<PAGE> 1
--
As filed with the Securities and Exchange Commission on March , 1997
--
Registration No. 33-
------
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
Under The Securities Act Of 1933
--------------------
LOMAK PETROLEUM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 500 Throckmorton Street 34-1312571
(STATE OR OTHER JURISDICTION OF Ft. Worth Texas 76102 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) (817) 870-2601 IDENTIFICATION NO.)
(ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------
John H. Pinkerton, President
Lomak Petroleum, Inc.
500 Throckmorton Street Fort Worth, Texas 76102
(817) 870-2601
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------
With a copy to:
J. Mark Metts
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
(713) 758-2222
--------------------
Approximate date of commencement of proposed sale to the public: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box [ ].
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box [x].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
REGISTERED MAXIMUM MAXIMUM REGISTRATION FEE
OFFERING PRICE AGGREGATE
PER UNIT(1) OFFERING PRICE(1)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6% Convertible Subordinated Debentures Due 2007..... $55,000,000 $ - $ 55,000,000 $ 16,667
Common Stock, $.01 par value(2)..................... 4,287,249 $ 19.125 $ 81,993,637 $ 24,847
Total........................................... $ 41,514
=============================================================================================================================
-----------------
<FN>
(1) Estimated solely for the purpose of computing the registration fee. This
amount was calculated pursuant to Rule 457 under the Securities Act of
1933, as amended, based on a price of $19.125 (average of the high and low
price of the Common Stock of Lomak Petroleum, Inc, on the New York Stock
Exchange on March 121 1997).
(2) Includes 2,857,143 shares of the Common Stock issuable upon conversion of
the 6% Convertible Subordinated Notes Due 2007, 1,410,106 shares of Common
Stock owned by Cometra Energy L.P. and 20,000 shares of the Common Stock
issuable upon the exercise of warrants outstanding at and exercise price
of $12.88 per share.
</TABLE>
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These Securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any such offer, solicitation or sale would be unlawful prior to registration
or qualification under the Securities laws of any such State.
SUBJECT TO COMPLETION, DATED MARCH , 1997
--
PROSPECTUS
----------
LOMAK PETROLEUM, INC.
$55,000,000 OF 6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007
AND
4,287,249 SHARES OF COMMON STOCK
This Prospectus relates to the offer and sale by the Selling
Securityholders (as defined below) of the following securities of Lomak
Petroleum, Inc., a Delaware corporation (the "Company"): (i) $55,000,000 of 6%
Convertible Subordinated Debentures due 2007 (the "6% Debentures") and (ii)
4,287,249 shares (the "Common Shares") of Common Stock, $.01 par value per share
(the "Common Stock").
The foregoing securities consist of the 6% Debentures, the 2,857,143
shares of the Common Stock issuable upon the conversion of the 6% Debentures,
the 1,410,106 shares of Common Stock owned by Cometra Energy L.P. and 20,000
shares of the Common Stock issuable upon the exercise of outstanding warrants to
purchase Common Stock at a price of $12.88 per share (the "Warrants")
(collectively the "Selling Securityholder Securities"), which may be sold from
time to time for the accounts of certain stockholders and debentureholders of
the Company (the "Selling Securityholders"). See "Selling Securityholders".
The Securities may be sold through agents, underwriters or dealers
designated from time to time. If any underwriters are involved in the sale of
the Securities by the Company in respect of which this Prospectus is being
delivered, the names of such agents or underwriters and any applicable discounts
or commissions with respect to such Securities will also be set forth in a
Prospectus Supplement, to the extent required. See "Plan of Distribution."
The Common Stock is traded on the New York Stock Exchange ("NYSE")
under the symbol "LOM". The closing price of the Common Stock on March 21, 1997,
was $19.125.
The Securities offered by this Prospectus may be sold from time to time
by the Selling Securityholders, or by their transferees. The distribution of
these securities may be effected in one or more transactions that may take place
on the NYSE, including ordinary brokers' transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Securityholders.
The Selling Securityholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company has agreed to indemnify certain of
the Selling Securityholders against certain liabilities, including liabilities
under the Securities Act.
The Company will not receive any of the proceeds from the sale of shares
of the Securities by the Selling Securityholders. See "Use of Proceeds."
All expenses of the registration of securities covered by this
Prospectus, estimated to be $75,000, are to be borne by the Company, except that
the Selling Securityholders will pay any applicable underwriters' commissions
and expenses, brokerage fees or transfer taxes, as well as the fees and
disbursements of their counsel.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS FOR A
DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE SECURITIES HEREBY OFFERED.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is March , 1997.
--
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as the following
regional offices: 7 World Trade Center, Suite 1300, New York, New York 10048;
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies can be obtained by mail at prescribed rates. Requests for
copies should be directed to the Commission's Public Reference Section,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a Website (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. In addition, reports, proxy statements and
other information concerning the Company can be inspected and copied at the
offices of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New
York, New York 10005, on which the Common Stock is listed.
This Prospectus constitutes a part of a Registration Statement filed by
the Company with the Commission under the Securities Act. This prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and related exhibits for
further information with respect to the Company and the Securities offered
hereby. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents and information heretofore filed with the
Commission by the Company are hereby incorporated by reference into this
Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
2. The Company's Current Report on Form 8-K dated February 26,
1997, as amended on Form 8-K/A on March 14, 1997.
3. The Company's Current Report on Form 8-K, dated April 19,
1996, as amended on Form 8-K/A, dated May 31, 1996
4. The description of the Common Stock contained in the
Registration Statement on Form 8-A declared effective by the
Commission on October 8, 1996.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offerings made hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. The Company will provide without charge
to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any document described above (other than exhibits). Requests for such
copies should be directed to Lomak Petroleum, Inc., 500 Throckmorton Street,
Fort Worth, Texas 76102, Attn: Corporate Secretary, Telephone No. (817)
870-2601.
2
<PAGE> 4
THE COMPANY
Lomak is an independent energy company engaged in oil and gas
development, exploration and acquisition primarily in three core areas: the
Midcontinent, Appalachia and the Gulf Coast. Over the past five years, the
Company has significantly increased its reserves and production through
acquisitions and, to a growing extent, development and exploration of its
properties. On a pro forma basis as of December 31, 1996, the Company had proved
reserves of 644 Bcfe with a Present Value of $974 million. On an Mcfe basis, the
reserves were 63% developed and 77% natural gas, with a reserve life index
excess of 13 years. Properties operated by the Company accounted for 94% of
its pro forma Present Value. The Company also owns over 2,000 miles of gas
gathering systems and a gas processing plant in proximity to its principal gas
properties. On a pro forma basis in 1996, the Company had revenues of $172
million and EBITDA of $105 million.
The Company recently acquired oil and gas properties located in West
Texas, South Texas and the Gulf of Mexico (the "Cometra Properties") from
American Cometra, Inc. ("Cometra") for a purchase price of $385 million (the
"Cometra Acquisition"), consisting of $355 million in cash and 1,410,106 shares
of Common Stock. The Company financed the cash portion of the purchase price
with $221 million of borrowings under its bank credit facility and the issuance
to Cometra of a $134 million non-interest bearing promissory note due March 31,
1997, which is secured by a bank letter of credit. As a result of the Cometra
Acquisition, the Company has significantly expanded its inventory of both
development and exploration projects, increased its proved reserves at December
31, 1996 by 68% to 644 Bcfe and increased the Company's Present Value at
December 31, 1996 by 98% to $974 million.
From 1991 through 1996, the Company made 63 acquisitions for an
aggregate purchase price of approximately $635 million and has spent $39 million
on development and exploration activities. These activities have added
approximately 719 Bcfe of reserves at an average cost of $0.76 per Mcfe. As a
result, the Company has achieved substantial growth since 1991.
The Company maintains its corporate headquarters at 500 Throckmorton
Street, Fort Worth, Texas 76102 and its telephone number is (817) 870-2601.
RISK FACTORS
Prior to making an investment decision, prospective investors should
carefully consider, together with the other information contained in this
Prospectus, the following risk factors:
VOLATILITY OF OIL AND GAS PRICES
The Company's financial condition, operating results and future growth
and the carrying value of its oil and gas properties are substantially dependent
on prevailing prices of, and demand for, oil and gas. The Company's ability to
maintain or increase its borrowing capacity and to obtain additional capital on
attractive terms is also substantially dependent upon oil and gas prices.
Historically the markets for oil and gas have been volatile and are likely to
continue to be volatile in the future. Prices for oil and gas are subject to
large fluctuations in response to relatively minor changes in the supply of and
demand for oil and gas, market uncertainty and a variety of additional factors
beyond the control of the Company. These factors include weather conditions in
the United States and elsewhere, the economic conditions in the United States
and elsewhere, the actions of the Organization of Petroleum Exporting Countries
("OPEC"), governmental regulation, political stability in the Middle East and
elsewhere, the supply and demand of oil and gas, the price of foreign imports
and the availability and prices of alternate fuel sources. Any substantial and
extended decline in the price of oil or gas would have an adverse effect on the
Company's carrying value of its proved reserves, borrowing capacity, the
Company's ability to obtain additional capital, and its financial condition,
revenues, profitability and cash flows from operations.
Volatile oil and gas prices make it difficult to estimate the value of
producing properties for acquisition and often cause disruption in the market
for oil and gas producing properties, as buyers and sellers have difficulty
agreeing on such value. Price volatility also makes it difficult to budget for
and project the return on acquisitions and development and exploitation
projects.
3
<PAGE> 5
UNCERTAINTY OF ESTIMATES OF RESERVES AND FUTURE NET REVENUES
This Prospectus contains estimates of the Company's oil and gas
reserves and the future net revenues from those reserves which have been
prepared by the Company and certain independent petroleum consultants. Reserve
engineering is a subjective process of estimating the recovery from underground
accumulations of oil and gas that cannot be measured in an exact manner, and the
accuracy of any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment. Estimates of
economically recoverable oil and gas reserves and of future net cash flows
necessarily depend upon a number of variable factors and assumptions, such as
historical production from the area compared with production from other
producing areas, the assumed effects of regulations by governmental agencies and
assumptions concerning future oil and gas prices, future operating costs,
severance and excise taxes, development costs and workover and remedial costs,
all of which may in fact vary considerably from actual results. Because all
reserve estimates are to some degree speculative, the quantities of oil and gas
that are ultimately recovered, production and operation costs, the amount and
timing of future development expenditures and future oil and gas sales prices
may all vary from those assumed in these estimates and such variances may be
material. In addition, different reserve engineers may make different estimates
of reserve quantities and cash flows based upon the same available data.
The present value of estimated future net cash flows referred to in
this Prospectus should not be construed as the current market value of the
estimated proved oil and gas reserves attributable to the Company's properties.
In accordance with applicable requirements of the Commission, the estimated
discounted future net cash flows from proved reserves are generally based on
prices and costs as of the date of the estimate, whereas actual future prices
and costs may be materially higher or lower. The calculation of the Present
Value of the Company's oil and gas reserves were based on prices on December 31,
1996. Average product prices at December 31, 1996 were $23.58 per barrel of oil
and $3.54 per Mcf of gas and pro forma average product prices at December 31,
1996 were $23.23 per barrel of oil and $3.99 per Mcf of gas, which prices were
substantially higher than historical prices used by the Company to calculate
Present Value in recent years. The closing price on the New York Mercantile
Exchange ("NYMEX") for the prompt month contract delivered at Henry Hub on
December 31, 1996 and February 28, 1997 was $2.76 and $1.83, respectively. The
closing price on NYMEX for the prompt month contract delivered for Light Crude
Oil on December 31, 1996 and February 28, 1997 was $25.92 and $20.30,
respectively. In addition, the calculation of the present value of the future
net revenues using a 10% discount as required by the Commission is not
necessarily the most appropriate discount factor based on interest rates in
effect from time to time and risks associated with the Company's reserves or the
oil and gas industry in general. Furthermore, the Company's reserves may be
subject to downward or upward revision based upon actual production, results of
future development, supply and demand for oil and gas, prevailing oil and gas
prices and other factors.
FINDING AND ACQUIRING ADDITIONAL RESERVES
The Company's future success depends upon its ability to find or
acquire additional oil and gas reserves that are economically recoverable.
Except to the extent the Company conducts successful exploration or development
activities or acquires properties containing proved reserves, the proved
reserves of the Company will generally decline as they are produced. There can
be no assurance that the Company's planned development projects and acquisition
activities will result in significant additional reserves or that the Company
will have success drilling productive wells at economic returns. If prevailing
oil and gas prices were to increase significantly, the Company's finding costs
to add new reserves could increase. The drilling of oil and gas wells involves a
high degree of risk, especially the risk of dry holes or of wells that are not
sufficiently productive to provide an economic return on the capital expended to
drill the wells. The cost of drilling, completing and operating wells is
uncertain, and drilling or production may be curtailed or delayed as a result of
many factors.
The Company's business is capital intensive. To maintain its base of
proved oil and gas reserves, a significant amount of cash flow from operations
must be reinvested in property acquisitions, development or exploration
activities. To the extent cash flow from operations is reduced and external
sources of capital become limited or unavailable, the Company's ability to make
the necessary capital investments to maintain or expand its asset base would be
impaired. Without such investment, the Company's oil and gas reserves would
decline.
4
<PAGE> 6
DEVELOPMENT AND EXPLORATION RISKS
The Company intends to increase its development and exploration
activities. Exploration drilling, and to a lesser extent development drilling,
involve a high degree of risk that no commercial production will be obtained or
that the production will be insufficient to recover drilling and completion
costs. The cost of drilling, completing and operating wells is 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 of
equipment. Furthermore, completion of a well does not assure a profit on the
investment or a recovery of drilling, completion and operating costs.
ACQUISITION RISKS
The Company intends to continue acquiring oil and gas properties. It
generally is not feasible to review in detail every individual property involved
in an acquisition. Ordinarily, review efforts are focused on the higher-valued
properties. However, even a detailed review of all properties and records may
not reveal existing or potential problems nor will it permit the Company to
become sufficiently familiar with the properties to assess fully their
deficiencies and capabilities. Inspections are not always performed on every
well, and environmental problems, such as groundwater contamination, are not
necessarily observable even when an inspection is undertaken.
The Cometra Acquisition substantially increased the Company's reserves,
cash flow and production. The Company's ability to achieve any advantages from
the Cometra Acquisition will depend in large part on successfully integrating
the Cometra Properties into the operations of the Company. No assurances can be
made that the Company will be able to achieve such integration successfully.
EFFECTS OF LEVERAGE
On a pro forma basis giving effect to the Cometra Acquisition and the
related financings, at December 31, 1996, the Company's outstanding indebtedness
would have been $412 million and the Company's ratio of total debt to total
capitalization would have been 66%. In 1994, 1995, 1996 and on a pro forma basis
for 1996, the Company's ratio of earnings to fixed charges was 2.0x, 2.1x, 3.6x
and 1.9x, respectively. The principal payment obligations of the Company's pro
forma debt for 1997, 1998 and 1999 amount to $26,000, $413,000 and $12,000
respectively. The Company's level of indebtedness will have several important
effects on its future operations, including (i) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment of interest
on its indebtedness and will not be available for other purposes, (ii) covenants
contained in the Company's debt obligations will require the Company to meet
certain financial tests, and other restrictions will limit its ability to borrow
additional funds or to dispose of assets and may affect the Company's
flexibility in planning for, and reacting to, changes in its businesses,
including possible acquisition activities and (iii) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired. The Company's ability to meet its debt service obligations and to
reduce its total indebtedness will be dependent upon the Company's future
performance, which will be subject to oil and gas prices, the Company's level of
production, general economic conditions and to financial, business and other
factors affecting the operations of the Company, many of which are beyond its
control. There can be no assurance that the Company's future performance will
not be adversely affected by some or all of these factors. In addition, the
Credit Agreement and the Indenture for the Notes contain restrictions on the
Company's ability to pay dividends on capital stock. Under the most restrictive
of these provisions, the Company could have paid $5,000,000 of dividends as of
December 31, 1996. See "Forward-Looking Information."
CAPITAL AVAILABILITY
The Company's strategy of acquiring and developing oil and gas
properties is dependent upon its ability to obtain financing for such
acquisitions and development projects. The Company expects to utilize the Credit
Agreement among the Company and several banks (the "Banks") to borrow a portion
of the funds required for any given transaction or project. If funds under the
Credit Agreement are not available to fund acquisition and development projects,
the Company would seek to obtain such financing from the sale of equity
securities or other debt financing. There can be no assurance that any such
other financing would be available on terms acceptable to the Company. Should
sufficient capital not be available, the Company may not be able to continue to
implement its strategy.
5
<PAGE> 7
The Credit Agreement limits the amounts the Company may borrow to
amounts, determined by the Banks, in their sole discretion, based upon a variety
of factors including the discounted present value of the Company's estimated
future net cash flow from oil and gas production (the "Borrowing Base"). At
March 17, 1997, the Borrowing Base was $300 million, of which the Company had
borrowings of $329 million outstanding (including $134 million of then
outstanding letters of credit to secure the promissory note issued to Cometra as
part of the purchase price in the Cometra Acquisition). If oil or gas prices
decline below their current levels, the availability of funds and the ability to
pay outstanding amounts under the Credit Agreement could be materially adversely
affected. The Indenture for the Company's 8.75% Senior Subordinated Notes Due
2007 (the "Senior Subordinated Notes") also contains restrictions on the
Company's ability to incur additional indebtedness, and other contractual
arrangements to which the Company may become subject to in the future could
contain similar restrictions.
OPERATING HAZARDS AND UNINSURED RISKS; PRODUCTION CURTAILMENTS
The oil and gas business involves a variety of operating risks,
including, but not limited to, unexpected formations or pressures,
uncontrollable flows of oil, gas, brine or well fluids into the environment
(including groundwater contamination), blowouts, cratering, fires, explosions,
pipeline ruptures or spills, pollution and other risks, any of which could
result in personal injuries, loss of life, damage to properties, environmental
pollution, suspension of operations and substantial losses. Although the Company
carries insurance which it believes is reasonable, it is not fully insured
against all risks. The Company does not carry business interruption insurance.
Losses and liabilities arising from uninsured or under-insured events could have
a material adverse effect on the financial condition and results of operations
of the Company.
From time to time, due primarily to contract terms, pipeline
interruptions or weather conditions, the producing wells in which the Company
owns an interest have been subject to production curtailments. The curtailments
vary from a few days to several months. In most cases the Company is provided
only limited notice as to when production will be curtailed and the duration of
such curtailments. The Company is currently not curtailed on any of its
production.
Certain of the Cometra Properties are offshore operations in the Gulf
of Mexico which are subject to a variety of operating risks peculiar to the
marine environment, such as hurricanes or other adverse weather conditions, more
extensive governmental regulation, including regulations that may, in certain
circumstances, impose strict liability for pollution damage, and to interruption
or termination of operations by governmental authorities based on environmental
or other considerations.
HEDGING RISKS
From time to time, the Company hedges a portion of its physical oil and
natural gas production by entering short positions through fixed price swaps or
options. The Company does not generally trade directly utilizing NYMEX futures.
The Company currently has one oil fixed price swap relating to 80,000 Bbls in
each of January, February and March 1997 and 60,000 Bbls in April 1997. The
settlement is determined by the difference between the Company's fixed price and
the average of the daily prompt NYMEX WTI contract during each corresponding
month. The Company had one fixed price natural gas swap during January 1997
relating to 155,000 MmBtu. As of March 17, 1997, there are no other hedge
positions.
The Company's Vice-President--Gas Management has the responsibility for
implementing approved hedge strategies. The hedge program provides for oversight
and reporting requirements, hedge goals and how strategies will be developed.
The above described hedges represent approximately 12% of the Company's
combined oil and gas production through April 1997, and there are none
thereafter. The production that is hedged represents 51% of the Company's oil
production and 1% of the Company's gas production through April 1997. None of
the production sold pursuant to fixed price gas sales contracts is hedged.
These hedges have in the past involved fixed price arrangements and
other price arrangements at a variety of prices, floors and caps. The Company
may in the future enter into oil and natural gas futures contracts, options and
swaps. The Company's hedging activities, while intended to reduce the Company's
sensitivity to changes in market prices of oil and gas, are subject to a number
of risks including instances in which (i) production is less than expected, (ii)
there is a widening of price differentials between delivery points required by
fixed price delivery contracts to the extent they differ from those of the
Company's production or (iii) the Company's customers or the counterparties to
its futures contracts fail to purchase or deliver the contracted quantities of
oil or natural gas. Additionally, the fixed price sales and hedging contracts
limit the benefits the
6
<PAGE> 8
Company will realize if actual prices rise above the contract prices. In
the future, the Company may increase the percentage of its production covered by
hedging arrangements.
GAS CONTRACT RISK
A significant portion of the Company's production is subject to fixed
price contracts. On a pro forma basis, approximately 47% of average gas
production for December 1996 was sold subject to fixed price sales contracts
(including a contract relating to the Cometra Properties described below and
excluding the hedging activities described above). These fixed price contracts
are at prices ranging from $2.15 to $3.70 per Mcf. The fixed price contracts
with terms of less than one year, between one and five years and greater than
five years constitute approximately 31%, 65% and 4%, respectively, of the volume
sold under fixed price contracts. The fixed price sales contracts limit the
benefits the Company will realize if actual prices rise above the contract
prices.
As part of the Cometra Acquisition, the Company acquired a gas sales
contract covering 20,000 acres currently producing approximately 20,000 Mcf/d.
The price paid pursuant to the contract was $3.70 per Mcf at December 31, 1996
(65% higher than average 1996 natural gas prices received by the Company) and
escalates at $0.05 per Mcf per annum. The contract is with a large gas utility
and expires in June 2000. This contract represents 15% of the Company's pro
forma December 1996 production on an Mcfe basis.
The gas contract contains language that requires the purchaser to
purchase all of the gas legally produced on the designated acreage. The contract
also contains language that may be read to provide that the purchaser is not
required to purchase more than 80% of the Company's delivery capacity (up to a
delivery capacity of 20,000 Mcf/d). However, since the commencement of the
contract in 1990 through the date hereof, the purchaser has purchased all of the
gas produced on the designated acreage.
The Company believes that these fixed price contracts are enforceable
and it has not received any notice or other indication from any of the
counterparties that they intend to cease performing any of their obligations
under these contracts. However, there can be no assurance that one or more of
these counterparties will not attempt to totally or partially mitigate their
obligations under these contracts. If any of the purchasers under the contracts
should be successful in doing so, then the Company could be required to market
its production on less attractive terms, which could have a material adverse
effect on the Company's financial condition, results of operations and cash
flow.
GAS GATHERING, PROCESSING AND MARKETING
The Company's gas gathering, processing and marketing operations depend
in large part on the ability of the Company to contract with third party
producers to produce their gas, to obtain sufficient volumes of committed
natural gas reserves, to maintain throughput in the Company's processing plant
at optimal levels, to replace production from declining wells, to assess and
respond to changing market conditions in negotiating gas purchase and sale
agreements and to obtain satisfactory margins between the purchase price of its
natural gas supply and the sales price for such residual gas volumes and the
natural gas liquids processed. In addition, the Company's operations are subject
to changes in regulations relating to gathering and marketing of oil and gas.
The inability of the Company to attract new sources of third party natural gas
or to promptly respond to changing market conditions or regulations in
connection with its gathering, processing and marketing operations could
materially adversely affect the Company's financial condition and results of
operations.
LAWS AND REGULATIONS
The Company's operations are affected by extensive regulation pursuant
to various federal, state and local laws and regulations relating to the
exploration for and development, production, gathering, marketing,
transportation and storage of oil and gas. These regulations, among other
things, control the rate of oil and gas production, and control the amount of
oil that may be imported. The Company's operations are subject to numerous laws
and regulations governing plugging and abandonment, the discharge of materials
into the environment or otherwise relating to environmental protection. These
laws and regulations require the acquisition of a permit before drilling
commences, restrict the types, quantities and concentration of various
substances that can be released into the environment in connection with drilling
and production activities, limit or prohibit drilling activities on certain
lands lying within wilderness, wetlands and other protected areas, and impose
substantial liabilities
7
<PAGE> 9
for pollution which might result from the Company's operations. The Company
may also be subject to substantial clean-up costs for any toxic or hazardous
substance that may exist under any of its properties. Moreover, the recent trend
toward stricter standards in environmental legislation and regulation is likely
to continue. For instance, legislation has been proposed in Congress from time
to time that would reclassify certain crude oil and natural gas exploration and
production wastes as "hazardous wastes" which would make the reclassified wastes
subject to much more stringent handling, disposal and clean-up requirements. If
such legislation were to be enacted, it could have a significant impact on the
operating costs of the Company, as well as the oil and gas industry in general.
Initiatives to further regulate the disposal of crude oil and natural gas wastes
are also pending in certain states, and these various initiatives could have a
similar impact on the Company. The Company could incur substantial costs to
comply with environmental laws and regulations.
COMPETITION
The Company encounters substantial competition in acquiring properties,
marketing oil and gas, securing equipment and personnel and operating its
properties. The competitors in acquisitions, development, exploration and
production include major oil companies, numerous independent oil and gas
companies, individual proprietors and others. Many of these competitors have
financial and other resources which substantially exceed those of the Company
and have been engaged in the energy business for a much longer time than the
Company. Therefore, competitors may be able to pay more for desirable leases and
to evaluate, bid for and purchase a greater number of properties or prospects
than the financial or personnel resources of the Company will permit.
DEPENDENCE ON KEY PERSONNEL
The Company depends, and will continue to depend in the foreseeable
future, on the services of its officers and key employees with extensive
experience and expertise in evaluating and analyzing producing oil and gas
properties and drilling prospects, maximizing production from oil and gas
properties and marketing oil and gas production, including John H. Pinkerton,
the Company's President and Chief Executive Officer. However, the Company does
not have employment contracts with any of its officers or key employees. The
ability of the Company to retain its officers and key employees is important to
the continued success and growth of the Company. The loss of key personnel could
have a material adverse effect on the Company. The Company does not maintain key
man life insurance on any of its officers or key employees.
CERTAIN BUSINESS INTERESTS OF CHAIRMAN
Thomas J. Edelman, Chairman of the Company, is also the Chairman,
President and Chief Executive Officer of Patina Oil & Gas Company ("Patina"), a
publicly traded oil and gas company. The Company currently has no existing
business relationships with Patina, and Patina does not own any of the Company's
securities. However, as a result of Mr. Edelman's position in Patina, conflicts
of interests may arise between them. The Company has board policies that require
Mr. Edelman to give notification of any potential conflicts that may arise
between the Company and Patina. There can be no assurance, however, that the
Company will not compete with Patina for the same acquisition or encounter other
conflicts of interest.
SUBORDINATION OF 6% DEBENTURES
The 6% Debentures will be subordinated in right of payment to all
existing and future Senior Debt of the Company, including borrowings under the
Credit Agreement and the Senior Subordinated Notes. In the event of bankruptcy,
liquidation or reorganization of the Company, the assets of the Company will be
available to pay obligations on the Notes only after all Senior Debt has been
paid in full, and there may not be sufficient assets remaining to pay amounts
due on any or all of the Notes outstanding. The aggregate principal amount of
Senior Debt of the Company, as of December 31, 1996, would have been $229
million on a pro forma basis. Additional Senior Debt may be incurred by the
Company from time to time, subject to certain restrictions. In addition to being
subordinated to all existing and future Senior Debt of the Company, the 6%
Debentures will not be secured by any of the Company's assets, unlike the
borrowings under the Credit Agreement. See "Description of the
Notes--Subordination."
8
<PAGE> 10
FRAUDULENT CONVEYANCE
The incurrence of indebtedness (such as the 6% Debentures) is subject
to review under relevant federal and state fraudulent conveyance statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of other
creditors of the Company. To the extent that a court were to find that (x) the
6% Debentures were incurred with the intent to hinder, delay or defraud any
present or future creditor or that the Company contemplated insolvency with a
design to favor one or more creditors to the exclusion in whole or in part of
others or (y) the Company did not receive fair consideration or reasonably
equivalent value for issuing the 6% Debentures and, at the time thereof, the
Company (i) was insolvent or rendered insolvent by reason of the issuance of the
6% Debentures or the Guarantee, (ii) was engaged or about to engage in a
business or transaction for which its remaining assets constituted unreasonably
small capital or (iii) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they matured, a court could avoid or
subordinate the 6% Debentures in favor of other creditors.
On the basis of historical financial information and recent operating
history and other information currently available to it, the Company believes
that the 6% Debentures were incurred for proper purposes and in good faith and
that, after giving effect to Indebtedness incurred in connection with the
issuance of the 6% Debentures, the Company is solvent, will have sufficient
capital for carrying on its business and will be able to pay its debts as such
debts become absolute and mature. There can be no assurance, however, that a
court passing on such questions would reach the same conclusions and, if not, a
court could, among other things, void all or a portion of the Company's
obligations to holders of 6% Debentures and/or subordinate the Company's
obligations under the 6% Debentures to a greater extent than would otherwise be
the case.
ABSENCE OF A PUBLIC MARKET FOR 6% DEBENTURES
There is no existing market for the 6% Debentures and, although the
Underwriters have advised the Company that they currently intend to make a
market in the 6% Debentures, the Underwriters are not obligated to do so and may
discontinue such market making at any time. The Company does not intend to apply
for listing of the 6% Debentures on a securities exchange or to seek approval
for quotation through an automated quotation system. Accordingly, there can be
no assurance that an active market will develop for the 6% Debentures or, if
developed, that such market will be sustained or as to the liquidity of any
market. The initial offering price of the 6% Debentures may bear no relationship
to the market price of the 6% Debentures. Factors such as quarterly or cyclical
variations in the Company's financial results, variations in interest rates,
future announcements concerning the Company or its competitors, government
regulation, general economic and other conditions and developments affecting the
oil and gas industry could cause the market price of the 6% Debentures to
fluctuate substantially.
RISKS RELATING TO A CHANGE OF CONTROL
Upon a Change of Control (as defined herein), holders of the 6%
Debentures will have the right to require the Company to repurchase all or any
part of such holders' 6% Debentures at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase. The events that constitute a Change of Control hereunder would
constitute a default under the Credit Agreement, which prohibits the purchase of
the 6% Debentures by the Company in the event of certain Change of Control
events unless and until such time as the Company's indebtedness under the Credit
Agreement is repaid in full. There can be no assurance that the Company and the
Subsidiary Guarantors would have sufficient financial resources available to
satisfy all of its or their obligations under the Credit Agreement and the 6%
Debentures in the event of a Change of Control. The Company's failure to
purchase the 6% Debentures would result in a default under the Indenture and
under the Credit Agreement, each of which could have adverse consequences for
the Company and the holders of the 6% Debentures. See "Description of Capital
Stock and Indebtedness" and "Description of the 6% Convertible Subordinated
Debentures ." The definition of "Change of Control" in the Indenture includes a
sale, lease, conveyance or other disposition of "all or substantially all" of
the assets of the Company and its Subsidiaries taken as a whole to a person or
group of persons. There is little case law interpreting the phrase "all or
substantially all" in the context of an indenture. Because there is no precise
established definition of this phrase, the ability of a holder of the 6%
Debentures to require the Company to repurchase such 6% Debentures as a result
of a sale, lease, conveyance or transfer of all or substantially all of the
Company's assets to a person or group of persons may be uncertain.
9
<PAGE> 11
FORWARD-LOOKING INFORMATION
Information included in this Prospectus, including information
incorporated by reference herein, contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, including projections, estimates and expectations. Those statements by
their nature are subject to certain risks, uncertainties and assumptions and
will be influenced by various factors. Should one or more of these statements or
their underlying assumptions prove to be incorrect, actual results could vary
materially. Although the Company believes that such projections, estimates and
expectations are based on reasonable assumptions, it can give no assurance that
such projections, estimates and expectations will be achieved. Important factors
that could cause actual results to differ materially from those in the
forward-looking statements herein include political and economic developments in
the United States and foreign countries, federal and state regulatory
developments, the timing and extent of changes in commodity prices, the extent
of success in acquiring oil and gas properties and in discovering, developing
and producing reserves and conditions of the capital markets and equity markets
during the periods covered by the forward-looking statements. See "Risk Factors"
for further information with respect to certain of such factors. In addition,
certain of such projections and expectations are based on historical results,
which may not be indicative of future performance. See "Unaudited Pro Forma
Consolidated Financial Statements."
<TABLE>
<CAPTION>
RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
Pro Forma
1992 1993 1994 1995 1996 1996
----------- ---------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges 1.9x 2.2x 2.0x 2.1x 3.6x 1.9x
Ratio of earnings to fixed
charges and preferred
dividends 1.5x 1.7x 1,7x 1.9x 2.7x 1.8x
- ---------------
</TABLE>
For purposes of determining the ratio of earnings to fixed charges, earnings are
defined as income before income taxes plus fixed charges. Fixed charges consist
of interest expense on all indebtedness.
USE OF PROCEEDS
The Company will not receive any proceeds upon the sale by the Selling
Securityholders of the Selling Securityholder Securities.
10
<PAGE> 12
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1996, and the pro forma capitalization of the Company at December
31, 1996, giving effect to the Cometra Acquisition and the related financings
and certain other acquisitions and financings consummated in 1996, as described
in the notes to the Unaudited Pro Forma Consolidated Financial Statements,
incorporated by reference in this prospectus as if such transactions occurred on
December 31, 1996. This table should be read in conjunction with the
Consolidated Financial Statements and Unaudited Pro Forma Consolidated Financial
Statements and Notes thereto incorporated into this Prospectus.
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------
Actual Pro Forma
------------------ ------------------
(unaudited)
(Dollars in thousands)
<S> <C> <C>
Current portion of debt $ 26 $ 26
================== ==================
Long-term debt:
Revolving credit facility............................... $ 61,355 $231,305
8.75% Senior Subordinated Notes......................... -- 125,000
6% Convertible Subordinated Debentures (1).............. 55,000 55,000
Other long-term debt.................................... 425 425
------------------ ------------------
Total long-term debt............................. $116,780 $411,730
================== ==================
Stockholders' equity:
Preferred Stock, $1 par value, 4,000,000 shares
authorized: $2.03 Convertible Preferred Stock,
1,150,000 shares outstanding ($28,750,000
liquidation preference)(2)....................... 1,150 1,150
Common Stock, $.01 par value, 35,000,000 shares
authorized: 14,750,537 issued and outstanding;
20,160,643 shares issued and outstanding
pro forma (3).................................... 148 202
Capital in excess of par value.......................... 110,248 204,294
Retained earnings....................................... 5,291 5,291
Unrealized gain on marketable securities................ 692 692
------------------ ------------------
Total stockholders' equity....................... 117,529 211,629
------------------ ------------------
Total capitalization........................ $234,309 $623,359
================== ==================
- -------------------
<FN>
(1) The 6% Convertible Subordinated Debentures were issued on December 27, 1996. See "Description of Capital Stock
and Indebtedness."
(2) The $2.03 Convertible Preferred Stock, may, at the election of the Company, be exchanged for an aggregate of
$28,750,000 principal amount of 8.125% Convertible Subordinated Notes due December 31, 2005. See "Description of
Capital Stock and Indebtedness."
(3) The pro forma column includes the 1,410,106 shares issued to Cometra as partial consideration for the Cometra
Properties.
</TABLE>
11
<PAGE> 13
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock was listed on the NYSE on October 11, 1996 under the
symbol "LOM". Prior to listing on the NYSE, the Common Stock was listed on the
Nasdaq National Market under the symbol "LOMK". On March 17, 1997, 20,272,242
shares were held by approximately 4,300 stockholders of record.
The following table sets forth the high and low sales prices as
reported on the NYSE Composite Transaction tape or the Nasdaq National Market,
as applicable, on a quarterly basis for the periods indicated.
<TABLE>
<CAPTION>
Common
Stock
High Low Dividends
----------- ----------- -----------
1997
----
<S> <C> <C> <C>
First Quarter (through March 17) $23.625 $16.000 (a)
1996
----
Fourth Quarter....................... $17.375 $13.125 $ .02
Third Quarter........................ 14.875 12.750 .02
Second Quarter....................... 15.500 11.625 .01
First Quarter........................ 12.125 9.560 .01
1995
----
Fourth Quarter....................... $7.500 $5.500 $ .01
Third Quarter........................ 9.250 7.250 -
Second Quarter....................... 8.188 7.250 -
First Quarter........................ 7.375 5.500 -
<FN>
(a) Since the fourth quarter of 1995, dividends have been declared at the
beginning of the last month of each calendar quarter and have been paid at
the end of such calendar quarter..
</TABLE>
Dividends on the Common Stock were initiated in December 1995 and have
been paid each successive quarter. The $2.03 Convertible Preferred Stock
receives cumulative quarterly dividends at the annual rate of $2.03 per share.
If there is any arrearage in dividends on the $2.03 Convertible Preferred Stock,
the Company may not pay dividends on the Common Stock. The Company has never
been in arrears in the payment of dividends on the $2.03 Convertible Preferred
Stock. See "Description of Capital Stock and Indebtedness."
The payment of dividends is subject to declaration by the Board of
Directors and may depend on earnings, capital expenditures and market factors
existing from time to time. The Amended Credit Facility and the Indenture for
the 6% Convertible Subordinated Debenture Due 2007 and 8.75% Senior Subordinated
Notes due 2007 contain restrictions on the Company's ability to pay dividends on
capital stock. Under the most restrictive of these provisions, the Company could
have paid $5,000,000 of dividends as of December 31, 1996.
12
<PAGE> 14
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated financial statements
give effect to: (i) the purchase by the Company of certain oil and gas
properties from Bannon Energy Incorporated (the "Bannon Acquisition") in April
1996 for $37 million, (ii) the Cometra Acquisition, (iii) the private placements
of 600,000 shares of Common Stock and $55 million of 6% Convertible Subordinated
Debentures (collectively referred to as the "Private Placements"), (iv) the
Offerings, (v) the application of the estimated net proceeds from the Private
Placements and the Offerings and (vi) the conversion of the Company's 7 1/2%
Convertible Exchangeable Preferred Stock into Common Stock. The unaudited pro
forma consolidated statement of income for the year ended December 31, 1996 was
prepared as if the Bannon Acquisition, the Cometra Acquisition, the Private
Placements and the Offerings (collectively, the "Transactions") had occurred on
January 1, 1996. The accompanying unaudited pro forma consolidated balance sheet
of the Company as of December 31, 1996 has been prepared as if the Transactions
had occurred as of that date. The historical information provided under the
heading "Bannon Acquisition" in the statement of income for the year ended
December 31, 1996, includes results for the properties acquired in the Bannon
Acquisition for the period from January 1, 1996 until its purchase on March 31,
1996. The historical information provided in the statement of income of the
Company for the year ended December 31, 1996 includes results for the properties
acquired in the Bannon Acquisition for the period from April 1, 1996 through
December 31, 1996.
This information is not necessarily indicative of future consolidated
results of operations and it should be read in conjunction with the separate
historical statements and related notes of the respective entities appearing
elsewhere in this Registration Statement or incorporated by reference herein.
13
<PAGE> 15
<TABLE>
<CAPTION>
LOMAK PETROLEUM, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
PRO FORMA
BANNON COMETRA PRO FORMA PRE-OFFERING OFFERING PRO FORMA
LOMAK ACQUISITION ACQUISITION ADJUSTMENTS LOMAK ADJUSTMENTS LOMAK
----- ----------------------- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Oil and gas sales............. $ 68,054 $ 1,703 $ 60,751 $ $ 130,508 $ $ 130,508
Field services................ 14,223 - - 14,223 14,223
Gas transportation and
marketing................... 5,575 - 7,273 11,478 (a) 24,326 24,326
Interest and other............ 3,386 - - 3,386 3,386
----- ----- ------ ----- -----
91,238 1,703 68,024 172,443 172,443
------ ----- ------ ------- -------
EXPENSES
Direct operating.............. 24,456 562 14,376 39,394 39,394
Field services................ 10,443 - - 10,443 10,443
Gas transportation and
marketing................... 1,674 - - 11,478 (a) 13,152 13,152
Exploration................... 1,460 - - 1,460 1,460
General and administrative.... 3,966 - - 3,966 3,966
Interest...................... 7,487 - - 23,991 (b) 31,478 (521) (e) 30,957
Depletion, depreciation and
amortization................ 22,303 - - 22,086 (c) 44,389 44,389
------ --- ------ ------ ------
71,789 562 14,376 144,282 143,761
------ --- ------ ------- -------
Income before taxes............. 19,449 1,141 53,648 28,161 28,682
INCOME TAXES
Current....................... (729) - - (115) (d) (844) (16) (f) (860)
Deferred...................... (6,105) - - (2,906) (d) (9,011) (167) (f) (9,178)
------ ------ ------ ------ -----
Net income...................... $ 12,615 $ 1,141 $ 53,648 $ 18,306 $ 18,644
======== ======== ========= ========== ==========
Net income applicable to
common shares................ $ 10,161 $ 15,972 $ 16,310
======== ========== ==========
Earnings per common share....... $ 0.69 $ 0.97 $ 0.80
======== ========== ==========
Weighted average shares
outstanding.................. 14,812 1,583 16,395 4,000 20,395
====== ====== ======
</TABLE>
See notes to pro forma combined financial statements
14
<PAGE> 16
LOMAK PETROLEUM, INC.
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRE-OFFERING OFFERING PRO FORMA
LOMAK ADJUSTMENTS LOMAK ADJUSTMENTS LOMAK
---------- ----------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents ............. $ 8,625 $ $ 8,625 $ $ 8,625
Accounts receivable .............. 18,121 18,121 18,121
Marketable securities ............ 7,658 7,658 7,658
Inventory and other .............. 799 799 799
------- ------- -------
Total current assets .......... 35,203 35,203 35,203
------- ------- -------
Oil and gas properties ............. 282,519 325,000 (g) 607,519 607,519
Accumulated depletion and
amortization ................... (53,102) (53,102) 53,102)
------- ------- -------
229,417 554,417 554,417
------- ------- -------
Gas transportation and field service 21,139 60,000 (g) 81,139 81,139
assets...........................
Accumulated depreciation ......... (4,997) (4,997) (4,997)
------ ------ ------
16,142 76,142 76,142
------ ------ ------
Other assets ....................... 1,785 1,785 4,050 (h) 5,835
---------- ----------- ----------
$ 282,547 $ 667,547 $ 671,597
========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................. $ 14,433 $ $ 14,433 $ $ 14,433
Accrued liabilities............... 4,603 4,603 4,603
Accrued payroll and benefit costs. 3,245 3,245 3,245
Current portion of debt........... 26 26 26
------- ------- -------
Total current liabilities....... 22,307 22,307 22,307
------- ------- -------
Revolving credit facility........... 61,355 355,000 (g) 416,355 (120,950) (h) 231,305
(64,100) (i)
8.75% Senior subordinated notes..... - - 125,000 (h) 125,000
6% Convertible subordinated
debentures....................... 55,000 55,000 55,000
Other long-term debt................ 425 425 425
------- ------- -------
116,780 471,780 411,730
------- ------- -------
Deferred income taxes............... 25,931 25,931 25,931
Stockholders' equity
$2.03 Preferred stock, $1 par value 1,150 1,150 1,150
Common stock, $.01 par value...... 148 14 (g) 162 40 (i) 202
Capital in excess of par value.... 110,248 29,986 (g) 140,234 64,060 (i) 204,294
Retained earnings (deficit)....... 5,291 5,291 5,291
Unrealized gain on marketable
securities...................... 692 692 692
----------- ------------ ---------
Total stockholders' equity ..... 117,529 147,529 211,629
------- ------- -------
$ 282,547 $ 667,547 $ 671,597
========== =========== =========
</TABLE>
See notes to pro forma combined financial statements
15
<PAGE> 17
LOMAK PETROLEUM, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE (1) PRO FORMA ADJUSTMENTS FOR THE TRANSACTIONS -- FOR THE YEAR ENDED
DECEMBER 31, 1996
The accompanying unaudited pro forma consolidated statement of income
for the year ended December 31, 1996 has been prepared as if the Transactions
had occurred on January 1, 1996 and reflects the following adjustments:
(a) To reclassify gas transportation and marketing revenue and
expenses to conform with the accounting presentation followed
by the Company.
(b) To adjust interest expense for the estimated amount that would
have been incurred on the incremental borrowings for the
Bannon Acquisition and the Cometra Acquisition, net of
proceeds received from the Private Placements. A 1/8% per
annum increase in interest rate would decrease the Company's
income before taxes by $392,000.
(c) To record depletion expense for the Bannon Acquisition and the
Cometra Acquisition at a rate of $0.87 per Mcfe, which would
have been the rate in effect for 1996 had such acquisitions
taken place at January 1, 1996. Additionally, to record
depreciation expense on the gas processing plant purchased in
the Cometra Acquisition.
(d) To adjust the provision for income taxes for the change in
taxable income resulting from the Bannon Acquisition, the
Cometra Acquisition and the Private Placements and the effect
on deferred taxes recorded at January 1, 1996 as if such
Transactions had taken place at that time.
(e) To adjust interest expense for the estimated amounts that
would have been repaid with the net proceeds from the
Offerings. Because the net proceeds from the Offerings will be
used to repay debt, a 1/8% per annum increase in interest rate
would increase the Company's income before taxes by $76,000.
(f) To adjust the provision for income taxes for the change in
taxable income resulting from interest adjustments made to
reflect the amounts of borrowings repaid with the net proceeds
from the Offerings and the effect on deferred taxes recorded
at January 1, 1996 as if the Offerings had taken place at that
time.
NOTE (2) PRO FORMA ADJUSTMENTS FOR THE COMETRA ACQUISITION AND THE
OFFERINGS--AS OF DECEMBER 31, 1996
(g) To record the Cometra Acquisition.
(h) To record the Notes Offering, net of offering costs and the
application of proceeds therefrom.
(i) To record the Common Stock Offering, net of offering costs
and the application of proceeds therefrom.
NOTE (3) EXPECTED GENERAL AND ADMINISTRATION EXPENSES
In connection with the Cometra Acquisition, the Company expects that
general and administrative expenses will increase approximately $1.7 million as
a result of offers made to Cometra personnel and that field service revenues
will increase approximately $240,000 for operating agreements acquired in the
Cometra Acquisition. The impact of these increases would be to reduce 1996 pro
forma earnings per share to $0.75.
16
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present selected consolidated financial data
covering the five years ended December 31, 1996. Such data has been derived
from, and should be read in conjunction with, the audited Consolidated Financial
Statements and Notes thereto for each of the five years ended December 31, 1996,
the Unaudited Pro Forma Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
PRO FORMA
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Oil and gas sales................. $ 7,703 $ 11,132 $ 24,461 $ 37,417 $ 68,054 $130,508
Field services.................... 5,283 6,966 7,667 10,097 14,223 14,223
Gas transportation and marketing.. 332 559 2,195 3,284 5,575 24,326
Interest and other................ 577 418 471 1,317 3,386 3,386
------ ------ ------ ------ ------ -------
13,895 19,075 34,794 52,115 91,238 172,443
Expenses
Direct operating.................. 3,039 4,438 10,019 14,930 24,456 39,394
Field services.................... 3,951 5,712 5,778 6,469 10,443 10,443
Gas transportation and marketing.. - 13 490 849 1,674 13,152
Exploration....................... 36 86 359 512 1,460 1,460
General and administrative........ 1,915 2,049 2,478 2,736 3,966 3,966
Interest.......................... 952 1,120 2,807 5,584 7,487 30,957
Depletion, depreciation and
amortization...................... 3,124 4,347 10,105 14,863 22,303 44,389
----- ----- ------ ------ ------ ------
13,017 17,765 32,036 45,943 71,789 143,761
------ ------ ------ ------ ------ -------
Income before taxes................. 878 1,310 2,758 6,172 19,449 28,682
Income taxes........................ 192 (81) 139 1,782 6,834 10,038
--- --- --- ----- ----- ------
Net income.......................... $ 686 $ 1,391 $ 2,619 $ 4,390 $ 12,615 $ 18,644
======= ======== ========= ======== ======== ========
Earnings per common share........... $ 0.08 $ 0.18 $ 0.25 $ 0.31 $ 0.69 $ 0.80
======= ======== ========= ======== ======== ========
Cash dividends per common share..... $ 0.00 $ 0.00 $ 0.00 $ 0.01 $ 0.06 N/A
======= ======== ========= ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA (a).......................... $ 4,990 $ 6,863 $ 16,029 $ 27,131 $ 50,699 $105,488
Net cash provided by operations..... 5,168 4,305 11,241 16,561 38,445 N/A
Net cash used in investing.......... (4,210) (43,459) (29,536) (76,113) (69,666) N/A
Net cash provided by financing...... 126 38,912 21,173 57,702 36,799 N/A
Capital expenditures................ 5,920 48,240 70,024 88,530 79,390 N/A
Ratios:
EBITDA to interest expense........ 5.2x 6.1x 5.7x 4.9x 6.8x 3.4x
Earnings to fixed charges(b)...... 1.9x 2.2x 2.0x 2.1x 3.6x 1.9x
Total debt to EBITDA.............. 2.6x 4.5x 3.9x 3.1x 2.3x 3.9x
BALANCE SHEET DATA (END OF PERIOD):
Cash and equivalents................ $ 2,261 $ 2,019 $ 4,897 $ 3,047 $ 8,625 $ 8,625
Total assets........................ 28,328 76,333 141,768 214,788 282,547 671,597
Long-term debt (c).................. 13,127 31,108 62,592 83,088 116,806 411,756
Stockholders' equity................ 9,504 32,263 43,248 99,367 117,529 211,629
<FN>
(a) EBITDA represents net income plus income taxes, exploration expense,
interest expense and depletion, depreciation, and amortization expense.
EBITDA is not presented as an indicator of the Company's operating
performance, an indicator of cash available for discretionary spending
or as a measure of liquidity. EBITDA may not be comparable to other
similarly titled measures of other companies. The Company's Credit
Agreement requires the maintenance of certain EBITDA ratios.
(b) For the purpose of determining the ratio of earnings to fixed charges,
earnings are defined as income before taxes plus fixed charges. Fixed
charges consist of interest expense.
(c) Long-term debt includes current portion.
</TABLE>
17
<PAGE> 19
SELLING SECURITYHOLDERS
The following table sets forth certain information with respect to the
Selling Securityholders for whom the Company is registering the Selling
Securityholder Securities for resale to the public. The Company will not receive
any of the proceeds from the sale of the Selling Securityholder Securities.
There are no material relationships between any of the Selling Securityholders
and the Company except as otherwise indicated. Beneficial ownership of the
Selling Securityholder Securities by each Selling Securityholder after the sale
will depend on the number of Selling Securityholder Securities sold by each
Selling Securityholder. The shares offered by the Selling Securityholder are not
being underwritten. No estimate can be given as to the amount of Common Stock
that will be held by the Selling Securityholders upon termination of the
Offering.
No arrangements have been made for the distribution or sale of the Selling
Securityholder Securities. There can be no assurance that Selling
Securityholders will be able to sell some or all of the Selling Securityholder
Securities listed for sale herein. There is no established public trading market
for the Debentures as of the date of this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
SHARES TO
BE OWNED
AFTER PERCENT OF
NUMBER OF OFFERING PERCENT OF CLASS
SHARES MAXIMUM ASSUMING DEBENTURES CLASS OF OF
BENEFICIALLY NUMBER OF ALL SHARES BENEFICIALLY COMMON DEBENTURES
OWNED PRIOR SHARES TO OFFERED ARE OWNED PRIOR STOCK AFTER PRIOR TO
NAME OF SELLING SECURITYHOLDER TO OFFERING BE OFFERED DISTRIBUTED TO OFFERING OFFERING OFFERING
------------------------------ ----------- ---------------------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
6% CONVERTIBLE SUBORDINATED DEBENTURES:
Allstate Insurance 103,896 103,896 (1) 0 $2,000,000 0.0% 3.6%
AON Corporation 36,364 36,364 (1) 0 700,000 0.0% 1.3%
Bankers Trust 51,948 51,948 (1) 0 1,000,000 0.0% 1.9%
Paul Berkman and Company 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Camden Asset Management 103,896 103,896 (1) 0 2,000,000 0.0% 3.6%
CIBC 25,974 25,974 (1) 0 500,000 0.0% 0.9%
CNA Insurance 129,870 129,870 (1) 0 2,500,000 0.0% 4.5%
Eagle Asset Management 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Fidelity Management 519,481 519,481 (1) 0 10,000,000 0.0% 18.2%
Fiduciary Trust 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Harris Trust 15,584 15,584 (1) 0 300,000 0.0% 0.5%
High Bridge Capital 51,948 51,948 (1) 0 1,000,000 0.0% 1.8%
Kessler Asher Trading 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Laterman 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Lynch & Mayer 259,740 259,740 (1) 0 5,000,000 0.0% 9.1%
New York Life 207,792 207,792 (1) 0 4,000,000 0.0% 7.3%
Oaktree Capital Management 207,792 207,792 (1) 0 4,000,000 0.0% 7.3%
Orion Capital 77,922 77,922 (1) 0 1,500,000 0.0% 2.7%
Palisade Capital 207,792 207,792 (1) 0 4,000,000 0.0% 7.3%
Pecks Management 415,584 415,584 (1) 0 8,000,000 0.0% 14.5%
Putnam Investments 233,766 233,766 (1) 0 4,500,000 0.0% 8.2%
Sage Capital 15,584 15,584 (1) 0 300,000 0.0% 0.6%
William E Simon & Sons 10,390 10,390 (1) 0 200,000 0.0% 0.4%
Society Asset Management 51,948 51,948 (1) 0 1,000,000 0.0% 1.8%
Donald & Company 20,000 20,000 0 0 0.0% 0.0%
Cometra Energy, L.P. 1,410,106 1,410,106 0 0 0.0% 0.0%
- ------------------------------
<FN>
(1) Issuable upon conversion of the Preferred Stock.
</TABLE>
18
<PAGE> 20
PLAN OF DISTRIBUTION
The Company has not been advised by the Selling Security holders as to any
plan of distribution. Distribution of the Common Stock and the Debentures by the
Selling Securityholders, or by pledgees, donees (including charitable
organizations), transferees or other successors in interest, may be effected
from time to time in one or more transactions (which may involve block
transactions) (i) in the case of Common Stock, on the NYSE in transactions that
may include special offerings, exchangeable distributions, the writing of
options , in each case pursuant to and in accordance with the rules of such
exchange, (ii) in the over-the-counter market, or (iii) in transactions
otherwise than on such exchange or in the over-the-counter market, or in a
combination of any such transactions. Such transactions may be effected by the
Selling Securityholders at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated prices or at
fixed prices.
The Selling Securityholders may effect such transactions by selling the
Common Stock or the Debentures to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts or commissions
from the purchasers of the Common Stock for whom they may act as agent.
All expenses of the registration of the Securities covered by this
Prospectus, estimated to be $75,000, are to be borne by the Company, except that
the Selling Securityholders will pay any applicable underwriters' commissions
and expenses, brokerage fees or transfer taxes, as well as the fees and
disbursements of their counsel.
The Selling Securityholders may agree to indemnify any broker-dealer or
agent that participates in transactions involving sales of the shares against
certain liabilities, including liabilities arising under the Securities Act.
DESCRIPTION OF 6% CONVERTIBLE SUBORDINATED DEBENTURES
The following is a summary of the terms of the 6% Convertible Subordinated
Debentures due 2007 (the "Debentures"). This summary is not intended to be
complete and is subject to, and qualified in its entirety by reference to, the
Indenture (as defined below), including the definition therein of certain terms.
The Debentures were be issued under an indenture (the "Indenture"), between
the Company and Keycorp Shareholder Services, Inc., as trustee (the "Trustee"),
a copy of which is available upon request from the Company. The following
statements are summaries of certain terms applicable to the Debentures and do
not purport to be complete. The summaries are subject to, and qualified in their
entirety by reference to, the provisions of the Indenture, including the
definitions therein of certain terms. Whenever reference is made to defined
terms of the Indenture and not otherwise defined herein, such defined terms are
incorporated herein by reference.
GENERAL
The Debentures are unsecured general obligations of the Company,
subordinate in right of payment to certain other obligations of the Company as
described under "Subordination of the Debentures," and convertible into Common
Stock as described under "Conversion of the Debentures." The Debentures are
limited to $55 million aggregate principal amount and will mature on February 1,
2007 (the "Maturity Date"). The Debentures will bear interest at the rate per
annum of 6% from the date of original issue or from the most recent Interest
Payment Date (as defined below) to which interest has been paid or duly provided
for, and accrued but unpaid interest will be payable semi-annually in arrears on
February 1 and August 1 of each year commencing February 1, 1997 (each, an
"Interest Payment Date"), or, if any such day is not a business day, on the next
succeeding business day. Interest will be paid to Debentureholders of record
("Holders") at the close of business on January 15 and July 15, respectively,
immediately preceding the relevant Interest Payment Date (each, a "Regular
Record Date"). Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
Principal and premium, if any, and interest are payable, and the Debentures
may be presented for conversion, registration of transfer and exchange, at the
office or agency of the Company maintained for those purposes in New York, New
York (which initially will be the corporate trust office of the Trustee), except
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the Holder entitled thereto as it appears on the
Debenture Register on the related record date.
19
<PAGE> 21
The Debentures are issued in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. At any time from and
after the execution and delivery of the Indenture, the Company may deliver
Debentures to the Trustee for authentication and the Trustee shall, in
accordance with the instructions of the Company, authenticate and deliver such
Debentures as provided in the Indenture. No service charge will be made for any
transfer or exchange of Debentures, but, subject to certain exceptions set forth
in the Indenture, the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
The Indenture does not contain any restrictions on the payment of dividends
or on the repurchase of securities by the Company or any financial covenants,
nor does the Indenture require the Company to maintain any sinking fund or other
reserve for the payment of the Debentures.
CONVERSION OF THE DEBENTURES
The Debentures are convertible at any time prior to the Maturity Date
(subject to earlier redemption or repurchase, as described below) into shares of
Common Stock of the Company at the conversion price of $19.25 per share (the
"Conversion Price"), subject to adjustment under certain circumstances as
described below.
The Conversion Price is subject to adjustment as set forth in the Indenture
upon the occurrence of certain events, including: (i) the issuance of Common
Stock as a dividend or other distribution on any class of capital stock of the
Company; (ii) a subdivision or combination of outstanding shares of Common
Stock; (iii) the issuance or distribution of capital stock of the Company or the
issuance or distribution of options, rights, warrants or convertible or
exchangeable securities entitling the holder thereof to subscribe for, purchase,
convert into or exchange for capital stock of the Company at less than the
current market price of such capital stock on the date of issuance or
distribution, but in each case only if such issuance or distribution is made
generally to holders of Common Stock or of a class or series of capital stock
convertible into or exchangeable or exercisable for Common Stock (provided that
the issuance of capital stock upon the exercise of such options, rights or
warrants or the conversion or exchange of convertible or exchangeable securities
will not cause an adjustment in the conversion price if no such adjustment would
have been required at the time such options, rights or warrants or convertible
or exchangeable securities were issued); (iv) the dividend or other distribution
to holders of Common Stock, or of a class or series of capital stock convertible
into or exchangeable or exercisable for Common Stock, generally (other than in
connection with the liquidation or distribution of the Company) of evidences of
indebtedness of the Company or assets (including securities, but excluding
issuances, dividends and distributions referred to above and dividends and
distributions in connection with the liquidation, dissolution or winding up of
the Company; and (v) distributions consisting exclusively of cash to the extent
the amount of such cash combined with all such cash distributions made within
the preceding 12 months with respect to which no adjustment has been made,
exceeds 10% of the Company's market capitalization (being the product of the
then current market price of the Common Stock multiplied by the number of shares
of Common Stock then outstanding) on the record date for such distribution.
Notwithstanding the foregoing, no adjustment in the Conversion Price shall
be made upon (i) the issuance of Common Stock of the Company pursuant to any
compensation or incentive plan for officers, Directors, employees or consultants
of the Company, which plan has been approved by the Compensation Committee of
the Board of Directors (or if there is no such committee then serving, by the
majority vote of the independent Directors) and, if required by law, the
requisite vote of the stockholders of the Company (unless the exercise or
conversion price of the instrument issued pursuant to such plan is subsequently
changed other than solely by operation of the anti-dilution provisions thereof
or by the Compensation Committee, if applicable, the Board of Directors and, if
required by law, the stockholders of the Company as provided in this clause
(i)); (ii) the issuance of Common Stock upon the conversion or exercise of
preferred stock or warrants of the Company outstanding on the date hereof,
unless the conversion or exercise price thereof is changed after the date of the
Indenture (other than solely by operation of the anti-dilution provisions
thereof); (iii) the declaration, setting aside or payment of dividends on any
outstanding preferred stock or any other preferred stock hereafter issued by the
Company; or (iv) after giving effect to any dividend pursuant to the preceding
clause (iii), the declaration, setting aside or payment of dividends out of the
Company's cumulative retained earnings. Also, notwithstanding the provisions of
the preceding paragraph, (a) if the options, rights or warrants or convertible
or exchangeable securities described in clause (iii) of the preceding paragraph
are exercisable only upon the occurrence of certain triggering events, then the
Conversion Price will not be adjusted until such triggering events occur and (b)
if options, rights or warrants or convertible or exchangeable securities expire
unexercised, the Conversion Price will be readjusted to take into account only
the actual number of such options, rights or warrants or convertible or
exchangeable securities which were exercised.
20
<PAGE> 22
No adjustment will be made to the Conversion Price until cumulative
adjustments to the Conversion Price amount to at least 1% of the Conversion
Price, as last adjusted. Except as stated above, the Conversion Price will not
be adjusted for the issuance of Common Stock or any securities convertible into
or exchangeable for Common Stock or carrying the right to purchase any of the
foregoing, or the payment of dividends on the Common Stock. The Company from
time to time may reduce the Conversion Price if the Board of Directors of the
Company has made a determination that such reduction would be in the best
interests of the Company, which determination shall be conclusive.
In the event of (i) any reclassification or change of the Common Stock or
(ii) a consolidation, merger or combination to which the Company is a party or a
sale or conveyance to another entity of the property and assets of the Company
as an entirety or substantially as an entirety, in each case as a result of
which holders of Common Stock shall be entitled to receive stock, other
securities, other property or assets (including cash) with respect to or in
exchange for such Common Stock, each Holder will have the right thereafter to
convert such Holder's Debentures into the kind and amount of shares of stock,
other securities or other property or assets which the Holder would have owned
or have been entitled to receive immediately upon such consolidation, merger,
combination, sale or conveyance had such Debenture been converted into Common
Stock immediately prior to the effective date of such reclassification, change,
consolidation, merger, combination, sale or conveyance. Certain of the foregoing
events may also constitute or result in a Change of Control requiring the
Company to offer no repurchase the Debentures. See "Repurchase at Option of
Holders Upon Change of Control."
Fractional shares of Common Stock will not be issued upon conversion. A
person otherwise entitled to a fractional share of Common Stock upon conversion
shall receive cash equal to the equivalent fraction of the current market price
of a share of Common Stock on the business day prior to conversion.
A Holder who surrenders a Debenture (or portion thereof) for conversion
between the close of business on a Regular Record Date and the next Interest
Payment Date will receive interest on such Interest Payment Date with respect to
such Debenture (or portion thereof) so converted through such Interest Payment
Date. Subject to such payments in the event of conversion after the close of
business on a Regular Record Date, no payment or adjustment shall be made upon
any conversion on account of any interest accrued but unpaid on the Debentures
surrendered for conversion.
OPTIONAL REDEMPTION BY THE COMPANY
The Debentures are not redeemable at the option of the Company prior to
February 1, 2000. Thereafter, the Debentures will be redeemable, in whole or
from time to time in part, upon not less than 30 days' nor more than 60 days'
prior notice of redemption to each Holder at such Holder's last address as it
appears in the Debenture Register (as defined in the Indenture), at the
Redemption Prices established for the Debentures, together with accrued but
unpaid interest, if any, to the date fixed for redemption. The Redemption Prices
for the Debentures (expressed as a percentage of the principal amount) are as
follows:
For the 12 Months
After February 1, Percentage
----------------------------------
2000 104.0
2001 103.5
2002 103.0
2003 102.5
2004 102.0
2005 101.5
2006 101.0
If less than all the Debentures are to be redeemed, the Trustee will select
the Debentures to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Debentures are
quoted or listed or admitted to trading, or, if the Debentures are not quoted or
listed, on a pro rata basis by lot or by such method that complies with
applicable legal requirements and that the Trustee considers fair and
appropriate. The Trustee may select for redemption portions of the principal
amount of Debentures that have a denomination larger than $1,000. Debentures and
portions thereof will be redeemed in the amount of $1,000 or integral multiples
of $1,000. The Trustee will make the selection from Debentures outstanding and
not previously called for redemption.
21
<PAGE> 23
REPURCHASE AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL
If a Change of Control occurs, the Company shall offer to repurchase each
Holder's Debentures pursuant to an offer (the "Change of Control Offer") at a
purchase price equal to 100% of the principal amount of such Holder's
Debentures, plus accrued but unpaid interest, if any, to the date of purchase.
A "Change of Control" means the occurrence of any of the following events
after the date of the Indenture (i) any person or group (within the meaning of
Section 13(d) or Section 14(d) of the Exchange Act), becomes the direct or
indirect beneficial owner of shares of capital stock of the Company representing
greater than 50% of the combined voting power of all outstanding shares of
capital stock of the Company entitled to vote in the election of directors under
ordinary circumstances; (ii) subject to certain exceptions, the Company
consolidates with or merges into any other entity and the outstanding Common
Stock is changed or exchanged as a result; (iii) sale, transfer or other
disposition of a majority of the assets of the Company or of the collective
assets of the Company and the subsidiaries; (iv) at any time Continuing
Directors cease to constitute a majority of the Board of Directors of the
Company then in office; or (v) on any day the Company makes any distribution of
cash, property or securities (other than regular quarterly dividends, Common
Stock, preferred stock which is substantially equivalent to Common Stock or
rights to acquire Common Stock or preferred stock which is substantially
equivalent to Common Stock) to holders of Common Stock, or the Company or any of
its subsidiaries purchases or otherwise acquires Common Stock, and the sum of
the fair market value of such cash, property or securities distributed or Common
Stock purchased on the date the same is made, plus the fair market value, when
made, of all other cash, property or securities so distributed or Common Stock
so purchased which have occurred during the 12 month period ending on the such
date, in each case expressed as a percentage of the aggregate market price of
all of the shares of Common Stock outstanding at the close of business on the
last day prior to the date of such distribution or purchase, exceeds 50%.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such Board on the date of the Indenture or
(ii) who was nominated or elected by at least two-thirds of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Company's Board of Directors was recommended or endorsed by at
least two-thirds of the directors who were Continuing Directors at the time of
such election. (Under this definition, if the present Board of Directors of the
Company were to approve a new director or directors and then resign, no Change
of Control would occur even though the present Board of Directors would
thereafter cease to be in office). Notwithstanding the foregoing, a Change of
Control under clause (ii) above will not include any transaction or series of
related transactions in which 85% or more of the consideration received by the
Holders of the Debentures (assuming conversion of the Debentures immediately
after such transaction) consists of common stock that is listed on a national
securities exchange or approved for quotation on the Nasdaq National Market.
Within 30 days after any Change of Control, unless the Company has
previously given a notice of optional redemption by the Company of all of the
Debentures, the Company shall give a notice of the Change of Control Offer to
each Holder at such Holder's last address as it appears on the Debenture
Register stating: (i) that a Change of Control has occurred and that the Company
is offering to repurchase all of such Holder's Debentures; (ii) a brief
description of such Change of Control; (iii) the repurchase price (the "Change
of Control Payment"); (iv) the expiration date of the Change of Control Offer,
which shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed; (v) the date such purchase shall be effected, which shall be
no later than 30 days after expiration date of the Change of Control Offer; (vi)
a statement that any Debentures not accepted for payment pursuant to the Change
of Control Offer shall continue to accrue interest; (vii) a statement that
unless the Company defaults in the payment of the Change of Control Payment, all
Debentures accepted for payment pursuant to the Change of Control offer shall
cease to accrue interest after the Change of Control Payment Date; (viii) the
Conversion Price; (ix) the name and address of the paying agent and conversion
agent; (x) a statement that Debentures must be surrendered to the paying agent
to collect the Change of Control Payment; and (xi) any other information
required by applicable law to be included therein.
In the event that the Company is required to make a Change of Control
Offer, the Company will comply with any applicable securities laws and
regulations, including, to the extent applicable, Section 14(e) of and Rule
14e-1 and any other tender offer rules under, the Exchange Act which may then be
applicable in connection with any offer by the Company to purchase Debentures at
the option of the Holders.
The Company, could, in the future, enter into certain transactions,
including certain recapitalizations of the Company, that would not constitute a
Change of Control under the Debentures, but that would increase the amount of
Senior Indebtedness (or any other indebtedness) outstanding at such time. The
incurrence of significant amounts of additional indebtedness could have an
22
<PAGE> 24
adverse effect on the Company's ability to service its indebtedness, including
the Debentures. If a Change of Control were to occur, there can be no assurance
that the Company would have sufficient funds at the time of such event to pay
the Change of Control Payment of for all Debentures tendered by the Holders.
Certain of the Company's existing and future agreements relating to its
indebtedness could prohibit the purchase by the Company of the Debentures
pursuant to the tender by Holders pursuant to a Change of Control Offer.
Depending on the financial circumstances of the Company, such purchase by the
Company could cause a breach of certain covenants contained in such agreements.
A default by the Company on its obligation to pay the Change of Control Payment
could, pursuant to cross-default provisions, result in acceleration of the
payment of other indebtedness of the Company outstanding at that time. See "-
Subordination."
SUBORDINATION
The payment of principal of and premium, if any, and interest on the
Debentures will be, to the extent set forth in the Indenture, subordinated in
right of payment to the prior payment in full of all Senior Indebtedness (as
defined). Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors or marshalling of assets, whether voluntary, involuntary or in
receivership, bankruptcy, insolvency or similar proceedings, the holders of all
Senior Indebtedness will be first entitled to receive payment in full of all
amounts due or to become due thereon before any payment is made on account of
principal of and premium, if any, and interest on the Debentures or on account
of any other monetary claims under or in respect of the Debentures, and before
any distribution is made to acquire any of the Debentures for any cash,
property, assets or securities. No payments on account of principal of and
premium, if any, and interest on the Debentures shall be made if at the time
thereof: (i) there is a default in the payment of all or any portion of the
obligations under any Senior Indebtedness or (ii) there shall exist a default in
any covenant with respect to the Senior Indebtedness (other than as specified in
clause (i) of this sentence), and, in such event, such default shall not have
been cured or waived or shall not have ceased to exist, the Trustee and the
Company shall have received written notice from any holder of such Senior
Indebtedness stating that no payment shall be made with respect to the
Debentures and such default would permit the maturity of such Senior
Indebtedness to be accelerated, provided that no such default will prevent any
payment on, or in respect of, the Debentures for more than 120 days unless the
maturity of such Senior Indebtedness has been accelerated.
The Holders will be subrogated to the rights of the holders of the Senior
Indebtedness to the extent of payments made on Senior Indebtedness upon any
distribution of assets in any such proceedings out of the distributive share of
the Debentures.
"Senior Indebtedness" is defined to mean the principal of (and premium, if
any), and interest on (a) existing indebtedness of the Company (including
indebtedness of others guaranteed by the Company) other than the Debentures,
which is (i) for money borrowed or (ii) evidenced by a note, debenture or
similar instrument given in connection with the acquisition of any businesses,
properties or assets of any kind, (b) obligations of the Company as lessee under
leases required to be capitalized on the balance sheet of the lessee under
generally accepted accounting principles and leases of property or assets made
as part of any sale and leaseback transaction to which the Company is a party,
(c) amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligation and (d) all future indebtedness of the Company for
money borrowed or evidenced by a note, debenture or similar instrument, other
than indebtedness which by its terms is convertible into shares of Common Stock
or other equity securities of the Company, and amendments, renewals, extensions,
modifications and refundings thereof, if the instrument creating such future
indebtedness provides by its terms that such indebtedness is senior in right of
payment to the Debentures; provided, however, that all future indebtedness for
money borrowed or evidenced by a note or similar instrument which by its terms
is convertible into shares of Common Stock or other equity securities of the
Company (including, without limitation, if issued pursuant to the terms of the
Company's $2.03 Convertible Preferred Stock, the Company's 8.125% Convertible
Subordinated Notes due 2005), and amendments, renewals, extensions,
modifications and refundings thereof, will rank pari passu with the Debentures,
unless the instruments creating such future indebtedness provide by their terms
that such indebtedness is junior in right of payment to the Debentures. Senior
Indebtedness includes any compensation owed to hourly employees in the ordinary
course of the Company's business but does not include other indebtedness or
amounts owed (except to banks and other financial institutions) for compensation
to non-hourly employees, for goods or materials purchased, or services utilized,
in the ordinary course of business of the Company or of any other person from
whom such indebtedness or amount was assumed.
The Debentures are unsecured obligations of the Company, and, accordingly,
will rank pari passu with all unsecured trade debt and unsecured obligations of
the Company that arise by operation of law or are imposed by any judicial or
governmental authority. The Debentures are obligations exclusively of the
Company, and accordingly, will be effectively subordinated to all
23
<PAGE> 25
indebtedness and other liabilities and commitments (including trade
payables and lease obligations) of its Subsidiaries (as defined in the
Indenture). The right of the Company, and, therefore, the right of creditors of
the Company (including Holders) to receive assets of any such Subsidiary upon
the liquidation or reorganization of such Subsidiary or otherwise, as a
practical matter, will be effectively subordinated to the claims of such
Subsidiary's creditors, except to the extent the Company is itself recognized as
a creditor of such Subsidiary or such other creditors have agreed to subordinate
their claims to the payment of the Debentures, in which case the claims of the
Company would still be subordinate to any secured claim on the assets of such
Subsidiary and any indebtedness of such Subsidiary senior to that held by the
Company.
At March 17, 1997, $195 million of Senior Indebtedness (excluding the $134
million letter of credit outstanding with American Cometra) was outstanding,
including indebtedness under the Credit Agreement and $125 million principal
amount of 8.75% Senior Subordinated Notes due 2007 (the "Senior Subordinated
Notes"). The Senior Subordinated Notes are due on January 15, 2007 which is
prior to the maturity date of the Debentures. In addition the Company's
obligations under the Credit Agreement and the Senior Subordinated Debentures
are guaranteed by the Company's Subsidiaries. The Company will from time to time
incur additional indebtedness constituting Senior Indebtedness.
LIMITATION ON DIVIDEND RESTRICTIONS AFFECTING SUBSIDIARIES
Without the consent of the Holders of a majority in aggregate principal
amount of the Debentures then outstanding the Company may not, and may not
permit any of its Subsidiaries to, create or otherwise cause or suffer to exist
or become effective any encumbrance or restriction of any kind on the ability of
any Subsidiary to (a) pay to the Company dividends or make to the Company any
other distribution of its capital stock, (b) pay any debt owed to the Company or
any other Subsidiary, (c) make loans or advances to the Company or any other
Subsidiary or (d) transfer any of its property or assets to the Company or any
other Subsidiary, other than such encumbrances or restrictions existing or
created under or by reason of (i) applicable laws, (ii) the Indenture, (iii)
covenants or restrictions contained in any instrument governing debt of the
Company or any of the Subsidiaries existing on the date of the Indenture, or
covenants or restrictions in any loan documents relating to Senior Indebtedness
incurred after the date hereof, provided that in the absence of a default under
any such loan documents, no such restriction shall prevent a Subsidiary from
paying dividends or otherwise distributing funds to the Company in amounts
sufficient to enable the Company to make interest and principal payments on the
Debentures as and when due, (including pursuant to any Change of Control Offer),
(iv) customary provisions restricting subletting, assignment and transfer of any
lease governing a leasehold interest of the Company or any of the Subsidiaries
or in any license or other agreement entered into in the ordinary course of
business, (v) any agreement governing debt of a person acquired by the Company
or any of the Subsidiaries in existence at the time of such acquisition (but not
created in contemplation thereof), which encumbrances or restrictions are not
applicable to any person, or the property or assets of any person, other than
the person, or the property or assets of the person, so acquired or (vi) any
restriction with respect to a Subsidiary imposed pursuant to an agreement
entered into in accordance with the terms of the Indenture for the sale or
disposition of capital stock or property or assets of such Subsidiary, pending
the closing of such sale or disposition.
24
<PAGE> 26
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not, without the consent of the Holders of a majority in
aggregate principal amount of the Debentures then outstanding, consolidate with
or merge into any other entity or convey, transfer, sell or lease its assets
substantially as an entirety to any entity, unless: (i) either (a) the Company
is the continuing corporation or (b) the entity formed by such consolidation or
into which the Company is merged or the entity to which such assets are sold,
leased, transferred, conveyed or disposed is organized under the laws of the
United States or any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all obligations of the Company under the
Debentures and the Indenture, (ii) immediately before and immediately after
giving effect to such merger, consolidation, conveyance, transfer, sale, lease
or disposition no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, under the Indenture occurred and
is continuing, (iii) immediately after giving effect to such merger,
consolidation, conveyance, transfer, sale, lease or disposition, the Debentures
and the Indenture, as supplemented, will be a valid and enforceable obligation
of the Company or such successor and (iv) the Company has delivered to the
Trustee an Officer's certificate and an opinion of counsel, each stating that
such merger, consolidation, conveyance, transfer, sale, lease or disposition and
such supplemental indenture comply with the applicable provisions of the
Indenture and that all conditions precedent to such transaction provided in the
Indenture have been satisfied.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Debenture when due and payable,
whether at maturity, upon redemption, upon a Change of Control Offer or
otherwise, whether or not such payment is prohibited by the subordination
provisions of the Indenture; (b) failure to pay any interest on any Debenture
when due, which failure continues for 30 days, whether or not such payment is
prohibited by the subordination provisions of the Indenture; (c) failure to
perform the other covenants of the Company in the Indenture, which failure
continues for 60 days after written notice as provided in the Indenture; (d)
failure to pay when due principal of and or acceleration of, any indebtedness
for money borrowed by the Company or any of its Subsidiaries in excess of $5
million, individually or in the aggregate, if such indebtedness is not
discharged, or such acceleration is not annulled, within 10 days after written
notice as provided in the Indenture; and (e) certain events of bankruptcy,
insolvency or reorganization of the Company or any Significant Subsidiary (as
defined in the Indenture). Subject to the provisions of the Indenture relating
to the duties of the Trustee in case of the occurrence of an Event of Default,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Debentures will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee.
If an Event of Default occurs and is continuing, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the then outstanding
Debentures by notice to the Company and Trustee may declare the unpaid
principal, premium if any, and interest on all outstanding Debentures due and
payable; provided, however, that if an Event of Default under clause (e) above
shall occur, all unpaid principal, premium, if any, and interest on all
outstanding Debentures will automatically become due and payable without any
declaration or other act on the part of the Trustee or any Holders. After such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of the then outstanding Debentures
may, under certain circumstances, rescind and annul such acceleration if all
Events of Default, other than the nonpayment of accelerated principal, have been
cured or waived as provided in the Indenture. For information as to waiver of
defaults, see "Modifications, Amendments and Waivers."
No Holder of any Debenture will have any right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder unless (i) such Holder shall have previously
given to the Trustee written notice of a continuing Event of Default, (ii)
Holders of at least 25% in aggregate principal amount of the then outstanding
Debentures shall have made written request and offered satisfactory indemnity to
the Trustee to institute such proceeding as Trustee, (iii) the Trustee shall
have failed to institute such proceeding within 60 days after the receipt of
such request of and offer of indemnity and (iv) during such 60-day period, no
direction inconsistent with such request shall have been given to the Trustee by
the Holders of a majority in aggregate principal amount of the then outstanding
Debentures.
25
<PAGE> 27
MODIFICATIONS, AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the then outstanding Debentures held by persons
other than affiliates of the Company; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
outstanding Debenture affected thereby, (i) change the stated maturity of, or
any installment of interest on or waive a default in the payment of principal,
premium, if any, or interest on, any Debenture, (ii) reduce the principal amount
of any Debenture or reduce the rate or extend the time of payment of interest on
any Debenture, (iii) increase the Conversion Price (other than in connection
with a reverse stock split as provided in the Indenture), (iv) change the place
or currency of payment of principal of, or premium or repurchase price, if any,
or interest on, any Debenture, (v) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debenture, (vi) adversely
affect the right to exchange or convert Debentures, (vii) reduce the percentage
of the aggregate principal amount of outstanding Debentures, the consent of the
Holders of which is necessary to modify or amend the Indenture, (viii) reduce
the percentage of the aggregate principal amount of outstanding Debentures, the
consent of the Holders of which is necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults, (ix)
modify the provisions of the Indenture with respect to the subordination of the
Debentures in a manner adverse to the Holders, (x) except as permitted by the
Indenture, consent to the assignment or transfer by the Company of any of its
rights and obligations thereunder or (xi) modify the provisions of the Indenture
with respect to the right to require the Company to repurchase Debentures in a
manner adverse to the Holders.
The Holders of a majority in aggregate principal amount of the then
outstanding Debentures held by persons other than affiliates of the Company may,
on behalf of all Holders, waive any past default under the Indenture or Event of
Default, except a default in the payment of principal, premium of, if any, or
interest on any of the Debentures or in respect of a provision which under the
Indenture cannot be amended without the consent of the Holder of each
outstanding Debenture.
Amendments and supplements of the Indenture may be made by the Company and
the Trustee without the consent of any Holder, in part, to: (i) cure any
ambiguity, defect or inconsistency (which does not adversely affect the rights
of any Holder); (ii) comply with the restriction on mergers, consolidations, and
asset sales or with the provisions relating to conversion upon such events;
(iii) add to the covenants of the Company further covenants, restrictions,
conditions or provisions for the protection of the Holders; (iv) make any change
that does not adversely affect the rights of any Holder under the Indenture; or
(v) comply with requirements of the Commission in order to effect or maintain
qualification of the Indenture under the Trust Indenture Act.
DISCHARGE OF INDENTURE
The Indenture provides that the Company may defease and be discharged from
its obligations in respect of the Debentures while the Debentures remain
outstanding (except for certain obligations to convert the Debentures into
Common Stock, register the transfer, substitution or exchange of Debentures, to
replace stolen, lost or mutilated Debentures and to maintain an office or agency
and the rights, obligations and immunities of the Trustee), if all outstanding
Debentures will become due and payable at their scheduled maturity within one
year and the Company has irrevocably deposited, or caused to be deposited, with
the Trustee (or another trustee satisfying the requirements of the Indenture),
in trust for such purpose, (a) money in an amount, (b) U.S. Government
Obligations (as defined) which through the payment of principal, premium, if
any, and interest in accordance with their terms (without reinvestment of such
interest or principal) will provide not later than one day before the due date
of any payment money in an amount, or (c) 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
the principal of, premium, if any, and interest on the outstanding Debentures at
maturity or upon redemption, together with all other amounts payable by the
Company under the Indenture. Such defeasance will become effective 91 days after
such deposit only if, among other things, (x) no Default or Event of Default
with respect to the Debentures has occurred and is continuing on the date of
such deposit or will occur as a result of such deposit or at any time during the
period ending on the 91st day after the date of such deposit, (y) such
defeasance does not result in a breach or violation of, or constitute a default
under, any other agreement or instrument to which the Company is a party or by
which it is bound and (z) the Company has delivered to the Trustee (A) either a
private Internal Revenue Service ruling or an opinion of counsel that Holders
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to federal
income tax on the same amount, in the same manner, and at the same times, as
would have been the case if such deposit, defeasance and discharge had not
occurred, (B) an opinion of counsel to the effect that the deposit shall not
result in the Company, the Trustee or the trust
26
<PAGE> 28
being deemed to be an "investment company" under the Investment Company Act
of 1940, as amended, and (C) an Officers' Certificate and a opinion of counsel,
each stating that all conditions precedent relating to a discharge have been
complied with.
GOVERNING LAW
The Indenture and the Debentures will be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
such State's conflict of law principles.
CONCERNING THE TRUSTEE
Keycorp Shareholders Services, Inc., the Trustee under the Indenture, has
been appointed by the Company as the paying agent, conversion agent, registrar
and custodian with respect to the Debentures. Keycorp Shareholder Services, Inc.
also serves as the transfer agent for the Common stock and the $2.03 Convertible
Preferred Stock. The Company and its subsidiaries may maintain deposit accounts
and conduct other banking transactions with the Trustee or its affiliates in the
ordinary course of business, and the Trustee and its affiliates may from time to
time in the future provide the Company and its subsidiaries with banking and
financial services in the ordinary course of their business.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Debentures will initially be issued in the
form of one or more registered Debentures in global form, without coupons (the
"Global Debentures"). Each Global Debenture will be deposited on the date of the
closing of the sale of the Debentures (the "Closing Date") with, or on behalf
of, The Depository Trust Company (the "Depositary") and registered in the name
of Cede & Co., as nominee of the Depositary. Interests in Global Debentures will
be available for purchase only by "qualified institutional buyers," as defined
in Rule 144A under the Securities Act ("QIBs").
Debentures that are (i) originally issued to or transferred to
institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, who are not QIBs or to any other persons who are
not QIBs or (ii) issued as described below under "Certified Securities," will be
issued in registered form without coupons (the "Certified Securities"). Upon the
transfer to a QIB of Certified Securities, such Certificated Securities will,
unless the Global Debenture has previously been exchanged for Certificated
Securities, be exchanged for an interest in the Global Debentures representing
the principal amount of Debentures being transferred. For a description of the
restrictions on the transfer of Certificated Securities, see "Notice to
Investors."
The Depositary has advised the Company that it is (i) a limited-purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the meaning
of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The Depositary was
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers, banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as bank's, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. QIBs may elect to hold
Debentures purchased by them through the Depositary. QIBs who are not
Participants may beneficially own securities held by or on behalf of the
Depositary only through Participants or Indirect Participants. Persons that are
not QIBs may not hold Debentures through the Depositary.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Debenture, the Depositary will credit
the accounts of Participants designated by the Initial Purchasers with an
interest in the Global Debenture and (ii) ownership of the Debentures will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depositary (with respect to the interests of
Participants), the Participants and the Indirect Participants. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own and that security interests in negotiable instruments
can only be perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Debentures or to pledge the Debentures as
collateral will be limited to such extent. For certain other restrictions on the
transferability of the Debentures, see "Notice to Investors."
So long as the Depositary or its nominee is the registered owner of a
Global Debenture, the Depositary or such nominee, as the case may be, will be
considered the sole owner or Holder of the Debentures represented by the Global
Debenture for all purposes under the Indenture. Except as provided below, owners
of beneficial interests in a Global Debenture will not be entitled
27
<PAGE> 29
to have Debentures represented by such Global Debenture registered in their
names, will not receive or be entitled to receive physical delivery of the
Certificated Securities, and will not be considered the owners or Holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
As a result, the ability of a person having a beneficial interest in Debentures
represented by a Global Debenture to pledge such interest to persons or entities
that do not participate in the Depositary's system, or to otherwise take actions
with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Accordingly, each QIB owing a beneficial interest in a Global Debenture
must rely on the procedures of the Depositary and, if such QIB is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such QIB owns its interest, to exercise any rights of a Holder
under the Indenture or such Global Debenture. The Company understands that under
existing industry practice, in the event the Company requests any action of
Holders of Debentures or a QIB that is an owner of a beneficial interest in a
Global Debenture desires to take any action that the Depositary, as the Holder
of such Global Debenture, is entitled to take, the Depositary would authorize
the Participants to take such action and the Participants would authorize QIBs
owning through such Participants to take such action or would otherwise act upon
the instructions of such QIBs. 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 Debentures by the Depositary, or for maintaining,
supervising or reviewing any records of the Depositary relating to such
Debentures.
Payments with respect to the principal of, premium, if any, and interest on
any Debentures represented by a Global Debenture registered in the name of the
Depositary or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depositary or its nominee in its capacity
as the registered Holder of the Global Debenture representing such Debentures
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee may treat the persons in whose names the Debentures, including the
Global Debentures, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Company nor the Trustee has or will have
responsibility or liability for the payment of such amounts to beneficial owners
of Debentures (including principal, premium, if any, and interest), or to
immediately credit the accounts of the relevant Participants with such payment,
in amounts proportionate to their respective holdings in principal amount of
beneficial interest in the Global Debenture as shown on the records of the
Depositary Payments by the Participants and the Indirect Participants to the
beneficial owners of Debentures will be governed by standing instructions and
customary practice and will be the responsibility of the Participants or the
Indirect Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
Debentures in definitive form under the Indenture, then, upon surrender by the
Depositary of its Global Debenture, Certificated Securities will be issued to
each person that the Depositary identifies as the beneficial owner of the
Debentures represented by the Global Debenture. In addition, subject to certain
conditions, any person having a beneficial interest in a Global Debenture may,
upon request to the Trustee, exchange such beneficial interest for Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of such person or persons (or the nominee of
any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the related Debentures and each person may conclusively
rely on, and shall be protected in relying on instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Debentures to be issued).
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable. The
Company will have no responsibility for the performance by DTC or its
Participants of their respective obligations as described hereunder or under the
rules and procedures governing their respective operations.
28
<PAGE> 30
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Debentures
represented by the Global Debenture (including principal, premium, if any,
interest and liquidated damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the registered Holder of the Global
Debenture. With respect to Certificated Securities, the Company will make all
payments of principal, premium, if any, interest and liquidated damages, if any,
by wire transfer of immediately available funds to the accounts specified by
Holders thereof or, if no such account is specified, by mailing a check to each
such Holder's registered address. Secondary trading in long-term notes and
debentures of corporate issuers is generally settled in clearing-house or
next-day funds. In contrast, the Debentures represented by the Global Debenture
are expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Debentures will therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Securities will also be settled in
immediately available funds.
DESCRIPTION OF CAPITAL STOCK AND INDEBTEDNESS
The authorized capital stock of the Company consists of (i) 4,000,000
shares of serial preferred stock, $1.00 par value and (ii) 35,000,000 shares of
Common Stock, $.01 par value. As of March 17, 1997, the Company had outstanding
20,272,242 shares of Common Stock and 1,150,000 shares of $2.03 Convertible
Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to receive dividends if, when and
as declared by the Board of Directors of the Company out of funds legally
available therefor (however, the Indenture for the Senior Subordinated Notes and
the Credit Agreement contain certain restrictions on the payment of cash
dividends. If there is any arrearage in the payment of dividends on any
preferred stock, the Company may not pay dividends upon, repurchase or redeem
shares of its Common Stock. All shares of Common Stock have equal voting rights
on the basis of one vote per share on all matters to be voted upon by
stockholders. Cumulative voting for the election of directors is not permitted.
Shares of Common Stock have no preemptive, conversion, sinking fund or
redemption provisions and are not liable for further call or assessment. Each
share of Common Stock is entitled to share on a pro rata basis in any assets
available for distribution to the holders of the Common Stock upon liquidation
of the Company after satisfaction of any liquidation preference on any series of
the Company's preferred stock. All outstanding shares of Common Stock have been,
and all shares offered in the Common Stock Offering are when issued, validly
issued, fully paid and nonassessable.
OPTIONS
The Company's stock option plan, which is administered by the
Compensation Committee, provides for the granting of options to purchase shares
of Common Stock to key employees and certain other persons who are not employees
for advice or other assistance or services to the Company. The plan permits the
granting of options to acquire up to 2,000,000 shares of Common Stock subject to
a limitation of 10% of the outstanding Common Stock on a fully diluted basis. At
March 13, 1997, a total of 1,216,032 options had been granted under the plan of
which options to purchase 503,632 shares were exercisable at that date. The
options outstanding at March 13, 1997 were granted at an exercise price of $3.38
to $13.88 per share. The exercise price of all such options was equal to the
fair market value of the Common Stock on the date of grant. All were options
granted for a term of five years, with 30% of the options becoming exercisable
after one year, an additional 30% becoming exercisable after two years and the
remaining options becoming exercisable after three years.
WARRANTS
Warrants to acquire 20,000 shares of Common Stock at a price of $12.88
per share were outstanding at March 17, 1997. These warrants expire in May 1999.
The warrants were issued in a private placement not registered under the
Securities Act, and the resale of the shares of Common Stock underlying such
warrants are covered by the Prospectus.
29
<PAGE> 31
PREFERRED STOCK
The Board of Directors of the Company, without action by stockholders,
is authorized to issue shares of serial preferred stock in one or more series
and, within certain limitations, to determine the voting rights (including the
right to vote as a series on particular matters), preferences as to dividends
and the liquidation, conversion, redemption and other rights of each such
series. The Board of Directors could issue a series with rights more favorable
with respect to dividends, liquidation and voting than those held by the holders
of its Common Stock. At March 17, 1997, 1,150,000 shares of Preferred Stock were
outstanding, designated as $2.03 Convertible Preferred Stock.
The $2.03 Convertible Preferred Stock bears an annual dividend rate of
$2.03 payable quarterly. If dividends have not been paid on the $2.03
Convertible Preferred Stock, the Company cannot redeem or pay dividends on
shares of stock ranking junior to the $2.03 Convertible Preferred Stock. No new
serial preferred stock can be created with rights superior to those of the $2.03
Convertible Preferred Stock, as to dividends and liquidation rights, without the
approval of the holders of a majority of the $2.03 Convertible Preferred Stock.
In addition, the holders of the $2.03 Convertible Preferred Stock are entitled
to one vote for each share owned. Additionally, if dividends remain unpaid for
six full quarterly periods, or if any future class of preferred stockholders is
entitled to elect members of the Board of Directors based on actual missed and
unpaid dividends, the number of members of the Board of Directors are increased
to such number as may be necessary to entitle the holders of the $2.03
Convertible Preferred Stock and such other future preferred stockholders, voting
as a single class, to elect one-third of the members of the Board of Directors.
The $2.03 Convertible Preferred Stock has liquidation rights of $25 per share.
The Company may exchange the $2.03 Convertible Preferred Stock for an aggregate
of $28,750,000 principal amount of its 8.125% Convertible Subordinated Notes due
December 31, 2005. Each share of $2.03 Convertible Preferred Stock is
convertible into Common Stock at a conversion price of $9.50 per share, subject
to adjustment under certain circumstances. The conversion price are reduced for
a limited period (but to not less than $5.21) if a change in control or
fundamental change in the Company occurs at a time that the market price of the
Common Stock is less than the conversion price. The Company may redeem the $2.03
Convertible Preferred Stock at any time after November 1, 1998, at redemption
prices declining from $26.50 to $25.00 per share, plus cumulative unpaid
dividends.
CREDIT AGREEMENT
In connection with the financing of the Cometra Acquisition, the
Company and its subsidiaries expanded the existing credit facility with the bank
lenders. The Credit Agreement permits the Company to obtain revolving credit
loans and to issue letters of credit for the account of the Company from time to
time in an aggregate amount not to exceed $300 million (of which not more than
$150 million may be represented by letters of credit). The Borrowing Base is
subject to semi-annual determination and certain other redeterminations based
upon a variety of factors, including the discounted present value of estimated
future net cash flow from oil and gas production. At the Company's option, loans
may be prepaid, and revolving credit commitments may be reduced, in whole or in
part at any time in certain minimum amounts. The Credit Agreement matures in
February 2002.
The obligations of the Company under the Credit Agreement are
unconditionally and irrevocably guaranteed by each of the Company's direct and
indirect domestic subsidiaries (collectively, the "Bank Guarantors"). In
addition, the Credit Agreement is secured by first priority security interests
in (i) existing mortgaged oil and gas properties of the Company and the Cometra
Properties, (ii) all accounts receivable, inventory and intangibles of the
Company and the Bank Guarantors, and (iii) all of the capital stock of the
Company's direct or indirect subsidiaries. Substantially all of the assets of
the Company are pledged as collateral if, on May 15, 1997, the Borrowing Base
and amounts outstanding under the Credit Agreement have not been reduced to $300
million. Such security interests are released upon the (i) reduction of the
amounts outstanding under the Credit Agreement to $300 million (or the then
determined Borrowing Base) and (ii) issuance of $65 million of Common Stock
and/or the sale of Company assets in excess of the Borrowing Base value
attributable to such assets as agreed by the lenders (the "Trigger Event"). On
March 14, 1997, the Trigger Event occurred and the Company's Credit Agreement
became unsecured with a Borrowing Base up to $300 million.
At the Company's option, the applicable interest rate per annum is
either the Eurodollar loan rate plus a margin ranging from 0.625% to 1.125% or
the Alternate Base Rate (as defined) plus a margin ranging from 0% to 0.25%. The
Alternate Base Rate is the higher of (a) the administrative agent bank's prime
rate and (b) the federal funds effective rate plus 0.5%. Until the
30
<PAGE> 32
occurrence of the Trigger Event, the interest rate margins are increased by
50 basis points prior to March 31, 1997 and 100 basis points thereafter.
The Credit Agreement includes various covenants that require, among
other things, that the Company (i) maintain a minimum consolidated tangible net
worth of at least $100 million plus 90% of the net proceeds from the Common
Stock Offering and 50% of the net proceeds from any subsequent equity offering;
(ii) maintain a ratio of EBITDA to consolidated interest expense on total debt
for each period of four consecutive fiscal quarters of at least 2.5 to 1.0; and
(iii) not make restricted payments (defined as dividends, distributions or
guarantees to third parties or the retirement, repurchase or prepayment prior to
the scheduled maturity of its subordinated debt) in an aggregate amount in any
one fiscal year in excess of $5 million plus 50% of the net proceeds from equity
offerings subsequent to the Common Stock Offering and 50% of the Company's
consolidated net income earned after January 1, 1997. In addition, the Credit
Agreement restricts the ability of the Company to dispose of assets, incur
additional indebtedness, repay other indebtedness or amend other debt
instruments, create liens on assets, make investments or acquisitions, engage in
mergers or consolidations, make capital expenditures or engage in certain
transactions with affiliates.
LEGAL MATTERS
Certain legal matters related to the Securities and the Selling
Securityholder Securities are being passed upon for the Company by Vinson &
Elkins L.L.P., 2300 First City Tower, Houston, Texas 77002-6760.
EXPERTS
The Consolidated Financial Statements of the Company, as of December
31, 1995 and 1996 and for the three years then ended, included and incorporated
by reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto incorporated by reference in this Prospectus in reliance upon the
authority of said firm as experts in giving said reports.
The statements of revenues and direct operating expenses of the
American Cometra Interests (referred to herein as the Cometra Properties) for
the years ended December 31, 1994, 1995 and 1996, incorporated by reference in
this Registration Statement have been audited by Coopers & Lybrand L.L.P.,
independent accountants, and are incorporated by reference herein in reliance
upon the authority of that firm as experts in accounting and auditing.
The financial statements of the Bannon Interests as of December 31,
1995 and for the year then ended, have been incorporated by reference herein and
in the Registration Statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
31
<PAGE> 33
GLOSSARY
The terms defined in this glossary are used throughout this Prospectus.
Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in
reference to crude oil or other liquid hydrocarbons.
Bcf. One billion cubic feet.
Bcfe. One billion cubic feet of natural gas equivalents, based on a ratio of 6
Mcf for each barrel of oil, which reflects the relative energy content.
Development well. A well drilled within the proved area of an oil or natural gas
reservoir to the depth of a stratigraphic horizon known to be productive.
Dry hole. A well found to be incapable of producing either oil or natural gas in
sufficient quantities to justify completion as an oil or gas well.
Exploratory well. A well drilled to find and produce oil or gas in an unproved
area, to find a new reservoir in a field previously found to be productive of
oil or gas in another reservoir, or to extend a known reservoir.
Gross acres or gross wells. The total acres or wells, as the case may be, in
which a working interest is owned.
Infill well. A well drilled between known producing wells to better exploit the
reservoir.
Mbbl. One thousand barrels of crude oil or other liquid hydrocarbons.
Mcf. One thousand cubic feet.
Mcfe. One thousand cubic feet of natural gas equivalents, based on a ratio of
6 Mcf for each barrel of oil, which reflects the relative energy content.
Mmbbl. One million barrels of crude oil or other liquid hydrocarbons.
MmBtu. One million British thermal units. One British thermal unit is the heat
required to raise the temperature of a one-pound mass of water from 58.5 to 59.5
degrees Fahrenheit.
Mmcf. One million cubic feet.
Mmcfe. One million cubic feet of natural gas equivalents.
Net acres or net wells. The sum of the fractional working interests owned in
gross acres or gross wells.
Net oil and gas sales. Oil and natural gas sales less oil and natural gas
production expenses.
Present Value. The pre-tax present value, discounted at 10%, of future net cash
flows from estimated proved reserves, calculated holding prices and costs
constant at amounts in effect on the date of the report (unless such prices or
costs are subject to change pursuant to contractual provisions) and otherwise in
accordance with the Commission's rules for inclusion of oil and gas reserve
information in financial statements filed with the Commission.
Productive well. A well that is producing oil or gas or that is capable of
production.
32
<PAGE> 34
Proved developed non-producing reserves. Reserves that consist of (i) proved
reserves from wells which have been completed and tested but are not producing
due to lack of market or minor completion problems which are expected to be
corrected and (ii) provided reserves currently behind the pipe in existing wells
and which are expected to be productive due to both the well log characteristics
and analogous production in the immediate vicinity of the wells.
Proved developed producing reserves. Proved reserves that can be expected to be
recovered from currently producing zones under the continuation of present
operating methods.
Proved developed reserves. Proved reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
Proved reserves. The estimated quantities of crude oil, natural gas and natural
gas liquids which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and operating conditions.
Proved undeveloped reserves. Proved reserves that are expected to be recovered
from new wells on undrilled acreage, or from existing wells where a relatively
major expenditure is required for recompletion.
Recompletion. The completion for production of an existing wellbore in another
formation from that in which the well has previously been completed.
Royalty interest. An interest in an oil and gas property entitling the owner to
a share of oil and natural gas production free of costs of production.
Standardized Measure. The present value, discounted at 10%, of future net cash
flows from estimated proved reserves after income taxes calculated holding
prices and costs constant at amounts in effect on the date of the report (unless
such prices or costs are subject to change pursuant to contractual provisions)
and otherwise in accordance with the Commission's rules for inclusion of oil and
gas reserve information in financial statements filed with the Commission.
Working interest. The operating interest that gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
production, subject to all royalties, overriding royalties and other burdens and
to all costs of exploration, development and operations and all risks in
connection therewith.
33
<PAGE> 35
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any underwriter. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any securities offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to anyone to whom it is
unlawful to make such offer or solicitation.
------------------
TABLE OF CONTENTS
Page
----
Available Information............................... 2
Incorporation of Certain Information by Reference... 2
The Company.......................................... 3
Risk Factors........................................ 3
Forward-Looking Information......................... 10
Ratio of Earnings to Fixed Charges.................. 10
Use of Proceeds..................................... 10
Capitalization...................................... 11
Price Range of Common Stock and Dividend Policy..... 12
Unaudited Pro Forma Consolidated
Financial Statements................................ 13
Selected Consolidated Financial Data................ 17
Selling Securityholders ............................ 18
Plan of Distribution................................ 19
Description of 6% Convertible
Subordinated Debentures............................. 19
Description of Capital Stock and Indebtedness....... 29
Legal Matters....................................... 31
Experts............................................. 31
Glossary............................................ 32
============================================================
LOMAK PETROLEUM, INC.
---------------------
PROSPECTUS
---------------------
March , 1997
---
================================================================================
34
<PAGE> 36
PART II
<TABLE>
<CAPTION>
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<S> <C>
SEC Registration Fee..................................... $ 41,514
Legal Fees and Expenses*................................. 5,000
Accounting Fees*......................................... 7,500
Printing and Engraving*.................................. 15,000
Miscellaneous*........................................... 5,986
--------------
Total.............................................. $ 75,000
<FN>
* Estimated
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation. Section 145 of the Delaware General
Corporation Law generally provides that a corporation is empowered to indemnify
any person who is made a party to a proceeding or threatened proceeding by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or was, at the request of the corporation, serving in any of
such capacities in another corporation or other enterprise. This statute
describes in detail the right of the corporation to indemnify any such person.
Article SEVENTH, section (5) the Company Certificate of Incorporation provides:
Any former, present or future director, officer or employee of the Company
or the legal representative of any such director, officer, or employee shall be
indemnified by The Company
(a) against reasonable costs, disbursements and counsel fees paid or
incurred where such person has been successful on the merits or otherwise in any
pending, threatened or completed civil, criminal, administrative or arbitrative
action, suit or proceeding, and any appeal therein and any inquiry or
investigation which could lead to such action, suit or proceeding, or in defense
of any claim, issue or matter therein, by reason of such person being or having
been such director, officer or employee, and
(b) with respect to any such action, suit, proceeding, inquiry or
investigation for which indemnification is not made under (a) above, against
reasonable costs, disbursements (which shall include amounts paid in
satisfaction of settlements, judgments, fines and penalties, exclusive, however,
of any amount paid or payable to the Company) and counsel fees if such person
also had no reasonable cause to believe the conduct was unlawful, with the
determination as to whether the applicable standard of conduct was met to be
made by a majority of the members of the Board of Directors (sitting as a
committee of the Board) who were not parties to such inquiry, investigation,
action, suit or proceeding or by any one or more disinterested counsel to whom
the question may be referred to the Board of Directors; provided, however, in
connection with any proceeding by or in the right of the Company, no
indemnification shall be provided as to any person adjudged by any court to be
liable for negligence or misconduct except as and to the extent determined by
such court.
II-1
<PAGE> 37
The termination of any such inquiry, investigation, action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not of itself create a presumption that such
person did not meet the standards of conduct set forth in subsection (b) above.
Reasonable costs, disbursements and counsel fees incurred by such person in
connection with any inquiry, investigation action, suit or proceeding may be
paid by the Company in advance of the final disposition of such matter if
authorized by a majority of the Board of Directors (sitting as a committee of
the Board) not parties to such matter upon receipt by The Company of an
undertaking by or on behalf of such person to repay such amount unless it is
ultimately determined that such person is entitled to be indemnified as set
forth herein.
The Board of Directors may, at any regular or special meeting of the Board,
by resolution, accord similar indemnification (prospective or retroactive) to
any director, trustee, officer or employee of any other company who is serving
as such at the request of the Company because of the Company's interest in such
other company and any officer, director or employee of any constituent
corporation absorbed by the Company in a consolidation or merger, or the legal
representative of any such director, trustee, officer or employee.
The indemnification herein provided shall not exclude any other rights to
which such person may be entitled as a matter of law or which may be lawfully
granted.
Article XII of the Company's Bylaws, incorporating the above provisions,
provides for an indemnification agreement to be entered into by directors' and
designated officers of the Company. All directors of the Company have executed
an indemnification agreement the form of which was approved by stockholders at
the Company's 1994 annual stockholders meeting.
Article XII of the Company's Bylaws also allows the Company to purchase
liability insurance for Officers and Directors. As of the date hereof there is
no such insurance in place.
Article XIII of the Company's Bylaws, with certain specified exceptions,
limits the personal liability of the Directors to Lomak or its stockholders for
monetary damages for breach of fiduciary duty to the fullest extent permitted by
Delaware law, including any changes in Delaware law adopted in the future.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant,
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. See Item 17,
"Undertakings."
II-2
<PAGE> 38
ITEM 16. EXHIBITS.
Exhibit No. Description
- ----------- -----------
1.1* Purchase Agreement dated December 20, 1996 among Lomak
Petroleum, Inc., Forum Capital Markets L.P., McDonald & Company
Securities, Inc. and Morgan Keegan & Company, Inc.
4.1(a)* Form of Indenture between Lomak Petroleum, Inc. and Keycorp.
Shareholder Service, Inc. relating to the 8.125% Subordinated
Convertible Notes due 2005.
4.1(b)* Registration Rights Agreement dated October 31, 1995 among
Lomak Petroleum, Inc., Forum Capital Markets L.P. and Hanifen,
Imhoff Inc.
5.1** Opinion of Vinson & Elkins, L.L.P.
24.1(a)** Consent of Vinson & Elkins, L.L.P. (included in Exhibit 5.1
hereto).
24.1(b)* Consent of Arthur Andersen LLP.
24.1(c)* Consent of Coopers & Lybrand LLP.
24.1(d)* Consent of KPMG Peat Marwick LLP.
- ----------------
* Filed herewith.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8, or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) 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.
II-3
<PAGE> 39
"The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent for given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information."
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Forth Worth, State of Texas on March 25 1997.
LOMAK PETROLEUM, INC.
BY:/S/ JOHN H. PINKERTON
-------------------------------------
John H. Pinkerton
President and
Chief Executive Officer
(Principal 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>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas J. Edelman Chairman and Director March 25, 1997
- ------------------------------------------
Thomas J. Edelman
/s/ John H. Pinkerton President, Chief Executive Officer and March 25, 1997
- ------------------------------------------ Director (Principal Executive Officer)
John H. Pinkerton
/s/ C. Rand Michaels Vice Chairman and Director March 25, 1997
- ------------------------------------------
C. Rand Michaels
/s/ Robert E. Aikman Director March 25, 1997
- --------------------------------------------
Robert E. Aikman
/s/ Allen Finkelson Director March 25, 1997
- --------------------------------------------
Allen Finkelson
/s/ Anthony V. Dub Director March 25, 1997
- --------------------------------------------
Anthony V. Dub
/s/ Ben A. Guill Director March 25, 1997
- ------------------------------------------
Ben A. Guill
/s/ Thomas W. Stoelk Vice President - Finance and Chief Financial March 25, 1997
- ------------------------------------------ Officer (Principal Financial Officer)
Thomas W. Stoelk
/s/ John R. Frank Controller and Chief Accounting Officer March 25, 1997
- ------------------------------------------ (Principal Accounting Officer)
John R. Frank
</TABLE>
II-5
<PAGE> 41
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
1.1* Purchase Agreement dated December 20, 1996 among Lomak
Petroleum, Inc., Forum Capital Markets L.P., McDonald
& Company Securities, Inc. and Morgan Keegan & Company,
Inc.
4.1(a)* Form of Indenture between Lomak Petroleum, Inc. and
Keycorp. Shareholder Service, Inc. relating
to the 8.125% Subordinated Convertible Notes due 2005.
4.1(b)* Registration Rights Agreement dated October 31, 1995
among Lomak Petroleum, Inc., Forum Capital Markets L.P.
and Hanifen, Imhoff Inc.
5.1** Opinion of Vinson & Elkins, L.L.P.
24.1(a)** Consent of Vinson & Elkins, L.L.P. (included in
Exhibit 5.1 hereto).
24.1(b)* Consent of Arthur Andersen LLP.
24.1(c)* Consent of Coopers & Lybrand LLP.
24.1(d)* Consent of KPMG Peat Marwick LLP.
* Filed herewith.
** To be filed by amendment.
II-6
<PAGE> 1
EXHIBIT 1.1
$55,000,000
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007
LOMAK PETROLEUM, INC.
PURCHASE AGREEMENT
------------------
New York, New York
December 20, 1996
FORUM CAPITAL MARKETS L.P.
McDONALD & COMPANY SECURITIES, INC.
MORGAN KEEGAN & COMPANY, INC.
c\o Forum Capital Markets L.P.
53 Forest Avenue
Old Greenwich, Connecticut 06870
Ladies and Gentlemen:
Lomak Petroleum, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Forum Capital Markets L.P., McDonald & Company
Securities and Morgan Keegan & Company, Inc. (the "Initial Purchasers")
$55,000,000 aggregate principal amount of its 6% Convertible Subordinated
Debentures due 2007 (the "Debentures") to be issued pursuant to the provisions
of an indenture dated as of the date hereof (the "Indenture") between the
Company and Keycorp Shareholder Services, Inc., as trustee (the "Trustee"). The
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), issuable upon conversion of the Debentures are hereinafter referred to
as the "Conversion Shares." The Debentures and the Conversion Shares are
hereinafter referred to collectively as the "Securities." The Company hereby
confirms its agreement with the Initial Purchasers with respect to the sale by
the Company and the purchase by the Initial Purchasers of the Debentures, as set
forth herein.
The Debentures will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated December 11, 1996 (the
"Preliminary Offering Memorandum"), and a final offering memorandum dated
December 20, 1996 (the "Offering Memorandum"), setting forth information
regarding the Company and the Securities. The Company hereby confirms that it
has authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and sale of the Debentures (the
"Offering").
Holders (including subsequent transferees) of the Securities
will have the registration rights set forth in the Registration Rights Agreement
(the "Registration Rights Agreement") between the Initial Purchasers and the
Company, dated concurrently herewith. Pursuant to the Registration Rights
Agreement, the Company has agreed to file with the Securities and Exchange
Commission (the "Commission") a shelf registration statement pursuant to Rule
415 under the Securities Act (the "Shelf Registration Statement") to cover
public resales of the Securities by the holders thereof.
Capitalized terms used herein without definition have the
respective meanings specified therefor in the Offering Memorandum. For purposes
hereof, "Rules and Regulations" means the rules and regulations adopted by the
Commission under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), as applicable.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Initial Purchasers of the date
hereof, and as of the Closing Date, as follows:
<PAGE> 2
(a) The Offering Memorandum, as of its date, together with
each amendment or supplement thereto, as of its date, contains all the
information that, if requested by a prospective purchaser, would be required to
be provided pursuant to Rule 144A(d)(4) under the Securities Act. The Offering
Memorandum does not, and at the Closing Date will not, and any amendment or
supplement thereto, if any, as of its date, will not, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The preceding
sentence does not apply to information contained in or omitted from the
Preliminary Offering Memorandum or the Offering Memorandum (or any supplement or
amendment thereto) in reliance upon and in conformity with written information
furnished to the Company by or on behalf of either Initial Purchaser
specifically for use therein (the "Initial Purchasers' Information"). The
parties acknowledge and agree that the Initial Purchasers' Information consists
solely of the last paragraph at the bottom of the front cover page concerning
the terms of the offering by the Initial Purchasers, the legends concerning
over-allotment and trading activities of the Initial Purchasers and their
affiliates on the inside front cover page and the paragraphs under the caption
"Plan of Distribution" in the Offering Memorandum. No order suspending or
preventing the sale of the Securities in any jurisdiction has been issued or
threatened or, to the knowledge of the Company, is contemplated.
(b) The Company is subject to Section 13 or 15(d) of the
Exchange Act. The documents incorporated by reference into the Offering
Memorandum (the "Incorporated Documents"), when they were filed with the
Commission (or, if any amendment with respect to any such document was filed,
when such amendment was filed), complied in all material respects with the
requirements of the Exchange Act and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and any
Incorporated Documents filed subsequent to the date of the Offering Memorandum
shall, when filed with the Commission, conform in all respects to the
requirements of the Securities Act, the Rules and Regulations and the Exchange
Act, as applicable. All reports and statements required to be filed by the
Company under the Securities Act and the Exchange Act have been filed, together
with all exhibits required to be filed therewith. The documents and agreements
so filed which are described in the Offering Memorandum are in full force and
effect on the date hereof and neither the Company nor any of its direct and
indirect subsidiaries identified on Annex I hereto (collectively, the
"Subsidiaries"), nor, to the knowledge of the Company, any other party thereto
is in breach of or default under a material provision of any such document or
agreement.
(c) The Company and each of the corporate Subsidiaries has
been duly organized and is validly existing as a corporation in good standing
under the laws of the state of its incorporation. Lomak Production I, L.P. (the
"Partnership") is a partnership duly organized under the laws of the State of
Texas. Lomak Resources L.L.C. (the " Limited Liability Company") is a limited
liability company duly organized under the laws of the State of Oklahoma. The
corporate Subsidiaries, the Partnership and the Limited Liabilty Company are all
of the Subsidiaries. Each of the Company and the Subsidiaries is duly qualified
and licensed and in good standing as a foreign corporation (or, with respect to
the Partnership, as a foreign partnership and with respect to the Limited
Liability Company, as a foreign limited liability company) in each jurisdiction
in which its ownership or leasing of any properties or the character of its
operations require such qualification or licensing (each of which jurisdictions
is designated on Annex I hereto), except where the failure to be so qualified or
licensed would not have a material adverse effect on the condition, financial or
otherwise, results of operations, business or prospects of the Company and the
Subsidiaries, taken as a whole (a "Material Adverse Effect"). Each Subsidiary
which accounted for more than 5% of the Company's consolidated assets at
September 30, 1996 or more than 10% of the Company's consolidated revenues
during the 12 months then ended or which is reasonably expected to exceed such
percentages with respect to the Company's next four fiscal quarters ending after
the date hereof are indicated on Annex I hereto, and all such Subsidiaries are
hereinafter referred to collectively as the "Significant Subsidiaries." The
Company does not own or control, directly or indirectly, any corporation,
association or other entity other than the Subsidiaries. Except as set forth on
Annex I, the Company owns, either directly or through other Subsidiaries, all
of the outstanding capital stock (capital stock for purposes of this Agreement
including partnership interests and membership interests, in addition to common
stock and preferred stock) of each Subsidiary, in each case free and clear of
all liens, charges, claims, encumbrances, pledges, security interests defects or
other restrictions or equities of any kind whatsoever; and all outstanding
capital stock of the Subsidiaries has been duly authorized and validly issued
and is fully paid and non-assessable and not issued in violation of any
preemptive rights or applicable securities laws. Each of the Company and the
Subsidiaries has all requisite power and authority (corporate, partnership and
other),
2
<PAGE> 3
and has obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies, to own or lease its properties and conduct its
business as described in the Offering Memorandum; each of the Company and the
Subsidiaries is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, foreign, state and local laws, rules and regulations;
and neither the Company nor any of the Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or permit which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect.
(d) The Company has an authorized capitalization as set forth
in the Offering Memorandum and will have the adjusted capitalization as of the
period indicated therein, based upon the assumptions set forth therein. Neither
the Company nor any of the Subsidiaries is a party to or bound by any
instrument, agreement or other arrangement, including, but not limited to, any
voting trust agreement, stockholders' agreement or other agreement or
instrument, affecting the securities or rights or obligations of securityholders
of the Company or any of the Subsidiaries or providing for any of them to issue,
sell, transfer or acquire any capital stock, rights, warrants, options or other
securities of the Company or any of the Subsidiaries, except for this Agreement,
the certificate of designations relating to the Company's $2.03 Convertible
Exchangeable Preferred Stock outstanding on the date hereof (the "Existing
Preferred") and the indenture related thereto, the Indenture and as set forth in
the Offering Memorandum (including the notes to the financial statements set
forth therein). The Company's capital stock and the Debentures conform in all
material respects to all statements with respect thereto contained in the
Offering Memorandum. All issued and outstanding securities of the Company and
the Subsidiaries have been duly authorized and validly issued and are fully paid
and non-assessable, as applicable; the holders thereof have no rights of
rescission with respect thereto and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any securityholder of the Company or any
of the Subsidiaries or similar contractual rights granted by the Company or any
of the Subsidiaries.
(e) The Debentures will be issued pursuant to the terms and
conditions of the Indenture, and the Indenture and the Registration Rights
Agreement each conform to the description thereof contained in the Offering
Memorandum. At the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act and the Rules and
Regulations applicable to an indenture which is qualified thereunder. The
Debentures have been duly authorized and, when validly authenticated, issued,
delivered and paid for in the manner contemplated by the Indenture, will be duly
authorized, validly issued and outstanding obligations of the Company entitled
to the benefits of the Indenture. The Conversion Shares issuable upon conversion
of the Debentures will, upon such issuance, be duly authorized, fully-paid and
non-assessable, and the Company has duly authorized and reserved the Conversion
Shares for issuance upon conversion of the Debentures. The Securities are not
and will not be subject to any preemptive or other similar rights of any
securityholder of the Company or any of the Subsidiaries; all corporate action
required to be taken for the authorization, issue and sale of the Securities has
been duly and validly taken; and the certificates representing the Securities
will be in due and proper form. Upon the issuance and delivery pursuant to the
terms of this Agreement and the Indenture of the Debentures, the Initial
Purchasers will acquire good and marketable title thereto free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The consolidated financial statements of the Company and
the Subsidiaries together with the related notes thereto included in the
Preliminary Offering Memorandum and the Offering Memorandum fairly present the
financial position, income, changes in stockholders' equity, cash flow and
results of operations of the Company and the Subsidiaries at the respective
dates and for the respective periods to which they apply and such financial
statements have been prepared in conformity with generally accepted accounting
principles and the Rules and Regulations, consistently applied throughout the
periods involved; the pro forma financial information included in each
Preliminary Offering Memorandum and the Offering Memorandum presents fairly the
information shown therein in accordance with Article 11 of Regulation S-X.
Except as described in the Offering Memorandum, there has been no material
adverse change or development involving a material prospective change in the
condition, financial or otherwise, or in the earnings, business, prospects or
results of operations of the Company or any of the Subsidiaries, taken as a
whole, whether or not arising in the ordinary course of business, since the date
of the financial statements included in the Offering Memorandum and the
outstanding debt, the property, both tangible and intangible, and the businesses
of each of the Company and the
3
<PAGE> 4
Subsidiaries conform in all material respects to the descriptions thereof
contained in the Offering Memorandum. Financial information set forth in the
Offering Memorandum under the headings "Summary Financial, Operating and Reserve
Information," "Selected Historical and Pro Forma Financial Data,"
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" fairly present, on the basis stated in the
Offering Memorandum, the information set forth therein and have been derived
from or compiled on a basis consistent with that of the audited financial
statements included in the Offering Memorandum.
(g) Each of the Company and the Subsidiaries has filed all
income and franchise tax returns required to be filed by it in any jurisdiction,
and has paid all taxes shown to be due on such returns or claimed to be due from
such entities, other than those being contested in good faith. All tax
liabilities, including those being contested by the Company or the Subsidiaries
are adequately reserved for in the Company's financial statements (in accordance
with generally accepted accounting principles). No tax deficiency has been
asserted and no tax proceedings are pending or is threatened against the Company
or any of the Subsidiaries, and to the knowledge of the Company, no such
deficiency or proceeding is contemplated.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Initial Purchasers in connection with (i) the
issuance by the Company of the Securities, (ii) the purchase by the Initial
Purchaser of the Debentures from the Company or (iii) the consummation by the
Company of any of its obligations under this Agreement.
(i) Each of the Company and the Subsidiaries maintains
liability, casualty and other insurance (subject to customary deductions and
retentions) with responsible insurance companies against such risk of the types
and in the amounts customarily maintained by independent oil companies of
comparable size to the Company engaged in the acquisition, development and
exploration of oil and gas properties (which may include self-insurance in
comparable form to that maintained by such responsible companies), all of which
insurance is in full force and effect.
(j) There is no action, suit, proceeding, litigation or
governmental proceeding pending or threatened or, to the knowledge of the
Company, contemplated against (or circumstances that are reasonably likely to
give rise to the same), or involving the properties or businesses of, the
Company or any of the Subsidiaries which (i) questions the validity of the
capital stock of the Company or any of the Subsidiaries, this Agreement, the
Indenture, the Registration Rights Agreement or of any action taken or to be
taken by the Company or any of the Subsidiaries pursuant to or in connection
with this Agreement, the Indenture or the Registration Rights Agreement or (ii)
except as disclosed in the Offering Memorandum, would have a Material Adverse
Effect.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Debentures and the Conversion Shares upon
conversion of the Debentures, to enter into this Agreement, the Indenture and
the Registration Rights Agreement and to consummate the transactions provided
for in such agreements; and this Agreement has been duly and properly
authorized, executed and delivered by the Company and when the Company has duly
executed and delivered the Registration Rights Agreement (assuming the due
execution and delivery thereof by the Initial Purchasers) and the Indenture
(assuming the due execution and delivery thereof by the Trustee), this
Agreement, the Registration Rights Agreement and the Indenture each will
constitute a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms. None of the Company's issue
and sale of the Debentures and the Conversion Shares upon the conversion of the
Debentures, the execution or delivery of this Agreement, the Indenture and the
Registration Rights Agreement, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein or the conduct
by it and the Subsidiaries of their businesses as described in the Offering
Memorandum or any amendments or supplements thereto conflicts or will conflict
with or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or results or
will result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of, (i) the certificate of incorporation or
by-laws of the Company or any of the Subsidiaries, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or other agreement or instrument to
which the Company or any of the Subsidiaries is a party or by which it or any
Subsidiary is or may be bound or to which its or any of the Subsidiaries'
4
<PAGE> 5
properties or assets is or may be subject, or any indebtedness, or (iii) any
statute, judgment, decree, order, rule or regulation applicable to the Company
or any of the Subsidiaries of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body, having jurisdiction
over the Company or any of the Subsidiaries or any of their respective
activities or properties.
(l) Neither the Company nor any of the Subsidiaries (i) is in
violation of its certificate of incorporation or by-laws, (ii) is in default in
the performance of any obligation, agreement or condition contained in any
license, contract, indenture, mortgage, installment sale agreement, lease, deed
of trust, voting trust agreement, stockholders' agreement, note, loan or credit
agreement, purchase order, agreement or instrument evidencing an obligation for
borrowed money or other material agreement or instrument to which the Company or
any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries may be bound or to which the property or assets of the Company or
any of the Subsidiaries is subject or affected or (iii) is in violation in any
respect of any law, ordinance, governmental rule, regulation or court decree to
which it or its property or assets may be subject, except any violation or
default under the foregoing clauses (ii) or (iii) as would not have a Material
Adverse Effect.
(m) No consent, approval, authorization or order of, and no
filing with, any court, arbitrator, regulatory body, government agency or other
body, domestic or foreign, is required for the execution, delivery or
performance of this Agreement, the Indenture, the Registration Rights Agreement
or the transactions contemplated hereby or thereby, except such as have been or
may be obtained under the Securities Act or may be required under state
securities or Blue Sky laws.
(n) Subsequent to the respective dates as of which information
is set forth in the Offering Memorandum, and except as may otherwise be
indicated or contemplated herein or therein, neither the Company nor any of the
Subsidiaries has (i) issued any securities (other than upon exercise of options
outstanding on the date hereof pursuant to the Company's Stock Option Plan, 1994
Outside Directors Stock Option Plan and 1994 Stock Purchase Plan or upon
conversion of the preferred stock of the Company or the exercise of warrants
outstanding on such respective dates, or incurred any material liability or
obligation, direct or contingent, for borrowed money not in the ordinary course
of business, (ii) entered into any material transaction other than in the
ordinary course of business or (iii) declared or paid any dividend or made any
other distribution on or in respect of its capital stock of any class and there
has not been any change in the capital stock (excluding changes contemplated by
clause (i) hereof) or long term debt of the Company and the Subsidiaries taken
as a whole or any material adverse change in or affecting the general affairs,
business, management, financial conditions, stockholders' equity or results of
operation of the Company or any of the Subsidiaries.
(o) The Company and the Subsidiaries is in compliance with all
federal, state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours.
There are no pending investigations involving the Company or any of the
Subsidiaries by the U.S. Department of Labor or any other governmental agency
responsible for the enforcement of such federal, state, local or foreign laws
and regulations. There is no unfair labor practice charge or complaint against
the Company or any of the Subsidiaries pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or threatened against or involving the Company or any of the
Subsidiaries. No representation question exists respecting the employees of the
Company or any of the Subsidiaries, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or any of the
Subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
the Subsidiaries. No material labor dispute with the employees of the Company or
any of the Subsidiaries exists or, to the knowledge of the Company, is imminent.
(p) Except as identified on Schedule II attached hereto,
neither the Company nor any of the Subsidiaries maintains, sponsors or
contributes to any program or arrangement that is an "employee pension benefit
plan" an "employee welfare benefit plan" or a "multi-employer plan" ("ERISA
Plans") as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Except as identified on Schedule II attached hereto, neither the
Company nor any of the Subsidiaries maintains or contributes to, now or at any
time previously, a defined benefit plan as defined in Section 3(35) of ERISA. No
ERISA Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of
5
<PAGE> 6
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code") which could subject the Company or any of the Subsidiaries to any tax
penalty on prohibited transactions and which has not adequately been corrected.
No "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any
of the events set forth in Section 4043(b) of ERISA (other than events with
respect to which the 30-day notice under Section 4043 of ERISA has been waived)
has occurred with respect to any employee benefit plan which might reasonably be
expected to have a Material Adverse Effect. Each ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Code and
ERISA as they relate to such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan which
is intended to comply with Code Section 401(a) stating that such ERISA Plan and
the attendant trust are qualified thereunder. Neither the Company nor any of the
Subsidiaries has ever completely or partially withdrawn from a "multi-employer
plan" as so defined.
(q) Neither the Company or any of the Subsidiaries, nor any of
its affiliates has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might be expected to cause or
result in, under the Exchange Act or otherwise, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Securities or otherwise.
(r) Each of the Company and the Subsidiaries (i) owns or has
the right to use, free and clear of all liens, claims, encumbrances, pledges,
security interests, and other adverse interests of any kind whatsoever, all
patents, trademarks, service marks, trade names, copyrights, technology, and all
licenses and rights with respect to the foregoing, used in the conduct of its
business as now conducted or proposed to be conducted without, to the best
knowledge of the Company and the Subsidiaries, infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity, (ii) is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner or licensee of,
or other claimant to, any patent, trademark, service mark, trade name,
copyright, know-how, technology or other intangible asset, with respect to the
use thereof or in connection with the conduct of its business or otherwise and
(iii) has not received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a Material Adverse Effect.
(s) Except as to its interests in oil and gas leases, each of
the Company and the Subsidiaries has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property which
are material to its business and/or reflected as owned by it in the financial
statements included in the Offering Memorandum, in each case free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, defects
and other restrictions except those disclosed in the Offering Memorandum or
those which are not material in amount and do not materially adversely affect
the use made or proposed to be made of such property. Each of the Company and
the Subsidiaries has good and defensible title to its interests in oil and gas
leases, free and clear of any liens, charges, claims, encumbrances, pledges,
security interests, defects and other restrictions of any kind, and liens and
encumbrances under operating agreements, unitization and pooling arrangements
and gas sales contracts that secure payment of amounts not yet due and payable
and which are of a nature and scope customary in connection with similar oil and
gas drilling and producing operations, and except those which are not material
in amount and do not materially adversely affect the use made and proposed to be
made of such oil and gas leases. The Company and each of the Subsidiaries has
conducted such title investigations and has acquired its interest in oil and gas
leases in such manner as is customary in the oil and gas industry for the
respective regions in which the property subject to such leases is located. The
Company and each of the Subsidiaries has complied in all material respects with
the terms of oil and gas leases in which each purports to own an interest, and
no claim of any sort has been asserted by any person or entity adverse to the
rights of the Company or any of the Subsidiaries as lessee or sublessee under
any of such leases or questioning its rights to the continued possession of the
leased premises under any such lease, except with respect to claims which do not
materially adversely affect the use made and proposed to be made of such oil and
gas leases by the Company or any of the Subsidiaries. The concessions,
reservations, licenses, permits and rights to hydrocarbons held by the Company
and each of the Subsidiaries are valid, subsisting and enforceable with such
exceptions which do not materially adversely affect the use made and proposed to
be made of such oil and gas leases. Except as set forth in the Offering
Memorandum, neither the Company nor any of the Subsidiaries owns or leases any
material real or personal property, the loss of which would have a Material
Adverse Effect.
6
<PAGE> 7
(t) Ernst & Young LLP and Arthur Andersen LLP are independent
certified public accountants of the Company as required by the Securities Act
and the Rules and Regulations.
(u) The Debentures satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act. The Common Stock is registered
pursuant to Section 12(b) of the Exchange Act, and is approved for trading on
the New York Stock Exchange under the symbol "LOM". The Company has taken no
action that was designed to terminate, or that is likely to have the affect of
terminating, trading of the Common Stock on the New York Stock Exchange, nor has
the Company received any notification that the Commission or the New York Stock
Exchange is contemplating terminating such trading.
(v) The information provided by the Company or any of the
Subsidiaries to the Petroleum Consultants (as hereinafter defined) for the
preparation of the estimates or reserves in the reserve reports for the oil and
gas properties of the Company prepared by H.J. Gruy & Associates, Harper &
Associates, Inc., Clay, Holt & Klammer, Long Consultants, Inc. and Wright &
Company, Inc., independent petroleum consultants (collectively the "Petroleum
Consultants"), were at the time of delivery thereof to the Petroleum Consultants
complete and accurate in all material respects. The Petroleum Consultants are
each independent petroleum consulting firms as required by the Securities Act
and the Rules and Regulations. Except as expressly stated in the Preliminary
Offering Memorandum and the Offering Memorandum, information in the Preliminary
Offering Memorandum and in the Offering Memorandum regarding estimates of
reserves, future net cash flows and present values of proved reserves comply in
all material respects with the applicable requirements of Rule 4-10 of
Regulation S-X and Industry Guide 2 under the Securities Act.
(w) Neither the Company nor any of the Subsidiaries has, nor
to the knowledge of the Company, has any officer, director or employee of the
Company or any of the Subsidiaries or any other person acting on behalf of the
Company or any of the Subsidiaries, for the benefit of the Company or any such
Subsidiaries at any time during the last five years, (i) made any unlawful gift
or contribution to any candidate for federal, state, local or foreign political
office, or failed to disclose fully any such gift or contribution in violation
of law, or (ii) made any payment to any federal, state, local or foreign
governmental officer or official, which would be reasonably likely to subject
the Company or any of the Subsidiaries to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign). Each of
the Company's and the Subsidiaries' internal accounting controls are sufficient
to cause the Company and the Subsidiaries to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(x) Except as set forth in the Offering Memorandum, no
officer, director or 5% or greater stockholder of the Company or any of the
Subsidiaries, or any "affiliate" or "associate" (as these terms are defined in
Rule 405 promulgated under the Rules and Regulations) of any of the foregoing
persons or entities, has or has had, either directly or indirectly, (i) a
material interest in any person or entity which (A) furnishes or sells services
or products which are furnished or sold or are proposed to be furnished or sold
by the Company or any of the Subsidiaries or (B) purchases from or sells or
furnishes to the Company or any of the Subsidiaries any goods or services or
(ii) a material beneficiary interest in any contract or agreement to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries may be bound or affected. Except as set forth in the Offering
Memorandum under the caption "Certain Transactions," there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company or any of the Subsidiaries and any such officer, director, 5% or greater
stockholder, "affiliate" or "associate." For the purpose of this subsection (y),
interests which may be excluded from disclosure pursuant to the instructions to
items of Regulation S-K shall be deemed to be per se not material.
(y) The minute books of each of the Company and the
Subsidiaries have been made available to the Initial Purchasers, contain a
complete summary of all meetings and actions of the directors and stockholders
of each of the Company and the Subsidiaries since the time of their respective
incorporation and reflect all transactions referred to in such minutes
accurately in all respects.
(z) Neither the Company nor any of the Subsidiaries has been
notified or is otherwise aware that it is liable with respect to obligations
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or any similar law ("Environmental Laws"), and it is not
aware of any facts or circumstances
7
<PAGE> 8
which could reasonably be expected to result in any such liability. The Company
and the Subsidiaries are in substantial compliance with all applicable existing
Environmental Laws, except for such instances of non-compliance which would not
have a Material Adverse Effect. The term "Hazardous Material" means (i) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) any "hazardous waste"
as defined by the Resource Conservation and Recovery Act, as amended, (iii) any
petroleum or petroleum product, (iv) any polychlorinated biphenyl and (v) any
pollutant or contaminant or hazardous, dangerous or toxic chemical, material,
waste or substance regulation under or within the meaning of any other
Environmental Law. To the best of the Company's knowledge, no disposal, release
or discharge of "Hazardous Material" has occurred on, in, at or about any of the
facilities or properties of the Company or any of the Subsidiaries. Except as
described in the Offering Memorandum, to the best of the Company's knowledge:
(i) there has been no storage, disposal, generation, transportation, handling or
treatment of hazardous substances or solid wastes by the Company or any of the
Subsidiaries (or to the knowledge of the Company, any of its predecessors in
interest) at, upon or from any of the property now or previously owned or leased
by the Company or any of the Subsidiaries in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which would
require remedial action which has not been taken, under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit, except for such
violations and failures to take remedial action which would not result in,
singularly or in the aggregate, a Material Adverse Effect; (ii) there has been
no material spill, discharge, leak, emission, injection, escape, dumping or
release of any kind onto such property or into the environment surrounding such
property by the Company or any of the Subsidiaries of any solid waste or
Hazardous Materials, except for such spills, discharges, leaks, emissions,
injections, escapes, dumping or releases which would not result in, singularly
or in the aggregate, a Material Adverse Effect.
(aa) The Company is not an "investment company," a
company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
(bb) Neither the Company nor any affiliate (as such
term is defined in Rule 501(b) under the Securities Act) of the Company has,
directly or through any agent, sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any "security" (as defined in the
Securities Act), which is or will be integrated with the sale of the Debentures
in a manner that would require the registration of the Debentures under the
Securities Act.
(cc) None of the Company, any affiliate (as such
term is defined in Rule 501(b) under the Securities Act) of the Company and any
other person acting on its or their behalf has engaged, in connection with the
Offering, in any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act.
(dd) Assuming the accuracy of the Initial
Purchasers' representations in Section 2(b) hereof and its compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Debentures and the offer, resale and delivery of the
Debentures in the manner contemplated by this Agreement and the Offering
Memorandum, to register the Debentures or the Conversion Shares under the
Securities Act or to qualify the Indenture under the Trust Indenture Act.
2. PURCHASE BY THE INITIAL PURCHASERS.
(A) On the basis of the representations, warranties
and agreements contained herein, and subject to the terms and conditions set
forth herein, the Company agrees to issue and sell to the Initial Purchasers,
and the Initial Purchasers agree, severally and not jointly, to purchase from
the Company, the aggregate principal amount of Debentures set forth across from
their respective names on Schedule A attached hereto at a purchase price equal
to 97% of the principal amount thereof.
(b) The Initial Purchasers have advised the Company
that it is their intention, as promptly as they deem appropriate after the
Company shall have furnished the Initial Purchasers with copies of the Offering
Memorandum, to resell the Debentures pursuant to the procedures and upon the
terms set forth in the Offering Memorandum, including not to solicit any offer
to buy or offer to sell the Debentures by means of any form of general
8
<PAGE> 9
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act. The Initial Purchasers warrant
and agree with the Company that they have solicited and will solicit offers (the
"Exempt Resales") for Debentures only from, and will offer Debentures only to,
persons that they reasonably believe to be (i) "qualified institutional buyers"
(as defined in Rule 144A under the Securities Act ("QIBs")) in transactions that
meet the requirements for an exemption from the registration requirements of the
Securities Act under Rule 144A or (ii) to a limited number of "institutional
accredited investors" (as defined in Regulation D under the Securities Act and
of the types described in the Offering Memorandum ("Institutional Accredited
Investors")) that execute and deliver a letter containing certain
representations and agreements in the form attached as Annex A of the Offering
Memorandum. The QIBs and the Institutional Accredited Investors are referred to
herein as "Eligible Purchasers." Each of the Initial Purchasers represents and
warrants that it is an Institutional Accredited Investor with such knowledge and
experience in financial and business matters as are necessary to evaluate the
merits and risks of an investment in the Debentures, and is acquiring its
interest in the Debentures not with a view to the distribution or resale
thereof, except resales in compliance with the registration requirements or
exemption provisions of the Securities Act and that neither it, nor anyone
acting on its behalf, will offer the Debentures so as to bring the issuance and
sale of the Debentures within the provisions of Section 5 of the Securities Act.
The Company acknowledges and agrees that the Initial Purchasers may sell
Debentures to any affiliate of any of the Initial Purchasers and any such
affiliate may sell Debentures purchased by it to the Initial Purchasers. Each of
the Initial Purchasers agrees that, prior to or simultaneously with the
confirmation of sale by it to any purchaser of any of the Debentures purchased
from the Company pursuant hereto, such Initial Purchaser shall furnish to that
purchaser a copy of the Offering Memorandum (and any amendment thereof or
supplement thereto that the Company shall have furnished to the Initial
Purchasers prior to the date of such confirmation of sale).
3. DELIVERY OF AND PAYMENT FOR THE DEBENTURES. Delivery of,
and payment for, the Debentures shall be made at 10:00 a.m., New York City time,
on December 27, 1996, or at such other date or time as shall be agreed by the
Initial Purchasers and the Company (such date and time being referred to herein
as the "Closing Date"). Delivery of, and payment for, the Debentures shall be
made at the offices of Kelley Drye & Warren LLP, New York, New York, or any such
other place as shall be agreed by the Initial Purchasers and the Company. On the
Closing Date, the Company shall deliver or cause to be delivered to the Initial
Purchasers certificates for the Debentures against payment to or upon the order
of the Company of the purchase price by wire or book-entry transfer of
immediately available funds. Upon delivery, the Debentures shall be in global
form, in such denominations and registered in such names, or otherwise, as the
Initial Purchasers shall have requested in writing not less than two full
business days prior to the Closing Date. The Company shall make the certificates
for the Debentures available for inspection by the Initial Purchasers in New
York, New York, not later than one full business day prior to the Closing Date.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company
covenants and agrees with the Initial Purchasers as follows:
(a) during the period ending 90 days after the date hereof
to advise the Initial Purchasers promptly and, if requested, confirm such advice
in writing, of the happening of any event which makes any statement of a
material fact made in the Offering Memorandum untrue or that requires the making
of any additions to or changes in the Offering Memorandum (as amended or
supplemented from time to time) in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; to advise
the Initial Purchasers promptly of any order preventing or suspending the use of
the Preliminary Offering Memorandum or the Offering Memorandum, of the
suspension of the qualification of the Debentures for offering or sale in any
jurisdiction and of the initiation or threatening of any proceeding for any such
purpose; and to use its reasonable best efforts to prevent the issuance of any
such order preventing or suspending the use of the Preliminary Offering
Memorandum or of the Offering Memorandum or suspending any such qualification
and, if any such suspension is issued, to use its reasonable best efforts to
obtain the lifting thereof at the earliest possible time;
(b) to furnish promptly to the Initial Purchasers and
counsel for the Initial Purchasers, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum (and of any
amendments or supplements thereto) as may be reasonably requested; to furnish to
the Initial Purchasers on the date hereof a copy of the independent accountants'
report included in the Offering Memorandum signed by the accountants rendering
such
9
<PAGE> 10
report; and the Company hereby consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto, in connection with Exempt Resales of the Debentures;
(c) if the delivery of the Offering Memorandum is
required at any time in connection with the sale of the Debentures and if at
such time any events shall have occurred as a result of which the Offering
Memorandum as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made when the Offering Memorandum is delivered, not misleading, or if for any
other reason it shall be necessary at such time to amend or supplement the
Offering Memorandum in order to comply with any law, to notify the Initial
Purchasers immediately thereof, and to promptly prepare and furnish to the
Initial Purchasers an amended Offering Memorandum or a supplement to the
Offering Memorandum so that statements in the Offering Memorandum, as so amended
or supplemented, will not, in light of the circumstances under which they were
made when it is so delivered, be misleading, or so that the Offering Memorandum
will comply with applicable law. The Initial Purchasers' delivery of any such
amendment or supplement shall not constitute a waiver of any of the conditions
set forth in Section 6 hereof;
(d) during the five-year period following the Closing
Date, provided any of the Debentures remain outstanding, to furnish to the
Initial Purchasers all public reports and all reports, documents, information
and financial statements furnished by the Company to the Commission pursuant to
the Trust Indenture Act, the Exchange Act or the Rules and Regulations;
(e) during the three-year period following the
Closing Date, for so long as and at any time that it is not subject to Section
13 or 15(d) of the Exchange Act, upon request of any holder of the Debentures,
to furnish to such holder, and to any prospective purchaser or purchasers of the
Debentures designated by such holder, information satisfying the requirements of
subsection (d)(4) of Rule 144(A) under the Securities Act. This covenant is
intended to be for the benefit of the holders from time to time of the
Debentures, and prospective purchasers of the Debentures designated by such
holders;
(f) to use the proceeds from the sale of the
Debentures in the manner described in the Offering Memorandum under the caption
"Use of Proceeds";
(g) in connection with the Offering, to make its
officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchasers;
(h) to use its reasonable best efforts to do and
perform all things required to be done and performed under this Agreement by it
that are within its control prior to or after the Closing Date and to use
reasonable efforts to satisfy all conditions precedent on its part to the
delivery of the Securities;
(i) except following the effectiveness of the Shelf
Registration Statement, to not authorize or knowingly permit any person acting
on its or their behalf to, solicit any offer to buy or offer to sell the
Debentures by means of any form of general solicitation or general advertising
(as such terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act;
(j) to not, and to use its reasonable best efforts to
ensure that no affiliate (as such term is defined in Rule 501(b) under the
Securities Act) of the Company will, offer, sell or solicit offers to buy or
otherwise negotiate in respect of any "security" (as defined in the Securities
Act) which could be integrated with the sale of the Debentures in a manner that
would require the registration of the Debentures under the Securities Act;
(k) to not, so long as the Debentures are
outstanding, be or become, or be or become owned by, an open-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act, and to
not be or become, or be or become owned by, a closed-end investment company
required to be registered, but not registered thereunder;
10
<PAGE> 11
(l) to cooperate with the Initial Purchasers and
counsel for the Initial Purchasers to qualify the Debentures for offering and
sale under the securities laws of such jurisdictions as the Initial Purchasers
may reasonably request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for as long as
may be necessary to complete the distribution of the Debentures; provided,
however, that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process or to subject it to taxation in any jurisdiction where it is not so
qualified or so subject;
(m) to comply with the Registration Rights Agreement
and all agreements set forth in the representation letters of the Company to The
Depository Trust Company relating to the approval of the Debentures for
"book-entry" transfers;
(n) in connection with the Offering, until the
Initial Purchasers shall have notified the Company of the completion of the
resale of the Debentures, to not and use its reasonable best efforts to not
permit any affiliated purchasers (as defined in Rule 10b-6 under the Exchange
Act), either alone or with one or more other persons, to bid for or purchase,
for any account in which it or any of its affiliated purchasers has a beneficial
interest, any Debentures or Common Stock, or attempt to induce any person to
purchase any Debentures; and to not and use its reasonable best efforts to not
permit any of its affiliated purchasers to make bids or purchases for the
purpose of creating actual, or apparent, active trading in or of raising the
price of the Debentures;
(o) prior to the Closing Date, to not issue any press
release or other communication directly or indirectly or hold any press
conference with respect to the Company, its condition, financial or otherwise,
or earnings, business affairs or business prospects, without the prior consent
of the Initial Purchasers, unless in the judgment of the Company and its
counsel, and after notification to the Initial Purchasers, such press release or
communication is required by law;
(p) to not take any action prior to the execution and
delivery of the Indenture which, if taken after such execution and delivery,
would have violated any of the covenants contained in the Indenture;
(q) to not take any action prior to the Closing Date
which in the Company's reasonable judgment would require the Offering Memorandum
to be amended or supplemented pursuant to Section 4(c) hereof;
(r) to maintain a transfer agent and, if necessary
under the laws of the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for the Common Stock; and
(s) for a period of five (5) years from the date
hereof, to use its best efforts to maintain the Private Offerings, Resale and
Trading through Automated Linkages ("Portal") Market (or after the Shelf
Registration Statement, New York Stock Exchange (or other national securities
exchange or Nasdaq National Market listing, if the Company is then listed
thereon) listing of the Debentures, to the extent outstanding, and the New York
Stock Exchange (or other national securities exchange or Nasdaq Stock Market, if
the Common Stock is then listed thereon) listing of the Common Stock.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay all of the
following expenses and fees incident to the performance of the obligations of
the Company under this Agreement, the Indenture and the Registration Rights
Agreement, including, regardless of whether any sale of the Debentures to the
Initial Purchasers is consummated (subject to Section 5(b) below): (i) the fees
and expenses of accountants and counsel for the Company, (ii) all costs and
expenses incurred in connection with the preparation, duplication, printing
(including mailing and handling charges), delivery and mailing (including the
payment of postage with respect thereto) of each Preliminary Offering Memorandum
and the Offering Memorandum and any amendments and supplements thereto, in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of the certificates representing the Debentures, (iv) costs and
expenses of travel, food and lodging of Company personnel in connection with the
"road show," information meetings and
11
<PAGE> 12
presentations, (v) fees and expenses of the transfer agent and registrar, (vi)
fees and expenses of the Trustee, including the Trustee's counsel, in connection
with the Indenture and the Debentures and (vii) the fees payable to the NASD,
CUSIP Service Bureau and DTC incurred in connection with the listing of the
Debentures and the Conversion Shares for trading in the PORTAL Market, (viii)
the fees payable to the Commission and New York Stock Exchange in connection
with the filing of a registration statement with respect to the Debentures and
the Conversion Shares and the listing of the Conversion Shares on the New York
Stock Exchange and (ix) all other costs and expenses incident to the performance
of its obligations hereunder which are not specifically otherwise provided for
in this Section. The Company shall not be responsible for any promotional or
tombstone expenses, if any, related to the Offering, lodging and travel expenses
of the Initial Purchasers' personnel on the "road show" or expenses of counsel
for the Initial Purchasers.
(b) If this Agreement is terminated for any reason,
the Company shall reimburse and indemnify the Initial Purchasers for their
actual accountable out-of-pocket expenses.
6. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
obligations of the Initial Purchasers hereunder shall be subject to the
continuing accuracy of the representations and warranties of the Company herein
as of the date hereof and as of the Closing Date as if they had been made on and
as of the Closing Date; and the performance by the Company on and as of the
Closing Date of its covenants and obligations hereunder and to the following
further conditions:
(a) The Initial Purchasers shall not have advised the
Company that the Offering Memorandum, or any supplement or amendment thereto,
contains an untrue statement of fact which, in the Initial Purchasers' opinion,
is material, or omits to state a fact which, in the Initial Purchasers' opinion,
is material and is required to be stated therein or is necessary to make the
statements, in light of the circumstances under which they were made, not
misleading. No order suspending the sale of the Securities in any jurisdiction
shall have been issued on the Closing Date and no proceedings for that purpose
shall have been instituted or shall be contemplated.
(b) On or prior to the Closing Date the Initial
Purchasers shall have received from Kelley Drye & Warren LLP such opinion or
opinions with respect to the organization of the Company, the validity of the
Debentures, the Conversion Shares, the Offering Memorandum and other related
matters as the Initial Purchasers may request and Kelley Drye & Warren LLP shall
have received such papers and information as they request to enable it to pass
upon such matters.
(c) On the Closing Date the Initial Purchasers shall
have received the favorable opinion of Rubin Baum Levin Constant & Friedman,
counsel to the Company, dated the Closing Date, addressed to the Initial
Purchasers and in form and substance satisfactory to the Initial Purchasers and
Kelley Drye & Warren LLP, to the effect that:
i) (A) the Company and each of the Subsidiaries has
been duly organized and the Company and each of the
Subsidiaries is validly existing as a corporation, partnership
or limited liability company, as the case may be, in good
standing under the laws of its jurisdiction of formation, (B)
the Company and each of the Significant Subsidiaries is duly
qualified and in good standing as a foreign corporation (or,
with respect to the Partnership, as a foreign partnership and
with respect to the Limited Liability Company, as a foreign
limited liability company) in each jurisdiction identified in
a schedule to such opinion and (C) the Company and each of the
Subsidiaries has all requisite power and authority to own or
lease its properties and conduct its business as described in
the Offering Memorandum;
ii) the Company's authorized capital stock is as set
forth under the heading "Capitalization" in the Offering
Memorandum, subject to such adjustments therein as are
expressly contemplated by the Offering Memorandum; all of the
outstanding shares of capital stock of each of the
Subsidiaries are owned by the Company, directly or through one
or more Subsidiaries, in each case free and clear of any
liens, charges, claims, pledges, security interests or
encumbrances of any kind whatsoever other than as disclosed in
the Offering Memorandum;
12
<PAGE> 13
iii) except as disclosed in the Offering Memorandum,
to the best of such counsel's knowledge, neither the Company
nor any of the Subsidiaries is a party to or bound by any
instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other
securities of the Company or any of the Subsidiaries, except
for this Agreement and as described in the Offering
Memorandum, the Indenture, the Securities and all other
securities issued or issuable by each of the Company or any of
the Subsidiaries which are described in the Offering
Memorandum conform, or when issued and paid for, will conform
in all material respects to the descriptions thereof contained
in the Offering Memorandum; all issued and outstanding capital
stock of the Company or any of the Subsidiaries has been duly
authorized and validly issued and is fully paid and
non-assessable; to the best of such counsel's knowledge, none
of such securities were issued in violation of the preemptive
rights of any securityholder of the Company or any of the
Subsidiaries or similar contractual rights granted by the
Company or any of the Subsidiaries or applicable securities
laws; the Debentures have been duly authorized and, when
validly authenticated, issued, delivered and paid for by the
Initial Purchasers in the manner contemplated by this
Agreement, will be duly authorized, validly issued and
outstanding obligations of the Company entitled to the
benefits of the Indenture and enforceable against the Company
in accordance with their terms, except to the extent that
enforceability thereof may be limited by (1) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally;
or (2) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity); the Indenture conforms in all material respects to
the description thereof set forth in the Offering Memorandum;
the shares of Common Stock issuable upon conversion of the
Debentures have been duly authorized and reserved for issuance
upon conversion and, when issued, delivered and paid for in
accordance with the terms of the Indenture, will be validly
issued, fully paid and nonassessable; and the holders of
outstanding securities of the Company are not entitled to any
preemptive rights with respect to the Securities; all
corporate action required to be taken for the authorization,
issue and sale of the Securities has been duly and validly
taken; and the certificates representing the Securities are in
due and proper form; upon the issuance and delivery pursuant
to this Agreement and the Indenture of the Debentures to be
sold by the Company hereunder, the Initial Purchasers will
acquire good and marketable title thereto free and clear of
any pledge, lien, charge, claim, encumbrance, pledge, security
interest or other restriction or equity of any kind
whatsoever;
iv) the descriptions in the Offering Memorandum of
agreements and documents to which the Company or any of the
Subsidiaries is a party or by which any of them or their
respective properties are bound, including any such agreement
or document incorporated by reference into the Offering
Memorandum, or of any statutes, are accurate in all material
respects and fairly present the subject matter thereof; to the
best of such counsel's knowledge, there is no action,
arbitration, suit, or other proceeding pending or threatened
in writing or any judgments outstanding against the Company or
any of the Subsidiaries or involving the properties or
business of the Company or any of the Subsidiaries which (A)
questions the validity of the capital stock of the Company or
any of the Subsidiaries or of this Agreement, the Indenture,
the Registration Rights Agreement or of any action taken or to
be taken by the Company or any of the Subsidiaries pursuant to
or in connection with any of the foregoing or (B) except as
disclosed in the Offering Memorandum, could have a Material
Adverse Effect;
v) the Company has the corporate power and authority
to execute, deliver and perform each of this Agreement,
Indenture and the Registration Rights Agreement and to
consummate the transactions provided for herein and therein;
the execution and delivery of this Agreement, the Indenture
and the Registration Rights Agreement have been duly
authorized by all requisite corporate action on the part of
the Company and each of this Agreement, the Indenture and the
Registration Rights Agreement has been duly executed and
delivered by the Company, and, assuming due authorization,
execution and delivery by each other party thereto,
constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its
terms; except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and
13
<PAGE> 14
(ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity) and except to the extent that rights to
indemnification and contribution contained in this Agreement
and the Registration Rights Agreement may be limited by
federal or state securities laws or public policy relating
thereto;
vi) the execution and delivery by the Company of
this Agreement, the Indenture and the Registration Rights
Agreement, the performance by the Company hereunder or
thereunder, the compliance by the Company with the provisions
thereof and the consummation of the transactions contemplated
hereby and thereby, each in accordance with its terms, do not
and will not conflict with or result in any breach or
violation of, constitute a default under or result in the
creation or imposition of any lien, charge, claim, pledge,
security interest or other encumbrance upon any property or
assets of the Company or the Subsidiaries pursuant to the
terms of (A) the charter or by-laws of the Company or any of
the Subsidiaries, (B) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or other agreement
or instrument known to such counsel to which the Company or
any of the Subsidiaries is a party or by which any of them is
or may be bound or to which any of their respective properties
or assets is or may be subject, except for such conflicts,
breaches, violations, defaults and creations or impositions
which in the aggregate would not have a Material Adverse
Effect, or (C) any statute, rule or regulation (other than
federal or state securities laws) or, to the best of such
counsel's knowledge, any judgment, decree or order applicable
to the Company or any of the Subsidiaries of any arbitrator,
court, regulatory body or administrative agency or other
governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries or any of their respective
activities or properties, except with respect to this clause
(C) for such conflicts, breaches, violations, defaults and
creations or impositions which in the aggregate would not have
a Material Adverse Effect. Such counsel need express no
opinion in this paragraph (vi) as to (A) state securities or
Blue Sky laws or (B) with respect to matters of fact relating
to compliance with any financial covenants, ratios or tests or
any aspect of the financial condition or results of operations
of the Company;
vii) to the knowledge of such counsel, the Company
and the Subsidiaries are not in violation of their charters or
by-laws; neither the Company nor any of the Subsidiaries is in
breach of, or in default with respect to, any provisions of
any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders' agreement, note, loan or
credit agreement or other agreement or instrument known to
such counsel to which the Company or any of the Subsidiaries
is a party or by which any of them is or may be bound or to
which any of their respective properties or assets is or may
be subject, except for such breaches or defaults as would not
have a Material Adverse Effect, and to the knowledge of such
counsel, the Company and the Subsidiaries are in material
compliance with all laws, rules and regulations and all
judgments, decrees and orders of any judicial or governmental
authority to which the Company or any of the Subsidiaries or
by which any of them is or may be bound or to which any of
their respective properties or assets is or may be subject,
except for such noncompliance as would not have a Material
Adverse Effect;
viii) no consent, approval, authorization or order
of, and no filing with, any court, regulatory body, government
agency or other body (other than such as may have been made or
obtained and such as may be required under state securities or
Blue Sky laws, as to which no opinion need be rendered) is
required in connection with the issuance of the Securities as
contemplated by the Offering Memorandum, the performance of
this Agreement, the Indenture and the Registration Rights
Agreement, and the transactions contemplated hereby and
thereby; to the knowledge of such counsel, the Company and
each of the Subsidiaries holds all licenses, certificates,
permits, franchises, consents, authorizations and approvals
from all state and federal regulatory authorities that are
required for the Company and the Subsidiaries to conduct their
business as described in the Offering Memorandum, except for
such licenses, certificates, permits, franchises, consents,
authorizations and approvals the loss of which or the failure
to maintain would not have a Material Adverse Effect;
14
<PAGE> 15
ix) the statements in the Offering Memorandum under
the caption "Federal Income Tax Considerations" have been
reviewed by such counsel, and insofar as they refer to
statements of law, or descriptions of statutes, licenses,
rules or regulations or legal conclusions, are correct in all
material respects;
x) assuming the (A) accuracy of the representations,
warranties and agreements of the Company contained in Sections
1(y) and (z) of this Agreement and of the Initial Purchasers
in Section 2 of this Agreement and in the Purchase Letter, if
any, and (B) the due performance by the Company of the
agreements set forth in Section 4 of this Agreement and of the
Initial Purchasers in Section 3 this Agreement, neither the
registration of the Securities under the Securities Act, nor
the qualification of the Indenture under the Trust Indenture
Act with respect thereto is required for the offer, sale and
initial resale of the Debentures in the manner contemplated by
this Agreement and the Offering Memorandum, it being
understood that such counsel need express no opinion as to any
subsequent resale of any of the Securities; and
xi) the Company is not an "investment company,"
within the meaning of, is not registered or otherwise required
to be registered under, and is not "controlled" by a company
which is required to be registered under, the Investment
Company Act of 1940, as amended;
xii) the Indenture conforms as to form in all
material respects with the requirements of the Trust Indenture
Act and the Rules and Regulations applicable to an Indenture
qualified under the Trust Indenture Act.
In rendering such opinion, such counsel may rely: (A) as to matters involving
the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to the Initial Purchasers and
Kelley Drye & Warren LLP) of other counsel acceptable to the Initial Purchasers
and Kelley Drye & Warren LLP, familiar with the applicable laws; and (B) as to
matters of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company and the Subsidiaries, provided, that copies of any such statements or
certificates shall be delivered to the Initial Purchasers and Kelley Drye &
Warren LLP, if requested. In addition, such counsel shall state in such opinion
that they have conducted such investigation as they deem reasonable in support
of the opinions referred to above and in satisfaction of their due diligence
obligations to the Company . The opinion of such counsel for the Company shall
state that the opinion of any such other counsel is in form satisfactory to such
counsel and that the Initial Purchasers and they are justified in relying
thereon.
(d) Rubin Baum Levin Constant & Friedman shall state
in the opinion letter contemplated by Section 6(c) that such counsel has
participated in conferences with officers and other representatives of each of
the Company and the Subsidiaries and representatives of the independent public
accountants for the Company and the Subsidiaries and the Initial Purchasers, at
which conferences the contents of the Offering Memorandum and related matters
were discussed, and, although such counsel is not passing upon, and does not
assume any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum, on the basis of the foregoing,
no facts have come to the attention of such counsel which has lead them to
believe that the Offering Memorandum, as of its date contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except that such counsel need express no opinion or belief with respect to the
financial statements and related notes, the pro forma financial information and
other financial, statistical or accounting data included in the Offering
Memorandum or excluded therefrom);
(e) On or prior to the Closing Date Kelley Drye &
Warren LLP shall have been furnished such documents, certificates and opinions
as they may reasonably require for the purpose of enabling them to review or
pass upon the matters referred to in subsection (c) of this Section 6 or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions of the Company herein contained.
15
<PAGE> 16
(f) On and as of the Closing Date: (i) there shall
have been no adverse change involving a prospective change in the condition,
financial or otherwise, prospects, stockholders' equity or the business
activities of the Company and the Subsidiaries taken as a whole, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Offering Memorandum; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
or any of the Subsidiaries, from the latest date as of which the financial
condition of the Company and the Subsidiaries is set forth in the Offering
Memorandum which is materially adverse to the Company and the Subsidiaries taken
as a whole; (iii) neither the Company nor any of the Subsidiaries shall be in
default under any provision of any instrument relating to any material
outstanding indebtedness; (iv) no material amount of the assets of the Company
or any of the Subsidiaries shall have been pledged or mortgaged, except as set
forth in the Offering Memorandum; (v) no action, suit or proceeding, at law or
in equity, shall have been pending, threatened or, to the knowledge of the
Company, contemplated against the Company or any of the Subsidiaries, or
affecting any of their respective properties or businesses, before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may have a Material
Adverse Effect, except as set forth in the Offering Memorandum; and (vi) no stop
order shall have been issued under the Securities Act and no proceedings
therefor shall have been initiated or threatened or, to the knowledge of the
Company, contemplated by the Commission or any state regulatory authority.
(g) On the Closing Date the Initial Purchasers shall
have received a certificate of the Company signed by the principal executive
officer and by the chief financial or chief accounting officer of the Company,
in their capacities as such, dated the Closing Date, to the effect that each of
such persons has carefully examined the Offering Memorandum, this Agreement, the
Indenture and the Registration Rights Agreement, and that:
i) the representations and warranties of the Company
in this Agreement, the Indenture and the Registration Rights
Agreement are true and correct, as if made on and as of the
Closing Date, and the Company has complied with all agreements
and covenants and satisfied all conditions contained in this
Agreement, the Indenture and the Registration Rights Agreement
on its part to be performed or satisfied at or prior to the
Closing Date;
ii) no stop order suspending the qualification or
exemption from qualification of the Securities shall have been
issued and no proceedings for that purpose shall have been
commenced or, to the knowledge of the Company, be
contemplated;
iii) since the date of the most recent financial
statements included in the Offering Memorandum, there has been
no material adverse change in the condition, financial or
otherwise, business, prospects or results of operation of the
Company and the Subsidiaries, taken as a whole, except as set
forth in the Offering Memorandum;
iv) none of the Offering Memorandum or any amendment
or supplement thereto includes any untrue statement of a
material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading; and
v) subsequent to the respective dates as of which
information is given in the Offering Memorandum: (a) neither
the Company nor any of the Subsidiaries has incurred up to and
including the Closing Date other than in the ordinary course
of its business, any material liabilities or obligations,
direct or contingent, except as disclosed in the Offering
Memorandum; (b) neither the Company nor any of the
Subsidiaries has paid or declared any dividends or other
distributions on its capital stock; (c) neither the Company
nor any of the Subsidiaries has entered into any material
transactions not in the ordinary course of business, except as
disclosed in the Offering Memorandum; (d) there has not been
any change in the capital stock (other than pursuant to the
Company's Stock Option Plan, 1994 Outside Directors Stock
Option Plan or 1994 Stock Repurchase Plan or upon conversion
of the Existing Preferred or the exercise of warrants
outstanding on such respective dates) or the long term debt of
the Company or any of the Subsidiaries; (e) neither the
Company nor any of the Subsidiaries has sustained
16
<PAGE> 17
any material loss or damage to its property or assets, whether
or not insured; (f) there is no litigation which is pending,
threatened or, to the best of the Company's knowledge,
contemplated against the Company, any of the Subsidiaries or
any affiliated party of any of the foregoing which would have
a Material Adverse Effect and which is required to be set
forth in an amended or supplemented Offering Memorandum which
has not been set forth; and (g) there has occurred no event
which would be required to be set forth in an amended or
supplemented prospectus if the Offering Memorandum were a
prospectus included in a registration statement on Form S-3,
which has not been set forth in an amendment or supplement to
the Offering Memorandum.
(h) On or before the date hereof the Initial
Purchasers shall have received a letter, dated such date, addressed to the
Initial Purchasers in form and substance satisfactory in all respects to the
Initial Purchasers and Kelley Drye & Warren LLP, from Arthur Andersen LLP:
i) confirming that they are independent certified
public accountants with respect to the Company within the
meaning of the Securities Act and the Exchange Act and the
applicable Rules and Regulations;
ii) stating that it is their opinion that the
consolidated financial statements and supporting schedules of
the Company and the Subsidiaries included in the Offering
Memorandum or incorporated by reference therein comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act;
iii) stating that, on the basis of procedures which
included a reading of the latest available unaudited interim
consolidated financial statements of the Company and the
Subsidiaries (with an indication of the date of the latest
available unaudited interim consolidated financial statements
of the Company and the Subsidiaries), a reading of the latest
available minutes of the stockholders and board of directors
and the various committees of the board of directors of each
of the Company and the Subsidiaries, consultations with
officers and other employees of each of the Company and the
Subsidiaries responsible for financial and accounting matters
and other procedures specified by the American Institute of
Certified Public Accountants for a review of interim financial
information as described in SAS No. 71, Interim Financial
Information, nothing has come to their attention which would
lead them to believe that (A) at September 30, 1996, there has
been any change in the stockholder's equity or long-term debt
of the Company, or any decrease in the stockholders' equity or
net current assets or net assets of the Company, as compared
with amounts shown in the December 31, 1995 balance sheet
included in the Offering Memorandum, other than as set forth
in or contemplated by the Offering Memorandum, or, if there
was any change or decrease, setting forth the amount of such
change or decrease, (B) during the period from January 1, 1996
to September 30, 1996, there was any decrease in net revenues
or net earnings, or net earnings per common share of the
Company, in each case as compared with the corresponding
period beginning January 1, 1995, other than as set forth in
or contemplated by the Offering Memorandum, or, if there was
any such decrease, setting forth the amount of such decrease,
(C) at a specified date not more than five (5) days prior to
the later of the date of this Agreement or the Offering
Memorandum, there has been any change in the stockholders'
equity or long-term debt of the Company, or any decrease in
the stockholders' equity or net current assets or net assets
of the Company, as compared with amounts shown in the December
31, 1995 balance sheet included in the Offering Memorandum,
other than as set forth in or contemplated by the Offering
Memorandum, or, if there was any change or decrease, setting
forth the amount of such change or decrease, and (D) during
the period from January 1, 1996 to a specified date not more
than five (5) days prior to the later of the date of this
Agreement, there was any decrease in net revenues or net
earnings or net earnings per common share of the Company, in
each case as compared with the corresponding period beginning
January 1, 1995, other than as set forth in or contemplated by
the Offering Memorandum, or, if there was any such decrease,
setting forth the amount of such decrease;
17
<PAGE> 18
iv) stating that, (A) on the basis of a reading of
unaudited pro forma combined balance sheet as of December 31,
1995 and the unaudited pro forma combined statements of
operations for the year ended December 31, 1995 included in
the Offering Memorandum and consultations with officers and
other employees of the Company and the Subsidiaries who have
responsibility for financial and accounting matters about the
basis for such officers' and employees' determination of the
pro forma adjustments and whether such unaudited pro forma
combined financial statements comply as to form in all
material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X, nothing has come to their
attention which would lead them to believe that the unaudited
pro forma combined financial statements do not comply as to
form in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X and that the pro
forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements and
(B) they have proved the arithmetic accuracy of the
application of the pro forma adjustments to the historical
amounts in such unaudited pro forma combined financial
statements;
v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, statements and/or other financial information
pertaining to the Company and the Subsidiaries set forth in
the Offering Memorandum in each case to the extent that such
amounts, numbers, percentages, statements and information may
be derived from the general accounting records, including work
sheets, of the Company and/or the Subsidiaries and excluding
any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which
procedures need not constitute an examination in accordance
with generally accepted auditing standards) set forth in the
letter and found them to be in agreement; and
vi) statements as to such other matters incident to
the transaction contemplated hereby as the Initial Purchasers
may reasonably request.
(i) On the Closing Date the Initial Purchasers shall
have received from Arthur Andersen LLP a letter, dated as of the Closing Date to
the effect that they reaffirm that statements made in the letter furnished
pursuant to subsection (h) of this Section 6, except that the specified date
referred to shall be a date not more than five (5) days prior to the Closing
Date, to the further effect that they have carried out procedures as specified
in clause (iii) of subsection (h) of this Section 6 with respect to certain
amounts, percentages and financial information as specified by the Initial
Purchasers and deemed to be a part of the Offering Memorandum and have found
such amounts, percentages and financial information to be in agreement with the
records specified in such clause (iii).
(j) On the Closing Date there shall have been duly
tendered to the Initial Purchasers the appropriate principal amount of
Debentures.
(k) The Debentures shall have been approved by the
National Association of Securities Dealers, Inc. for trading in the PORTAL
market.
(l) Trading in the Common Stock shall not have been
suspended by the New York Stock Exchange at any time after November 30, 1996.
(m) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, the American Stock Exchange
or the over-the-counter market shall have been suspended or limited, or minimum
prices shall have been established on either of such exchanges or such market by
the Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction, or trading in securities of the Company on any
exchange or in the over-the-counter market shall have been suspended or (ii) any
moratorium on commercial banking activities shall have been declared by Federal
or New York State authorities or (iii) an outbreak or escalation of hostilities
or a declaration by the United States of a national emergency or war or such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States shall be such) as to make
18
<PAGE> 19
it, in the judgment of the Initial Purchasers, impracticable or inadvisable to
proceed with the offering or the delivery of the Debentures on the terms and in
the manner contemplated in the Offering Memorandum.
(n) The Company and the Initial Purchasers shall have
executed and delivered the Registration Rights Agreement on the date of this
Agreement.
(o) The Indenture shall have been duly executed and
delivered by the Company and the Trustee, and the Debentures shall have been
duly executed and delivered by the Company and authenticated by the Trustee.
(p) If any event shall have occurred that requires
the Company under Section 4(c) hereof to prepare an amendment or supplement to
the Offering Memorandum, such amendment or supplement shall have been prepared,
the Initial Purchasers shall have been given a reasonable opportunity to comment
thereon, and copies thereof delivered to the Initial Purchasers.
(q) There shall not have occurred any invalidation of
Rule 144A under the Securities Act by any court or any withdrawal or proposed
withdrawal of any rule or regulation under the Securities Act or the Exchange
Act by the Commission or any amendment or proposed amendment thereof by the
Commission which in the judgment of the Initial Purchasers would materially
impair the ability of the Initial Purchasers to purchase, hold or effect resales
of the Debentures as contemplated hereby.
(r) On or prior to the Closing Date the Initial
Purchasers shall have received a certificate signed by the secretary of the
Company, in his capacity as such, dated the Closing Date as to:
i) the absence of any contemplated proceeding for
the merger, consolidation, liquidation or dissolution of the
Company or any Subsidiary, as the case may be, or the sale of
all or substantially all of its assets;
ii) the due adoption and full force and effect of
the By-laws of the Company (with a copy of the By-laws
attached);
iii) resolutions adopted by the Board of Directors of
the Company and/or a committee thereof authorizing the
Offering and the consummation of the transactions contemplated
by this Agreement, the Indenture and the Registration Rights
Agreement (with copies of such resolutions attached); and
iv) the incumbency, authorization and signatures of
certain officers and directors of the company including all
those signing this Agreement, the Indenture, the Registration
Rights Agreement and/or any certificate delivered at Closing.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to the Initial Purchasers.
If any condition to the Initial Purchasers' obligations
hereunder to be fulfilled prior to or at the Closing Date is not so fulfilled,
the Initial Purchasers may terminate this Agreement or, if the Initial
Purchasers so elect, they may waive any such conditions which have not been
fulfilled or extend the time for their fulfillment.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless
the Initial Purchasers (for purposes of this Section 7, "Initial Purchasers"
shall include the officers, directors, partners, employees and agents, and each
person, if any, who controls either of the Initial Purchasers ("controlling
person") within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, from and against any and all losses, claims, damages,
expenses
19
<PAGE> 20
or liabilities, joint or several (and actions, proceedings, suits and litigation
in respect thereof), whatsoever, as the same are incurred, to which the Initial
Purchasers or any such controlling person may become subject, under the
Securities Act, the Exchange Act or any other statute or at common law or
otherwise insofar as such losses, claims, damages, expenses or liabilities arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Offering Memorandum or the Offering
Memorandum (as from time to time amended and supplemented) or arise out of or
are based upon the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein in the
light of the circumstances under which they were made, not misleading; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, expense or liability arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Memorandum or the Offering Memorandum
or any such amendment or supplement in reliance upon and in conformity with
Initial Purchasers Information and provided, further, that the Company shall not
be liable to the Initial Purchasers under the indemnity agreement in this
subsection (a) (i) with respect to any Preliminary Offering Memorandum to the
extent that any such loss, liability, claim, damage or expense of the Initial
Purchasers arises out of a sale of the Debentures by such Initial Purchaser to a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Offering Memorandum (or of the Offering
Memorandum as then amended or supplemented) if the Company has previously
furnished sufficient copies thereof to the Initial Purchasers a reasonable time
in advance and the loss, liability, claim, damage or expense of such Initial
Purchaser results from an untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in the Preliminary
Offering Memorandum which was corrected in the Offering Memorandum (or the
Offering Memorandum as amended or supplemented) or (ii) to the extent that any
such loss, claim, damage, expense or liability arises out of or is based upon
any action or failure to act by the Initial Purchasers, that is found in a final
judicial determination (or a settlement tantamount thereto) to constitute bad
faith, willful misconduct or gross negligence on the part of the Initial
Purchasers. The indemnity agreement in this subsection (a) shall be in addition
to any liability which the Company may have at common law or otherwise.
(b) The Initial Purchasers agree severally and not
jointly to indemnify and hold harmless the Company, each of its directors, each
of its officers, and each other person, if any, who controls the Company within
the meaning of the Securities Act, to the same extent as the foregoing indemnity
from the Company to the Initial Purchasers, but only with respect to statements
or omissions made in conformity with the Initial Purchasers Information in any
Preliminary Offering Memorandum or the Offering Memorandum or any amendment
thereof or supplement thereto.
(c) Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action, suit or
proceeding, such indemnified party shall, if a claim in respect thereof is to be
made against one or more indemnifying parties under this Section 7, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure to notify an indemnifying party shall not
relieve it from any liability which it may have under Sections 7(a) or (b)
unless and to the extent that it has been prejudiced in a material respect by
such failure or from the forfeiture of substantial rights and defenses). In case
any such action, suit or proceeding is brought against any indemnified party,
and it notifies an indemnifying party or parties of the commencement thereof,
the indemnifying party or parties will be entitled to participate therein, and
to the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party, which may be the same counsel as counsel to the indemnifying
party. Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case but the fees
and expenses of such counsel shall be at the expense of such indemnified party
or parties unless (i) the employment of such counsel shall have been authorized
in writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to take charge of the defense of such action within a reasonable time
after notice of commencement of the action or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel shall be borne by the indemnifying parties. 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
20
<PAGE> 21
actions in the same jurisdiction arising out of the same general allegations or
circumstances. Anything in this Section 7 to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its written consent.
(d) In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes claim for
indemnification pursuant to this Section 7, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Section 7 provide for indemnification in
such case, or (ii) contribution under the Securities Act may be required, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid as a result of such losses, claims, damages,
expenses or liabilities (or actions, suits, proceedings or litigation in respect
thereof) (A) in such proportion as is appropriate to reflect the relative
benefits received by each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand, from the offering of the Securities
or (B) if the allocation provided by clause (A) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each of the contributing parties, on the one hand, and the party to be
indemnified, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, 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, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Debentures (before deducting expenses) bear to the total
discounts received by the Initial Purchasers hereunder, in each case as set
forth in the table on the Cover Page of the Offering Memorandum. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Initial Purchasers, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses or liabilities (or actions, suits, proceedings
or litigation in respect thereof) referred to above in this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating, preparing or defending any
such action, claim, suit, proceeding or litigation. Notwithstanding the
provisions of this subsection (d), the Initial Purchasers shall not be required
to contribute any amount in excess of the discount applicable to the Debentures
purchased by the Initial Purchasers hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Securities Act, each
executive officer of the Company and each director of the Company shall have the
same rights to contribution as the Company, subject in each case to this
subsection (d). Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit, proceeding or litigation against
such party in respect to which a claim for contribution may be made against
another party or parties under this subsection (d), notify such party or parties
from whom contribution may be sought, but the omission so to notify such party
or parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have hereunder or otherwise than under
this subsection (d), or to the extent that such party or parties were not
adversely affected by such omission. The contribution agreement set forth above
shall be in addition to any liabilities which any indemnifying party may have at
common law or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto
shall be deemed to be representations, warranties and agreements at the Closing
Date, and the agreements of the Company and the provisions with respect to the
payment of expenses contained in Sections 5 and 9 and the respective indemnity
agreements contained in Section 7 hereof shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Initial Purchasers, the Company, any of the Subsidiaries or any controlling
person, and shall survive termination of this Agreement or the issuance and
delivery of the Debentures to the Initial Purchasers.
21
<PAGE> 22
9. TERMINATION.
(a) Subject to subsection (b) of this Section 9, the
Initial Purchasers shall have the right to terminate this Agreement (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Initial Purchasers' opinion will in the immediate future disrupt the financial
markets, or (ii) if any material adverse change in the financial markets shall
have occurred or (iii) if trading on the New York Stock Exchange, the American
Stock Exchange or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required on the over-the-counter
market by the NASD or by order of the Commission or any other government
authority having jurisdiction; or (iv) if the United States shall have become
involved in a war or major hostilities, or there shall have been an escalation
in an existing war or major hostilities, or a national emergency shall have been
declared in the United States; or (v) if a banking moratorium has been declared
by a state or federal authority; or (vi) if a moratorium in foreign exchange
trading has been declared; or (vii) if the Company or any of the Subsidiaries
shall have sustained a loss material or substantial to the Company or any of the
Subsidiaries by fire, flood, accident, hurricane, earthquake, theft, sabotage or
other calamity or malicious act which, whether or not such loss shall have been
insured, will, in the Initial Purchasers' opinion, make it inadvisable to
proceed with the delivery of the Securities; or (viii) if there shall have been
such a material adverse change in the general market, political or economic
conditions in the United States or elsewhere, as in the Initial Purchasers'
judgment would make it inadvisable to proceed with the offering, sale and/or
delivery of the Debentures.
(b) If this Agreement is terminated by the Initial
Purchasers in accordance with the provisions of Section 9(a) due to any events
or circumstances specifically applicable to the Company (as opposed to events or
circumstances having a general effect upon market, political or economic
conditions) or if this Agreement shall not be carried out within the time
specified herein, or any extension thereof granted to the Initial Purchasers, by
reason of any failure on the part of the Company to perform any undertaking or
satisfy any condition of this Agreement by it to be performed or satisfied
(including, without limitation, pursuant to Section 6, 9 or 10 hereof), then the
Company shall promptly reimburse and indemnify the Initial Purchasers for all of
their out-of-pocket expenses, including the fees and disbursements of counsel
for the Initial Purchasers (less amounts previously paid pursuant to Section 5).
If the amount previously paid pursuant to Section 5(a) above exceeds the Initial
Purchasers' out-of-pocket expenses, the Initial Purchasers shall refund such
excess to the Company. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 6, 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
10. DEFAULT BY THE COMPANY. If the Company shall fail at the
Closing Date to sell and deliver the number of Securities which it is obligated
to sell hereunder on such date, then this Agreement shall terminate without any
liability on the part of any non-defaulting party other than pursuant to
Sections 5, 7 and 9 hereof. No action taken pursuant to this Section 10 shall
relieve the Company from liability, if any, in respect of such default.
11. NOTICES. All notices and communications hereunder, except
as herein otherwise specifically provided, shall be given 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 it
at Forum Capital Markets L.P., 53 Forest Avenue, Old Greenwich, Connecticut
06870, Attention: Mr. C. Keith Hartley, with a copy to Kelley Drye & Warren LLP,
Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut 06901,
Attention: Jay R. Schifferli, Esq. Notices to the Company shall be directed to
the Company at 500 Throckmorton Street, Fort Worth, Texas 76102, Attention:
President, with a copy to Rubin Baum Levin Constant & Friedman, 30 Rockefeller
Plaza, New York, New York 10112, Attention: Walter M. Epstein, Esq.
12. PARTIES. This Agreement shall inure solely to the benefit
of and shall be binding upon the Initial Purchasers, the Company and the
controlling persons, directors and officers referred to in Section 7 hereof, and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein
22
<PAGE> 23
contained. No purchaser of Debentures from the Initial Purchasers shall be
deemed to be a successor by reason merely of such purchase.
13. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to choice of law or conflict of laws principles.
14. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
23
<PAGE> 24
15. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement of the parties hereto and supersedes all prior written or
oral agreements, understandings and negotiations with respect to the subject
matter hereof. This Agreement may not be amended except in a writing signed by
the Initial Purchasers and the Company.
If the foregoing correctly sets forth the understanding
between the Initial Purchasers and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
LOMAK PETROLEUM, INC.
By:
-------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written.
FORUM CAPITAL MARKETS L.P.
By:
-----------------------------------
Name: Michael F. McNulty
Title: Managing Director
MCDONALD & COMPANY SECURITIES, INC.
By:
-----------------------------------
Name: Michael F. McNulty
Title: Attorney-in-fact
MORGAN KEEGAN & COMPANY, INC.
By:
-----------------------------------
Name: Michael F. McNulty
Title: Attorney-in-fact
24
<PAGE> 25
SCHEDULE A
<TABLE>
<CAPTION>
Name Principal Amount of Debentures
---- ------------------------------
<S> <C>
Forum Capital Markets L.P. $36,800,000
McDonald & Company Securities, Inc. 9,100,000
Morgan Keegan & Company, Inc. 9,100,000
-----------
Total $55,000,000
</TABLE>
<PAGE> 26
ANNEX I
Subsidiaries
------------
<TABLE>
<CAPTION>
Jurisdictions in
Ownership which Qualified to
Name State of Formation Percentage Conduct Business
- ----------------------------------------- ------------------- ---------- ------------------
<S> <C> <C> <C>
Lomak Operating Company* Ohio 100% Alabama
Michigan
Mississippi
New York
Ohio
Pennsylvania
Utah
West Virginia
Lomak Resources Company* Delaware 100% Delaware
Ohio
Pennsylvania
Oklahoma
Lomak Production Company* Delaware 100% Alabama
Delaware
Louisiana
Michigan
Mississippi
Oklahoma
Texas
Utah
Buffalo Oilfield Services, Inc. Ohio 100% Ohio
Pennsylvania
Lomak Energy Services Company** Delaware 100% Delaware
Texas
Ohio
Oklahoma
Talon Trucking Company Oklahoma 100% Oklahoma
Lomak Resources, L.L.C.* Oklahoma 100% Oklahoma
Pennsylvania
Lomak Production I, L.P.* Texas 100% Texas
Lomak Energy Company Delaware 100% Delaware
Eastern Petroleum Company* Ohio 100% Ohio
Pennsylvania
LPI Operating Company Ohio 100% Ohio
LPI Acquisition Inc. Texas 100% Texas
Latoka Holdings Inc. Texas 100% Texas
</TABLE>
- --------
* Denotes the Significant Subsidiaries
** Formerly known as Border Resources Inc.
<PAGE> 27
ANNEX II
(1)
Plan Sponsor - Lomak Petroleum, Inc.
Name of Plan - Lomak Petroleum, Inc. 401(k) Plan
Type of Plan - Pension benefit plan
Employer identification number - 34-1312571
Plan year January 1 to December 31
(2)
Plan Sponsor - Lomak Petroleum, Inc.
Name of Plan - Profit Sharing 401(k) Plan
Type of Plan - Pension benefit plan
Employer identification number - 34-1312571
Plan year January 1 to December 31
(3)
Plan Sponsor - Lomak Petroleum, Inc.
Name of Plan - Welfare Plan
Type of Plan - Welfare benefit plan
Employer identification number - 34-1312571
Plan year July 1 to June 30
27
<PAGE> 1
Exhibit 4.1(a)
LOMAK PETROLEUM, INC.,
Company
and
KEYCORP SHAREHOLDER SERVICES, INC.,
Trustee
INDENTURE
Dated as of December 20, 1996
=============================
$55,000,000
6% Convertible Subordinated Debentures Due 2007
<PAGE> 2
INDENTURE dated as of December 20, 1996, between Lomak Petroleum, Inc.,
a Delaware corporation, and Keycorp Shareholder Services, Inc., as trustee.
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the registered holders of the Company's 6%
Convertible Subordinated Debentures due February 1, 2007 (the "Debentures"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
- ------------------------
"AFFILIATE" of a Person means (i) any other Person which, directly or
indirectly, is in control of, is controlled by or is under common control with
such specified Person. For the purpose of this definition, "control" of a Person
means the power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person, whether by ownership of voting
securities, by contract or otherwise, and "CONTROLLING" or "CONTROLLED" have
corresponding meanings.
"AGENT" means any Registrar, Paying Agent or Conversion Agent.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
duly authorized committee thereof, except that, for purposes of the definitions
of "CHANGE OF CONTROL," and "CONTINUING DIRECTORS," "BOARD OF DIRECTORS" means
the Board of Directors of the Company.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which banking institutions in the city of New York, New York are required or
authorized by law or other governmental action to be closed.
"CAPITAL STOCK" of any Person means the Common Stock or Preferred Stock
of such Person. Unless otherwise stated herein or the context otherwise
requires, "CAPITAL STOCK" means Capital Stock of the Company.
"CHANGE OF CONTROL" means the occurrence of any of the following events
after the date of this Indenture: (i) any Person (including, without limitation,
any "person" or "group" within the meaning of Section 13(d) or 14(d) of the
Exchange Act) becomes the direct or indirect beneficial owner of shares of
Capital Stock representing greater than 50% of the combined voting power of all
outstanding shares of Capital Stock entitled to vote in the election of
directors under ordinary circumstances; (ii) the Company consolidates with or
merges into any other Person and the outstanding Common Stock is changed or
exchanged as a result, (iii) sale, transfer or other disposition of a majority
of the assets of the Company or of the collective assets of the Company
<PAGE> 3
and the Subsidiaries, (iv) at any time Continuing Directors cease to constitute
a majority of the Board of Directors then in office; or (v) on any day the
Company makes any distribution of cash, Property or securities (other than
regular quarterly dividends, Common Stock, Preferred Stock which is
substantially equivalent to Common Stock or rights to acquire Common Stock or
Preferred Stock which is substantially equivalent to the Common Stock) to
holders of Common Stock, or the Company or any of its Subsidiaries purchases or
otherwise acquires Common Stock, and the sum of the Fair Market Value of such
cash, Property or securities distributed or Common Stock purchased on the date
the same is made, plus the Fair Market Value, when made, of all other cash,
Property or securities so distributed or Common Stock so purchased which have
occurred during the 12-month period ending on such date, in each case expressed
as a percentage of the aggregate Current Market Price of all the shares of
Common Stock outstanding at the close of business on the last Trading Day prior
to the date of such distribution or purchase, exceeds 50%. Notwithstanding the
foregoing, "Change of Control" under clause (ii) above does not include any
transaction or series of related transactions in which 85% or more of the
consideration received by the Holders (assuming conversion of the Debentures
immediately after such transaction) consists of common stock that is listed on a
national securities exchange or approved for quotation on the Nasdaq National
Market.
"COMMON STOCK" of any Person other than the Company means the common
equity (however designated), including, without limitation, common stock or
partnership or membership interests of, or participations or interests in such
Person (or equivalents thereof). "COMMON STOCK" of the Company means the Common
Stock, par value $.01 per share, of the Company, any successor class or classes
of common equity (however designated) of the Company into or for which such
Common Stock may hereafter be converted, exchanged or reclassified and any class
or classes of common equity (however designated) of the Company which may be
distributed or issued with respect to such Common Stock or successor class of
classes to holders thereof generally. Unless otherwise stated herein or the
context requires otherwise, "COMMON STOCK" means Common Stock of the Company.
"COMPANY" means Lomak Petroleum, Inc., a Delaware corporation, until a
successor replaces it in accordance with the applicable provisions of this
Indenture and, thereafter, "COMPANY" shall mean such successor.
"CONTINUING DIRECTORS" means any member of the Board of Directors who
(i) is a member of the Board of Directors on the date hereof or (ii) was
nominated for election or elected to the Board of Directors with the affirmative
vote of at least two-thirds of such members and members of the Board of
Directors who were previously so nominated or elected.
"CURRENT MARKET PRICE" means, when used with respect to any security as
of any date, the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, of such security in either case as reported for consolidated transactions
on the New York Stock Exchange or, if such security is not listed or admitted to
trading on the New York Stock Exchange, as reported for consolidated
transactions with respect to securities listed on the principal national
securities exchange on which such
2
<PAGE> 4
security is listed or admitted to trading or, if such security is not listed or
admitted to trading on any national securities exchange, as reported on the
Nasdaq National Market, or, if such security is not listed or admitted to
trading on the Nasdaq National Market, as reported on the Nasdaq SmallCap
Market, or if such security is not listed or admitted to trading on any national
securities exchange or the Nasdaq National Market or the Nasdaq SmallCap Market,
the average of the high bid and low asked prices of such security in the
over-the-counter market as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System or such other system then in use or,
if such security is not quoted by any such organization, the average of the
closing bid and asked prices of such security furnished by a New York Stock
Exchange member firm selected by the Company. If such security is not quoted by
any such organization and no such New York Stock Exchange member firm is able to
provide such prices, the Current Market Price of such security shall be the Fair
Market Value thereof.
"DEFAULT" means any event which is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DEPOSITARY" means, with respect to the Debentures issued in global
form, the Trustee and any successor entity thereto or such other Person as
appointed by the Company from time to time in accordance with the provisions of
this Indenture.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"FAIR MARKET VALUE" means, at any date as to any asset, Property or
right (including, without limitation, Capital Stock of any Person, evidences of
indebtedness or other securities, but excluding cash), the fair market value of
such item as determined in good faith by the Board of Directors, whose
determination shall be conclusive; provided, however, that such determination is
described in an Officers' Certificate filed with the Trustee and that, if there
is a Current Market Price for such item on such date, "FAIR MARKET VALUE" means
such Current Market Price (without giving effect to the last sentence of the
definition thereof).
"GAAP" means, as of any date, generally accepted accounting principles
in the United States and does not include any interpretations or regulations
that have been proposed but that have not become effective.
"HOLDER" means a Person in whose name a Debenture is registered on the
Register.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time.
"INTEREST PAYMENT DATE" means February 1 and August 1 of each year,
commencing February 1, 1997.
"JUNIOR SECURITIES" means (a) shares of any and all classes of Capital
Stock and (b) securities of the Company which are subordinated in right of
payment to Senior Indebtedness at
3
<PAGE> 5
the time of issuance or delivery of such securities to substantially the same
extent as, or to a greater extent than, the Debentures are so subordinated as
provided in Article 11.
"OFFICER" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary, any Assistant Secretary or any Vice President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers, one
of whom must be the Chairman of the Board, the President, the Treasurer or a
Vice-President of the Company, that meets the requirements of Sections 13.3 and
13.4; provided, however, that for purposes of Section 4.8, "Officers'
Certificate" means a certificate signed by the principal executive officer,
principal financial officer or principal accounting officer of the Company.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee and that meets the requirements of Sections
13.3 and 13.4. The counsel may be an employee of or counsel to the Company or to
the Trustee.
"PERSON" means any individual, corporation, partnership, association,
trust or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
"PREFERRED STOCK" of any Person means the class or classes of equity,
ownership or participation interests (however designated) in such Person,
including, without limitation, stock, share, partnership and membership
interests, which are preferred as to the payment of dividends or distributions
by, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of, such Person (or equivalents thereof) over
interests of any other class of interests of such Person. Unless otherwise
stated herein or the context otherwise requires, "PREFERRED STOCK" means
Preferred Stock of the Company.
"PRINCIPAL" of a debt security means the principal of the security plus
the premium, if any, on the security. "PRINCIPAL" shall include, with respect to
the Debentures, the redemption price, if any, payable thereon.
"PROPERTY" of any Person means any and all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included on the most recent consolidated balance sheet of such Person in
accordance with GAAP.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative for an issue of Senior Indebtedness.
"SEC" means the Securities and Exchange Commission.
4
<PAGE> 6
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SENIOR INDEBTEDNESS" means the principal of (and premium, if any) and
accrued interest on (a) indebtedness of the Company (including indebtedness of
other Persons guaranteed by the Company), other than the Debentures, outstanding
on the date of this Indenture which is (i) for money borrowed or (ii) evidenced
by a note, debenture or similar instrument given in connection with the
acquisition of any business, Property or assets, (b) obligations of the Company,
whether outstanding on the date of this Indenture or thereafter created,
incurred or assumed, as lessee under leases required to be capitalized on the
balance sheet of the lessee under GAAP and leases of Property or assets made as
part of any sale and leaseback transaction to which the Company is a party, (c)
amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligation and (d) indebtedness of the Company (including
indebtedness of other Persons guaranteed by the Company) created, incurred or
assumed after the date of this Indenture which is (i) for money borrowed or (ii)
evidenced by a note, debenture or similar instrument (other than indebtedness
which by its terms is convertible or exchangeable into Capital Stock) and
amendments, renewals, extensions, modifications and refundings thereof, if the
if the instrument creating or evidencing such indebtedness provides by its terms
that such indebtedness is senior in right of payment to the Debentures;
PROVIDED, HOWEVER, that indebtedness of the Company (including indebtedness of
other Persons guaranteed by the Company) created, incurred or assumed after the
date of this Indenture which is (i) for money borrowed or (ii) evidenced by a
note, debenture or similar instrument and which by its terms is convertible or
exchangeable into Capital Stock (including, without limitation, if issued
pursuant to the terms of the Company's $2.03 Convertible Exchangeable Preferred
Stock, the Company's 8.125% Convertible Subordinated Notes due 2005), and
amendments, renewals, extensions, modifications and refundings thereof, will
rank PARI PASSU with the Debentures, unless the instruments creating or
evidencing such indebtedness provide by their terms that such indebtedness is
junior in right of payment to the Debentures. "SENIOR INDEBTEDNESS" shall
include any compensation owed to hourly employees of the Company in the ordinary
course of business, but shall not include other indebtedness or amounts owed
(except to banks or other financial institutions) for compensation to non-hourly
employees, for goods or materials purchased or services utilized, in the
ordinary course of business of the Company or of any other Person from whom such
indebtedness or amount was assumed or for whom such indebtedness was guaranteed.
"SUBSIDIARY" of a Person on any date means any other Person, a majority
of whose Capital Stock with voting power, under ordinary circumstances,
entitling holders of such Capital Stock to elect the board of directors or other
governing body of such other Person, is at such date, directly or indirectly,
owned by such Person and/or a Subsidiary or Subsidiaries of such Person. Unless
otherwise stated herein or the context otherwise requires, "SUBSIDIARY" means a
Subsidiary of the Company.
"TIA" or "TRUST INDENTURE ACT OF 1939" means the Trust Indenture Act of
1939 (U.S. Code section section 77aaa-77bbbb) as amended and as in effect on the
date of this Indenture; provided,
5
<PAGE> 7
however, that if the TIA is amended after such date, "TIA" or "TRUST INDENTURE
ACT OF 1939" means, to the extent required by any such amendments, the TIA as so
amended.
"TRADING DAY" means (i) if the applicable security is listed or
admitted for trading on a national security exchange, a day on which such
exchange is open for business, (ii) if the applicable security is quoted on the
Nasdaq National Market, a day on which trades may be
made thereon or (iii) if the applicable security is not so listed, admitted for
trading or quoted, any Business Day.
"TRUSTEE" means the party identified in the title of this Indenture as
trustee until a successor replaces it in accordance with the applicable
provisions of this Indenture and, thereafter, "TRUSTEE" means such successor.
"TRUST OFFICER" means any officer or corporate trust officer or
assistant corporate trust officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"U.S. GOVERNMENT OBLIGATIONS" means non-callable (i) direct obligations
(or certificates representing an ownership interest in such obligations) of the
United States for which its full faith and credit are pledged and (ii)
obligations of a Person controlled or supervised by, and acting as an agency or
instrumentality of, the United States, the payment of which is unconditionally
guaranteed as a full faith and credit obligation of the United States.
SECTION 1.2 OTHER DEFINITIONS.
- ------------------------------
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
---- ------------------
<S> <C>
"Agent Members"........................................................................................2.1
"Aggregate Consideration".............................................................................10.4
"Bankruptcy Law".......................................................................................6.1
"Change of Control Date"...............................................................................4.6
"Change of Control Notice".............................................................................4.6
"Change of Control Offer"..............................................................................4.6
"Change of Control Payment"............................................................................4.6
"Change of Control Payment Date".......................................................................4.6
"Code"................................................................................................10.4
"Conversion Agent".....................................................................................2.3
"Conversion Price"....................................................................................10.1
"Custodian"............................................................................................6.1
"Definitive Securities"................................................................................2.1
"DTC".................................................................................................10.4
"Equity Securities"...................................................................................10.4
"Event of Default".....................................................................................6.1
</TABLE>
6
<PAGE> 8
<TABLE>
<S> <C>
"Expiration Time".....................................................................................10.4
"Global Security"......................................................................................2.1
"Notice of Default"....................................................................................6.1
"Paying Agent".........................................................................................2.3
"Purchase Agreement"...................................................................................2.1
"Purchased Shares"....................................................................................10.4
"Register".............................................................................................2.3
"Registrar"............................................................................................2.3
"Rule 144A"............................................................................................2.1
"Significant Subsidiary"...............................................................................6.1
"Trigger Event".......................................................................................10.4
</TABLE>
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
-------------------------------------------------------------
This Indenture is subject to the mandatory provisions of the TIA, which
are incorporated by reference in and made a part of this Indenture. Such
provisions shall apply to this Indenture at all times, notwithstanding that at
any time or from time to time this Indenture is not required to be qualified
under the TIA.
The following TIA terms used in this Indenture have the following
meanings:
"Commission" means the SEC;
"indenture securities" means the Debentures;
"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 Debentures means the Company and any
successor obligor on the Debentures.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
and not otherwise defined herein have the meanings so assigned to them.
SECTION 1.4 RULES OF CONSTRUCTION.
- ----------------------------------
Unless the context otherwise requires or unless otherwise stated
herein:
(1) a term has the meaning assigned to it;
7
<PAGE> 9
<PAGE> 10
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) references to sections of or rules under the
Securities Act, the Exchange Act or the TIA shall be
deemed to include substitute, replacement or
successor sections or rules;
(6) references to Sections or Articles mean Sections or
Articles of this Indenture; and
(7) solely for purposes of this Indenture and the
Debentures, a determination, approval or other action
by the Board of Directors shall not be deemed to have
been made, given or taken unless it is set forth in a
written resolution or resolutions (or comparable
written instrument) duly adopted thereby.
ARTICLE 2.
THE DEBENTURES
SECTION 2.1 FORM AND DATING.
- ----------------------------
The Debentures and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A which is hereby incorporated in and
expressly made a part of this Indenture. The Debentures may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable to the Company). Each Debenture
shall be dated the date of its authentication. The terms of the Debentures set
forth in Exhibit A are part of the terms of this Indenture. The Debentures are
general unsecured obligations of the Company limited to $55,000,000 in the
aggregate principal amount, subject to Section 2.7.
(a) GLOBAL SECURITIES. The Debentures are being offered and sold by the
Company pursuant to a Purchase Agreement, dated concurrently herewith, among the
Company, Forum Capital Markets L.P., McDonald & Company Securities, Inc. and
Morgan Keegan & Company, Inc. (the "Purchase Agreement").
Debentures offered and sold to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act "Rule 144A") in reliance on Rule
144A as provided in the Purchase
8
<PAGE> 11
Agreement, shall be issued initially in the form of one or more permanent global
securities in definitive, fully registered form without interest coupons and
with the Global Securities Legend and, unless removed in accordance with Section
2.6(g), the Restricted Securities Legend set forth in Exhibit A hereto (each, a
"Global Security"), which shall be deposited on behalf of the purchasers of the
Debentures represented thereby with the Trustee, at its New York office, as
custodian for the Depositary, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary or its nominee as hereinafter
provided.
(b) BOOK-ENTRY PROVISIONS. This Section 2.1(b) shall apply only to any
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (i) shall be registered in the name of the Depositary for such
Global Security or Global Securities or the nominee of the Depositary and (ii)
shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
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 by the Trustee as the custodian of the
Depositary or under such 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 impair, as between the Depositary and its Agent Members, the operation of
customary practices of the Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) CERTIFICATED SECURITIES. Except as provided in Section 2.10, owners
of beneficial interests in Global Securities will not be entitled to receive
physical delivery of certificated Debentures. Debentures offered and sold to
Persons who are not "qualified institutional buyers" shall be issued in
certificated Debentures in definitive, fully registered form without interest
coupons, with the Restricted Securities Legend and, if such Person is an
institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act), the Institutional Accredited Investor Legend, but
without the Schedule of Exchanges of Global Security for Definitive Securities,
set forth in Exhibit A hereto ("Definitive Securities"); provided, however, that
upon transfer of such Definitive Securities to a "qualified institutional
buyer," such Definitive Securities will, unless the Global Security has
previously been exchanged, be exchanged for an interest in a Global Security
pursuant to the provisions of Section 2.6.
9
<PAGE> 12
After a transfer of any Debentures during the period of the
effectiveness of a registration statement under the Securities Act with respect
to the Debentures, all requirements pertaining to legends on such Debentures
will cease to apply, the requirements requiring any such Debentures issued to
certain Holders be issued in global form will cease to apply, and a certificated
Debenture without legends will be available to the transferee of the Holder of
such Debentures upon exchange of such transferring Holder's certificated
Debentures or directions to transfer such Holder's interest in the Global
Security, as applicable.
SECTION 2.2 EXECUTION AND AUTHENTICATION.
- -----------------------------------------
Two Officers shall sign the Debentures for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Debentures
and may be in facsimile form.
Any Debenture bearing the manual or facsimile signature of an
individual shall be valid notwithstanding that such individual ceased to be an
Officer prior to authentication of the Debenture or ceased to hold the office of
Company ascribed to such individual on the Debenture.
A Debenture shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Debenture has been authenticated under this Indenture.
The Trustee shall authenticate Debentures for original issue up to the
aggregate principal amount stated in Paragraph 4 of the Debentures, upon
delivery of (i) a written order of the Company signed by an Officer directing
the Trustee to authenticate the Debentures and (ii) an Officers' Certificate
certifying that all conditions precedent to the issuance of the Debentures
contained herein have been complied with. The aggregate principal amount of
Debentures outstanding at any time may not exceed such amount, except as
provided in Section 2.7.
The Trustee may appoint an authenticating agent upon the approval and
at the expense of the Company to authenticate Debentures. Unless limited by the
terms of such appointment, an authenticating agent shall be authorized to
authenticate Debentures at such times and upon such conditions as the Trustee is
so authorized. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent.
SECTION 2.3 REGISTRAR, PAYING AGENT AND CONVERSION AGENT.
The Company shall maintain in the City of New York, New York an office
or agency where Debentures may be presented for registration of transfer or for
exchange (the "REGISTRAR"), an office or agency where Debentures may be
presented for payment (the "PAYING AGENT") and an office or agency where the
Debentures may be presented for conversion (the "CONVERSION AGENT"). The
Registrar shall keep a register of the Debentures (the "REGISTER") and of their
transfer and exchange. The Company may appoint one or more co-registrars and
one or more
10
<PAGE> 13
additional paying agents upon the reasonable approval of the other Registrar or
Registrars or Paying Agent or Paying Agents, as the case may be, and at the
expense of the Company. The term "REGISTRAR" includes any co-registrar or
co-registrars and the term "PAYING AGENT" includes any additional paying agent
or paying agents. The Company may change any Paying Agent, Conversion Agent or
Registrar without notice to any Holder. The Company shall promptly notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. The Company or any Subsidiary may act as Paying Agent (except for
purposes specified in Sections 2.8 and 4.1), Conversion Agent or Registrar. If
the Company fails to appoint or maintain itself or another Person as Registrar,
Conversion Agent or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the terms of the
TIA. The agreement shall implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee of the name and address of
any such Agent.
The Company initially appoints the office of the Trustee at 127 Public
Square, 15th Floor, Cleveland, Ohio, 44114-1306, and through it the offices of
its agent, Society Trust Company of New York, 5 Hanover Square, 10th Floor, New
York, New York 10004, as the offices or agencies for each of the purposes
designated in this Section 2.3 to act as Registrar, Paying Agent and Conversion
Agent with respect to the Debentures.
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
- ------------------------------------------------
The Company shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
Principal or repurchase price, if any, of or interest on the Debentures, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee and account for any money
disbursed by it. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and account for any money disbursed by it. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary of the Company) shall have no further liability for the money
delivered to the Trustee. If the Company or an Affiliate of the Company acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to the Company, the Trustee shall serve
as Paying Agent for the Debentures.
SECTION 2.5 HOLDER LISTS.
- -------------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the
11
<PAGE> 14
Company shall furnish to the Trustee at least ten Business Days before each
Interest Payment Date, and at such other times as the Trustee may request in
writing within five Business Days after such request, a list in such form and as
of such date as the Trustee may reasonably require, and upon which the Trustee
may conclusively rely, of the names and addresses of, and principal amount of
Debentures held by, the Holders.
12
<PAGE> 15
SECTION 2.6 TRANSFER AND EXCHANGE.
- ----------------------------------
(a) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES. When Definitive
Securities are presented to the 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 Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Securities presented or surrendered for register of transfer or
exchange:
i) shall be duly endorsed or accompanied by a written
instruction of transfer in form and substance
satisfactory to the Registrar duly executed by the
Holder thereof or by his or her 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:
(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for
registration in the name of such Holder,
without transfer, a certification from such
Holder to that effect (in the form set forth
on the reverse of the Debentures); or
(B) if such Transfer Restricted Security is being
transferred to the Company or a "qualified
institutional buyer" (as defined in Rule
144A) in accordance with Rule 144A, a
certification to that effect (in the form set
forth on the reverse of the Debentures); or
(C) if such Transfer Restricted Securities are
being transferred (w) pursuant to an
exemption from registration in accordance
with Rule 144 or Regulation S under the
Securities Act; or (x) to an institutional
"accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is acquiring the security
for its own account, or for the account of
such an institutional accredited investor, in
each case in a minimum principal amount of
Debentures of $250,000 for investment
purposes
13
<PAGE> 16
and not with a view to, or for offer or sale
in connection with, any distribution in
violation of the Securities Act; or (y) in
reliance on another exemption from the
registration requirements of the Securities
Act: (i) a certification to that effect (in
the form set forth on the reverse of the
Debentures), (ii) if the Company, Trustee or
Registrar so requests, an Opinion of Counsel
reasonably acceptable to the Company,
Trustee and Registrar to the effect that
such transfer is in compliance with the
Securities Act and (iii) in the case of
clause (x), a signed letter in substantially
the form of Exhibit B hereto.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A BENEFICIAL
INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form of
Exhibit B hereto, that such Definitive Security is
being transferred to a "qualified institutional
buyer" (as defined in Rule 144A) in accordance with
Rule 144A; and
ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions directing
the Trustee to make, or to direct the Debentures
Custodian to make, an endorsement on the Global
Security to reflect an increase in the aggregate
principal amount of the Debentures represented by the
Global Security,
then the Trustee shall cancel such Definitive Security in accordance with
Section 2.11 hereof and cause, or direct the Debentures Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Debentures Custodian, the aggregate principal amount of
Debentures represented by the Global Security to be increased accordingly. If no
Global Security is then outstanding, the Company shall issue and the Trustee
shall authenticate a new Global Security in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITY. The transfer and exchange
of a Global Security 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.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
DEFINITIVE SECURITY.
14
<PAGE> 17
i) Any Person having a beneficial interest in a Global
Security that is being exchanged or transferred
pursuant to an effective registration statement under
the Securities Act or pursuant to clause (A), (B) or
(C) below may
upon request, and if accompanied by the information
specified below, exchange such beneficial interest
for a Definitive Security of the same aggregate
principal amount. Upon receipt by the Trustee of
written instructions or such other form of
instructions as is customary for the Depositary, from
the Depositary, or its nominee on behalf of any
Person having a beneficial interest in a Global
Security, and upon receipt by the Trustee of a
written order or such other form of instructions,
and, in the case of a Transfer Restricted Security
only, the following additional information and
documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the
Depositary as being the beneficial owner, a
certification from such Person to that
effect (in the form set forth on the reverse
of the Debentures) or
(B) if such beneficial interest is being
transferred to a "qualified institutional
buyer" (as defined in Rule 144A) in
accordance with Rule 144A, a certification
to that effect from the transferor (in the
form set forth on the reverse of the
Debentures); or
(C) if such beneficial interest is being
transferred (w) pursuant to an exemption
from registration in accordance with Rule
144 or Regulation S under the Securities
Act; or (x) to an institutional "accredited
investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the
Securities Act that is acquiring the
security for its own account, or for the
account of such an institutional accredited
investor, in each case in a minimum
principal amount of Debentures of $250,000
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 (y) in reliance on
another exemption from the registration
requirements of the Securities Act: (i) a
certification to that effect from the
transferee or transferor (in the form set
forth on the reverse of the Debentures),
(ii) if the Company, Trustee or Registrar so
requests, an Opinion of Counsel from the
transferee or transferor reasonably
acceptable to the Company and to the
Registrar to the effect that such transfer
is in compliance with the Securities Act,
and (iii) in the case of clause (x), a
signed letter in substantially the form of
Exhibit B hereto,
then the Trustee or the Debentures Custodian, at the
direction of the Trustee, will cause, in accordance
with the standing instructions and
15
<PAGE> 18
procedures existing between the Depositary and the
Debentures Custodian, the aggregate principal amount
of the Global Security to be reduced on its books and
records and, following such reduction, the Company
will execute and, upon receipt of an authentication
order in the form of an Officers' Certificate in
accordance with Section 2.2 hereof, the Trustee will
authenticate and deliver to the transferee a
Definitive Security in the appropriate principal
amount.
ii) Definitive Debentures issued in exchange for a
beneficial interest in a Global Security pursuant to
this Section 2.6(d) shall be registered in such names
and in such authorized denominations as the
Depositary, pursuant to instructions from the Agent
Members or otherwise, shall instruct the Trustee. The
Trustee shall deliver such Definitive Securities to
the Persons in whose names such Debentures are so
registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITY.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in Section 2.6(f)), a Global Security may not be
transferred as a whole or in part 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 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, upon receipt of an Officers'
Certificate, in accordance with Section 2.2, requesting the authentication and
delivery of Definitive Securities, 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.
(g) LEGENDS.
i) Except as permitted by the following paragraph (ii),
each Debenture certificate evidencing the Global
Securities and the Definitive Securities (and all
Debentures issued in exchange therefor or in
substitution thereof) shall bear a legend in
substantially the following form:
16
<PAGE> 19
"THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS DEBENTURE NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION. EACH PURCHASER OF THIS DEBENTURE IS
HEREBY NOTIFIED THAT THE SELLER OF THIS DEBENTURE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
"THE HOLDER OF THIS DEBENTURE AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS DEBENTURE MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (III) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (IV) TO THE COMPANY OR (V)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH OF
CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER OF THIS DEBENTURE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE."
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 legends set forth above and rescind any
restriction on the transfer of such Transfer
Restricted Security; and
(B) any such Transfer Restricted Security
represented by a Global Security shall not
be subject to the provisions set forth in
(i) above
17
<PAGE> 20
(such sales or transfers being subject only to the
provisions of Section 2.6(e)); provided, however,
that with respect to any request for an exchange of a
Transfer Restricted Security that is represented by a
Global Security for a Definitive Security that does
not bear a legend, which request is made in reliance
upon Rule 144 under the Securities Act, the Holder
thereof shall certify in writing to the Registrar
that such request is being made pursuant to Rule 144
under the Securities Act (such certification to be in
the form set forth on the reverse of the Debentures).
(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 cancelled, such Global Security
shall be returned to or retained and cancelled by the Trustee in accordance with
Section 2.11. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for Definitive Securities, redeemed,
repurchased or cancelled, the principal amount of Debentures represented by such
Global Security shall be reduced accordingly and an endorsement shall be made on
such Global Security, by the Trustee or the Debentures Custodian, at the
direction of the Trustee, to reflect such reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF DEFINITIVE
SECURITIES.
i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall
authenticate Definitive Securities and a Global
Security at the Registrar's request.
(ii) No service charge shall be made for any registration
of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer
tax, assessments or similar governmental charge
payable in connection therewith.
(iii) The Registrar or co-registrar shall not be required
to register the transfer of or exchange of (a) any
Definitive Security selected for redemption in whole
or in part pursuant to Article 3, except the
unredeemed portion of any Definitive Security being
redeemed in part, or (b) any Debenture during the 15
day period preceding the mailing of a notice of
redemption or an offer to repurchase or redeem
Debentures or the 15 day period preceding an Interest
Payment Date.
(iv) Prior to the due presentation for registration of
transfer of any Debenture, the Company, the Trustee,
the Paying Agent, the Registrar or any co-registrar
may deem and treat the Person in whose name a
Debenture is registered as the absolute owner of such
Debenture for the purpose of receiving payment of
Principal of and interest on such Debenture and for
all other purposes whatsoever, whether or not such
Debenture is overdue,
18
<PAGE> 21
and none of the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) All Debentures issued upon any transfer or exchange
pursuant to the terms of this Indenture shall
evidence the same debt and shall be entitled to the
same benefits under this Indenture as the Debentures
surrendered upon such transfer or exchange.
(j) NO OBLIGATION OF THE TRUSTEE.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of a Global
Security, a member of, or a participant in the
Depositary or other Person with respect to the
accuracy of the records of the Depositary or its
nominee or of any participant or member thereof, with
respect to any ownership interest in the Debentures
or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than
the Depositary) of any notice (including any notice
of redemption) or the payment of any amount, under or
with respect to such Debentures. All notices and
communications to be given to the Holders and all
payments to be made to Holders under the Debentures
shall be given or made only to or upon the order of
the registered Holders (which shall be the Depositary
or its nominee in the case of a Global Security). The
rights of beneficial owners in any Global Security
shall be exercised only through the Depositary
subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully
protected in relying upon information furnished by
the Depositary with respect to its members,
participants and any beneficial owners.
(ii) 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 Debenture (including
any transfers between or among the Agent Members or
beneficial owners in any Global Security) other than
to require delivery of such certificates and other
documentation or evidence as are expressly required
by, and to do so if and when expressly required by,
the terms of this Indenture, and to examine the same
to determine substantial compliance as to form with
the express requirements hereof.
SECTION 2.7 REPLACEMENT DEBENTURES.
- -----------------------------------
Upon surrender of a mutilated Debenture at the office or agency of the
Registrar, the Company shall execute, and the Trustee shall authenticate and
deliver, a replacement Debenture
19
<PAGE> 22
in the name of the Holder of such mutilated Debenture, of like principal amount
and dated the date of such mutilated Debenture.
Upon surrender of written notice by a Holder or a Holder's attorney
duly authorized in writing at the office or agency of the Registrar that a
Debenture has been lost, destroyed or wrongfully taken, the Company shall
execute, and the Trustee shall authenticate and deliver, a replacement Debenture
in the name of such Holder, of like principal amount and dated the date of such
lost, destroyed or wrongfully taken Debenture; provided, however, that, unless
such requirement is waived by the Company, such notice shall be accompanied by
an indemnity bond that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Trustee, any Agent and any authenticating
agent from any loss which any of them may suffer by reason of such Debenture's
replacement.
The Company may charge the Holder for its expenses in replacing a
Debenture.
Every replacement Debenture shall be an additional obligation of the
Company and shall be entitled to all benefits of this Indenture equally and
proportionately with all other Debentures duly issued hereunder.
SECTION 2.8 OUTSTANDING DEBENTURES.
- -----------------------------------
The Debentures outstanding at any time are all the Debentures
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in the Global Security
effected by the Trustee hereunder and those described in this Section 2.8 as not
outstanding. Except as set forth in Section 2.9, a Debenture does not cease to
be outstanding because the Company or an Affiliate of the Company holds the
Debenture.
If a Debenture is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a bona fide purchaser.
If the principal amount of any Debenture is considered paid under
Section 4.1, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, any Subsidiary or an
Affiliate of any thereof) segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date money sufficient to redeem or
pay Debentures payable on that date, and is not prohibited from paying such
money to the Holders thereof pursuant to the terms of this Indenture, then on
and after such redemption date or maturity date such Debentures shall be deemed
to be no longer outstanding and shall cease to accrue interest.
20
<PAGE> 23
SECTION 2.9 TREASURY DEBENTURES.
- --------------------------------
In determining whether the Holders of the required aggregate principal
amount of Debentures have concurred in any direction, waiver or consent,
Debentures owned by the Company or by any Affiliate of the Company shall be
considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Debentures as to which a Trust Officer of the
Trustee knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY DEBENTURES.
- ----------------------------------
(a) Until definitive Debentures are ready for delivery, the Company may
prepare and execute and the Trustee shall authenticate and deliver temporary
Debentures upon a written order of the Company signed by an Officer and
delivered to a Trust Officer. Temporary Debentures shall be substantially in the
form of definitive Debentures but may have variations that the Company considers
appropriate for temporary Debentures. If temporary Debentures are issued, the
Company shall, without unreasonable delay, prepare definitive Debentures which
may be exchanged for temporary Debentures.
After the preparation of definitive Debentures, the temporary
Debentures shall be exchangeable for definitive Debentures upon surrender of the
temporary Debentures at the office or agency of the Registrar, without charge to
Holders. Upon surrender for cancellation of one or more temporary Debentures,
the Company shall execute and the Trustee upon a written order of the Company
signed by an Officer shall authenticate and deliver in exchange therefor a like
principal amount of definitive Debentures of authorized denominations. Until so
exchanged, the temporary Debentures shall in all respects be entitled to the
same benefits under this Indenture as definitive Debentures.
(b) A Global Security deposited with the Depositary or with the Trustee
as custodian for the Depositary pursuant to Section 2.1 shall be transferred to
the beneficial owners thereof only if such transfer complies with Section 2.6
and (i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Security or if at any time such
Depositary ceases to be a "clearing agency" registered under the Exchange Act
and a successor Depositary is not appointed by the Company within 90 days after
such notice or (ii) an Event of Default has occurred and is continuing.
(c) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.10 shall be surrendered by the Depositary to
the Trustee located in New York, to be so transferred, in whole or from time to
time in part, without charge, and the Trustee shall authenticate and deliver,
upon such transfer of each portion of such Global Security, an equal aggregate
principal amount of Debentures of authorized denominations. Any portion of a
Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the
21
<PAGE> 24
Depositary shall direct. Any Debenture delivered in exchange for an interest in
the Global Security shall, except as otherwise provided by Section 2.6(b) bear
the restricted securities legend set forth in Exhibit A hereto.
(d) Subject to the provisions of Section 2.10(c), the registered Holder
of a Global Security may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under this
Indenture or the Debentures.
(e) In the event of the occurrence of either of the events specified in
Section 2.10(b), the Company will promptly make available to the Trustee, at the
Company's expense, a reasonable supply of certificated Debentures in definitive,
fully registered form without interest coupons.
SECTION 2.11 CANCELLATION.
- --------------------------
The Company at any time may deliver Debentures to the Trustee for
cancellation. The Registrar, Conversion Agent and Paying Agent shall forward to
the Trustee any Debentures surrendered to them for registration of transfer,
exchange, conversion or payment. The Trustee shall promptly cancel and destroy
(in accordance with the standard document destruction policies of the Trustee)
all Debentures so delivered and certify to the Company their destruction unless
by a written order signed by an Officer, the Company shall direct that cancelled
Debentures be returned to it. The Company may not issue new Debentures to
replace Debentures that have matured or been converted or redeemed.
SECTION 2.12 DEFAULTED INTEREST.
- --------------------------------
If the Company defaults in a payment of interest on the Debentures, the
Company shall pay defaulted interest (plus interest on such defaulted interest
to the extent lawful) in any lawful manner. The Company shall pay the defaulted
interest to the Persons who are Holders on a subsequent special record date. The
Company shall fix or cause to be fixed (or upon the Company's failure to do so
the Trustee shall fix) any such special record date and payment date to the
reasonable satisfaction of the Trustee, which specified record date shall not be
less than 10 days prior to the payment date for such defaulted interest, and
shall promptly mail or cause to be mailed to each Holder a notice that states
the special record date, the payment date and the amount of defaulted interest
to be paid. The Company shall notify the Trustee in writing of the amount of
defaulted interest proposed to be paid 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 with respect to such defaulted
interest or shall make arrangements reasonably satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, which money when so
deposited shall be held in trust for the benefit of the Person entitled to such
defaulted interest as provided in this Section 2.12.
22
<PAGE> 25
SECTION 2.13 DEPOSIT OF MONEYS.
- -------------------------------
Prior to 10:00 a.m., New York City time, on each Interest Payment Date
and the maturity date, the Company shall deposit with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or maturity date, as the case may be, in a timely
manner which permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date or maturity date, as the case may be.
ARTICLE 3.
REDEMPTION
SECTION 3.1 NOTICES TO TRUSTEE.
- -------------------------------
If the Company elects to redeem Debentures pursuant to the optional
redemption provisions of Paragraph 5 of the Debentures, it shall notify the
Trustee in writing of the redemption date, the Section of the Indenture and/or
Paragraph of the Debenture pursuant to which such redemption shall be effected,
the principal amount of Debentures to be redeemed and the redemption price at
least 15 days prior to mailing any notice of redemption to the Holders (unless
the Trustee consents to a shorter period). Such notice shall be in the form of
an Officers' Certificate from the Company and will state that such redemption
will comply with the conditions herein.
If less than all the Debentures are to be redeemed, the record date
relating to such redemption shall be selected by the Company and given to the
Trustee, which record date shall be not less than 15 days after the date of
notice to the Trustee.
SECTION 3.2 SELECTION OF DEBENTURES TO BE REDEEMED.
- ----------------------------------------------------
If less than all the Debentures are to be redeemed, the Trustee shall
select the Debentures to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Debentures are
quoted or listed or admitted to trading or, if the Debentures are not so quoted
or listed or admitted to trading, on a pro rata basis, by lot or by such other
method that complies with applicable legal requirements and that the Trustee
considers fair and appropriate. The Trustee shall make the selection not more
than 60 days and not less than 30 days before the redemption date from
Debentures outstanding and not previously called for redemption. The Trustee may
select for redemption portions of the principal amount of Debentures that have
denominations larger than $1,000. The Trustee will make the selection from
Debentures outstanding and not previously called for redemption. Debentures and
portions thereof selected by the Trustee shall be in amounts of $1,000 or
integral multiples of $1,000. If less than all of the Debentures are to be
redeemed and a Debenture is converted in accordance with Article 10 after the
date on which notice of redemption is given pursuant to Section 3.3 and prior
to the time and
23
<PAGE> 26
date specified in Section 3.5, such Debenture shall, for purposes of determining
the amount of such Debentures which have been redeemed, be deemed to have been
redeemed. Provisions of this Indenture that apply to Debentures called for
redemption also apply to portions of Debentures called for redemption. The
Trustee shall notify the Company promptly of the Debentures or portions of
Debentures to be called for redemption.
SECTION 3.3 NOTICE OF REDEMPTION.
- ---------------------------------
At least 30 days but not more than 60 days before a redemption date,
the Company or, upon written notice to the Trustee by the Company, the Trustee
shall give a notice of redemption to the Holders.
The notice shall identify the Debentures to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) the Conversion Price;
(d) the name and address of the Paying Agent and Conversion
Agent;
(e) that Debentures called for redemption may be converted at
any time before the close of business on the Business Day immediately
preceding the redemption date in accordance with Article 10;
(f) that Holders who want to convert Debentures must satisfy
the requirements in Paragraph 8 of the Debentures;
(g) that Debentures called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(h) the CUSIP number of the Debentures;
(i) if fewer than all of the outstanding Debentures are to be
redeemed, the certificate numbers and principal amounts of the
particular Debentures to be redeemed;
(j) if any Debenture is being redeemed in part, that, after
the redemption date, upon surrender of such Debenture, a new Debenture
or Debentures in principal amount equal to the unredeemed portion will
be issued; and
(k) that unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such redemption
payment pursuant to the
24
<PAGE> 27
terms of this Indenture, interest on Debentures called for redemption
ceases to accrue on and after the redemption date.
If the Trustee gives such notice of redemption, it shall do so in the
Company's name and at the Company's expense and the Company shall provide the
Trustee with the information required to give such notice of redemption.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION; DEFINITION OF REDEMPTION PRICE.
- --------------------------------------------------------------------------
Notice of redemption given in accordance with Sections 3.3 and 13.2 to
each Holder shall be deemed to have been duly given, whether or not any
particular Holder receives such notice. Once notice of redemption is so mailed,
Debentures called for redemption become due and payable on the redemption date
at the redemption price set forth in the Debentures. A notice of redemption may
not be conditional. Upon surrender to the Trustee or the Paying Agent, such
Debentures called for redemption shall be paid at the redemption price.
References in this Indenture to the "redemption price" mean the redemption price
set forth in the Debentures plus the interest payable as provided in the
Debentures on Debentures called for redemption.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.
- ----------------------------------------
On or before 10:00 a.m., New York City time, on any redemption date,
the Company shall deposit with the Trustee or with the Paying Agent immediately
available funds sufficient to pay the redemption price of all Debentures to be
redeemed on that date other than Debentures or portions of Debentures called for
redemption which prior thereto have been delivered by the Company to the Trustee
for cancellation or have been converted; provided, however, that any such
deposit shall be a payment with respect to the Debentures and shall be subject
to the provisions of Article 11 and shall be permitted only if payment would be
permitted under Article 11. The Trustee or the Paying Agent shall return to the
Company any money not required for the purpose of paying such redemption price.
SECTION 3.6 DEBENTURES REDEEMED IN PART.
- ----------------------------------------
Upon surrender of a Debenture that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the expense of
the Company a new Debenture equal in principal amount to the unredeemed portion
of the Debenture surrendered.
25
<PAGE> 28
ARTICLE 4.
COVENANTS
SECTION 4.1 PAYMENT OF DEBENTURES.
- ----------------------------------
The Company shall pay the Principal and repurchase price, if any, of
and interest on the Debentures on the dates and in the manner provided in the
Debentures and this Indenture. Principal and interest shall be considered paid
on the date due if the Paying Agent (other than the Company or a Subsidiary) on
that date holds money in accordance with this Indenture designated for and
sufficient to pay in cash all Principal and interest then due and the Paying
Agent is not prohibited from paying such money to Holders on that date pursuant
to the terms of this Indenture.
To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on (i)
overdue Principal and repurchase price, if any, of the Debentures at the rate
borne by the Debentures and (ii) overdue installments of interest at the same
rate.
SECTION 4.2 STAY, EXTENSION AND USURY LAWS.
- -------------------------------------------
The Company covenants (to the extent that it 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 wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, 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 has been
enacted.
SECTION 4.3 CONTINUED EXISTENCE.
- --------------------------------
Subject to Article 5, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence as
a corporation and the corporate existence of the Subsidiaries and will refrain
or cause the Subsidiaries to refrain from taking any action that would cause its
corporate existence or the corporate existence of any of the Subsidiaries to
cease, including without limitation any action that would result in the
liquidation, winding up or dissolution of it or any of the Subsidiaries;
provided, however, that the Company shall not be required to preserve the
existence of any Subsidiary if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and
26
<PAGE> 29
the Subsidiaries and that the loss thereof to the Company taken as a whole is
not disadvantageous in any material respect to the Holders.
SECTION 4.4 REPORTS.
- --------------------
(a) The Company shall file with the Trustee copies of all reports and
other information and documents that the Company is required to file with the
SEC pursuant to the Exchange Act. Each such report or other information or
document shall be filed with the Trustee within 15 days after filing of such
report or other information or document with the SEC. The Company will mail or
cause to be mailed to all Holders copies of all of (a) its annual reports to
stockholders and (b) quarterly reports to stockholders which are mailed to its
institutional stockholders.
(b) If the Company is at any time no longer subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will
prepare (i) for the first three quarters of each fiscal year of the Company,
quarterly financial statements substantially equivalent to the financial
statements required to be included in a report on Form 10-Q under the Exchange
Act, and (ii) annually, complete audited consolidated financial statements,
including, but not limited to, a balance sheet, a statement of operations, a
statement of stockholders' equity and all appropriate notes. All such financial
statements will be prepared in accordance with GAAP, except for changes with
which the Company's independent accountants concur and except that quarterly
financial statements may be subject to year-end adjustments. The Company will
file or cause to be filed with the Trustee and will mail or cause to be mailed
to the Holders a copy of such financial statements within 50 days after the end
of each of the first three quarters of each fiscal year of the Company and
within 95 days after the close of each fiscal year of the Company, respectively.
Notwithstanding the foregoing, if the Company is no longer subject to such
reporting requirements by reason of the acquisition of Capital Stock by, or
merger or consolidation of the Company with, a Person which is subject to such
reporting requirements or a Subsidiary of such a Person and such Person has
unconditionally and irrevocably guaranteed payment in full when due of all
amounts payable with respect to the Debentures, then the Company need not
prepare, file or mail the financial statements described in this Section 4.4(b);
provided, however, that such Person complies with Section 4.4(a) as if
references therein to the Company were references to such Person.
SECTION 4.5 TAXES.
- ------------------
The Company shall, and shall cause each of the Subsidiaries to, pay or
discharge prior to delinquency all taxes, assessments and governmental levies,
except as contested in good faith and by appropriate proceedings.
SECTION 4.6 CHANGE OF CONTROL.
- ------------------------------
27
<PAGE> 30
(a) In the event of a Change of Control, the Company shall give or
cause to be given written notice in the form of an Officers' Certificate (the
"CHANGE OF CONTROL NOTICE") to all Holders, the Trustee and the Paying Agent of
such event and shall make an offer to purchase (as the same may be extended in
accordance with applicable law, the "CHANGE OF CONTROL OFFER")
all then outstanding Debentures at a purchase price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to the Change
of Control Payment Date. The Change of Control Notice shall be given in
accordance with Section 13.2 and the Change of Control Offer shall be made not
more than 30 days following the date of the Change of Control (the "CHANGE OF
CONTROL DATE"), unless the Company has previously given a notice of optional
redemption by the Company of all of the Debentures in accordance with this
Indenture. The Change of Control Notice shall set forth:
(i) that a Change of Control has occurred and, unless the
Debentures are subject to a notice of optional redemption
described above, that the Company is offering to repurchase
all of the outstanding Debentures;
(ii) a brief description of such Change of Control and, to the
extent readily available to the Company, information with
respect to pro forma consolidated income, cash flow and
capitalization of the Company after giving effect to such
Change of Control and such other financial information
relating to the Company with respect to such Change of Control
as the Company may, in its sole discretion, deem relevant to a
decision whether to convert or hold Debentures or tender
Debentures in connection with such Change of Control Offer;
(iii) the repurchase price (the "CHANGE OF CONTROL PAYMENT");
(iv) the expiration date of the Change of Control Offer, which
shall be no earlier than 30 days nor later than 60 days from
the date the Change of Control Notice is mailed;
(v) the date such purchase shall be effected, which shall be
no later than 30 days after the expiration date of the Change
of Control Offer (the "CHANGE OF CONTROL PAYMENT DATE");
(vi) a statement that any Debentures not accepted for payment
pursuant to the Change of Control Offer shall continue to
accrue interest;
(vii) that unless the Company defaults in the payment of the
Change of Control Payment, all Debentures or portions thereof
accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest on and after the Change of
Control Payment Date;
(viii) the Conversion Price;
28
<PAGE> 31
(ix) the name and address of the Paying Agent and the
Conversion Agent;
(x) that Debentures (duly endorsed for transfer to the
Company), together with the form of "Option of Holder to Elect
Repurchase" thereon completed and signed, must be surrendered
to the Paying Agent prior to the expiration of the Change of
Control Offer to collect the Change of Control Payment; and
(xi) any other information required by applicable law to be
included therein and any other procedures that a Holder must
follow in order to have Debentures repurchased.
(b) The Change of Control Offer shall remain open until the close of
business on the expiration date of the Change of Control Offer. Each Holder
shall have the right to withdraw his tender in accordance with applicable rules
promulgated by the SEC under the Exchange Act.
(c) In the event that the Company is required to make a Change of
Control Offer, the Company will comply with any applicable securities laws and
regulations, including, to the extent applicable, Section 14(e) of, and Rule
14e-1 and any other tender offer rules under, the Exchange Act which may then be
applicable in connection with any offer by the Company to purchase Debentures at
the option of the Holders.
(d) On the Change of Control Payment Date, the Company shall, to the
extent lawful:
(i) accept for payment Debentures or portions thereof tendered
pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent in immediately available
funds an amount equal to the Change of Control Payment with
respect to all Debentures or portions thereof so accepted; and
(iii) deliver or cause to be delivered to the Trustee the
Debentures so accepted together with an Officers' Certificate
stating the Debentures or portions thereof tendered to the
Company.
(e) The Paying Agent shall promptly (but in any case not later than
five Business Days after the Change of Control Payment Date) mail to each Holder
of Debentures so accepted payment in an amount equal to the Change of Control
Payment for such Debentures, and the Trustee shall promptly authenticate and
mail to each Holder a new Debenture equal in principal amount to any unpurchased
portion of the Debentures surrendered by such Holder, if any; provided, that
each such new Debenture shall be in principal amount of $1,000 or an integral
multiple thereof. The Company shall publicly announce the results of all
repurchases pursuant to this Section 4.6 on or as soon as practicable after the
Change of Control Payment Date.
29
<PAGE> 32
SECTION 4.7 LIMITATION ON DIVIDEND RESTRICTIONS AFFECTING SUBSIDIARIES.
- ----------------------------------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries to,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction of any kind on the ability of any Subsidiary to (a) pay to the
Company dividends or make to the Company any other distribution on its Capital
Stock, (b) pay any debt owed to the Company or any of the Subsidiaries, (c) make
loans or advances to the Company or any of the Subsidiaries or (d) transfer any
of its property or assets to the Company or any of the Subsidiaries, other than
such encumbrances or restrictions existing or created under or by reason of (i)
applicable law, (ii) this Indenture, (iii) covenants or restrictions contained
in any instrument governing debt of the Company or any of the Subsidiaries
existing on the date of this Indenture, or covenants or restrictions in any loan
documents relating to Senior Indebtedness incurred after the date hereof,
provided that in the absence of a default under any such loan documents, no such
restriction shall prevent a Subsidiary from paying dividends or otherwise
distributing funds to the Company in amounts sufficient to enable the Company to
make interest and principal payments on the Debentures as and when due,
(including pursuant to any Change of Control Offer), (iv) customary provisions
restricting subletting, assignment and transfer of any lease governing a
leasehold interest of the Company or any of the Subsidiaries or in any license
or other agreement entered into in the ordinary course of business, (v) any
agreement governing debt of a Person acquired by the Company or any of the
Subsidiaries in existence at the time of such acquisition (but not created in
connection with or in contemplation thereof), which encumbrances or restrictions
are not applicable to any Person, or the property or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired, or (vi)
any restriction with respect to a Subsidiary imposed pursuant to an agreement
entered into in accordance with the terms of this Indenture for the sale or
disposition of Capital Stock or property or assets of such Subsidiary, pending
the closing of such sale or disposition.
SECTION 4.8 COMPLIANCE CERTIFICATE.
- -----------------------------------
The Company shall deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company, an Officers' Certificate stating that a
review of the activities of the Company and the Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing Officer
with a view to determining whether the Company has kept, observed, performed and
fulfilled its obligations under this Indenture and further stating, as to such
Officer, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant and condition
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Event of Default of which he or she may have knowledge and what action the
Company is taking or proposes to take with respect thereto), and that, to the
best of his or her knowledge, no event has occurred and remains in existence by
reason of which payments on account of the Principal of or interest on the
Debentures are prohibited.
30
<PAGE> 33
SECTION 4.9 FURTHER ASSURANCE TO THE TRUSTEE.
- ---------------------------------------------
The Company shall, upon reasonable request of the Trustee, execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the provisions of this
Indenture.
ARTICLE 5.
SUCCESSORS
SECTION 5.1 WHEN COMPANY MAY MERGE OR SELL ASSETS.
- --------------------------------------------------
The Company shall not consolidate with or merge into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to, any
Person, without the consent of Holders of the majority in aggregate principal
amount of Debentures then outstanding, unless:
(a) the Company is the continuing corporation or the Person formed by
or surviving any such consolidation or merger (if other than the Company), or to
which such sale, lease, conveyance or other disposition of assets shall have
been made, is organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such Person (if other than the
Company) expressly assumes by supplemental indenture executed and delivered to
the Trustee and in a form reasonably satisfactory to the Trustee, all the
obligations of the Company under the Debentures and this Indenture, including,
without limitation, conversion rights in accordance with Article 10;
(b) immediately before and immediately after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time, or both, would become an Event of Default, shall have occurred and be
continuing;
(c) immediately after giving effect to such transaction, the Debentures
and this Indenture (as supplemented by such supplemental indenture) will be a
valid and enforceable obligation of the Company or such successor; and
(d) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such proposed
transaction and such supplemental indenture comply with the applicable
provisions of this Indenture and that all conditions precedent herein provided
for relating to such transaction have been satisfied.
31
<PAGE> 34
SECTION 5.2 SUCCESSOR SUBSTITUTED.
- ----------------------------------
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.1, the Person formed by such consolidation or into or
with which the Company is merged or to which such sale, lease, conveyance or
other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person has been named as the Company herein;
provided, however that in the case of a sale, lease, conveyance or other
disposition the Company shall not be released from the obligation to pay the
Principal of and interest on the Debentures.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT.
- ------------------------------
The following shall constitute an "EVENT OF DEFAULT":
(a) failure to pay any Principal or repurchase price, in any, of
any Debenture when due and payable, whether at maturity, upon redemption, upon a
Change of Control Offer or otherwise, whether or not such payment is prohibited
by the subordination provisions of this Indenture;
(b) failure to pay any interest on any Debenture when due and
payable, which failure continues for 30 days, whether or not such payment is
prohibited by the subordination provisions of this Indenture;
(c) failure to perform the other covenants of the Company in this
Indenture, which failure continues for 60 days after written notice as provided
in the last paragraph of this Section 6.1;
(d) a default occurs (after giving effect to any applicable grace
periods or any extension of any maturity date) in the payment when due of
Principal of, or an acceleration of, any indebtedness for money borrowed by the
Company or any of its Subsidiaries in excess of $5 million, individually or in
the aggregate, if such indebtedness is not discharged, or such acceleration is
not annulled, within 10 days after written notice as provided in the last
paragraph of this Section 6.1;
(e) the Company or any of its Significant Subsidiaries, pursuant
to or within the meaning of any Bankruptcy Law:
32
<PAGE> 35
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property, and such Custodian is not
discharged within 30 days,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) admits in writing that it is generally unable to pay its
debts as the same become due;
(f) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief in an involuntary case against the Company
or any Significant Subsidiary,
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of the property of the
Company or any Significant Subsidiary, or
(iii) orders the liquidation of the Company or any Significant
Subsidiary,
and, in each case, the order or decree remains unstayed and in effect for 60
consecutive days.
The term "BANKRUPTCY LAW" means Title 11 of the U.S. Code or any
similar federal, foreign or state law for the relief of debtors. The term
"CUSTODIAN" means any receiver, trustee, assignee, liquidator, examiner or
similar official under any Bankruptcy Law. The term "SIGNIFICANT SUBSIDIARY" has
the same meaning as significant subsidiary has under Regulation S-X under the
Securities Act as in effect on the date hereof.
A Default under clause (c) of this Section 6.1 (other than a Default
under Section 5.1, which Default shall be an Event of Default with the notice
but without the passage of time specified in clause (c) of this Section 6.1) or
clause (d) of this Section 6.1 shall not be an Event of Default until (i) the
Trustee shall have notified the Company, or the Holders of at least 25% in
aggregate principal amount of the Debentures then outstanding shall have
notified the Company and the Trustee, of the Default and (ii) the Company shall
have failed to cure the Default under such clause (c) within 60 days after
receipt of the notice or under such clause (d) within 10 days after receipt of
the notice, respectively. Any such notice must specify the Default, demand that
it be remedied and state that the notice is a "NOTICE OF DEFAULT."
33
<PAGE> 36
SECTION 6.2 ACCELERATION.
- -------------------------
If an Event of Default (other than an Event of Default specified in
clauses (e) and (f) of Section 6.1) occurs and is continuing, the Trustee (by
notice to the Company), or the Holders
of at least 25% in aggregate principal amount of the Debentures then outstanding
(by notice to the Company and the Trustee), may declare the unpaid Principal of
and accrued interest on all the Debentures then outstanding to be due and
payable. Upon any such declaration, such Principal and accrued interest shall be
due and payable immediately. If an Event of Default specified in clause (e) or
(f) of Section 6.1 occurs, such an amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of a majority in aggregate principal
amount of the Debentures then outstanding by written notice to the Trustee may
rescind an acceleration and its consequences if (a) the Company has paid or
deposited with the Trustee a sum sufficient to pay (i) all overdue interest on
all Debentures then outstanding and (ii) the Principal or repurchase price, if
any, of the Debentures then outstanding which have become due otherwise than by
such declaration of acceleration and accrued interest thereon at a rate borne by
the Debentures and (b) the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of Principal or interest that has become due solely because of the
acceleration. No such recision shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 6.3 OTHER REMEDIES.
- ---------------------------
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of Principal or repurchase price, if
any, of or interest on the Debentures or to enforce the performance of any
provision of the Debentures or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Debentures or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
SECTION 6.4 WAIVER OF EXISTING AND PAST DEFAULTS.
- -------------------------------------------------
The Holders of a majority in aggregate principal amount of the
Debentures then outstanding held by Persons who are not Affiliates of the
Company by written notice to the Trustee may waive an existing Default or Event
of Default and its consequences, except (i) a continuing Default or Event of
Default in the payment of the Principal of or the interest on any Debenture or
(ii) a Default or Event of Default with respect to a provision that under
Section 9.2 cannot be amended without the consent of each Holder affected. Upon
any such waiver, such
34
<PAGE> 37
Default shall cease to exist and any Event of Default arising therefrom shall be
deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
35
<PAGE> 38
SECTION 6.5 CONTROL BY MAJORITY.
- --------------------------------
Notwithstanding anything contained in Section 6.3 to the contrary, the
Holders of a majority in aggregate principal amount of the Debentures then
outstanding may 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 it; PROVIDED, HOWEVER, that the Trustee may refuse to follow any
direction that conflicts with applicable law or this Indenture or that the
Trustee determines is unduly prejudicial to the rights of other Holders or would
involve the Trustee in personal liability; PROVIDED FURTHER, however, that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Prior to taking any action or following any direction pursuant to this
Article 6, the Trustee shall be entitled to request indemnification satisfactory
to it in its sole discretion against any loss or expense caused by taking such
action or following such direction. If the Trustee makes such request, it shall
be entitled to delay taking such action or following such direction until it has
received such indemnification.
SECTION 6.6 LIMITATION ON SUITS.
- --------------------------------
A Holder may pursue a remedy with respect to this Indenture or the
Debentures only if:
(a) the Holder gives to the Trustee notice of a continuing
Event of Default;
(b) the Holders of at least 25% in aggregate principal amount
of the Debentures then outstanding make a written request to the
Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in
aggregate principal amount of the Debentures then outstanding do not
give the Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
- -------------------------------------------------
36
<PAGE> 39
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Debenture to receive payment of Principal or repurchase price, if
any, of and interest on such Debenture, on or after the respective due dates
expressed in the Debenture, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Debenture to bring suit for the enforcement of the right to convert
such Debenture shall not be impaired or affected without the consent of such
Holder.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.
- ---------------------------------------
If an Event of Default specified in Section 6.1(a) or 6.1(b) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of Principal or
repurchase price, if any, of and interest accrued on the Debentures and interest
on overdue Principal or repurchase price, if any, of and accrued interest on the
Debentures and for such further amount as shall be sufficient to cover the costs
and, to the extent lawful, expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel.
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
- ---------------------------------------------
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
the Holders allowed in any judicial proceedings relative to the Company, its
creditors or its property. Except as provided in this Indenture, nothing
contained herein 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 Debentures
or the rights of any Holder or to authorize the Trustee to vote with respect to
the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
- ------------------------
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 6.8 or 7.7;
Second: to holders of Senior Indebtedness to the extent required by
Article 11;
Third: to Holders for amounts due and unpaid on the Debentures for
Principal and interest, ratably, without preference or
priority of any kind, according to
37
<PAGE> 40
the amounts due and payable on the Debentures for Principal
and interest, respectively; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders and, if it does so, will give prompt prior written notice thereof to the
Registrar.
At least 15 days before any such record date, the Trustee shall give or
cause to be given to each Holder a notice that states such record date, such
payment date and the amount to be paid.
SECTION 6.11 UNDERTAKING FOR COSTS.
- -----------------------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as 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, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by Holders of more than 10% in aggregate
principal amount of the then outstanding Debentures or any suit for the
enforcement of the right to convert any Debenture in accordance with Article 10.
ARTICLE 7.
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
- ------------------------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that are
specifically set forth in this Indenture or the TIA and no others; and
38
<PAGE> 41
(ii) in the absence of gross negligence, willful misconduct or
bad faith on its part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture, but the Trustee
need not verify the contents thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this Section 7.1(c) does not limit the effect of Section
7.1(b);
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to the provisions of the TIA and Sections 7.1(a), 7.1(b),
7.1(c) and 7.1(e).
(e) The Trustee may refuse to perform any duty or exercise any right or
power hereunder unless it receives indemnity satisfactory to it against any
loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received
by it hereunder, except as the Trustee may agree in writing with the Company.
Money held by the Trustee in trust hereunder need not be segregated from other
funds, except to the extent required by law.
SECTION 7.2 RIGHTS OF TRUSTEE.
- ------------------------------
(a) The Trustee may conclusively rely on any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters to the extent reasonably deemed necessary by it.
(b) Before the Trustee acts or refrains from acting pursuant to the
terms of this Indenture or otherwise, it may require an Officers' Certificate or
an Opinion of Counsel, or both. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
39
<PAGE> 42
(c) The Trustee may act through agents and attorneys and shall not be
responsible for the willful misconduct or gross negligence of any agents and
attorneys appointed with due care.
(d) Subject to the provisions of Section 7.1(c), the Trustee shall not
be liable for any action it takes or omits to take in good faith which it
believes to be authorized or within its rights or powers conferred by this
Indenture.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
- -----------------------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Debentures and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to and must comply with Sections 7.10 and 7.11.
SECTION 7.4 TRUSTEE'S DISCLAIMER.
- ---------------------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Debentures, it shall not be accountable for the Company's
use of the proceeds from the Debentures, and it shall not be responsible for any
statement of the Company in this Indenture or any statement in the Debentures
other than its authentication.
SECTION 7.5 NOTICE OF DEFAULTS.
- -------------------------------
If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall mail to each Holder a notice of
the Default or Event of Default within 90 days after it occurs, unless such
Default or Event of Default shall have been cured or waived. Except in the case
of a Default or Event of Default in payment on any Debenture under Section
6.1(a) or 6.1(b), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the best interests of Holders.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.
- ------------------------------------------
Within 60 days after each May 15, commencing, May 15, 1997, the Trustee
shall mail to each Holder, at the Company's expense, a brief report dated as of
such reporting date that complies with TIA section 313(a) (but if no event
described in TIA section 313(a) has occurred within the 12 months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA section 313(b)(2) to the extent applicable. The Trustee shall also
transmit by mail all reports as required by TIA section 313(c).
40
<PAGE> 43
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange or market on which the Debentures are
listed or admitted to trading. The Company shall promptly notify the Trustee
when the Debentures are listed on any stock exchange or admitted to trading on
any market and of any delisting thereof.
SECTION 7.7 COMPENSATION AND INDEMNITY.
- ---------------------------------------
The Company shall pay to the Trustee (in its capacities as Trustee,
Conversion Agent, Paying Agent and Registrar) from time to time such
compensation as may be agreed in writing between the Company and the Trustee for
its services hereunder. The Trustee's compensation shall not be (to the extent
permitted by law) limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred by it in accordance with any provision of this
Indenture. Such expenses may include the reasonable compensation and
out-of-pocket expenses of the Trustee's agents and counsel, except such
disbursements, advances and expenses as may be attributable to its negligence,
willful misconduct or bad faith. Any "float" earned on any money disbursed
hereunder shall be considered additional compensation to the Trustee.
The Company shall indemnify the Trustee (in its capacity as Trustee,
Conversion Agent, Paying Agent and Registrar) and each of its officers,
directors, attorneys-in-fact and agents for, and hold each of such Persons
harmless against, any claim, demand, expense (including, but not limited to,
reasonable disbursements and expenses of the Trustee's agents and counsel), loss
or liability incurred by any of them without negligence, willful misconduct or
bad faith on such Person's part, arising out of or in connection with the
administration of this trust and the rights or duties of the Trustee hereunder,
including the costs and expenses of such Person's defense against any claim or
liability in connection with the exercise or performance of any of the Trustee's
powers or duties hereunder. The Trustee shall notify the Company promptly of any
claim asserted against the Trustee for which it may seek indemnity. The Company
shall defend the claim and the Trustee shall provide reasonable cooperation at
the Company's expense in the defense. The Trustee may engage separate counsel at
its own expense and participate in the defense, provided that the Company shall
bear the reasonable expenses of such separate counsel which is reasonably
acceptable to the Company if the defendants regarding such claim include both
the Trustee and the Company and the Trustee shall have been advised by such
separate counsel that representation of the Trustee and the Company would be
inappropriate under applicable standards of professional responsibility due to
actual or potential differing interests between them. The Company need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful misconduct.
The Company need not pay for any settlement made without its consent, which
consent shall not be unreasonable withheld.
The Company's payment obligations pursuant to this Section 7.7 shall
survive the discharge of this Indenture. When the Trustee incurs expenses or
renders services after an Event
41
<PAGE> 44
of Default specified in Section 6.1(e) or 6.1(f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
- -----------------------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
The Trustee may resign by so notifying the Company in writing at least
30 days prior to the date of the proposed resignation; provided, however, that
no such resignation shall be effective until a successor Trustee has accepted
its appointment pursuant to this Section 7.8. The Holders of a majority in
aggregate principal amount of the then outstanding Debentures may remove the
Trustee by so notifying the Trustee and the Company. The Company shall remove
the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property;
or
(d) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee is not appointed or does not take office within
30 days after the retiring Trustee resigns or is removed, the retiring Trustee,
the Company or the Holders of at least 10% in aggregate principal amount of the
then outstanding Debentures may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee. Notwithstanding the replacement
of the Trustee pursuant to this Section 7.8,
42
<PAGE> 45
the Company's obligations under Section 7.7 shall continue for the benefit of
the retiring Trustee with respect to expenses and liabilities incurred by it
prior to such replacement.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER.
- ----------------------------------------
Except as otherwise provided in Section 7.8(a) or 7.8(d), if the
Trustee consolidates, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the successor
corporation without any further act shall be the successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
- -------------------------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a). The Trustee shall always have a combined capital
and surplus as stated in its most recent published annual report of condition of
at least $100 million. The Trustee shall comply with TIA ss. 310(b). In the
event the Trustee shall cease to be eligible in accordance with this Section
7.10, the Trustee shall resign immediately in the manner and with the effect
specified in Section 7.8.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
- ---------------------------------------------------------------
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8.
DISCHARGE OF INDENTURE
SECTION 8.1 TERMINATION OF COMPANY'S OBLIGATIONS.
- -------------------------------------------------
This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.7 and 8.3 shall survive) when all
outstanding Debentures theretofore authenticated and issued (other than
destroyed, lost or stolen Debentures which have been replaced or paid) have been
delivered to the Trustee for cancellation and the Company has paid all sums
payable hereunder. In addition, the Company shall be discharged from all of its
obligations under Section 2.13 and Sections 4.3 through 4.9 while the Debentures
remain outstanding if all outstanding Debentures will become due and payable at
their scheduled maturity within one year and the following conditions have been
satisfied:
43
<PAGE> 46
(a) the Company has deposited, or caused to be deposited, irrevocably
with the Trustee as trust funds specifically pledged as security for, and
dedicated solely for, such purpose, (i) money in an amount, (ii) non-callable
U.S. Government Obligations which through the payment of Principal and interest
in accordance with their terms (without the reinvestment of such interest or
Principal) will provide not later than one day before the due date of any
payment money in an amount, or (iii) a combination thereof, sufficient with
respect to clauses (ii) and (iii) in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee at or prior to the time of such deposit, to pay the
Principal and discharge each installment of interest on the outstanding
Debentures, together with all other amounts payable by the Company under this
Indenture.
(b) no Default or Event of Default with respect to the Debentures has
occurred and is continuing on the date of such deposit or shall occur as a
result of such deposit or at any time during the period ending on the 91st day
after the date of such deposit, as evidenced to the Trustee by an Officer's
Certificate delivered to the Trustee concurrently with such deposit.
(c) such defeasance does not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which the
Company is a party or by which it is bound, and is not prohibited by Article 11,
as evidenced to the Trustee by an Officers' Certificate delivered to the Trustee
concurrently with such deposit.
(d) the Company has delivered to the Trustee a private Internal Revenue
Service ruling or an opinion of counsel that Holders will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount, in the same manner, and at the same times, as would have been the case
if such deposit, defeasance and discharge had not occurred.
(e) the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the deposit shall not result in the Company, the Trustee or the
trust being deemed to be an "investment company" under the Investment Company
Act of 1940, as amended.
(f) 91 days pass after the deposit is made and during such 91 day
period no event of Default specified in Section 6.1(e) or (f) shall occur and be
continuing at the end of such period.
(g) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent relating
to the discharge of such provisions of the Indenture have been complied with.
Notwithstanding the foregoing, the Company's obligations to pay Principal and
interest on the Debentures shall continue until the Internal Revenue Service
ruling or Opinion of Counsel referred to in clause (d) above is provided.
If the Company exercises such option to discharge such provisions of
the Indenture, payment of the Debentures may not be accelerated because of an
event of default specified in
44
<PAGE> 47
Sections 6.1(c) with respect to the failure to perform any of the covenants set
forth in Section 2.13 and Section 4.3 through 4.9, or Section 6.1(d).
After a deposit made pursuant to this Section 8.1, the Trustee upon
request shall acknowledge in writing the discharge of the Company's obligations
specified above under this Indenture.
SECTION 8.2 APPLICATION OF TRUST MONEY.
- ---------------------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.1. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of Principal and interest on the
Debentures. Money and securities so held in trust are not subject to Article 11.
SECTION 8.3 REPAYMENT TO COMPANY.
- ---------------------------------
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request by the Company any money held by them for the payment of Principal,
repurchase price or interest that remains unclaimed for one year after the date
upon which such payment shall have become due; provided, however, that the
Company shall have first caused notice of such payment to the Company to be
mailed to each Holder entitled thereto no less than 30 days prior to such
payment. After payment to the Company, Holders entitled to the money must look
to the Company for payment as general creditors unless an applicable abandoned
property law designates another Person.
SECTION 8.4 REINSTATEMENT.
- --------------------------
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 8.2 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Debentures
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.1 until such time as the Trustee or Paying Agent is permitted to apply
all such money in accordance with Section 8.2; provided, however that if the
Company makes any payment of interest on or Principal of any Debenture following
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Debentures to receive such payment from the money
held by the Trustee or Paying Agent.
45
<PAGE> 48
ARTICLE 9.
AMENDMENTS
SECTION 9.1 WITHOUT CONSENT OF HOLDERS.
- ---------------------------------------
The Company and the Trustee may amend this Indenture or the Debentures
without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
provided, that such amendment does not in the opinion of the Trustee
adversely affect the rights of any Holder;
(b) to comply with Section 5.1 or 10.5;
(c) to provide for uncertificated Debentures in addition
to or in lieu of certificated Debentures;
(d) to add to the covenants of the Company such further
covenants, restrictions, conditions or provisions for the protection of
the Holders, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants,
restrictions, conditions or provisions an Event of Default permitting
the enforcement of all or any of the several remedies provided in this
Indenture or in the Debentures as herein set forth;
(e) to make any change that does not adversely affect the
rights hereunder of any Holder; or
(f) to comply with requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
provided, however, that, in each case, the Company has delivered to the Trustee
an Opinion of Counsel and an Officers' Certificate, each stating that such
amendment complies with the provisions of this Section 9.1.
SECTION 9.2 WITH CONSENT OF HOLDERS.
- ------------------------------------
Subject to the provisions of Sections 6.4 and 6.7, the Company and the
Trustee may amend or modify this Indenture or the Debentures with the written
consent of the Holders of at least a majority in aggregate principal amount of
the then outstanding Debentures, and the Holders of a majority in aggregate
principal amount of the Debentures then outstanding may waive compliance
46
<PAGE> 49
in a particular instance by the Company with any provision of this Indenture or
the Debentures; provided, however, that, without the consent of each Holder
affected, an amendment, modification or waiver under this Section 9.2 may not
(with respect to any Debentures held by a non-consenting Holder):
(a) change the stated maturity of, or any installment of interest
on, or waive a default in the payment of Principal or repurchase
price, if any, of or interest on any Debenture;
(b) reduce the principal amount of any Debenture or reduce the
rate or extend the time of payment of interest on any Debenture;
(c) increase the Conversion Price (other than in connection with
a combination described in Section 10.4(a)(iii));
(d) except as otherwise provided in Section 9.1(e), change the
place or currency of payment of Principal or repurchase price, if any,
of or interest on any Debenture;
(e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debenture;
(f) adversely affect the right to exchange or convert Debentures;
(g) reduce the percentage of the aggregate principal amount of
outstanding Debentures, the consent of the Holders of which is
necessary to amend this Section 9.2, consent to a merger,
consolidation or conveyance, sale, transfer or lease of assets as
described in Section 5.1 or modify or amend any other provision of
this Indenture;
(h) reduce the percentage of the aggregate principal amount of
outstanding Debentures, the consent of the Holders of which is
necessary for waiver of compliance with certain provisions of this
Indenture or for waiver of certain defaults;
(i) modify the provisions of this Indenture with respect to the
subordination of the Debentures in a manner adverse to the Holders;
(j) except as otherwise permitted under Article 5, consent to the
assignment or transfer by the Company of any of its rights and
obligations under this Indenture;
(k) modify the provisions of this Indenture with respect to the
obligation of the Company to repurchase Debentures in a manner adverse
to the Holders.
47
<PAGE> 50
To secure a consent of the Holders under this Section 9.2, it shall not
be necessary for the Holders to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment or waiver under this Section 9.2 becomes effective,
the Company shall mail to Holders a notice briefly describing the amendment or
waiver. Any failure of the Company to mail such notices, or any defect therein,
shall not, however, in any way, impair or affect the validity of any such
amendment or waiver.
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.
- ------------------------------------------------
Every amendment to this Indenture or the Debentures shall be set forth
in a supplemental indenture that complies with the TIA as then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.
- ----------------------------------------------
Until an amendment, supplemental indenture or waiver becomes effective,
a consent to it by a Holder of a Debenture is a continuing consent by such
Holder and every subsequent Holder of a Debenture or portion of a Debenture that
evidences the same debt as such consenting Holder's Debenture, even if notation
of the consent is not made on any Debenture. However, prior to becoming
effective, any such Holder or subsequent Holder may revoke the consent as to its
Debentures or a portion thereof if the Trustee receives written notice of
revocation before the consent of Holders of the requisite aggregate principal
amount of Debentures then outstanding has been obtained and not revoked.
The Company may, but shall not be obligated to, fix a record date
pursuant to Section 12.1 for the purpose of determining the Holders entitled to
consent to any amendment or waiver. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to consent to such amendment or waiver
or to revoke any consent previously given, whether or not such Persons continue
to be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consents from Holders of the
principal amount of Debentures required hereunder for such amendment or waiver
to be effective shall have also been given and not revoked within such 90-day
period.
After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in any of clauses (a) through (k) of
Section 9.2. In such case, the amendment or waiver shall bind each Holder of a
Debenture who has consented to it and every subsequent Holder of a Debenture
that evidences the same debt as the consenting Holder's Debenture.
48
<PAGE> 51
SECTION 9.5 NOTATION ON OR EXCHANGE OF DEBENTURES.
- --------------------------------------------------
The Trustee (in accordance with the written direction of the Company)
may (at the Company's expense) place an appropriate notation about an amendment,
supplement or waiver on any Debenture thereafter authenticated. The Company in
exchange for all Debentures may issue and the Trustee shall authenticate new
Debentures that reflect the amendment or waiver. Failure to make the appropriate
notation or issue a new Debenture shall not affect the validity and effect of
such amendment, supplement or waiver.
SECTION 9.6 TRUSTEE PROTECTED.
- ------------------------------
The Trustee shall sign all supplemental indentures authorized by this
Indenture, except that the Trustee need not sign any supplemental indenture that
adversely affects its rights. In signing or refusing to sign such supplemental
indenture, the Trustee shall be entitled to receive an Officers' Certificate and
Opinion of Counsel to the effect that such supplemental indenture is authorized
or permitted by this Indenture and will be valid and binding on the Company in
accordance with its terms.
ARTICLE 10.
CONVERSION
SECTION 10.1 CONVERSION PRIVILEGE.
- ----------------------------------
Each Holder may, at such Holder's option, at any time prior to the
close of business on February 1, 2007, unless earlier redeemed or repurchased,
convert such Holder's Debentures, in whole or in part (in denominations of
$1,000 or multiples thereof), at 100% of the principal amount so converted, into
shares of Common Stock at a conversion price per share equal to $19.25, as such
conversion price may be adjusted from time to time in accordance with this
Article 10 (the "CONVERSION PRICE").
SECTION 10.2 CONVERSION PROCEDURE.
- ----------------------------------
To convert a Debenture, the Holder thereof must (1) complete and sign
the "Form of Election to Convert" thereon (unless such Holder is The Depository
Trust Company ("DTC") or its nominee, in which case the customary procedures of
DTC will apply), (2) surrender such Debenture to the Conversion Agent, (3)
furnish appropriate endorsements and transfer documents if required by the
Registrar or the Conversion Agent, (4) pay any transfer or similar tax if
required by Section 10.6 and (5) make any payment required by the first proviso
to the third sentence of this paragraph. The Company's delivery to the Holder of
a fixed number of shares of Common Stock (and any cash in lieu of fractional
shares of Common Stock into which such
49
<PAGE> 52
Debenture is converted) shall be deemed to satisfy the Company's obligation to
pay the principal amount of such Debenture and, except as provided in the next
sentence, all accrued interest on such Debenture. If such Debenture (including a
Debenture which has been called for redemption and even if a Change of Control
Offer has been made) is converted after a regular interest payment record date
and prior to the related Interest Payment Date, the full interest installment
on such Debenture scheduled to be paid on such Interest Payment Date shall be
payable on such Interest Payment Date to the Holder of record at the close of
business on such record date.
As promptly as practicable after the surrender of a Debenture in
compliance with this Section 10.2, the Company shall issue and deliver at the
office or agency of the Registrar or the Conversion Agent to such Holder, or on
such Holder's written order, a certificate or certificates for the full number
of whole shares of Common Stock issuable upon the conversion of such Debenture
in accordance with the provisions of this Article 10 and a check or cash with
respect to any fractional share of Common Stock arising upon such conversion as
provided in Section 10.3. In case any Debenture of a denomination greater than
$1,000 shall be surrendered for partial conversion, then, subject to Article 2,
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder of the Debenture so surrendered, without charge to such Holder, a new
Debenture or Debentures in authorized denominations in an aggregate principal
amount equal to the unconverted portion of the surrendered Debenture.
Each conversion shall be deemed to have been effected on the date on
which such Debenture shall have been surrendered in compliance with this Section
10.2, and the Person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares of Common Stock
represented thereby for all purposes; provided, however, that no surrender of a
Debenture on any date when the stock transfer books of the Company shall be
closed shall be effective to constitute the Person or Persons entitled to
receive such shares upon such conversion as the record holder or holders of such
shares on such date, but such surrender shall be effective to constitute the
Person or Persons entitled to receive such shares as the record holder or
holders thereof for all purposes at the close of business on the next succeeding
day on which such stock transfer books are open and, in any such case, such
conversion shall be at the Conversion Price in effect on the date on which such
Debenture shall have been surrendered.
If the last day on which a Debenture may be converted is not a Business
Day, the Debenture may be surrendered to that Conversion Agent on the next
succeeding Business Day.
Provisions of this Indenture that apply to conversion of all of a
Debenture also apply to conversion of a portion of such Debenture.
SECTION 10.3 CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES.
- --------------------------------------------------------
No fractional shares of Common Stock or scrip representing fractional
shares of Common Stock shall be issued upon conversion of Debentures. If more
than one Debenture shall be
50
<PAGE> 53
surrendered for conversion at one time by the same Holder, the full number of
whole shares of Common Stock which shall be issuable upon conversion shall be
computed on the basis of the aggregate principal amount of Debentures (or
specified portions thereof to the extent permitted hereby) so surrendered. If
any fractional share of Common Stock would be issuable upon the conversion of
any Debenture or Debentures, the Company shall make an adjustment therefor in
cash at the Current Market Price of the Common Stock as of the close of business
on the Business Day prior to such conversion.
SECTION 10.4 ADJUSTMENT OF CONVERSION PRICE.
- --------------------------------------------
(a) If the Company shall (i) pay a dividend or other distribution, in
Common Stock, on any class of Capital Stock of the Company or any Subsidiary
which is not wholly owned by the Company, (ii) subdivide the outstanding Common
Stock into a greater number of shares by any means or (iii) combine the
outstanding Common Stock into a smaller number of shares by any means
(including, without limitation, a reverse stock split), then in each such case
the Conversion Price in effect immediately prior thereto shall be adjusted so
that the Holder of any Debenture thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock that such Holder would
have owned or have been entitled to receive upon the happening of such event had
such Debenture been converted immediately prior to the relevant record date or,
if there is no such record date, the effective date of such event. An adjustment
made pursuant to this Section 10.4(a) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date of such subdivision or combination, as the case may be.
(b) If the Company shall (i) issue or distribute (at a price per share
less than the Current Market Price per share of such Capital Stock on the date
of such issuance or distribution) Capital Stock generally to holders of Common
Stock or to holders of any class or series of Capital Stock which is convertible
into or exchangeable or exercisable for Common Stock (excluding an issuance or
distribution of Common Stock described in Section 10.4(a)) or (ii) issue or
distribute generally to such holders rights, warrants, options or convertible or
exchangeable securities entitling the holder thereof to subscribe for, purchase,
convert into or exchange for Capital Stock at a price per share less than the
Current Market Price per share of such Capital Stock on the date of issuance or
distribution, then, in each such case, at the earliest of (A) the date the
Company enters into a firm contract for such issuance or distribution, (B) the
record date for the determination of stockholders entitled to receive any such
Capital Stock or any such rights, warrants, options or convertible or
exchangeable securities or (C) the date of actual issuance or distribution of
any such Capital Stock or any such rights, warrants, options or convertible or
exchangeable securities, the Conversion Price shall be reduced by multiplying
the Conversion Price in effect immediately prior to such earliest date by:
(x) if such Capital Stock is Common Stock, a fraction the numerator of
which is the number of shares of Common Stock outstanding on such
earliest date plus the number of shares of Common Stock which could be
purchased at the Current Market Price per share
51
<PAGE> 54
of Common Stock on the date of such issuance or distribution with the
aggregate consideration (based on the Fair Market Value thereof)
received or receivable by the Company either (A) in connection with
such issuance or distribution or (B) upon the conversion, exchange,
purchase or subscription of all such rights, warrants, options or
convertible or exchangeable securities (the "AGGREGATE
CONSIDERATION"), and the denominator of which is the number of shares
of Common Stock outstanding on such earliest date plus the number of
shares of Common Stock to be so issued or distributed or to be issued
upon the conversion, exchange, purchase or subscription of all such
rights, warrants, options or convertible or exchangeable securities;
or
(y) if such Capital Stock is other than Common Stock, a fraction the
numerator of which is the Current Market Price per share of Common
Stock on such earliest date minus an amount equal to (A) the sum of (1)
the Current Market Price per share of such Capital Stock multiplied by
the number of shares of such Capital Stock to be so issued minus (2)
the Aggregate Consideration, divided by (B) the number of shares of
Common Stock outstanding on such date, and the denominator of which is
the Current Market Price per share of Common Stock on such earliest
date.
Such adjustment shall be made successively whenever any such Capital Stock,
rights, warrants, options or convertible or exchangeable securities are so
issued or distributed. In determining whether any rights, warrants, options or
convertible or exchangeable securities entitle the holders thereof to subscribe
for, purchase, convert into or exchange for shares of such Capital Stock at less
than such Current Market Price, there shall be taken into account the Fair
Market Value of any consideration received or receivable by the Company for such
rights, warrants, options or convertible or exchangeable securities. If any
right, warrant, option or convertible or exchangeable securities, the issuance
of which resulted in an adjustment in the Conversion Price pursuant to this
Section 10.4(b), shall expire and shall not have been exercised, the Conversion
Price shall immediately upon such expiration be recomputed to the Conversion
Price which would have been in effect if such right, warrant, option or
convertible or exchangeable securities had never been distributed or issued.
Notwithstanding anything contained in this paragraph to the contrary, the
issuance of Capital Stock upon the exercise of such rights, warrants or options
or the conversion or exchange of such convertible or exchangeable securities
will not cause an adjustment in the Conversion Price if no such adjustment would
have been required at the time such right, warrant, option or convertible or
exchangeable security was issued or distributed; provided, however, that, if the
consideration payable upon such exercise, conversion or exchange and/or the
Capital Stock receivable thereupon are changed after the time of the issuance or
distribution of such right, warrant, option or convertible or exchangeable
security, then such change shall be deemed to be the expiration thereof without
having been exercised and the issuance or distribution of new options, rights,
warrants or convertible or exchangeable securities.
Notwithstanding anything contained in this Indenture to the contrary,
options, rights or warrants issued or distributed by the Company, including
options, rights or warrants distributed prior to the date of this Indenture, to
holders of Common Stock generally which, until the occurrence of a specified
event or events (a "TRIGGER EVENT"), (i) are deemed to be transferred
52
<PAGE> 55
with Common Stock, (ii) are not exercisable and (iii) are also issued on a pro
rata basis with respect to future issuances of Common Stock, shall be deemed not
to have been issued or distributed for purposes of this Section 10.4 (and no
adjustment to the Conversion Price under this Section 10.4 will be required)
until the occurrence of the earliest Trigger Event, whereupon such options,
rights and warrants shall be deemed to have been distributed and an adjustment
(if any is required) to the Conversion Price shall be made in accordance with
this Section 10.4(b). If any such option, right or warrant, including any such
options, rights or warrants distributed prior to the date of this Indenture, are
subject to events, upon the occurrence of which such options, rights or warrants
become exercisable to purchase different securities, evidences of indebtedness,
cash, Properties or other assets or different amounts thereof, then the date of
the occurrence of any and each such event shall be deemed to be the date of
distribution and record date with respect to new options, rights or warrants
with such new purchase rights (and a termination or expiration of the existing
options, rights or warrants without exercise thereof). In addition, in the event
of any distribution (or deemed distribution) of options, rights or warrants, or
any Trigger Event or other event of the type described in the preceding
sentence, that required (or would have required but for the provisions of
Section 10.4(e)) an adjustment to the Conversion Price under this Section 10.4
which was in fact made and such options, rights or warrants shall thereafter
have been redeemed or repurchased without having been exercised, then the
Conversion Price shall be readjusted upon such redemption or repurchase to give
effect to such distribution, Trigger Event or other event, as the case may be,
as though it had instead been a cash distribution, equal on a per share basis to
the result of the aggregate redemption or repurchase price received by holders
of such options, rights or warrants divided by the number of shares of Common
Stock outstanding as of the date of such repurchase or redemption, made to
holders of Common Stock generally as of the date of such redemption or
repurchase. For purposes of this paragraph, the earlier of the Distribution
Date, Redemption Date or Final Expiration Date shall be deemed to be a Trigger
Event with respect to the Rights and the Flip-in Event shall be deemed to be an
event described in the second sentence of this paragraph.
Notwithstanding anything contained in this Section 10.4(b) to the
contrary, no adjustment shall be made in the Conversion Price pursuant to this
Section 10.4(b) with respect to the issuance of Common Stock or options or other
rights to purchase Common Stock pursuant to any employee stock purchase, bonus,
award, grant, option or ownership plan (including, without limitation, an
employee stock ownership plan which is part of an employee benefit plan
qualified under Section 401 of the Internal Revenue Code of 1986, as amended
(the "CODE"), an employee stock option or incentive stock option plan qualified
under Section 422 of the Code and a restricted stock plan), including the
issuance of Common Stock upon the exercise of such options; provided, that, for
purposes of this paragraph, the term "employee" includes directors, consultants
and advisors and the term "plan" means a plan, program or arrangement in which 5
or more Persons are eligible to participate (or, if only directors of the
Company are eligible to participate and there are fewer than 5 such directors,
in which all of such directors are eligible to participate).
(c) If the Company shall pay or distribute, as a dividend or otherwise,
generally to holders of Common Stock or any class or series of Capital Stock
which is convertible into or exercisable or exchangeable for Common Stock any
assets, Properties or rights (including, without
53
<PAGE> 56
limitation, evidences of indebtedness of the Company, any Subsidiary or any
other Person, cash or Capital Stock or other securities of the Company, any
Subsidiary or any other Person, but excluding payments and distributions as
described in Section 10.4(a) or 10.4(b), dividends and distributions in
connection with the liquidation, dissolution or winding up of the Company in its
entirety and distributions consisting solely of cash described in Section
10.4(d)), then in each such case the Conversion Price shall be reduced by
multiplying the Conversion Price in effect immediately prior to the date of such
payment or distribution by a fraction, the numerator of which is the Current
Market Price per share of Common Stock on the record date for the determination
of stockholders entitled to receive such payment or distribution less the Fair
Market Value per share on such record date of the assets, Properties or rights
so paid or distributed, and the denominator of which is the Current Market Price
per share of Common Stock on such record date. Such adjustment shall become
effective immediately after such record date. For purposes of this Section
10.4(c), such Fair Market Value per share shall equal the aggregate Fair Market
Value on such record date of the assets, Properties or rights so paid or
distributed divided by the number of shares of Common Stock outstanding on such
record date.
(d) If the Company shall, by dividend or otherwise, make a distribution
(other than in connection with the liquidation, dissolution or winding up of the
Company in its entirety), generally to holders of Common Stock or any class or
series of Capital Stock which is convertible into or exercisable or exchangeable
for Common Stock, consisting solely of cash where (x) the sum of (i) the
aggregate amount of such cash plus (ii) the aggregate amount of all cash so
distributed (by dividend or otherwise) to such holders within the 12-month
period ending on the record date for determining stockholders entitled to
receive such distribution with respect to which no adjustment has been made to
the Conversion Price pursuant to this Section 10.4(d) exceeds (y) 10% of the
result of the multiplication of (1) the Current Market Price per share of Common
Stock on such record date times (2) the number of shares of Common Stock
outstanding on such record date, then the Conversion Price shall be reduced,
effective immediately prior to the opening of business on the day following such
record date, by multiplying the Conversion Price in effect immediately prior to
the close of business on the day prior to such record date by a fraction, the
numerator of which is the Current Market Price per share of Common Stock on such
record date less the aggregate amount of cash per share so distributed and the
denominator of which is such Current Market Price; provided, however, that, if
the aggregate amount of cash per share is equal to or greater than such Current
Market Price, then, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Holder shall have the right to receive upon
conversion (with respect to each share of Common Stock issued upon such
conversion and in addition to the Common Stock issuable upon conversion) the
aggregate amount of cash per share such Holder would have received had such
Holder's Debenture been converted immediately prior to such record date. In no
event shall the Conversion Price be increased pursuant to this Section 10.4(d);
provided, however, that if such distribution is not so made, the Conversion
Price shall be adjusted to be the Conversion Price which would have been in
effect if such distribution had not been declared. For purposes of this
paragraph of this Section 10.4(d), such aggregate amount of cash per share shall
equal such sum divided by the number of shares of Common Stock outstanding on
such record date.
54
<PAGE> 57
(e) The provisions of this Section 10.4 shall similarly apply to all
successive events of the type described in this Section 10.4. Notwithstanding
anything contained herein to the contrary, no adjustment in the Conversion Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Conversion Price then in effect; provided, however, that
any adjustments which by reason of this Section 10.4(e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Article 10 shall be made by the Company
and shall be made to the nearest cent or to the nearest one hundredth of a
share, as the case may be, and the Trustee shall be entitled to rely
conclusively thereon. Notwithstanding anything contained in this Section 10.4 to
the contrary, the Company shall be entitled to make such reductions in the
Conversion Price, in addition to those required by this Section 10.4, as it in
its discretion shall determine to be advisable in order that any stock
dividends, subdivision of shares, distribution of rights to purchase stock or
securities, or distribution of securities convertible into or exchangeable for
stock hereafter made by the Company to its stockholders shall not be taxable.
Except as provided in this Article 10, no adjustment in the Conversion Price
will be made for the issuance of Common Stock or any securities convertible into
or exchangeable for Common Stock or carrying the right to purchase Common Stock
or any securities so convertible or exchangeable.
(f) Whenever the Conversion Price is adjusted as provided herein, the
Company shall promptly file with the Trustee and any Conversion Agent other than
the Trustee an Officers' Certificate setting forth the Conversion Price in
effect after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Promptly after delivery of such Officers'
Certificate, the Company shall give or cause to be given to each Holder a notice
of such adjustment of the Conversion Price setting forth the adjusted Conversion
Price and the date on which such adjustment becomes effective.
(g) Notwithstanding anything contained herein to the contrary, in any
case in which this Section 10.4 provides that an adjustment in the Conversion
Price shall become effective immediately after a record date for an event, the
Company may defer until the occurrence of such event (i) issuing to the Holder
of any Debenture converted after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above the number of
shares of Common Stock issuable upon such conversion before giving effect to
such adjustment and (ii) paying to such Holder any amount in cash in lieu of any
fractional share of Common Stock pursuant to Section 10.3.
SECTION 10.5 EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
- -----------------------------------------------------------------------
In the event of (i) any reclassification (including, without
limitation, a reclassification effected by means of an exchange or tender offer
by the Company or any Subsidiary) or change of outstanding Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), (ii) any
consolidation, merger or combination of the Company with another corporation as
a result of which holders of Common Stock shall be entitled to receive
securities or other Property (including
55
<PAGE> 58
cash) with respect to or in exchange for Common Stock or (iii) any sale or
conveyance of the Property of the Company as, or substantially as, an entirety
to any other corporation as a result of which holders of Common Stock shall be
entitled to receive securities or other Property (including cash) with respect
to or in exchange for Common Stock, then the Company or the successor or
purchasing corporation, as the case may be, shall enter into a supplemental
indenture providing that each Debenture shall be convertible into the kind and
amount of securities or other Property (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
which the Holder of such Debenture would have received if such Debenture had
been converted immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance. Such supplemental
indenture shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article 10.
Whenever a supplemental indenture is entered into as provided herein,
the Company shall promptly file with the Trustee and any Conversion Agent other
than the Trustee an Officers' Certificate setting forth a brief statement of the
facts requiring such supplemental indenture. Promptly after delivery of such
Officers' Certificate, the Company shall give or cause to be given to each
Holder a notice of the execution of such supplemental indenture.
The provisions of this Section 10.5 shall similarly apply to all
successive events of the type described in this Section 10.5.
SECTION 10.6 TAXES ON SHARES ISSUED.
- ------------------------------------
The issuance of a certificate or certificates on conversions of
Debentures shall be made without charge to the Holders of such Debentures for
any tax or charge with respect to the issuance thereof. The Company shall not,
however, be required to pay any tax or charge which may be payable with respect
to any transfer involved in the issuance and delivery of a certificate or
certificates in any name other than that of the Holders of such Debentures, and
the Company shall not be required to issue or deliver any such certificate or
certificates unless and until the Person or Persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or charge or shall
have established to the satisfaction of the Company that such tax or charge has
been paid.
SECTION 10.7 RESERVATION OF SHARES; SHARES TO BE FULLY PAID; COMPLIANCE WITH
- ----------------------------------------------------------------------------
GOVERNMENT REQUIREMENTS; LISTING OF COMMON STOCK.
-------------------------------------------------
The Company shall reserve, out of its authorized but unissued Common
Stock or its Common Stock held in treasury, sufficient shares of Common Stock to
provide for the conversion of all of the Debentures that are outstanding from
time to time.
56
<PAGE> 59
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the Common Stock issuable
upon conversion of Debentures, the Company will take all corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue Common Stock at such adjusted Conversion Price.
The Company covenants that all Common Stock which may be issued upon
conversion of Debentures will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance and delivery thereof.
The Company covenants that if any Common Stock issued or delivered upon
conversion of Debentures hereunder require registration with or approval of any
governmental authority under any applicable federal or state law (excluding
federal or state securities laws) before such Common Stock may be lawfully
issued, the Company will in good faith and as expeditiously as possible endeavor
to secure such registration or approval, as the case may be.
The Company covenants that it will not take any action which would
cause the exemption from the registration requirement of Section 5 of the
Securities Act afforded by Section 3(a)(9) of the Securities Act to be
unavailable with respect to the issuance and delivery of Common Stock upon the
conversion of Debentures in accordance with this Indenture.
SECTION 10.8 RESPONSIBILITY OF TRUSTEE REQUIREMENTS.
- ----------------------------------------------------
The Trustee and any other Conversion Agent shall not at any time be
under any duty or responsibility to any Holder to determine whether any fact
exists which may require any adjustment of the Conversion Price or other
adjustment, or with respect to the nature, extent or calculation of any such
adjustment when made, or with respect to the method employed, or herein or in
any supplemental indenture provided to be employed, in making any such
adjustment, or with respect to the correctness thereof. The Trustee and any
other Conversion Agent shall not be accountable with respect to the validity,
value, kind or amount of any item at any time issued or delivered upon the
conversion of any Debenture, and neither the Trustee nor any other Conversion
Agent makes any representations with respect thereto. Subject to Section 7.1,
neither the Trustee nor any Conversion Agent shall be responsible for any
failure of the Company to issue, transfer or deliver any item upon the surrender
of any Debenture for conversion or to comply with any of the duties,
responsibilities or covenants of the Company contained in this Article 10.
Without limiting the generality of the foregoing, neither the Trustee nor any
Conversion Agent shall be under any responsibility to determine the correctness
of any provisions contained in any supplemental indenture entered into pursuant
to Section 10.5, but, subject to the provisions of Section 7.1, may accept as
conclusive evidence of the correctness of any such provisions, and shall be
protected in relying upon, the Officers' Certificate with respect thereto.
57
<PAGE> 60
SECTION 10.9 NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS.
- --------------------------------------------------------
In the event that:
(a) the Company shall declare or authorize any event which could result
in an adjustment in the Conversion Price under Section 10.4 or require the
execution of a supplemental indenture under Section 10.5; or
(b) the Company shall authorize the granting to the holders of Common
Stock generally of rights, options or warrants to subscribe for or purchase any
shares of any class or series of Capital Stock of the Company or any Subsidiary
or any other rights, options or warrants, the reclassification of Common Stock
(other than a subdivision or combination of outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par value to
par value), the combination, consolidation or merger of the Company for which
approval of any stockholders of the Company is required, the sale or transfer of
all or substantially all of the assets of the Company or the voluntary or
involuntary dissolution, liquidation or winding-up of the Company in whole or in
part;
then, in each such case, the Company shall file or cause to be filed with the
Trustee and shall give or cause to be given to each Holder, as promptly as
possible but in any event at least 15 days prior to the applicable date
hereinafter specified, a notice stating the date on which a record is to be
taken for the purpose of determining the holders of outstanding Common Stock
entitled to participate in such event, the date on which such event is expected
to become effective or occur and the date on which it is expected that holders
of outstanding Common Stock of record shall be entitled to surrender their
shares, or receive any items, in connection with such event. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such event.
ARTICLE 11.
SUBORDINATION
SECTION 11.1 AGREEMENT TO SUBORDINATE.
- --------------------------------------
The Company covenants and agrees, and each Holder, by such Holder's
acceptance of a Debenture, likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article 11, the indebtedness
represented by the Debentures and the payment of the Principal and repurchase
price, if any, of and interest on each and all of the Debentures are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness.
No provision of this Article 11 shall prevent the occurrence of any
Default or Event of Default hereunder.
58
<PAGE> 61
SECTION 11.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
- ------------------------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other
winding-up of the Company, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy, or (c) any assignment for the benefit of
creditors or any other marshalling of assets and liabilities of the Company,
then and in any such event the holders of Senior Indebtedness shall be entitled
to receive payment in full of all amounts due or to become due on or with
respect to all Senior Indebtedness, or provision shall be made for such payment
in money or money's worth, before the Holders are entitled to receive any
payment on account of Principal or repurchase price, if any, of or interest on
the Debentures, and to that end the holders of Senior Indebtedness shall be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
which may be payable or deliverable with respect to the Debentures in any such
case, proceeding, liquidation, dissolution or other winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section 11.2, the Trustee or any Holder shall have received any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, before all Senior Indebtedness is paid in full or
payment thereof provided for, and if such fact shall, at or prior to the time of
such payment or distribution, have been made known to the Trustee or, as the
case may be, such Holder, then and in such event such payment or distribution
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, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the conveyance or transfer of its properties and assets substantially as an
entirety to another Person upon the terms and conditions set forth in Article 5
shall not be deemed a dissolution, winding-up, liquidation, reorganization,
assignment for the benefit of creditors or marshalling of assets and liabilities
of the Company for the purposes of this Section 11.2 if the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer such properties and assets substantially as
an entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Article 5.
59
<PAGE> 62
SECTION 11.3 PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION OF
- ----------------------------------------------------------------------
DEBENTURES.
-----------
In the event that any Debentures are declared due and payable before
their stated maturity, then and in such event the holders of Senior Indebtedness
outstanding at the time such Debentures so become due and payable shall be
entitled to receive payment in full of all amounts due or to become due on or
with respect to such Senior Indebtedness, or provision shall be made for such
payment in money or money's worth, before the Holders are entitled to receive
any payment by the Company on account of the Principal or repurchase price, if
any, of or interest on the Debentures or on account of the purchase or other
acquisition of Debentures.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or to any Holder prohibited by the foregoing
provision of this Section 11.3, and if such fact shall, at or prior to the time
of such payment, have been made known to the Trustee by written notice or, as
the case may be such Holder, then and in such event such payment shall be paid
over and delivered forthwith to the Company.
The provisions of this Section 11.3 shall not apply to any payment with
respect to which Section 11.2 would be applicable.
SECTION 11.4 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
- ------------------------------------------------------------
(a) In the event and during the continuation of any default in the
payment of principal of or interest on any Senior Indebtedness beyond any
applicable grace period with respect thereto, or in the event that any event of
default with respect to any Senior Indebtedness shall have occurred and be
continuing permitting the holders of such Senior Indebtedness (or a trustee on
behalf of the holders thereof) to declare such Senior indebtedness due and
payable prior to the date on which it would otherwise have become due and
payable, unless and until such event of default shall have been cured or waived
or shall have ceased to exist or the Company and the Trustee shall have received
written notice from the Representative of the Senior Indebtedness with respect
to which such event of default relates approving payment on the Debentures, then
no payment shall be made by the Company with respect to the Principal or
repurchase price, if any, or interest on the Debentures or to acquire any of the
Debentures; provided that no such default will prevent any payment on, or with
respect to, the Debentures for more than 120 days unless the maturity of such
Senior Indebtedness has been accelerated. Not more than one such 120 day delay
may be made in any consecutive 360 day period, irrespective of the number of
defaults with respect to Senior Indebtedness during such period.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or to any Holder prohibited by the foregoing
provision of this Section 11.4, and if such fact shall, at or prior to the time
of such payment, have been made known to the Trustee by written notice or, as
the case may be such Holder, then and in such event such payment shall be paid
over and delivered forthwith to the Company.
60
<PAGE> 63
The provisions of this Section 11.4 shall not apply to any payment with
respect to which Section 11.2 would be applicable.
SECTION 11.5 PAYMENT PERMITTED IF NO DEFAULT.
- ---------------------------------------------
Nothing contained in this Article 11 or elsewhere in this Indenture or
in any of the Debentures shall prevent (a) the Company, at any time except
during the pendency of any case, proceeding, dissolution, liquidation or other
winding-up, assignment for the benefit of creditors or other marshalling of
assets and liabilities of the Company referred to in Section 11.2 or under the
conditions described in Section 11.3 or 11.4, from making payments at any time
of Principal or repurchase price, if any, of or interest on the Debentures or
(b) the application by the Trustee of any money deposited with it hereunder to
the payment of or on account of the Principal or repurchase price, if any, of or
interest on the Debentures or the retention of any such payment by the Holders,
if, at the time of the application by the Trustee, it did not have knowledge
that such payment would have been prohibited by the provisions of this Article
11.
SECTION 11.6 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
- ---------------------------------------------------------------------
Subject to the payment in full of all Senior Indebtedness, the Holders
shall be subrogated to the extent of the payments or distributions made to the
holders of such Senior Indebtedness pursuant to the provisions of this Article
11 (equally and ratably with the holders of all indebtedness of the Company
which is not Senior Indebtedness and which is entitled to like rights of
subrogation) 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 or repurchase price, if any, of and
interest on the Debentures shall be paid in full. 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 or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Indebtedness
by Holders or the Trustee, shall, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders be deemed to be a payment or
distribution by the Company to or on account of Senior Indebtedness.
SECTION 11.7 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
- ---------------------------------------------------------
The provisions of this Article 11 are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article 11 or elsewhere in this Indenture or in the Debentures is intended to or
shall: (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders, the obligation of the Company, which is
absolute and unconditional (and which, subject to the rights under this Article
11 of the holders of Senior Indebtedness, is intended to rank equally with all
other general obligations of the Company), to
61
<PAGE> 64
pay to the Holders the Principal or repurchase price, if any, of and interest on
the Debentures 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 and creditors of the Company other than the holders of Senior
Indebtedness; or (c) 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 11 of the holders
of Senior Indebtedness to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 11.8 TRUSTEE TO EFFECTUATE SUBORDINATION.
- -------------------------------------------------
Each Holder of a Debenture by acceptance thereof authorizes and directs
the Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article 11 and
appoints the Trustee as such Holder's attorney-in-fact for any and all such
purposes.
SECTION 11.9 NO WAIVER OF SUBORDINATION PROVISIONS.
- ---------------------------------------------------
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 by 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.
Without in any way limiting the generality of the foregoing paragraph,
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, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in this Article 11 or the obligations hereunder of the
Holders 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 otherwise amend or
supplement in any manner Senior Indebtedness or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii) release any Person liable in any
manner for the collection of Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
SECTION 11.10 NOTICE TO TRUSTEE.
- --------------------------------
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee with respect to
62
<PAGE> 65
the Debentures. Notwithstanding the provisions of this Article 11 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee with respect to the Debentures, unless and until the Trustee
shall have received written notice thereof from the Company or a holder of
Senior Indebtedness or from any Representative therefor, and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 7.1, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the notice
provided for in this Section 11.10 at least 10 Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (and premium, if
any) or interest on any Debenture), then, notwithstanding anything herein
contained to the contrary, 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 during or after such 10 Business Day period.
Subject to the provisions of Section 7.1, 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 Senior Indebtedness (or a Representative therefor) to
establish that such notice has been given by a holder of Senior Indebtedness (or
a Representative 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 11, 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 11, 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 11.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
- -----------------------------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article 11, the Trustee, subject to the provisions of Section 7.1, 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 the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 11.
63
<PAGE> 66
SECTION 11.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.
- -----------------------------------------------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to, or be
subject to any implied covenants or obligations in favor of, the holders of
Senior Indebtedness and shall not be liable to any such holders if it shall in
good faith mistakenly pay over or distribute to Holders or to the Company or to
any other Person cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article 11 or otherwise.
SECTION 11.13 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 11 with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
Nothing in this Article 11 shall subordinate to Senior Indebtedness the
claims of, or payments to, the Trustee under or pursuant to Section 7.7.
SECTION 11.14 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 11 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 11 in addition to or in place of the Trustee; provided,
however, that Section 11.13 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 11.15 CERTAIN CONVERSIONS DEEMED PAYMENT.
- -------------------------------------------------
For the purposes of this Article 11 only, (a) the issuance and delivery
of Junior Securities upon conversion of Debentures in accordance with Article 10
shall not be deemed to constitute a payment or distribution on account of the
Principal or repurchase price, if any, of or interest on Debentures or on
account of the purchase or other acquisition of Debentures and (b) the payment,
issuance or delivery of cash, property or securities (other than Junior
Securities) upon conversion of a Debenture shall be deemed to constitute payment
on account of the Principal of such Debenture. Nothing contained in this Article
11 or elsewhere in this Indenture or in the Debentures is intended to or shall
impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the Holders, the right, which is absolute and unconditional, of
a Holder to convert any Debenture in accordance with Article 10.
64
<PAGE> 67
ARTICLE 12.
MEETINGS OF HOLDERS
SECTION 12.1 ACTION BY HOLDERS.
- -------------------------------
Whenever in this Indenture it is provided that the Holders of a
specified percentage in aggregate principal amount of the Debentures may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action), the fact that at
the time of taking any such action, the Holders of such specified percentage
have joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by Holders in person or by proxy appointed
in writing or (b) by the record of the Holders voting in favor thereof at any
meeting of Holders called and held in accordance with the provisions of this
Article 12. Whenever the Company or the Trustee solicits the taking of action by
the Holders, the Company or the Trustee may fix in advance of such solicitation
a date as the record date for determining Holders entitled to take such action.
If a record date is fixed, those and only those Persons who are Holders at the
record date so fixed, or their proxies, shall be entitled to take such action
regardless of whether they are Holders at the time of such action.
SECTION 12.2 PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
- -------------------------------------------------------
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article 12 for any of the following purposes:
(a) to give any notice to the Company, or the Trustee, or to give
any directions to the Trustee, or to waive or to consent to the
waiving of any Default hereunder and its consequences, or to take any
other action authorized to be taken by Holders pursuant to any of the
provisions of Article 6;
(b) to remove the Trustee or to appoint a successor Trustee
pursuant to the provisions of Article 7;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to Section 9.2; or
(d) to take any other action (i) authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of
the Debentures under any other provision of this Indenture, or
authorized or permitted by law or (ii) which the Trustee deems
necessary or appropriate in connection with the administration of this
Indenture.
65
<PAGE> 68
SECTION 12.3 MANNER OF CALLING MEETINGS.
- ----------------------------------------
The Trustee may at any time call a meeting of Holders to take any
action specified in Section 12.2, to be held at such time and at such place in
the City of New York, New York or such other place as the Trustee shall
determine. Notice of every meeting of Holders, setting forth the time and place
of such meeting and in general terms the action proposed to be taken at such
meeting, shall be given by the Trustee, to the Company and to each Holder not
less than 10 nor more than 60 days prior to the date fixed for such meeting.
Any meeting of Holders shall be valid without notice if the Holders of
all Debentures then outstanding are present in person or by proxy, or if notice
is waived before or after the meeting by all of the Holders and if the Company
and the Trustee are either present by duly authorized representatives or have,
before or after the meeting, waived notice.
SECTION 12.4 CALL OF MEETINGS BY THE COMPANY OR HOLDERS.
- --------------------------------------------------------
In case at any time the Company or the Holders of not less than 10% in
aggregate principal amount of the Debentures then outstanding, shall have
requested the Trustee to call a meeting of Holders to take any action specified
in Section 12.2, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have given
the notice of such meeting within 20 days after receipt of such request, then
the Company or the Holders of Debentures in the amount above specified may
determine the time and place in the City of New York, New York for such meeting
and may call such meeting for the purpose of taking such action, by giving or
causing to be given notice thereof as provided in Section 12.3.
SECTION 12.5 WHO MAY ATTEND AND VOTE AT MEETINGS.
- -------------------------------------------------
To be entitled to vote at any meeting of Holders, a person shall be (a)
a Holder on the record date for such meeting or, if there is no such record
date, on the date of such meeting or (b) a Person appointed by an instrument in
writing as proxy for one or more of such Holders. The only Persons who shall be
entitled to be present or to speak at any meeting of Holders shall be the
Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 12.6 REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT OF THE MEETING; VOTING
- -------------------------------------------------------------------------------
RIGHTS; ADJOURNMENT.
--------------------
Notwithstanding any other provision of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Holders, in regard to proof of the holding of Debentures and of the appointment
of proxies, and in regard to the appointment and duties of inspectors of votes,
the submission and examination of proxies, certificates and other
66
<PAGE> 69
evidence of the right to vote, and such other matters concerning the conduct of
the meeting as it shall deem appropriate.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders as provided in Section 12.4, in which case the Company or
the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the Holders of a majority in principal
amount of the Debentures represented at the meeting and entitled to vote.
At any meeting each Holder or proxy shall be entitled to one vote for
each $1,000 principal amount of Debentures held or represented by such Holder or
proxy, as the case may be; provided, however, that no vote shall be cast or
counted at any meeting with respect to any Debentures challenged as not
outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of
Debentures held by such chairman or instruments in writing as aforesaid duly
designating such chairman as the proxy to vote on behalf of other Holders. At
any meeting of Holders, the presence (in person or by proxy) of Persons holding
or representing a majority in aggregate principal amount of the Debentures then
outstanding shall be sufficient for a quorum. Any meeting of Holders duly called
pursuant to the provisions of Section 12.3 or 12.4 may be adjourned from time to
time by vote of the Holders of a majority in aggregate principal amount of the
Debentures represented at the meeting and entitled to vote, and the meeting may
be held as so adjourned without further notice.
SECTION 12.7 VOTING AT THE MEETING AND RECORD TO BE KEPT.
- ---------------------------------------------------------
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the Holders
or of their representatives by proxy and the principal amount of the Debentures
voted by the ballot. The permanent chairman of the meeting shall appoint two
inspectors of votes, who shall count all votes cast at the meeting for or
against any resolution and who shall make and file with the secretary of the
meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of Holders
shall be prepared by the secretary of the meeting and there shall be attached to
such record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more Persons having knowledge of
the facts, setting forth a copy of the notice of the meeting and showing that
such notice was given as provided in Section 12.3 or 12.4. The record shall be
signed and verified by the affidavits of the permanent chairman and the
secretary of the meeting and one of the duplicates shall be delivered to the
Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
67
<PAGE> 70
SECTION 12.8 EXERCISE OF RIGHTS OF TRUSTEE OR HOLDERS MAY NOT BE HINDERED OR
- ----------------------------------------------------------------------------
DELAYED BY CALL OF MEETING.
---------------------------
Nothing contained in this Article 12 shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred upon or reserved to the
Trustee or to the Holders under any of the provisions of this Indenture or of
the Debentures.
SECTION 12.9 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
- ---------------------------------------------------------
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Debentures. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
ARTICLE 13.
MISCELLANEOUS
SECTION 13.1 TRUST INDENTURE ACT CONTROLS.
- ------------------------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required or deemed to be included in this Indenture
by the TIA, the required or deemed provision shall control.
SECTION 13.2 NOTICES.
- ---------------------
Any notice or communication by the Company or the Trustee to the other
shall be deemed to have been duly given if given in writing and delivered in
person or mailed by first-class mail (registered or certified, return receipt
requested), telecopier or overnight air courier guaranteeing next day delivery
addressed as follows:
68
<PAGE> 71
if to the Company:
Lomak Petroleum, Inc.
500 Throckmorton Street
Suite 2104
Fort Worth, Texas 76102
Fax No.: (817) 870-2601
Attention: President
if to the Trustee:
Keycorp Shareholder Services, Inc.
127 Public Square
15th Floor
Cleveland, Ohio 44114-1306
Fax. No.: (216) 689-5440
Attention: Mr. Michael Lang
The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be in writing and shall
be mailed by first class mail, certified or registered, return receipt
requested, or by overnight air courier guaranteeing next day delivery to its
last address shown on the Register. Any notice or communication shall also be so
mailed to any Person described in TIA ss. 313(c), to the extent required by the
TIA. Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
If a notice or communication is given in the manner provided above
within the time prescribed, it shall be deemed to have been duly given, whether
or not received by the addressee.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
69
<PAGE> 72
SECTION 13.3 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
- ----------------------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(b) at the Trustee's request, an Opinion of Counsel stating
that, in the opinion of such counsel, all such conditions precedent
have been complied with.
SECTION 13.4 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION OF COUNSEL.
- ----------------------------------------------------------------------
Each Officers' Certificate or Opinion of Counsel with respect to
compliance with a condition or covenant in this Indenture shall include:
(a) a statement that each Person executing such Officers'
Certificate or Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such Officers' Certificate or Opinion of Counsel are
based;
(c) a statement that, in the opinion of each such Person,
such examination or investigation has been made as is necessary to
enable it 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 or not, in the opinion of
such Person, such condition or covenant has been complied with;
provided, however, that an Opinion of Counsel may be based, insofar as
it relates to factual matters, on a certificate or certificates of
public officials, a legal opinion of counsel employed by the Company or
a Subsidiary or a certificate of or representations by an Officer or
Officers unless counsel rendering such Opinion of Counsel actually
knows that such certificate, legal opinion or representation is
erroneous.
SECTION 13.5 RULES BY TRUSTEE AND AGENTS.
- -----------------------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar, Paying Agent or Conversion Agent may make reasonable
rules and set reasonable requirements for its functions.
70
<PAGE> 73
SECTION 13.6 LEGAL HOLIDAYS.
- ----------------------------
If a payment date is not a Business Day at a place of payment, payment
may be made at such place of payment on the next succeeding Business Day, and no
additional interest shall accrue for the intervening period.
SECTION 13.7 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
Debentures or this Indenture or for any claim based on, with respect to or by
reason of such obligations or their creation including with respect to any
certificate delivered thereunder or hereunder. Each Holder by accepting a
Debenture waives and releases all such liability. The waiver and release
contained in this Section 13.7 are part of the consideration for the Company's
issuance of the Debentures.
SECTION 13.8 COUNTERPARTS.
- --------------------------
This Indenture may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
SECTION 13.9 GOVERNING LAW.
- ---------------------------
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN
THIS INDENTURE AND THE DEBENTURES, WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
SECTION 13.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
- ------------------------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 13.11 SUCCESSORS.
- -------------------------
All agreements of the Company in this Indenture and the Debentures
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
71
<PAGE> 74
SECTION 13.12 SEVERABILITY.
- ---------------------------
In case any provision of this Indenture or in the Debentures 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.
SECTION 13.13 TABLE OF CONTENTS, HEADINGS, ETC.
- -----------------------------------------------
The Table of Contents and headings of the Articles and Sections have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
executed as of the day and year first above written.
LOMAK PETROLEUM, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ------------------------------
Name:
KEYCORP SHAREHOLDER SERVICES, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ------------------------------
Name:
72
<PAGE> 75
EXHIBIT A
[Face of Debenture]
LOMAK PETROLEUM, INC.
__% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY 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 IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS DEBENTURE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION. EACH PURCHASER OF THIS DEBENTURE IS HEREBY NOTIFIED THAT THE
SELLER OF THIS DEBENTURE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS DEBENTURE AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) THIS DEBENTURE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (III)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (IV)
TO THE COMPANY OR (V) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS DEBENTURE FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
A-1
<PAGE> 76
[Institutional Accredited Investor Legend]
IN CONNECTION WITH ANY TRANSFER OF THIS DEBENTURE, THE HOLDER WILL
DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
CUSIP No. 541509 AB 1
No. $
------------------- -------------
LOMAK PETROLEUM, INC. promises to pay to
------------------------------
or registered assigns, the principal sum of
------------------------------------
Dollars on February 1, 2007.
Interest Payment Dates: February 1 and August 1, commencing
February 1, 1997.
Record Dates: January 15 and July 15.
Reference is made to the further provisions of this Debenture set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
LOMAK PETROLEUM, INC.
By:
---------------------------------
Chairman
(SEAL)
ATTEST:
By:
----------------------------------
Secretary
Authentication:
This is one of the Debentures referred to
in the within-mentioned Indenture:
KEYCORP SHAREHOLDER SERVICES, INC.,
as Trustee
By:
--------------------------------
Authorized Signature
Dated:
-----------------------------
A-2
<PAGE> 77
[Reverse Side]
Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Indenture dated as of December 20, 1996 between
Lomak Petroleum, Inc., a Delaware corporation, and Keycorp Shareholder Services,
Inc., as trustee, as amended from time to time in accordance with its terms (the
"Indenture").
1. INTEREST.
(a) The Company shall pay interest on the outstanding
principal amount of this Debenture at the rate of 6% per annum from the date of
original issuance of any Debentures under the Indenture until maturity. The
Company will pay interest semi-annually on February 1 and August 1 of each year
commencing February 1, 1997, or if any such day is not a Business Day, on the
next succeeding Business Day. Interest on the Debentures will accrue from the
most recent date on which interest has been paid or, if no interest has been
paid, from the date of original issuance of any Debentures under the Indenture;
provided, however, that if there is no existing Default in the payment of
interest and this Debenture is authenticated between a record date shown on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
(b) To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
(i) overdue Principal or repurchase price, if any, of the Debentures at the rate
borne by the Debentures and (ii) overdue installments of interest on the
Debentures at the rate borne by the Debentures.
2. METHOD OF PAYMENT. The Company will pay interest (except defaulted
interest) on the Debentures to Holders at the close of business on the record
date shown on the face hereof next preceding the applicable Interest Payment
Date (even if such Debentures are cancelled after such record date and on or
before such Interest Payment Date), except as provided in Section 10.2 of the
Indenture. Defaulted interest shall be paid to Holders as of a special record
date established for purposes of determining the Holders entitled thereto. The
Debentures will be payable as to Principal, repurchase price and interest at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, as set forth in the Indenture, or, at the option
of the Company, payment of interest may be made by check mailed to the Holders
at their addresses set forth in the Register, and provided that payment by wire
transfer of immediately available funds will be required with respect to
Principal of and interest on the Global Security. Such payment shall be in the
currency of the United States of America which at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT, REGISTRAR AND CONVERSION AGENT. Initially, the
Trustee will act as Paying Agent, Registrar and Conversion Agent. The Company
may change any Paying Agent, Registrar or Conversion Agent without notice to any
Holder. The Company or any Subsidiary may act in any such capacity.
4. INDENTURE. The Company issued the Debentures under the Indenture.
The terms of the Debentures include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939. The
Debentures are subject to all such terms, and Holders are referred to the
Indenture and the Trust Indenture Act of 1939 for a statement of such terms. The
Debentures are general unsecured obligations of the Company limited to
$55,000,000 in aggregate principal amount, subject to Section 2.7 of the
Indenture.
5. OPTIONAL REDEMPTION BY THE COMPANY. The Debentures are not subject
to redemption at the option of the Company prior to February 1, 2000.
Thereafter, the Debentures will be redeemable at any time prior to maturity at
the option of the Company, in whole or in part from time to time, upon not less
than 30 days' nor more than 60 days' prior notice to the Holders at the
redemption prices (expressed as percentages of principal amount) set forth
below:
A-3
<PAGE> 78
<TABLE>
<CAPTION>
AFTER FEBRUARY 1, PERCENTAGE
----------------- ----------
<S> <C> <C>
2000 104.0
2001 103.5
2002 103.0
2003 102.5
2004 102.0
2005 101.5
2006 101.0
</TABLE>
in each case together with accrued but unpaid interest, if any, up to but not
including the redemption date.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the
Company shall not be required to make mandatory redemptions with respect to the
Debentures.
7. REPURCHASE AT THE OPTION OF HOLDER. Upon a Change of Control, the
Company shall offer to repurchase all then outstanding Debentures at a
repurchase price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest to the Change of Control Payment Date, if any. Within 30 days
after a Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture. A Holder may tender or refrain from tendering all or any
portion of such Holder's Debentures, at such Holder's discretion, by completing
and signing the form entitled "Option of Holder to Elect Repurchase" below and
delivering such form, together with the Debentures with respect to which the
repurchase right is being exercised, duly endorsed for transfer to the Company,
to the Paying Agent. Any partial tender of Debentures must be made in an
integral multiple of $1,000.
8. CONVERSION. To convert a Debenture, the Holder thereof must (i)
complete and sign the "Form of Election to Convert" below (unless such Holder is
DTC, in which case the customary procedures of DTC will apply), (ii) surrender
such Debenture to the Conversion Agent, (iii) furnish appropriate endorsements
and transfer documents if required by the Registrar or the Conversion Agent,
(iv) pay any transfer or similar tax if required by Section 10.6 of the
Indenture and (v) make the payment described in the next sentence. If this
Debenture (even if this Debenture has been called for redemption or a Change of
Control Offer has been made) is converted after a regular interest payment
record date and prior to the related Interest Payment Date, the full interest
installment on this Debenture scheduled to be paid on such Interest Payment Date
shall be payable on such Interest Payment Date to the Holder of this Debenture
at the close of business on such record date. No fractional shares of Common
Stock will be issued upon conversion, but an adjustment in cash will be made, as
provided in the Indenture, with respect to any fractional share which would
otherwise be issuable upon conversion. A Holder is not entitled to any rights of
a holder of Common Stock until such Holder has converted its Debentures into
Common Stock as provided in the Indenture.
9. SUBORDINATION. The Debentures are subordinated to Senior
Indebtedness. To the extent provided in the Indenture, Senior Indebtedness must
be paid before the Debentures may be paid. The Company agrees, and each Holder
by accepting a Debenture agrees, to the subordination provisions contained in
the Indenture and authorizes the Trustee to give effect to such provisions, and
each Holder appoints the Trustee its attorney-in-fact for any and all such
purposes.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Debentures are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. A Holder may transfer or exchange Debentures as provided in the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the exchange or transfer of any Debentures (or portion thereof) during the 15
day period (or shorter) preceding the mailing of a notice of redemption or any
Debentures (or portion thereof) with respect to which a repurchase election has
been tendered and not withdrawn by the Holder thereof in accordance with Section
4.6 of the Indenture.
A-4
<PAGE> 79
11. PERSONS DEEMED OWNERS. The registered Holder of a Debenture may
be treated as its owner for all purposes.
12. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Debentures may be amended with the consent of the Holders of at
least a majority in aggregate principal amount of the Debentures then
outstanding and any existing Default (except a payment default) may be waived
with the consent of the Holders of at least a majority in aggregate principal
amount of the Debentures then outstanding. Without the consent of any Holder,
the Company and the Trustee may amend or supplement the Indenture or the
Debentures to (i) cure any ambiguity, defect or inconsistency, provided that
such amendment does not in the opinion of the Trustee adversely affect the
rights of any Holder, (ii) provide for uncertificated Debentures in addition to
or in lieu of certificated Debentures, (iii) comply with Sections 5.1 and 10.5
of the Indenture, (iv) make any change that does not adversely affect the rights
of any Holder, (v) comply with requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the TIA and (vi) add to the
covenants of the Company.
13. DEFAULTS AND REMEDIES. Events of Default include: (a) failure to
pay any Principal or repurchase price, if any, of any Debenture when due and
payable, whether at maturity, upon redemption, upon a Change of Control Offer or
otherwise, whether or not such payment is prohibited by the subordination
provisions of the Indenture; (b) failure to pay any interest on any Debenture
when due and payable, which failure continues for 30 days, whether or not such
payment is prohibited by the subordination provisions of the Indenture; (c)
failure to perform the other covenants of the Company in the Indenture, which
failure continues for 60 days after written notice as provided in the Indenture;
(d) default in payment when due of Principal of, or acceleration of, any
indebtedness for money borrowed by the Company or any Subsidiary in excess of $5
million, individually or in the aggregate, if such indebtedness is not
discharged, or such acceleration is not annulled, within 10 days after written
notice as provided in the Indenture; and (e) certain events of bankruptcy,
insolvency or reorganization of the Company or any Significant Subsidiary. If an
Event of Default shall occur and be continuing, the Trustee or the Holders of at
least 25% in aggregate principal amount of the then outstanding Debentures may
accelerate the maturity of all Debentures, except that in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, all
outstanding Debentures shall immediately so accelerate. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Debentures
at the request or direction of any of the Holders. Subject to certain
limitations, the Holders of a majority in aggregate principal amount of the
outstanding Debentures will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. The Company must furnish
an annual compliance certificate to the Trustee.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if were not Trustee; provided, however, that if the Trustee
acquires any conflicting interest as described in the Trust Indenture Act of
1939, it must eliminate such conflict or resign.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Debentures or the
Indenture or for any claim based on, with respect to, or by reason of, such
obligations or their creation. Each Holder by accepting a Debenture waives and
releases all such liability. The waiver and release contained in Article 13 of
the Indenture are part of the consideration for the Company's issuance of the
Debentures.
16. AUTHENTICATION. This Debenture shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to
Minors Act).
A-5
<PAGE> 80
18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES.
In addition to the rights provided to Holders of Debentures under the Indenture,
Holders of Transfer Restricted Securities shall have all the rights set forth in
the Registration Rights Agreement.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and the Registration Rights Agreement. Requests
may be made to:
Lomak Petroleum, Inc.
500 Throckmorton Street
Suite 2104
Fort Worth, Texas 76102
Attn: President
A-6
<PAGE> 81
SCHEDULE OF EXCHANGES OF GLOBAL SECURITY
FOR DEFINITIVE SECURITIES
<TABLE>
<CAPTION>
The following exchanges of this Global Security for Definitive
Securities have been made:
<S> <C> <C> <C> <C>
Amount of Principal Amount Signature of
decrease in Amount of increase of this Global authorized officer
Principal Amount in Principal Security following of Trustee or
of this Global Amount of this such decrease or Debentures
Date of Exchange Security Global Security increase) Custodian
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-7
<PAGE> 82
FORM OF ELECTION TO CONVERT
I (we) hereby irrevocably exercise the option to convert this
Debenture, or the portion below designated, into shares of Common Stock in
accordance with the terms of the Indenture referred to in this Debenture, and
direct that the shares issuable and deliverable upon conversion, together with
any check in payment for fractional shares, be issued in the name of and
delivered to the undersigned registered Holder hereof, unless a different name
has been indicated below. If shares are to be issued in the name of a Person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.
Portion of this Debenture
to be converted (if partial
conversion, $1,000 or an
integral multiple thereof): $
------------------
Signature:
-----------------------------
(exactly as your name appears on the
face of this Debenture)
Name:
-----------------------------------------
Title:
----------------------------------------
Address:
--------------------------------------
Phone No.:
-------------------------------------
Date:
-----------------------------------------
If shares are to be issued and registered in the name of a Person other than the
undersigned, please print the name and address, including zip code, and social
security or other taxpayer identification number of such Person below.
Name:
--------------------------------
Address:
-----------------------------
TIN/Social Security No:
--------------
Signature Guaranteed (if Common Stock to be issued
to other than registered holders):
By:
---------------------------------------
This signature shall be guaranteed by an eligible guarantor
institution (a bank or trust company having an office or
correspondent in the United States or a broker or dealer
which is a member of a registered securities exchange or the
National Association of Securities Dealers, Inc.) with membership
in an approved signature guaranty medallion program pursuant to
SEC Rule 17Ad-15.
A-8
<PAGE> 83
ASSIGNMENT FORM
(I) or (we) assign and transfer this Debenture to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-------------------------------------------------------
agent to transfer this Debenture on the Register. The agent may substitute
another to act for him.
Date:
----------------------
Signature:
-------------------------
(exactly as your name appears on the
face of this Debenture)
Name:
----------------------------------------
Title:
---------------------------------------
Address:
-------------------------------------
Phone No.:
------------------------------------
Date:
----------------------------------------
Signature Guaranteed:
By:
-------------------------------------
This signature shall be guaranteed by an eligible guarantor
institution (a bank or trust company having an office or
correspondent in the United States or a broker or
dealer which is a member of a registered securities
exchange or the National Association of Securities
Dealers, Inc.) with membership in an approved signature
guaranty medallion program pursuant to SEC Rule 17Ad-15.
==========================
[THE FOLLOWING IS APPLICABLE ONLY IF A RESTRICTED SECURITIES LEGEND APPEARS ON
THE FACT OF THIS DEBENTURE]
In connection with any transfer or exchange of any of the Debentures
evidenced by this certificate occurring prior to the date that is three years
after the later of the date of original issuance of such Debentures and the last
date, if any, on which such Debentures were owned by the Company or any
Affiliate of the Company, the undersigned confirms that such Debentures are
being:
[CONTINUED ON NEXT PAGE]
A-9
<PAGE> 84
CHECK ONE BOX BELOW:
[ ] (1) acquired for the undersigned's own account, without transfer
(in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture; or
[ ] (2) transferred to the Company; or
[ ] (3) transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
[ ] (4) transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
[ ] (5) transferred to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933), that has furnished to the Company and
the Trustee a signed letter containing certain representations
and agreements (the form of which letter appears as Exhibit C
to the Indenture); or
[ ] (6) transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Debentures evidenced by this certificate in the name of any Person other
than the registered holder thereof; provided, however, that if box (4), (5) or
(6) is checked, the Company, Trustee or Registrar may require, prior to
registering any such transfer of the Debentures, in their sole discretion, such
legal opinions, certifications and other information as the Company, Trustee or
Registrar has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, including but not
limited to the exemption provided by Rule 144 under such Act.
Your Name:
---------------------------------
(exactly as your name appears
on the face of this Debenture)
By:
----------------------------------------
Title:
-------------------------------------
Date:
---------------------------------------
Signature Guaranteed:
By:
------------------------------------
This signature shall be guaranteed by an eligible guarantor
institution (a bank or trust company having an office or
correspondent in the United States or a broker or
dealer which is a member of a registered securities
exchange or the National Association of Securities
Dealers, Inc.) with membership in an approved signature
guaranty medallion program pursuant to SEC Rule 17Ad-15.
A-10
<PAGE> 85
OPTION OF HOLDER TO ELECT REPURCHASE
To elect to have all or part of this Debenture repurchased by the
Company pursuant to Section 4.6 of the Indenture in connection with a Change of
Control Offer, state the amount you elect to have repurchased (if all, write
"ALL"): $_____________________.
Your Name:
-------------------------------------
(exactly as your name appears on the
face of this Debenture)
By:
-------------------------------------------
Title:
-----------------------------------------
Date:
-----------------------------------------
Signature Guaranteed:
By:
-----------------------------
This signature shall be guaranteed by an eligible guarantor
institution (a bank or trust company having an office or
correspondent in the United States or a broker or
dealer which is a member of a registered securities
exchange or the National Association of Securities
Dealers, Inc.) with membership in an approved signature
guaranty medallion program pursuant to SEC Rule 17Ad-15.
A-11
<PAGE> 86
EXHIBIT B
TRANSFEREE LETTER OF REPRESENTATION
Lomak Petroleum, Inc.
c/o Keycorp Shareholder Services, Inc.
127 Public Square
15th Floor
Cleveland, Ohio 44114-1306
Dear Sirs:
This Certificate is delivered to request a transfer of $___________
principal amount of the 6% Convertible Subordinated Debentures due 2007 (the
"Debentures") of Lomak Petroleum, Inc. (the "Company").
Upon transfer, the Debentures would be registered in the name of the
new beneficial owner as follows:
Name:
-----------------------------------------------
Address:
--------------------------------------------
Taxpayer ID Number:
---------------------------------
The undersigned represents and warrant to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring the Debentures 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 business matters as to be capable of evaluating the merits and risk of
our investment in the Debentures and invest in or purchase securities similar to
the Debentures in the normal course of our business. We and any accounts for
which we are acting are each able to bear the economic risk of our or its
investment.
2. We understand that the Debentures have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Debentures to offer, sell or otherwise
transfer such Debentures prior to the date which is three 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 Debentures (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act, to a Person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own account
or for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing
for its own account or for the account of such an institutional "accredited
investor," in each case in a minimum principal amount of Debentures of $250,000
or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of our property or the property of
such investor account or accounts be at all times within our or their control
and in compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Debentures is proposed
to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to the Company and the Trustee, which
shall provide, among
B-1
<PAGE> 87
other things, that the transferee is an institutional "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
and that it is acquiring such Debentures for investment purposes and not for
distribution in violation of the Securities Act. Each purchaser acknowledges
that the Company, Trustee and Registrar reserve the right prior to any offer,
sale or other transfer prior to the Resale Termination Date of the Debentures
pursuant to clauses (d), (e) or (f) above to require the delivery of an opinion
of counsel, certifications and/or other information satisfactory to the Company,
Trustee and Registrar.
TRANSFEREE:
--------------------------------
BY:
----------------------------------------
B-2
<PAGE> 88
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE................................................. 1
Section 1.1 Definitions.......................................................................... 1
Section 1.2 Other Definitions.................................................................... 6
Section 1.3 Incorporation by Reference of Trust Indenture Act.................................... 7
Section 1.4 Rules of Construction................................................................ 7
ARTICLE 2. THE DEBENTURES............................................................................. 8
Section 2.1 Form and Dating...................................................................... 8
Section 2.2 Execution and Authentication......................................................... 10
Section 2.3 Registrar, Paying Agent and Conversion Agent......................................... 10
Section 2.4 Paying Agent to Hold Money in Trust.................................................. 11
Section 2.5 Holder Lists......................................................................... 11
Section 2.6 Transfer and Exchange................................................................ 12
Section 2.7 Replacement Debentures............................................................... 18
Section 2.8 Outstanding Debentures............................................................... 19
Section 2.9 Treasury Debentures.................................................................. 20
Section 2.10 Temporary Debentures................................................................. 20
Section 2.11 Cancellation......................................................................... 21
Section 2.12 Defaulted Interest................................................................... 21
Section 2.13 Deposit of Moneys.................................................................... 22
ARTICLE 3. REDEMPTION................................................................................. 22
Section 3.1 Notices to Trustee................................................................... 22
Section 3.2 Selection of Debentures to be Redeemed............................................... 22
Section 3.3 Notice of Redemption................................................................. 23
Section 3.4 Effect of Notice of Redemption; Definition of Redemption Price....................... 24
Section 3.5 Deposit of Redemption Price.......................................................... 24
Section 3.6 Debentures Redeemed in Part.......................................................... 24
ARTICLE 4. COVENANTS.................................................................................. 25
Section 4.1 Payment of Debentures................................................................ 25
Section 4.2 Stay, Extension and Usury Laws....................................................... 25
Section 4.3 Continued Existence.................................................................. 25
Section 4.4 Reports.............................................................................. 26
Section 4.5 Taxes................................................................................ 26
Section 4.6 Change of Control.................................................................... 26
Section 4.7 Limitation on Dividend Restrictions Affecting Subsidiaries........................... 29
Section 4.8 Compliance Certificate............................................................... 29
Section 4.9 Further Assurance to the Trustee..................................................... 30
</TABLE>
-i-
<PAGE> 89
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 5. SUCCESSORS................................................................................. 30
Section 5.1 When Company May Merge or Sell Assets................................................ 30
Section 5.2 Successor Substituted................................................................ 30
ARTICLE 6. DEFAULTS AND REMEDIES...................................................................... 31
Section 6.1 Events of Default.................................................................... 31
Section 6.2 Acceleration......................................................................... 32
Section 6.3 Other Remedies....................................................................... 33
Section 6.4 Waiver of Existing and Past Defaults................................................. 33
Section 6.5 Control by Majority.................................................................. 34
Section 6.6 Limitation on Suits.................................................................. 34
Section 6.7 Rights of Holders to Receive Payment................................................. 34
Section 6.8 Collection Suit by Trustee........................................................... 35
Section 6.9 Trustee May File Proofs of Claim..................................................... 35
Section 6.10 Priorities........................................................................... 35
Section 6.11 Undertaking for Costs................................................................ 36
ARTICLE 7. TRUSTEE.................................................................................... 36
Section 7.1 Duties of Trustee.................................................................... 36
Section 7.2 Rights of Trustee.................................................................... 37
Section 7.3 Individual Rights of Trustee......................................................... 38
Section 7.4 Trustee's Disclaimer................................................................. 38
Section 7.5 Notice of Defaults................................................................... 38
Section 7.6 Reports by Trustee to Holders........................................................ 38
Section 7.7 Compensation and Indemnity........................................................... 39
Section 7.8 Replacement of Trustee............................................................... 40
Section 7.9 Successor Trustee by Merger.......................................................... 41
Section 7.10 Eligibility; Disqualification........................................................ 41
Section 7.11 Preferential Collection of Claims Against Company.................................... 41
ARTICLE 8. DISCHARGE OF INDENTURE..................................................................... 41
Section 8.1 Termination of Company's Obligations................................................. 41
Section 8.2 Application of Trust Money........................................................... 43
Section 8.3 Repayment to Company................................................................. 43
Section 8.4 Reinstatement........................................................................ 43
ARTICLE 9. AMENDMENTS................................................................................. 44
Section 9.1 Without Consent of Holders........................................................... 44
Section 9.2 With Consent of Holders.............................................................. 44
Section 9.3 Compliance with Trust Indenture Act.................................................. 46
Section 9.4 Revocation and Effect of Consents.................................................... 46
Section 9.5 Notation on or Exchange of Debentures................................................ 46
Section 9.6 Trustee Protected.................................................................... 47
</TABLE>
-ii-
<PAGE> 90
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 10. CONVERSION................................................................................. 47
Section 10.1 Conversion Privilege................................................................. 47
Section 10.2 Conversion Procedure................................................................. 47
Section 10.3 Cash Payments in Lieu of Fractional Shares........................................... 48
Section 10.4 Adjustment of Conversion Price....................................................... 49
Section 10.5 Effect of Reclassification, Consolidation, Merger or Sale............................ 53
Section 10.6 Taxes on Shares Issued............................................................... 54
Section 10.7 Reservation of Shares; Shares to be Fully Paid; Compliance with
Government Requirements; Listing of Common Stock..................................... 54
Section 10.8 Responsibility of Trustee Requirements............................................... 55
Section 10.9 Notice to Holders Prior to Certain Actions........................................... 56
ARTICLE 11. SUBORDINATION.............................................................................. 56
Section 11.1 Agreement to Subordinate............................................................. 56
Section 11.2 Payment Over of Proceeds Upon Dissolution, Etc....................................... 57
Section 11.3 Prior Payment to Senior Indebtedness Upon Acceleration of
Debentures........................................................................... 58
Section 11.4 No Payment When Senior Indebtedness in Default....................................... 58
Section 11.5 Payment Permitted If No Default...................................................... 59
Section 11.6 Subrogation to Rights of Holders of Senior Indebtedness.............................. 59
Section 11.7 Provisions Solely to Define Relative Rights.......................................... 59
Section 11.8 Trustee to Effectuate Subordination.................................................. 60
Section 11.9 No Waiver of Subordination Provisions................................................ 60
Section 11.10 Notice to Trustee.................................................................... 60
Section 11.11 Reliance on Judicial Order or Certificate of Liquidating Agent....................... 61
Section 11.12 Trustee Not Fiduciary for Holders of Senior Indebtedness............................. 62
Section 11.13 Rights of Trustee as Holder of Senior Indebtedness; Preservation
of Trustee's Rights.................................................................. 62
Section 11.14 Article Applicable to Paying Agents.................................................. 62
Section 11.15 Certain Conversions Deemed Payment................................................... 62
ARTICLE 12. MEETINGS OF HOLDERS........................................................................ 63
Section 12.1 Action by Holders.................................................................... 63
Section 12.2 Purposes for Which Meetings May Be Called............................................ 63
Section 12.3 Manner of Calling Meetings........................................................... 64
Section 12.4 Call of Meetings by the Company or Holders........................................... 64
Section 12.5 Who May Attend and Vote at Meetings.................................................. 64
Section 12.6 Regulations May be Made by Trustee; Conduct of the Meeting;
Voting Rights; Adjournment........................................................... 64
Section 12.7 Voting at the Meeting and Record to be Kept.......................................... 65
Section 12.8 Exercise of Rights of Trustee or Holders May Not Be Hindered
or Delayed by Call of Meeting........................................................ 66
Section 12.9 Communication by Holders with Other Holders.......................................... 66
</TABLE>
-iii-
<PAGE> 91
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 13. MISCELLANEOUS.............................................................................. 66
Section 13.1 Trust Indenture Act Controls......................................................... 66
Section 13.2 Notices.............................................................................. 66
Section 13.3 Certificate and Opinion as to Conditions Precedent................................... 67
Section 13.4 Statements Required in Certificate or Opinion of Counsel............................. 68
Section 13.5 Rules by Trustee and Agents.......................................................... 68
Section 13.6 Legal Holidays....................................................................... 68
Section 13.7 No Recourse Against Others........................................................... 68
Section 13.8 Counterparts......................................................................... 69
Section 13.9 Governing Law........................................................................ 69
Section 13.10 No Adverse Interpretation of Other Agreements........................................ 69
Section 13.11 Successors........................................................................... 69
Section 13.12 Severability......................................................................... 69
Section 13.13 Table of Contents, Headings, Etc..................................................... 69
EXHIBITS
Exhibit A - Form of Debenture
Exhibit B - Transferee Letter of Representation
</TABLE>
-iv-
<PAGE> 92
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
INDENTURE
TIA SECTION SECTION
----------- ---------
<S> <C>
310(a)(1)..............................................................7.10
(a)(2)..............................................................7.10
(a)(3)...............................................................N.A
(a)(4)...............................................................N.A
(a)(5)..............................................................7.10
(b)............................................................7.8, 7.10
(c)..................................................................N.A
311(a).................................................................7.11
(b).................................................................7.11
(c)..................................................................N.A
312(a)..................................................................2.5
(b).................................................................12.9
(c).................................................................12.9
313(a)..................................................................7.6
(b)(1)...............................................................N.A
(b)(2)...............................................................7.6
(c)............................................................7.6, 13.2
(d)..................................................................7.6
314(a).......................................................4.4, 4.8, 13.2
(b)..................................................................N.A
(c)(1)........................................................13.3, 13.4
(c)(2)........................................................13.3, 13.4
(c)(3)...............................................................N.A
(d)..................................................................N.A
(e).................................................................13.4
(f)..................................................................N.A
315(a)...............................................................7.1(b)
(b)............................................................7.5, 13.2
(c)...............................................................7.1(a)
(d)...............................................................7.1(c)
(e).................................................................6.11
316(a)(last sentence)...................................................2.9
(a)(1)(A)............................................................6.5
(a)(1)(B)............................................................6.4
(a)(2)...............................................................N.A
(b)..................................................................6.7
(c)............................................................9.4, 12.1
317(a)(1)...............................................................6.8
(a)(2)...............................................................6.9
(b)..................................................................2.4
318(a).................................................................13.1
<FN>
- --------------------
*This Cross-Reference Table shall not, for any purpose, be deemed a part of this
Indenture.
</TABLE>
<PAGE> 1
Exhibit 4.1(b)
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of December 20, 1996, by and between Lomak
Petroleum, Inc., a Delaware corporation (the "Company"), and Forum Capital
Markets L.P., McDonald & Company Securities, Inc. and Morgan Keegan & Company,
Inc. (together, the "Initial Purchasers"). The Company proposes to issue and
sell to the Initial Purchasers, upon the terms set forth in a purchase
agreement dated concurrently herewith (the "Purchase Agreement") $55,000,000
aggregate principal amount of its Convertible Subordinated Debentures due 2007
(the "Debentures"). The Debentures are convertible into Common Stock (as
defined herein) as provided in the Debentures and the Indenture (as defined
herein). As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the Initial Purchasers'
obligations thereunder, the Company agrees with the Initial Purchasers, for the
benefit of the Initial Purchasers and the other Holders (as defined herein), as
follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall have
the following meanings:
"ACT" means the Securities Act of 1933, as amended from time to time.
"CLOSING DATE" has the meaning set forth in the Purchase Agreement.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of
the Company, or any successor class thereto, issuable upon conversion of the
Debentures.
"COMMISSION" means the Securities and Exchange Commission.
"DAMAGES PAYMENT DATE" means February 1 and August 1 in each year.
"EFFECTIVENESS PERIOD" has the meaning set forth in Section 2 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"HOLDERS" means Persons owning Transfer Restricted Securities.
"INDENTURE" means the Indenture, to be dated the date hereof, between
the Company and Keycorp Shareholder Services, Inc. or other comparable entity
selected by the Company, as trustee (the "TRUSTEE"), pursuant to which the
Debentures are to be issued, as such Indenture is amended or supplemented from
time to time in accordance with the terms thereof.
<PAGE> 2
"PERSON" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"PROSPECTUS" means the prospectus included in the Shelf Registration
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
"RECORD HOLDER" means with respect to any Damages Payment Date
relating to the Debentures, each Person who is a holder of Debentures on the
record date with respect to the interest payment on the Debentures due on such
date and with respect to any Damages Payment Date relating to the Common Stock,
each Person who is a holder of Common Stock on the day that is fifteen days
prior to such Damages Payment Date.
"REGISTRATION DEFAULT" has the meaning set forth in Section 4 hereof.
"SHELF REGISTRATION STATEMENT" has the meaning set forth in Section 2
hereof.
"SUPPLEMENTAL REGISTRATION PAYMENT" has the meaning set forth in
Section 4 hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
"TRANSFER RESTRICTED SECURITIES" means each Debenture and, if such
Debenture has been converted, each share of Common Stock issued in connection
with such conversion, until (a) the date on which such Debenture or shares of
Common Stock, as applicable, have been effectively registered under the Act and
disposed of in accordance with the Shelf Registration Statement or (b) the date
on which such Debenture or shares of Common Stock, as applicable, are
distributed to the public pursuant to Rule 144 or any other applicable
exemption under the Act without additional restriction upon public resale.
"UNDERWRITTEN OFFERING" means a registration in which securities of
the Company are sold to an underwriter for re-offering to the public.
2. SHELF REGISTRATION. The Company shall use its reasonable best
efforts to file a registration statement with the Commission within 90 days
after the Closing Date relating to the offer and sale of the Transfer
Restricted Securities by Holders from time to time pursuant to Rule 415 under
the Act and in accordance with the methods of distribution set forth therein,
which registration statement may be substituted for by one or more subsequent
registration statements each relating to the offer and sale of the Transfer
Restricted Securities by Holders from time to time (as in effect from time to
time, the "Shelf Registration Statement"), and the Company shall use its
reasonable best efforts to cause such Shelf Registration Statement to be
declared effective by the Commission within 150 days after the Closing Date,
PROVIDED, HOWEVER, that the Company
- 2 -
<PAGE> 3
may delay such filing or effectiveness under the circumstances and during the
periods described in Section 3 hereof. In addition, the Company shall use its
reasonable best efforts to keep the Shelf Registration Statement continuously
effective, supplemented and amended for a period (the "Effectiveness Period")
of not less than three years following the Closing Date or such shorter period
that will terminate when all the Debentures and shares of Common Stock covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement.
3. DELAY PERIODS; SUSPENSION OF SALES.
(a) If at any time prior to the expiration of the
Effectiveness Period, counsel to the Company (which counsel shall be
experienced in securities laws matters) has determined in good faith that the
filing of the Shelf Registration Statement or the compliance by the Company
with its disclosure obligations in connection with the Shelf Registration
Statement would require the disclosure of material information which the
Company has a bona fide business purpose for preserving as confidential, then
the Company may delay the filing of the Shelf Registration Statement (if not
then filed) and shall not be required to maintain the effectiveness thereof or
amend or supplement the Shelf Registration Statement for a period (an
"Information Delay Period") expiring upon the earlier to occur of (A) the date
on which such material information is disclosed to the public or ceases to be
material or the Company is able to so comply with its disclosure obligations
and Commission requirements or (B) 30 days after counsel to the Company makes
such good faith determination. There shall not be more than four Information
Delay Periods during the Effectiveness Period, and there shall not be two
Information Delay Periods during any contiguous 90 day period.
(b) If at any time prior to the expiration of the
Effectiveness Period, the Company is advised by a nationally recognized
investment banking firm selected by the Company that, in such firm's written
reasonable opinion addressed to the Company (a copy of which shall be delivered
to each Holder of Transfer Restricted Securities registered under the Shelf
Registration Statement), sales of Common Stock pursuant to the Shelf
Registration Statement at such time would materially adversely affect any
immediately planned underwritten public equity financing by the Company of at
least $5 million, the Company shall not be required to maintain the
effectiveness of the Shelf Registration Statement or amend or supplement the
Shelf Registration Statement for a period (a "Transaction Delay Period")
commencing on the date of pricing of such equity financing and expiring upon
the earliest to occur of (i) the abandonment of such financing or (ii) 90 days
after the completion of such financing. There shall not be more than two
Transaction Delay Periods during the Effectiveness Period.
(c) A Transaction Delay Period and an Information Delay
Period are hereinafter collectively referred to as "Delay Periods" or a "Delay
Period." The Company will give prompt written notice, in the manner prescribed
by Section 10(a) hereof, to each Holder of each Delay Period. Such notice
shall be given (i) in the case of a Transaction Delay Period, 30 days in
advance of the commencement of such Delay Period and (ii) in the case of an
Information Delay Period, as soon as practicable after the circumstances giving
rise thereto are identified. Such
- 3 -
<PAGE> 4
notice shall state to the extent, if any, as is practicable, an estimate of the
duration of such Delay Period. Each Holder, by his acceptance of any Transfer
Restricted Securities, agrees that (i) upon receipt of such notice of an
Information Delay Period it will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, (ii) upon
receipt of such notice of a Transaction Delay Period it will forthwith
discontinue disposition of the Common Stock pursuant to the Shelf Registration
Statement and (iii) in either such case, will not deliver any prospectus
forming a part of the Shelf Registration Statement in connection with any sale
of Transfer Restricted Securities or Common Stock, as applicable until the
expiration of such Delay Period.
4. SUPPLEMENTAL REGISTRATION PAYMENT.
(a) Except as provided in Section 4(b), if (i) the Shelf
Registration Statement is not filed with the Commission within 60 days after
the Closing Date, (ii) the Shelf Registration Statement has not been declared
effective by the Commission within 150 days after the Closing Date (the
"Effectiveness Target Date"), or (iii) at any time prior to the third
anniversary of the Closing Date the Shelf Registration Statement is filed and
declared effective but shall thereafter cease to be effective (other than as a
result of the effectiveness of a successor registration statement) or fail to
be useable for its intended purpose without being succeeded promptly by a
post-effective amendment to the Shelf Registration Statement that cures such
failure and that is itself declared effective within 75 days after the Shelf
Registration Statement ceases to be effective (each such event referred to in
clauses (i) through (iii), a "Registration Default"), the Company will pay
supplemental registration payments (a "Supplemental Registration Payment") to
each Holder who has complied with its obligations under this Agreement. During
the first 90-day period immediately following the occurrence of such
Registration Default, the amount of such Supplemental Registration Payment $.05
per week per $1,000 principal amount of Debentures and, if applicable, $.0005
per week per share of Common Stock constituting Transfer Restricted Securities
registered under the Shelf Registration Statement (subject to adjustment in the
event of stock splits, stock consolidations, stock dividends and the like).
During each subsequent 90-day period following the occurrence of such
Registration Default, the amount of the Supplemental Registration Payment shall
increase by an additional $.05 per week per $1,000 principal amount of
Debentures and $.0005 per week per share of Common Stock constituting Transfer
Restricted Securities registered under the Shelf Registration Statement
(subject to adjustment as set forth above); provided, however, the maximum
amount of the Supplemental Registration Payment shall be $.20 per week per
$1,000 principal amount of Debentures and $.002 per week per share of Common
Stock constituting Transfer Restricted Securities registered under the Shelf
Registration Statement (subject to adjustment as set forth above). All accrued
Supplemental Registration Payments shall be paid by the Company to Record
Holders entitled thereto on the next succeeding Damages Payment Date by wire
transfer of immediately available funds or by federal funds check. Following
the cure of all Registration Defaults, the accrual of Supplemental Registration
Payments will cease, but any Supplemental Registration Payments accrued through
the date of cure shall be paid to Record Holders on the next succeeding Damages
Payment Date. If the Registration Defaults described in either of clauses (i)
or (ii) above arose solely because the applicable Holder
- 4 -
<PAGE> 5
or Holders failed to provide the Company with certain information within 20
business days after request therefor pursuant to Section 5(m), Supplemental
Registration Payments in respect thereof will not begin to accrue until five
business days after such information has been provided to the Company.
All of the Company's obligations set forth in the preceding
paragraph which are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
(b) Notwithstanding the foregoing, the time periods
specified in Section 4(a) shall be tolled during the pendency of any
circumstances beyond the Company's control that prevent performance by the
Company of its obligations hereunder despite the Company's best efforts. Such
matters include events affecting issuers generally, such as the temporary
closure of federal agencies, and events directly affecting the Company, such as
the Company's inability to obtain all information regarding an acquisition
entity within a time period that would permit independent auditors to prepare
any required audited financial information on a timely basis.
5. REGISTRATION PROCEDURES.
In connection with the Shelf Registration Statement and any
Prospectus required by this Agreement to permit the sale or resale of Transfer
Restricted Securities, the following provisions shall apply:
(a) The Company shall furnish to each Holder, prior to
the filing thereof with the Commission, a copy of the Shelf Registration
Statement and each amendment thereto or each amendment or supplement to the
Prospectus included therein, and shall use its reasonable best efforts to
reflect in each such document, when so filed with the Commission, such comments
as any Holder reasonably may propose.
(b) The Company shall take such action as may be
necessary so that (i) the Shelf Registration Statement and any amendment
thereto and any Prospectus forming a part thereof and any supplement or
amendment thereto complies in all material respects with the Act and the rules
and regulations thereunder, (ii) the Shelf Registration and any amendment
thereto (in either case, other than with respect to written information
furnished to the Company by or on behalf of any Holder specifically for
inclusion therein) does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make any statement therein not misleading and
(C) the Prospectus and any supplement thereto (in either case, other than with
respect to such information from Holders), does 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 light of the circumstances under which they were
made, not misleading.
- 5 -
<PAGE> 6
(c) The Company shall promptly advise the Holders of
Transfer Restricted Securities registered under the Shelf Registration
Statement (which advice pursuant to clauses (ii) - (iv) shall be accompanied by
an instruction to suspend the use of the Prospectus until the requisite changes
have been made) and, if requested by such Persons, to confirm such advice in
writing;
(i) when the Shelf Registration Statement and any
amendment thereto has been filed with the Commission and when
the Shelf Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for amendments
to the Shelf Registration Statement or amendments or
supplements to the Prospectus or for additional information
relating thereto;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Shelf Registration
Statement or of the suspension by any state securities
commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding
purposes; and
(iv) of the happening of any event that requires the
making of any changes in the Shelf Registration Statement or
the Prospectus so that, as of such date, the Shelf
Registration Statement and the Prospectus do not contain an
untrue statement of a material fact and do not omit to state a
material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not
misleading.
(d) If at any time the Commission shall issue any stop
order suspending the effectiveness of the Shelf Registration Statement, or any
state securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
shall use its reasonable best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time.
(e) The Company shall furnish to each Holder of Transfer
Restricted Securities included under the Shelf Registration Statement, without
charge, at least one copy of the Shelf Registration Statement and each
post-effective amendment thereto, including all financial statements and
schedules, documents incorporated by reference therein and, if the Holder so
requests in writing, all exhibits (including exhibits incorporated therein by
reference).
(f) The Company shall, during the Effectiveness Period,
deliver to each Holder of Transfer Restricted Securities included under the
Shelf Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary prospectus) included in the Shelf Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
- 6 -
<PAGE> 7
request; and the Company consents to the use of the Prospectus and any
amendment or supplement thereto by each of the selling Holders in connection
with the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto during the Effectiveness
Period.
(g) Prior to any public offering pursuant to the Shelf
Registration Statement, the Company shall use its reasonable best efforts to
register or qualify or cooperate with the Holders of Transfer Restricted
Securities registered thereunder, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
such Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as such Holders or underwriters reasonably request in
writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of such Transfer Restricted
Securities; provided, however, that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process or to
taxation in any jurisdiction where it is not then so subject.
(h) Unless any Transfer Restricted Securities shall be in
book-entry form only, the Company shall cooperate with the Holders and the
underwriter(s), if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold under the
Shelf Registration Statement, free of any restrictive legends and in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request in connection with the sales of Transfer
Restricted Securities pursuant to the Shelf Registration Statement.
(i) Upon the occurrence of any event contemplated by
Section 5(c)(ii) - (iv), the Company shall file (and use its reasonable best
efforts to have declared as soon as possible) a post-effective amendment to the
Shelf Registration Statement or an amendment or supplement to the Prospectus or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities registered under the Shelf
Registration Statement, the Prospectus will not contain an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading. Each Holder of Transfer Restricted Securities registered under the
Shelf Registration Statement agrees by acquisition of such Transfer Restricted
Securities that, upon receipt of any notice from the Company of the existence
of any fact of the kind described in Section 5(c)(ii) - (iv) hereof, such
Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the Shelf Registration Statement until such Holder receives copies
of the supplemented or amended Prospectus contemplated by this Section 5(i), or
until such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and such Holder has received copies of any
additional or supplemental filings which are incorporated by reference in the
Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time
- 7 -
<PAGE> 8
period regarding the Company's obligations to maintain the effectiveness of the
Shelf Registration Statement set forth in Section 2 hereof shall be extended by
the number of days during the period from and including the date of the giving
of such notice pursuant to Section 5(c) hereof to and including the date when
such Holder shall have received the copies of the supplemented or amended
Prospectus contemplated by this Section 5(i).
(j) The Company shall provide CUSIP numbers for all
Transfer Restricted Securities registered under the Shelf Registration
Statement, in the event of and at the time of any distribution thereof to
Holders, not later than the effective date of the Shelf Registration Statement
and provide the Trustee and the transfer agent for the Common Stock with
printed certificates for such Transfer Restricted Securities which are in a
form eligible for deposit with the Depository Trust Company.
(k) The Company shall use its reasonable best efforts to
comply with all applicable rules and regulations of the Commission, and make
generally available to its security holders or otherwise provide in accordance
with Section 11(a) of the Act, as soon as practicable after the effective date
of the Shelf Registration Statement an earnings statement satisfying the
provisions of Section 11(a) of the Act.
(l) The Company shall cause the Indenture to be qualified
under the TIA in a timely manner not later than the effective date of the Shelf
Registration Statement, and, in connection therewith, cooperate with the
Trustee and the Holders of Debentures to effect such changes to the Indenture
as may be required for such Indenture to be so qualified in accordance with the
terms of the TIA.
(m) The Company may require each Holder of Transfer
Restricted Securities to be registered under the Shelf Registration Statement
to furnish to the Company such information regarding such Holder and the
distribution of such Holder's securities thereunder as the Company may from
time to time reasonably require for inclusion in the Shelf Registration
Statement and the Company may exclude from such registration the Transfer
Restricted Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
(n) The Company shall, if requested by the Holders of
Transfer Restricted Securities being sold in an Underwritten Offering or the
underwriter(s) thereof, promptly incorporate in the Shelf Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment,
if necessary, such information as such underwriters and Holders reasonably
agree should be included therein and to which the Company does not reasonably
object including, without limitation, information relating to the plan of
distribution of the Transfer Restricted Securities, information with respect to
the principal amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and with respect to any
other terms of the offering of the Transfer Restricted Securities to be sold in
such offering; and shall make all required filings of such Prospectus
supplement or post-effective amendment as soon as
- 8 -
<PAGE> 9
practicable after the Company is notified of the matters to be incorporated in
such Prospectus supplement or post-effective amendment.
(o) The Company shall enter into such customary
agreements (including an underwriting agreement in customary form, if
applicable) and take all such other appropriate actions in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant to
the Shelf Registration Statement, and in connection therewith, the Company
shall (1) make such representations and warranties to the Holders of Transfer
Restricted Securities registered thereunder and the underwriter(s), if any, in
form, substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings; (2) obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to such underwriters and the Holders of a
majority of the Transfer Restricted Securities being sold) addressed to each
such Holder and underwriter covering such matters as are customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by such Holders and underwriters; (3) if and to the extent
permitted by Statement of Auditing Standards No. 72, obtain comfort letters and
updates thereof from the Company's independent certified public accountants
addressed to the underwriters requesting the same, such letters to be in
customary form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings; (4) in connection
with an Underwritten Offering only, set forth in full or incorporate by
reference in the underwriting agreement the indemnification provisions and
procedures of Section 6 hereof with respect to all parties to be indemnified
pursuant to said Section; and (5) deliver such documents and certificates as
may be reasonably requested by such Holders or underwriters to evidence
compliance with Section 5(i) and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company pursuant
to this Section 5(o). The foregoing actions set forth in clauses (1), (2), (3)
and (5) of this Section 5(o) shall be performed at each closing under any
underwriting or similar agreement as and to the extent required thereunder.
(p) The Company shall make available at reasonable times
for inspection by the Holders of the Transfer Restricted Securities, any
underwriter participating in any disposition pursuant to the Shelf Registration
Statement, and any attorney or accountant retained by any such Holders or
underwriters, all financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries; and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in connection
with the Shelf Registration Statement subsequent to the filing thereof as is
customary for similar due diligence examinations; PROVIDED, HOWEVER, that any
information that is designated in writing by the Company, in good faith, as
confidential at the time of delivery of such information shall be kept
confidential by such Holders or any such underwriter, attorney or accountant,
unless such disclosure is made in connection with a court proceeding or
required by law, or such information becomes available to the public generally
or through a third party without an accompanying obligation of confidentiality;
and PROVIDED, FURTHER that the foregoing inspection and information gathering
shall, to the greatest extent possible, be
- 9 -
<PAGE> 10
coordinated on behalf of the Holders and the other parties entitled thereto by
one counsel designated by and on behalf of such Holders and other parties.
(q) The Company shall use its reasonable best efforts,
subject to any applicable rules thereto, to cause all Common Stock included
among the Transfer Restricted Securities to be listed on each securities
exchange on which the Common Stock is listed and, if requested by the Holders
of a majority of in aggregate principal amount of Debentures, to list the
Debentures registered under the Shelf Registration Statement on a national
securities exchange or the Nasdaq Stock Market.
6. REGISTRATION EXPENSES.
(a) Except as otherwise provided in Section 8, the
Company shall bear all expenses incurred in connection with the performance of
or compliance with its obligations under Sections 2, 4 and 5 hereof, including
without limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses and fees and disbursements of counsel for the Company and all
independent certified public accountants, and other persons retained by the
Company (all such expenses being herein called "Registration Expenses").
Registration Expenses shall also include the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the New York Stock Exchange. The Company will reimburse the
Holders for the reasonable fees and disbursements of one firm of attorneys
chosen by the Holders of a majority in aggregate principal amount of the
Debentures to be sold pursuant to the Shelf Registration Statement to act as
counsel therefor in connection therewith.
(b) Each Holder will pay any discounts and commissions
incurred upon the sale of securities by it under the Shelf Registration
Statement.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) In connection with any Shelf Registration Statement,
the Company shall indemnify and hold harmless each Holder, its officers and
directors and each Person who controls such Holder within the meaning of the
Act against any and all losses, claims, damages or liabilities and expenses
whatsoever as incurred, insofar as such losses, claims, damages, liabilities
and expenses arise out of or are based upon any untrue or alleged untrue
statement of material fact contained in the Shelf Registration Statement, or
any Prospectus or preliminary Prospectus or any amendment thereof or supplement
thereto or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and agrees to reimburse each such
indemnified Person, as incurred, for any legal or other expense reasonably
incurred by them in connection with
- 10 -
<PAGE> 11
investigating or defending any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER, that (i) the Company will not be liable in any case to the
extent that any loss, claim, damage, liability or expense arises out of or is
based upon any such untrue or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such Holder
specifically for inclusion therein and (ii) the foregoing indemnity with
respect to any untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus relating to the Shelf
Registration Statement shall not inure to the benefit of any Holder (or any
person controlling such Holder) from whom the person asserting any such loss,
claim, damage or liability purchases any of the Transfer Restricted Securities
that are the subject thereof if such person did not receive a copy of the final
prospectus (or the final prospectus as supplemented) at or prior to the written
confirmation of the sale of such Transfer Restricted Securities to such person
and the untrue statement or alleged omission contained in the preliminary
prospectus was corrected in the final prospectus (or the final prospectus as
supplemented).
The Company also agrees to indemnify or contribute to losses
of, as provided in Section 7(d), any underwriters of Transfer Restricted
Securities registered under the Shelf Registration Statement, their officers
and directors and each Person, if any, who controls any such underwriter
(within the meaning of the Act) on substantially the same basis as that of the
indemnification of the Holders provided in this Section 7(a) and shall, if
requested by any Holder, enter into an underwriting agreement reflecting such
agreement, as provided in Section 5(o) hereof.
(b) Each Holder shall indemnify and hold harmless the
Company, its directors and officers and each Person, if any, who controls the
Company (within the meaning of the Act) against any and all losses, claims,
damages, liabilities and expenses described in the indemnity contained in
Section 7(a) hereof, as incurred, resulting from any untrue or alleged untrue
statement of material fact contained in the Shelf Registration Statement or any
amendment thereof or supplement thereto or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading to the extent, but only to the
extent, that such loss, claim, damage, liability or expense relates to or
arises from information relating to such Holder furnished in writing by such
Holder specifically for use in the Shelf Registration Statement; PROVIDED,
HOWEVER, that the obligation to indemnify will be individual to each Holder and
will be limited to the amount of net proceeds received by such Holder from the
sale of Transfer Restricted Securities pursuant to the Shelf Registration
Statement.
(c) Any Person entitled to indemnification hereunder
shall give notice as promptly as reasonably practicable to each indemnifying
party of any claim or action commenced against it in respect of which indemnity
may be sought hereunder; PROVIDED, HOWEVER, that failure to so notify an
indemnifying party shall not relieve such indemnifying party from any
obligation that it may have pursuant to this Section except to the extent that
it has been materially prejudiced (through the forfeiture of substantive rights
or defenses) by such failure; PROVIDED FURTHER,
- 11 -
<PAGE> 12
HOWEVER, that the failure to notify the indemnifying party shall not relieve it
from any liability that it may have to an indemnified party otherwise than on
account of this indemnity agreement. If any such claim or action shall be
brought against an indemnified party, the indemnified party shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; PROVIDED, HOWEVER, that an indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be
at the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm of
attorneys (in addition to any local counsel) at any one time for all such
indemnified party or parties. Each indemnified party, as a condition to the
indemnity agreements contained in Sections 7(a) and 7(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement or any such action effected without its written consent, but if
settled with its written consent or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of
any pending or threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) If a claim by an indemnified party for
indemnification under this Section 7 is found unenforceable in a final judgment
by a court of competent jurisdiction (not subject to further appeal or review)
even though the express provisions hereof provide for indemnification in such
case, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such
- 12 -
<PAGE> 13
losses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the actions,
statements or omissions that resulted in such losses 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 any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a
result of any losses shall be deemed to include, subject to the limitations set
forth in Section 7(c), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceedings.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7(d), an
indemnifying party that is a Holder shall not be required to contribute any
amount in excess of the amount by which the total price at which the Transfer
Restricted Securities sold by such indemnifying party and distributed to the
public were offered to the public exceeds the amount of any damages that such
indemnifying party 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
Act) shall be entitled any contribution from any person who was not guilty of
such fraudulent misrepresentation.
8. RULES 144 AND 144A. The Company shall use commercially
reasonable efforts to file the reports required to be filed by it under the Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written request of any Holder
of Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A. The Company covenants that it will take such further action as
any Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell securities
without registration under the Act within the limitation of the exemptions
provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)).
9. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted
Securities included under the Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders
of a majority of the shares of Common Stock included among such Transfer
Restricted Securities (calculated as if all of the then outstanding Debentures
were converted into Common Stock at the time of such selection), PROVIDED,
HOWEVER, that such managing underwriters shall be reasonably satisfactory to
the Company and the Company shall
- 13 -
<PAGE> 14
not be obligated to arrange for more than one underwritten offering during the
Effectiveness Period.
No Person may participate in any underwritten registration
hereunder unless such Person (i) agrees to sell such Person's Transfer
Restricted Securities on the basis reasonably 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, lock-up letters and other
documents reasonably required under the terms of such underwriting arrangements
and (iii) at least 20% of the outstanding Transfer Restricted Securities are
included in such underwritten offering. The Holders participating in any
underwritten offering shall be responsible for any expenses customarily borne
by selling securityholders, including underwriting discounts and commissions
and fees and expenses of counsel to the selling securityholders.
10. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of Holders of a majority of the Common Stock
issued or issuable upon conversion of the Debentures (calculated as if all of
the then outstanding Debentures were converted into Common Stock at the time of
such consent). Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of the Holders of Transfer Restricted Securities being sold pursuant
to the Shelf Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of a majority of the
shares of Common Stock included among such Transfer Restricted Securities.
(b) NOTICES. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand- delivery,
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:
(1) if to a Holder, at the address of such Holder
maintained by the Registrar under the Indenture;
(2) if to the Initial Purchaser, at the address set
forth in the Purchase Agreement;
(3) if to the Company, at its address set forth in
the Purchase Agreement;
or to such other addresses as the recipient party has specified to the sending
party by prior written notice to the sending party.
- 14 -
<PAGE> 15
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being delivered to a next-day air courier; five business days after
being deposited in the mail; when answered back, if faxed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(c) REMEDIES. In the event of a breach by the Company or
by a Holder of any of their respective obligations under this Agreement, each
Holder or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of
any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(d) SEVERABILITY. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(e) NO INCONSISTENT AGREEMENTS. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the Holders in this
Agreement.
(f) SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of their respective heirs, executors, administrators,
successors, legal representatives and assigns. In addition, whether or not any
express assignment has been made, the provisions of this Agreement which are
for the benefit of Holders are also for the benefit of, and enforceable by, any
subsequent Holder.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
(i) GOVERNING LAW. All questions concerning the
construction, validity and interpretation of this Agreement shall be governed
by and construed in accordance with the
- 15 -
<PAGE> 16
domestic laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
- 16 -
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
LOMAK PETROLEUM, INC.
By: _____________________________________
Its: ____________________________________
Acting on behalf of themselves and as the
representatives of the Holders:
FORUM CAPITAL MARKETS L.P.
By: _____________________________________
Name: Michael F. McNulty
Title: Managing Director
McDONALD & COMPANY SECURITIES,INC.
By: _____________________________________
Name: Michael F. McNulty
Title: Attorney-in-fact
MORGAN KEEGAN & COMPANY,INC.
By: _____________________________________
Name: Michael F. McNulty
Title: Attorney-in-fact
- 17 -
<PAGE> 1
EXHIBIT 24.1(b)
ARTHUR ANDERSEN
Arthur Andersen LLP
Suite 1800
200 Public Square
Cleveland, OH 44114
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in, or incorporated by reference,
in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Cleveland, Ohio
March 24, 1997
II-7
<PAGE> 1
EXHIBIT 24.1(c)
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of our report dated February 7, 1997, on our audits of the Statements
of revenues and direct operating expenses of the American Cometra Interests, for
the years ended December 31, 1994, 1995 and 1996. We also consent to the
reference to our firm under the caption "Experts".
COOPERS & LYBRAND L.L.P.
Forth Worth, Texas
March 24, 1997
II-8
<PAGE> 1
EXHIBIT 24.1(d)
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Lomak Petroleum, Inc,.:
We consent to the incorporation by reference in the registration statement (No.
333-XXXXX) on Form S-3 of Lomak Petroleum, Inc. of our report dated May 23,
1996, with respect to the statement of assets (other than productive oil and gas
properties) and liabilities of the Bannon Interests as of December 31, 1995 and
the related statement of revenues ad direct operating expenses for the year then
ended, which report appears in the Form 8-K/A of Lomak Petroleum, Inc. dated May
31, 1996.
KPMG Peat Marwick LLP
Houston, Texas
March 24, 1997
II-9
