
Dry hole and impairment 4,690 7,088 6,703 8,579 9,631 6,926 7,906
Depreciation, depletion and amortization 40,693 63,308 68,489 61,857 103,157 75,989 83,739
--------- --------- --------- --------- --------- --------- ---------
Total 89,021 121,405 134,131 142,869 208,231 151,600 169,944
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss) 50,533 52,203 23,428 61,108 78,069 63,631 (10,372)
Interest charges (10,956) (10,104) (11,167) (13,203) (21,886) (15,771) (17,513)
Interest income 14 53 26 232 453 271 534
Interest capitalized 451 739 1,834 4,244 6,175 3,463 6,540
Foreign currency translation gain (loss) -- -- -- -- (7,604) (6,522) 953
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before taxes and
extraordinary items 40,042 42,891 14,121 52,381 55,207 45,072 (19,858)
Income tax (expense) benefit (14,981) (15,517) (4,891) (18,800) (18,091) (15,694) 9,052
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary items 25,061 27,374 9,230 33,581 37,116 29,378 (10,806)
Extraordinary loss -- (307) -- (821) -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) $ 25,061 $ 27,067 $ 9,230 $ 32,760 $ 37,116 $ 29,378 $ (10,806)
========= ========= ========= ========= ========= ========= =========
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(a) $95,930 $122,652 $98,646 $131,776 $183,706 $140,295 $82,760
Capital and exploration expenditures
(excluding interest capitalized 74,600 120,800 110,400 206,200 259,500 165,000 121,800
SELECTED RATIOS:
EBITDA/Net interest expense 9.1x 13.1x 10.6x 14.7x 11.7x 11.4x 7.5x
Ratio of earnings to fixed charges(b) 4.5x 5.1x 2.1x 4.6x 3.2x 3.6x (c)
Long-term obligations/EBITDA(d) 1.4x 1.2x 1.7x 1.9x 1.9x 2.4x 4.6x
Long-term obligations/Total proved
reserves (BOE) $ 1.95 $ 2.01 $ 1.63 $ 2.24 $ 2.78 n/a n/a
</TABLE>
<TABLE>
<CAPTION>
September 30, 1998(e)
-----------------------------
Actual As Adjusted(f)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets $823,350 $829,675
Long-term obligations, including current portion 381,854 388,179
Total shareholders' equity 283,824 283,824
</TABLE>
- ---------------------
(a) EBITDA represents income from continuing operations before 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
principals) as an indicator of the Company's operating performance, or
(ii) cash flows from operating activities (as determined in accordance
with generally accepted accounting principals) 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.
(c) For the nine-month period ended September 30, 1998, earnings were
insufficient to cover fixed charges by $26.5 million.
(d) Long-term obligations includes the current portion of long-term debt.
(e) Includes the results of Arch from August 17, 1998, the effective date of
its acquisition by the Company. The acquisition was accounted for using
the purchase method.
(f) Adjusted to give effect to the sale of the outstanding notes and the
application of the net proceeds from that sale as if it had occurred on
September 30, 1998.
26
<PAGE> 28
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, 1997, and for the nine month periods ended September
30, 1997, and 1998, is unaudited and should be read in conjunction with the
consolidated financial statements and related notes thereto 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,
1997 has been derived from the summary reserve report prepared by Ryder Scott
and should be read in conjunction with the notes to the Company's consolidated
financial statements and "Business and Properties -- Exploration and Production
Data; Reserves." The data included in the Reports is incorporated in this
prospectus by reference. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
Year Ended December 31, SEPTEMBER 30,
-------------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
PRODUCTION (SALES) DATA:
Net daily average and weighted average
price:
Natural gas:
Mcf per day 91,700 144,800 121,000 107,700 181,700 184,500 164,400
Price per Mcf $ 1.98 $ 1.88 $ 1.63 $ 2.40 $ 2.39 $ 2.31 $ 2.04
Crude oil and condensate:
Bbls per day 9,851 11,100 11,786 11,968 15,927 15,856 16,090
Price per Bbl $ 17.81 $ 16.08 $ 17.80 $ 22.12 $ 19.37 $ 19.52 $ 13.49
Natural gas liquids:
Bbls per day 1,678 2,222 1,998 2,173 2,923 3,424 2,768
Price per Bbl $ 11.90 $ 11.33 $ 11.10 $ 14.92 $ 12.89 $ 12.57 $ 10.78
RESERVE DATA(A)(D):
Estimated proved reserves:
Crude oil, condensate and natural gas
liquids (MBbls) 28,268 33,862 45,182 49,602 58,164 -- --
Natural gas (MMcf) 232,866 242,890 328,061 360,944 401,488 -- --
Natural gas equivalents (MMcfe) 402,474 446,062 599,153 658,556 750,472 -- --
Estimated future net revenues before
income taxes, discounted at 10%(b)(c) $403,840 $382,980 $532,475 $954,545 $462,781 -- --
Estimated future net revenues after
income taxes, discounted at 10%(b) $300,260 $290,069 $377,145 $686,040 $349,465 -- --
</TABLE>
(a) Proved reserves were estimated in accordance with SEC guidelines using
oil and gas prices and production and development costs as of December 31
of each such year. These amounts exclude Arch's proved reserves. See
"Business and Properties -- Arch and its Subsidiaries; Oil and Gas
Reserves."
(b) These values were estimated in accordance with SEC guidelines. See
"Business and Properties -- Exploration and Production Data; Reserves."
27
<PAGE> 29
(c) Based on assumed Company-wide flat prices of $12.00 per Bbl 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 $254,599,000 at December 31, 1997. This calculation
represents an internal Company estimate, is presented for information
purposes and has not been calculated entirely in accordance with SEC
guidelines.
(d) On a pro forma basis, giving effect to the Company's merger with Arch as
if it had occurred on December 31, 1997, and using SEC pricing in effect
on that date, the Company's estimated proved reserves of: (i) crude oil,
condensate and natural gas liquids would have been 64,045 MBbls; (ii)
natural gas would have been 478,373 MMcf; (iii) natural gas equivalents
would have been 862,643 MMcfe; and estimated future net revenues before
income taxes discounted at 10% would have been $528,745,000. Based on
assumed Company-wide flat prices of $12.00 per Bbl 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 our proved reserves would have been approximately
$305,806,000 at December 31, 1997 if Arch's reserves were included as of
that date.
28
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's acquisition of Arch was initially accounted for as a pooling
of interests which requires the financial results for all periods prior to the
acquisition to be combined and restated as if the Company and Arch had always
been combined. The Company then restated its consolidated financial statements
for periods prior to the merger, including the first nine months of 1997 and
the first nine months of 1998, to reflect the combined results of both the
Company and Arch. A report on Form 10-Q for the quarter ended September 30,
1998 was filed on that basis. The Company recently concluded that, as a result
of the current environment of low crude oil and natural gas prices, the Company
must maintain maximum flexibility to address its cash flow needs, including the
option of selling certain of the Company's assets. Under the current
application of accounting principles, such transactions would preclude the
pooling of interests method of accounting and require that the Company account
for the acquisition using the purchase method of accounting. Consequently, on
December 24, 1998, the Company filed an amended report on Form 10-Q for the
quarter ended September 30, 1998, primarily for the purpose of restating the
financial statements contained in such report and to make conforming changes to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" to reflect the change from the pooling method of accounting to the
purchase method of accounting for the Arch acquisition. See "Incorporation of
Certain Documents by Reference."
NINE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
RESULTS OF OPERATIONS
Net Income (Loss)
For the first nine months of 1998, the Company reported a net loss of
$10,806,000 or $0.29 per share (on both a basic and a diluted basis) compared
to net income for the first nine months of 1997 of $29,378,000 or $0.88 per
share ($31,689,000 or $0.83 on a diluted basis). Among other items affecting
net income for the first nine months of 1998, were non-recurring expenses
totaling approximately $2,285,000 ($1,485,000 or $0.04 per share on an
after-tax basis), related to the Company's acquisition of Arch.
Earnings per share are based on the weighted average number of common
shares outstanding for the first nine months of 1998 of 37,171,000, compared to
33,374,000 for the first nine months of 1997. The increase in the weighted
average number of common shares outstanding for the 1998 period, compared to
the 1997 period, resulted primarily from the issuance of 3,882,023 shares of
its common stock upon the conversion of the Company's 5 1/2% Convertible
Subordinated Notes due 2004 (the "2004 Notes") prior to their being redeemed on
March 16, 1998, the issuance as of August 17, 1998, of approximately 2,540,000
shares of common stock to former holders of Arch capital stock and convertible
debt securities in connection with the Company's acquisition of Arch and, to a
lesser extent, the issuance of common stock upon the exercise of stock options
pursuant to the Company's stock option plans. The earnings per share
computation on a diluted basis in the 1998 period is identical to the basic
earnings per share computation because there were no securities of the Company
that were dilutive during the period. The earnings per share computation on a
diluted basis in the 1997 period primarily reflects additional shares of common
stock issuable upon the assumed conversion of the 2004 Notes and the
elimination of related interest requirements, as adjusted for applicable
federal income taxes and, to a lesser extent, the assumed exercise of options
to purchase common shares. The weighted average number of common shares
outstanding on a diluted basis for the first nine months of 1997 were
38,064,000.
Total Revenues
The Company's total revenues for the first nine months of 1998 were
$159,572,000, a decrease of approximately 26% compared to total revenues of
$215,231,000 for the first nine months of 1997. The decrease in the Company's
total revenues for the first nine months of 1998, compared to the first nine
months of 1997, resulted primarily from decreases in revenue from the Company's
oil and gas operations and, to a lesser extent, a decline in revenue from the
29
<PAGE> 31
sale of non-strategic properties, pipeline sales revenues and other
miscellaneous items. Total revenues for the first nine months of 1998 reflect
the inclusion of pipeline revenues from Saginaw Pipeline, L.C. and its
marketing subsidiary, Industrial Natural Gas, L.C., which the Company acquired
through its acquisition of Arch on August 17, 1998. Total revenues for the
first nine months of 1997 include a net gain of $1,459,000 on the sale of a
compressor by the Company during the first half of 1997.
Oil And Gas Revenues
The following table reflects an analysis of differences in the Company's
oil and gas revenues (expressed in thousands of dollars) between the first nine
months of 1998 and the same period in the preceding year.
<TABLE>
<CAPTION>
9 MONTHS 1998
COMPARED TO
9 MONTHS 1997
-------------
<S> <C>
Increase (decrease) in oil and gas revenues resulting from differences in:
NATURAL GAS --
Price...................................................................... $(13,598)
Production................................................................. (11,108)
--------
(24,706)
CRUDE OIL AND CONDENSATE --
Price...................................................................... (26,366)
Production................................................................. 866
--------
(25,500)
NGL--......................................................................... (3,597)
--------
Increase (decrease) in oil and gas revenues................................ $(53,803)
========
</TABLE>
Prices and production volumes attributable to the Company's operations in
Canada are included in the Company's domestic oil and gas prices and production
volumes. This information is not presented separately because the Company does
not believe that such information is material to an understanding of the
Company's results of operations for the period presented due to the relatively
small portion of the Company's oil and gas revenues which were attributable to
such operations during the applicable periods.
NATURAL GAS PRICES. Prices that the Company received for its natural gas
production during the first nine months of 1998 averaged $2.04 per Mcf, a
decrease of approximately 12% from an average price of $2.31 per Mcf that the
Company received for its natural gas production during the first nine months of
1997.
Domestic Prices. Prices that the Company received for its domestic natural
gas production during the first nine months of 1998 averaged $2.13 per Mcf, a
decrease of approximately 10% from an average price of $2.37 per Mcf that the
Company received for its domestic natural gas production during the first nine
months of 1997.
Thailand Prices. The Company's Tantawan Field located in the Kingdom of
Thailand commenced production of natural gas and liquid hydrocarbons in
February 1997. During the first nine months of 1998, the prices that the
Company received under its long term gas sales contract for natural gas
production from the Tantawan Field averaged approximately 74 Thai Baht per Mcf.
Based on the Thai Baht to U.S. dollar exchange rates in effect at the time that
such production was recorded on the Company's financial statements, the average
price in U.S. dollars that the Company recorded during the first nine months of
1998 for such production was approximately $1.73 per Mcf, a decrease of
approximately 14% from an average price of $2.00 per Mcf that the Company
recorded in the first nine months of 1997. The price that the Company receives
under its Gas Sales Agreement normally adjusts on a semi-annual basis. However,
the Gas Sales Agreement provides for adjustment on a more frequent basis in the
event that certain indices and factors on which the price is based fluctuate
outside a given range. Due to the volatility of the Thai Baht and the current
economic difficulties in the Kingdom of Thailand and throughout Southeast Asia,
the price that the Company received under the Gas Sales Agreement was adjusted
several times during the first nine months of 1998. See "Business and
Properties -- International Operations; Contractual Terms Governing the
Thailand Concession and Related Production." The Company cannot predict what
the Baht to dollar exchange rate may be in the future. Moreover, it is
anticipated that this exchange rate will remain volatile. See "; Foreign
Currency
30
<PAGE> 32
Transaction Gain (Loss)", "-- Liquidity and Capital Resources; Other Matters;
Southeast Asia Economic Issues" and "Business and Properties -- International
Operations; Contractual Terms Governing the Thailand Concession and Related
Production."
NATURAL GAS PRODUCTION. The Company's total natural gas production during
the first nine months of 1998 averaged 164.4 MMcf per day, a decrease of
approximately 11% from an average of 184.5 MMcf per day that the Company
produced during the first nine months of 1997.
Domestic Production. The decrease in the Company's natural gas production
during the first nine months of 1998, compared to the first nine months of
1997, was related in large measure to decreased production from the Company's
East Cameron Block 334 "E" platform, and to a lesser extent, three periods in
the third quarter of 1998 during which most of the Company's offshore
production was shut-in as a precautionary measure due to hurricanes in the Gulf
of Mexico and natural production declines, that was partially offset by
increased production from the Company's onshore properties located in South
Texas and South Louisiana. As of December 31, 1998, the Company was not a party
to any future natural gas sales contracts.
Thailand Production. The Company's share of natural gas production from the
Tantawan Field during the first nine months of 1998 averaged 38.9 MMcf per day,
an increase of approximately 21% from an average of 32.1 MMcf per day that the
Company produced during the first nine months of 1997. The increase in the
Company's average daily natural gas production from the Tantawan Field during
the first nine months of 1998, compared to the first nine months of 1997,
reflects the fact that production from the Tantawan Field did not commence
until early in February 1997 and did not achieve sustained commercial
production rates until March 15, 1997. Commencing on October 1, 1998, the
Company and its joint venture partners have been delivering less natural gas
than is being nominated by PTT under the Gas Sales Agreement. This could result
in the Company receiving only 75% of the current contract price on a portion of
its future natural gas sales to PTT. The Company is taking actions that it
currently believes will minimize the penalty that it will incur on future gas
sales to PTT by, among other things, increasing production from the Tantawan
Field.
CRUDE OIL AND CONDENSATE PRICES. Prices that the Company received for its
crude oil and condensate production during the first nine months of 1998
averaged $13.49 per Bbl, a decrease of approximately 31% from an average price
of $19.58 per Bbl that the Company received during the first nine months of
1997.
Domestic Prices. Prices that the Company received for its domestic crude
oil and condensate production during the first nine months of 1998 averaged
$13.44 per Bbl, a decrease of approximately 32% from an average price of $19.69
per Bbl that the Company received during the first nine months of 1997.
Thailand Prices. Since the inception of production from the Tantawan Field,
crude oil and condensate have been stored in a Floating Production, Storage and
Offloading System (the "FPSO") until an economic quantity is accumulated for
offloading and sale. The first such sale of crude oil and condensate from the
Tantawan Field occurred in July 1997. The price that the Company recorded for
its crude oil and condensate production stored on the FPSO for the first nine
months of 1998 was $13.72 per Bbl, a decrease of approximately 27% from the
price of $18.84 per Bbl that was recorded for the first nine months of 1997.
Prices that the Company receives for its crude oil and condensate production
from Thailand are based on world benchmark prices, which are denominated in
dollars. In addition, the Company is generally paid for its crude oil and
condensate production from Thailand in U.S. dollars.
CRUDE OIL AND CONDENSATE PRODUCTION. The Company's total crude oil and
condensate production during the first nine months of 1998 averaged 16,090 Bbls
per day, an increase of approximately 1% from an average of 15,856 Bbls per day
during the first nine months of 1997.
Domestic Production. The Company's domestic crude oil and condensate
production during the first nine months of 1998 averaged 13,317 Bbls per day, a
decrease of approximately 4% from an average of 13,927 Bbls per day during the
first nine months of 1997. The decrease in the Company's domestic crude oil and
condensate production during the first nine months of 1998, compared to the
first nine months of 1997, resulted primarily from a decrease
31
<PAGE> 33
in condensate production from the Company's East Cameron Block 334 "E"
platform, which was in part due to damage sustained in a marine accident at the
crude oil and condensate pipeline from the platform, that was only partially
offset by increased production from the Company's ongoing development drilling
and workover programs in the offshore and onshore Gulf of Mexico regions. As of
December 31, 1998, the Company was not a party to any crude oil swaps or
futures contracts.
Thailand Production. The Company's share of crude oil and condensate
production from the Tantawan Field during the first nine months of 1998
averaged 2,773 Bbls per day, an increase of approximately 44% from an average
of 1,930 Bbls per day during the first nine months of 1997. The increase in the
Company's average daily crude oil and condensate production from the Tantawan
Field during the first nine months of 1998, compared to the first nine months
of 1997, primarily reflects the fact that production from the Tantawan Field
did not commence until early in February 1997 and did not achieve sustained
commercial production rates until March 15, 1997.
NGL PRODUCTION. The Company's oil and gas revenues, and its total liquid
hydrocarbon production volumes, reflect the production and sale by the Company.
The Company's NGL revenues for the first nine months of 1998 decreased
$3,597,000, from the first nine months of 1997. The decrease in the Company's
NGL for the first nine months of 1998, compared to the first nine months of
1997, was related to both a decrease in NGL production volumes from the
Company's domestic offshore properties and a decrease in the price that the
Company received for its NGL production volumes.
TOTAL LIQUID HYDROCARBON PRODUCTION. The Company's average liquid
hydrocarbon production during the first nine months of 1998 was 18,858 Bbls per
day, a decrease of approximately 2% from an average liquid hydrocarbon
production of 19,280 Bbls per day during the first nine months of 1997.
Lease Operating Expenses
Company-wide lease operating expenses for the first nine months of 1998
were $51,196,000, an increase of approximately 13% from lease operating
expenses of $45,116,000 for the first nine months of 1997. A discussion of
lease operating expenses attributable to the Company's operations in Canada is
included in the Company's domestic lease operating expenses. The information is
not presented separately because the Company does not believe that such
information is material to an understanding of the Company's results of
operations for the periods presented due to the relatively small portion of the
Company's lease operating expenses which were attributable to such operations
during the applicable periods.
DOMESTIC LEASE OPERATING EXPENSES. The Company's domestic lease operating
expenses for the first nine months of 1998 were $35,249,000, an increase of
approximately 11% from domestic lease operating expenses of $31,802,000 for the
first nine months of 1997. The increase in domestic lease operating expenses
for the first nine months of 1998, compared to the first nine months of 1997,
were affected by a non-recurring maintenance project on the Company's East
Cameron 334 "E" platform during the first quarter of 1998 and by expenses
related to purchasing natural gas for transportation and subsequent resale on
the pipeline system acquired in the merger with Arch, operating expenses
related to the pipeline system for which no corresponding expenses were
recorded during the first nine months of 1997. In addition, lease operating
expenses for the first nine months of 1997 were reduced by a $954,000 refund in
connection with the Company's audit of a joint venture partner, for which no
corresponding refund of a similar magnitude was obtained in the first nine
months of 1998.
THAILAND LEASE OPERATING EXPENSES. The Company's lease operating expenses
in the Kingdom of Thailand for the first nine months of 1998 were $15,947,000,
an increase of approximately 20% from lease operating expenses of $13,314,000
for the first nine months of 1997. The increase in lease operating expenses in
the Kingdom of Thailand for the first nine months of 1998, compared to the
first nine months of 1997, was primarily related to the fact that prior to the
commencement of production in the Tantawan Field on February 1, 1997, no lease
operating expenses were incurred by the Company in Thailand. Consequently, the
Company does not believe that a comparison of lease operating expenses in the
Kingdom of Thailand between the first nine months of 1998 and the first nine
months of 1997 is meaningful. A substantial portion of the Company's lease
operating expenses in the Kingdom of Thailand
32
<PAGE> 34
relate to lease payments made by Tantawan Services, L.C., in connection with
its bareboat charter of the FPSO, which amounted to $8,318,000 and $7,404,000
(net to the Company's interest) for the first nine months of 1998 and 1997,
respectively. See "-- Liquidity and Capital Resources; Capital Requirements;
Other Material Long-Term Commitments."
General and Administrative Expenses
General and administrative expenses for the first nine months of 1998 were
$19,843,000, an increase of approximately 26% from general and administrative
expenses of $15,746,000 for the first nine months of 1997. The increase in
general and administrative expenses for the first nine months of 1998, compared
with the first nine months of 1997, was primarily related to a number of
non-recurring expenses arising in connection with the Company's acquisition of
Arch totaling approximately $2,285,000, that included severance payments to
former officers and employees of Arch. In addition, the increase in general and
administrative expense was attributable, in part, to an increase in the size of
the Company's work force and normal salary and concomitant benefit expense
adjustments.
Exploration Expenses
Exploration expenses consist primarily of rental payments required under
oil and gas leases to hold non-producing properties ("delay rentals") and
geological and geophysical costs which are expensed as incurred. Exploration
expenses for the first nine months of 1998 were $7,260,000, a decrease of
approximately 7% from exploration expenses of $7,823,000 for the first nine
months of 1997. The decreases in exploration expenses for the first nine months
of 1998, compared to the first nine months of 1997, resulted primarily from
decreased geophysical activity in the Gulf of Mexico and West Texas, and a
decrease in delay rental payments, that were partially offset, during the
comparable nine month periods, by increased geophysical activity by the Company
in East Texas, South Louisiana and in the Gulf of Thailand.
Dry Hole and Impairment Expenses
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
nine months of 1998 were $7,906,000, an increase of approximately 14% from dry
hole and impairment expenses of $6,926,000 for the first nine months of 1997.
Depreciation, Depletion and Amortization Expenses
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
value of such property on the Company's books may not be recoverable. Unproved
properties are reviewed quarterly to determine if there has been impairment of
the carrying value, 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 generally creates cost centers on a field by field basis for oil and
gas activities in the Gulf of Mexico and Gulf of Thailand. Generally, the
Company establishes cost centers on the basis of an oil or gas trend or play
for its oil and gas activities onshore in the United States. The Company's DD&A
expense for the first nine months of 1998 was $83,739,000, an increase of
approximately 10% from DD&A expense of $75,989,000 for the first nine months of
1997. The increases in DD&A expense for the first nine months of 1998, compared
to the first nine months of 1997, resulted primarily from an
33
<PAGE> 35
increase in the Company's composite DD&A rate that was only partially offset by
a decrease in production of oil and natural gas.
The composite DD&A rate for all of the Company's producing fields for the
first nine months of 1998 was $1.09 per equivalent Mcf ($6.54 per equivalent
Bbl), an increase of approximately 20% from a composite DD&A rate of $0.91 per
equivalent Mcf ($5.46 per equivalent Bbl) for the first nine months of 1997.
The increase in the composite DD&A rate for all of the Company's producing
fields for the first nine months of 1998, compared to the first nine months of
1997, 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 coming
from fields that have DD&A rates that are lower than the Company's recent
historical composite DD&A rate. The Company produced 75,781,000 equivalent Mcf
(12,630,000 equivalent Bbls) during the first nine months of 1998, a decrease
of approximately 8% from the 82,036,000 equivalent Mcf (13,673,000 equivalent
Bbls) produced by the Company during the first nine months of 1997.
Interest
INTEREST CHARGES. Interest charges incurred by the Company for the first
nine months of 1998 were $17,513,000, an increase of approximately 11% from
interest charges of $15,771,000 for the first nine months of 1997. The increase
in interest charges for the first nine months of 1998, compared to the first
nine months of 1997, resulted primarily from an increase in the average amount
of debt outstanding and, to a lesser extent, the average interest rate charged
on the Company's outstanding debt. As of December 31, 1998, the Company was not
a party to any interest rate swap agreements.
CAPITALIZED INTEREST. Capitalized interest expense for the first nine
months of 1998 was $6,540,000, an increase of approximately 89% from
capitalized interest expense of $3,463,000 for the first nine months of 1997.
The increase in capitalized interest for the first nine months of 1998,
compared to the first nine months of 1997, resulted primarily from an increase
in the amount of capital expenditures subject to interest capitalization during
the first nine months of 1998 ($122,414,000), compared to the first nine months
of 1997 ($73,086,000), and from an increase in the computed rate that the
Company uses to apply on such capital expenditures to arrive at the total
amount of capitalized interest. A substantial percentage of the Company's
capitalized interest expense during the latter half of 1997 and the first nine
months of 1998 resulted from capitalization of interest related to such capital
expenditures for the development of the Benchamas Field in the Gulf of Thailand
and, to a lesser extent, several development projects in the Gulf of Mexico.
Foreign Currency Transaction Gain (Loss)
The Company experienced a foreign currency transaction gain of $953,000
during the first nine months of 1998, compared to a foreign currency
transaction loss of $6,522,000 during the first nine months of 1997. The
foreign currency transaction gain and loss each resulted primarily from the
fluctuation against the U.S. dollar of cash and other monetary assets and
liabilities denominated in Thai Baht that were on the Company's subsidiary's
financial statements during the respective periods and, to a much lesser
extent, the fluctuation of the Canadian dollar against the U.S. dollar. In
early July 1997, the government of the Kingdom of Thailand announced that the
value of the Baht would be set against the dollar and other currencies under a
"managed float" program arrangement. This led to a substantial decline in value
of the Thai Baht compared to the U.S. dollar, resulting in the foreign currency
transaction losses during the 1997 periods presented. During the 1998 periods
presented, the value of the Thai Baht has generally strengthened against the
U.S. dollar, resulting in corresponding foreign currency transaction gains.
However, the Company cannot predict what the Thai Baht to dollar exchange rate
may be in the future. Moreover, it is anticipated that this exchange rate will
remain volatile. As of December 31, 1998, the Company was not a party to any
financial instrument that was intended to constitute a foreign currency hedging
arrangement.
34
<PAGE> 36
Income Tax Benefit (Expense)
The Company experienced an income tax benefit for the first nine months of
1998 of $9,052,000, compared to income tax expense of $15,694,000 for the first
nine months of 1997. The income tax benefit for the first nine months of 1998,
compared to the income tax expense for the first nine months of 1997, resulted
primarily from a pre-tax loss resulting from substantially lower revenues in
the United States and the tax benefit of accrued foreign losses from the
Company's operations in the Kingdom of Thailand.
YEAR ENDED DECEMBER 31, 1997, COMPARED WITH YEARS ENDED DECEMBER 31, 1996 AND
1995, RESPECTIVELY
RESULTS OF OPERATIONS
Net income
The Company reported net income for 1997 of $37,116,000 or $1.11 per share
($40,198,000 or $1.06 per share on a diluted basis) compared to net income for
1996 of $32,760,000 or $0.99 per share ($35,843,000 or $0.95 per share on a
diluted basis)and net income for 1995 of $9,230,000 or $0.28 per share (on both
a basic and a diluted basis). The Company recorded an extraordinary loss of
$821,000 during the second quarter of 1996 related to the early retirement of
the Company's 8% Convertible Subordinated Debentures, due 2005 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 1997 of 33,421,000
(38,064,000 on a diluted basis), compared to 33,203,000 (37,920,000 on a
diluted basis) for 1996 and 32,893,000 (33,490,000 on a diluted basis) for
1995. The yearly increases in the weighted average number of common 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 diluted basis primarily reflect
additional common shares issuable upon the assumed conversion of the 2004 Notes
in 1996 and 1997 (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. In addition, the
number of common shares outstanding in the diluted computation is adjusted, in
accordance with the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), to include dilutive shares
that are assumed to have been issued by the Company in connection with options
exercised during the year, less treasury shares that are assumed to have been
purchased by the Company from the option proceeds. SFAS 128 was adopted by the
Company in 1997, resulting in a restatement of the earnings per share
calculations for 1996 and 1995, and all preceding years.
Total Revenues
The Company's total revenues for 1997 were $286,300,000, an increase of
approximately 40% from total revenues of $203,977,000 for 1996, and an increase
of approximately 82% from total revenues of $157,559,000 for 1995. The increase
in the Company's total revenues for 1997, compared to 1996, resulted primarily
from the substantial increase in the Company's natural gas and liquid
hydrocarbon (including crude oil, condensate and NGL) production, which was
only partially offset by a decline in the average price that the Company
received for its liquid hydrocarbon production and, to a much lesser extent,
the average price that the Company received for its natural gas production. The
increase in the Company's total revenues for 1997, compared to 1995, resulted
primarily from the substantial increases in the Company's natural gas
production, the average price that the Company received for its natural gas
production, the Company's liquid hydrocarbon production and, to a lesser
extent, the average price that the Company received for its liquid hydrocarbon
production.
Oil and Gas Revenues
The Company's oil and gas revenues for 1997 were $285,200,000, an increase
of approximately 40% from oil and gas revenues of $204,142,000 for 1996, and an
increase of approximately 81% from oil and gas revenues of
35
<PAGE> 37
$157,459,000 for 1995. The following table reflects an analysis of variances in
the Company's oil and gas revenues (expressed in thousands) between 1997 and
the previous two years:
<TABLE>
<CAPTION>
1997 COMPARED TO
----------------------
1996 1995
-------- --------
<S> <C> <C>
Increase (decrease) in oil and gas revenues resulting from variances in:
NATURAL GAS --
Price................................................ $ (394) $ 33,466
Production........................................... 64,305 53,002
-------- --------
63,911 86,468
CRUDE OIL AND CONDENSATE --
Price................................................ (12,064) 6,767
Production........................................... 27,759 29,279
-------- --------
15,695 36,046
NGL AND OTHER, NET --................................... 1,452 5,227
-------- --------
Increase in oil and gas revenues..................... $ 81,058 $127,741
======== ========
</TABLE>
NATURAL GAS PRICES. Prices per Mcf that the Company received for its
natural gas production during 1997 averaged $2.39 per Mcf. The average price
that the Company received for its natural gas production in 1997 was
approximately equal to the average price that the Company had received during
1996 of $2.40 per Mcf, but was a substantial increase (of approximately 47%)
from the average price of $1.63 that it received during 1995.
Domestic Prices. Prices that the Company received for its domestic natural
gas production during 1997 averaged $2.50 per Mcf, an increase of approximately
4% from an average price of $2.40 per Mcf that the Company received for its
domestic natural gas production during 1996, and an increase of approximately
53% from an average price of $1.63 that the Company received for its natural
gas production during 1995.
Thailand Prices. The Company's Tantawan Field located in the Kingdom of
Thailand commenced production of natural gas and liquid hydrocarbons in
February 1997. During 1997, the price that the Company received under the Gas
Sales Agreement averaged approximately 60 Thai Baht per Mcf. The price that the
Company receives under the Gas Sales Agreement would normally adjust on a
semi-annual basis. However, the Gas Sales Agreement provides for adjustment on
a more frequent basis in the event that certain indices and factors on which
the price is based fluctuate outside a given range. See "Business and
Properties -- International Operations; Contractual Terms Governing the
Thailand Concession and Related Production." Due to the volatility of the Thai
Baht and the current economic difficulties in the Kingdom of Thailand and
throughout Southeast Asia, the price that the Company receives under the Gas
Sales Agreement has been adjusted on almost a monthly basis since July 1997. As
a result of these adjustments, during December 1997 the price that the Company
received under the Gas Sales Agreement for its production from the Thailand
Concession averaged approximately 68 Thai Baht per Mcf. However, the increases
that the Company received during 1997 in the Thai Baht price for its natural
gas production from the Thailand Concession were not sufficient to completely
ameliorate, in U.S. dollar terms, the decline of the Thai Baht against the U.S.
dollar. The Company cannot predict when, if ever, the adjustments provided for
in the Gas Sales Agreement will completely recompense the Company for the
decline of the Thai Baht against the U.S. dollar. See ";Foreign Currency
Transaction Loss," "-- Liquidity and Capital Resources; Other Matters;
Southeast Asia Economic Issues" and "Business and Properties -- International
Operations; Contractual Terms Governing the Thailand Concession."
NATURAL GAS PRODUCTION. The Company's natural gas production for 1997
averaged 181.7 MMcf per day, an increase of approximately 69% from average
production of 107.7 MMcf per day during 1996, and an increase of approximately
50% from average production of 121 MMcf per day during 1995.
36
<PAGE> 38
Domestic Production. The Company's domestic natural gas production for 1997
averaged 147.2 MMcf per day, an increase of approximately 37% from average
production of 107.7 MMcf per day during 1996, and an increase of approximately
22% from average production of 121 MMcf per day during 1995. The increase in
the Company's average domestic natural gas production for 1997, compared to
1996 and 1995, was related in large measure to production from the Company's
East Cameron Block 334 "E" platform, which commenced production in April 1997,
and, to a lesser extent, the results of successful drilling in the Company's
Lopeno Field in South Texas and its Eugene Island Block 261 field, that was
only partially offset by the anticipated natural decline in deliverability from
certain of the Company's properties.
Thailand Production. The Company commenced production from its Tantawan
Field early in February 1997. Following a field startup phase which ended on
March 15, 1997, production from the Tantawan Field stabilized. During 1997, the
Company's share of natural gas production from the Tantawan Field averaged
approximately 37.7 MMcf per day.
CRUDE OIL AND CONDENSATE PRICES. Prices received by the Company for its
crude oil and condensate production averaged $19.37 per Bbl during 1997, a
decrease of approximately 12% compared to an average of $22.12 per Bbl during
1996, and an increase of approximately 9% compared to an average price of
$17.80 per Bbl that the Company received during 1995.
Domestic Prices. Prices that the Company received for its domestic crude
oil and condensate production during 1997 averaged $19.49 per Bbl, a decrease
of approximately 12% from an average price of $22.12 per Bbl that the Company
received for its domestic crude oil and condensate production during 1996, and
an increase of approximately 9% from an average price of $17.80 per Bbl that
the Company received for its crude oil and condensate production during 1995.
Thailand Prices. Since the inception of production from the Tantawan Field,
crude oil and condensate has been stored on the FPSO until an economic quantity
was accumulated for offloading and sale. The first such sale of crude oil and
condensate from the Tantawan Field occurred in July 1997. The average price
that the Company recorded for its crude oil and condensate production stored on
the FPSO during 1997 was $18.60 per Bbl. Prices that the Company receives for
such production are based on world benchmark prices, which are denominated in
U.S. dollars, and are generally paid in U.S. dollars.
CRUDE OIL AND CONDENSATE PRODUCTION. The Company's crude oil and condensate
production for 1997 averaged 15,927 Bbls per day, an increase of approximately
33% from 11,968 Bbls per day for 1996, and an increase of approximately 35%
from 11,786 Bbls per day for 1995.
Domestic Production. The Company's domestic crude oil and condensate
production for 1997 averaged 13,711 Bbls per day, an increase of approximately
15% from 11,968 Bbls per day for 1996, and an increase of approximately 16%
from 11,786 Bbls per day for 1995. The increase in the Company's crude oil and
condensate production for 1997, compared to 1996 and 1995, resulted primarily
from increased condensate production from wells located in the Gulf of Mexico
and, to a lesser extent, increased crude oil production from certain of the
Company's onshore properties, which was only partially offset by the natural
decline in deliverability from certain of the Company's more mature properties.
Thailand Production. The Company commenced production from its Tantawan
Field early in February 1997. Following a field startup phase which ended on
March 15, 1997, production from the Tantawan Field stabilized. During 1997, the
Company's share of crude oil and condensate production from the Tantawan Field
averaged approximately 2,216 Bbls per day.
NGL PRODUCTION AND "OTHER" NET REVENUE ITEMS. The Company's oil and gas
revenues, and its total liquid hydrocarbon production, reflect the production
and sale by the Company of NGL, which are liquid products that are extracted
from natural gas production. In addition, the Company's oil and gas revenues
for 1997, 1996 and 1995 also reflect adjustments for various miscellaneous
items. The Company's NGL and other, net revenues for 1997
37
<PAGE> 39
increased $1,452,000 from those reported in 1996, and $5,227,000 from those
reported in 1995. The increase in NGL and other, net revenues in 1997, compared
with 1996, primarily related to an increase in the Company's NGL production
that was partially offset by a decrease in the average price that the Company
received for such NGL production. The increase in NGL and other, net revenues
in 1997, compared with 1995, primarily related to an increase in the Company's
NGL production and, to a lesser extent, an increase in the price that the
Company received for its NGL production.
TOTAL LIQUID HYDROCARBON PRODUCTION. The Company's average liquid
hydrocarbon (including crude oil, condensate and NGL) production during 1997
was 18,851 Bbls per day, an increase of approximately 33% from an average total
liquids production of 14,141 Bbls per day for 1996, and an increase of
approximately 37% from an average total liquids production of 13,784 Bbls per
day for 1995.
Lease Operating Expenses
Lease operating expenses for 1997 were $63,501,000, an increase of
approximately 69% from lease operating expenses of $37,628,000 for 1996, and an
increase of approximately 81% from lease operating expenses of $35,071,000 for
1995.
DOMESTIC LEASE OPERATING EXPENSES. The Company's domestic lease operating
expenses for 1997 were $43,934,000, an increase of approximately 17% from
domestic lease operating expenses of $37,628,000 for 1996, and an increase of
approximately 25% from domestic lease operating expenses of $35,071,000 for
1995. The increase in domestic lease operating expenses for 1997, compared to
1996 and 1995, resulted primarily from increased costs to the Company (and the
entire offshore oil industry) because of a shortage of qualified offshore
service contractors, which permitted such contractors to increase the costs of
their services significantly during 1997, increased expenses related to the
leasing of certain equipment in the Gulf of Mexico, 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.
THAILAND LEASE OPERATING EXPENSES. The Company's lease operating expenses
in Thailand for 1997 were $19,567,000. Prior to the commencement of production
in the Tantawan Field on February 1, 1997, there were no lease operating
expenses incurred by the Company in Thailand. A substantial portion of the
Company's lease operating expenses in the Kingdom of Thailand relate to lease
payments made by a subsidiary of the Company in connection with its bareboat
charter of the FPSO, which amounted to $10,200,000 during 1997. See " --
Liquidity and Capital Resources; Capital Requirements; Other Material Long-Term
Commitments."
General and Administrative Expenses
General and administrative expenses for 1997 were $21,412,000, an increase
of approximately 19% from general and administrative expenses of $18,028,000
for 1996, and an increase of approximately 31% from general and administrative
expenses of $16,400,000 for 1995. The increase in general and administrative
expenses for 1997, compared to 1996 and 1995, was primarily related to salary
and benefit expenses incurred in connection with the increase in the Company's
work force in its Bangkok, Thailand office as a result of the Company's
increased activities there.
Exploration Expenses
Exploration expenses for 1997 were $10,530,000, a decrease of approximately
37% from exploration expenses of $16,777,000 for 1996, and an increase of
approximately 41% from exploration expenses of $7,468,000 for 1995. The
decrease in exploration expenses for 1997, compared to 1996, resulted primarily
from the incurrence of costs associated with conducting several 3-D seismic
surveys by the Company on its leases in South Louisiana, East Texas and the
Permian Basin during 1996 for which no similar costs of their magnitude were
incurred during the comparative periods, although such costs were partially
offset in 1997 by the costs associated with conducting the
38
<PAGE> 40
Jarmjuree 3-D seismic survey in the Gulf of Thailand and by increased seismic
data acquisition in the Gulf of Mexico. The increase in exploration expenses
for 1997, compared to 1995, resulted primarily from increased geophysical
activity by the Company, including the costs of conducting and processing the
Jarmjuree 3-D seismic surveys. In addition, exploration expenses attributable
to increased delay rental expense resulting from the Company's acquisition of
additional prospective oil and gas acreage during 1997, as compared to 1996 and
1995, served to offset the decrease in exploration expenses for 1997, compared
to 1996, and to increase the exploration expenses incurred during 1997,
compared to 1995. The Company does not currently expect its exploration
expenses in 1998 to increase significantly over those incurred during 1997.
Dry Hole and Impairment Expenses
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 1997 were
$9,631,000, an increase of approximately 12% from dry hole and impairment costs
of $8,579,000 for 1996, and an increase of approximately 44% from dry hole and
impairment costs of $6,703,000 for 1995.
Depreciation, Depletion and Amortization Expenses
The Company's DD&A expense for 1997 was $103,157,000, an increase of
approximately 67% from DD&A expenses of $61,857,000 for 1996, and an increase
of approximately 51% from DD&A expenses of $68,489,000 for 1995. The increase
in the Company's DD&A expenses for 1997, compared to 1996 and 1995, resulted
primarily from an increase in the Company's natural gas and liquid hydrocarbon
production and, to a lesser extent, an increase in the Company's composite DD&A
rate.
The composite DD&A rate for all of the Company's producing fields for 1997
was $0.95 per equivalent Mcf ($5.68 per equivalent Bbl), an increase of
approximately 9% from a composite DD&A rate of $0.87 per equivalent Mcf ($5.20
per equivalent Bbl) for 1996, and an increase of approximately 3% from a
composite DD&A rate of $0.91 per equivalent Mcf ($5.47 per equivalent Bbl) for
1995. The increase in the composite DD&A rate for all of the Company's
producing fields for 1997, compared to 1996 and 1995, 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 coming from fields that have DD&A rates that are lower
than the Company's recent historical composite DD&A rate. Management currently
anticipates that this trend will continue for the foreseeable future, resulting
in generally increasing DD&A rates. The Company produced 107,605,000 equivalent
Mcf (17,934,000 equivalent Bbls) in 1997, an increase of approximately 53% from
the 70,472,000 equivalent Mcf (11,745,000 equivalent Bbls) produced in 1996,
and an increase of approximately 45% from the 74,337,000 equivalent Mcf
(12,389,000 equivalent Bbls) produced in 1995.
Interest
INTEREST CHARGES. The Company incurred interest charges for 1997 of
$21,886,000, an increase of approximately 66% from interest charges of
$13,203,000 for 1996, and an increase of approximately 96% from interest
charges of $11,167,000 for 1995. The increase in the Company's interest charges
for 1997, compared to 1996 and 1995, resulted primarily from an increase in the
average amount of the Company's outstanding debt and, to a lesser extent,
increased average interest rates on the debt outstanding (resulting primarily
from the issuance of the 8 3/4% Senior Subordinated Notes due 2007 (the "2007
Notes") on May 22, 1997, which bear interest at an 8 3/4% annual interest rate)
and increased expenses related to amortization of debt issuance expenses
resulting from the issuance of the 2006 Notes in 1996.
CAPITALIZED INTEREST EXPENSE. Capitalized interest for 1997 was $6,175,000
an increase of approximately 46% from capitalized interest of $4,244,000 for
1996, and an increase of approximately 237% from capitalized interest of
$1,834,000 for 1995. The increase in capitalized interest for 1997, compared to
1996 and 1995, resulted primarily from the requirement to capitalize interest
expense attributable to capital expenditures on non-producing properties,
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<PAGE> 41
principally capital expenditures related to the Company's development of the
Tantawan Field and the East Cameron Block 334 "E" platform during the first
quarter of 1997 and its development of the Benchamas Field commencing in 1997,
which substantially exceeded the Company's capital expenditures on
non-producing properties (principally the Tantawan Field) during 1996 and 1995.
To a lesser extent, the increase in capitalized interest expense is also
attributable to an increase in the rate used to compute the interest that was
capitalized. The Company expects its capitalized interest costs to increase in
the future, primarily as a result of the requirement to capitalize interest
expense attributable to capital expenditures incurred in connection with its
development of the Benchamas Field in the Gulf Thailand. See "Business and
Properties -- International Operations; Significant International Operating
Areas During 1997."
Foreign Currency Transaction Loss
The Company incurred a foreign currency transaction loss of $7,604,000
during 1997. No comparable losses were incurred in 1996 or 1995. The foreign
currency transaction loss resulted from the devaluation against the U.S. dollar
of cash and other monetary assets and liabilities denominated in Thai Baht that
were on the Company's subsidiary's financial statements during 1997. In early
July 1997, the government of the Kingdom of Thailand announced that the value
of the Thai Baht would be set against the U.S. dollar and other currencies
under a "managed float" program arrangement. Since that time the value of the
Thai Baht has generally declined, although in recent weeks it has shown some
sign of stabilizing. During the last two weeks of the month of February 1998,
the Thai Baht traded in a range of approximately 43 to 48 Thai Baht to the U.S.
dollar. The Company cannot predict what the Thai Baht to U.S. dollar exchange
rate may be in the future. Moreover, it is anticipated that this exchange rate
will remain volatile.
Income Tax Expense
Income tax expense for 1997 was $18,091,000, a decrease of approximately 4%
from income tax expense of $18,800,000 for 1996, and an increase of
approximately 270% from income tax expense of $4,891,000 for 1995. The decrease
in income tax expense for 1997, compared to 1996, resulted primarily from the
foreign currency transaction loss discussed in the preceding paragraph, which
was partially offset by increased taxable income. The increase in income tax
expense for 1997, compared to 1995, resulted primarily from increased taxable
income.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The Company's Condensed Consolidated Statement of Cash Flows for the nine
months ended September 30, 1998, reflects net cash provided by operating
activities of $70,466,000. In addition to net cash provided by operating
activities, the Company received net proceeds of $998,000 from the exercise of
stock options, $350,000 from the sale of certain non-strategic properties, and
had net borrowings of $83,354,000 under its Credit Agreement and other senior
debt facilities.
During the first nine months of 1998, the Company invested $135,964,000 of
such cash flow in capital projects, retired a production payment obligation for
$15,246,000, spent $2,961,000 to purchase proved reserves, paid $3,327,000
($0.03 per share for each of the first three quarters of 1998) in cash
dividends to holders of the Company's common stock and paid a net amount of
$621,000 in miscellaneous other expenditures. As of September 30, 1998, the
Company's cash and cash investments were $17,422,000 and its long-term debt
stood at $381,854,000.
Future Capital Requirements
The Company's capital and exploration budget for 1998, which does not
include any amounts that 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 $230,000,000. Substantially
all of the Company's 1998 capital and exploration budget was spent or incurred
during 1998. The Company currently anticipates that its
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<PAGE> 42
available cash and cash investments, cash provided by operating activities,
funds available under its Credit Agreement and an uncommitted line of credit
and amounts that the Company currently believes that it can obtain from
external sources including the issuance of new debt (including the Notes) and
convertible preferred securities, or asset sales, will be sufficient to fund
the Company's ongoing operating, interest and general and administrative
expenses, the remainder of its 1998 capital and exploration budget, any
currently anticipated costs associated with the Company's projects during 1999,
and future dividend payments at current levels. Subject to favorable market
conditions and other factors, the Company also currently intends to issue
convertible preferred equity securities during 1999 to assist in funding its
future capital and exploration plans. The declaration of future dividends on
the Company's common stock will depend upon, among other things, the Company's
future earnings and financial condition, liquidity and capital requirements,
its ability to pay dividends under certain covenants contained in its debt
instruments, the general economic and regulatory climate and other factors
deemed relevant by the Company's Board of Directors.
Other Material Long-Term Commitments
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 the 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. 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 negative pledge 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%).
The Charter currently provides for an estimated charter hire commitment of
$24,000,000 per year ($11,122,000 net to Thaipo).
As of August 24, 1998, Thaipo and its joint venture partners (collectively,
the "Charterers") entered into a Bareboat Charter Agreement (the "BCA") with
Watertight Shipping B.V. for the charter of a Floating Storage and Offloading
system named the "Benchamas Explorer" (the "FSO"). See "Business and Properties
- -- International Operations." The term of the BCA is for a period of ten years
commencing on the date that the FSO is ready to begin operations in the
Benchamas Field. In addition, the Charterers have a purchase option on the FSO
throughout the term of the BCA. The Charterers have also contracted with
another company, Tanker Pacific (Thailand) Co. Ltd, to operate the FSO on a
fixed fee basis throughout the initial term of the BCA. Performance of both the
BCA and the agreement to operate the FSO are non-recourse to the Company.
However the obligations of each joint venturer are full recourse to each joint
venturer, but the obligations are several, meaning that each joint venturer's
obligations are limited to its percentage interest in the Thailand Concession.
Collectively, the BCA and the operating agreement currently provides for an
estimated expense of chartering and operating the FSO of $11,253,000 per year
($5,215,000 net to Thaipo).
Capital Structure
CREDIT AGREEMENT AND UNCOMMITTED CREDIT LINE. Effective August 1, 1997, the
Company entered into an amended and restated Credit Agreement, which has
subsequently been amended several times, most recently on December 21, 1998.
The Credit Agreement provides for a $250,000,000 revolving/term credit facility
which will be fully revolving until July 1, 2000, after which the balance will
be due in eight quarterly term loan installments, commencing October 31, 2000.
A portion of the amount that may be borrowed under the Credit Agreement (the
"Primary Tranche") may not exceed a borrowing base which is composed of
domestic, Canadian and Thai properties. Generally, the borrowing base is
determined semi-annually by the lenders in accordance with the Credit
Agreement, based on the lenders' usual and customary criteria for oil and gas
transactions. As of December 21, 1998, the Company's total borrowing base was
set at $200,000,000, which amount cannot be reduced until after April 30, 1999.
In addition, certain lenders that are parties to the Credit Agreement have
agreed to extend an additional $50,000,000 in credit (the "Secondary Tranche")
under the Credit Agreement without reference to the
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<PAGE> 43
borrowing base limitations of the Credit Agreement. The term of the Secondary
Tranche is until the earlier of April 30, 1999 or the completion of the
Offering. 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. Upon the occurrence or declaration of certain events, the
lenders would be entitled to a security interest in the Company's domestic
borrowing base properties. In addition, the Company is prohibited from pledging
borrowing base properties as security for other debt. Borrowings under the
Primary Tranche bear interest at a rate based upon the percentage of the
borrowing base that is being utilized, ranging from a base (prime) rate or
LIBOR plus 1.25% to a base rate plus 0.25% or LIBOR plus 2.0%, at the Company's
option. Borrowings under the Primary Tranche currently bear interest at a base
rate plus 0.25% or LIBOR plus 2.0%, at the Company's option. Borrowings under
the Secondary Tranche currently bear interest at a base rate plus 0.75% or
LIBOR plus 2.5%, at the Company's option. A commitment fee on the unborrowed
amount under the Primary Tranche is also charged and is based upon the
percentage of the borrowing base that is being utilized, ranging from 0.25% to
0.375%. The commitment fee is currently 0.375% per annum on the unborrowed
amount under the Primary Tranche. As of December 31, 1998, there was
$155,000,000 outstanding under the Primary Tranche and $50,000,000 outstanding
under the Secondary Tranche.
As of December 31, 1998, the Company had also entered into a separate
letter agreement with a bank under which the bank may provide a $20,000,000
uncommitted money market line of credit. The line of credit is on an as
available or offered basis and the bank has no obligation to make any advances
under its line of credit. Although loans made under that letter agreement 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. The letter
agreement permits either party to terminate such letter agreement at any time.
Under its Credit Agreement, the Company is currently limited to incurring a
maximum of $20,000,000 of additional senior debt, which would include debt
incurred under that line of credit and under the banker's acceptances discussed
below. Further, the 2007 Notes and the Notes offered hereby also restrict the
incurrence of additional senior indebtedness. See "; 2007 Notes" and
"Description of the Notes -- Certain Covenants; Limitation on Indebtedness."
BANKER'S ACCEPTANCES. On June 3, 1998, the Company entered into a Master
Banker's Acceptance Agreement under which one of the Company's lenders has
offered to accept up to $20,000,000 in bank drafts from the Company. The
banker's drafts are available on an uncommitted basis and the bank has no
obligation to accept the Company's request for drafts. Drafts drawn under this
agreement are for a maximum term of 182 days; however, 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 the Credit Agreement.
Under its Credit Agreement, the Company is currently limited to incurring a
maximum of $20,000,000 of additional senior debt, which would include banker's
acceptances as well as debt incurred under the line of credit discussed
previously. Further, the 2007 Notes and the Notes offered hereby also restrict
the incurrence of additional senior indebtedness. See "; 2007 Notes" and
"Description of the Notes -- Certain Covenants; Limitation on Indebtedness."
The Master Banker's Acceptance Agreement permits either party to terminate the
letter agreement at any time upon five business days notice. As of September
30, 1998, bank drafts in the principal amount of $10,854,000 bearing interest
at a rate of 6.1% were outstanding under this agreement.
2007 NOTES. On May 22, 1997, the Company issued $100,000,000 principal
amount of 2007 Notes. The proceeds from the issuance of the 2007 Notes were
used to repay amounts outstanding under the Credit Agreement, and to purchase
short-term cash investments. The 2007 Notes bear interest at a rate of 8 3/4%,
payable semi-annually in arrears on May 15 and November 15 of each year,
commencing November 15, 1997. The 2007 Notes are general unsecured senior
subordinated obligations of the Company, are subordinated in right of payment
to the Company's senior indebtedness, which currently includes the Company's
obligations under the Credit Agreement, its unsecured credit line and its
banker's acceptances, are equal in right of payment to the Notes offered
hereby, but are senior in right of payment to the Company's subordinated
indebtedness, which currently includes the 2006 Notes. The Company, at its
option, may redeem the 2007 Notes in whole or in part, at any time on or after
May 15, 2002, at a redemption price of 104.375% of their principal value and
decreasing percentages thereafter. No sinking fund payments are required on the
2007 Notes. The 2007 Notes are redeemable at the option of any holder, upon the
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<PAGE> 44
occurrence of a change of control (as defined in the indenture governing the
2007 Notes), at 101% of their principal amount. The indenture governing the
2007 Notes also imposes certain covenants on the Company that are substantially
identical to the covenants contained in the indenture governing the Notes,
including covenants limiting: incurrence of indebtedness including senior
indebtedness; restricted payments; the issuance and sales of restricted
subsidiary capital stock; transactions with affiliates; liens; disposition of
proceeds of assets sales; non-guarantor restricted subsidiaries; dividends and
other payment restrictions affecting restricted subsidiaries; and mergers,
consolidations and the sale of assets.
2004 NOTES. The Company's 2004 Notes were called for redemption on March
13, 1998, at a price equal to 103.30% of their principal amount. Prior thereto,
holders of all but $95,000 principal amount of the 2004 Notes chose to convert
their 2004 Notes into Common Stock at a conversion price of $22.188 per common
share, rather than receive cash for their 2004 Notes resulting in the issuance
of 3,879,726 shares of Common Stock.
2006 NOTES. The outstanding principal amount of 2006 Notes was $115,000,000
as of September 30, 1998. 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 any 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.
Other Matters
INFLATION. 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 U.S. 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 U.S. dollar due to inflation, such effect is not
currently considered significant.
SOUTHEAST ASIA ECONOMIC ISSUES. A substantial portion of the Company's oil
and gas operations are conducted in Southeast Asia, and a substantial portion
of its natural gas and liquid hydrocarbon production are sold there. In recent
months, Southeast Asia in general, and the Kingdom of Thailand in particular,
have experienced severe economic difficulties which have been characterized by
sharply reduced economic activity, illiquidity, highly volatile foreign
currency exchange rates and unstable stock markets. The government of the
Kingdom of Thailand and other governments in the region are currently acting to
address these issues. However, the economic difficulties currently being
experienced in Thailand, together with the volatility of the Thai Baht against
the U.S. dollar, will continue to have a material impact on the Company's
operations in the Kingdom of Thailand, together with the prices that the
company receives for its oil and natural gas production there. See "-- Results
of Operations; Oil and Gas Revenues" and "-- Results of Operations; Foreign
Currency Transaction Gain (Loss)" for both the nine month and yearly
comparative periods.
All of the Company's current natural gas production from the Thailand
Concession is committed under a long term Gas Sales Agreement to PTT at a price
denominated in Thai Baht which is determined in accordance with a formula that
is intended to ameliorate, at least in part, any decline in the purchasing
power of the Thai Baht against the U.S. dollar. See "Business and Properties --
International Operations; Contractual Terms Governing the Thailand Concession"
and "Business and Properties -- Miscellaneous; Sales." Although the Company
currently believes that PTT will honor its commitments under the Gas Sales
Agreement, a failure by PTT to honor such commitments could have a material
adverse effect on the Company.
The Company's crude oil and condensate production from the Thailand
Concession is sold on a tanker load by tanker load basis. Prices that the
Company receives for such production are based on world benchmark prices, which
are denominated in U.S. dollars, and are typically paid in U.S. dollars. See
"Business and Properties -- International Operations; Contractual Terms
Governing the Thailand Concession and Related Production" and "Business and
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<PAGE> 45
Properties -- Miscellaneous; Sales." The Company believes that the current
economic difficulties in Southeast Asia have resulted in a decreased demand for
petroleum products in the region, which has contributed to the recent general
decline in crude oil and condensate prices throughout the world. This price
decline has had an adverse effect on all oil and gas companies that sell their
production on the world spot markets, including the Company, without regard to
where their respective production is located.
YEAR 2000 READINESS DISCLOSURE. Many computer software systems, as well as
certain hardware and equipment using date-sensitive data, were structured to
use a two-digit date field meaning that they may not be able to properly
recognize dates in the year 2000. The Company is addressing this issue through
a process that entails evaluation of the Company's critical software and, to
the extent possible, its hardware and equipment to identify and assess Year
2000 issues and to remediate, replace or establish alternative procedures
addressing non-Year 2000 compliant systems, hardware and equipment.
The Company has substantially completed an inventory of its systems and
equipment including computer systems and business applications. Based upon this
review, the Company currently believes that all of its critical software and
computer hardware systems are either Year 2000 compliant or will be within the
next six months. The Company continues to inventory its equipment and
facilities to determine if they contain embedded date-sensitive technology. If
problems are discovered, remediation, replacement or alternative procedures for
non-compliant equipment and facilities will be undertaken on a business
priority basis. This process will continue and, depending upon the equipment
and facilities, is scheduled for completion during the first three quarters of
1999. As of September 30, 1998, the Company had incurred approximately $50,000
in expenses related to its Year 2000 compliance efforts. These costs are
currently being expensed as they are incurred. However, in certain instances
the Company may determine that replacing existing equipment may be more
efficient, particularly where additional functionality is available. These
replacements may be capitalized and therefore would reduce the estimated 1998
and 1999 expenses associated with the Year 2000 issue. The Company currently
expects total out-of-pocket costs to become Year 2000 compliant to be less than
$1,000,000. The Company currently expects that such costs will not have a
material adverse effect on the Company's financial condition, operations or
liquidity.
The foregoing timetable and assessment of costs to become Year 2000
compliant reflect management's current best estimates. These estimates are
based on many assumptions, including assumptions about the cost, availability
and ability of resources to locate, remediate and modify affected systems,
equipment and facilities. Based upon its activities to date, the Company does
not currently believe that these factors will cause results to differ
significantly from those estimated. However, the Company cannot reasonably
estimate the potential impact on its financial condition and operations if key
third parties including, among others, suppliers, contractors, joint venture
partners, financial institutions, customers and governments do not become Year
2000 compliant on a timely basis. The Company is contacting many of these third
parties to determine whether they will be able to resolve in a timely fashion
their Year 2000 issues as they may affect the Company.
In the event that the Company is unable to complete the remediation or
replacement of its critical systems, facilities and equipment, establish
alternative procedures in a timely manner, or if those with whom the Company
conducts business are unsuccessful in implementing timely solutions, Year 2000
issues could have a material adverse effect on the Company's liquidity and
results of operations. At this time, the potential effect in the event the
Company and/or third parties are unable to timely resolve their Year 2000
problems is not determinable; however, the Company currently believes that it
will be able to resolve its own Year 2000 issues in a timely manner.
The disclosure set forth in this section is provided pursuant to Securities
Act Release No. 33-7558. As such it is protected as a forward-looking statement
under the Private Securities Litigation Reform Act of 1995. See "Forward-
Looking Statements." This disclosure is also subject to protection under the
Year 2000 Information and Readiness Disclosure Act of 1998, Public Law 105-271,
as a "Year 2000 Statement" and "Year 2000 Readiness Disclosure" as defined
therein.
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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, primarily in the Gulf of Thailand. As of
December 31, 1998, the Company had interests in 105 lease blocks offshore
Louisiana and Texas, approximately 378,000 gross acres onshore in the United
States, approximately 734,000 gross acres offshore in the Kingdom of Thailand,
150,000 gross acres in Canada and 113,000 gross acres in the British North Sea.
On August 17, 1998, a wholly owned subsidiary of the Company merged with and
into Arch in a tax free, stock for stock transaction through which Arch became
a wholly owned subsidiary of the Company. The Company issued approximately
2,540,000 of its common shares in connection with the merger, or approximately
6% of its common stock outstanding at the time of the merger. For a description
of the Arch and its subsidiaries' businesses, properties and operations, please
see "-- Arch and its Subsidiaries." Quantitative information in this "Business
and Properties" section which precedes "-- Arch and its Subsidiaries" does not
include any such information relating to Arch and its subsidiaries.
Quantitative and geological information in the "-- Arch and its Subsidiaries"
subsection includes only information relating to Arch and its subsidiaries.
Unless otherwise specifically identified, the information set forth in this
offering memorandum, including production rates and the number of wells,
platforms and blocks, is presented on a gross basis, rather than net to the
Company or Arch, as applicable. Unless otherwise stated, quantitative data set
forth in this "Business and Properties" section was current as of March 13,
1998. The Company has not attempted to update this information but it believes
that any changes in this quantitative information are not material to an
understanding of the Company and its subsidiaries.
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 rates of return. As of December 31, 1997, six significant operating
areas, of which three are located in the Gulf of Mexico and one each in South
Texas, New Mexico and Thailand, accounted for approximately 82% of the
Company's estimated proved natural gas reserves, approximately 90% of the
Company's estimated proved oil, condensate and natural gas liquids reserves,
approximately 80% of the Company's natural gas production and 89% of the
Company's oil, condensate and natural gas liquids production for 1997.
Reserves, as estimated by Ryder Scott, and production data, as estimated by the
Company, for the six 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 December 31, 1997.
SIGNIFICANT OPERATING AREAS
<TABLE>
<CAPTION>
1997 AVERAGE NET
NET PROVED RESERVES(A) DAILY PRODUCTION
---------------------------------------- --------------------------------------- TOTAL NET
NATURAL GAS LIQUIDS(B) NATURAL GAS LIQUIDS(B) PROVED
----------------- ----------------- ----------------- ----------------
RESERVES(a)
MMCF % MBBLS % MCF % BBLS % %
------- ---- ------ ---- ------ ---- ----- ---- ----
DOMESTIC OFFSHORE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Eugene Island........ 27,182 6.8 7,607 13.1 23,334 13.5 4,673 24.5 10.7
Main Pass............ 14,570 3.6 3,830 6.6 7,104 4.1 2,777 14.6 5.0
East Cameron......... 30,199 7.5 1,006 1.7 53,893 31.2 3,242 17.0 4.8
DOMESTIC ONSHORE
New Mexico........... 20,578 5.1 11,287 19.4 9,151 5.3 4,008 21.0 11.8
South Texas.......... 52,724 13.1 1 0.0 11,484 6.6 0 0.0 7.0
INTERNATIONAL
Kingdom of Thailand.. 184,768 46.0 28,783 49.5 37,733 19.0 2,421 14.0 47.6
</TABLE>
- -------------
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(a) Net proved reserves and total net proved reserves are each as of December
31, 1997.
(b) "Liquids," includes oil, condensate and NGL.
DOMESTIC OFFSHORE OPERATIONS
Historically, the Company's interests have been concentrated in the Gulf of
Mexico, where approximately 59% of the Company's domestic proved reserves and
31% of its total proved reserves were located as of December 31, 1997. During
1997, approximately 65% of the Company's natural gas production and
approximately 59% of its oil and condensate production was from its domestic
offshore properties, contributing approximately 62% of the Company's
consolidated oil and gas revenues. Three offshore producing areas, Eugene
Island, Main Pass and East Cameron, accounted for approximately 18% of the
Company's net proved natural gas reserves and approximately 21% of the
Company's proved crude oil, condensate and natural gas liquids reserves as of
December 31, 1997. See "-- Significant Domestic Offshore Operating Areas During
1997."
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 December 31, 1997, the Company owned interests in 93 federal
leases and 8 state leases offshore Louisiana and Texas. Federal leases
generally have primary terms of five, eight or ten years, depending on water
depth, and state leases generally have terms of three or five years, depending
on location, 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 1997, the Company was successful in
acquiring interests in 19 lease blocks through federal Outer Continental Shelf
oil and gas lease sales and 1 lease block by assignment from a third party. As
in the case of prior sales, the extent to which the Company participates in
future bidding on federal or state offshore lease sales 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 1997 were approximately $86,300,000, or 9% lower than the Company's
domestic offshore capital and exploration expenditures of approximately
$94,400,000 (excluding approximately $2,000,000 of net property acquisitions)
for 1996 and 128% higher than the Company's domestic offshore capital and
exploration expenditures of approximately $37,800,000 for 1995 (excluding
approximately $650,000 of net property acquisitions) for 1995. The decrease in
the Company's domestic offshore capital and exploration expenditures for 1997,
compared with 1996, resulted primarily from a decrease in drilling activity and
in construction and installation of offshore platforms, pipelines and other
facilities, which was partially offset by the increased costs to the Company
(and the entire oil and gas industry generally) because of price increases by
the oil and gas services, construction and supply industries due to the
shortage of skilled workers and the comparative scarcity of certain equipment,
such as drilling rigs, and critical materials, such as certain types of steel
pipe. The increase in the Company's domestic offshore capital and exploration
expenditures for 1997, compared to 1995, resulted primarily from increased
drilling activity and increased costs associated with
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the construction and installation of offshore platforms, pipelines and other
facilities and the increase in prices discussed above. 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 was the operator on all or a
portion of 30 of the 101 offshore leases in which it had an interest on
December 31, 1997.
Platforms and related facilities 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 three years ended December 31, 1997,
the gross cost of production platforms and related facilities to the joint
ventures in which the Company has varying net interests has ranged from
approximately $3,000,000 to approximately $16,500,000. 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. For example, during 1997, the Company and its joint venture
partners approved construction of a platform located on Viosca Knoll Block 823
which will be located in approximately 1,200 feet of water. This platform,
together with its related pipelines and other facilities, is estimated to have
a gross cost of approximately $140,000,000 (approximately $15,100,000 net to
the Company's current working interest).
Significant Domestic Offshore Operating Areas During 1997
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. As of December 31, 1997,
the Company held interests in 10 blocks in the Eugene Island area. These blocks
comprise eight fields containing 64 oil and gas wells producing from multiple
reservoirs and horizons. During 1997, the Company participated in the drilling
of eight wells in the Eugene Island operating area.
The Eugene Island Block 330 field is one of the Company's most significant
producing assets. This 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. As of December 31, 1997, there were 12 wells producing
primarily natural gas and 34 wells producing primarily oil on the block. The
Company and its joint venture partners drilled six new wells which added
significant new reserves in this field during 1997.
MAIN PASS. The Company's 12 lease blocks in the Main Pass area, including
two 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 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%. As of
December 31, 1997, this field contained 20 producing oil wells and nine
producing natural gas wells from three platforms operated by the Company's
joint venture partner and is located in 125 feet of water. The Company
participated in the drilling of 3 exploratory wells in the Main Pass area
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 19 producing gas
wells. Two of the
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five blocks were awarded to the Company and its joint venture partners during
1997 and have yet to be fully evaluated.
During 1997, the Company and its partners were active in the East Cameron
Block 334/335 field. In February 1997, the Company and one of its joint venture
partners completed construction of the East Cameron "E" platform and commenced
production from two wells. Following mechanical problems in one of these wells
which caused it to be shut in, production was restored in the first week of
January 1998. The Company and its joint venture partners completed construction
of a sixth platform during 1997, known as the "F" platform. Production from the
well served by this platform, in which the Company holds a 42% interest,
commenced in December 1997.
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 1997."
Lease Acquisitions
Commencing in 1995 and continuing into 1997, the Company increased its
activities in the onshore Gulf Coast areas of East Texas and South Louisiana
through its participation in several large proprietary 3-D seismic surveys, in
connection with which the Company typically purchases an option to acquire an
interest in the acreage covered by the 3-D seismic survey. As it has in recent
years, in 1997 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, 1997, the Company held interests
in approximately 237,000 gross (113,000 net) acres onshore in the United
States, an increase of approximately 12% from year end 1996.
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 357 wells
in the Permian Basin, West and Northwest Texas areas through December 31, 1997,
including 58 wells in 1997.
The Company's primary drilling activity in East Texas has been in the
Cotton Valley formation reef play. In South Louisiana, the Company participated
in drilling 11 wells in 1997 to test various Hackberry formation and Yegua
formation prospects, all of which were identified on proprietary 3-D seismic
surveys that the Company and its industry partners have acquired since 1995.
The Company also actively explores for oil and gas onshore in South Texas. In
total, the Company participated in the drilling of 25 wells in the onshore Gulf
Coast areas of South Texas, East Texas and South Louisiana, including 14
exploratory wells (principally in East Texas and South Louisiana) and 11
developmental wells (principally in the Lopeno Field in South Texas). See "--
Significant Domestic Onshore Operating Areas During 1997; South Texas."
Domestic onshore reserves as of December 31, 1997, accounted for approximately
41% of the Company's domestic proved reserves and approximately 21% of its
total proved reserves. During 1997, approximately 16% of the Company's natural
gas production and 27% of its oil and condensate production was from its
domestic onshore properties, contributing approximately 20% of the Company's
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 $60,000,000 (excluding approximately $1,700,000 of net property
acquisitions) for 1997, or 28% higher than the Company's
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domestic onshore capital and exploration expenditures of approximately
$47,000,000 (excluding approximately $3,800,000 of net property acquisitions)
for 1996 and 82% higher than the Company's domestic onshore capital and
exploration expenditures of approximately $33,000,000 (excluding approximately
$7,800,000 of net property acquisitions) for 1995. The increase in the
Company's domestic onshore capital and exploration expenditures for 1997,
compared to 1996 and 1995, resulted primarily from increased drilling activity
in South Texas, East Texas and South Louisiana and, to a lesser extent, by the
increased costs to the Company (and the entire oil and gas industry generally)
because of price increases by the oil and gas services, construction and supply
industries due to the shortage of skilled workers and the comparative scarcity
of certain equipment, such as drilling rigs and critical materials, such as
certain types of steel pipe.
Significant Domestic Onshore Operating Areas During 1997
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 79,000 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 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.
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, 1997, in the drilling of, among others,
94 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%, 60 wells in the Livingston Ridge field where
the Company's working interest ranges from 25% to 100%, 61 wells in the Red
Tank field where the Company's working interest ranges from 89% to 100%, 31
wells in the Cedar Canyon field where the Company's working interest ranges
from 38% to 100% (including 15 during 1997), 15 wells in the Lost Tank field
where the Company's working interest ranges from 50% to 100% (including 12
during 1997), and 3 wells in the Poker Lake Field where the Company's working
interest ranges from 60% to 100%.
SOUTH TEXAS. The Company has increased its activity in South Texas in
recent years, where, as of December 31, 1997, it was active in two fields, both
of which primarily produce natural gas. The most significant of these two
fields is the Lopeno Field, which is located within 40 miles of the border with
Mexico. The Company acquired its initial interest in the Lopeno Field in 1983.
As of December 31, 1997, the Company had interests in over 7,800 gross acres in
South Texas containing 29 producing 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. Based in part
on a 3-D seismic survey acquired over the field in 1994, the Company and its
joint venture partners commenced an active development drilling program in the
fourth quarter of 1995. In 1997, the Company drilled seven successful wells in
the Lopeno Field and drilled additional wells in this field during 1998.
INTERNATIONAL OPERATIONS
The Company has conducted international exploration activities since the
late 1970's in numerous oil and gas areas throughout the world. Currently, the
Company maintains an office in Bangkok, Thailand from which it directs field
operations in the Gulf of Thailand on its Thailand Concession through its
wholly owned subsidiary Thaipo. As a result of its acquisition in 1995 and
March 1997 of portions of the original interest of Maersk Oil (Thailand) Ltd.,
a former joint venture partner that owned a 31.67% interest in the Thailand
Concession, the Company has increased its ownership interest in the Thailand
Concession so that it currently owns, directly or indirectly, a 46.34% working
interest in the entire Thailand Concession. The remainder of the working
interest is owned, directly or indirectly by Thai Romo Ltd. (46.34%), a
subsidiary of RMOC, and Palang Sophon Limited ("Palang") (7.32%). Thaipo is
currently the operator of the Thailand Concession, pursuant to the joint
operating agreement and as designated by the
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government of Thailand. On December 23, 1998, RMOC, the parent company of Thai
Romo, Ltd., announced that it had agreed to be acquired by Chevron. Their
agreement is subject to conditions, several of which are outside of RMOC's
control. One of these conditions is that Chevron reach agreement with the
Company on a new joint operating agreement that would include the transfer of
operatorship on the Thailand Concession from Thaipo to a subsidiary of Chevron.
The merger is also conditioned upon Chevron reaching agreement with Palang, the
third partner in the Thailand Concession, to acquire at least a 5 percent
interest in the Concession from Palang and upon all parties waiving any
preferential rights that may arise in connection with the acquisition. The
Company cannot predict whether Chevron will reach agreement with the Company
and Palang or whether the other conditions to Chevron's acquisition of RMOC
will be satisfied or waived. RMOC has also stated that its financial resources
will be exhausted in February 1999, and that its banks have currently refused
to lend it any additional funds. Chevron has agreed to lend additional funds to
RMOC if most of the conditions to the acquisition have been satisfied,
including Chevron's reaching agreement with us on a new joint operating
agreement. Thai Romo's failure to pay its share of the expenses of our projects
in the Gulf of Thailand could have a material adverse effect on the Company,
due to the increased capital requirements that funding Thai Romo's share of the
project development costs could have on the Company. As of December 31, 1997,
the Company's proved reserves located in the Kingdom of Thailand accounted for
approximately 48% of the Company's total proved reserves. During 1997,
approximately 19% of the Company's natural gas production and 14% of its oil
and condensate production came from its operations on the Thailand Concession,
contributing approximately 14% of the Company's consolidated oil and gas
revenues.
Exploration and Development
The Company's international capital and exploration expenditures were
approximately $88,300,000 (excluding approximately $28,600,000 of net property
acquisitions) for 1997, or 37% higher than the Company's international capital
and exploration expenditures of approximately $64,400,000 for 1996 and 152%
higher than the Company's international capital and exploration expenditures of
approximately $35,000,000 (excluding approximately $4,200,000 of net property
acquisitions) for 1995. The increase in the Company's international capital and
exploration expenditures for 1997, compared to 1996 and 1995, resulted
primarily from increased platform and facilities construction costs related to
initial development of the Benchamas Field, increased drilling activity and, to
a lesser extent, by the increased costs to the Company (and the entire oil and
gas industry generally) because of price increases by the oil and gas services,
construction and supply industries due to the shortage of skilled workers and
the comparative scarcity of certain equipment, such as drilling rigs, and
certain critical materials, such as certain types of steel pipe. Substantially
all of the Company's international capital and exploration expenditures for
1997 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 three years ended December 31, 1997, the gross cost of the first four
production platforms and related facilities in the Tantawan Field 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 1997; Tantawan Field."
Significant International Operating Areas During 1997
TANTAWAN FIELD. In August 1995, at the request of Thaipo and its 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 has been named the Tantawan
Field. Through March 13, 1998, 19 exploration and 29 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. Currently,
there are wells producing
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from four platforms. The Company is currently planning to install a fifth
platform in the Tantawan Field from which production is currently expected to
commence in the second half of 1999.
Oil and gas production from the Tantawan Field is gathered through
pipelines from the platforms into the FPSO named the "Tantawan Explorer." The
FPSO 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 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 FIELD AND THE MALIWAN PRODUCTION AREA. In July 1997, the
government of Thailand designated another portion of the Thailand Concession
comprising approximately 102,000 acres of the Benchamas and Pakakrong
production area as the Benchamas Field. This area includes at least two
discrete geologic structures which were previously designated as the Benchamas
and Pakakrong areas, respectively. In September 1997, the government of
Thailand designated an additional 91,000 acres of the Thailand Concession as
the Maliwan production area. Through March 13, 1998, 14 exploration wells have
been drilled in the Benchamas Field and four exploration wells have been
drilled in the Maliwan production area. Current development plans call for the
staged development of these fields, with the Benchamas Field to be brought on
production first. The Benchamas Field development plan contemplates the initial
installation of three production platforms, with natural gas and oil from these
platforms delivered by undersea pipeline to a central processing and
compression platform where the oil, condensate and natural gas will be
processed and separated. The natural gas will then be sold to PTT and delivered
into export pipelines for transportation to shore, while the oil and condensate
produced from the field will be stored on board the FSO for sale and ultimate
transfer to shore by oil tanker. The FSO will be moored in the Benchamas Field.
Its capacity will be approximately 1,400,000 Bbls of oil, or slightly more than
the FPSO. The field's current development plan calls for initial production to
commence in the third quarter of 1999.
OTHER AREAS. In addition to the above mentioned fields, Thaipo and its
joint venture partners have 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 673,650 acres of the Thailand Concession, including
221,650 acres during the fourth quarter of 1997 over what is known as the
Jarmjuree area. Interpretation of the Jarmjuree 3-D seismic survey commenced in
the first quarter of 1998 and is ongoing.
Contractual Terms Governing the Thailand Concession and Related Production
The Thailand Concession was granted in August 1991. The original
exploratory term of the concession agreement governing those portions of the
Thailand Concession not designated as a production area expired on July 31,
1997. However, on application from Thaipo and its joint venture partners, the
government of Thailand agreed in a supplemental concession agreement to extend
the exploratory term for those portions of the Thailand Concession that have
not yet been designated a production area (comprising approximately 474,000
acres) until July 31, 2000. In exchange, the Company and its joint venture
partners committed to, among other things, an additional work program which
includes the drilling of two wells and the acquisition of 148,000 acres of 3-D
seismic data during the remainder of the exploratory term. (This work
commitment was satisfied during the ordinary course of the Company's operations
on the Thailand Concession during 1998.) For those portions of the Thailand
Concession that have been designated as production areas the initial production
period term is 20 years, which is also subject to extension, generally for a
term of ten years. See also "-- Miscellaneous; Sales." Currently, the Tantawan,
Maliwan, and Benchamas and Pakakrong areas have been designated as production
areas. Subject to governmental approval, other portions of the Thailand
Concession may be designated production areas in the future.
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Production resulting from the Thailand Concession is subject to a royalty
ranging from 5% to 15% of oil and gas sales, plus certain fixed U.S. 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").
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. On November 12, 1997, Thaipo and its joint
venture partners entered into an amendment to the gas sales agreement to
include the reserves and anticipated gas production from the Benchamas Field.
The terms of the Gas Sales Agreement currently include a minimum daily contract
quantity ("DCQ") of 85 MMcf per day, which the Company currently anticipates
will continue until the Benchamas Field commences production, at which time the
DCQ will, subject to certain exceptions, be based on a percentage of the
remaining proved reserves, but in any event, will not be less than 125 MMcf per
day. The DCQ is the minimum daily volume that PTT has agreed to take, or pay
for if not taken under the agreement. Likewise, Thaipo and its joint venture
partners are subject to certain penalties if they are unable to meet the DCQ,
principal among which is a decrease in sales price of up to 25% of the then
current sales price. As a result of declining production from existing wells in
the Tantawan Field, the need to shut-in existing wells while drilling
additional wells from the same platform, and the decision to emphasize oil and
condensate production from the Tantawan Field, commencing on October 1, 1998,
the Company and its joint venture partners are currently delivering less
natural gas than is being nominated by PTT under the Gas Sales Agreement. This
could result in the Company receiving only 75% of the current contract price on
a portion of its future natural gas sales to PTT. The Company is taking actions
that it currently believes will minimize the penalty that it will incur on
future gas sales to PTT by, among other things, increasing production from the
Tantawan Field. The contract sales price is subject to automatic semi-annual
adjustments based upon a formula which takes into account, among other things,
changes in: Singapore fuel oil prices; the U.S. Bureau of Labor Statistics
Oilfield Machinery and Tool Index; the Thai wholesale producer price index; and
the U.S./Thai currency exchange rate. However, the Gas Sales Agreement provides
for adjustment on a more frequent basis in the event that certain indices and
factors on which the price is based fluctuate outside a given range. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations; Foreign Currency Transaction Gain (Loss)"
and "-- Liquidity and Capital Resources; Other Matters; Southeast Asia Economic
Issues."
MISCELLANEOUS
Other Assets
The Company and a subsidiary, Pogo Offshore Pipeline Co., own interests in
eight pipelines (excluding field gathering pipelines) through which offshore
hydrocarbon production is transported. In addition, the Company owns
approximately 19% 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. See also "-- Arch and its Subsidiaries."
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, 1997, Pogo Gulf Coast had interests in 5
federal offshore leases. The Company owned 40% of any interest in properties
acquired by the limited partnership. Unless otherwise noted, the statistical
data reported in this offering memorandum reflect only the Company's share of
Pogo Gulf Coast's holdings as of March 13, 1998. Effective September 1, 1998,
the Company acquired all of the limited partnership interest of Pogo Gulf
Coast.
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
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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 Field). Thaipo and its joint
venture partners in the Tantawan Field signed a long term gas sales contract
with PTT in November 1995 which has since been amended to include production
from the Benchamas Field. All oil and condensate production from the Tantawan
field is initially stored aboard the FPSO and is then sold to various third
parties, including PTT, on a tanker load by tanker load basis at prices based
on then current world oil prices, typically with reference to the Malaysian
Tapis crude oil benchmark price. The buyer is responsible for sending a tanker
to off load the oil and condensate it has purchased. It is currently
anticipated that crude oil and condensate production from the Benchamas Field,
when it commences production, will be initially stored aboard the FSO and sold
in the same manner. See "-- International Operations; Contractual Terms
Governing the Thailand Concession and Related Production."
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. 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 price
that is then currently available. 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 Agreement with PTT for
production from the Tantawan and Benchamas Fields (see "-- International
Operations; 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.
Enron Corp. and its affiliates and PTT, who purchased $57,965,000 (20% of the
Company's consolidated gross revenues) and $30,108,000 (11% of the Company's
consolidated gross revenues) of the Company's oil and gas production during
1997, respectively, were the Company's only customers to which sales exceeded
10% of its 1997 revenues. The oil and gas sold to Enron Corp. and its
affiliates was sold under a number of short term, generally month to month,
contracts.
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. In the past, when natural gas
prices in the United States were low, the Company at times elected to curtail
certain quantities of its production. In the future, the Company may again
elect to curtail certain quantities of its natural gas production. Current oil
prices which, on an inflation adjusted basis are at historic lows, continue to
have a material adverse effect on the Company's cash flows and, if sustained
for a significant length, could have a material adverse effect on the Company's
operations and financial condition and may result in a further 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 price declines, such
transactions could effectively limit the Company's participation in price
increases for the covered period, which increases could be significant. As of
December 31, 1998, the Company was not a party to any natural gas futures
contracts, crude oil swap agreements or other commodity hedging arrangements.
When the Company does engage in
53
<PAGE> 55
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
material, 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
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. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations; Foreign
Currency Transaction Gain (Loss)," and "-- Liquidity and Capital Resources;
Other Matters; Southeast Asia Economic Issues." 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.
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, 1997:
54
<PAGE> 56
<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED
ACREAGE(a) ACREAGE(b)
------------------- ---------------------
Gross Net Gross Net
----- --- ----- ---
<S> <C> <C> <C> <C>
DOMESTIC ONSHORE
Louisiana.............................. 2,475 598 36,074 10,895
New Mexico............................. 21,021 12,591 58,410 42,932
Texas.................................. 12,084 4,346 103,100 40,769
Other.................................. 3,200 333 238 55
------ ------ ------ ------
Total Domestic Onshore......... 38,780 17,868 197,822 94,651
------ ------ ------- ------
DOMESTIC OFFSHORE
Louisiana (State)...................... 7,942 3,255 1,508 753
Louisiana (Federal)(c)................. 186,422 61,378 152,879 56,061
Texas (Federal)........................ 40,320 10,251 56,905 16,530
------ ------ ------ ------
Total Domestic Offshore........ 234,684 74,854 211,292 73,344
------- ------ ------- ------
Total Domestic................. 273,464 92,722 409,114 167,995
------- ------ ------- -------
INTERNATIONAL
Kingdom of Thailand.................... 260,407 120,682 473,733 219,530
------- ------- ------- -------
Total Company.................. 533,871 213,404 882,847 387,525
======= ======= ======= =======
</TABLE>
- -----------------
(a) "Developed acreage" consists of lease acres spaced or assignable to
production (including acreage held by production) on which wells have
been drilled or completed to a point that would permit production of
commercial quantities of oil or natural gas. "Developed acreage" in
Thailand includes all acreage designated as production area by the Thai
government, which currently includes the Tantawan, Maliwan, Benchamas and
Pakakrong production areas.
(b) "Undeveloped acreage" includes acreage under lease or subject to lease or
purchase options that the Company currently expects to exercise. Less
than 1% of the Company's total domestic offshore net undeveloped acreage
is under leases that have terms expiring in 1998 (unless otherwise
extended) and another approximately 1% of total domestic offshore net
undeveloped acreage will expire in 1999 (unless otherwise extended).
Approximately 7% of the Company's total domestic onshore net undeveloped
acreage is under leases that have terms expiring in 1998 (unless
otherwise extended) and another approximately 15% of total domestic
onshore net undeveloped acreage will expire in 1999 (unless otherwise
extended). The Company's total international net undeveloped acreage must
be relinquished to the Thai government on July 31, 2000, unless
designated as a production area or unless the exploration term is
extended. See "--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).
Productive Wells and Drilling Activity
The following table shows the Company's interest in productive oil and
natural gas wells as of December 31, 1997. For purposes of this table
"productive wells" are defined as wells producing hydrocarbons and 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 currently installed production
facilities). This table does not include exploratory or developmental wells
which have located commercial quantities of oil or natural gas but which are
not capable of commercial production without the installation of material
production facilities or which, for a variety of reasons, the Company does not
currently believe will be placed on production.
55
<PAGE> 57
<TABLE>
<CAPTION>
NATURAL GAS
OIL WELLS(a) WELLS(a)
------------------ ----------------
GROSS NET GROSS NET
----- --- ----- ---
<S> <C> <C> <C> <C>
Offshore United States......................... 129 33.3 113 33.8
Onshore United States.......................... 339 214.4 91 33.1
Kingdom of Thailand............................ -- -- 34 15.8
--- ----- --- ----
Total................................ 468 247.7 238 82.7
=== ===== === ====
</TABLE>
- -------------------
(a) One or more completions in the same bore hole are counted as one well.
The data in the above table includes five gross (.6 net) oil wells and 45
gross (20.4 net) natural gas wells with multiple completions.
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>
1997 1996 1995
------------------ ---------------- -----------------
SUCCESSFUL DRY SUCCESSFUL DRY SUCCESSFUL DRY
---------- --- ---------- --- ---------- ---
<S> <C> <C> <C> <C> <C> <C>
Gross Wells:
Offshore United States
Exploratory....................... 4.0 1.0 4.0 2.0 7.0 4.0
Development....................... 12.0 3.0 17.0 3.0 3.0 1.0
Onshore United States
Exploratory....................... 18.0 12.0 12.0 4.0 8.0 1.0
Development....................... 50.0 3.0 39.0 1.0 47.0 1.0
Offshore Kingdom of Thailand
Exploratory....................... 18.0 1.0 7.0 -- 3.0 --
Development....................... 12.0 -- 16.0 -- 7.0 --
----- ----- ---- ---- ---- ----
Total........................ 114.0 20.0 95.0 10.0 75.0 7.0
===== ===== ==== ==== ==== ====
NET WELLS:
Offshore United States
Exploratory....................... 1.21 .25 1.7 1.5 3.0 1.6
Development....................... 4.15 1.05 4.9 1.5 1.0 0.4
Onshore United States
Exploratory....................... 11.27 7.40 6.5 0.9 4.6 1.0
Development....................... 30.18 1.41 24.4 0.7 31.3 0.1
Onshore Kingdom of Thailand
Exploratory....................... 8.34 .46 2.4 -- 1.1 --
Development....................... 5.11 -- 7.4 -- 3.2 --
----- ----- --- ---- ---- ---
Total........................ 60.26 10.57 47.3 4.6 44.2 3.1
===== ===== ==== ==== ==== ===
</TABLE>
As of December 31, 1997, the Company was participating in the drilling of 3
gross (1.1 net) offshore domestic wells, 6 gross (4.2 net) onshore wells and 1
gross (0.5 net) wells offshore the Kingdom of Thailand.
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<PAGE> 58
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>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Located in the United States
Natural Gas (Mcf per day)................................... 147,200 107,700 121,000
======= ======= =======
Liquid Hydrocarbons (Bbls per day)
Crude Oil and Condensate................................. 13,712 11,968 11,786
Natural Gas Liquids(a)................................... 2,923 2,173 1,998
------- ------- -------
Total Domestic Liquid Hydrocarbons.................. 16,635 14,141 13,784
======= ======= =======
Located in the Kingdom of Thailand
Natural Gas (Mcf per day)................................... 37,700 -- --
======= ======= =======
Liquid Hydrocarbons (Bbls per day)
Crude Oil and Condensate................................. 2,421 -- --
======= ======= =======
</TABLE>
- -------------------
(a) NGL 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 "-- Miscellaneous; Market Conditions and Sales."
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
SALES PRICES:
Located in the United States
Natural Gas (per Mcf).................................. $ 2.50 $ 2.40 $ 1.63
Crude Oil and Condensate (per Bbl)..................... $ 19.49 $ 22.12 $ 17.80
Natural Gas Liquids (per Bbl).......................... $ 12.89 $ 14.92 $ 11.10
Located in the Kingdom of Thailand
Natural Gas (per Mcf).................................. $ 1.93 -- --
Crude Oil and Condensate (per Bbl).......................... $ 18.60 -- --
PRODUCTION (LIFTING) COSTS(a):
Located in the United States
Natural Gas, Crude Oil, Condensate and Natural
Gas Liquids (per Mcf equivalent)...................... $ .49 $ .53 $ .47
Located in the Kingdom of Thailand
Natural Gas, Crude Oil and Condensate (per Mcf
equivalent)(b)........................................ $ 1.12 -- --
</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.
(b) The major contributing factor to lifting costs are lease operating
expenses. A substantial portion of the Company's lease operating expenses
in the Kingdom of Thailand relate to lease payments made by a subsidiary
of the Company in connection with its bareboat charter of the FPSO, which
amounted to $10,200,000 during 1997. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity
and Capital Resources; Future Capital Requirements; Other Material
Long-Term Commitments."
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<PAGE> 59
Reserves
The following table sets forth information as to the Company's net proved
and proved developed reserves as of December 31, 1997, 1996, and 1995, 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 SEC.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
TOTAL PROVED RESERVES(a):
Oil, condensate, and natural gas liquids (MBbls)
Located in the United States............................ 29,382 28,270 26,185
Located in the Kingdom of Thailand...................... 28,783 21,332 18,997
-------- -------- --------
Total Company...................................... 58,165 49,602 45,182
======== ======== ========
Natural Gas (MMcf)
Located in the United States............................ 216,720 215,946 196,454
Located in the Kingdom of Thailand...................... 184,768 144,998 131,607
-------- -------- --------
Total Company...................................... 401,488 360,944 328,061
======== ======== ========
Present value of estimated future net revenues, before
income taxes (in thousands)(b)
Located in the United States............................ $406,161 $773,127 $400,845
Located in the Kingdom of Thailand...................... 56,620 181,418 131,630
-------- -------- --------
Total Company...................................... $462,781 $954,545 $532,745
======== ======== ========
TOTAL DEVELOPED RESERVES(a):
Oil, condensate, and natural gas liquids (MBbls)
Located in the United States............................ 26,168 25,898 22,488
Located in the Kingdom of Thailand...................... 6,982 5,192 --
-------- -------- --------
Total Company...................................... 33,150 31,090 22,488
======== ======== ========
Natural Gas (MMcf)
Located in the United States............................ 179,972 192,034 164,679
Located in the Kingdom of Thailand...................... 59,760 45,998 --
-------- -------- --------
Total Company...................................... 239,732 238,032 164,679
======== ======== ========
Present value of estimated future net revenues, before
income taxes (in thousands)(b)
Located in the United States............................ $377,530 $710,871 $359,984
Located in the Kingdom of Thailand...................... 36,692 69,062 --
-------- -------- --------
Total Company...................................... $414,222 $779,933 $359,984
======== ======== ========
</TABLE>
- ------------------------
(a) Gives no effect to the Company's acquisition of Arch in August 1998. See
"-- Arch and its Subsidiaries; Oil and Gas Reserves."
(b) The Company believes, for the reasons set forth in succeeding paragraphs,
that the present value of estimated future net revenues set forth in the
Annual Report and calculated in accordance with SEC 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. See the discussion on the following
pages for the prices used in making these calculations.
Natural gas liquids comprised approximately 7% of the Company's total
proved liquids reserves and approximately 11% of the Company's proved developed
liquids reserves as of December 31, 1997. 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
58
<PAGE> 60
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 non-associated,
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, 1997 were used,
including current market prices, contract prices and fixed and determinable
price escalations where applicable. In accordance with SEC 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, 1997 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.
59
<PAGE> 61
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 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, 1997, in accordance with SEC
guidelines. In computing future revenues from liquids attributable to the
Company's interests in the Kingdom of Thailand, a price was used which the
Company believes approximates the price that the Company would have received
for its production from the Thailand Concession based upon the world market
price for Tapis benchmark crude on December 31, 1997, 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.
In accordance with SEC guidelines, the prices used by the Company to
calculate the present value of estimated future revenues are determined on a
well or field by field basis, as applicable, as described above and were held
constant over the productive life of the reserves. The initial weighted average
prices used by Ryder Scott were as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
INITIAL WEIGHTED AVERAGE PRICE (in U.S. dollars):
Oil, condensate, and natural gas liquids (per Bbl)
Located in the United States............................ $16.60 $24.06 $19.10
Located in the Kingdom of Thailand...................... $16.00 $24.56 $18.71
Natural Gas (per Mcf)
Located in the United States............................ $ 2.30 $ 3.93 $ 2.08
Located in the Kingdom of Thailand...................... $ 1.83 $ 2.09 $ 2.02
</TABLE>
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 SEC 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 1997. 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 allocable 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 SEC, omitted
from consideration in arriving at such estimates. See "Risk Factors --
Volatility of oil and gas markets affects us" and "-- Miscellaneous;
Competition and Market Conditions."
60
<PAGE> 62
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; with respect to reserves located in Canada, with the
Alberta Energy Utilities Board and, with respect to reserves located in
Thailand, the Kingdom of Thailand's Department of Mineral Resources and PTT,
which the Company considers a quasi-governmental authority. 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 in accordance with SEC guidelines 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 1997, 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 SEC and, with respect to
reserves relating to the Company's properties located in Thailand, the Kingdom
of Thailand's Department of Mineral Resources and PTT.
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. Oil and gas lessees are subject to liability for the costs of
clean-up of pollution resulting from a lessee's operations, and may also be
subject to 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,
61
<PAGE> 63
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 Bbls (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 ranges 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 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 than 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 and gas operations, many of the costs
attributable to environmental control facilities would have been incurred
absent environmental regulations as prudent, safe oilfield practice. During
1997, the Company incurred capital expenditures of approximately $610,000 for
environmental control facilities, primarily relating to the installation of
certain environmental control facilities on two platforms installed in the Gulf
of Thailand. The Company budgeted approximately $1,630,000 for expenditures
involving environmental control facilities during 1998, including, among other
things, two salt water disposal facilities in New Mexico and
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<PAGE> 64
environmental control equipment for three platforms in the Gulf of Thailand and
two platforms 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 Minerals Management Service of the Department of the Interior
(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.
Recently the MMS and various state and municipal authorities have
attempted to collect alleged underpayment of royalties from various integrated
oil companies in connection with sale transactions between exploration and
production affiliates and pipeline affiliates of the same company. The Company
has not been named in any of these collection efforts, a fact that the Company
believes is primarily due to its never having sold any oil or gas production
from one of its affiliates to another. The Company does not believe that it has
any material liability for underpayment of royalty in connection with affiliate
transactions, including those described above.
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 mechanisms to such pipelines for transmission and storage
services. Among the FERC initiatives is the creation of a pilot program to
determine the effect on rates of lifting price caps on the rates for
interruptible transportation, short-term firm transportation, and for
transportation using capacity released by the firm transportation customers of
interstate pipelines. In addition, the FERC has announced and implemented 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
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affiliated and non-affiliated entities that are not subject to the FERC's rate
jurisdiction. These orders have been generally upheld 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 December 31, 1998, the Company and its subsidiaries had 185
full-time employees, including 24 in its Bangkok, Thailand office and seven in
its Calgary, Canada 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.
ARCH AND ITS SUBSIDIARIES
Overview
Arch and its subsidiaries primarily engage in oil and natural gas
exploration, development, production, transportation and marketing in the
Southwestern United States and Western Canada. Arch and its subsidiaries are
also active in the acquisition of interests in both producing and non-producing
oil and gas leases. Arch was acquired by the Company in a stock-for-stock
tax-free merger accounted for as a purchase. In connection with the merger, the
Company paid off $36,500,000 of Arch's existing bank debt and a $15,246,000
production payment obligation (the "VPP") utilizing funds under its Credit
Agreement. The Company also exchanged $5,000,000 of Arch's existing convertible
subordinated notes, 777,273 shares of Arch preferred stock (having a
liquidation preference of $20,000,000) and 17,321,804 shares of Arch common
stock for approximately 2,540,000 shares of Common Stock.
As of January 1, 1999, Pogo Canada Ltd. (formerly known as Arch
Petroleum Ltd. ("APL")), Saginaw Pipeline Company, L.C. ("Saginaw") and its
subsidiary Industrial Natural Gas, L.C. ("ING") were the only subsidiaries of
Arch. All of the Company's and Arch's operations in Canada are conducted by
Pogo Canada Ltd. Saginaw owns a six inch pipeline that extends approximately
100 miles from Wichita Falls, Texas to Saginaw, Texas. ING, a subsidiary of
Saginaw, markets the sale and transmission of natural gas through the Saginaw
pipeline.
Oil and Gas Reserves
The following table sets forth a summary of Arch's oil and gas
reserve quantities and present value of future net cash flows associated
therewith at the dates indicated. All domestic oil and gas reserves were
estimated by Ryder Scott, independent petroleum engineers, and are detailed in
a report prepared for the exclusive use of Arch. Oil and gas reserves for APL
were estimated by Ryder Scott and Sproule Associates Limited, both independent
petroleum engineers in Canada in 1997 and 1996, respectively. All such
estimations were made in accordance with regulations promulgated by the SEC.
Such reserve reports are available for examination at Arch's corporate
headquarters in Houston, Texas.
<TABLE>
<CAPTION>
UNITED STATES CANADA TOTAL
-------------- ------------ -------------
<S> <C> <C> <C>
Present value of discounted future net cash flows
before income taxes:
December 31, 1997............................... $ 60,289,500 $ 8,422,300 $ 68,711,800
December 31, 1996............................... 101,701,100 11,775,700 113,476,800
December 31, 1995............................... 64,296,200 -- 64,296,200
Proved developed and undeveloped reserves:
Oil (Bbls)
December 31, 1997............................... 5,060,500 812,900 5,873,400
December 31, 1996............................... 3,861,000 856,900 4,717,900
</TABLE>
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<PAGE> 66
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31, 1995............................... 4,030,200 -- 4,030,200
Gas (Mcf)
December 31, 1997............................... 68,430,700 6,575,000 75,005,700
December 31, 1996............................... 59,120,900 1,136,000 60,256,900
December 31, 1995............................... 61,286,300 -- 61,286,300
Proved developed reserves:
Oil (Bbls)
December 31, 1997............................... 4,475,600 693,800 5,169,400
December 31, 1996............................... 3,128,400 809,900 3,938,300
December 31, 1995............................... 2,993,600 -- 2,993,600
Gas (Mcf)
December 31, 1997............................... 65,324,800 6,489,000 71,813,800
December 31, 1996............................... 54,981,200 504,000 55,485,200
December 31, 1995............................... 55,628,500 -- 55,628,500
</TABLE>
The United States figures above exclude 1.9 Bcf, 8.7 Bcf and 11.9 Bcf
of proved gas reserves and $436,400, $2,960,600 and $11,672,700 of discounted
future net cash flows (after operating expenses and severance taxes) at
December 31, 1997, 1996 and 1995, respectively, which were sold to Enron Corp.
in the VPP. See "-- Exploration and Production Data; Reserves" for key factors
and additional information related to Arch's reserve estimates.
Leases and Wells Owned
At December 31, 1997, Arch owned interests in the following acreage.
<TABLE>
<CAPTION>
UNITED STATES CANADA TOTAL
------------- ------- -------
<S> <C> <C> <C>
Developed acres:
Gross........................................... 67,017 35,223 102,240
Net............................................. 16,950 3,810 20,760
Undeveloped acres:
Gross........................................... 74,435 106,705 181,140
Net............................................. 23,452 51,777 75,229
</TABLE>
As of December 31, 1997, Arch's interests in wells owned were as
follows:
<TABLE>
<CAPTION>
TOTAL UNITED STATES CANADA
----------------- ----------------- -----------------
Gross Net Gross Net Gross Net
TYPE Wells Wells Wells Wells Wells Wells
- ------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Oil ...... 1,209 363.7 1,076 344.8 133 18.9
Gas ...... 134 62.8 131 62.2 3 0.6
----- ----- ----- ----- --- ----
1,343 426.5 1,207 407.0 136 19.5
===== ===== ===== ===== === ====
</TABLE>
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<PAGE> 67
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 December 31, 1998, 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, President and Chief 52 1991
Executive Officer
Stuart P. Burbach Executive Vice President-- Exploration 46 1998
Kenneth R. Good Executive Vice President 61 1998
Jerry A. Cooper Senior Vice President and Western Division 50 1998
Manager
R. Phillip Laney Senior Vice President and Manager of Worldwide 58 1998
New Ventures
John O. McCoy, Jr. Senior Vice President and Chief Administrative 47 1998
Officer
J. D. McGregor Senior Vice President-- Sales 54 1998
Bruce E. Archinal Vice President and Onshore Division Manager 46 1997
David R. Beathard Vice President-- Engineering 40 1997
Stephen R. Brunner Vice President-- Operations 40 1997
Frank Davis III Vice President-- Land 52 1997
John W. Elsenhans Vice President and Chief Financial Officer 46 1998
Thomas E. Hart Vice President and Controller 56 1988
Ronald B. Manning Vice President and General Counsel 45 1995
Gerald A. Morton Vice President-- Law and Corporate 40 1997
Secretary
</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. Burbach
served as Vice President and Offshore Division Manager since rejoining the
Company in 1991; Mr. Good, who joined the Company in 1977, served as Corporate
Senior Vice President of the Company since 1996 and prior thereto served as the
Company's Senior Vice President -- Land and Budgets since 1991; Mr. Cooper, who
joined the Company in 1979, served as Vice President and Western Division
Manager for the Company since 1991; Mr. Laney, who joined the Company in 1977,
served as Vice President and International Exploration Manager for the Company
since 1991; Mr. McCoy, who joined the Company in 1978, served as Vice President
and Chief Administrative Officer of the Company since 1989; Mr. McGregor, who
joined the Company in 1981, served as Vice President -- Sales since 1988; Mr.
Archinal, who joined the Company in 1982, served as the Company's Onshore
Division Manager since 1994 and prior thereto served as Offshore Division
Exploration Manager for the Company since 1991; Mr. Beathard, who joined the
Company in 1982, served as Manager of Petroleum Engineering for the Company
since 1991; Mr. Brunner served as Resident Manager of the Company's Thailand
operations since 1995, prior to which he was an Operations Manager for the
Company since joining in 1994 and prior thereto held various positions in the
energy industry, the most recent of which was as Operations Manager for Zilkha
Energy since 1991; Mr. Davis, who joined the Company in 1978, served as Land
Manager for the Company since 1991; Mr. Elsenhans, who joined the Company in
1991, served as Vice President -- Finance and Treasurer for the Company since
1995, and prior thereto was Director, Corporate Finance for the Company since
1991; Mr. Hart was Controller for the Company since joining the Company in
1977; Mr. Manning, who joined the Company in 1987, was Corporate Secretary and
an Associate General Counsel for the Company since 1990; and Mr. Morton was an
Associate General Counsel for the Company since 1993.
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<PAGE> 68
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
Jerry M. Armstrong*.............................. Rancher
Tobin Armstrong*................................. Rancher
Jack S. Blanton.................................. President, Eddy Refining Company;
Chairman, Houston Endowment, Inc.
W. M. Brumley, Jr................................ Personal Investments
John B. Carter, Jr............................... Director, Sterling Bancshares
William L. Fisher................................ Barrow Chair and Geological Sciences
Professor University of Texas at
Austin
Gerrit W. Gong................................... Freeman Chair and Director of 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.
Jack A. Vickers.................................. Chairman of the Board, The Vickers
Companies
</TABLE>
- ----------
* Jerry M. Armstrong and Tobin Armstrong are not related to each other.
67
<PAGE> 69
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Company entered into a Registration Rights Agreement with the
initial purchasers of the outstanding notes in which the Company agreed to file
a registration statement relating to an offer to exchange the outstanding notes
for new notes. The Company also agreed to use its reasonable best efforts to
complete that offer within 180 days after January 15, 1999. The Company is
offering the new notes under this prospectus to satisfy those obligations under
the Registration Rights Agreement.
Under limited circumstances, the Company will use its reasonable best
efforts to cause the SEC to declare effective a shelf registration statement
with respect to the resale of the outstanding notes and keep the shelf
registration statement effective for up to two years after the effective date
of the shelf registration statement. These circumstances include:
o if any changes in law or applicable interpretations by the staff
of the SEC do not permit the Company to effect the exchange
offer as contemplated by the Registration Rights Agreement
o if the exchange offer is not consummated within 180 days after
January 15, 1999
o if any initial purchaser of the outstanding notes so requests,
in certain circumstances
If the Company fails to comply with deadlines for registering the
issuance of the new notes and completion of the exchange offer, it will be
required to pay additional interest to holders of the outstanding notes. Please
read the section captioned "Outstanding Notes Registration Rights Agreement"
for more details regarding the Registration Rights Agreement.
To exchange an outstanding note for transferable new notes in the
exchange offer, the holder of that outstanding note will be required to make
the following representations:
o any new note the holder receives will be acquired in the
ordinary course of its business
o the holder has no arrangement with any person to participate in
the distribution of the new notes
o if the holder is not a broker-dealer, that holder is not engaged
in and does not intend to engage in the distribution of the new
notes
o if the holder is a broker-dealer that will receive new notes for
its own account in exchange for outstanding notes that were
acquired as a result of market-making activities, that holder
will deliver a prospectus, as required by law, in connection
with any resale of such new notes
o the holder is not the Company's "affiliate," as defined in Rule
405 of the Securities Act, nor a broker-dealer tendering
outstanding notes acquired directly from the Company for its own
account
RESALE OF NEW NOTES
Based on interpretations of the SEC staff in no action letters issued
to third parties, the Company believes that each new note issued under the
exchange offer may be offered for resale, resold and otherwise transferred by
the holder of that new note without compliance with the registration and
prospectus delivery provisions of the Securities Act if:
o the holder is not the Company's "affiliate" within the meaning
of Rule 405 under the Securities Act
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<PAGE> 70
o such new note is acquired in the ordinary course of the holder's
business
o the holder does not intend to participate in the distribution of
new notes
If a holder of outstanding notes tenders in the exchange offer with
the intention of participating in any manner in a distribution of the new
notes, that holder
o cannot rely on such interpretations by the SEC staff
o must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction
Unless an exemption from registration is otherwise available, any
security holder intending to distribute new notes should be covered by an
effective registration statement under the Securities Act containing the
selling securityholder's information required by Item 507 of Regulation S-K
under the Securities Act. This prospectus may be used for an offer to resell,
resale or other retransfer of new notes only as specifically described in this
prospectus. Only broker-dealers that acquired the outstanding notes as a result
of market-making activities or other trading activities may participate in the
exchange offer. Please read the section captioned "Plan of Distribution" for
more details regarding the transfer of new notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions described in this
prospectus and in the letter of transmittal, the Company will accept for
exchange any outstanding notes properly tendered and not withdrawn prior to the
expiration date. The Company will issue $1,000 principal amount of new notes in
exchange for each $1,000 principal amount of outstanding notes surrendered
under the exchange offer. Outstanding notes may be tendered only in integral
multiples of $1,000.
The exchange offer is not conditioned upon any minimum aggregate
principal amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $150 million aggregate principal
amount of the outstanding notes are outstanding. This prospectus and the letter
of transmittal are being sent to all registered holders of outstanding notes.
There will be no fixed record date for determining registered holders of
outstanding notes entitled to participate in the exchange offer.
The Company intends to conduct the exchange offer in accordance with
the provisions of the registration rights agreement, the applicable
requirements of the Securities Act and the Securities Exchange Act of 1934 and
the rules and regulations of the SEC. Outstanding notes that are not tendered
for exchange in the exchange offer will remain outstanding and continue to
accrue interest and will be entitled to the rights and benefits such holders
have under the indenture relating to the notes and the Registration Rights
Agreement.
The Company will be deemed to have accepted for exchange properly
tendered outstanding notes when it has given oral or written notice of the
acceptance to the exchange agent and complied with the applicable provisions of
the Registration Rights Agreement. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the new notes from the Company.
Holders tendering outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. The Company will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the exchange
offer. It is important for noteholders to read the section labeled "--Fees and
Expenses" for more details regarding fees and expenses incurred in the exchange
offer.
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<PAGE> 71
The Company will return any outstanding notes that it does not accept
for exchange for any reason without expense to the tendering holder as promptly
as practicable after the expiration or termination of the exchange offer.
EXPIRATION DATE
The exchange offer will expire at 5:00 p.m., New York City time on
, 1999, unless in the Company's sole discretion, the Company
extends it.
EXTENSIONS, DELAY IN ACCEPTANCE, TERMINATION OR AMENDMENT
The Company expressly reserves the right, at any time or at various
times, to extend the period of time during which the exchange offer is open.
During any such extensions, all outstanding notes previously tendered will
remain subject to the exchange offer, and the Company may accept them for
exchange.
In order to extend the exchange offer, the Company will notify the
exchange agent orally or in writing of any extension. The Company will also
make a public announcement of the extension no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
If any of the conditions described below under "--Conditions to the
Exchange Offer" have not been satisfied, the Company reserves the right, in its
sole discretion to delay accepting for exchange any outstanding notes or to
extend the exchange offer or to terminate the exchange offer by giving oral or
written notice of such delay, extension or termination to the exchange agent.
Subject to the terms of the Registration Rights Agreement, the Company also
reserves the right 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 to the
registered holders of outstanding notes. If the Company amends the exchange
offer in a manner that it determines to constitute a material change, it will
promptly disclose such amendment by means of a prospectus supplement. The
supplement will be distributed to the registered holders of the outstanding
notes. Depending upon the significance of the amendment and the manner of
disclosure to the registered holders, the Company will extend the exchange
offer if the exchange offer would otherwise expire during such period.
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 will 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.
CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, the Company will not be
required to accept for exchange, or exchange any new notes for, any outstanding
notes, and the Company may terminate the exchange offer as provided in this
prospectus before accepting any outstanding notes for exchange, if in the
Company's reasonable judgment the exchange offer, or the making of any exchange
by a holder of outstanding notes, would violate applicable law or any
applicable interpretation of the staff of the SEC.
In addition, the Company will not be obligated to accept for exchange
the outstanding notes of any holder that has not made to us (1) the
representations described under "--Purpose and Effect of the Exchange Offer,"
"--Procedures for Tendering" and "Plan of Distribution" and (2) such other
representations as may be reasonably necessary under applicable SEC rules,
regulations or interpretations to make available to the Company an appropriate
form for registration of the new notes under the Securities Act.
The Company expressly reserves the right to amend or terminate the
exchange offer, and to reject for exchange any outstanding notes not previously
accepted for exchange, upon the occurrence of any of the conditions
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<PAGE> 72
to the exchange offer specified above. The Company will give oral or written
notice of any extension, amendment, non-acceptance or termination to the
holders of the outstanding notes as promptly as practicable.
These conditions are for the Company's sole benefit and the Company
may assert them or waive them in whole or in part at any time or at various
times in our sole discretion. If the Company fails at any time to exercise any
of these rights, this failure will not mean that the Company has waived its
rights. Each such right will be deemed an ongoing right that the Company may
assert at any time or at various times.
In addition, the Company will not accept for exchange any outstanding
notes tendered, and will not issue new notes in exchange for any such
outstanding notes, if at such time any stop order has been threatened or is in
effect with respect to the registration statement of which this prospectus
constitutes a part or the qualification of the indenture relating to the notes
under the Trust Indenture Act of 1939.
PROCEDURES FOR TENDERING
How to Tender Generally
Only a holder of outstanding notes may tender such outstanding notes
in the exchange offer. To tender in the exchange offer, a holder must:
o complete, sign and date the letter of transmittal, or a
facsimile of the letter of transmittal; have the signature on
the letter of transmittal guaranteed if the letter of
transmittal so requires; and mail or deliver such letter of
transmittal or facsimile to the exchange agent prior to the
expiration date
o comply with the automated tender offer program procedures of The
Depository Trust Company, or DTC, described below
In addition, either:
o the exchange agent must receive outstanding notes along with the
letter of transmittal
o the exchange agent must receive, prior to the expiration date, a
timely confirmation of book-entry transfer of such outstanding
notes into the exchange agent's account at DTC according to the
procedure for book-entry transfer described below or a properly
transmitted agent's message, or
o the holder must comply with the guaranteed delivery procedures
described below
To be tendered effectively, the exchange agent must receive any
physical delivery of the letter of transmittal and other required documents at
its address provided above under "Prospectus Summary--The Exchange Agent" prior
to the expiration date.
The tender by a holder that is not withdrawn prior to the expiration
date will constitute an agreement between the holder and the Company in
accordance with the terms and subject to the conditions described in this
prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE HOLDER'S
ELECTION AND RISK. RATHER THAN MAIL THESE ITEMS, THE COMPANY RECOMMENDS THAT
HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD
ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. HOLDERS SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR
OUTSTANDING NOTES TO THE COMPANY. HOLDERS MAY REQUEST THEIR BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR YOU.
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<PAGE> 73
How to Tender--Beneficial Owners
Beneficial owners of outstanding notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee wishing to
tender those notes should contact the registered holder promptly and instruct
it to tender on the beneficial owner's behalf. Beneficial owners who wish to
tender on their own behalf must, prior to completing and executing the letter
of transmittal and delivering their outstanding notes, either:
o make appropriate arrangements to register ownership of the
outstanding notes in their name, or
o obtain a properly completed bond power from the registered
holder of outstanding notes
The transfer of registered ownership may take considerable time and
may not be completed prior to the expiration date.
Signatures and Signature Guarantees
Holders of outstanding notes must have signatures on a letter of
transmittal or a notice of withdrawal described below 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 Securities
Exchange Act of 1934, that is a member of one of the recognized signature
guarantee programs identified in the letter of transmittal, unless the
outstanding notes are tendered:
o by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal and the new notes are
being issued directly to the registered holder of the
outstanding notes tendered in the exchange for those new notes
o for the account of 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
When Endorsements or Bond Powers are Needed
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes, the outstanding notes must be
endorsed or accompanied by a properly completed bond power. The bond power must
be signed by the registered holder as the registered holder's name appears on
the outstanding notes and 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 must guarantee the
signature on the bond power.
If the letter of transmittal or any outstanding notes or bond powers
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or other acting in a fiduciary or
representative capacity, those persons should so indicate when signing. Unless
waived by the Company, they should also submit evidence satisfactory to the
Company of their authority to deliver the letter of transmittal.
Tendering Through DTC's Automated Tender Offer Program
The exchange agent and DTC have confirmed that any financial
institution that is a participant in DTC's system may use DTC's automated
tender offer program to tender. Participants in the program may, instead of
physically completing and signing the letter of transmittal and delivering it
to the exchange agent, transmit their acceptance of the exchange offer
electronically. They may do so by causing DTC to transfer the outstanding notes
to
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the exchange agent in accordance with its procedures for transfer. DTC will
then send an agent's message to the exchange agent.
The term "agent's message" means a message transmitted by DTC,
received by the exchange agent and forming part of the book-entry confirmation,
to the effect that:
o DTC has received an express acknowledgment from a participant in
its automated tender offer program that is tendering outstanding
notes that are the subject of such book-entry confirmation
o such participant has received and agrees to be bound by the
terms of the letter of transmittal or, in the case of an agent's
message relating to guaranteed delivery, that such participant
has received and agrees to be bound by the applicable notice of
guaranteed delivery
o the agreement may be enforced against such participant
Determinations Under the Exchange Offer
The Company will determine in its sole discretion all questions as to
the validity, form, eligibility, time of receipt, acceptance of tendered
outstanding notes and withdrawal of tendered outstanding notes. The Company's
determination will be final and binding. The Company reserves the absolute
right to reject any outstanding notes not properly tendered or any outstanding
notes the Company's acceptance of which would, in the opinion of its counsel,
be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular outstanding notes. The
Company's interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding notes must be cured within such time as
the Company shall determine. Neither the Company, the exchange agent nor any
other person will be under any duty to give notification of defects or
irregularities with respect to tenders of outstanding notes, and they will
incur no liability for failure to give such notification. Tenders of
outstanding notes will not be deemed made until such defects or irregularities
have been cured or waived. Any outstanding 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 to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
When the Company Will Issue New Notes
In all cases, the Company will issue new notes for outstanding notes
that it has accepted for exchange under the exchange offer only after the
exchange agent timely receives:
o outstanding notes or a timely book-entry confirmation of such
outstanding notes into the exchange agent's account at DTC
o a properly completed and duly executed letter of transmittal and
all other required documents or a properly transmitted agent's
message
Return of Outstanding Notes Not Accepted or Exchanged
If the Company does not accept any tendered outstanding notes for
exchange for any reason described in the terms and conditions of the exchange
offer or if outstanding notes are submitted for a greater principal amount than
the holder desires to exchange, the unaccepted or non-exchanged outstanding
notes will be returned without expense to their tendering holder. In the case
of outstanding notes tendered by book-entry transfer into the exchange agent's
account at DTC according to the procedures described below, such non-exchanged
outstanding notes will be credited to an account maintained with DTC. These
actions will occur as promptly as practicable after the expiration or
termination of the exchange offer.
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Representations to the Company
Each holder, by signing or agreeing to be bound by the letter of
transmittal, will represent to the Company that, among other things:
o any new notes that the holder receives will be acquired in the
ordinary course of its business
o that holder has no arrangement or understanding with any person
or entity to participate in the distribution of the new notes
o if the holder is not a broker-dealer, that the holder is not
engaged in and does not intend to engage in the distribution of
the new notes
o if the holder is a broker-dealer that will receive new notes for
its own account in exchange for outstanding notes that were
acquired as a result of market-making activities, that the
holder will deliver a prospectus, as required by law, in
connection with any resale of such new notes
o that holder is not the Company's "affiliate," as defined in Rule
405 of the Securities Act, or, if the holder is an affiliate of
the Company, that holder will comply with any applicable
registration and prospectus delivery requirements of the
Securities Act
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with
respect to the outstanding notes at DTC for purposes of the exchange offer
promptly after the date of this prospectus. Any financial institution
participating in DTC's system may make book-entry delivery of outstanding notes
by causing DTC to transfer such outstanding notes into the exchange agent's
account at DTC in accordance with DTC's procedures for transfer. Holders of
outstanding notes who are unable to deliver confirmation of the book-entry
tender of their outstanding notes into the exchange agent's account at DTC or
all other documents required by the letter of transmittal to the exchange agent
on or prior to the expiration date must tender their outstanding notes
according to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Any holder wishing to tender its outstanding notes but whose
outstanding notes are not immediately available or who cannot deliver its
outstanding notes, the letter of transmittal or any other required documents to
the exchange agent or comply with the applicable procedures under DTC's
automated tender offer program prior to the expiration date may tender if:
o the tender is made through 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
o prior to the expiration date, the exchange agent receives from
such member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc.,
commercial bank or trust company having an office or
correspondent in the United States, or eligible guarantor
institution either a properly completed and duly executed notice
of guaranteed delivery by facsimile transmission, mail or hand
delivery or a properly transmitted agent's message and notice of
guaranteed delivery:
o setting forth the holder's name and address, the
registered number(s) of the holder's outstanding notes
and the principal amount of outstanding notes tendered
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<PAGE> 76
o stating that the tender is being made thereby
o guaranteeing that, within five business days after the
expiration date, the letter of transmittal or
facsimile thereof, together with the outstanding notes
or a book-entry confirmation, and any other documents
required by the letter of transmittal will be
deposited by the eligible guarantor institution with
the exchange agent
o the exchange agent receives such properly completed and executed
letter of transmittal or facsimile thereof, as well as all
tendered outstanding notes in proper form for transfer or a
book-entry confirmation, and all other documents required by the
letter of transmittal, within five business days after the
expiration date
Upon request to the exchange agent, a notice of guaranteed delivery
will be sent to a holder if it wishes to tender its outstanding notes according
to the guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, any holder may
withdraw its tender at any time prior to 5:00 p.m., New York City time, on the
expiration date (unless previously accepted for exchange).
For a withdrawal to be effective:
o the exchange agent must receive a written notice of withdrawal
at one of the addresses listed above under "Prospectus
Summary--The Exchange Agent" or
o the withdrawing holder must comply with the appropriate
procedures of DTC's automated tender offer program system
Any notice of withdrawal must:
o specify the name of the person who tendered the outstanding
notes to be withdrawn (the "Depositor")
o identify the outstanding notes to be withdrawn, including the
registration number or numbers and the principal amount of such
outstanding notes
o be signed by the Depositor in the same manner as the original
signature on the letter of transmittal used to deposit those
outstanding notes (or be accompanied by documents of transfer
sufficient to permit the trustee for the outstanding notes to
register the transfer into the name of the Depositor withdrawing
the tender)
o specify the name in which such outstanding notes are to be
registered, if different from that of the Depositor
If outstanding notes have been tendered under the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn
outstanding notes and otherwise comply with the procedures of DTC.
The Company will determine all questions as to the validity, form,
eligibility and time of receipt of notice of withdrawal, and the Company's
determination shall be final and binding on all parties. The Company will deem
any outstanding notes so withdrawn not to have been validly tendered for
exchange for purposes of the exchange offer.
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<PAGE> 77
Any outstanding notes that have been tendered for exchange but that
are not exchanged for any reason will be returned to their holder without cost
to the holder or, in the case of outstanding notes tendered by book-entry
transfer into the exchange agent's account at DTC according to the procedures
described above, such outstanding notes will be credited to an account
maintained with DTC for the outstanding notes. This return or crediting will
take place as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Holders may retender properly withdrawn
outstanding notes by following one of the procedures described under
"--Procedures for Tendering" above at any time on or prior to the expiration
date.
FEES AND EXPENSES
The Company will bear the expenses of soliciting tenders. The
principal solicitation is being made by mail; however, the Company may make
additional solicitation by telegraph, telephone or in person by our officers
and regular employees and those of our affiliates.
The Company has not retained any dealer-manager in connection with the
exchange offer and will not make any payments to broker-dealers or others
soliciting acceptances of the exchange offer. The Company will, however, pay
the exchange agent reasonable and customary fees for its services and reimburse
it for its related reasonable out-of-pocket expenses. 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 outstanding notes and in handling or forwarding tenders for
exchange.
The Company will pay the cash expenses to be incurred in connection
with the exchange offer. They include:
o SEC registration fees
o fees and expenses of the exchange agent and trustee
o accounting and legal fees and printing costs
o related fees and expenses
The Company will pay all transfer taxes, if any, applicable to the
exchange of outstanding notes under the exchange offer. The tendering holder,
however, will be required to pay any transfer taxes, whether imposed on the
registered holder or any other person, if:
o certificates representing outstanding notes for principal
amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person
other than the registered holder of outstanding notes tendered
o tendered outstanding notes are registered in the name of any
person other than the person signing the letter of transmittal
o a transfer tax is imposed for any reason other than the exchange
of outstanding notes under the exchange offer
If satisfactory evidence of payment of any transfer taxes payable by a note
holder is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to that tendering holder.
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<PAGE> 78
TRANSFER TAXES
If a holder tenders its outstanding notes for exchange, it will not be
required to pay any transfer taxes. However, if a holder instructs the Company
to register new notes in the name of, or request that outstanding notes not
tendered or not accepted in the exchange offer be returned to, a person other
than that holder, in that holder's capacity as the registered tendering holder,
that holder will be required to pay any applicable transfer tax.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders who do not exchange their outstanding notes for new notes
under the exchange offer will remain subject to the existing restrictions on
transfer of the outstanding notes.
In general, such a holder may not offer or sell the outstanding notes
unless they are registered under the Securities Act, or if the offer or sale is
exempt from registration under the Securities Act and applicable state
securities laws. Except as required by the Registration Rights Agreement, the
Company does not intend to register resales of the outstanding notes under the
Securities Act. Based on interpretations of the SEC staff, holders may offer
for resale, resell or otherwise transfer new notes issued in the exchange offer
without compliance with the registration and prospectus delivery provisions of
the Securities Act, if (1) they are not the Company's "affiliate" within the
meaning of Rule 405 under the Securities Act, (2) they acquired the new notes
in the ordinary course of their business and (3) they have no arrangement or
understanding with respect to the distribution of the new notes to be acquired
in the exchange offer. If a holder tenders in the exchange offer for the
purpose of participating in a distribution of the new notes, it:
o cannot rely on the applicable interpretations of the SEC
o must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction
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 new notes
under generally accepted accounting principles.
OTHER
Participation in the exchange offer is voluntary, and holders of
outstanding notes should carefully consider whether to accept. Those holders
are urged to consult their financial and tax advisors in making their own
decision on what action to take.
The Company may in the future seek to acquire untendered outstanding
notes in open market or privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company has no present plans to acquire any
outstanding notes that are not tendered in the exchange offer or to file a
registration statement to permit resales of any untendered outstanding notes.
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<PAGE> 79
DESCRIPTION OF THE NOTES
The new notes will be issued, and the outstanding notes were issued,
pursuant to an indenture (the "Indenture") between the Company, as issuer, and
State Street Bank and Trust Company, as trustee (the "Trustee"). The terms of
the notes include those stated in the Indenture and those made part of the
Indenture by the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The definitions of certain capitalized terms used in the following
summary are set forth below under "-- Certain Definitions."
The following description is a summary of the material provisions of
the Indenture. It does not restate that agreement in its entirety. The Company
urges Holders to read the Indenture because it, and not this description,
defines the rights of Holders of these notes. The Company has filed the
Indenture as an exhibit to the registration statement which includes this
Prospectus.
If the exchange offer contemplated by this prospectus (the "Exchange
Offer") is consummated, Holders of outstanding notes who do not exchange those
notes for new notes in the Exchange Offer will vote together with Holders of
new 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 outstanding notes that remain outstanding after the Exchange
Offer will be aggregated with the new notes, and the Holders of such
outstanding notes and the new 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 notes outstanding shall be deemed to mean,
at any time after the Exchange Offer is consummated, such percentages in
aggregate principal amount of the outstanding notes and the new notes then
outstanding.
BRIEF DESCRIPTION OF THE NOTES
The notes:
o are unsecured obligations of the Company;
o are limited to $150,000,000 aggregate principal amount;
o are subordinated in right of payment to all existing and future
Senior Indebtedness of the Company;
o are senior in right of payment to all existing and future
Subordinated Indebtedness of the Company; and
o rank equally with all Pari Passu Indebtedness.
The new notes will be issued, and the outstanding 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
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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 outstanding notes may be temporarily increased, see
"Outstanding Notes Registration Rights Agreement."
Any outstanding notes that remain outstanding after the completion of
the Exchange Offer, together with the new 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 February 15, 2009. Interest on the notes will
accrue at the rate of 10 3/8% per annum and will be payable semiannually on
February 15 and August 15 of each year (each an "Interest Payment Date"),
commencing August 15, 1999, to the Person in whose name the note is registered
in the Note Register at the close of business on the February 1, or August 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 February 15, 2004, 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 February 15 of the years indicated
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ------------
<S> <C>
2004................................................................................. 105.188%
2005................................................................................. 103.458%
2006................................................................................. 101.729%
2007 and thereafter.................................................................. 100.000%
</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 notes
outstanding 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. Another 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:
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(1) upon the occurrence of a Change of Control, the Company is obligated
to make an offer to purchase all of the notes then outstanding 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
(2) 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."
SUBORDINATION
Payments of and distributions on or with respect to the Note
Obligations are 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 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. In addition, the Note Obligations
are effectively subordinated to all creditors of the Company's Subsidiaries,
including trade creditors. See "Risk Factors -- The right to receive payments on
the notes is junior to our senior debt; The notes are structurally subordinated
to obligations of our subsidiaries."
In the event of:
(1) 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
(2) any liquidation, dissolution or other winding-up of the Company,
whether voluntary or involuntary, or
(3) 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.
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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:
(1) 179 days shall have elapsed since the receipt by the Trustee of such
notice;
(2) 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);
(3) the date on which such Designated Senior Indebtedness is discharged or
paid in full in cash or Cash Equivalents; and
(4) 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 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."
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<PAGE> 83
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 September 30, 1998, after giving effect pro forma to the sale of
the outstanding notes and the application of the net proceeds therefrom as if
that sale had occurred on that date, the aggregate amount of outstanding Senior
Indebtedness would have been approximately $23,179,000. See "Use of Proceeds,"
"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 are 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. Currently, the aggregate amount of outstanding Indebtedness of the
Company that is:
(1) contractually subordinated in right of payment to the notes is
$115,000,000 and
(2) pari passu in right of payment with the notes is $100,000,000.
POSSIBLE SUBSIDIARY GUARANTEES OF THE NOTES
If the Company's existing or future Restricted Subsidiaries guarantee
any other Indebtedness of the Company, they will be required by the terms of
the Indenture to jointly and severally guarantee the notes on a senior
subordinated basis. See "-- Certain Covenants; Limitations on Non-Guarantor
Restricted Subsidiaries." At the date hereof, no Subsidiary of the Company has
an outstanding guarantee of any Indebtedness of the Company, and the Company
does not intend to cause any Subsidiary to guarantee any such Indebtedness in
the future, thus requiring it to issue a Subsidiary Guarantee.
Any Subsidiary that issues a Subsidiary Guarantee is herein called 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
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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:
(1) 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
(2) such transaction does not:
(a) violate any of the covenants described below under the caption
"-- Certain Covenants" or in the Indenture or
(b) result in a Default or Event of Default immediately thereafter.
The Subsidiary Guarantee of any Restricted Subsidiary may be released
upon the terms and subject to the conditions described under paragraph (2) 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.
CERTAIN COVENANTS
The Indenture contains, among others, the covenants described below:
Limitation on Indebtedness.
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:
(1) 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 (4) 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
(2) no Default or Event of Default would occur or be continuing.
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Limitation on Restricted Payments.
(1) 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):
(a) 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);
(b) 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;
(c) 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 (each as
defined in "-- Limitation on Disposition of Proceeds of Asset Sales")
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;
(d) 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);
(e) make any Investment; or
(f) 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
(a) through (f) 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), (i) no Default or Event of Default shall have
occurred and be continuing, (ii) 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
(iii) 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:
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(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.
(2) Notwithstanding paragraph (1) above, the Company and its
Restricted Subsidiaries may take the following actions so long as (in the case
of clauses (b), (c) and (d) below) no Default or Event of Default shall have
occurred and be continuing:
(a) 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 (1) 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
(1) above);
(b) 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;
(c) 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
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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;
(d) 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 (i) 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,
(ii) 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, (iii) 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
(e) 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 (a), (b) and (c) of this paragraph (2)
shall be Restricted Payments that shall be permitted to be taken in accordance
with this paragraph (2) but shall reduce the amount that would otherwise be
available for Restricted Payments under clause (c) of paragraph (1) (provided,
that any dividend paid pursuant to clause (a) of this paragraph (2) shall reduce
the amount that would otherwise be available under clause (c) of paragraph (1)
when declared, but not also when subsequently paid pursuant to such clause (a)),
and the actions described in clauses (d) and (e) of this paragraph (2) 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 (c) of paragraph (1).
(3) In computing Consolidated Net Income of the Company under
paragraph (1) above:
(a) 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
(b) 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.
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Limitation on Issuances and Sales of Restricted Subsidiary Capital Stock.
The Company:
(1) will not permit any Restricted Subsidiary to issue any Preferred Stock
(other than to the Company or a Wholly Owned Restricted Subsidiary)
and
(2) 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:
(1) 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,
(2) the ownership by directors of directors' qualifying shares,
(3) 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
(4) 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 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:
(1) 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,
(2) 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 (1) above
and such transaction or series of transactions has been approved by
the Board of Directors and
(3) 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 (2) 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 (1) above;
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provided, however, that this covenant will not restrict the Company from:
(1) paying reasonable and customary regular compensation and fees to
directors of the Company who are not employees of the Company or any
Restricted Subsidiary,
(2) 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,"
(3) making Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "-- Limitation on
Restricted Payments,"
(4) 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,
(5) 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
(6) 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 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:
(1) 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
(2) 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 notes then outstanding (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 notes then outstanding that are 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
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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.
Moreover, the definition of Change of Control includes a phrase
relating to the sale or other disposition of the Company's properties and
assets "substantially as an entirety." Although there is a developing body of
case law interpreting phrases such as "substantially as an entirety," there is
no precise established definition of such phrases under applicable law.
Accordingly, the ability of a Holder of the notes to require the Company to
repurchase such notes as a result of a sale or other disposition of less than
all of the properties and assets of the Company on a consolidated basis to
another Person or related group of Persons may be uncertain.
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 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.
(1) The Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (a) 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 (b) 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.
(2) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may either: (a) 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 (13) 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 (b) 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."
(3) 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
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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:
(a) (i) 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
below) of all notes tendered), and (ii) 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.
(b) 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."
(c) 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 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.
(1) 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 (a)(i) 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 (ii), with respect to any guarantee of Subordinated
Indebtedness by a Restricted Subsidiary, any such guarantee shall be
subordinated
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to such Restricted Subsidiary's Subsidiary Guarantee at least to the same
extent as such Subordinated Indebtedness is subordinated to the notes; (b) 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 (c) 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
(i) may be limited by bankruptcy, insolvency or similar laws (including,
without limitation, all laws relating to fraudulent transfers and fraudulent
conveyances), (ii) is subject to general principles of equity and (iii) any
implied covenant of good faith or fair dealing.
(2) 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 (a) (i) any
sale, exchange or transfer of all the Capital Stock in the applicable
Subsidiary Guarantor owned by the Company and any Restricted Subsidiary or (ii)
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),
(b) 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 (c) 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 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:
(1) 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,
(2) pay any Indebtedness owed to the Company or any Restricted Subsidiary,
(3) make an Investment in the Company or any Restricted Subsidiary or
(4) transfer any of its properties or assets to the Company or any
Restricted Subsidiary;
except for such encumbrances or restrictions:
(a) pursuant to any agreement in effect or entered into on the date of the
Indenture,
(b) 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,
(c) by reason of customary non-assignment provisions in leases and
licenses entered into in the ordinary course of business,
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(d) 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 (4) above on the
property so leased or acquired,
(e) 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,
(f) pursuant to Permitted Liens which are customary limitations on the
transfer of collateral,
(g) pursuant to applicable law,
(h) 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
(i) existing under any agreement that extends, renews, refinances or
replaces the agreements containing the restrictions in the preceding
clauses (a) and (b), 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 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 Company (and the Subsidiary Guarantors, if applicable) must file
on a timely basis with the SEC, to the extent such filings are accepted by the
SEC and whether or not the Company has a class of securities registered under
the Exchange Act, the annual reports, quarterly reports and other documents
that the Company would be required to file if it were subject to Section 13 or
15(d) of the Exchange Act. The Company is (and any future Subsidiary Guarantors
will be) also required:
(1) 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 SEC 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
(2) if filing such reports and documents with the SEC is not accepted by
the SEC 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 or prospective purchaser 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 the transfer of
any note is restricted under the Securities Act.
Future Designation of Restricted and Unrestricted Subsidiaries.
The preceding 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
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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.
CONSOLIDATION, MERGER, ETC.
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:
(1) either (a) 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 (b) 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;
(2) 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;
(3) 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;
(4) except in the case of the consolidation or merger of (a) any
Restricted Subsidiary with or into the Company or any Wholly Owned
Restricted Subsidiary or (b) 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;"
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(5) 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
(6) 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 supplemental indenture in respect
thereto comply with the requirements under the Indenture and an Opinion of
Counsel stating that the requirements of clause (1) 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 are "Events of Default" under the Indenture:
(1) 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
(2) 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
(3) default in the performance or breach of the provisions of the
"Consolidation, Merger, Etc." 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
(4) 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 (1),
(2) or (3) above) for a period of 45 days after written notice of such failure
requiring the Company to remedy the same shall have been given (a) to the
Company by the Trustee or (b) to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the notes then outstanding; or
(5) 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
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consequential acceleration of the notes shall be automatically rescinded, so
long as such rescission does not conflict with any judgment or decree; or
(6) 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 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 (a) such rescission does not
conflict with any judgment or decree and (b) the holder of such Indebtedness
shall not have applied any such property or assets in satisfaction of such
Indebtedness; or
(7) 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
(8) certain events giving rise to ERISA liability; or
(9) 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
(a) 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 (b) 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
(10) the entry of a decree or order by a court having jurisdiction in
the premises (a) 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
(b) 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
(11) 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 (10) or (11)
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 notes
then outstanding due and payable immediately, upon which declaration all
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amounts payable in respect of the notes shall be immediately due and payable.
If an Event of Default specified in clause (10) or (11) above occurs and is
continuing, then the principal of, premium, if any, and accrued interest on all
of the notes then outstanding 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 notes
then outstanding, by written notice to the Company and the Trustee, may rescind
such declaration if:
(1) the Company or any Subsidiary Guarantor has paid or deposited with the
Trustee a sum sufficient to pay:
(a) 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,
(b) all overdue interest on all notes then outstanding,
(c) 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 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
(d) 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;
(2) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction; and
(3) 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 notes then outstanding 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 note then
outstanding 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
notes then outstanding 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 aggregate principal
amount of the notes then outstanding. 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.
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 notes
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then outstanding 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 determine 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 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
notes then outstanding ("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 notes then outstanding,
except for:
(1) the rights of Holders of notes then outstanding to receive payment in
respect of the principal of, premium, if any, on and interest on such
notes when such payments are due,
(2) 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,
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
(4) 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:
(1) 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 notes then outstanding to redemption or
maturity;
(2) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Holders of the notes then outstanding 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);
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(3) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit;
(4) 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;
(5) 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
(6) 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.
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 notes then
outstanding when:
(1) either (a) 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 (b) 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;
(2) the Company has paid all other sums payable under the Indenture by the
Company; and
(3) 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
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, 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
notes then outstanding; provided, however, that no such modification or
amendment may, without the consent of the Holder of each note then outstanding
affected thereby:
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(1) change the Stated Maturity of the principal of, or any installment of
interest on any note,
(2) reduce the principal amount of (or the premium, if any, on) or
interest on any note,
(3) change the place, coin or currency of payment of principal of (or the
premium, if any, on) or interest on, any note,
(4) impair the right to institute suit for the enforcement of any payment
on or with respect to any note,
(5) reduce the above-stated percentage of aggregate principal amount of
notes then outstanding necessary to modify or amend the Indenture,
(6) reduce the percentage of aggregate principal amount of notes then
outstanding necessary for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults under the
Indenture,
(7) 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,
(8) modify or amend any provision of the Indenture relating to Subsidiary
Guarantees in a manner adverse to the Holders or
(9) 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 the Trust Indenture Act contain 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.
State Street Bank and Trust Company is also trustee under indentures
for the 2007 Notes and the 2006 Notes. Pursuant to the Trust Indenture Act,
should a default occur with respect to either the notes or the 2006 Notes,
State Street Bank and Trust Company would be required to resign as trustee
under either the Indenture and the indenture for the 2007 Notes or the
indenture for the 2006 Notes within 90 days of such default unless such default
were cured, duly waived or otherwise eliminated.
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.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person:
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(1) assumed in connection with an Asset Acquisition from such Person,
(2) 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
(3) any renewals, extensions, substitutions, refinancings or replacements
(each, for purposes of this clause, a "refinancing") by the Company of
any Indebtedness described in clause (1) or (2) of this definition,
including any successive refinancings, so long as
(a) 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,
(b) 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
(c) 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:
(1) the sum of:
(a) 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 (i) estimated proved oil and
gas reserves acquired since the date of such year-end reserve
report, and (ii) 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 (using 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 (iii) estimated proved oil and gas reserves
produced or disposed of since the date of such year-end reserve
report and (iv) 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 (using the
prices utilized in such year-end reserve report); provided, that
in the case of each of the determinations made pursuant to
clauses (i) through (iv), 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 used for purposes of this clause (1) (a)
shall be confirmed in writing by a nationally recognized firm of
independent petroleum engineers,
(b) 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
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books and records as of a date no earlier than the date of the
Company's latest annual or quarterly financial statements,
(c) the Net Working Capital on a date no earlier than the date of the
Company's latest annual or quarterly financial statements and
(d) the greater of (i) the net book value on a date no earlier than
the date of the Company's latest annual or quarterly financial
statements or (ii) 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,
(2) minus the sum of
(a) 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),
(b) any net gas balancing liabilities of the Company and its
Restricted Subsidiaries reflected in the Company's latest audited
financial statements,
(c) to the extent included in (1) (a) above, the discounted future
net revenues, calculated in accordance with SEC guidelines (using
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
(d) 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 (1)
(a) 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:
(1) 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
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(2) 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:
(1) any Capital Stock of any Restricted Subsidiary held by the Company or
any Restricted Subsidiary;
(2) 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
(3) 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:
(1) any transfer of properties or assets that is governed by, and made in
accordance with, the provisions described under the caption "--
Consolidation, Merger, etc."
(2) any transfer of properties or assets to any Person, if permitted under
the provisions described under the caption "-- Limitation on
Restricted Payments;"
(3) 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 (i) any
officer of the Company if such fair market value is less than
$5,000,000 and (ii) 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
(4) 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,
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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:
(1) the sum of the products of (a) 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 (b) the amount of each such principal
payment by
(2) the sum of all such principal payments.
"Board of Directors" means:
(1) with respect to the Company, either the board of directors of the
Company or any properly constituted committee thereof that is (a)
authorized to take the action in question and (b) comprised of
members, a majority of whom are not officers or employees of the
Company or any Subsidiary of the Company, and
(2) 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:
(1) 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),
(2) 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,
(3) 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
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Moody's shall be rating such obligations, then from such other rating
service as may be acceptable to the Trustee),
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above
entered into with any commercial bank meeting the specifications of
clause (2) above,
(5) overnight bank deposits and bankers' acceptances at any commercial
bank meeting the qualifications specified in clause (2) above, and
(6) 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:
(1) 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;
(2) there shall be consummated any consolidation or merger of the Company
(a) 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 (b) 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
(3) 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:
(1) 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
(a) the amount of deferred revenues that are amortized during such
period and are attributable to reserves that are subject to
Volumetric Production Payments and
(b) amounts recorded in accordance with GAAP as repayments of
principal and interest pursuant to Dollar-Denominated Production
Payments, to
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(2) 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 (1) 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
accordance with clause (1) 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:
(1) 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:
(a) any amortization of debt discount,
(b) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts),
(c) the interest portion of any deferred payment obligation,
(d) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing
and
(e) all accrued interest, in each case to the extent attributable to
such period,
(2) 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,
(3) 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
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(4) 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:
(1) net after-tax extraordinary gains or losses (less all fees and
expenses relating thereto),
(2) net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to Asset Sales,
(3) 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),
(4) 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,
(5) 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,
(6) income resulting from transfers of assets received by the Company or
any Restricted Subsidiary from an Unrestricted Subsidiary and
(7) 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 August 1, 1997, 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 has
been and 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
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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:
(1) all Senior Indebtedness constituting Credit Agreement Obligations and
(2) any other Senior Indebtedness which (a) at the time of incurrence
equals or exceeds $10,000,000 in aggregate principal amount and (b) 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:
(1) 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
(2) 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 (1) 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:
(1) 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
(2) 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.
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"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:
(1) Indebtedness of such Subsidiary Guarantor evidenced by its Subsidiary
Guarantee,
(2) 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,
(3) 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,
(4) any repurchase, redemption or other obligation in respect of
Redeemable Capital Stock of such Subsidiary Guarantor,
(5) to the extent it might constitute Indebtedness, any liability for
federal, state, local or other taxes owed or owing by such Subsidiary
Guarantor,
(6) 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
(7) 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 (7) 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 (1), (2) or (3) of the second paragraph under
the caption "-- Subordination."
"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:
(1) 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
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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,
(2) 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,
(3) 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,
(4) all Capitalized Lease Obligations of such Person,
(5) the Attributable Indebtedness (in excess of any related Capitalized
Lease Obligations) related to any Sale/Leaseback Transaction of such
Person,
(6) 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),
(7) 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),
(8) all Redeemable Capital Stock of such Person valued at the greater of
its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends,
(9) all obligations of such Person under or in respect of currency
exchange contracts and Interest Rate Protection Obligations and
(10) any amendment, supplement, modification, deferral, renewal, extension
or refunding of any liability of such Person of the types referred to
in clauses (1) through (9) 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 (7)
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
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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:
(1) extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices and
(2) 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
(3) bonds, notes, debentures or other securities received in compliance
with the covenant described under the caption "-- Limitation on
Disposition of Proceeds of Asset Sales."
"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 (1) (a) of the definition of Adjusted Consolidated Net
Tangible Assets; provided, however, that the following will be excluded from
the calculation of Material Change:
(1) 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
(2) 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:
(1) any Subsidiary Guarantor and
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(2) any other Restricted Subsidiary that, together with its Subsidiaries:
(a) 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
(b) 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 (a) and (b) 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:
(1) brokerage commissions and other fees and expenses (including fees and
expenses of engineers, legal counsel, accountants and investment
banks) related to such Asset Sale,
(2) provisions for all taxes payable as a result of such Asset Sale,
(3) amounts required to be paid (a) 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 (b) 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
(4) 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:
(1) all current assets of the Company and its Restricted Subsidiaries,
minus
(2) 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:
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(1) 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
(2) 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.
"Note Register" means the register maintained by or for the Company in
which the Company shall provide for the registration of the notes and of
transfer of the 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:
(1) the acquisition, exploration, exploitation, development, operation and
disposition of interests in oil, gas and other hydrocarbon properties,
(2) the gathering, marketing, treating, processing, storage, refining,
selling and transporting of any production from such interests or
properties,
(3) 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,
(4) 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
(5) any activity necessary, appropriate or incidental to the activities
described in the preceding clauses (1) through (4) 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:
(1) the Company's 8 3/4% Senior Subordinated Notes due 2007 issued under
the Indenture dated as of May 15, 1997 between the Company and Fleet
National Bank (now State Street Bank and Trust Company), as Trustee,
and
(2) any other Indebtedness of the Company that is pari passu in right of
payment to the notes.
"Permitted Indebtedness" means any of the following:
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(1) 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:
(a) the greater of: (i) $270,000,000 and (ii) an amount equal to
the sum of (A) $170,000,000 and (B) 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
(b) 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 (1) 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 (1) (and clause (1) of the definition of
"Permitted Subsidiary Indebtedness"), shall not at any one time exceed
the Maximum Credit Amount;
(2) Indebtedness of the Company under the notes;
(3) Indebtedness of the Company outstanding on the date of the
Indenture (and not repaid or defeased with the proceeds of the Company's sale
of the outstanding notes);
(4) 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;
(5) Indebtedness of the Company to any Restricted Subsidiaries;
(6) in-kind obligations relating to net gas balancing positions arising
in the ordinary course of business and consistent with past practice;
(7) 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);
(8) Non-Recourse Indebtedness;
(9) Indebtedness incurred in respect of any letters of credit in the
ordinary course of business of the Company or reimbursement obligations in
respect thereof;
(10) 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 (2) or (3)
above, including any successive refinancings by the Company, so long as (a) 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 (b) in the case of
any refinancing of
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Subordinated Indebtedness, such new Indebtedness is made subordinate to the
notes at least to the same extent as the Indebtedness being refinanced and (c)
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;
(11) 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:
(1) Investments in Cash Equivalents;
(2) Investments in the Company or any of its Restricted Subsidiaries;
(3) Investments by the Company or any of its Restricted Subsidiaries
in another Person, if as a result of such Investment (a) such other Person
becomes a Restricted Subsidiary of the Company or (b) 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;
(4) 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;
(5) entry into any arrangement pursuant to which the Company or any of
its Restricted Subsidiaries may incur Hedging Obligations; and
(6) 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 (6) 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:
(1) Liens existing as of the date the notes are first issued;
(2) Liens securing the notes;
(3) Liens in favor of the Company or a Subsidiary Guarantor;
(4) Liens securing Senior Indebtedness or Guarantor Senior
Indebtedness;
(5) Liens for taxes, assessments and governmental charges or claims
either (a) not delinquent or (b) 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;
(6) 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;
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(7) 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);
(8) 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;
(9) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(10) 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 (a) limiting the transfer of properties and assets
pending consummation of the subject transaction or (b) in respect of earnest
money deposits, good faith deposits, purchase price adjustment escrows or
similar deposits or escrow arrangements made or established thereunder;
(11) Liens securing any Hedging Obligations of the Company or any
Restricted Subsidiary;
(12) 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;
(13) 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;
(14) 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;
(15) 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;
(16) Liens securing Interest Rate Protection Obligations which
Interest Rate Protection Obligations relate to Indebtedness that is secured by
Liens otherwise permitted under this Indenture;
(17) 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;
(18) Liens on pipeline or pipeline facilities which arise out of
operation of law;
(19) 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
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interest agreements, development agreements, joint ownership arrangements and
other agreements which are customary in the Oil and Gas Business;
(20) Liens reserved in oil and gas mineral leases for bonus or rental
payments and for compliance with the terms of such leases;
(21) 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, 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;
(22) 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;
(23) 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
(24) 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 (1) through (24) 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:
(1) 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
(1) of the definition of "Permitted Indebtedness");
(2) Indebtedness of any Restricted Subsidiary outstanding on the date
of the Indenture;
(3) 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;
(4) the Subsidiary Guarantees (and any assumption of the obligations
guaranteed thereby);
(5) Indebtedness of any Restricted Subsidiary relating to guarantees
by such Restricted Subsidiary of Permitted Indebtedness;
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(6) in-kind obligations relating to net gas balancing positions
arising in the ordinary course of business and consistent with past practice;
(7) 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);
(8) Indebtedness of any Restricted Subsidiary to any other Restricted
Subsidiary or to the Company;
(9) 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";
(10) Indebtedness incurred in respect of letters of credit in the
ordinary course of business of any Restricted Subsidiary or reimbursement
obligation in respect thereof;
(11) Non-Recourse Indebtedness;
(12) 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
(a) 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 (b) 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
(13) 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 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:
(1) registered with the SEC pursuant to Section 12(b) or 12(g) of the
Exchange Act and
(2) traded either on a national securities exchange or on the NASDAQ Stock
Market.
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"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:
(1) a Public Market exists in the shares of Common Stock of the Company
and
(2) 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 February 1 or August 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 Ratings Services, 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.
"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:
(1) Indebtedness evidenced by the notes,
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(2) Indebtedness that is expressly subordinate or junior in right of
payment to any Senior Indebtedness of the Company,
(3) 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,
(4) any repurchase, redemption or other obligation in respect of
Redeemable Capital Stock of the Company,
(5) to the extent it might constitute Indebtedness, any liability for
federal, state, local or other taxes owed or owing by the Company,
(6) 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
(7) 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 (7) 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 preceding 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 (1), (2) or (3) 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:
(1) 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 (now State Street Bank and Trust Company), as
Trustee and
(2) 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 any
Restricted Subsidiary in accordance with the provisions set forth in the
covenant described under the caption "-- Limitation on Non-Guarantor Restricted
Subsidiaries."
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"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 "-- 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 "-- Possible Subsidiary Guarantees of the Notes."
"Unrestricted Subsidiary" means:
(1) 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
(2) 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:
(a) neither the Company nor any Restricted Subsidiary is directly or
indirectly liable pursuant to the terms of any Indebtedness of
such Subsidiary;
(b) 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;
(c) 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, the covenant described under
the caption "-- Limitation on Restricted Payments" (other than
Investments of the type described in clause (4) of the definition
of "Permitted Investments"); and
(d) 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 (a) of this sentence, the
Company or a Restricted Subsidiary may be liable for Indebtedness of an
Unrestricted Subsidiary if:
(i) 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
(ii) 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
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(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:
(1) 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
(2) 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.
OUTSTANDING NOTES REGISTRATION RIGHTS AGREEMENT
In connection with the sale of the outstanding notes, the Company
entered into a Registration Rights Agreement. Under that agreement, the Company
agreed to use its reasonable best efforts to:
o file a registration statement with the SEC with respect to an
offer to exchange the outstanding notes for new notes having
substantially identical terms as the outstanding notes (except
that the new notes will not contain terms with respect to
transfer restrictions or interest rate increases)
o cause that registration statement to be declared effective under
the Securities Act within 135 days of the date of original
issuance of the outstanding notes
o keep that registration statement effective until the closing of
the exchange offer
o cause the exchange offer to be consummated within 180 days
following the original issuance of the outstanding notes
Promptly after the exchange offer registration statement has been
declared effective, the Company will offer the outstanding notes in exchange
for surrender of the new notes.
Under the following circumstances, the Company will file with the SEC
a shelf registration statement to cover resales of the outstanding notes by
those holders who provide required information in connection with the shelf
registration statement:
o if any changes in law or the applicable interpretations of the
staff of the SEC do not permit the Company to effect the
exchange offer as contemplated by the Registration Rights
Agreement
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o if for any reason the exchange offer registration statement is
not declared effective within 135 days after the date of
original issuance of the outstanding notes
o if the exchange offer is not consummated within 180 days after
the date of original issuance of the outstanding notes
o if the initial purchasers of outstanding notes request in
certain circumstances
A "Registration Default" will occur if, among other things:
o the exchange offer registration statement is not declared
effective on or prior to the 135th day following the date of
original issuance of the outstanding notes
o the exchange offer is not consummated or a shelf registration
statement with respect to the notes is not declared effective on
or prior to the 180th day following the date of original
issuance of the outstanding notes
o the Company files the exchange offer registration statement or
shelf registration statement and the SEC declares it effective,
but afterward the Company withdraws it, or it 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
o the Company effects a suspension of offers and sales under the
shelf registration statement for more than 60 days, whether or
not consecutive, within any period of 12 consecutive months
If any Registration Default occurs, the Company will be obligated to
pay additional interest to each holder of outstanding notes at a rate equal to
0.50% per annum. This rate will continue until all registration defaults have
been cured (and, if applicable, the suspension of offers and sales of notes
under the shelf registration statement ceases).
Holders who desire to tender their outstanding notes will be required
to make to the Company the representations described under "The Exchange Offer
- -- Purpose and Effect of the Exchange Offer" and "-- Procedures for Tendering"
in order to participate in the exchange offer. In addition, the Company may
require holders to deliver information to be used in connection with the shelf
registration statement in order to have their notes included in the shelf
registration statement and benefit from the provisions regarding additional
interest described in the preceding paragraphs. A holder who sells outstanding
notes under the shelf registration statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers. Such a holder will also be subject to 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 that are
applicable to such holder, including indemnification obligations.
The description of the Registration Rights Agreement contained in
this section is a summary only. For more information, you may review the
provisions of the Registration Rights Agreement that the Company filed with the
SEC as an exhibit to the registration statement of which this prospectus is a
part.
BOOK ENTRY; DELIVERY AND FORM
The new notes will initially be represented by one or more permanent
global notes in definitive, fully registered book-entry form (the "Global
Securities") that will be registered in the name of Cede & Co., as nominee of
DTC. The Global Securities will be deposited on behalf of the acquirors of the
new notes represented thereby with a custodian for DTC for credit to the
respective accounts of the acquirors or to such other accounts as they may
direct at DTC. See "The Exchange Offer -- Book-Entry Transfer."
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THE GLOBAL SECURITIES
The Company expects that under procedures established by DTC
o upon deposit of the Global Securities with DTC or its custodian,
DTC will credit on its internal system portions of the Global
Securities that shall be comprised of the corresponding
respective amounts of the Global Securities to the respective
accounts of persons who have accounts with such depositary
o ownership of the notes will be shown on, and the transfer of
ownership thereof will be effected only through, records
maintained by DTC or its nominee, with respect to interests of
persons who have accounts with DTC ("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
any of the notes, DTC or such nominee will be considered the sole owner or
holder of such notes represented by the Global Securities for all purposes
under the Indenture and under the notes represented thereby. No beneficial
owner of an interest in the Global Securities will be able to transfer such
interest except in accordance with the applicable procedures of DTC in addition
to those provided for under the indenture.
Payments on the notes represented by the Global Securities will be
made to DTC or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the trustee or any paying agent under the
Indenture 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 Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any
payment on the notes represented by the Global Securities, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Securities as shown in the
records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in the Global Securities held
through such participants will be governed by standing instructions and
customary practice as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payment
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in accordance
with DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a certificated security for any reason, including
to sell notes to persons in states that require physical delivery of such
security or to pledge such securities, such holder must transfer its interest
in the Global Securities in accordance with the normal procedures of DTC and
the procedures in the indenture.
DTC has advised the Company that DTC will take any action permitted
to be taken by a holder of notes, including the presentation of notes for
exchange as described below, only at the direction of one or more participants
to whose account the DTC interests in the Global Securities are credited and
only in respect of the aggregate principal amount as to which such participant
or participants has or have given such direction. However, if there is an event
of default under the Indenture, DTC will exchange the Global Securities for
certificated securities that it will distribute to its participants.
DTC has advised the Company as follows:
o DTC is a limited-purpose 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
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and a "clearing agency" registered under the provisions of
Section 17A of the Securities Exchange Act of 1934
o 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
o Direct participants include securities brokers and dealers,
banks, trust companies, clearing corporations and other
organizations
o DTC is owned by a number of its participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc.
o 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
o The rules applicable to DTC and its participants are on file
with the SEC
Although DTC is expected to follow these procedures in order to
facilitate transfers of interests in the Global Securities among participants
of DTC, it is under no obligation 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 its direct or
indirect participants on their respective obligations under the rules and
procedures governing their operations.
CERTIFICATED SECURITIES
Interests in the Global Securities will be exchanged for certificated
securities if:
o DTC or any successor depositary (the "'Depositary") notifies the
Company that it is unwilling or unable to continue as depositary
for the Global Securities, or DTC ceases to be a "clearing
agency" registered under the Securities Exchange Act of 1934,
and a successor depositary is not appointed by the Company
within 90 days
o the Company determines not to have the notes represented by
Global Securities
Upon the occurrence of either of the events described in the preceding
sentence, the Company will cause the appropriate certificated securities to be
delivered.
Neither the Company nor the trustee will be liable for any delay by
the Depositary or its nominee in identifying the beneficial owners of the
related notes. Each such person may conclusively rely on, and will be protected
in relying on, instructions from such Depositary or nominee for all purposes,
including the registration and delivery, and the respective principal amounts,
of the notes to be issued.
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
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(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 outstanding notes for new notes, including the applicability and
effect of any state, local or foreign tax laws.
The Company believes that the exchange of outstanding notes for new
notes pursuant to the exchange offer will not be treated as an "exchange" for
federal income tax purposes because the new notes will not be considered to
differ materially in kind or extent from the outstanding notes. Rather, the new
notes received by a holder will be treated as a continuation of the outstanding
notes in the hands of such holder. As a result, there will be no federal income
tax consequences to holders exchanging outstanding notes for new notes pursuant
to the exchange offer.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC in no action letters
issued to third parties, the Company believes that any holder may transfer new
notes issued under the exchange offer in exchange for the outstanding notes if:
o the holder acquires the new notes in the ordinary course of its
business
o the holder is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to
participate in, a distribution of such new notes
Broker-dealers receiving new notes in the exchange offer will be
subject to a prospectus delivery requirement with respect to resales of the new
notes.
The Company believes that a holder may not transfer new notes issued
under the exchange offer in exchange for the outstanding notes if that holder
is:
o an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act
o a broker-dealer that acquired outstanding notes directly from
the Company
o a broker-dealer that acquired outstanding notes as a result of
market-making or other trading activities without compliance
with the registration and prospectus delivery provisions of the
Securities Act
To date, the staff of the SEC has taken the position that
participating broker-dealers may fulfill their prospectus deliver requirements
with respect to transactions involving an exchange of securities such as this
exchange offer, other than a resale of an unsold allotment from the original
sale of the outstanding notes, with the prospectus contained in the exchange
offer registration statement. In the Registration Rights Agreement, the Company
has agreed to permit participating broker-dealers to use this prospectus in
connection with the resale of new notes. The Company has agreed that, for a
period of up to 180 days after the expiration of the exchange offer, the
Company will make this prospectus, and any amendment or supplement to this
prospectus, available to any broker-dealer that requests such documents in the
letter of transmittal.
If a holder wishes to exchange its outstanding notes for new notes in
the exchange offer, the holder will be required to make representations to us
as described in "The Exchange Offer -- Purpose and Effect of the Exchange
Offer" and "-- Procedures for Tendering -- Representations to the Company" of
this prospectus and in the letter of transmittal. In addition, if a
broker-dealer receives new notes for its own account in exchange for
outstanding notes that were acquired by it as a result of market-making
activities or other trading activities, it will be required to acknowledge that
it will deliver a prospectus in connection with any resale by it of such new
notes.
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The Company will not receive any proceeds from any sale of new notes
by broker-dealers. Broker-dealers who receive new notes for their own account
in the exchange offer may sell them from time to time in one or more
transactions in the over-the-counter market:
o in negotiated transactions
o through the writing of options on the new notes or a combination
of such methods of resale
o at market prices prevailing at the time of resale
o at prices related to such prevailing market prices or negotiated
prices
Any 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 broker-dealer or the purchasers of any new notes. Any broker-dealer
that resells new notes it received for its own account in the exchange offer
and any broker or dealer that participates in a distribution of such new notes
may be deemed to be an "underwriter" within the meaning of the Securities Act.
Any profit on any resale of new notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the exchange
offer other than commissions and concessions of any brokers or dealers. The
Company will indemnify holders of the outstanding notes, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act, as provided in the Registration Rights Agreement.
TRANSFER RESTRICTIONS ON OUTSTANDING NOTES
The outstanding notes were not registered under the Securities Act.
Those outstanding notes 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
exemption from the Securities Act registration requirements. Accordingly, the
outstanding notes were offered and sold only in the United States to "qualified
institutional buyers" under Rule 144A under the Securities Act in a private
sale exempt from the registration requirements of the Securities Act.
LEGAL MATTERS
The validity of the issuance of the new notes is being passed upon
for the Company by Gerald A. Morton, Vice President-Law and Corporate Secretary
of the Company. Mr. Morton owns approximately 3,961 shares of the Company's
Common Stock directly and through the Company's tax advantaged savings plan and
options to purchase an aggregate of 29,000 shares of the Company's common
stock, which are or become exercisable in periodic installments through August
1, 2001.
EXPERTS
The consolidated financial statements of Pogo Producing Company as of
December 31, 1997 and 1996, and for the three years in the period ended
December 31, 1997, 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 that firm as experts in accounting and auditing
in giving that report.
126
<PAGE> 128
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 that firm as experts with respect to matters contained in that
report.
127
<PAGE> 129
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
Consolidated Financial Statements of Pogo Producing Company ----
<S> <C>
Report of Independent Public Accountants................................................................ F-2
Consolidated Statements of Income for the Years Ended December 31, 1997, 1996, and
1995................................................................................................. F-3
Consolidated Balance Sheets as of December 31, 1997 and 1996............................................ F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996
and 1995............................................................................................. F-5
Consolidated Statements of Shareholders' Equity for the Years Ended December 31,
1997, 1996, and 1995................................................................................. F-6
Notes to Consolidated Financial Statements.............................................................. F-7
</TABLE>
F-1
<PAGE> 130
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Pogo Producing Company:
We have audited the accompanying consolidated balance sheets of Pogo
Producing Company (a Delaware corporation) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pogo Producing Company and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 13, 1998
F-2
<PAGE> 131
POGO PRODUCING COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
(EXPRESSED IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Oil and gas..................... $ 285,200 $ 204,142 $ 157,459
Gains (losses) on sales......... 1,100 (165) 100
---------- ---------- ----------
Total...................... 286,300 203,977 157,559
---------- ---------- ----------
Operating Costs and Expenses:
Lease operating................. 63,501 37,628 35,071
General and administrative...... 21,412 18,028 16,400
Exploration..................... 10,530 16,777 7,468
Dry hole and impairment......... 9,631 8,579 6,703
Depreciation, depletion and
amortization.................. 103,157 61,857 68,489
---------- ---------- ----------
Total...................... 208,231 142,869 134,131
---------- ---------- ----------
Operating Income..................... 78,069 61,108 23,428
Interest:
Charges......................... (21,886) (13,203) (11,167)
Income.......................... 453 232 26
Capitalized..................... 6,175 4,244 1,834
Foreign Currency Transaction Loss.... (7,604) -- --
---------- ---------- ----------
Income Before Taxes and Extraordinary
Item............................... 55,207 52,381 14,121
---------- ---------- ----------
Income Tax Expense................... (18,091) (18,800) (4,891)
---------- ---------- ----------
Income Before Extraordinary Item..... 37,116 33,581 9,230
Extraordinary Loss on Early
Extinguishment of Debt, net of
taxes.............................. -- (821) --
---------- ---------- ----------
Net Income........................... $ 37,116 $ 32,760 $ 9,230
========== ========== ==========
Earnings per Share (restated for 1996
and 1995):
Basic
Before extraordinary
item.................... $ 1.11 $ 1.01 $ 0.28
Extraordinary item......... -- (0.02) --
---------- ---------- ----------
Net income................. $ 1.11 $ 0.99 $ 0.28
========== ========== ==========
Diluted
Before extraordinary
item.................... $ 1.06 $ 0.97 $ 0.28
Extraordinary item......... -- (0.02) --
---------- ---------- ----------
Net income................. $ 1.06 $ 0.95 $ 0.28
========== ========== ==========
Dividends per Common Share........... $ 0.12 $ 0.12 $ 0.12
========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part hereof.
F-3
<PAGE> 132
POGO PRODUCING COMPANY & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996
----------- -----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash investments ......... $ 19,646 $ 3,054
Accounts receivable ............... 39,540 30,031
Other receivables ................. 46,951 35,027
Inventory -- product .............. 713 --
Inventories -- tubulars ........... 8,334 6,165
Other ............................. 4,087 641
----------- -----------
Total current assets ......... 119,271 74,918
----------- -----------
Property and Equipment:
Oil and gas, on the basis of
successful efforts accounting
Proved properties being
amortized ................ 1,321,817 1,079,523
Unevaluated properties and
properties under
development, not being
amortized ................ 110,231 111,192
Other, at cost .................... 12,619 8,773
----------- -----------
1,444,667 1,199,488
Less -- accumulated
depreciation, depletion, and
amortization, including $6,004
and $4,822 respectively,
applicable to other property ..... 917,363 814,623
----------- -----------
527,304 384,865
----------- -----------
Other .................................. 30,042 19,459
----------- -----------
$ 676,617 $ 479,242
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable -- operating
activities ....................... $ 13,639 $ 7,676
Accounts payable -- investing
activities ....................... 90,833 56,961
Accrued interest payable .......... 3,130 1,957
Accrued payroll and related
benefits ......................... 1,938 1,490
Other ............................. 632 163
----------- -----------
Total current
liabilities .............. 110,172 68,247
Long-Term Debt ......................... 348,179 246,230
Deferred Federal Income Tax ............ 57,502 46,321
Deferred Credits ....................... 14,658 11,162
----------- -----------
Total liabilities ............ 530,511 371,960
----------- -----------
Shareholders' Equity:
Preferred stock, $1 par;
2,000,000 shares authorized ...... -- --
Common stock, $1 par;
100,000,000 shares authorized,
and 33,552,702 and 33,321,381
shares issued, respectively ...... 33,553 33,321
Additional capital ................ 144,848 139,337
Retained earnings (deficit) ....... (31,971) (65,075)
Treasury stock and other, at
cost ............................. (324) (301)
----------- -----------
Total shareholders'
equity ................... 146,106 107,282
----------- -----------
$ 676,617 $ 479,242
=========== ===========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part hereof.
F-4
<PAGE> 133
POGO PRODUCING COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers ......................................................... $ 272,004 $ 195,931 $ 164,065
Federal income taxes received ........................................................ 7,037 -- 6,000
Operating, exploration, and general and administrative expenses paid ................. (86,445) (74,512) (56,997)
Interest paid ........................................................................ (20,713) (12,960) (11,036)
Federal income taxes paid ............................................................ (19,500) 12,500) (6,000)
Other ................................................................................ (1,651) (3,061) 301
--------- --------- ---------
Net cash provided by operating activities ....................................... 150,732 92,898 96,333
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures ................................................................. (197,326) (172,032) (96,403)
Purchase of proved reserves .......................................................... (31,234) -- (11,921)
Proceeds from the sale of property and tubular stock ................................. 387 100 100
--------- --------- ---------
Net cash used in investing activities ........................................... (228,173) (171,932) (108,224)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of new debt ................................................... 100,000 115,000 --
Borrowings under senior debt agreements .............................................. 502,000 208,000 199,000
Payments under senior debt agreements ................................................ (500,000) (201,000) (182,000)
Proceeds from exercise of stock options .............................................. 3,874 3,378 1,717
Payment of cash dividends on common stock ............................................ (4,012) (3,979) (3,946)
Debt issue expenses paid ............................................................. (3,165) (3,116) --
Purchase of 8% debentures due 2005 ................................................... -- (40,699) (450)
Principal payments of other long-term debt obligations ............................... -- -- (871)
--------- --------- ---------
Net cash provided by financing activities ....................................... 98,697 77,584 13,450
--------- --------- ---------
Effect of exchange rate changes on cash .................................................. (4,664) 23 --
--------- --------- ---------
Net increase (decrease) in cash and cash investments ..................................... 16,592 (1,427) 1,559
Cash and cash investments at the beginning of the year ................................... 3,054 4,481 2,922
--------- --------- ---------
Cash and cash investments at the end of the year ......................................... $ 19,646 $ 3,054 $ 4,481
========= ========= =========
Reconciliation of net income to net cash provided by operating activities:
Net income ........................................................................... $ 37,116 $ 32,760 $ 9,230
Adjustments to reconcile net income to net cash provided by operating activities
Extraordinary losses on early extinguishments of debt, net of taxes ............. -- 821 --
Foreign currency transaction loss ............................................... 7,604 -- --
(Gains) losses on sales ......................................................... (1,100) 165 (100)
Depreciation, depletion and amortization ........................................ 103,157 61,857 68,489
Dry hole and impairment ......................................................... 9,631 8,579 6,703
Interest capitalized ............................................................ (6,175) (4,244) (1,834)
Increase in deferred income tax ................................................. 12,999 7,175 5,592
Change in assets and liabilities:
(Increase) decrease in accounts receivable .................................. (12,483) (8,211) 7,095
Increase in inventory -- product ............................................ (713) -- --
(Increase) decrease in other current assets ................................. (6,470) 81 23
Increase in other assets .................................................... (7,418) (5,228) (1,187)
Increase (decrease) in accounts payable ..................................... 8,998 (2,079) 1,942
Increase in accrued interest payable ........................................ 1,173 243 131
Increase in accrued payroll and related benefits ............................ 448 251 2
Increase in other current liability ......................................... 469 60 63
Increase in deferred credits ................................................ 3,496 668 184
--------- --------- ---------
Net cash provided by operating activities ................................................ $ 150,732 $ 92,898 $ 96,333
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part hereof.
F-5
<PAGE> 134
POGO PRODUCING COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
TREASURY
RETAINED STOCK SHARE-
SHARES COMMON ADDITIONAL EARNINGS AND HOLDERS'
OUTSTANDING STOCK CAPITAL (DEFICIT) OTHER EQUITY
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 ........... 32,810,261 $ 32,826 $ 130,675 $ (99,140) $ (324) $ 64,037
Net income ............................. -- -- -- 9,230 -- 9,230
Exercise of stock options .............. 181,136 181 2,206 -- -- 2,387
Dividends ($0.12 per common share) ..... -- -- -- (3,946) -- (3,946)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1995 ........... 32,991,397 33,007 132,881 (93,856) (324) 71,708
Net income ............................. -- -- -- 32,760 -- 32,760
Foreign currency translation gain ...... -- -- -- -- 23 23
Exercise of stock options .............. 274,714 274 4,924 -- -- 5,198
Shares issued in connection with the
Long-Term Incentive Plan ............. 5,896 6 246 -- -- 252
Shares issued in connection with the
conversion of --
8% Debentures ..................... 32,898 33 1,267 -- -- 1,300
2004 Notes ........................ 901 1 19 -- -- 20
Dividends ($0.12 per common share) ..... -- -- -- (3,979) -- (3,979)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1996 ........... 33,305,806 33,321 139,337 (65,075) (301) 107,282
Net income ............................. -- -- -- 37,116 -- 37,116
Foreign currency translation loss ...... -- -- -- -- (23) (23)
Exercise of stock options .............. 229,024 230 5,461 -- -- 5,691
Shares issued in connection with the
conversion of 2004 Notes ............. 2,297 2 50 -- -- 52
Dividends ($0.12 per common share) ..... -- -- -- (4,012) -- (4,012)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1997 ........... 33,537,127 $ 33,553 $ 144,848 $ (31,971) $ (324) $ 146,106
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part hereof.
F-6
<PAGE> 135
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations --
Pogo Producing Company was incorporated in 1970. Pogo Producing Company and
its subsidiaries (the "Company") are engaged in oil and gas exploration,
development and production activities on its properties located offshore in the
Gulf of Mexico and onshore in the United States and internationally in the Gulf
of Thailand. The Company has interests in 101 lease blocks offshore Louisiana
and Texas, approximately 237,000 gross acres onshore in the United States and
approximately 734,000 gross acres offshore in the Kingdom of Thailand.
Use of Estimates --
The preparation of these financial statements require the use of certain
estimates by management in determining the Company's assets, liabilities,
revenues and expenses. Depreciation, depletion and amortization of oil and gas
properties and the impairment of oil and gas properties are determined using
estimates of proved oil and gas reserves. 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. 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.
Principles of Consolidation --
The consolidated financial statements include the accounts of Pogo
Producing Company and its subsidiary and affiliated companies, after elimination
of all significant intercompany transactions. Majority owned subsidiaries are
fully consolidated. Minority owned subsidiaries or affiliates are pro rata
consolidated in the same manner as the Company, and the oil and gas industry
generally, accounts for its operating or working interest in oil and gas joint
ventures.
Prior-Year Reclassifications --
Certain prior-year amounts have been reclassified to conform with the
current year presentation.
Foreign Currency --
The U. S. Dollar is the functional currency for all areas of operations of
the Company. Accordingly, monetary assets and liabilities and items of income
and expense denominated in a foreign currency are remeasured to U. S. dollars at
the rate of exchange in effect at the end of each month and the resulting gains
or losses on foreign currency transactions are included in the consolidated
statements of income for the period.
Inventory -- Product
Crude oil and condensate from the Company's Tantawan field located in the
Kingdom of Thailand is produced into a floating production, storage and off
loading ("FPSO") system and sold periodically as an economic barge quantity is
accumulated. The product inventory at December 31, 1997 consists of
approximately 43,000 barrels of crude oil and condensate, net to the Company's
interest, and is carried at its estimated net realizable value of $16.67 per
barrel.
Inventory -- Tubulars
Tubular Inventories consist primarily of goods used in the Company's
operations and are stated at the lower of average cost or market value.
F-7
<PAGE> 136
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest Capitalized --
Interest costs related to financing major oil and gas projects in progress
are capitalized until the projects are evaluated or until production commences
if the projects are evaluated as successful.
Earnings per Share --
In 1997, the Company adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128"). Prior years have been restated in conformity with the provisions of SFAS
128. Earnings per common share (basic earnings per share) are based on the
weighted average number of shares of common stock outstanding during the
periods. Earnings per common share and potential common share (diluted earnings
per share) consider the effect of dilutive securities as set out below in
thousands, except per share amounts.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
-----------------------------
INCOME SHARES PER SHARE
------- ------- -------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE ........................................ $37,116 33,421 $ 1.11
Effect of potential dilutive
securities:
Shares assumed issued from the exercise of options to
purchase common shares, net of treasury shares
assumed purchased from the proceeds, at the average
market price for the period .............................. -- 758 --
Interest expense avoided, net of taxes, and shares issued
from the assumed conversion at $22.188 per share of
the 2004 Notes ........................................... 3,082 3,885
------- ------- -------
DILUTED EARNINGS PER SHARE ...................................... $40,198 38,064 $ 1.06
======= ======= =======
Antidilutive securities:
Shares assumed not issued from options to purchase
common shares as the exercise prices are above the
average market price for the period ...................... -- 471 $ 40.82
Interest expense incurred, net of taxes, and shares not
issued related to the assumed non-conversion at
$42.185 per share of the 2006 Notes ...................... $ 4,111 2,726 $ 1.51
</TABLE>
F-8
<PAGE> 137
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
-----------------------------
INCOME(a) SHARES PER SHARE
------- ------- -------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE ........................................ $33,581 33,203 $ 1.01
Effect of potential dilutive securities:
Shares issued from the assumed exercise of options to
purchase common shares, net of treasury shares
assumed purchased from the proceeds, at the average
market price for the period .............................. -- 831 --
Interest expense avoided, net of taxes, and shares issued
from the assumed conversion at $22.188 per share of
the 2004 Notes ........................................... 3,083 3,886
------- ------- -------
DILUTED EARNINGS PER SHARE ...................................... $36,664 37,920 $ 0.97
======= ======= =======
(a) Computed on income before extraordinary item
Antidilutive securities:
Shares assumed not issued from options to purchase
common shares as the exercise prices are above the
average market price for the period ...................... -- 20 $ 40.94
Interest expense incurred, net of taxes, and shares not
issued related to the assumed non-conversion at $39.50
per share of the 8% Debentures, retired on
June 28, 1996 ............................................ $ 1,179 521 $ 2.26
Interest expense incurred, net of taxes, and shares not issued
related to the assumed non-conversion at $42.185 per share
of the 2006 Notes ............................................. $ 2,238 1,472 $ 1.52
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
--------------------------
INCOME SHARES PER SHARE
------ ------ ------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE ........................................ $9,230 32,893 $ 0.28
Effect of potential dilutive
securities:
Shares issued from the assumed exercise of options to
purchase common shares, net of treasury shares
assumed purchased from the proceeds, at the average
market price for the period .............................. -- 597 --
------ ------ ------
DILUTED EARNINGS PER SHARE ...................................... $9,230 33,490 $ 0.28
====== ====== ======
Antidilutive securities:
Shares assumed not issued from options to purchase
common shares as the exercise prices are above the
average market price for the period ...................... -- 598 $22.13
Interest expense incurred, net of taxes, and shares not
issued related to the assumed non-conversion at $39.50
per share of the 8% Debentures ........................... $2,229 1,085 $ 2.05
Interest expense incurred, net of taxes, and shares not
issued related to the assumed non-conversion at $22.188
per share of the 2004 Notes .............................. $3,083 3,887 $ 0.79
</TABLE>
F-9
<PAGE> 138
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Production Imbalances --
Owners of an oil and gas property often take more or less production from a
property than entitled to based on their ownership percentages in the property.
This results in a condition known in the industry as a production imbalance. The
Company follows the "take" (cash) method of accounting for production
imbalances. Under this method, the Company recognizes revenues on production as
it is taken and delivered to its purchasers. The Company's crude oil imbalances
are not significant. At December 31, 1997, the Company had taken approximately
3,751 MMcf of natural gas less than it was entitled to based on its interest in
those properties, and approximately 1,757 MMcf more than its entitlement on
other properties placing the Company at year end in a net under-delivered
position of approximately 1,994 MMcf of natural gas based on its working
interest ownership in the properties.
Oil and Gas Activities and Depreciation, Depletion and Amortization --
The Company follows the successful efforts method of accounting for its oil
and gas activities. 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 value of such
property on the Company's books may not be recoverable. Unproved properties are
reviewed quarterly to determine if there has been impairment of the carrying
value, 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 is based on the capitalized costs as determined
above, plus future costs to abandon offshore wells and platforms, and is on a
cost center by cost center basis using the units of production method. The
Company generally creates cost centers on a field by field basis for oil and gas
activities in the Gulf of Mexico and the Gulf of Thailand. Generally, the
Company establishes cost centers on the basis of an oil or gas trend or play for
its oil and gas activities onshore in the United States.
Other properties are depreciated using a straight-line method in amounts
which in the opinion of management are adequate to allocate the cost of the
properties over their estimated useful lives.
Consolidated Statements of Cash Flows --
For the purpose of cash flows, the Company considers all highly liquid
investments with a maturity date of three months or less to be cash equivalents.
Significant transactions may occur which do not directly affect cash balances
and as such will not be disclosed in the Consolidated Statements of Cash Flows.
Certain such noncash transactions are disclosed in the Consolidated Statements
of Shareholders' Equity relating to shares issued in connection with the
Long-Term Incentive Plan and the conversion of debentures into Common Stock in
1996 and 1997.
Commitments and Contingencies --
The Company has commitments for operating leases for office space in
Houston, Midland and Bangkok and commitments for an operating lease and
operating expenses related to a floating production, storage and off-loading
vessel (FPSO) in the Gulf of Thailand. Rental expense for office space was
$1,440,000 in 1997, $1,054,000 in 1996, and $861,000 in 1995. Expenses for the
FPSO lease and related
F-10
<PAGE> 139
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operating costs were $14,809,000 in 1997. Future minimum office and FPSO lease
expenses and related FPSO operating expense payments (in thousands of dollars)
at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998................................. $ 17,826
1999................................. 17,830
2000................................. 17,758
2001................................. 17,758
2002................................. 16,611
Thereafter........................... 91,352
</TABLE>
(2) INCOME TAXES
The components of income (loss) before income taxes for each of the three
years in the period ended December 31, 1997, are as follows (expressed in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
United States........................ $ 62,953 $ 56,380 $ 16,899
Foreign.............................. (7,746) (3,999) (2,778)
--------- --------- ---------
Total........................... $ 55,207 $ 52,381 $ 14,121
========= ========= =========
</TABLE>
The components of federal income tax expense (benefit) for each of the
three years in the period ended December 31, 1997, are as follows (expressed in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
United States, current............... $ 16,000 $ 12,500 $ --
United States, deferred(a)........... 5,964 7,162 5,602
Foreign, deferred.................... (3,873) (862) (711)
--------- --------- ---------
Total........................... $ 18,091 $ 18,800 $ 4,891
========= ========= =========
</TABLE>
- ------------
(a) Excludes $443,000 of deferred tax benefit on extraordinary loss of
$1,264,000 in 1996.
Total federal income tax expense (benefit) for each of the three years in
the period ended December 31, 1997, differs from the amounts computed by
applying the statutory federal income tax rate to income before taxes as follows
(expressed as a percent of pretax income):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Federal statutory income tax rate.... 35.0% 35.0% 35.0%
Increases (reductions) resulting
from:
Statutory depletion in excess of
tax basis....................... (0.2) (0.2) (2.2)
Foreign taxes................... (2.1) 1.1 1.6
Other........................... 0.1 -- 0.2
--------- --------- ---------
32.8% 35.9% 34.6%
========= ========= =========
</TABLE>
Deferred income taxes are determined based upon the differences between the
financial statement and tax basis of the Company's assets and liabilities using
enacted tax rates in effect for the years in which the differences are expected
to reverse. Deferred tax assets are recognized if it is more likely than not
that the
F-11
<PAGE> 140
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
future tax benefit will be realized. The principal components of the Company's
deferred income tax assets and liabilities include the following at December 31,
1997 and 1996 (expressed in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Intangible drilling costs, capitalized and amortized for
financial statement purposes and deducted for income
tax purposes ............................................... $ 204,218 $ 184,981
Charges to property and equipment, expensed for financial
statement purposes, and capitalized and amortized for
income tax purposes ........................................ 12,203 8,089
Interest charges, capitalized and amortized for financial
statement purposes and deducted for income tax purposes .... 19,762 21,046
--------- ---------
236,183 214,116
Deferred tax asset:
Differences in depletion and depreciation rates used for
tangible assets for financial and income tax purposes ...... (178,681) (167,795)
--------- ---------
Net deferred tax liability ........................................ $ 57,502 $ 46,321
========= =========
</TABLE>
(3) LONG-TERM DEBT
Long-term debt and the amount due within one year at December 31, 1997 and
1996, consists of the following (dollars expressed in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Senior debt --
Bank revolving credit agreement debt:
LIBO Rate based loans, borrowings at December 31, 1997
and 1996 at average interest rates of 6.52% and 6.59%,
respectively ............................................ $ 47,000 $ 22,000
Prime rate based loans, borrowing at December 31, 1996
at an interest rate of 8.25% ............................ -- 13,000
-------- --------
Total bank revolving credit agreement debt ............ 47,000 35,000
Uncommitted credit lines with banks, borrowing at
December 31, 1996 at an average interest rate of 7.0% ... -- 10,000
-------- --------
Total senior debt .................................................... 47,000 45,000
-------- --------
Subordinated debt --
8 3/4% Senior subordinated notes, due 2007 (issued
May 22, 1997) ................................................. 100,000 --
5 1/2% Convertible subordinated notes, due 2004 ................. 86,179 86,230
5 1/2% Convertible subordinated notes, due 2006 ................. 115,000 115,000
-------- --------
Total subordinated debt .............................................. 301,179 201,230
-------- --------
Total debt ........................................................... 348,179 246,230
-------- --------
Amount due within one year -- ........................................ -- --
-------- --------
Long-term debt ....................................................... $348,179 $246,230
======== ========
</TABLE>
F-12
<PAGE> 141
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective August 1, 1997, the Company entered into an amended and restated
credit agreement (as so amended and restated, the "Credit Agreement"). The
Credit Agreement provides for an unsecured $250,000,000 revolving/term credit
facility which will be fully revolving until July 1, 2000, after which the
balance will be due in eight quarterly term loan installments, commencing
October 31, 2000. The amount that may be borrowed under the Credit Agreement may
not exceed a borrowing base which is composed of both domestic and Thai
properties less, in certain circumstances, the present value of interest
payments on the 2007 Notes. The domestic borrowing base is determined
semiannually by the lenders in accordance with the Credit Agreement, based
primarily on the discounted present value of future net revenues from the
Company's domestic oil and gas reserves. The portion of the borrowing base which
composed of properties located in the Kingdom of Thailand is also determined
semiannually, but may, at the lenders' discretion, be redetermined once more
during each semiannual period. The value of this portion of the borrowing base
is determined by the lenders applying their usual and customary criteria for oil
and gas evaluation. As of January 1, 1998, the Company's total borrowing base,
including both domestic and Thai properties, exceeded $250,000,000. The Credit
Agreement is governed by various financial and other covenants, including
requirements to maintain positive working capital (excluding current maturities
of debt) and fixed charge coverage ratio, and limitations on indebtedness,
creation of liens, the prepayment of subordinated debt, the payment of
dividends, mergers and consolidation, investments and asset dispositions. 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 or LIBOR plus 5/8%, at the Company's option. A
commitment fee on the unborrowed amount under the Credit Agreement is also
charged. The commitment fee is currently 0.25% per annum on the unborrowed
amount under the Credit Agreement that is designated as "active" and 0.10% per
annum on the unborrowed amount under the Credit Agreement that is designated as
"inactive." Of the $250,000,000 that is currently available under the Credit
Agreement (subject to borrowing base limitations), $125,000,000 is designated as
"active" and $125,000,000 is designated as "inactive".
The Company has also entered into separate letter agreements with two banks
under which one of the banks may provide a $10,000,000 uncommitted money market
line of credit and the other bank may provide a $20,000,000 uncommitted money
market line of credit. Each line of credit is 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 will be reflected as long-term on the
Company's balance sheet because the Company 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.
On May 22, 1997, the Company issued $100,000,000 of 8 3/4% Senior
Subordinated Notes due 2007 (the "2007 Notes"). The proceeds from the issuance
of the 2007 Notes were used to repay amounts outstanding under the Company's
bank revolving credit agreement, and to purchase short-term cash investments.
The 2007 Notes bear interest at a rate of 8 3/4%, payable semiannually in
arrears on May 15 and November 15 of each year, commencing November 15, 1997.
The 2007 Notes are general unsecured senior subordinated obligations of the
Company and are subordinated in right of payment to the Company's senior
indebtedness, which currently includes the Company's obligations under its bank
revolving credit agreement and its unsecured credit lines, but are senior in
right of payment to its subordinated indebtedness, which currently includes the
2006 Notes and the 2004 Notes. The Company, at its option, may redeem the 2007
Notes in whole or in part, at any time on or after May 15, 2002, at a redemption
price of 104.375% of their principal value and decreasing percentages
thereafter. No sinking fund payments are required on the 2007 Notes. The 2007
Notes are redeemable at the option of any holder, upon the occurrence of a
change of control (as defined in the indenture governing the 2007 Notes), at
101% of their principal amount. The indenture governing the 2007 Notes also
imposes certain covenants on the Company that are customary for senior
subordinated indebtedness generally, including covenants limiting: incurrence of
indebtedness
F-13
<PAGE> 142
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
including senior indebtedness; restricted payments; the issuance and sales of
restricted subsidiary capital stock; transactions with affiliates; liens;
disposition of proceeds of asset sales; non-guarantor restricted subsidiaries;
dividends and other payment restrictions affecting restricted subsidiaries; and
mergers, consolidations and the sale of assets. As of December 31, 1997,
$28,657,000 was available for dividends under this limitation, which is
currently the Company's most restrictive such covenant.
The 5 1/2% Convertible Subordinated Notes, due 2004 (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% and decreasing percentages thereafter. No
sinking fund is provided. The 2004 Notes are redeemable at the option of the
holder, upon the occurrence of a repurchase event (a change in control and other
circumstances, as defined), at 100% of the principal amount. On February 12,
1998, the Company announced its intent to redeem the 2004 Notes on March 16,
1998 at an amount equal to 103.3% of their principal amount plus accrued
interest. Holders may elect to convert the principal or any integral multiple of
a 2004 Note into common stock at $22.188 per share until close of business on
March 13, 1998.
The 5 1/2% Convertible Subordinated Notes, due 2006 (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% and decreasing percentages thereafter. No
sinking fund is provided. The 2006 Notes are redeemable at the option of the
holder, upon the occurrence of a repurchase event (a change in control and other
circumstances, as defined), at 100% of the principal amount.
Current maturities and sinking fund requirements during the next five years
in connection with the above long-term debt are none in 1998 and 1999,
$7,050,000 in 2000, $25,850,000 in 2001 and $14,100,000 in 2002. All of the
current maturities reflected above are related to the retirement of the
Company's bank debt. The Company has established a history of refinancing its
bank debt before scheduled maturity payments commence and expects to do so again
before the amortization of bank debt commences in 2000.
F-14
<PAGE> 143
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) GEOGRAPHIC SEGMENT REPORTING
During 1997, the Company adopted the Financial and Accounting Standard's
Board's Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). Information
concerning the Company's revenues and long-lived assets as required by SFAS 131
is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
LONG-LIVED
REVENUES ASSETS
-------- --------
<S> <C> <C>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1997
United States ............................... $245,458 $366,638
Kingdom of Thailand ......................... 39,393 160,666
-------- --------
$284,851 $527,304
======== ========
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996
United States ............................... $203,364 $295,108
Kingdom of Thailand ......................... -- 89,757
-------- --------
$203,364 $384,865
======== ========
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995
United States ............................... $156,729 $232,527
Kingdom of Thailand ......................... -- 29,306
-------- --------
$156,729 $261,833
======== ========
</TABLE>
(5) SALES TO MAJOR CUSTOMERS
The Company is an oil and gas exploration and production company that
generally sells its oil and gas to numerous customers on a month-to-month basis.
Sales to the following customers exceeded 10% of revenues during any one of the
three years indicated (expressed in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Enron Corp. and affiliates ....................... $57,965 $58,101 $42,895
Petroleum Authority of Thailand (PTT) ............ $30,108 $ -- $ --
Coastal Gas Marketing Company .................... $ -- $18,376 $18,117
</TABLE>
(6) CREDIT RISK
Substantially all of the Company's accounts receivable at December 31, 1997
and 1996, result from oil and gas sales and joint interest billings to other
companies in the oil and gas industry. This concentration of customers and joint
interest owners may impact the Company's overall credit risk, either positively
or negatively, in that these entities may be similarly affected by industry-wide
changes in economic or other conditions. Such receivables are generally not
collateralized. Historically, credit losses incurred by the Company on
receivables generally have not been material. No known material credit losses
were experienced during 1997 or 1996.
A substantial portion of the Company's oil and gas operations are conducted
in Southeast Asia, and a substantial portion of its natural gas and liquid
hydrocarbon production are sold there. In recent months, Southeast Asia in
general, and the Kingdom of Thailand in particular, have experienced severe
economic difficulties which have been characterized by sharply reduced economic
activity, illiquidity, highly volatile foreign currency exchange rates and
unstable stock markets. The government of the Kingdom of Thailand and other
governments in the region are currently acting to address these issues. However,
the economic difficulties currently being experienced in Thailand, together with
the volatility of the Thai Baht against the
F-15
<PAGE> 144
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. dollar, will continue to have a material impact on the Company's operations
in the Kingdom of Thailand, together with the prices that the Company receives
for its oil and natural gas production there.
All of the Company's current natural gas production from its Thailand
operations committed under a long term Gas Sales Agreement to PTT at a price
denominated in Thai Baht. The Company's crude oil and condensate production from
its Thailand operations is sold on a tanker load by tanker load basis. Prices
that the Company receives for such production are based on world benchmark
prices, which are denominated in U.S. dollars, and are currently expected on
future crude oil sales to be paid in U.S. dollars. The Company believes that the
current economic difficulties in Southeast Asia have resulted in a decreased
demand for petroleum products in the region, which has contributed to the recent
general decline in crude oil and condensate prices throughout the world.
(7) EMPLOYEE BENEFITS
As permitted by SFAS No. 123, the Company applies APB Opinion No. 25 and
related interpretations in accounting for its stock option plans. Since the
exercise price of the options granted is equal to the quoted market price of the
Company's stock at the date of grant, no compensation cost has been recognized
for its stock option plans. Had compensation costs been determined based on the
fair value at the grant dates for awards made in 1997, 1996, and 1995 consistent
with the methods of SFAS No. 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below (in
thousands, except for per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net income:
As reported ........................................... $ 37,116 $ 32,760 $ 9,230
Pro forma ............................................. $ 34,220 $ 31,194 $ 8,619
Earnings per share:
As reported (restated for 1996 and 1995) -- Basic ..... $ 1.11 $ 0.99 $ 0.28
As reported (restated for 1996 and 1995) -- Diluted ... $ 1.06 $ 0.95 $ 0.28
Pro forma -- Basic .................................... $ 1.04 $ 0.94 $ 0.26
Pro forma -- Diluted .................................. $ 0.99 $ 0.91 $ 0.26
</TABLE>
The fair value of grants was estimated on the date of grant using the Black
Scholes option pricing model with the following weighted-average assumptions
used in 1997, 1996, and 1995, respectively: risk-free interest rates of 6.10%,
6.25%, and 6.00%, expected volatility of 34.63%, 39.15%, and 41.78%, dividend
yields of 0.29%, 0.34%, and 0.54%, and an expected life of the options of 4
years in each of the years 1997, 1996, and 1995.
The Company has a tax-advantaged savings plan in which all salaried
employees may participate. Under such plan, a participating employee may
allocate up to 10% of his salary, up to a maximum allowed by law ($10,000 for
1998), and the Company will then match the employee's contribution on a dollar
for dollar basis up to 6% of the employee's salary. Funds contributed by the
employee and the matching funds contributed by the Company are held in trust by
a bank trustee in six separate funds. Amounts contributed by the employee and
earnings and accretions thereon may be used to purchase shares of Common Stock,
invest in a money market fund or invest in four stock, bond, or blended stock
and bond mutual funds according to instructions from the employee. Matching
funds contributed to the savings plan by the Company are invested only in Common
Stock. The Company contributed $588,000 to the savings plan in 1997, $471,000 in
1996, and $277,000 in 1995.
The Company's stock option plans authorize the granting of options to key
employees and non-employee directors at prices equivalent to the market value at
the date of grant. Options generally become exercisable in three annual
installments commencing one year after the date of grant and, if not exercised,
F-16
<PAGE> 145
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expire 10 years from the date of grant. In 1996, the Company adopted the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123").
As permitted by SFAS No. 123, the Company elected to continue to account for
employee stock-based compensation using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. Accordingly, the adoption of SFAS No. 123 had no effect on the
Company's results of operations in 1996 and 1997. A summary of the status of the
Company's plans as of December 31, 1997, 1996, and 1995, and changes during the
years ended on those dates is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
---------- ----------
<S> <C> <C>
Outstanding, December 31, 1994 ................................ 1,387,537 $ 11.72
Granted .................................................. 389,000 $ 22.34
Exercised ................................................ (181,136) $ 9.48
Forfeited or expired ..................................... (20,000) $ 14.88
----------
Outstanding, December 31, 1995 ................................ 1,575,401 $ 14.56
==========
Exercisable, December 31, 1995 ................................ 1,006,686 $ 10.87
==========
Available for grant, December 31, 1995 ........................ 1,719,893
==========
Weighted-average fair value of options granted during 1995 .... $ 8.77
Outstanding, December 31, 1995 ................................ 1,575,401 $ 14.56
Granted .................................................. 406,500 $ 34.59
Exercised ................................................ (274,714) $ 12.30
----------
Outstanding, December 31, 1996 ................................ 1,707,187 $ 19.70
==========
Exercisable, December 31, 1996 ................................ 1,077,658 $ 14.31
==========
Available for grant, December 31, 1996 ........................ 1,313,393
==========
Weighted-average fair value of options granted during 1996 .... $ 13.56
Outstanding, December 31, 1996 ................................ 1,707,187 $ 19.70
Granted .................................................. 480,400 $ 40.49
Exercised ................................................ (229,024) $ 16.83
----------
Outstanding, December 31, 1997 ................................ 1,958,563 $ 25.13
==========
Exercisable, December 31, 1997 ................................ 1,196,803 $ 18.15
==========
Available for grant, December 31, 1997 ........................ 832,993
==========
Weighted-average fair value of options granted during 1997 .... $ 14.63
</TABLE>
F-17
<PAGE> 146
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------
WEIGHTED OPTIONS EXERCISABLE
AVERAGE -----------------------
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
RANGE OF NUMBER LIFE EXERCISE NUMBER EXERCISE
OPTION PRICES OUTSTANDING (DAYS) PRICE EXERCISABLE PRICE
- ------------------------------------- ------------ ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$4.38........................... 92,750 12 $ 4.38 92,750 $ 4.38
$5.56 to $8.06.................. 349,361 1,107 $ 6.83 349,361 $ 6.83
$15.13 to $19.13................ 156,046 2,014 $16.46 156,046 $16.46
$20.31 to $23.88................ 484,838 2,620 $22.15 381,827 $22.17
$30.56 to $34.88................ 325,001 3,143 $33.91 102,319 $33.93
$35.13 to $38.94................ 82,667 3,150 $36.18 56,000 $36.03
$40.56 to $44.38................ 465,900 3,483 $40.80 58,500 $41.20
$48.75.......................... 2,000 3,306 $48.75 -- --
------------ -----------
Total........................... 1,958,563 2,493 $25.13 1,196,803 $18.15
============ ===========
</TABLE>
F-18
<PAGE> 147
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A trusteed retirement plan has been adopted by the Company for its salaried
employees. The benefits are based on years of service and the employee's average
compensation for five consecutive years within the final ten years of service
which produce the highest average compensation. The Company makes annual
contributions to the plan in the amount of retirement plan cost accrued or the
maximum amount which can be deducted for federal income tax purposes. The
following table sets forth the plan's funded status (in thousands of dollars) as
of December 31, 1997, 1996, and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Actuarial present value (discounted at 7%, 7 1/4%, and
7 1/4%, respectively) of benefit obligations:
Accumulated benefit obligations --
Vested ................................................ $ 7,355 $ 6,408 $ 5,488
Non-vested ............................................ 1,536 1,138 1,173
-------- -------- --------
Total accumulated benefit obligations ................. 8,891 7,546 6,661
Projected salary increases (escalated at 5 1/2%, 5% and
5%, respectively) and other changes ...................... 2,329 1,804 1,734
-------- -------- --------
Projected benefit obligations for service rendered to
date ..................................................... 11,220 9,350 8,395
Plan assets at fair value, primarily listed securities with
an expected long-term rate of return of 9 1/2%, 8 1/2% and
8 1/2%, respectively .......................................... 31,312 24,181 19,089
-------- -------- --------
Plan assets in excess of projected benefit obligations .......... 20,092 14,831 10,694
Unrecognized:
Net overfunding being recognized over 15 years ............. (336) (440) (543)
Net gain arising from the difference between actual
experience and that assumed .............................. (13,134) (9,335) (5,989)
Prior service cost ......................................... (300) (343) (387)
-------- -------- --------
Accrued retirement plan asset ................................... $ 6,322 $ 4,713 $ 3,775
======== ======== ========
Retirement plan cost (benefit) for 1997, 1996, and 1995
included the following components:
Service cost, benefits accruing each year with
proration for future salary increases .................... $ 746 $ 621 $ 480
Interest cost on projected benefit obligations ........ 707 604 535
Actual return on plan assets .......................... (2,286) (1,615) (1,182)
Net amortization and deferral ......................... (775) (548) (333)
-------- -------- --------
Accrued retirement plan cost (benefit) ..................... $ (1,608) $ (938) $ (500)
======== ======== ========
</TABLE>
Although the Company has no obligation to do so, the Company currently
provides full medical benefits to its retired employees and dependents. For
current employees, the Company assumes all or a portion of post retirement
medical and term life insurance costs based on the employee's age and length of
service with the Company. The post retirement medical plan has no assets and is
currently funded by the Company on a pay-as-you-go basis.
F-19
<PAGE> 148
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is an analysis (in thousands of dollars) of the annual
expense and activity in the deferred cost and benefits obligation accounts for
1995, 1996 and 1997. The computation assumes that future increases in medical
costs will trend down from 8.1% to 5% per year over the next 7 years for
purposes of estimating future costs. The medical cost trend rate assumption has
a significant effect on the amounts reported. Increasing the assumed medical
cost trend rate by one percent in each year would increase the aggregate of
service and interest cost components of net periodic post retirement benefit
cost for 1997 by $170,000 and the accumulated post retirement benefit obligation
as of December 31, 1997 by $1,104,000.
<TABLE>
<CAPTION>
ANNUAL DEFERRED BENEFIT
EXPENSE COSTS OBLIGATION
------- -------- ----------
<S> <C> <C> <C>
Balance at January 1, 1995 ........................................... $ 3,349 $(5,487)
Amortization of transition costs over 14 years representing the
average remaining service period of eligible employees ............. $ 304 (304) 304
Amortization of net gain from earlier periods ........................ (69) (69)
Service cost, including interest ..................................... 241
Interest cost on transition obligation ............................... 399
-------
1995 expense ......................................................... $ 875 (875)
=======
Current benefits paid ................................................ 145
Unrecognized net gain ................................................ 541
------- -------
Balance at December 31, 1995 ......................................... 3,045 (5,441)
Amortization of transition costs over 14 years ....................... $ 304 (304) 304
Amortization of net gain from earlier periods ........................ (41) (41)
Service cost, including interest ..................................... 268
Interest cost on transition obligation ............................... 387
-------
1996 expense ......................................................... $ 918 (918)
=======
Current benefits paid ................................................ 94
Unrecognized net gain ................................................ 107
------- -------
Balance at December 31, 1996 ......................................... 2,741 (5,895)
Amortization of transition costs over 14 years ....................... $ 305 (305) 305
Amortization of net gain from earlier periods ........................ (26) (26)
Service cost, including interest ..................................... 459
Interest cost on transition obligation ............................... 427
-------
1997 expense ......................................................... $ 1,165 (1,165)
=======
Current benefits paid ................................................ 99
Unrecognized net loss ................................................ (224)
-------
Balance at December 31, 1997 ......................................... $ 2,436
=======
Plan assets at fair value
-------
Funded status at December 31, 1997 (discounted at 7%) ................ $(6,906)
=======
</TABLE>
The accumulated postretirement benefit obligation (in thousands of dollars)
at December 31, 1997 is attributable to the following groups:
<TABLE>
<S> <C>
Retirees and beneficiaries.............. $1,951
Dependents of retirees.................. 978
Fully eligible active employees......... 802
Active employees, not fully eligible.... 3,175
----------
$6,906
==========
</TABLE>
F-20
<PAGE> 149
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
Cash and Cash Investments
Fair value is carrying value as no cash equivalents or cash investments are
included in the balances as of December 31, 1997 and 1996.
Debt
<TABLE>
<CAPTION>
INSTRUMENT BASIS OF FAIR VALUE ESTIMATE
- -------------------------------------------------------------------------------
<S> <C>
Bank revolving credit agreement....... Fair value is carrying value as of
December 31, 1997 and 1996 based on the
market value interest rates.
Uncommitted credit lines with banks... Fair value is carrying value as of
December 31, 1997 and 1996 based on the
market value interest rates.
2007 Notes............................ Fair value is 102.5% of carrying value
as of December 31, 1997 based on a
quoted market value.
2004 Notes............................ Fair value is 140.38% and 166%, of
carrying value as of December 31, 1997
and 1996, respectively, based on quoted
market values.
2006 Notes............................ Fair value is 93.5% and 120%, of
carrying value as of December 31, 1997
and 1996, respectively, based on quoted
market values.
</TABLE>
The carrying value and estimated fair value of the Company's financial
instruments at December 31, 1997 and 1996 (in thousands of dollars) are as
follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash and cash investments ................... $ 19,646 $ 19,646 $ 3,054 $ 3,054
Debt:
Bank revolving credit agreement ........ (47,000) (47,000) (35,000) (35,000)
Uncommitted credit lines with banks .... -- -- (10,000) (10,000)
2007 Notes ............................. (100,000) (102,500) -- --
2004 Notes ............................. (86,179) (120,978) (86,230) (143,142)
2006 Notes ............................. (115,000) (107,525) (115,000) (138,000)
</TABLE>
The Company occasionally enters into forward and futures contracts to
minimize the impact of oil and gas price fluctuations. However, the Company does
not consider its forward and futures contracts to be financial instruments since
these contracts require or permit settlement by the delivery of the underlying
commodity. Gains and losses on these activities are recognized in revenues when
the hedged production occurs. No such contracts were outstanding as of December
31, 1997 or 1996.
F-21
<PAGE> 150
UNAUDITED SUPPLEMENTARY FINANCIAL DATA
OIL AND GAS PRODUCING ACTIVITIES
The results of operations from oil and gas producing activities excludes
non-oil and gas revenues, general and administrative expenses, interest charges,
interest income and interest capitalized. United States income tax expense was
determined by applying the statutory rates to pretax operating results with
adjustments for permanent differences. Kingdom of Thailand tax expense was
determined by applying the statutory tax rate to Thailand taxable income.
<TABLE>
<CAPTION>
UNITED KINGDOM OF
TOTAL STATES THAILAND
--------- --------- ---------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
1997
-------------------------------------
Revenues .............................................. $ 284,851 $ 245,458 $ 39,393
Lease operating expense ............................... (63,501) (43,934) (19,567)
Exploration expense ................................... (10,530) (6,242) (4,288)
Dry hole and impairment expense ....................... (9,631) (9,631) --
Depreciation, depletion and amortization expense ...... (101,273) (84,443) (16,830)
--------- --------- ---------
Pretax operating results .............................. 99,916 101,208 (1,292)
Income tax (expense) benefit .......................... (30,353) (32,390) 2,037
--------- --------- ---------
Operating results ..................................... $ 69,563 $ 68,818 $ 745
========= ========= =========
1996
-------------------------------------
Revenues .............................................. $ 204,142 $ 204,131 $ 11
Lease operating expense ............................... (37,628) (37,628) --
Exploration expense ................................... (16,777) (14,247) (2,530)
Dry hole and impairment expense ....................... (8,579) (8,834) 255
Depreciation, depletion and amortization expense ...... (61,033) (60,932) (101)
--------- --------- ---------
Pretax operating results .............................. 80,125 82,490 (2,365)
Income tax (expense) benefit .......................... (27,905) (28,767) 862
--------- --------- ---------
Operating results ..................................... $ 52,220 $ 53,723 $ (1,503)
========= ========= =========
1995
-------------------------------------
Revenues .............................................. $ 157,459 $ 157,536 $ (77)
Lease operating expense ............................... (35,071) (35,071) --
Exploration expense ................................... (7,468) (6,111) (1,357)
Dry hole and impairment expense ....................... (6,703) (6,703) --
Depreciation, depletion and amortization expense ...... (67,831) (67,798) (33)
--------- --------- ---------
Pretax operating results .............................. 40,386 41,853 (1,467)
Income tax (expense) benefit .......................... (13,623) (14,334) 711
--------- --------- ---------
Operating results ..................................... $ 26,763 $ 27,519 $ (756)
========= ========= =========
</TABLE>
F-22
<PAGE> 151
UNAUDITED SUPPLEMENTARY FINANCIAL DATA -- (CONTINUED)
The following table sets forth the Company's capitalized costs (expressed
in thousands) incurred for oil and gas producing activities during the years
indicated.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Capitalized costs incurred:
Property acquisition -- United States ................. $ 14,492 $ 5,927 $ 14,864
Property acquisition -- Kingdom of Thailand ........... 28,617 -- 4,171
Exploration -- United States .......................... 24,016 20,651 14,562
Exploration -- Kingdom of Thailand .................... 21,187 8,317 5,418
Development -- United States .......................... 95,768 99,464 39,461
Development -- Kingdom of Thailand .................... 60,996 53,564 23,994
Interest capitalized -- United States ................. 3,331 4,244 1,834
Interest capitalized -- Kingdom of Thailand ........... 2,748 -- --
-------- -------- --------
$251,155 $192,167 $104,304
======== ======== ========
Provision for depreciation, depletion and amortization:
United States ......................................... $ 85,104 $ 61,033 $ 67,798
Kingdom of Thailand ................................... 16,830 101 33
-------- -------- --------
$101,934 $ 61,134 $ 67,831
======== ======== ========
</TABLE>
F-23
<PAGE> 152
UNAUDITED SUPPLEMENTARY FINANCIAL DATA -- (CONTINUED)
The following information regarding estimates of the Company's proved oil
and gas reserves, which are located offshore in United States waters of the Gulf
of Mexico, onshore in the United States and offshore in the Kingdom of Thailand
is based on reports prepared by Ryder Scott Company Petroleum Engineers. The
definitions and assumptions that served as the basis for the discussions under
the caption "Item 1. Business -- Exploration and Production Data -- Reserves"
should be referred to in connection with the following information.
ESTIMATES OF PROVED RESERVES
<TABLE>
<CAPTION>
TOTAL COMPANY UNITED STATES
--------------------------- ---------------------------
OIL OIL
CONDENSATE CONDENSATE
& NATURAL NATURAL & NATURAL NATURAL
GAS LIQUIDS GAS GAS LIQUIDS GAS
(BBLS.) (MMCF) (BBLS.) (MMCF)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Proved Reserves as of December 31, 1994 .......... 33,861,612 242,890 26,187,240 186,151
Revisions of previous estimates .............. 496,849 21,800 363,213 16,592
Extensions, discoveries and other additions .. 11,901,880 78,434 4,267,871 35,058
Purchase of properties ....................... 4,015,131 30,054 460,156 3,770
Sale of properties ........................... (15,144) (748) (15,144) (748)
Estimated 1995 production .................... (5,078,326) (44,369) (5,078,326) (44,369)
----------- ----------- ----------- -----------
Proved Reserves as of December 31, 1995 .......... 45,182,002 328,061 26,185,010 196,454
Revisions of previous estimates .............. (499,595) (30,034) 3,374,647 3,022
Extensions, discoveries and other additions .. 9,810,363 102,039 3,601,333 55,592
Purchase of properties ....................... -- -- -- --
Sale of properties ........................... -- -- -- --
Estimated 1996 production .................... (4,890,588) (39,122) (4,890,588) (39,122)
----------- ----------- ----------- -----------
Proved Reserves as of December 31, 1996 .......... 49,602,182 360,944 28,270,402 215,946
Revisions of previous estimates .............. 1,033,664 (16,860) 2,194,936 (5,582)
Extensions, discoveries and other additions .. 9,316,407 92,063 4,649,856 49,651
Purchase of properties ....................... 5,175,501 30,319 409,428 8,919
Sale of properties ........................... (6,155) (1,864) (6,155) (1,864)
Estimated 1997 production .................... (6,957,246) (63,114) (6,136,957) (50,350)
----------- ----------- ----------- -----------
Proved Reserves as of December 31, 1997 .......... 58,164,353 401,488 29,381,510 216,720
=========== =========== =========== ===========
Proved developed reserves as of:
December 31, 1994 ............................ 24,669,755 178,518 24,669,755 178,518
December 31, 1995 ............................ 22,487,608 164,679 22,487,608 164,679
December 31, 1996 ............................ 31,090,407 238,032 25,898,414 192,034
December 31, 1997 ............................ 33,149,612 239,732 26,167,519 179,972
<CAPTION>
KINGDOM OF THAILAND
---------------------------
OIL
CONDENSATE
& NATURAL NATURAL
GAS LIQUIDS GAS
(BBLS.) (MMCF)
----------- -----------
<S> <C> <C>
Proved Reserves as of December 31, 1994 .......... 7,674,372 56,739
Revisions of previous estimates .............. 133,636 5,208
Extensions, discoveries and other additions .. 7,634,009 43,376
Purchase of properties ....................... 3,554,975 26,284
Sale of properties ........................... -- --
Estimated 1995 production .................... -- --
----------- -----------
Proved Reserves as of December 31, 1995 .......... 18,996,992 131,607
Revisions of previous estimates .............. (3,874,242) (33,056)
Extensions, discoveries and other additions .. 6,209,030 46,447
Purchase of properties ....................... -- --
Sale of properties ........................... -- --
Estimated 1996 production .................... -- --
----------- -----------
Proved Reserves as of December 31, 1996 .......... 21,331,780 144,998
Revisions of previous estimates .............. (1,161,272) (11,278)
Extensions, discoveries and other additions .. 4,666,551 42,412
Purchase of properties ....................... 4,766,073 21,400
Sale of properties ........................... -- --
Estimated 1997 production .................... (820,289) (12,764)
----------- -----------
Proved Reserves as of December 31, 1997 .......... 28,782,843 184,768
=========== ===========
Proved developed reserves as of:
December 31, 1994 ............................ -- --
December 31, 1995 ............................ -- --
December 31, 1996 ............................ 5,191,993 45,998
December 31, 1997 ............................ 6,982,093 59,760
</TABLE>
F-24
<PAGE> 153
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS RELATED TO PROVED OIL AND GAS RESERVES -- UNAUDITED
<TABLE>
<CAPTION>
TOTAL UNITED KINGDOM OF
COMPANY STATES THAILAND
----------- ----------- -----------
(EXPRESSED IN THOUSANDS)
1997
-------------------------------------------
<S> <C> <C> <C>
Future gross revenues ...................................... $ 1,801,254 $ 1,002,609 $ 798,645
Future production costs:
Lease operating expense ............................... (604,665) (269,505) (335,160)
Future development and abandonment costs ................... (401,970) (155,179) (246,791)
----------- ----------- -----------
Future net cash flows before income taxes .................. 794,619 577,925 216,694
Discount at 10% per annum .................................. (331,838) (171,764) (160,074)
----------- ----------- -----------
Discounted future net cash flow before income taxes ........ 462,781 406,161 56,620
Future income taxes, net of discount at 10% per annum ...... (113,316) (93,386) (19,930)
----------- ----------- -----------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves .................. $ 349,465 $ 312,775 $ 36,690
=========== =========== ===========
1996
-------------------------------------------
Future gross revenues ...................................... $ 2,318,113 $ 1,491,057 $ 827,056
Future production costs:
Lease operating expense ............................... (504,899) (259,501) (245,398)
Future development and abandonment costs ................... (310,839) (126,086) (184,753)
----------- ----------- -----------
Future net cash flows before income taxes .................. 1,502,375 1,105,470 396,905
Discount at 10% per annum .................................. (547,830) (332,343) (215,487)
----------- ----------- -----------
Discounted future net cash flow before income taxes ........ 954,545 773,127 181,418
Future income taxes, net of discount at 10% per annum ...... (268,505) (212,906) (55,599)
----------- ----------- -----------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves .................. $ 686,040 $ 560,221 $ 125,819
=========== =========== ===========
1995
-------------------------------------------
Future gross revenues ...................................... $ 1,495,320 $ 873,578 $ 621,742
Future production costs:
Lease operating expense ............................... (415,829) (208,477) (207,352)
Future development and abandonment costs ................... (247,019) (119,821) (127,198)
----------- ----------- -----------
Future net cash flows before income taxes .................. 832,472 545,280 287,192
Discount at 10% per annum .................................. (299,997) (144,435) (155,562)
----------- ----------- -----------
Discounted future net cash flow before income taxes ........ 532,475 400,845 131,630
Future income taxes, net of discount at 10% per annum ...... (155,330) (104,864) (50,466)
----------- ----------- -----------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves .................. $ 377,145 $ 295,981 $ 81,164
=========== =========== ===========
</TABLE>
The standardized measure of discounted future net cash flows from the
production of proved reserves is developed as follows:
1. Estimates are made of quantities of proved reserves and the future
periods in which they are expected to be produced based on year end
economic conditions.
F-25
<PAGE> 154
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS RELATED TO PROVED OIL
AND GAS RESERVES -- UNAUDITED -- (CONTINUED)
2. The estimated future gross revenues from proved reserves are
priced on the basis of year end prices, except in those instances where
fixed and determinable natural gas price escalations are covered by
contracts.
3. The future gross revenue streams are reduced by estimated future
costs to develop and to produce the proved reserves, as well as certain
abandonment costs based on year end cost estimates, and the estimated
effect of future income taxes. These cost estimates are subject to some
uncertainty, particularly those estimates relating to the Company's
properties located in the Kingdom of Thailand.
The standardized measure of discounted future net cash flows does not
purport to present the fair market value of the Company's oil and gas reserves.
An estimate of fair value would also take into account, among other things, the
recovery of reserves in excess of proved reserves, anticipated future changes in
prices and costs, a discount factor more representative of the time value of
money and the risks inherent in reserve estimates.
The following are the principal sources of change in the standardized
measure of discounted future net cash flows. All amounts are related to changes
in reserves located in the United States and the Kingdom of Thailand, as noted.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------
TOTAL UNITED KINGDOM OF
COMPANY STATES THAILAND
--------- --------- ---------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance ............................................... $ 686,040 $ 560,221 $ 125,819
Revisions to prior years' proved reserves:
Net changes in prices and production costs ................. (473,086) (344,493) (128,593)
Net changes due to revisions in quantity estimates ......... (18,624) 9,619 (28,243)
Net changes in estimates of future development costs ....... (83,170) (75,649) (7,521)
Accretion of discount ...................................... 95,455 77,313 18,142
Changes in production rate ................................. (2,907) 8,568 (11,475)
Other ...................................................... (28,225) (13,086) (15,139)
--------- --------- ---------
Total revisions ....................................... (510,557) (337,728) (172,829)
New field discoveries and extensions, net of future
production and development costs .............................. 79,258 76,687 2,571
Purchases of properties ......................................... 10,189 5,899 4,290
Sales of properties ............................................. (6,069) (6,069) --
Sales of oil and gas produced, net of production costs .......... (221,350) (201,524) (19,826)
Previously estimated development
costs incurred ................................................ 156,764 95,768 60,996
Net change in income taxes ...................................... 155,190 119,521 35,669
--------- --------- ---------
Net change in standardized measure of discounted
future net cash flows ............................... (336,575) (247,446) (89,129)
--------- --------- ---------
Ending balance .................................................. $ 349,465 $ 312,775 $ 36,690
========= ========= =========
</TABLE>
F-26
<PAGE> 155
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS RELATED TO PROVED OIL
AND GAS RESERVES -- UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------
TOTAL UNITED KINGDOM OF
COMPANY STATES THAILAND
--------- --------- ---------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance .......................................... $ 377,145 $ 295,981 $ 81,164
Revisions to prior years' proved reserves:
Net changes in prices and production costs ............... 304,233 289,182 15,051
Net changes due to revisions in quantity estimates ....... 6,717 53,708 (46,991)
Net changes in estimates of future development costs ..... (132,685) (79,791) (52,894)
Accretion of discount .................................... 53,248 40,085 13,163
Changes in production rate ............................... (59,714) (35,762) (23,952)
Other .................................................... (12,760) (2,831) (9,929)
--------- --------- ---------
Total revisions ....................................... 159,039 264,591 (105,552)
New field discoveries and extensions, net of future
production and development costs ......................... 275,738 173,962 101,776
Sales of oil and gas produced, net of production costs ..... (165,736) (165,736) --
Previously estimated development costs incurred ............ 153,028 99,464 53,564
Net change in income taxes ................................. (113,174) (108,041) (5,133)
--------- --------- ---------
Net change in standardized measure of discounted
future net cash flows ............................ 308,895 264,240 44,655
--------- --------- ---------
Ending balance ............................................. $ 686,040 $ 560,221 $ 125,819
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------
TOTAL UNITED KINGDOM OF
COMPANY STATES THAILAND
--------- --------- ---------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance .......................................... $ 290,069 $ 257,266 $ 32,803
Revisions to prior years' proved reserves:
Net changes in prices and production costs ............... 34,004 69,988 (35,984)
Net changes due to revisions in quantity estimates ....... 29,630 26,109 3,521
Net changes in estimates of future development costs ..... (8,632) (36,721) 28,089
Accretion of discount .................................... 38,298 33,087 5,211
Changes in production rate ............................... (14,754) (15,792) 1,038
Other .................................................... (4,393) (432) (3,961)
--------- --------- ---------
Total revisions ....................................... 74,153 76,239 (2,086)
New field discoveries and extensions, net of future
production and development costs ......................... 105,172 71,701 33,471
Purchases of properties .................................... 29,299 5,160 24,139
Sales of properties ........................................ (969) (969) --
Sales of oil and gas produced, net of production costs ..... (121,615) (121,615) --
Previously estimated development costs incurred ............ 63,455 39,461 23,994
Net change in income taxes ................................. (62,419) (31,262) (31,157)
--------- --------- ---------
Net change in standardized measure of discounted
future net cash flows ............................ 87,076 38,715 48,361
--------- --------- ---------
Ending balance ............................................. $ 377,145 $ 295,981 $ 81,164
========= ========= =========
</TABLE>
F-27
<PAGE> 156
QUARTERLY RESULTS -- UNAUDITED
Summaries of the Company's results of operations by quarter for the years
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31
---------- ---------- ---------- ----------
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1997
Revenues ................................................... $ 61,314 $ 76,740 $ 77,177 $ 71,069
Gross profit(a) ............................................ $ 27,776 $ 23,953 $ 27,648 $ 20,104
Net income ................................................. $ 12,818 $ 9,174 $ 7,386 $ 7,738
Earnings per share(b):
Basic ................................................. $ 0.38 $ 0.27 $ 0.22 $ 0.23
Diluted ............................................... $ 0.36 $ 0.26 $ 0.21 $ 0.22
1996
1996
Revenues ................................................... $ 48,052 $ 51,543 $ 48,233 $ 56,149
Gross profit(a) ............................................ $ 17,004 $ 20,011 $ 16,845 $ 25,276
Income before extraordinary loss ........................... $ 6,265 $ 8,937 $ 6,971 $ 11,408
Extraordinary loss on early extinguishment of debt ......... -- $ (821) -- --
Net income ................................................. $ 6,265 $ 8,116 $ 6,971 $ 11,408
Earnings per share(b):
Basic --
Income before extraordinary loss ................. $ 0.19 $ 0.27 $ 0.21 $ 0.34
Extraordinary loss ............................... -- $ (0.02) -- --
Net income ....................................... $ 0.19 $ 0.25 $ 0.21 $ 0.34
Diluted --
Income before extraordinary loss ................. $ 0.19 $ 0.26 $ 0.20 $ 0.32
Extraordinary loss ............................... -- $ (0.02) -- --
Net income ....................................... $ 0.19 $ 0.24 $ 0.20 $ 0.32
</TABLE>
- ------------
(a) Represents revenues less lease operating, exploration, dry hole and
impairment, and depreciation depletion and amortization expenses.
(b) Restated for September 30, 1997, and all prior periods
F-28
<PAGE> 157
===============================================================================
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION.
WE ARE NOT OFFERING THE EXCHANGE NOTES IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS AS
OF ANY DATE OTHER THAN THE DATE STATED ON THE COVER.
$150,000,000
POGO PRODUCING COMPANY
OFFER TO EXCHANGE
10 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
FOR
10 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2009
-------------------------
PROSPECTUS
-------------------------
, 1999
===============================================================================
<PAGE> 158
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 Company
eliminates the personal liability of each director of the Company to the
Company 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 Company provide that the Company will indemnify and
hold harmless, to the fullest extent permitted by applicable law as in effect
as of the date of the adoption of the Bylaws or as it may thereafter 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 Company or is or was serving at the
request of the Company 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 Bylaws further provide that the Company will 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 Company.
The Bylaws further provide that the Company will 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 proceeding) will 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.
The Company 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
II-1
<PAGE> 159
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.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- --------
<S> <C> <C>
4.1 -- Purchase Agreement, dated January 12, 1999, between Pogo
Producing Company and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, and Goldman, Sachs &
Co.
4.2 -- Indenture dated as of January 15, 1999 between Pogo
Producing Company and State Street Bank and Trust Company,
as Trustee, which includes the form of the 103/8% Senior
Subordinated Note due 2009 as an exhibit thereto
4.3 -- Registration Rights Agreement dated January 15,1999
among Pogo Producing Company, Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Goldman
Sachs & Co.
5.1 -- Opinion of Gerald A. Morton
12.1 -- Computation of ratio of earnings to fixed charges
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 5.1)
24.1 -- Powers of Attorney
25.1 -- Statement of Eligibility of Trustee
99.1 -- Form of Letter of Transmittal
99.2 -- Form of Notice of Guaranteed Delivery
99.3 -- Form of Letter to Depository Trust Company Participants
99.4 -- Form of Letter to Clients
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
II-2
<PAGE> 160
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement:
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) 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.
(5) 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.
(6) 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.
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.
II-3
<PAGE> 161
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, the State of Texas on February 10, 1999.
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 February 10, 1999
- ---------------------------- Chief Executive Officer (Principal
Paul G. Van Wagenen Executive Officer and Director)
/s/ John W. Elsenhans Vice President and Chief Financial February 10, 1999
- ---------------------------- Officer (Principal Financial Officer)
John W. Elsenhans
/s/ Thomas E. Hart Vice-President and Controller February 10, 1999
- ---------------------------- (Principal Accounting Officer)
Thomas E. Hart
*
- ---------------------------- Director February 10, 1999
Jerry M. Armstrong
*
- ---------------------------- Director February 10, 1999
Tobin Armstrong
*
- ---------------------------- Director February 10, 1999
Jack S. Blanton
*
- ---------------------------- Director February 10, 1999
W. M. Brumley, Jr.
*
- ---------------------------- Director February 10, 1999
John B. Carter, Jr.
*
- ---------------------------- Director February 10, 1999
William L. Fisher
*
- ---------------------------- Director February 10, 1999
Gerrit W. Gong
*
- ---------------------------- Director February 10, 1999
J. Stuart Hunt
</TABLE>
II-4
<PAGE> 162
<TABLE>
<CAPTION>
<S> <C> <C>
*
- ---------------------------- Director February 10, 1999
Frederick A. Klingenstein
*
- ---------------------------- Director February 10, 1999
Jack A. Vickers
*By: /s/ Thomas E. Hart
--------------------------------
Thomas E. Hart, Attorney-in-Fact
</TABLE>
II-5
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- --------
<S> <C> <C>
4.1 -- Purchase Agreement, dated January 12, 1999, between Pogo
Producing Company and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, and Goldman, Sachs &
Co.
4.2 -- Indenture dated as of January 15, 1999 between Pogo
Producing Company and State Street Bank and Trust Company,
as Trustee, which includes the form of the 103/8% Senior
Subordinated Note due 2009 as an exhibit thereto
4.3 -- Registration Rights Agreement dated January 15,1999
among Pogo Producing Company, Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Goldman
Sachs & Co.
5.1 -- Opinion of Gerald A. Morton
12.1 -- Computation of ratio of earnings to fixed charges
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 5.1)
24.1 -- Powers of Attorney
25.1 -- Statement of Eligibility of Trustee
99.1 -- Form of Letter of Transmittal
99.2 -- Form of Notice of Guaranteed Delivery
99.3 -- Form of Letter to Depository Trust Company Participants
99.4 -- Form of Letter to Clients
</TABLE>
<PAGE> 1
Exhibit 4.1
================================================================================
POGO PRODUCING COMPANY
$150,000,000
10 3/8 % SENIOR SUBORDINATED NOTES DUE 2009
PURCHASE AGREEMENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. Representations and Warranties.........................................................2
(a) Representations and Warranties by the Company..........................................2
(i) Similar Offerings...........................................................2
(ii) Offering Memorandum.........................................................2
(iii) Incorporated Documents......................................................2
(iv) Independent Accountants.....................................................3
(v) Financial Statements........................................................3
(vi) No Material Adverse Change in Business......................................3
(vii) Good Standing of the Company................................................3
(viii) Good Standing of Designated Subsidiaries....................................3
(ix) Capitalization..............................................................4
(x) Authorization of Agreement..................................................4
(xi) Authorization of the Indenture..............................................4
(xii) Authorization of the Securities.............................................4
(xiii) Description of the Securities and the Indenture.............................5
(xiv) Absence of Defaults and Conflicts...........................................5
(xv) Absence of Labor Dispute....................................................5
(xvi) Absence of Proceedings......................................................5
(xvii) Absence of Further Requirements.............................................6
(xviii) Possession of Licenses and Permits..........................................6
(xix) Title to Property...........................................................6
(xx) Environmental Laws..........................................................6
(xxi) Investment Company Act......................................................7
(xxii) Rule 144A Eligibility.......................................................7
(xxiii) No Registration Required....................................................7
(b) Officer's Certificates.................................................................7
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.......................................7
(a) Securities.............................................................................7
(b) Payment................................................................................7
(c) Qualified Institutional Buyer..........................................................8
(d) Denominations; Registration............................................................8
SECTION 3. Covenants of the Company...............................................................8
(a) Offering Memorandum....................................................................8
(b) Notice and Effect of Material Events...................................................8
(c) Amendment to Offering Memorandum and Supplements.......................................8
(d) Qualification of Securities for Offer and Sale.........................................8
(e) Rating of Securities...................................................................9
(f) DTC....................................................................................9
(g) Use of Proceeds........................................................................9
(h) Restriction on Sale of Securities......................................................9
SECTION 4. Payment of Expenses....................................................................9
(a) Expenses...............................................................................9
(b) Termination of Agreement...............................................................9
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5. Conditions of Initial Purchasers' Obligations..........................................9
(a) Opinions of Counsel for Company.......................................................10
(b) Opinion of Counsel for Initial Purchasers.............................................10
(c) Officers' Certificate.................................................................10
(d) Accountant's Comfort Letter...........................................................10
(e) Bring-down Comfort Letter.............................................................10
(f) Maintenance of Ratings................................................................10
(g) PORTAL................................................................................10
(h) Additional Documents..................................................................11
(i) Termination of Agreement..............................................................11
SECTION 6. Subsequent Offers and Sales of the Securities.........................................11
(a) Offer and Sale Procedures.............................................................11
(i) Offers and Sales only to Qualified Institutional Buyers....................11
(ii) Restrictions on Transfer...................................................11
(iii) Delivery of Offering Memorandum............................................11
(b) Covenants of the Company..............................................................11
(i) Due Diligence..............................................................11
(ii) Rule 144A Information......................................................12
(iii) Restriction on Repurchases.................................................12
SECTION 7. Indemnification.......................................................................12
(a) Indemnification of Initial Purchasers.................................................12
(b) Indemnification of Company, Directors and Officers....................................12
(c) Actions against Parties; Notification.................................................13
(d) Settlement without Consent if Failure to Reimburse....................................13
SECTION 8. Contribution..........................................................................13
SECTION 9. Representations, Warranties and Agreements to Survive Delivery........................14
SECTION 10. Termination of Agreement..............................................................15
(a) Termination; General..................................................................15
(b) Liabilities...........................................................................15
SECTION 11. Default by One of the Initial Purchasers..............................................15
SECTION 12. Notices...............................................................................15
SECTION 13. Parties...............................................................................16
SECTION 14. Governing Law and Time................................................................16
SECTION 15. Effect of Headings....................................................................16
</TABLE>
-ii-
<PAGE> 4
$150,000,000
POGO PRODUCING COMPANY
(A DELAWARE CORPORATION)
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009
PURCHASE AGREEMENT
January 12, 1999
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Goldman, Sachs & Co.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Pogo Producing Company, a Delaware corporation (the "Company"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and Goldman, Sachs & Co. (together, the
"Initial Purchasers", which term shall also include any initial purchaser
substituted as hereinafter provided in Section 11 hereof), with respect to the
issue and sale by the Company and the purchase by the Initial Purchasers, acting
severally and not jointly, of the respective principal amounts set forth in
Schedule A hereto of $150,000,000 aggregate principal amount of the Company's
Senior Subordinated Notes due 2009 (the "Securities"). The Securities are to be
issued pursuant to an indenture to be dated as of January 15, 1999 (the
"Indenture") between the Company and State Street Bank and Trust Company, as
trustee (the "Trustee"). The Securities will be issued in book-entry form only
and registered in the name of Cede & Co. as nominee of The Depository Trust
Company ("DTC") pursuant to a letter agreement, to be dated on or before the
Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among the
Company, the Trustee and DTC.
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
Purchasers") at any time after the date of this Agreement. The Securities are to
be offered and sold through the Initial Purchasers without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
exemptions therefrom. Pursuant to the terms of the Securities and the Indenture,
investors that acquire Securities may only resell or otherwise transfer such
Securities if such Securities are hereafter registered under the 1933 Act or if
an exemption from the registration requirements of the 1933 Act is available
(including the exemption afforded by Rule 144A ("Rule 144A") of the rules and
regulations promulgated under the 1933 Act by the Securities and Exchange
Commission (the "Commission")).
The Company has prepared and delivered to each Initial Purchaser copies
of a preliminary offering memorandum dated January 4, 1999 (the "Preliminary
Offering Memorandum") and has prepared and will deliver to each Initial
Purchaser, on the date hereof or the next succeeding day, copies of a final
offering memorandum dated January 12, 1999 (the "Final Offering Memorandum"),
each for use by such Initial Purchaser in connection with its solicitation of
purchases of, or offering of, the Securities. "Offering
<PAGE> 5
Memorandum" means, with respect to any date or time referred to in this
Agreement, the most recent offering memorandum (whether the Preliminary Offering
Memorandum or the Final Offering Memorandum, as amended or supplemented),
including exhibits thereto and any documents incorporated therein by reference,
which has been prepared and delivered by the Company to the Initial Purchasers
in connection with their solicitation of purchases of, or offering of, the
Securities.
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Offering Memorandum (or other references of like import) shall be deemed to mean
and include all such financial statements and schedules and other information
which are incorporated by reference in the Offering Memorandum; and all
references in this Agreement to amendments or supplements to the Offering
Memorandum shall be deemed to mean and include the filing of any document under
the Securities Exchange Act of 1934, as amended (the "1934 Act") which is
incorporated by reference in the Offering Memorandum.
The Initial Purchasers and other holders (including subsequent
transferees) of Securities will be entitled to the benefits of the registration
rights agreement, to be dated as of the Closing Time (the "Registration Rights
Agreement") among the Company and the Initial Purchasers, in the form attached
hereto as Exhibit B. Pursuant to the Registration Rights Agreement, subject to
the terms and conditions thereof, the Company will agree, among other things, to
file with the Commission a registration statement pursuant to the 1933 Act in
connection with an offer to exchange the Securities for securities having
substantially identical terms as the Securities, and to effect such exchange
offer, or, in certain circumstances, to file a registration statement pursuant
to Rule 415 under the 1933 Act to permit the resale of the Securities.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Initial Purchaser as of the date hereof and as
of the Closing Time referred to in Section 2(b) hereof, and agrees with each
Initial Purchaser as follows:
(i) Similar Offerings. The Company has not, directly or
indirectly, solicited any offer to buy or offered to sell, and will
not, directly or indirectly, solicit any offer to buy or offer to sell,
in the United States or to any United States citizen or resident, any
security which is or would be integrated with the sale of the
Securities in a manner that would require the Securities to be
registered under the 1933 Act.
(ii) Offering Memorandum. The Offering Memorandum does not,
and at the Closing Time will not, include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided that this
representation, warranty and agreement shall not apply to statements in
or omissions from the Offering Memorandum made in reliance upon and in
conformity with information furnished to the Company in writing by any
Initial Purchaser through Merrill Lynch expressly for use in the
Offering Memorandum.
(iii) Incorporated Documents. The Offering Memorandum as
delivered from time to time shall incorporate by reference the most
recent Annual Report of the Company on Form 10-K filed with the
Commission and each Quarterly Report of the Company on Form 10-Q and
each Current Report of the Company on Form 8-K filed with the
Commission since the filing of the end of the fiscal year to which such
Annual Report relates, together with any amendment to each such report.
The documents incorporated or deemed to be incorporated by reference in
the Offering Memorandum at the time they were or hereafter are filed
with the Commission complied and will
-2-
<PAGE> 6
comply in all material respects with the requirements of the 1934 Act
and the rules and regulations of the Commission thereunder (the "1934
Act Regulations"), and, when read together with the other information
in the Offering Memorandum, at the date of the Offering Memorandum and
at the Closing Time, do not and will not include an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(iv) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Offering Memorandum are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of
Regulation S-X under the 1933 Act.
(v) Financial Statements. The financial statements, together
with the related schedules and notes, included in the Offering
Memorandum present fairly the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the statement of
operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved. The selected financial data and the summary
financial information included in the Offering Memorandum present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in
the Offering Memorandum.
(vi) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise (a "Material Adverse
Effect"), whether or not arising in the ordinary course of business,
(B) there have been no transactions entered into by the Company or its
subsidiaries, other than those in the ordinary course of business,
which are material with respect to the Company and its subsidiaries
considered as one enterprise, and (C) except for regular quarterly
dividends on the common stock, par value $1.00 per share, of the
Company (the "Common Stock") in amounts per share that are consistent
with past practice, there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock (other than rights to acquire preferred stock attached to the
shares of Common Stock issued in connection with the Company's
acquisition of Arch Petroleum Inc.).
(vii) Good Standing of the Company. The Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum and to enter into and
perform its obligations under this Agreement; and the Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect.
(viii) Good Standing of Designated Subsidiaries. Each
corporate "significant subsidiary" of the Company (as such term is
defined in Rule 1-02 of Regulation S-X) (each a "Designated Subsidiary"
and, collectively, the "Designated Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its properties and to
-3-
<PAGE> 7
conduct its business as described in the Offering Memorandum and is
duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect;
except as otherwise disclosed in the Offering Memorandum, all of the
issued and outstanding capital stock of each Designated Subsidiary has
been duly authorized and validly issued, is fully paid and
non-assessable and (except for directors' qualifying shares or shares
representing an immaterial equity interest that are required under the
laws of any foreign jurisdiction to be owned by others) is owned by the
Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity; and none of the outstanding shares of capital stock of the
Designated Subsidiaries was issued in violation of any preemptive or
similar rights arising by operation of law, or under the charter or
by-laws of any Designated Subsidiary or under any agreement to which
the Company or any Designated Subsidiary is a party. The subsidiaries
of the Company other than Designated Subsidiaries, considered in the
aggregate as a single subsidiary, do not constitute a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X.
(ix) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Offering Memorandum
in the column entitled "Actual" under the caption "Capitalization"
(except for subsequent issuances, if any, pursuant to employee or
director benefit plans referred to in the Offering Memorandum or
pursuant to the exercise of convertible securities or options referred
to or incorporated by reference in the Offering Memorandum).
(x) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(xi) Authorization of the Indenture. The Indenture has been
duly authorized by the Company and, at the Closing Time, will have been
duly executed and delivered by the Company and will (assuming due
authorization, execution and delivery by the Trustee) constitute a
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement
of creditors' rights generally, or by general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law).
(xii) Authorization of the Securities. The Securities have
been duly authorized and, at the Closing Time, the global certificate
representing the Securities will have been duly executed by the Company
and, when such global certificate has been authenticated in the manner
provided for the Indenture and the Securities have been delivered
through the facilities of DTC against payment of the purchase price
therefor, the Securities will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with
their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers) reorganization, moratorium or other
similar laws relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and
will be in the form contemplated by, and entitled to the benefits of,
the Indenture.
-4-
<PAGE> 8
(xiii) Description of the Securities and the Indenture. The
Securities and the Indenture will conform in all material respects to
the respective statements relating thereto contained in the Offering
Memorandum and will be in substantially the respective forms previously
delivered to the Initial Purchasers.
(xiv) Absence of Defaults and Conflicts. Neither the Company
nor any of its subsidiaries is in violation of its charter, by-laws or
other governing documents, as applicable, or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or its subsidiaries is a party or by
which any of them may be bound, or to which any of the property or
assets of the Company or its subsidiaries is subject (collectively,
"Agreements and Instruments") except for such violations or defaults
that have not resulted or would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement,
the Indenture and the Securities and any other agreement or instrument
entered into or issued or to be entered into or issued by the Company
in connection with the transactions contemplated hereby or thereby or
in the Offering Memorandum (including the Registration Rights
Agreement) and the consummation of the transactions contemplated herein
and therein and in the Offering Memorandum (including the issuance and
sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Offering Memorandum under the caption
"Use of Proceeds") and compliance by the Company with its obligations
hereunder have been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice
or passage of time or both, conflict with or constitute a breach of, or
default or a Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or its subsidiaries pursuant to, the
Agreements and Instruments except for such conflicts, breaches or
defaults or liens, charges or encumbrances that, singly or in the
aggregate, have not resulted or would not result in a Material Adverse
Effect, nor will such action result in any violation of the provisions
of the charter, by-laws or other governing documents of the Company or
its subsidiaries or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or its subsidiaries or any of their assets or properties.
As used herein, a "Repayment Event" means any event or condition which
gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right
to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or its subsidiaries. No default, or
condition that with notice or lapse of time or both would constitute a
default, exists with respect to any agreement or obligation that would
constitute "Senior Indebtedness" within the meaning of the Indenture.
(xv) Absence of Labor Dispute. No labor dispute with the
employees of the Company or its subsidiaries exists or, to the
knowledge of the Company, is imminent, which, in either case, may
reasonably be expected to result in a Material Adverse Effect.
(xvi) Absence of Proceedings. Except as disclosed in the
Offering Memorandum, there is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or any subsidiary thereof which might reasonably
be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the
consummation of the transactions contemplated by this Agreement
(including the transactions contemplated by the Registration Rights
Agreement) or the performance by the Company of its obligations
hereunder.
-5-
<PAGE> 9
(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or Governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement (including the transactions
contemplated by the Registration Rights Agreement), except such as have
been already obtained or as may be required under federal securities
laws in connection with the Registration Rights Agreement and under
state securities or "blue sky" laws of any jurisdiction.
(xviii) Possession of Licenses and Permits. The Company and
its subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses") issued
by the appropriate federal, state, local or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them,
except where the failure to possess such Governmental Licenses, would
not, singly or in the aggregate, have a Material Adverse Effect; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would reasonably be
expected to result in a Material Adverse Effect.
(xix) Title to Property. Each of the Company and its
subsidiaries has (i) generally satisfactory title to its oil and gas
properties, title investigations having been carried out by the Company
in accordance with the practice in the oil and gas industry in the
areas in which the Company operates, (ii) good and marketable title to
all other real property owned by it to the extent necessary to carry on
its business, and (iii) good and marketable title to all personal
property owned by it, in each case free and clear of all liens,
encumbrances and defects except such as are described or incorporated
by reference in the Offering Memorandum or such as do not materially
affect the value of the properties of the Company and its subsidiaries,
considered as one enterprise, and do not interfere with the use made
and proposed to be made of such properties, by the Company and its
subsidiaries, considered as one enterprise; and all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Offering Memorandum, are
in full force and effect, and neither the Company nor any of its
subsidiaries has any notice of any material claim of any sort that has
been asserted by anyone adverse to the rights of the Company or its
subsidiaries under any of the leases or subleases mentioned above, or
affecting or questioning the rights of such the Company or any
subsidiary thereof to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xx) Environmental Laws. Except as described in the Offering
Memorandum or except for such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals,
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pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company and its
subsidiaries have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or, to the knowledge of
the Company, threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigation or proceedings relating to any
Environmental Law against the Company or its subsidiaries and (D) there
are no events or circumstances that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an action,
suit or proceeding by any private party or governmental body or agency,
against or affecting the Company or its subsidiaries relating to
Hazardous Materials or Environmental Laws.
(xxi) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xxii) Rule 144A Eligibility. The Securities are eligible for
resale pursuant to Rule 144A and will not be, at the Closing Time, of
the same class as securities listed on a national securities exchange
registered under Section 6 of the 1934 Act, or quoted in a U.S.
automated interdealer quotation system.
(xxiii) No Registration Required. Subject to compliance by the
Initial Purchasers with the representations and warranties set forth in
Section 2 and the procedures set forth in Section 6 hereof, it is not
necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers and to each Subsequent Purchaser
in the manner contemplated by this Agreement and the Offering
Memorandum to register the Securities under the 1933 Act or to qualify
the Indenture under the Trust Indenture Act of 1939, as amended (the
"1939 Act").
(b) Officer's Certificates. Any certificate signed by any officer of
the Company delivered to the Initial Purchasers or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Company to each
Initial Purchaser as to the matters covered thereby.
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
(a) Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Initial Purchaser, severally and not jointly, and
each Initial Purchaser, severally and not jointly, agrees to purchase from the
Company, at the price set forth in Schedule B, the aggregate principal amount of
Securities set forth in Schedule A opposite the name of such Initial Purchaser,
plus any additional principal amount of Securities which such Initial Purchaser
may become obligated to purchase pursuant to the provisions of Section 11
hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the office of Baker &
Botts, L.L.P., 910 Louisiana, Houston, Texas 77002, or at such other place as
shall be agreed upon by the Initial Purchasers and the Company, at 10:00 A.M. on
the third business day after the date hereof (unless postponed in accordance
with the provisions of Section 11), or such other time not later than ten
business days after such date as shall be agreed upon by the Initial Purchasers
and the Company (such time and date of payment and delivery being herein called
the "Closing
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Time"). Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery of
the Securities in book-entry form only, through the facilities of DTC, to
Merrill Lynch, for the respective accounts of the Initial Purchasers.
(c) Qualified Institutional Buyer. Each Initial Purchaser severally and
not jointly represents and warrants to, and agrees with, the Company that it is
a "qualified institutional buyer" within the meaning of Rule 144A under the 1933
Act (a "Qualified Institutional Buyer").
(d) Denominations; Registration. A single global certificate
representing the Securities shall be registered in the name of Cede & Co.
pursuant to the DTC Agreement and shall be delivered to the Trustee, as
custodian for DTC, at or prior to the Closing Time.
SECTION 3. Covenants of the Company.
The Company covenants with each Initial Purchaser as follows:
(a) Offering Memorandum. The Company, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of the
Preliminary Offering Memorandum, the Final Offering Memorandum and any
amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
(b) Notice and Effect of Material Events. The Company will immediately
notify each Initial Purchaser, and confirm such notice in writing, of (x) any
filing made by the Company of information relating to the offering of the
Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (y) prior to the completion of the
placement of the Securities by the Initial Purchasers as evidenced by a notice
in writing from the Initial Purchasers to the Company, any material changes in
or affecting the earnings, business affairs or business prospects of the Company
and its subsidiaries which (i) make any statement in the Offering Memorandum
false or misleading or (ii) are not disclosed in the Offering Memorandum. In
such event or if during such time any event shall occur as a result of which it
is necessary, in the reasonable opinion of the Company, its counsel, the Initial
Purchasers or counsel for the Initial Purchasers, to amend or supplement the
Final Offering Memorandum in order that the Final Offering Memorandum not
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances then existing, the Company will forthwith amend or supplement
the Final Offering Memorandum by preparing and furnishing to each Initial
Purchaser an amendment or amendments of, or a supplement or supplements to, the
Final Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Final Offering Memorandum will not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances existing at the time
it is delivered to a Subsequent Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Company will
advise each Initial Purchaser promptly of any proposal to amend or supplement
the Offering Memorandum and will not effect such amendment or supplement without
the consent of the Initial Purchasers. Neither the consent of the Initial
Purchasers, nor the Initial Purchaser's delivery of any such amendment or
supplement, shall constitute a waiver of any of the conditions set forth in
Section 5 hereof.
(d) Qualification of Securities for Offer and Sale. The Company will
use its reasonable best efforts, in cooperation with the Initial Purchasers, to
qualify the Securities for offering and sale under the applicable securities
laws of such jurisdictions as the Initial Purchasers may designate and will
maintain such
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<PAGE> 12
qualifications in effect as long as required for the sale of the Securities;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any U.S. jurisdiction in which it is not so qualified or
to subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise so subject.
(e) Rating of Securities. The Company shall take all reasonable action
necessary to enable Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc. ("S&P"), and Moody's Investors Service, Inc. ("Moody's") to
provide their respective credit ratings of the Securities.
(f) DTC. The Company will cooperate with the Initial Purchasers and use
its reasonable best efforts to permit the Securities to be eligible for
clearance and settlement through the facilities of DTC.
(g) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds."
(h) Restriction on Sale of Securities. During a period of 180 days from
the date of the Final Offering Memorandum, the Company will not, without the
prior written consent of Merrill Lynch, directly or indirectly, issue, sell,
offer or agree to sell, grant any option for the sale of, or otherwise dispose
of, any debt securities of the Company or securities of the Company that are
convertible into, or exchangeable for, debt securities (in each case, except as
contemplated by the Registration Rights Agreement).
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and any filing of the Offering Memorandum (including
financial statements and any schedules or exhibits and any document incorporated
therein by reference) and of each amendment or supplement thereto, (ii) the
printing or reproducing and delivery to the Initial Purchasers of this
Agreement, any Agreement among Initial Purchasers, the Indenture, the
Registration Rights Agreement and such other documents as may be required in
connection with the offering, purchase, sale and delivery of the Securities,
(iii) the preparation, issuance and delivery of the certificates for the
Securities to the Initial Purchasers, including any charges of DTC in connection
therewith, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Initial
Purchasers in connection therewith and in connection with the preparation of the
blue sky survey or any supplement thereto, (vi) the fees and expenses of the
Trustee, including the fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities, (vii) any fees payable in
connection with the rating of the Securities, and (viii) any fees payable to the
review by the National Association of Securities Dealers, Inc. (the "NASD") in
connection with the initial and continued designation of the Securities as
PORTAL securities under the PORTAL Market Rules pursuant to NASD Rule 5322.
(b) Termination of Agreement. If this Agreement is terminated by the
Initial Purchasers in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Initial Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations.
The obligations of the several Initial Purchasers hereunder are subject
to the accuracy of the representations and warranties of the Company contained
in Section 1 hereof or in certificates of any officer
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of the Company or its subsidiaries delivered pursuant to the provisions hereof,
to the performance by the Company of its covenants and other obligations
hereunder, and to the following further conditions:
(a) Opinions of Counsel for Company. At the Closing Time, the Initial
Purchasers shall have received the favorable opinions, dated as of the Closing
Time, of (i) Baker & Botts L.L.P., counsel for the Company, in form and
substance reasonably satisfactory to counsel for the Initial Purchasers, to the
effect set forth in Exhibit A-1 hereto, and (ii) Gerald A. Morton, Vice
President -- Law and Corporate Secretary of the Company, in form and substance
reasonably satisfactory to counsel for the Initial Purchasers, to the effect set
forth in Exhibit A-2 hereto.
(b) Opinion of Counsel for Initial Purchasers. At the Closing Time, the
Initial Purchasers shall have received the favorable opinion, dated as of the
Closing Time, of Vinson & Elkins L.L.P., counsel for the Initial Purchasers,
with respect to the incorporation of the Company, the validity of the Indenture,
the Securities, the Offering Memorandum and other related matters as you may
reasonably request. The Company confirms that Vinson & Elkins L.L.P., by virtue
of its acting as counsel to the Initial Purchasers, has not established and is
not establishing an attorney-client relationship with the Company, as the
Company is separately represented in this transaction by counsel of its own
choosing; provided, however, that it is understood that, Vinson & Elkins L.L.P.,
by virtue of its acting as counsel to the Initial Purchasers, has access to
material confidential information of the Company and that such access to that
information may preclude Vinson & Elkins L.L.P. from undertaking a legal
representation adverse to the Company.
(c) Officers' Certificate. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Initial Purchasers shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of the Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and warranties in
Section 1 hereof are true and correct with the same force and effect as though
expressly made at and as of the Closing Time, and (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Time.
(d) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Initial Purchasers shall have received from Arthur Andersen LLP a
letter dated such date, in form and substance satisfactory to the Initial
Purchasers, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to initial purchasers with respect to
the financial statements and certain financial information contained in the
Offering Memorandum.
(e) Bring-down Comfort Letter. At the Closing Time, the Initial
Purchasers shall have received from Arthur Andersen LLP a letter, dated as of
the Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (d) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
(f) Maintenance of Ratings. At the Closing Time, the Securities shall
be rated at least "B2" by Moody's and "B+" by S&P, and the Company shall have
delivered to the Initial Purchasers a letter dated the Closing Time, from each
such rating agency, or other evidence satisfactory to the Initial Purchasers,
confirming that the Securities have such ratings; and since the date of this
Agreement, there shall not have occurred a downgrading in the rating assigned to
the Securities or any of the Company's other debt securities by any nationally
recognized securities rating agency, and no such securities rating agency shall
have
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<PAGE> 14
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of the Securities or any of the Company's
other debt securities.
(g) PORTAL. At the Closing Time, the Securities shall have been
designated for trading on PORTAL.
(h) Additional Documents. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents and opinions as they
may reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the
Initial Purchasers and counsel for the Initial Purchasers.
(i) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Initial Purchasers by notice to the Company
at any time at or prior to the Closing Time, and such termination shall be
without liability of any party to any other party except as provided in Section
4 and except that Sections 7 and 8 shall survive any such termination and remain
in full force and effect.
SECTION 6. Subsequent Offers and Sales of the Securities.
(a) Offer and Sale Procedures. Each of the Initial Purchasers and the
Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i) Offers and Sales only to Qualified Institutional Buyers.
Offers and sales of the Securities will be made only by the Initial
Purchasers or Affiliates thereof qualified to do so in the jurisdiction
in which such offers or sales are made. Each such offer or sale shall
only be made to persons whom the offeror or seller reasonably believes
to be qualified institutional buyers (as defined in Rule 144A) in
transactions meeting the requirements of Rule 144A.
(ii) Restrictions on Transfer. The transfer restrictions and
the other provisions set forth in Section 2.7 of the Indenture,
including the legend required thereby, shall apply to the Securities
except as otherwise agreed by the Company and the Initial Purchasers.
Following the sale of the Securities by the Initial Purchasers to
Subsequent Purchasers pursuant to the terms hereof, the Initial
Purchasers shall not be liable or responsible to the Company for any
losses, damages or liabilities suffered or incurred by the Company,
including any losses, damages or liabilities under the 1933 Act,
arising from or relating to any resale or transfer of any Security.
(iii) Delivery of Offering Memorandum. Each Initial Purchaser
will deliver to each purchaser of the Securities from such Initial
Purchaser, in connection with its original distribution of the
Securities, a copy of the Offering Memorandum, as amended and
supplemented at the date of such delivery.
(b) Covenants of the Company. The Company covenants with each Initial
Purchaser as follows:
(i) Due Diligence. In connection with the original
distribution of the Securities, the Company agrees that, prior to any
offer or resale of the Securities by the Initial Purchasers, the
Initial Purchasers and counsel for the Initial Purchasers shall have
the right to make reasonable inquiries into the business of the Company
and its subsidiaries. The Company also agrees to provide
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<PAGE> 15
answers to each prospective Subsequent Purchaser of Securities who so
requests concerning the Company and its subsidiaries (to the extent
that such information is available and has been previously provided to
the public and can be acquired and made available to prospective
Subsequent Purchasers without unreasonable effort or expense and to the
extent the provision thereof is not prohibited by contract or
applicable law) and the terms and conditions of the offering of the
Securities, as provided in the Offering Memorandum.
(ii) Rule 144A Information. The Company agrees that, in order
to render the Securities eligible for resale pursuant to Rule 144A
under the 1933 Act, while any of the Securities remains outstanding, it
will make available, upon request, to any holder of Securities or
prospective purchasers of Securities the information specified in Rule
144A(d)(4), unless the Company furnishes information to the Commission
pursuant to Section 13 or 15(d) of the 1934 Act.
(iii) Restriction on Repurchases. Until the expiration of two
years after the original issuance of the Securities, the Company will
not, and will cause its Affiliates not to, purchase or agree to
purchase or otherwise acquire any Securities which are "restricted
securities" (as such term is defined under Rule 144(a)(3) under the
1933 Act), whether as beneficial owner or otherwise (except as agent
acting as a securities broker on behalf of and for the account of
customers in the ordinary course of business in unsolicited broker's
transactions) unless, immediately upon any such purchase, the Company
or any Affiliate shall submit such Securities to the Trustee for
cancellation.
SECTION 7. Indemnification.
(a) Indemnification of Initial Purchasers. The Company agrees to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act 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
Preliminary Offering Memorandum or the Final Offering Memorandum (or
any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(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 7(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 Merrill
Lynch), 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 this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission
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<PAGE> 16
made in reliance upon and in conformity with written information furnished to
the Company by any Initial Purchaser through Merrill Lynch expressly for use in
the Offering Memorandum (or any amendment thereto).
(b) Indemnification of Company, Directors and Officers. Each Initial
Purchaser severally agrees to indemnify and hold harmless the Company, each
officer and director of the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Offering Memorandum in reliance upon
and in conformity with written information furnished to the Company by such
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum.
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 7(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7 or Section
8 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding 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 7(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 7(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.
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SECTION 8. Contribution.
If the indemnification provided for in Section 7 hereof is for any
reason unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Initial Purchasers on
the other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total initial purchasers' discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Company on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Initial Purchasers 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 above in this Section 8. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 8 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party 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 or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Initial Purchaser 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 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each officer and director of the Company and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act
-14-
<PAGE> 18
shall have the same rights to contribution as the Company. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 8 are
several in proportion to the principal amount of Securities set forth opposite
their respective names in Schedule A hereto and not joint.
SECTION 9. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Initial Purchaser or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the Initial Purchasers.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Initial Purchasers may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Offering
Memorandum, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Initial Purchasers, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or limited by the Commission or the
New York Stock Exchange, or if trading generally on the American Stock Exchange
or the New York Stock Exchange or in the NASDAQ National Market System has been
suspended or limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the NASD or any other governmental
authority, or (iv) if a banking moratorium has been declared by either Federal
or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 11. Default by One of the Initial Purchasers.
If one of the Initial Purchasers shall fail at the Closing Time to
purchase the Securities which it is obligated to purchase under this Agreement
(the "Defaulted Securities"), the other Initial Purchaser shall have the right,
but not the obligation, within 24 hours thereafter, to make arrangements for
itself, or any other Initial Purchasers, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, the Initial Purchasers shall not have
completed such arrangements within such 24-hour period, then this Agreement
shall terminate without liability on the part of the non-defaulting Initial
Purchaser.
No action taken pursuant to this Section shall relieve the defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Initial Purchasers or the Company shall have the
right to postpone the Closing Time for a period not
-15-
<PAGE> 19
exceeding seven days in order to effect any required changes in the Offering
Memorandum or in any other documents or arrangements. As used herein, the term
"Initial Purchaser" includes any person substituted for an Initial Purchaser
under this Section 11.
SECTION 12. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Initial Purchasers shall be directed
to Merrill Lynch, Pierce, Fenner & Smith Incorporated at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Michael F. Senft;
notices to the Company shall be directed to it at Pogo Producing Company, 5
Greenway Plaza, Suite 2700, Houston, Texas 77046- 0504, attention: Corporate
Secretary.
SECTION 13. Parties.
This Agreement shall each inure to the benefit of and be binding upon
the Initial Purchasers and the Company and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Initial Purchasers and the
Company and their respective successors and the controlling persons and officers
and directors referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Initial Purchasers and the Company and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Initial Purchaser shall be
deemed to be a successor by reason merely of such purchase.
SECTION 14. Governing Law and Time.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS OTHERWISE SET FORTH HEREIN
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
-16-
<PAGE> 20
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
POGO PRODUCING COMPANY
By: /s/ JOHN W. ELSENHANS
--------------------------------------------
Name: John W. Elsenhans
Title: Vice President and Chief Financial
Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ MARISA D. DREW
-----------------------------------
Authorized Signatory
GOLDMAN, SACHS & CO.
By: /s/ GOLDMAN, SACHS & CO.
-----------------------------------
Authorized Signatory
-17-
<PAGE> 21
SCHEDULE A
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF INITIAL PURCHASER OF SECURITIES
------------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated....................... $ 97,500,000
Goldman, Sachs & Co...................................................... $ 52,500,000
------------
Total........................................................... $150,000,000
============
</TABLE>
-18-
<PAGE> 22
SCHEDULE B
POGO PRODUCING COMPANY
$150,000,000 Senior Subordinated Notes due 2009
1. The initial public offering price of the Securities shall be 97.7%
of the principal amount thereof, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Initial Purchasers for the
Securities shall be 95.95% of the principal amount thereof.
3. Interest on the Securities shall be payable at the rate of 10 3/8%
per annum, and shall be payable semi-annually in arrears on February 15 and
August 15 of each year, commencing August 15, 1999.
4. The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after February 15, 2004, at the redemption
prices (expressed as percentages of the principal amount) set forth below, plus
accrued and unpaid interest, if any, to the redemption date, if redeemed during
the 12-month period beginning on February 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PRICE
---- -------
<S> <C>
2004.................................... 105.188%
2005.................................... 103.458%
2006.................................... 101.729%
2007.................................... 100.000%
</TABLE>
-19-
<PAGE> 23
EXHIBIT A-1
FORM OF OPINION OF BAKER & BOTTS, L.L.P.
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware.
(ii) The Company has corporate power and authority to own its
properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the
Purchase Agreement and the Registration Rights Agreement.
(iii) The Purchase Agreement and the Registration Rights
Agreement have been duly authorized, executed and delivered by the
Company.
(iv) The Indenture has been duly authorized, executed and
delivered by the Company and (assuming the due authorization, execution
and delivery thereof by the Trustee) constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(v) The Securities have been duly authorized by the Company,
the global certificate representing the Securities is in the form
contemplated by the Indenture and has been duly executed by the Company
and, when such global certificate has been authenticated by the Trustee
in the manner provided in the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee)
and the Securities have been delivered through the facilities of DTC
against payment of the purchase price therefor, the Securities will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium (including, without limitation, all laws
relating to fraudulent transfers), or other similar laws relating to or
affecting enforcement of creditor's rights generally, or by general
principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law), and will be entitled to the
benefits of the Indenture.
(vi) The Securities, the Indenture and the Registration Rights
Agreement conform, as to legal matters, in all material respects to the
descriptions thereof contained in the Offering Memorandum.
(vii) No authorization, approval, consent or order of any
court or governmental authority or agency other than such as may be
required under the applicable securities laws of the various
jurisdictions in which the Securities will be offered or sold (as to
which we express no opinion) is required to be obtained by the Company
in connection with the due authorization, execution and delivery of the
Purchase Agreement or the due execution, delivery or performance of the
Indenture by the Company or for the offering, issuance, sale or
delivery of the Securities to the Initial Purchasers or the resale by
the Initial Purchasers in accordance with the Purchase Agreement.
A1-1
<PAGE> 24
(viii) It is not necessary in connection with the offer, sale
and delivery of the Securities to the Initial Purchasers and to each
Subsequent Purchaser in the manner contemplated by the Purchase
Agreement and the Offering Memorandum to register the Notes under the
1933 Act or to qualify the Indenture under the Trust Indenture Act.
(ix) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the 1940 Act.
We have participated in conferences with certain officers and
representatives of the Company, representatives of the Initial Purchasers,
counsel to the Initial Purchasers and representatives of the independent public
accountants of the Company at which the contents of the Offering Memorandum and
related matters were discussed and, although we are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum, on the basis of the foregoing
(relying in part upon the statements of officers and other representatives of
the Company), no facts have come to our attention that have caused us to believe
that the Offering Memorandum (other than the reserve information, financial
statements and other financial data included or incorporated by reference in the
Offering Memorandum, as to which we have not been asked to comment), as of its
date or as of the date hereof, contained or contains any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
The opinions set forth above are limited in all respects to matters of
the laws of the State of Texas, the General Corporation Law of the State of
Delaware, the contract law of the State of New York and the applicable federal
laws of the United States, each as in effect on the date hereof.
In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
A1-2
<PAGE> 25
EXHIBIT A-2
FORM OF OPINION OF GERALD A. MORTON
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.
(ii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Offering Memorandum in the column
entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to the Purchase Agreement or
pursuant to reservations, agreements, employee or director benefit
plans or the exercise of convertible securities or options referred to
in the Offering Memorandum). The shares of issued and outstanding
capital stock of the Company have been duly authorized and validly
issued and are fully paid and non assessable, and none of the
outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company.
(iii) Each Designated Subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum and is duly qualified
as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect, all of the
issued and outstanding capital stock of each Designated Subsidiary has
been duly authorized and validly issued, is fully paid and
non-assessable and, (except for directors' qualifying shares or shares
representing an immaterial equity interest that are required under the
laws of any foreign jurisdiction to be owned by others, and except as
set forth in the Offering Memorandum) is owned by the Company, directly
or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity.
(iv) The documents filed with the Commission pursuant to the
1934 Act that are incorporated by reference in the Offering Memorandum
(other than the financial statements, other financial information and
reserve information and supporting schedules therein, as to which I
express no opinion), when filed with the Commission, complied as to
form in all material respects with the requirements of the 1934 Act and
the rules and regulations of the Commission thereunder.
(v) There is not pending or, to the best of my knowledge,
threatened any action, suit, proceeding, inquiry or investigation, to
which the Company or any subsidiary is a party, or to which the
property of the Company or any subsidiary thereof is subject, before or
brought by any court or governmental agency or body, which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
consummation of the transactions contemplated in the Purchase Agreement
or the performance by the Company of its obligations thereunder or the
transactions contemplated by the Offering Memorandum;
A2-1
<PAGE> 26
(vi) The execution, delivery and performance of the Purchase
Agreement, the DTC Agreement, the Indenture, the Registration Rights
Agreement and the Securities and the consummation of the transactions
contemplated in the Purchase Agreement, the Registration Rights
Agreement and in the Offering Memorandum (including the use of the
proceeds from the sale of the Securities as described in the Offering
Memorandum under the caption "Use of Proceeds") and compliance by the
Company with its obligations under the Purchase Agreement, the
Registration Rights Agreement, the Indenture and the Securities will
not, whether with or without the giving of notice or lapse of time or
both, conflict with or constitute a breach of, or default or Repayment
Event under or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any
subsidiary thereof pursuant to any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or any other agreement
or instrument, known to me, to which the Company or its subsidiaries is
a party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any subsidiary thereof is
subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a Material Adverse Effect),
nor will such action result in any violation of the provisions of the
charter, by-laws or other governing document, as applicable, of the
Company or its subsidiaries, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to me (other than
federal and state securities or blue sky laws, as to which I express no
opinion), of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties, assets or
operations.
In addition, I have participated in the preparation of the Offering
Memorandum (except for the financial statements and other financial and reserve
information contained or incorporated by reference therein, as to which I
express no opinion) and nothing has come to my attention that leads me to
believe that the Offering Memorandum contained as of its date, or contains as of
the date of this opinion, an untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent he deems proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
A2-2
<PAGE> 27
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
[INCLUDED IN EXHIBIT 4.3 TO THE REGISTRATION STATEMENT ON FORM S-4]
A2-3
<PAGE> 1
Exhibit 4.2
- --------------------------------------------------------------------------------
POGO PRODUCING COMPANY
AND
STATE STREET BANK AND TRUST COMPANY
Trustee
----------------------
Indenture
Dated as of January 15, 1999
----------------------
$150,000,000
10 3/8% Series A Senior Subordinated Notes due 2009
and
10 3/8% Series B Senior Subordinated Notes due 2009
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
<S> <C> <C> <C>
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....................................................38
SECTION 2.7 Transfer and Exchange...............................................................38
SECTION 2.8 Additional Provisions for Global Securities.........................................44
SECTION 2.9 Mutilated, Destroyed, Lost and Stolen Securities....................................44
SECTION 2.10 Payment of Interest; Interest Rights Preserved......................................45
SECTION 2.11 Persons Deemed Owners...............................................................46
SECTION 2.12 Cancellation........................................................................46
SECTION 2.13 Computation of Interest.............................................................46
SECTION 2.14 CUSIP Numbers.......................................................................47
ARTICLE III
SATISFACTION AND DISCHARGE
SECTION 3.1 Satisfaction and Discharge of Indenture.............................................47
SECTION 3.2 Application of Trust Money..........................................................48
</TABLE>
i
<PAGE> 3
ARTICLE IV
REMEDIES
<TABLE>
<S> <C> <C> <C>
SECTION 4.1 Events of Default...................................................................49
SECTION 4.2 Acceleration of Maturity; Rescission and Annulment..................................51
SECTION 4.3 Collection of Indebtedness and Suits for Enforcement by Trustee.....................53
SECTION 4.4 Trustee May File Proofs of Claim....................................................53
SECTION 4.5 Trustee May Enforce Claims Without Possession of Securities.........................54
SECTION 4.6 Application of Money Collected......................................................54
SECTION 4.7 Limitation on Suits.................................................................55
SECTION 4.8 Unconditional Right of Holders to Receive Principal, Premium and Interest...........56
SECTION 4.9 Restoration of Rights and Remedies..................................................56
SECTION 4.10 Rights and Remedies Cumulative......................................................56
SECTION 4.11 Delay or Omission Not Waiver........................................................56
SECTION 4.12 Control by Holders..................................................................57
SECTION 4.13 Waiver of Past Defaults.............................................................57
SECTION 4.14 Waiver of Stay, Extension or Usury Laws.............................................57
SECTION 4.15 Undertaking for Costs...............................................................58
ARTICLE V
THE TRUSTEE
SECTION 5.1 Notice of Defaults..................................................................58
SECTION 5.2 Certain Rights of Trustee...........................................................58
SECTION 5.3 Trustee Not Responsible for Recitals or Issuance of Securities......................60
SECTION 5.4 May Hold Securities.................................................................60
SECTION 5.5 Money Held in Trust.................................................................60
SECTION 5.6 Compensation and Reimbursement......................................................60
SECTION 5.7 Corporate Trustee Required; Eligibility.............................................61
SECTION 5.8 Conflicting Interests...............................................................62
SECTION 5.9 Resignation and Removal; Appointment of Successor...................................62
SECTION 5.10 Acceptance of Appointment by Successor..............................................63
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.........................64
SECTION 5.12 Preferential Collection of Claims Against Company...................................64
</TABLE>
ii
<PAGE> 4
ARTICLE VI
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
<TABLE>
<S> <C> <C> <C>
SECTION 6.1 Disclosure of Names and Addresses of Holders........................................64
SECTION 6.2 Reports By Trustee..................................................................65
SECTION 6.3 Reports by Company..................................................................65
ARTICLE VII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 7.1 Company May Consolidate, etc., Only on Certain Terms................................66
SECTION 7.2 Successor Substituted...............................................................67
ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures without Consent of Holders..................................68
SECTION 8.2 Supplemental Indentures with Consent of Holders.....................................69
SECTION 8.3 Execution of Supplemental Indentures................................................70
SECTION 8.4 Effect of Supplemental Indentures...................................................70
SECTION 8.5 Conformity with Trust Indenture Act.................................................70
SECTION 8.6 Reference in Securities to Supplemental Indentures..................................70
SECTION 8.7 Notice of Supplemental Indentures...................................................71
ARTICLE IX
COVENANTS
SECTION 9.1 Payment of Principal, Premium, if any, and Interest.................................71
SECTION 9.2 Maintenance of Office or Agency.....................................................71
SECTION 9.3 Money for Security Payments to Be Held in Trust.....................................72
SECTION 9.4 Corporate Existence.................................................................73
SECTION 9.5 Payment of Taxes and Other Claims...................................................73
SECTION 9.6 Maintenance of Properties...........................................................74
SECTION 9.7 Insurance...........................................................................74
SECTION 9.8 Statement by Officers as to Default.................................................74
SECTION 9.9 Reports.............................................................................75
SECTION 9.10 Limitation on Restricted Payments...................................................75
SECTION 9.11 Limitation on Indebtedness..........................................................79
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
SECTION 9.12 Limitation on Non-Guarantor Restricted Subsidiaries.................................80
SECTION 9.13 Limitation on Issuances and Sales of Restricted Subsidiary Capital Stock............81
SECTION 9.14 Limitation on Liens.................................................................81
SECTION 9.15 Change of Control...................................................................82
SECTION 9.16 Limitation on Disposition of Proceeds of Asset Sales................................83
SECTION 9.17 Limitation on Transactions with Affiliates..........................................86
SECTION 9.18 Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries.............................................................87
SECTION 9.19 Limitation on Other Senior Subordinated Indebtedness................................88
SECTION 9.20 Limitation on Conduct of Business...................................................88
SECTION 9.21 Registration Rights Agreement.......................................................88
SECTION 9.22 Waiver of Certain Covenants.........................................................88
ARTICLE X
REDEMPTION OF SECURITIES
SECTION 10.1 Right of Redemption.................................................................88
SECTION 10.2 Applicability of Article............................................................89
SECTION 10.3 Election to Redeem; Notice to Trustee...............................................89
SECTION 10.4 Selection by Trustee of Securities to Be Redeemed...................................89
SECTION 10.5 Notice of Redemption................................................................90
SECTION 10.6 Deposit of Redemption Price.........................................................90
SECTION 10.7 Securities Payable on Redemption Date...............................................91
SECTION 10.8 Securities Redeemed in Part.........................................................91
ARTICLE XI
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 11.1 Company's Option to Effect Defeasance or Covenant Defeasance........................91
SECTION 11.2 Defeasance and Discharge............................................................92
SECTION 11.3 Covenant Defeasance.................................................................92
SECTION 11.4 Conditions to Defeasance or Covenant Defeasance.....................................93
SECTION 11.5 Deposited Money and U.S. Government Obligations to Be Held in Trust;
Other Miscellaneous Provisions......................................................94
SECTION 11.6 Reinstatement.......................................................................95
</TABLE>
iv
<PAGE> 6
ARTICLE XII
GUARANTEES
<TABLE>
<S> <C> <C> <C>
SECTION 12.1 Unconditional Guarantee.............................................................95
SECTION 12.2 Subsidiary Guarantors May Consolidate, etc. on Certain Terms........................97
SECTION 12.3 Release of a Subsidiary Guarantor...................................................98
SECTION 12.4 Limitation of Subsidiary Guarantor's Liability......................................98
SECTION 12.5 Contribution........................................................................98
SECTION 12.6 Execution and Delivery of Notation of Subsidiary Guarantee..........................99
SECTION 12.7 Severability........................................................................99
SECTION 12.8 Subsidiary Guarantees Subordinated to Guarantor Senior Indebtedness.................99
SECTION 12.9 Subsidiary Guarantors Not to Make Payments with Respect to Subsidiary
Guarantees in Certain Circumstances................................................100
SECTION 12.10 Subsidiary Guarantees Subordinated to Prior Payment of All Guarantor
Senior Indebtedness upon Dissolution, etc..........................................101
SECTION 12.11 Holders to be Subrogated to Rights of Holders of Guarantor Senior
Indebtedness.......................................................................103
SECTION 12.12 Obligations of the Subsidiary Guarantors Unconditional.............................103
SECTION 12.13 Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice............104
SECTION 12.14 Application by Trustee of Money Deposited with it..................................104
SECTION 12.15 Subordination Rights Not Impaired by Acts or Omissions of Subsidiary
Guarantors or Holders of Guarantor Senior Indebtedness.............................105
SECTION 12.16 Holders Authorize Trustee to Effectuate Subordination of Subsidiary
Guarantees.........................................................................106
SECTION 12.17 Right of Trustee to Hold Guarantor Senior Indebtedness.............................106
SECTION 12.18 Article XII Not to Prevent Events of Default.......................................106
SECTION 12.19 Payment............................................................................106
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1 Securities Subordinate to Senior Indebtedness......................................106
SECTION 13.2 Payment Over of Proceeds upon Dissolution, etc.....................................107
SECTION 13.3 Suspension of Payment When Senior Indebtedness in Default..........................108
SECTION 13.4 Trustee's Relation to Senior Indebtedness..........................................110
SECTION 13.5 Subrogation to Rights of Holders of Senior Indebtedness............................110
SECTION 13.6 Provisions Solely To Define Relative Rights........................................111
SECTION 13.7 Trustee To Effectuate Subordination................................................111
SECTION 13.8 No Waiver of Subordination Provisions..............................................112
SECTION 13.9 Notice to Trustee..................................................................112
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
SECTION 13.10 Reliance on Judicial Order or Certificate of Liquidating Agent.....................113
SECTION 13.11 Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's
Rights.............................................................................113
SECTION 13.12 Article Applicable to Paying Agents................................................114
SECTION 13.13 No Suspension of Remedies..........................................................114
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Compliance Certificates and Opinions...............................................114
SECTION 14.2 Form of Documents Delivered to Trustee.............................................115
SECTION 14.3 Acts of Holders....................................................................115
SECTION 14.4 Notices, etc. to Trustee, Company and Subsidiary Guarantors........................117
SECTION 14.5 Notice to Holders; Waiver..........................................................117
SECTION 14.6 Effect of Headings and Table of Contents...........................................118
SECTION 14.7 Successors and Assigns.............................................................118
SECTION 14.8 Separability Clause................................................................118
SECTION 14.9 Benefits of Indenture..............................................................118
SECTION 14.10 Governing Law; Trust Indenture Act Controls........................................118
SECTION 14.11 Legal Holidays.....................................................................119
SECTION 14.12 No Recourse Against Others.........................................................119
SECTION 14.13 Duplicate Originals................................................................119
SECTION 14.14 No Adverse Interpretation of Other Agreements......................................119
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
</TABLE>
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 January 15, 1999 between POGO PRODUCING COMPANY, a
Delaware corporation (hereinafter called the "Company") and State Street Bank
and Trust Company, 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 10 3/8% Series A
Senior Subordinated Notes due 2009 (the "Series A Securities") and the Company's
10 3/8% Series B Senior Subordinated Notes due 2009 (the "Series B Securities"
and, collectively with the Series A Securities, the "Securities" or each, a
"Security").
This Indenture shall be subject to the provisions of the Trust Indenture
Act that are required to be part of an indenture qualified thereunder 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
payable
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<PAGE> 10
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 (using the
prices used 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 (using the
prices used 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 used 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
2
<PAGE> 11
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 (using the prices used 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 of
4
<PAGE> 13
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
7
<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
8
<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 Goodwin Square, 225 Asylum Street, 23rd Floor, Hartford, Connecticut
06103, Attention: Corporate Trust Administration.
"Credit Agreement" means the Amended and Restated Credit Agreement dated
August 1, 1997 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 has been and 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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"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 (g)
of the first
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<PAGE> 22
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 such
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<PAGE> 23
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, to
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<PAGE> 24
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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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
January 12, 1999, 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 (a) the Company's 8 3/4% Senior
Subordinated Notes due 2007 issued under the Indenture dated as of May 15, 1997
between the Company and Fleet National Bank (the Trustee has succeeded to the
interest of Fleet National Bank under such Indenture), and (b) any other
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, pursuant
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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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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 payment
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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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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 January 15, 1999, among the Company and the Initial
Purchasers.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the February 1 or August 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 Services, 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 10 3/8% Series A Senior Notes
due 2009 to be issued pursuant to this Indenture.
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"Series B Securities" means the Company's 10 3/8% Series B Senior Notes
due 2009 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 (the Trustee has succeeded to the
interest of Fleet National Bank under such Indenture), as Trustee, and (b) 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 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 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 a senior subordinated 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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"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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"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 $150,000,000 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 Series A Securities shall be known and designated as the "10 3/8%
Series A Senior Subordinated Notes due 2009" of the Company, and the Series B
Securities shall be known and designated as the "10 3/8% Series B Senior
Subordinated Notes due 2009" of the Company. Their Stated Maturity shall be
February 15, 2009, and they shall bear interest at the rate of 10 3/8% per annum
from January 15, 1999, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable semiannually on February 15
and August 15 in each year, commencing August 15, 1999, and at said Stated
Maturity, until the principal thereof is paid or duly provided for.
The Series A Securities and the Series B Securities shall be considered
collectively to be single class for all purposes of this Indenture, including
waivers, amendments, redemptions and offers to purchase.
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.
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<PAGE> 44
The Securities shall be subject to defeasance at the option of the
Company as provided in Article XI hereof.
Initially, the Securities shall not be guaranteed by any Subsidiary of
the Company. In the circumstances set forth in Section 9.12(a) hereof, however,
the Securities shall be guaranteed in the future by the Subsidiary Guarantors as
provided in Article XII hereof.
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 or affixed thereto 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
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<PAGE> 45
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 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.
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<PAGE> 46
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 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 Security 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 Security
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
Security Registrar may conclusively rely:
(A) if such Transfer Restricted Securities
are being delivered to the Security 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
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<PAGE> 47
(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 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.
(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 only under the circumstances contemplated by
subsection (f) of this Section 2.7.
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<PAGE> 48
(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; or
(ii) 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.
(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
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<PAGE> 49
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 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
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<PAGE> 50
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.
(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 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 Security 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.
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(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).
(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.
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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.
(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.
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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 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
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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.
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.
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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.
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
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(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;
(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.
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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
(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
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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
(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
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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 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
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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
(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 Purchase 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.
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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 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
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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 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:
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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.
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 aggregate 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.
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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.
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.
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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
(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
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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 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
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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 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
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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 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
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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 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
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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. The indenture of the Company dated as of May 15, 1997
relating to its 8 3/4% Senior Subordinated Notes due 2007 shall be excluded from
the operation of paragraph (1) of Section 310(b).
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.
(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,
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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 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.
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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 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).
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Section 6.2 Reports By Trustee.
Within 60 days after May 15 of each year commencing with May 15, 1999,
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:
(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,
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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 Properties 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 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;
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(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;
(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
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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.
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
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(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 9.12(a) hereof or 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 as provided in Section 12.2(b) hereof; or
(h) to release a Subsidiary Guarantor from its Subsidiary
Guarantee pursuant to Section 9.12(b) hereof; or
(i) to provide for uncertificated Securities in addition to or
in place of certificated Securities.
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;
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(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.
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
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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.
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, the
Registration Rights Agreement 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 State Street Bank and Trust Company, N.A., 61 Broadway, 15th Floor,
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.
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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.
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
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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 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.
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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 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
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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 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. 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);
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(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 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
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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 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
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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.
(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
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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
(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,
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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.
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 satisfactory in form to
the Trustee 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.
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(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 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
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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.
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;
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(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 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
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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.
(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
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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 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
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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 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
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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
$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.
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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 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 February 15, 2004, 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
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(expressed as percentages of principal amount) specified in the form of
Security, together with accrued and unpaid interest, if any, to the Redemption
Date.
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.
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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.
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.
If any of the Securities to be redeemed is in the form of a Global
Security, then the Company shall modify such notice to the extent necessary to
accord with the procedures of the Depositary applicable to the redemption.
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.
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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 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.
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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 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.
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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 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.
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(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.
(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
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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.
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 executes and delivers a
supplemental indenture in the manner provided in Section 9.12(a) hereof shall
thereby 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
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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
(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
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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 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.
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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.
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.
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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 thereafter ordered to be authenticated
and delivered by the Trustee, and shall cause 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 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
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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.
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
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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 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
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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 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
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(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.
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
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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, 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.,
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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, 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.
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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 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
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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 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
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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;
(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
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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.
(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
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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 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
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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.
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.
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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.
(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
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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.
(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
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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 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;
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(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).
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
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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 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.
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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
(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.
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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.
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
Security 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. 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 shall be subject to the provisions of the
Trust Indenture Act that are required to be part of an indenture qualified
thereunder and shall, to the extent applicable,
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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.
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.
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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 and
Chief Financial Officer
TRUSTEE:
STATE STREET BANK AND TRUST
COMPANY
as Trustee
By: /s/ PHILIP G. KANE, JR.
------------------------------------
Name: Philip G Kane, Jr.
Title: Vice President
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EXHIBIT A
FORM OF SECURITY
POGO PRODUCING COMPANY
10 3/8% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2009
[FORM OF FACE]
No. _____ $__________
CUSIP No. Series A: 730448-AK3
Series B: 730448-AL1
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 (or such other amount as may be shown on the Schedule of
Exchanges on the reverse hereof) on February 15, 2009, at the office or agency
of the Company referred to below, and to pay interest thereon, commencing on
August 15, 1999 and continuing semiannually thereafter, on February 15 and
August 15 of each year, from January 15, 1999, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of 103/8% 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 February 1 or August 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.
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,
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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 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"
- --------
*This paragraph should be included only if the Security is issued in global
form.
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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.
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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
State Street Bank and Trust Company, as Trustee, certifies that this is one of
the 103/8% Series [A/B] Senior Subordinated Notes due 2009 referred to in the
within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY
By:
---------------------------------
Authorized Signatory
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FORM OF REVERSE OF SECURITY
POGO PRODUCING COMPANY
10 3/8% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2009
This Security is one of a duly authorized issue of securities of the
Company designated as its 103/8% Series [A/B] Senior Subordinated Notes due 2009
(herein called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $150,000,000,
which may be issued under an indenture (herein called the "Indenture") dated as
of January 15, 1999, between the Company and State Street Bank and Trust
Company, 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 February 15, 2004, 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 February 15 of the years indicated
below:
<TABLE>
<CAPTION>
Year Price
---- -----
<S> <C>
2004....................... 105.188%
2005....................... 103.458%
2006....................... 101.729%
2007 and thereafter........ 100.000%
</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> 134
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> 135
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> 136
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.
In addition to the rights provided to Holders of Securities under the
Indenture, Holders of Transfer Restricted Securities shall have the rights set
forth in the Registration Rights Agreement, including the right to receive
additional interest on their Securities as provided therein.
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
A-8
<PAGE> 137
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 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.
A-9
<PAGE> 138
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> 139
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> 140
SCHEDULE OF EXCHANGES*
The following exchanges redemptions or repurchases of a part of this Global
Security 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> 141
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> 142
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 signatories.
[SUBSIDIARY GUARANTOR]
Date: By:
---------------- --------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Attest:
-------------------------
Secretary
B-2
<PAGE> 143
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10 3/8% Series [A/B] Senior Subordinated Notes due 2009 of Pogo Producing
Company (the "Company")
This Certificate relates to $_____ principal amount of Securities held
in definitive form by _____________________ (the "Transferor").
The Transferor 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) 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.
[ ] 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).
C-1
<PAGE> 144
-----------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------------
Name:
Title:
Address:
Date:
--------------------
C-2
<PAGE> 145
EXHIBIT D
TRANSFEREE LETTER OF REPRESENTATIONS
Pogo Producing Company
c/o State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Attn: Corporate Trust Administration
Dear Sirs and Madams:
In connection with our proposed purchase of $_________ aggregate
principal amount of 10 3/8% Senior Subordinated Notes due 2009 (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
D-1
<PAGE> 146
substantially in the form of this letter to the Trustee, which shall provide,
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 4.3
POGO PRODUCING COMPANY
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of January 15, 1999, 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 the initial purchasers (the "Initial Purchasers"),
under the Purchase Agreement (as defined herein), of the 10 3/8% Senior
Subordinated Notes due 2009, of the Company.
The Company proposes to issue and sell the Securities (as defined
herein) to the Initial Purchasers upon the terms set forth in the Purchase
Agreement. 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.
"Exchange Registration" shall have the meaning assigned
thereto in Section 3(c) hereof.
<PAGE> 2
"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 January 15,
1999, among the Company and State Street Bank and Trust Company, as
Trustee, as the same shall be amended from time to time.
"Purchase Agreement" shall mean the Purchase Agreement, dated
as of January 12, 1999, 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 such
holder's business, (iii) a holder who has arrangements or
understandings with any person to
2
<PAGE> 3
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 103/8% Senior
Subordinated Notes due 2009 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
60 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 principal amount of debt securities issued
by the Company (and, if applicable, guarantees issued by
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<PAGE> 4
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 January 15, 1999, 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 135 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 135 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, all of the Registrable Securities, pursuant to Rule 415 or any similar rule
that may be adopted by the
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<PAGE> 5
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 60th day following the Closing
Time, (ii) the Exchange Registration Statement is not declared effective on or
prior to the 135th day following the Closing Time or (iii) the Exchange Offer
(if then required to be made) is not consummated or a Shelf Registration
Statement (if required pursuant to Section
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<PAGE> 6
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 135th 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 60th day described in clause (i) above, (B) the effectiveness of the
Exchange Registration Statement after the 135th 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.
(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):
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<PAGE> 7
(i) use its reasonable best efforts to prepare and file with
the Commission, no later than 60 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 135 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 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
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<PAGE> 8
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);
(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
8
<PAGE> 9
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 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
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<PAGE> 10
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;
(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
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<PAGE> 11
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
registered in such names as the managing underwriters may request at
least two business days prior to any sale of the Registrable
Securities;
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(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 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
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<PAGE> 13
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).
(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,
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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 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
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<PAGE> 15
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 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
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<PAGE> 16
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 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;
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<PAGE> 17
(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
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
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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
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
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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
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.
19
<PAGE> 20
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 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
20
<PAGE> 21
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 and Chief Financial Officer
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
By: MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By: /s/ MARISA D. DREW
--------------------------------------------
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") 10 3/8% Senior Subordinated Notes due 2009 (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.
23
<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") among 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
10 3/8% Senior Subordinated Notes due 2009 (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.
24
<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:
25
<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:
----------------------------
26
<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.
27
<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.
28
<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
29
<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
State Street Bank and Trust Company, as Trustee
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, CT 06103
(860) 244-1897 (fax)
Attention: Phillip Kane
Re: Pogo Producing Company 10 3/8% Senior Subordinated Notes due 2009
Gentlemen:
We hereby certify that Pogo Producing Company (the "Company") and to
State Street Bank and Trust Company, as Trustee, that [NAME OF SELLER] (the
"Seller") sold $[AMOUNT SOLD] of the Company's 103/8% Series A Senior
Subordinated Notes due 2009 (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 Notes (CUSIP
No. 730448 AK 3). 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:
<TABLE>
<CAPTION>
TRADE DATE AMOUNT OF NOTES SOLD
---------- --------------------
<S> <C>
[INSERT TRADE DATE] [AMOUNT SOLD]
</TABLE>
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, and
B-1
<PAGE> 31
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 Notes (CUSIP No. 730448
AK 3) to the Global Security representing the 10 3/8% Series B Senior
Subordinated Notes due 2009 of the Company (CUSIP No. 730448 AL 1).
[SELLER]
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
B-2
<PAGE> 1
EXHIBIT 5.1
February 10, 1999
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 $150,000,000 aggregate principal amount of 10 3/8% Senior Subordinated Notes
due 2009 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 successor in interest to Fleet National Bank, as trustee (the
"Trustee"). At your request, this opinion is being furnished to you for filing
as Exhibit 5.1 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.
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.
<PAGE> 2
FEBRUARY 9, 1999
PAGE 2 OF 2
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 exhibit to the Registration
Statement and to the use of my name under the caption "Legal Matters."
Regards,
Gerald A. Morton
GAM/kbm
<PAGE> 1
EXHIBIT 12.1
POGO PRODUCING COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) before taxes
and extraordinary items .......... $ 40,042 $ 42,891 $ 14,121 $ 52,381 $ 55,207 $ 45,072 $(19,858)
Add--
Fixed charges .................... 11,245 10,377 11,454 13,554 22,361 16,124 17,882
Less--
Capitalized interest ............. (451) (739) (1,834) (4,244) (6,175) (3,463) (6,540)
-------- -------- -------- -------- -------- -------- --------
$ 50,836 $ 52,529 $ 23,741 $ 61,691 $ 71,393 $ 57,733 $ (8,516)
======== ======== ======== ======== ======== ======== ========
FIXED CHARGES:
Interest expense ................... $ 10,956 $ 10,104 $ 11,167 $ 13,203 $ 21,886 $ 15,771 $ 17,513
Portion of rental expense
representing interest ............ 289 273 287 351 475 353 369
-------- -------- -------- -------- -------- -------- --------
Total fixed charges .............. $ 11,245 $ 10,377 $ 11,454 $ 13,554 $ 22,361 $ 16,124 $ 17,882
======== ======== ======== ======== ======== ======== ========
RATIO OF EARNINGS
TO FIXED CHARGES: .................. 4.51 5.1 2.1 4.6 3.2 3.6 N/A*
======== ======== ======== ======== ======== ======== ========
</TABLE>
* The ratio of earnings to fixed charges is not meaningful for periods in
which losses are recorded.
<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 on Form S-4 of our report dated February 13,
1998, included in Pogo Producing Company's Annual Report on Form 10-K for the
year ended December 31, 1997, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Houston, Texas
February 10, 1999
<PAGE> 1
EXHIBIT 23.2
[RYDER SCOTT COMPANY LETTERHEAD]
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 reserve and present value of future net reserves
in such Registration Statement.
/s/ RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
February 8, 1999
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
I, JERRY M. ARMSTRONG, in my individual capacity and as a director of
Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN
and THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the other, and with full power of
substitution and resubstitution, to prepare, execute and file, in my name, place
and stead in my individual capacity and as a director of the Company, such
documents, reports and filings as may be necessary or advisable under the
Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of
1933, as amended (the "Securities Act") or any other federal, state or local law
regulating the Company including, without limitation, the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, as prescribed
by the Securities and Exchange Commission (the "Commission") pursuant to the
Act, and the rules and regulations promulgated thereunder, with any and all
exhibits and other documents relating thereto, any and all amendments to said
Annual Report 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 any act whatsoever to accomplish the purpose
and intent of the foregoing that said attorneys deem may be 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 any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 26th day of
January, 1999.
/s/ JERRY M. ARMSTRONG
-----------------------------------
Jerry M. Armstrong
<PAGE> 2
POWER OF ATTORNEY
I, TOBIN ARMSTRONG, in my individual capacity and as a director of Pogo
Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the other, and with full power of
substitution and resubstitution, to prepare, execute and file, in my name, place
and stead in my individual capacity and as a director of the Company, such
documents, reports and filings as may be necessary or advisable under the
Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of
1933, as amended (the "Securities Act") or any other federal, state or local law
regulating the Company including, without limitation, the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, as prescribed
by the Securities and Exchange Commission (the "Commission") pursuant to the
Act, and the rules and regulations promulgated thereunder, with any and all
exhibits and other documents relating thereto, any and all amendments to said
Annual Report 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 any act whatsoever to accomplish the purpose
and intent of the foregoing that said attorneys deem may be 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 any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 26th day of
January, 1999.
/s/ TOBIN ARMSTRONG
-----------------------------------
Tobin Armstrong
<PAGE> 3
POWER OF ATTORNEY
I, JACK S. BLANTON, in my individual capacity and as a director of Pogo
Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the other, and with full power of
substitution and resubstitution, to prepare, execute and file, in my name, place
and stead in my individual capacity and as a director of the Company, such
documents, reports and filings as may be necessary or advisable under the
Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of
1933, as amended (the "Securities Act") or any other federal, state or local law
regulating the Company including, without limitation, the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, as prescribed
by the Securities and Exchange Commission (the "Commission") pursuant to the
Act, and the rules and regulations promulgated thereunder, with any and all
exhibits and other documents relating thereto, any and all amendments to said
Annual Report 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 any act whatsoever to accomplish the purpose
and intent of the foregoing that said attorneys deem may be 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 any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 26th day of
January, 1999.
/s/ JACK S. BLANTON
-----------------------------------
Jack S. Blanton
<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, 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 8th day of February, 1999.
/s/ W. M. BRUMLEY, JR.
-----------------------------------
W. M. Brumley, Jr.
<PAGE> 5
POWER OF ATTORNEY
I, JOHN B. CARTER, JR., in my individual capacity and as a director of
Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN
and THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the other, and with full power of
substitution and resubstitution, to prepare, execute and file, in my name, place
and stead in my individual capacity and as a director of the Company, such
documents, reports and filings as may be necessary or advisable under the
Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of
1933, as amended (the "Securities Act") or any other federal, state or local law
regulating the Company including, without limitation, the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, as prescribed
by the Securities and Exchange Commission (the "Commission") pursuant to the
Act, and the rules and regulations promulgated thereunder, with any and all
exhibits and other documents relating thereto, any and all amendments to said
Annual Report 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 any act whatsoever to accomplish the purpose
and intent of the foregoing that said attorneys deem may be 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 any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 26th day of
January, 1999.
/s/ JOHN B. CARTER, JR.
-----------------------------------
John B. Carter, Jr.
<PAGE> 6
POWER OF ATTORNEY
I, WILLIAM L. FISHER, in my individual capacity and as a director of
Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN
and THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the other, and with full power of
substitution and resubstitution, to prepare, execute and file, in my name, place
and stead in my individual capacity and as a director of the Company, such
documents, reports and filings as may be necessary or advisable under the
Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of
1933, as amended (the "Securities Act") or any other federal, state or local law
regulating the Company including, without limitation, the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, as prescribed
by the Securities and Exchange Commission (the "Commission") pursuant to the
Act, and the rules and regulations promulgated thereunder, with any and all
exhibits and other documents relating thereto, any and all amendments to said
Annual Report 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 any act whatsoever to accomplish the purpose
and intent of the foregoing that said attorneys deem may be 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 any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 26th day of
January, 1999.
/s/ WILLIAM L. FISHER
-----------------------------------
William L. Fisher
<PAGE> 7
POWER OF ATTORNEY
I, GERRIT W. GONG, in my individual capacity and as a director of Pogo
Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the other, and with full power of
substitution and resubstitution, to prepare, execute and file, in my name, place
and stead in my individual capacity and as a director of the Company, such
documents, reports and filings as may be necessary or advisable under the
Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of
1933, as amended (the "Securities Act") or any other federal, state or local law
regulating the Company including, without limitation, the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, as prescribed
by the Securities and Exchange Commission (the "Commission") pursuant to the
Act, and the rules and regulations promulgated thereunder, with any and all
exhibits and other documents relating thereto, any and all amendments to said
Annual Report 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 any act whatsoever to accomplish the purpose
and intent of the foregoing that said attorneys deem may be 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 any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 27th day of
January, 1999.
/s/ GERRIT W. GONG
-----------------------------------
Gerrit W. Gong
<PAGE> 8
POWER OF ATTORNEY
I, J. STUART HUNT, in my individual capacity and as a director of Pogo
Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the other, and with full power of
substitution and resubstitution, to prepare, execute and file, in my name, place
and stead in my individual capacity and as a director of the Company, such
documents, reports and filings as may be necessary or advisable under the
Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of
1933, as amended (the "Securities Act") or any other federal, state or local law
regulating the Company including, without limitation, the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, as prescribed
by the Securities and Exchange Commission (the "Commission") pursuant to the
Act, and the rules and regulations promulgated thereunder, with any and all
exhibits and other documents relating thereto, any and all amendments to said
Annual Report 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 any act whatsoever to accomplish the purpose
and intent of the foregoing that said attorneys deem may be 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 any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 26th day
of January, 1999.
/s/ J. STUART HUNT
-----------------------------------
J. Stuart Hunt
<PAGE> 9
POWER OF ATTORNEY
I, FREDERICK A. KLINGENSTEIN, in my individual capacity and as a
director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G.
VAN WAGENEN and THOMAS E. HART, and each of them severally, my true and lawful
attorney or attorneys with power to act with or without the other, and with full
power of substitution and resubstitution, to prepare, execute and file, in my
name, place and stead in my individual capacity and as a director of the
Company, such documents, reports and filings as may be necessary or advisable
under the Securities Exchange Act of 1934, as amended (the "Act"), the
Securities Act of 1933, as amended (the "Securities Act") or any other federal,
state or local law regulating the Company including, without limitation, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, as prescribed by the Securities and Exchange Commission (the "Commission")
pursuant to the Act, and the rules and regulations promulgated thereunder, with
any and all exhibits and other documents relating thereto, any and all
amendments to said Annual Report 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 any act whatsoever to accomplish the purpose
and intent of the foregoing that said attorneys deem may be 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 any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 26th day of
January, 1999.
/s/ FREDERICK A. KLINGENSTEIN
-----------------------------------
Frederick A. Klingenstein
<PAGE> 10
POWER OF ATTORNEY
I, JACK A. VICKERS, in my individual capacity and as a director of Pogo
Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN and
THOMAS E. HART, and each of them severally, my true and lawful attorney or
attorneys with power to act with or without the other, and with full power of
substitution and resubstitution, to prepare, execute and file, in my name, place
and stead in my individual capacity and as a director of the Company, such
documents, reports and filings as may be necessary or advisable under the
Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of
1933, as amended (the "Securities Act") or any other federal, state or local law
regulating the Company including, without limitation, the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, as prescribed
by the Securities and Exchange Commission (the "Commission") pursuant to the
Act, and the rules and regulations promulgated thereunder, with any and all
exhibits and other documents relating thereto, any and all amendments to said
Annual Report 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 any act whatsoever to accomplish the purpose
and intent of the foregoing that said attorneys deem may be 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 any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 26th day
of January, 1999.
/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)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, 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
(NAME OF ISSUER)
(Exact name of obligor as specified in its charter)
DELAWARE (74-1659398 )
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
(ADDRESS OF ISSUER)
(Address of principal executive offices) (Zip Code)
5 GREENWAY PLAZA, SUITE 2700 HOUSTON, TEXAS 77252-2504
(TYPE OF SECURITIES)
10 3/8 % SENIOR SUBORDINATED NOTES DUE 2009
(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 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.
<PAGE> 3
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.
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 February 1, 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ PHILIP G. KANE, JR.
--------------------------------
NAME PHILIP G. KANE, JR.
TITLE VICE PRESIDENT
<PAGE> 4
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 10 3/8% Senior Subordinated Notes due 2009 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/ PHILIP G. KANE, JR.
--------------------------------
NAME: PHILIP G. KANE, JR.
TITLE: VICE PRESIDENT
DATED: FEBRUARY 1, 1999
<PAGE> 5
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 September
30, 1998, 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 ............................. 2,008,956
Interest-bearing balances ...................................................... 12,286,877
Securities .......................................................................... 9,654,241
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................................ 10,922,779
Loans and lease financing receivables:
Loans and leases, net of unearned income ....................................... 7,457,235
Allowance for loan and lease losses ............................................ 82,851
Allocated transfer risk reserve ................................................ 0
Loans and leases, net of unearned income and allowances ........................ 7,374,384
Assets held in trading accounts ..................................................... 1, 898,804
Premises and fixed assets ........................................................... 513,372
Other real estate owned ............................................................. 100
Investments in unconsolidated subsidiaries .......................................... 484
Customers' liability to this bank on acceptances outstanding ........................ 48,563
Intangible assets ................................................................... 220,613
Other assets ........................................................................ 1,333,210
------------
Total assets ................................................................... 46,262,383
============
LIABILITIES
Deposits:
In domestic offices ............................................................ 9,557,938
Noninterest-bearing ............................................................ 7,158,356
Interest-bearing ............................................................... 2,399,582
In foreign offices and Edge subsidiary ......................................... 18,451,054
Noninterest-bearing ............................................................ 429,797
Interest-bearing ............................................................... 18,021,257
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................................ 12,023,438
Demand notes issued to the U.S. Treasury ............................................ 451,424
Trading liabilities ............................................................ 1,582,933
Other borrowed money ................................................................ 323,782
Subordinated notes and debentures ................................................... 0
Bank's liability on acceptances executed and outstanding ............................ 48,563
Other liabilities ................................................................... 1,226,129
Total liabilities .............................................................. 43,665,261
------------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ....................................... 0
Common stock ........................................................................ 29,931
Surplus ............................................................................. 462,782
Undivided profits and capital reserves/Net unrealized holding gains (losses) ........ 2,080,148
Net unrealized holding gains (losses) on available-for-sale securities ......... 27,376
Cumulative foreign currency translation adjustments ................................. (3,115)
Total equity capital ................................................................ 2,597,122
------------
Total liabilities and equity capital ........................................... 46,262,383
============
</TABLE>
<PAGE> 6
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
Truman S. Casner
<PAGE> 7
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 of the
obligor, the trustee has relied upon the 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 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 duly
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 February 1, 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ PHILIP G. KANE, JR.
----------------------------------
NAME PHILIP G. KANE, JR.
TITLE VICE PRESIDENT
<PAGE> 8
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 10 3/8% SENIOR SUBORDINATED NOTES DUE 2009, 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/ PHILIP G. KANE, JR.
---------------------------------
NAME: PHILIP G. KANE, JR.
TITLE: VICE PRESIDENT
DATED: FEBRUARY 1, 1999
<PAGE> 1
Exhibit 99.1
POGO PRODUCING COMPANY
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
IN EXCHANGE FOR
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B
----------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ____________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE")
OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE EXPIRATION DATE
----------------------------------------------------------------
DELIVER TO THE EXCHANGE AGENT:
STATE STREET BANK AND TRUST COMPANY
By Hand/Overnight Courier: By Mail:
Corporate Trust Department Corporate Trust Department
Two International Place, 4th Floor P. O. Box 778
Boston, Massachusetts 02110 Boston, Massachusetts 02102-0078
By Facsimile:
(617) 664-5739
Confirm by Telephone:
(617) 664-5314
-------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the
Prospectus dated _________, 1999 (the "Prospectus") of Pogo Producing Company, a
Delaware corporation (the "Company"), and this Letter of Transmittal (the
"Letter of Transmittal"), which together describe the Company's offer (the
"Exchange Offer") to exchange its 10 3/8% Senior Subordinated Notes due 2009,
Series B (the "New Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement
of which the Prospectus is a part, for a like principal amount of its issued and
outstanding 10 3/8% Senior Subordinated Notes due 2007, Series A (the
"Outstanding Notes"). Capitalized terms used but not defined herein have the
respective meaning given to them in the Prospectus.
1
<PAGE> 2
The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term "Expiration
Date" shall mean the latest date to which the Exchange Offer is extended. The
Company shall notify the 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.
This Letter of Transmittal is to be used by a holder of Outstanding
Notes (i) if certificates of Outstanding Notes are to be forwarded herewith or
(ii) if delivery of Outstanding Notes is to be made by book-entry transfer to
the account maintained by the Exchange Agent at The Depository Trust Company
(the "DTC") pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer -- Book-Entry Transfer." Holders of Outstanding
Notes whose Outstanding Notes are not immediately available, or who are unable
to deliver their Outstanding Notes and all other documents required by this
Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date,
or who are unable to complete the procedure for book-entry transfer on a timely
basis, must tender their Outstanding Notes according to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer
- --Guaranteed Delivery Procedures." See Instruction 2. Delivery of documents to
the DTC does not constitute delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person
in whose name Outstanding Notes are registered on the books of the Company or
any other person who has obtained a properly completed bond power from the
registered holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Outstanding
Notes must complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space below is inadequate, list the registered numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Old Note(s) Tendered
Holder(s) Exactly as Name(s) ------------------------------------------------------------
Appear(s) on Outstanding Notes
(Please Fill In, If Blank)
Aggregate Principal Principal
Registered Amount Represented Amount
Number(s)* by Note(s) Tendered**
------------------------------------- ----------- ------------------- ----------
<S> <C> <C> <C>
----------- ------------------- ----------
----------- ------------------- ----------
Total
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Outstanding Notes will
be deemed to have tendered the entire aggregate principal amount
represented by such Outstanding Notes. All tenders must be in integral
multiples of $1,000.
2
<PAGE> 3
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED OUTSTANDING NOTES ARE
BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED
BY THE EXCHANGE AGENT WITH THE DTC (FOR USE BY ELIGIBLE INSTITUTIONS
ONLY):
Name of Tendering
Institution:
-------------------------------------------------------------------
Account
Number:
------------------------------------------------------------------------
Transaction Code
Number:
------------------------------------------------------------------------
[ ] CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED OUTSTANDING NOTES ARE
BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED
HEREWITH (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered holder(s)
of Outstanding Notes:
----------------------------------------------------------
Date of Execution of Notice of
Guaranteed Delivery:
-----------------------------------------------------------
Window Ticket Number
(if available):
----------------------------------------------------------------
Name of Eligible Institution that
Guaranteed Delivery:
-----------------------------------------------------------
Account Number (if delivered by
book-entry transfer):
----------------------------------------------------------
[ ] CHECK HERE AND COMPLETE THE FOLLOWING IF YOU ARE A BROKER-DEALER AND
WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Number of Additional Copies:
----------------
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Outstanding Notes, it acknowledges that the
Outstanding Notes were acquired as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection with any
resale of such New Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
3
<PAGE> 4
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the principal amount of
Outstanding Notes indicated above. Subject to and effective upon the acceptance
for exchange of the principal amount of Outstanding Notes tendered in accordance
with this Letter of Transmittal, the undersigned hereby exchanges, assigns and
transfers to the Company all right, title and interest in and to the Outstanding
Notes tendered for exchange hereby. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent the true and lawful agent and
attorney-in-fact for the undersigned (with full knowledge that said Exchange
Agent also acts as the agent for the Company in connection with the Exchange
Offer) with respect to the tendered Outstanding Notes with full power of
substitution to (i) deliver such Outstanding Notes, or transfer ownership of
such Outstanding Notes on the account books maintained by the DTC, to the
Company and deliver all accompanying evidences of transfer and authenticity, and
(ii) present such Outstanding Notes for transfer on the books of the Company and
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Outstanding Notes, all in accordance with the terms of the Exchange
Offer. The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the
Outstanding Notes tendered hereby and to acquire the New Notes issuable upon the
exchange of such tendered Outstanding Notes, and that the Company will acquire
good and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made
in reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley Co. Inc., SEC No-Action Letter (available June
5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC
No-Action Letter (available June 5, 1991), that the New Notes issued in exchange
for the Outstanding Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than any such
holder 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 New
Notes are acquired in the ordinary course of such holders' business and such
holders are not engaging in and have no arrangement or understanding with any
person to participate in a distribution of such New Notes. The undersigned
hereby further represent(s) to the Company that (i) any New Notes acquired in
exchange for Outstanding Notes tendered hereby are being acquired in the
ordinary course of business of the person receiving such New Notes, whether or
not the undersigned, (ii) neither the undersigned nor any such other person is
engaging in or intends to engage in a distribution of the New Notes, (iii)
neither the undersigned nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iv) neither the holder nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company or, if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, and (v) if the
undersigned is a broker-dealer, such person has acquired the Outstanding Notes
as a result of market-making activities or other trading activities.
If the undersigned or the person receiving the New Notes is a
broker-dealer that is receiving New Notes for its own account in exchange for
Outstanding Notes that were acquired as a result of market-making activities or
other trading activities, the undersigned acknowledges that it or such other
person will deliver a prospectus in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that the undersigned or such other
person is an "underwriter" within the meaning of the Securities Act. The
undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the New Notes (i) the undersigned
cannot rely on the position of the staff of the SEC in certain no-action letters
and, in the absence of an exemption therefrom, must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes, in which case
4
<PAGE> 5
the registration statement must contain the selling security holder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the SEC,
and (ii) failure to comply with such requirements in such instance could result
in the undersigned incurring liability under the Securities Act for which the
undersigned is not indemnified by the Company.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Outstanding
Notes tendered hereby, including the transfer of such Outstanding Notes on the
account books maintained by the DTC.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Outstanding Notes when, as and if the
Company gives oral or written notice thereof to the Exchange Agent. Any tendered
Outstanding Notes that are not accepted for exchange pursuant to the Exchange
Offer for any reason will be returned, without expense, to the undersigned at
the address shown below or at a different address as may be indicated herein
under "Special Delivery Instructions" as promptly as practicable after the
Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Outstanding Notes pursuant to the procedures described under the
caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus and
in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions,"
please issue the New Notes issued in exchange for the Outstanding Notes accepted
for exchange and return any Outstanding Notes not tendered or not exchanged, in
the name(s) of the undersigned. Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail or deliver the New Notes issued in
exchange for the Outstanding Notes accepted for exchange and any Outstanding
Notes not tendered or not exchanged (and accompanying documents, as appropriate)
to the undersigned at the address shown below the undersigned's signatures). In
the event that both "Special Issuance Instructions" and "Special Delivery
Instructions" are completed, please issue the New Notes issued in exchange for
the Outstanding Notes accepted for exchange in the name(s) of, and return any
Outstanding Notes not tendered or not exchanged to, the person(s) so indicated.
The undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Outstanding Notes from the name of the registered holder(s) thereof if the
Company does not accept for exchange any of the Outstanding Notes so tendered
for exchange.
5
<PAGE> 6
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Outstanding Notes in a principal amount not
tendered, or New Notes issued in exchange for Outstanding Notes accepted for
exchange, are to be issued in the name of someone other than the other than the
undersigned, or (ii) if Outstanding Notes tendered by book-entry transfer which
are not exchanged are to be returned by credit to an account maintained at the
DTC. Issue New Notes and/or Outstanding Notes to:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
(include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(Please Type or Print)
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Oustanding Notes in a principal amount not tendered, or
New Notes Issued, in exchange for Outstanding Notes accepted for exchange, are
to be mailed or delivered to someone other than the undersigned, or the
undersigned at an address other than that shown below the undersigned's
signature.
Mail or deliver New Notes and/or Outstanding Notes to:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
(include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(Please Type or Print)
[ ] Credit unexchanged Outstanding Notes delivered by book-entry transfer
to the DTC set forth below:
DTC Account Number:
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OUTSTANDING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 Below)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(Signature(s) of Registered Holders of Outstanding Notes)
Dated , 1999
----------------------------------------------------------
(The above lines must be signed by the registered holder(s) of Outstanding Notes
as your name(s) appear(s) on the Outstanding Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by a properly
completed bond power from the registered holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Outstanding Notes to which this
Letter of Transmittal relate are held of record by two or more joint holders,
then all such holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding the completion of this
Letter of Transmittal, printed below.)
6
<PAGE> 7
Name(s):
-----------------------------------------------------------------------
(Please Type or Print)
Capacity:
----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE (If
Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an
Eligible Institution:
----------------------------------------------------------
(Authorized Signature)
- -------------------------------------------------------------------------------
(Title)
- -------------------------------------------------------------------------------
(Name of Firm)
- -------------------------------------------------------------------------------
(Address, Include Zip Code)
- -------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: , 1999
------------------------------------------------------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES OR
BOOK-ENTRY CONFIRMATIONS. All physically delivered Outstanding Notes or any
confirmation of a book-entry transfer to the Exchange Agent's account at the DTC
of Outstanding Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. THE METHOD OF DELIVERY OF THE TENDERED OUTSTANDING NOTES, THIS
LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS
AT THE ELECTION AND RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW,
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE
EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER
USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Outstanding Notes and (a) whose Outstanding Notes are not immediately available,
or (b) who cannot deliver their Outstanding Notes, this Letter of Transmittal or
any other documents required hereby to the Exchange Agent prior to the
Expiration Date or (c) who are unable to comply with the applicable procedures
under DTC's Automated Tender Offer Program on a timely basis, must tender their
Outstanding Notes according to the guaranteed delivery procedures set forth in
the Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through a firm which is a member of a registered national securities exchange or
of the National Association of Securities Dealers, Inc., a commercial bank or a
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution"); (ii) prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) or a properly transmitted agent's message
and Notice of Guaranteed Delivery setting forth the name and address of the
holder of the Outstanding Notes, the registration number(s) of such Outstanding
Notes and the total principal amount of Outstanding Notes tendered, stating that
the tender is being made thereby and guaranteeing that, within five business
days after the Expiration Date, this Letter of Transmittal (or facsimile hereof)
together with the Outstanding Notes in proper form for transfer (or a Book-Entry
Confirmation) and any other documents required hereby, will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) the certificates for all
physically tendered shares of Outstanding Notes, in proper form for transfer (or
Book-Entry Confirmation, as the case may be) and all other documents required
hereby are received by the Exchange Agent within five business days after the
Expiration Date.
Any holder of Outstanding Notes who wishes to tender Outstanding Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00
p.m., New York City time, on the Expiration Date. Upon request of the Exchange
Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to
tender their Outstanding Notes according to the guaranteed delivery procedures
set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of
the Prospectus.
3. TENDER BY HOLDER. Only a holder of Outstanding Notes may tender such
Outstanding Notes in the Exchange Offer. Any beneficial holder of Outstanding
Notes who is not the registered holder and who wishes to tender should arrange
with the registered holder to execute and deliver this Letter of Transmittal on
his behalf or must, prior to completing and executing this Letter of Transmittal
and delivering his Outstanding Notes, either make appropriate arrangements to
register ownership of the Outstanding Notes in such holder's name or obtain a
properly completed bond power from the registered holder.
4. PARTIAL TENDERS. Tenders of Outstanding Notes will be accepted only
in integral multiples of $1,000. If less than the entire principal amount of any
Outstanding Notes is tendered, the tendering holder should fill in the
8
<PAGE> 9
principal amount tendered in the fourth column of the box entitled "Description
of Outstanding Notes Tendered" above. The entire principal amount of Outstanding
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Outstanding
Notes is not tendered, then Outstanding Notes for the principal amount of
Outstanding Notes not tendered and New Notes issued in exchange for any
Outstanding Notes accepted will be sent to the holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Outstanding Notes are accepted for
exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal
(or facsimile hereof) is signed by the record holder(s) of the Outstanding Notes
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Outstanding Notes without alteration, enlargement or any change
whatsoever. If this Letter of Transmittal (or facsimile hereof) is signed by a
participant in the DTC, the signature must correspond with the name as it
appears on the security position listing as the holder of the Outstanding Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Outstanding Notes listed and tendered hereby and
the New Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Outstanding Notes is to be reissued) to the registered
holder, the said holder need not and should not endorse any tendered Outstanding
Notes, nor provide a separate bond power. In any other case, such holder must
either properly endorse the Outstanding Notes tendered or transmit a properly
completed separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered holder or holders of any Outstanding Notes
listed, such Outstanding Notes must be endorsed or accompanied by appropriate
bond powers, in each case signed as the name of the registered holder or holders
appears on the Outstanding Notes.
If this Letter of Transmittal (or facsimile hereof) or any Outstanding
Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, evidence satisfactory to the Company
of their authority to act must be submitted with this Letter of Transmittal.
Endorsements on Outstanding Notes or signatures on bond powers required
by this Instruction 5 must be guaranteed by an Eligible Institution.
NO SIGNATURE GUARANTEE IS REQUIRED IF (I) THIS LETTER OF TRANSMITTAL
(OR FACSIMILE HEREOF) IS SIGNED BY THE REGISTERED HOLDER(S) OF THE OUTSTANDING
NOTES TENDERED HEREIN (OR BY A PARTICIPANT IN THE DTC WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE OWNER OF THE TENDERED OUTSTANDING NOTES) AND
THE NEW NOTES ARE TO BE ISSUED DIRECTLY TO SUCH REGISTERED HOLDER(S) (OR, IF
SIGNED BY A PARTICIPANT IN THE DTC, DEPOSITED TO SUCH PARTICIPANT'S ACCOUNT AT
SUCH DTC) AND NEITHER THE BOX ENTITLED "SPECIAL DELIVERY INSTRUCTIONS" NOR THE
BOX ENTITLED "SPECIAL REGISTRATION INSTRUCTIONS" HAS BEEN COMPLETED, OR (II)
SUCH OUTSTANDING NOTES ARE TENDERED FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
IN ALL OTHER CASES, ALL SIGNATURES ON THIS LETTER OF TRANSMITTAL (OR FACSIMILE
HEREOF) MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the DTC) to which New Notes or substitute Outstanding Notes for
principal amounts not tendered or not accepted for exchange are to be issued or
sent, if different from the name and address of the person signing this Letter
of Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Outstanding Notes pursuant to the Exchange Offer.
If, however, New Notes or Outstanding Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder of the
Outstanding Notes tendered hereby, or if tendered Outstanding Notes are
registered in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is
9
<PAGE> 10
imposed for any reason other than the exchange of Outstanding Notes pursuant to
the Exchange offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with this Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Outstanding Notes or New Notes must provide the Company (as payer)
with its correct taxpayer identification number ("TIN"), which, in the case of a
holder who is an individual is his or her social security number. If the Company
is not provided with the correct TIN, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service and backup withholding of 31% on
interest payments on the New Notes.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the New Notes will be registered in more than one name or will not be in the
name of the actual owner, consult the instructions on Internal Revenue Service
Form W-9, which may be obtained from the Exchange Agent, for information on
which TIN to report.
Certain foreign individuals and entities will not be subject to backup
withholding or information reporting if they submit a Form W-8, signed under
penalties of perjury, attesting to their foreign status. A Form W-8 can be
obtained from the Exchange Agent.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Outstanding 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 Outstanding Notes not properly tendered or any
Outstanding 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
of tenders as to particular Outstanding Notes. The Company's interpretation of
the terms and conditions of the Exchange Offer (including this Letter of
Transmittal and the instructions hereto) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Outstanding Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any person shall be under
any duty to give notification of defects or irregularities with regard to
tenders of Outstanding Notes nor shall any of them incur any liability for
failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set forth
in the Prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Outstanding Notes on transmittal of this Letter of
Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES. Any holder
whose Outstanding Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance or for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover page of this Letter of Transmittal. Holders may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Exchange Offer.
10
<PAGE> 11
14. ACCEPTANCE OF TENDERED OUTSTANDING NOTES AND ISSUANCE OF NEW NOTES;
RETURN OF OUTSTANDING NOTES. Subject to the terms and conditions of the Exchange
Offer, the Company will accept for exchange all validly tendered Outstanding
Notes as soon as practicable after the Expiration Date and will issue New Notes
therefor as soon as practicable thereafter. For purposes of the Exchange Offer,
the Company shall be deemed to have accepted tendered Outstanding Notes when the
Company has given written or oral notice thereof to the Exchange Agent and
complied with the applicable provisions of the Registration Rights Agreement. If
any tendered Outstanding Notes are not exchanged pursuant to the Exchange Offer
for any reason, such unexchanged Outstanding Notes will be returned, without
expense, to the undersigned at the address shown above (or credited to the
undersigned's account at The Depository Trust Company designated above) or at a
different address as may be indicated under the box entitled "Special Delivery
Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OUTSTANDING NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN
ORIGINAL HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
11
<PAGE> 12
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT ------------------------------
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW SOCIAL SECURITY NUMBER
OR
------------------------------
EMPLOYER IDENTIFICATION NUMBER
- ----------------------------------------------------------------------------------------------------------------------------------
PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PART 3 --
PERJURY, I CERTIFY THAT:
(1) THE NUMBER SHOWN ON THIS FOR AWAITING TIN [ ]
CORRECT TAXPAYER IDENTIFICATION
NUMBER (OR I HAVE CHECKED THE BOX IN
PART 3 AND EXECUTED THE CERTIFICATE
OF AWAITING TAXPAYER IDENTIFICATION
NUMBER BELOW) AND
(2) I AM NOT SUBJECT TO BACK WITHHOLDING PLEASE COMPLETE THE CERTIFICATE OF
- ------------------------------- BECAUSE I HAVE NOT BEEN NOTIFIED BY THE AWAITING TAXPAYER IDENTIFICATION
NAME INTERNAL REVENUE SERVICE ("IRS") THAT I AM NUMBER BELOW.
- ------------------------------- SUBJECT TO BACKUP WITHHOLDING AS A RESULT
ADDRESS (NUMBER AND STREET) OF FAILURE TO REPORT ALL INTEREST OR
- ------------------------------- DIVIDENDS, OR THE IRS HAS NOTIFIED ME THAT I
CITY, STATE AND ZIP CODE AM NO LONGER SUBJECT TO BACKUP WITHHOLDING.
---------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYOR'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
CERTIFICATE INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) IN PART 2 ABOVE IF YOU HAVE
BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING BECAUSE OF
UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER BEING
NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING YOU RECEIVED ANOTHER
NOTIFICATION FROM THE IRS STATING THAT YOU ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING,
DO NOT CROSS OUT ITEM (2).
SIGNATURE DATE , 1999
--------------------------------- ------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE NEW
NOTES.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
12
<PAGE> 13
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION
NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN
APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE
INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (B)
I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND
THAT, WITH CERTAIN LIMITED EXCEPTIONS FOR PAYMENTS MADE WITHIN 60 DAYS HEREOF,
31% OF ALL REPORTABLE PAYMENTS MADE TO ME BEFORE I PROVIDE A NUMBER THEREAFTER
WILL BE WITHHELD.
, 1999
- ------------------------------------- -----------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------
13
<PAGE> 1
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
IN EXCHANGE FOR
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B
This form, or one substantially equivalent hereto, must be used by a
holder to accept the Exchange Offer of Pogo Producing Company, a Delaware
corporation (the "Company"), and to tender 10 3/8% Senior Subordinated Notes due
2009, Series A (the "Outstanding Notes") to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus, dated _____________ ___, 1999
(the "Prospectus") and in Instruction 2 to the related Letter of Transmittal.
Any holder who wishes to tender Outstanding Notes pursuant to such guaranteed
delivery procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_______________ ___, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). OUTSTANDING
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
State Street Bank and Trust Company
By Hand/Overnight Courier: By Mail:
Corporate Trust Department Corporate Trust Department
Two International Place, 4th Floor P. O. Box 778
Boston, Massachusetts 02110 Boston, Massachusetts 02102-0078
By Facsimile:
(617) 664-5739
Confirm by Telephone:
(617) 664-5314
---------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE IN THE BOX PROVIDED ON
THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Outstanding Notes set forth below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Outstanding Notes listed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Certificate Number(s) (if known) of Outstanding Aggregate Principal Amount Aggregate Principal Amount
Notes Represented Tendered
or Account Number at the DT C
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
Names of Record Holder(s): Signature(s):
-------------------------------------- ------------------------------
Address:
-------------------------------------------------------- -------------------------------------------
Dated: , 1997
- ---------------------------------------------------------------- -------------------------------
Area Code and Telephone Number(s):
------------------------------
- ----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
THIS NOTICE OF GUARANTEED DELIVERY MUST BE SIGNED BY THE HOLDER(S)
EXACTLY AS THEIR NAME(S) APPEAR ON CERTIFICATES FOR OUTSTANDING NOTES OR ON A
SECURITY POSITION LISTING AS THE OWNER OF OUTSTANDING NOTES, OR BY PERSON(S)
AUTHORIZED TO BECOME HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED WITH
THIS NOTICE OF GUARANTEED DELIVERY. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR,
ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OR OTHER PERSON ACTING IN A
FIDUCIARY OR REPRESENTATIVE CAPACITY, SUCH PERSON MUST PROVIDE THE FOLLOWING
INFORMATION.
2
<PAGE> 3
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE> 4
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Outstanding Notes tendered hereby in
proper form for transfer (or confirmation of the book-entry transfer of such
Outstanding Notes into the Exchange Agent's account at the DTC described in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York City time, within five business days following the
Expiration Date.
Name of Firm:
--------------------------- -------------------------------------
(AUTHORIZED SIGNATURE)
Address:
--------------------------------
(INCLUDE ZIP CODE) Name:
--------------------------------
Area Code and Tel. Number: Title:
-------------------------------
- ---------------------------------------- (PLEASE TYPE OR PRINT)
Date: , 1999
--------------------------
DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. ACTUAL SURRENDER
OF OUTSTANDING NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS.
4
<PAGE> 5
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Outstanding
Notes referred to herein, the signature(s) must correspond with the name(s)
written on the face of the Outstanding Notes without alteration, enlargement, or
any change whatsoever. If this Notice of Guaranteed Delivery is signed by a
participant of the DTC whose name appears on a security position listing as the
owner of the Outstanding Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Outstanding Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Outstanding Notes listed or a participant of the
DTC, this Notice of Guaranteed Delivery must be accompanied by appropriate bond
powers, signed as the name of the registered holder(s) appears on the
Outstanding Notes or signed as the name of the participant shown on the DTC's
security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Exchange Agent of such person's authority to so act.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
5
<PAGE> 1
Exhibit 99.3
POGO PRODUCING COMPANY
LETTER TO
DEPOSITORY TRUST COMPANY PARTICIPANTS
FOR
TENDER OF ALL OUTSTANDING 10 3/8% SENIOR SUBORDINATED NOTES DUE 2009,
SERIES A, IN EXCHANGE FOR
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ____________ ___, 1999. UNLESS EXTENDED (THE "EXPIRATION DATE").
- -------------------------------------------------------------------------------
OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the
offer by Pogo Producing Company, a Delaware corporation (the "Company"), to
exchange its 10 3/8% Senior Subordinated Notes due 2009, Series B (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of its issued and
outstanding 10 3/8% Senior Subordinated Notes due 2009, Series A (the
"Outstanding Notes"), upon the terms and subject to the conditions set forth in
the Company's Prospectus, dated ___________ ___, 1999, and the related Letter of
Transmittal (which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated ___________ ___, 1999;
2. Letter of Transmittal (together with accompanying
Substitute Form W-9 Guidelines);
3. Notice of Guaranteed Delivery; and
4. Letter that may be sent to your clients for whose account
you hold Outstanding Notes in your name or in the name of your nominee,
with space provided for obtaining such client's instruction with regard
to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
<PAGE> 2
The Exchange Offer is not conditioned upon any minimum number of
Outstanding Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Outstanding Notes
will represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not the undersigned, (ii) neither
the undersigned nor any such other person has an arrangement or understanding
with any person to participate in the distribution within the meaning of the
Securities Act of such New Notes, (iii) if the undersigned is not a
broker-dealer, or is a broker-dealer but will not receive New Notes for its own
account in exchange for Outstanding Notes, neither the undersigned nor any such
other person is engaged in or intends to participate in the distribution of such
New Notes and (iv) neither the undersigned nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or, if the undersigned is an "affiliate," that the undersigned will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable. If the undersigned is a broker-dealer (whether or not
it is also an "affiliate") that will receive New Notes for its own account in
exchange for Outstanding Notes, it represents that such Outstanding Notes were
acquired as a result of market-making activities or other trading activities,
and it acknowledges that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such New Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes, the undersigned is not deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The enclosed Letter to Clients contains an authorization by the
beneficial owners of the Outstanding Notes for you to make the foregoing
representations.
The Company will not pay any fee or commission to any broker or dealer
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Outstanding Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Outstanding Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
STATE STREET BANK AND
TRUST COMPANY
2
<PAGE> 1
Exhibit 99.4
POGO PRODUCING COMPANY
LETTER TO CLIENTS
FOR
TENDER OF ALL OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A,
IN EXCHANGE FOR
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _____________ ___, 1999 UNLESS EXTENDED (THE "EXPIRATION
DATE"). NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
To Our Clients:
We are enclosing herewith a Prospectus, dated ____________ ___, 1999,
of Pogo Producing Company, a Delaware corporation (the "Company"), and a related
Letter of Transmittal, which together constitute (the "Exchange Offer") relating
to the offer by the Company, to exchange its 10 3/8% Senior Subordinated Notes
due 2009, Series B (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like principal
amount of its issued and outstanding 10 3/8% Senior Subordinated Notes due 2009,
Series A (the "Outstanding Notes"), upon the terms and subject to the conditions
set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of
Outstanding Notes being tendered.
We are the holder of record of Outstanding Notes held by us for your
own account. A tender of such Outstanding Notes can be made only by us as the
record holder and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Outstanding Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of
the Outstanding Notes held by us for your account pursuant to the terms and
conditions of the Exchange Offer. We also request that you confirm that we may
on your behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Outstanding Notes
will represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
within
<PAGE> 2
the meaning of the Securities Act of such New Notes, (iii) if the undersigned
is not a broker-dealer, or is a broker-dealer but will not receive New Notes for
its own account in exchange for Outstanding Notes, neither the undersigned nor
any such other person is engaged in or intends to participate in the
distribution of such New Notes and (iv) neither the undersigned nor any such
other person is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
New Notes for its own account in exchange for Outstanding Notes, it represents
that such Outstanding Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges that it will deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes. By acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes, the undersigned is not deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
Very truly yours,
2
<PAGE> 3
PLEASE RETURN YOUR INSTRUCTIONS TO US IN THE ENCLOSED ENVELOPE WITHIN
AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION DATE.
INSTRUCTION TO
BOOK ENTRY TRANSFER PARTICIPANT
To Participant of the DTC:
The undersigned hereby acknowledges receipt of the Prospectus dated
____________ ___, 1999 (the "Prospectus") of Pogo Producing Company, a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange its 10 3/8% Senior Subordinated Notes due 2009,
Series B (the "New Notes"), for all of its outstanding 10 3/8% Senior
Subordinated Notes due 2009, Series A (the "Outstanding Notes"). Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus or the Letter of Transmittal.
This will instruct you, the DTC participant, as to the action to be
taken by you relating to the Exchange Offer with respect to the Outstanding
Notes held by you for the account of the undersigned.
The aggregate face amount of the Outstanding Notes held by you for the
account of the undersigned is (FILL IN AMOUNT):
$__________________ of the 10 3/8% Senior Subordinated Notes due 2009,
Series A.
WITH RESPECT TO THE EXCHANGE OFFER, THE UNDERSIGNED HEREBY INSTRUCTS
YOU (CHECK APPROPRIATE BOX):
[ ] TO TENDER THE FOLLOWING AMOUNT OF OUTSTANDING NOTES HELD BY
YOU FOR THE ACCOUNT OF THE UNDERSIGNED (INSERT PRINCIPAL AMOUNT OF
OUTSTANDING NOTES TO BE TENDERED) (IF ANY): $_____________________.
[ ] NOT TO TENDER ANY OUTSTANDING NOTES HELD BY YOU FOR THE
ACCOUNT OF THE UNDERSIGNED.
If the undersigned instructs you to tender the Outstanding Notes held
by you for the account of the undersigned, it is understood that you are
authorized to make, on behalf of the undersigned (and the undersigned by, its
signature below, hereby makes to you), the representations contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including, but not limited to, the representations, that (i)
the New Notes acquired pursuant to the Exchange Offer are being acquired in the
ordinary course of business of the undersigned, (ii) neither
3
<PAGE> 4
the undersigned nor any such other person has an arrangement or understanding
with any person to participate in the distribution within the meaning of the
Securities Act of 1933, as amended (the "Securities Act") of such New Notes,
(iii) if the undersigned is not a broker-dealer, or is a broker-dealer but will
not receive New Notes for its own account in exchange for Outstanding Notes,
neither the undersigned nor any such other person is engaged in or intends to
participate in the distribution of such New Notes and (iv) neither the
undersigned nor any such other person is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act or, if the undersigned is an
"affiliate," that the undersigned will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the undersigned is a broker-dealer (whether or not it is also an "affiliate")
that will receive New Notes for its own account in exchange for Outstanding
Notes, it represents that such Outstanding Notes were acquired as a result of
market-making activities or other trading activities, and it acknowledges that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the undersigned
is not deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
SIGN HERE
Name of beneficial owner(s):
--------------------------------------------------
Signature(s):
-----------------------------------------------------------------
Name(s) (please print):
-------------------------------------------------------
Address:
----------------------------------------------------------------------
Telephone Number:
-------------------------------------------------------------
Taxpayer Identification or Social Security Number:
----------------------------
Date:
-------------------------------------------------------------------------
4
