<PAGE>
As filed with the Securities and Exchange Commission on November __, 1999
Registration Number 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PLAINS RESOURCES INC.
(Exact name of registrant as specified in its charter)
See Table Of Additional Registrants Below
DELAWARE 1311 13-2898764
(State or other Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code Number
organization)
500 Dallas Street
Houston, Texas 77002
(713) 654-1414
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Michael R. Patterson
Vice President and General Counsel
Plains Resources Inc.
500 Dallas Street
Houston, Texas 77002
(713) 654-1414
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
John A. Watson
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
(713) 651-5151
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
Calculation of Registration Fee
<TABLE>
<CAPTION>
==============================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of each Class of Amount to Offering Price Aggregate Registration
Securities to Be Registered Be Registered Per Note(1) Offering Price(1) Fee
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/4% Senior Subordinated Notes due 2006, Series F.... $75,000,000 100.25% $75,187,500 $20,903
- ------------------------------------------------------------------------------------------------------------------------------
Subsidiary Guarantees of 10 1/4% Senior
Subordinated Notes due 2006, Series D............... -- -- -- (2)
- ------------------------------------------------------------------------------------------------------------------------------
Total................................................... $75,000,000 100.25% $75,187,500 $20,903
==============================================================================================================================
</TABLE>
(1) Pursuant to Rule 457(f) under the Securities Act of 1933, the registration
fee has been calculated based on the average of the bid and asked prices in
the PORTAL market on November 15, 1999, of the 10 1/4% Senior Subordinated
Notes due 2006, Series E of the Company, for which the securities registered
hereby will be exchanged.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the Subsidiary Guarantees.
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 commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
====================================================================================================================
State Or Other Address, Including Zip
Jurisdiction Of Primary Standard Code, and Telephone
Principal Industrial Number Including Area
Executive Classification Code Code of Registrants IRS
ID Name Incorporation No. No. Employer Offices
====================================================================================================================
<S> <C> <C> <C> <C>
Arguello Inc. Delaware 1311 76-0608465 *
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Calumet Florida, Inc. Delaware 1311 35-1880416 *
- --------------------------------------------------------------------------------------------------------------------
Plains Illinois Inc. Delaware 1311 76-0487569 *
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Plains Resources *
International Inc. Delaware 1311 76-0040974
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PMCT Inc. Delaware 1311 76-0410281 *
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Stocker Resources, Inc. California 1311 33-0421175 *
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Stocker Resources, L.P. California 1311 33-0430755 *
====================================================================================================================
</TABLE>
* 500 Dallas Street, Houston, Texas 77002, telephone (713) 654-1414.
<PAGE>
Plains Resources Inc.
Cross-Reference Sheet
(Pursuant to Rule 404(a) and Item 501(b) of Regulation S-K)
<TABLE>
FORM S-4 ITEM AND CAPTION LOCATION OR PROSPECTUS CAPTION
------------------------- ------------------------------
<S> <C>
1. Forepart of Registration Statement and Outside Outside Front Cover Page
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page
Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges Prospectus Summary; Risk Factors
and Other Information
4. Terms of the Transaction Summary; The Exchange Offer;
Description of the Exchange Notes; Certain
Federal Income Tax Consequences
5. Pro Forma Financial Information Incorporation of Certain Documents
6. Material Contacts with the Company Being Not Applicable
Acquired
7. Additional Information Required for Reoffering Not Applicable
by Persons and Parties Deemed to be
Underwriters
8. Interests of Named Experts and Counsel Legal Matters; Experts
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
10. Information with Respect to S-3 Registrants Prospectus Summary; Risk Factors; Description
of Certain Indebtedness
11. Incorporation of Certain Information by Reference Incorporation of Certain Documents
12. Information with Respect to S-2 or S-3 Registrants Not Applicable
13. Incorporation of Certain Information by Reference Not Applicable
14. Information with Respect to Registrants Other Not Applicable
Than S-3 or S-2 Registrants
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-2 or S-3 Companies Not Applicable
17. Information with Respect to Companies Other Not Applicable
Than S-3 or S-2 Companies
18. Information if Proxies, Consents or Authorizations Not Applicable
are to be Solicited
19. Information if Proxies, Consents or Authorizations Incorporation of
Certain Documents are not to be Solicited or in an Exchange Offer
</TABLE>
<PAGE>
PROSPECTUS
Offer to Exchange
all outstanding
10 1/4% Senior Subordinated Notes Due 2006, Series E
($75,000,000 principal amount outstanding)
for
10 1/4% Senior Subordinated Notes Due 2006, Series F
($75,000,000 principal amount)
of
======================
LOGO OF PLAIN
RESOURCES
======================
<TABLE>
<S> <C> <C>
Unconditionally Guaranteed by:
Arguello Inc. Plains Illinois Inc. Stocker Resources, Inc.
Calumet Florida, Inc. Plains Resources International Inc. Stocker Resources, L.P.
PMCT Inc.
</TABLE>
__________
The Exchange Offer will expire at 5:00 p.m., New York City time, on
________________, unless extended.
__________
We, Plains Resources Inc., a Delaware corporation, are offering to
you, on the terms and subject to the conditions set forth in this Prospectus and
the accompanying letter of transmittal, to exchange up to an aggregate principal
amount of $75,000,000 of our Senior Subordinated Notes due 2006, Series F (the
"Exchange Notes") for an equal principal amount of our outstanding 10 1/4%
Senior Subordinated Notes due 2006, Series E (the "Outstanding Notes"), in
integral multiples of $1,000. The Exchange Notes will be senior subordinated
obligations of us and are substantially identical (including principal amount,
interest rate, maturity and redemption rights) to the Outstanding Notes, except
that the Exchange Notes do not have certain transfer restrictions and
registration rights (including certain interest provisions) that the Outstanding
Notes do have. We issued the Outstanding Notes, and we will issue the Exchange
Notes, under an indenture dated as of September 15, 1999, among us, the
Subsidiary Guarantors (as defined) and Chase Bank of Texas, National
Association, as trustee (the "Trustee"). See "Description of Exchange Notes". We
will not receive any proceeds from this offering; but, pursuant to the
Registration Rights Agreement dated as of September 22, 1999 among us, the
Subsidiary Guarantors and the Initial Purchasers (as defined) of the Outstanding
Notes (the "Registration Rights Agreement"), we will bear certain offering
expenses.
(Cover text continued on next page)
____________
You should carefully consider the risk factors beginning on page 16 of
this prospectus before you decide to participate in this exchange offer.
__________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the exchange notes or has determined
if this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
__________
The date of this prospectus is November ___, 1999.
<PAGE>
We will accept for exchange any and all Outstanding Notes that you
validly tender on or before 5:00 p.m., New York City time, on ________________,
unless we extend the date (the "Expiration Date"). You may withdraw your tender
of Outstanding Notes at any time before 5:00 p.m., New York City time, on the
Expiration Date; otherwise your tender will be irrevocable. Chase Bank of Texas,
National Association is acting as Exchange Agent for this exchange offer. We are
not conditioning this exchange offer on any minimum principal amount of
Outstanding Notes being tendered for exchange, but we are subjecting this
exchange offer to certain customary conditions.
The Exchange Notes will bear interest from the date that we issue them
(or the most recent Interest Payment Date (as defined) to which interest on such
Exchange Notes has been paid), at a rate equal to 10 1/4% per annum and on the
same terms as the Outstanding Notes. We will pay interest on the Exchange Notes
semi-annually on March 15 and September 15 of each year beginning on March 15,
2000. We will pay the interest that has accrued and is unpaid through the
Exchange Date on the Outstanding Notes that you tender in exchange for the
Exchange Notes on or before March 15, 2000. Outstanding Notes that we accept for
exchange will no longer accrue interest on and after the date when interest on
the Exchange Notes begins to accrue.
The following subsidiaries of ours will unconditionally guarantee, on a
joint and several basis, our obligation to pay the principal of, premium, if
any, and interest on the Exchange Notes: Arguello Inc., Calumet Florida, Inc.,
Plains Illinois Inc., Plains Resources International Inc., PMCT Inc., Stocker
Resources, Inc., and Stocker Resources, L.P. (collectively "Subsidiary
Guarantors").
We sold the Outstanding Notes on September 22, 1999 to J.P. Morgan &
Co. and First Union Capital Markets, Inc., who are the "Initial Purchasers", in
a transaction that we did not register under the Securities Act and in which we
relied on the exemption that Section 4(2) of the Securities Act provides. The
Initial Purchasers then sold the Outstanding Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act. Accordingly, these
qualified institutional buyers may not reoffer, resell or otherwise transfer the
Outstanding Notes in the United States unless the Outstanding Notes are
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. We are offering the Exchange Notes to you to
satisfy our obligations under the Registration Rights Agreement. See "The
Exchange Offer".
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, we believe that you can offer for resale, resell or otherwise transfer
the Exchange Notes that we issue to you pursuant to this exchange offer without
needing to comply with the registration and prospectus delivery provisions of
the Securities Act, provided that you are acquiring the Exchange Notes in the
ordinary course of your business and you are not participating in and have no
arrangement or understanding with any person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes, and you are
not one of our affiliates. If you wish to exchange Outstanding Notes in the
exchange offer, you must represent to us that these conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the exchange offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus in connection with any resale of
Exchange Notes. A broker-dealer that delivers such a prospectus to purchasers in
connection with such resales will be subject to certain of the civil liability
provisions under the Securities Act and will be bound by the provisions of the
Registration Rights Agreement (including certain indemnification rights and
obligations). A broker-dealer may use this prospectus, as it may be amended or
supplemented from time to time, to resell the Exchange Notes that it receives in
exchange for Outstanding Notes if it acquired such Outstanding Notes as a result
of market-making activities or other trading activities. We have agreed that, if
requested by a Participating Broker-Dealer, we will use our best efforts to make
this prospectus available to any Participating Broker-Dealer to use in
connection with any such resale for up to six months or until such earlier date
as a Participating Broker-Dealer notifies us in writing that it has resold all
the Exchange Notes that it acquired in the exchange offer. See "Plan of
Distribution".
We do not intend to list the Exchange Notes on any national securities
exchange or to request the National Association of Securities Dealers Automated
Quotation System to admit them to trading. The Initial Purchasers have advised
us that they intend to make a market in the Exchange Notes, but they are not
obligated to do so and they may discontinue any market-making at any time
without notice. Accordingly, we cannot assure you that an active public
2
<PAGE>
or other market will develop for the Exchange Notes or as to how liquid the
trading market for the Exchange Notes will be.
If you do not tender, or if we do not accept your tender of, your
Outstanding Notes in the exchange offer, then your Outstanding Notes will remain
outstanding. The number of Outstanding Notes that are tendered and that we
accept in the exchange offer may adversely affect your ability to sell
untendered Outstanding Notes. After we complete the exchange offer, any holders
of Outstanding Notes will continue to be subject to the existing transfer
restrictions that restrict the transfer of the Outstanding Notes.
We expect that we will issue the Exchange Notes in the form of a Global
Exchange Note (as defined herein), which we will deposit with, or on behalf of,
The Depository Trust Company (the "DTC"). The Global Exchange Note will be
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Exchange Note representing the Exchange Notes will be
shown on, and transfers of the Global Exchange Note to qualified institutional
buyers will be effected through, records that DTC and its participants maintain.
After we initially issue the Global Exchange Note, we will issue Exchange Notes
in certificated form in exchange for the Global Exchange Note on the terms set
forth in the Indenture. See "Description of Exchange Notes--Book Entry; Delivery
and Form".
______________________
We have not authorized any dealer, salesperson or other person to give
information or to make any representations not contained in this prospectus,
and, if given or made, you should not rely on such information or
representations as though we did authorize them. This prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any security
other than the Exchange Notes offered hereby, nor does it constitute an offer to
sell or the solicitation of an offer to buy any of the Exchange Notes to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation to such person. Neither the delivery of this prospectus nor any
sale made hereunder shall under any circumstances create any implication that
the information contained herein is correct as of any date after the date of
this prospectus.
Until _________________ (90 days after we begin this exchange offer),
all dealers effecting transactions in the Exchange Notes, whether or not
participating in the exchange offer, may be required to deliver a prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S>............................................................... <C>
Available Information............................................. 3
Incorporation of Certain Documents................................ 4
Summary........................................................... 6
Risk Factors...................................................... 15
The Exchange Offer................................................ 24
Certain Federal Income Tax Consequences........................... 32
Use of Proceeds................................................... 32
Description of Certain Indebtedness............................... 34
Description of the Exchange Notes................................. 36
Plan of Distribution.............................................. 66
Legal Matters..................................................... 67
Experts........................................................... 67
</TABLE>
AVAILABLE INFORMATION
We have filed with the Commission in Washington, D.C., a Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered
by this prospectus. We have omitted from this prospectus certain of the
information contained in the Registration Statement, and we refer you to the
Registration Statement and its exhibits and schedules for further information
with respect to us and the securities that we are offering by this prospectus.
We are subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, in accordance therewith, we file
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information are available for inspection at,
and copies of such materials may be obtained upon payment of the prescribed fees
from, the Commission at its principal offices located at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the Regional Offices
of the Commission located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and at 7 World Trade Center, New York, New York 10048.
3
<PAGE>
In addition, the materials that we electronically file with the Commission are
available at the Commission's World Wide Web site at http://www.sec.gov. Our
Common Stock is traded on the American Stock Exchange, and such reports, proxy
statements and other information may be inspected at the offices of the American
Stock Exchange, Inc., 86 Trinity Place, New York, New York 10005.
So long as we are subject to the periodic reporting requirements of the
Exchange Act, we must furnish the information required to be filed with the
Commission to the Trustee and the holders of the Outstanding Notes and the
Exchange Notes. We have agreed that, even if, under the Exchange Act, we do not
need to furnish this information to the Commission, we will continue to furnish
information that we would be required to furnish by Section 13 of the Exchange
Act to the Trustee and the holders of the Outstanding Notes or Exchange Notes as
if we were subject to these periodic reporting requirements.
In addition, we have agreed that if any of the Notes remain outstanding
and are "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, we will make available to any prospective purchaser of the Notes
or beneficial owner of the Notes in connection with any sale of the Notes the
information required by Rule 144A(d)(4) under the Securities Act until we have
either exchanged the Outstanding Notes for the Exchange Notes or until the
holders of the Notes have disposed of such Outstanding Notes pursuant to an
effective registration statement that we file.
CAUTIONARY STATEMENT
This prospectus is part of the Registration Statement that we filed
with the Commission and,
. you should rely only on the information or representations
that we provide in this prospectus;
. we have not authorized any person to provide you with
information other than that provided in this prospectus;
. we are not making an offer of these securities in any
jurisdiction in which it would be prohibited; and
. you should not assume that the information in this
prospectus is accurate as of any date other than the date on
the front of this document.
INCORPORATION OF CERTAIN DOCUMENTS
We are incorporating by reference into this prospectus:
. our Annual Report on Form 10-K, as amended on Form 10-KA
filed on September 21, 1999, for the fiscal year ended
December 31, 1998;
. our Quarterly Report on Form 10-Q for the three months ended
March 31, 1999;
. our Current Report on Form 8-K filed on May 27, 1999, as
amended on Forms 8-KA, filed on June 28, 1999 and September
16, 1999;
. our Quarterly Report on Form 10-Q, as amended on Form 10-QA
filed on September 21, 1999, for the three months ended June
30, 1999;
. our Current Report on Form 8-K filed on September 23, 1999;
and
. our Quarterly Report on Form 10-Q for the three months ended
September 30, 1999.
4
<PAGE>
All documents that we file pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this prospectus and before the
termination of the Registration Statement of which this prospectus is a part
with respect to registration of the Exchange Notes, shall be deemed to be
incorporated by reference in this prospectus and be a part of it from the date
we file such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus, or in any other document that we later
file that also is or is deemed to be incorporated by reference, modifies or
replaces that statement.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, upon written or
oral request of any such person, a copy of any or all of the documents
incorporated by reference herein, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into the information
that this prospectus incorporates. Written or oral requests for such copies
should be directed to: Plains Resources Inc., 500 Dallas Street, Houston, Texas
77002, Attention: Investor Relations Department, telephone (713) 654-1414.
CERTAIN DEFINITIONS
As used in this prospectus, "EBITDA" means earnings before interest,
taxes, depreciation, depletion, amortization, minority interest, and other non-
cash items. EBITDA is commonly used by debt holders and financial statement
users as a measure to determine the ability of an entity to meet its interest
payment obligations. EBITDA is not a measure presented in accordance with
generally accepted accounting principles ("GAAP") and is not intended to be used
in lieu of GAAP presentations of results of operations and cash provided by
operating activities. "Present Value of Proved Reserves" means the present value
(discounted at 10%) of estimated future cash flows from proved oil and natural
gas reserves reduced by estimated future operating expenses, development
expenditures and abandonment costs (net of salvage value) associated therewith
(before income taxes), calculated using product prices in effect on the date of
determination. "Notes" includes the Outstanding Notes, the Exchange Notes and
any Private Exchange Notes (as defined).
5
<PAGE>
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SUMMARY
This summary highlights some information from this prospectus, but it
does not contain all information that you need to make an informed decision to
participate in the offer. We encourage you to read the detailed information and
financial statements and the related notes appearing elsewhere in this
prospectus in their entirety. In this prospectus, "we," "our," and "us"
collectively refer to Plains Resources Inc. and its subsidiaries; and "you" and
"your" refer to any legal holder of the Outstanding Notes immediately before the
Expiration Date, unless the context otherwise indicates.
What Is Our Business?
We are an independent energy company that acquires, exploits, develops,
explores and produces crude oil and natural gas. Through our majority ownership
in Plains All American Pipeline, L.P., we are also engaged in the midstream
activities of marketing, transportation, terminalling and storage of crude oil.
Our upstream oil and natural gas activities are focused in California in the Los
Angeles Basin, the Arroyo Grande Field, and the Mt. Poso Field, offshore
California in the Point Arguello Field, the Sunniland Trend of South Florida and
the Illinois Basin in southern Illinois. Our midstream activities are
concentrated in California, Texas, Oklahoma, Louisiana and the Gulf of Mexico.
For the year ended December 31, 1998, our EBITDA, cash flow from
operations and net loss totaled $80.3 million, $42.0 million and $58.6 million,
respectively. Excluding a non-cash full cost ceiling writedown and a gain
related to the initial public offering of Plains All American Pipeline, our net
income was $8.4 million for 1998. For the nine months ended September 30, 1999,
our EBITDA, cash flow from operations and net income totaled $98.2 million,
$52.0 million and $14.2 million, respectively. EBITDA for the 1999 period
excludes $1.9 million of noncash compensation expense. Our upstream operations
contributed approximately 58% and 35% of the our EBITDA for the fiscal year
ending December 31, 1998, and the nine months ended September 30, 1999,
respectively, while our midstream activities accounted for approximately 42% and
65% of our EBITDA for such periods.
One of our wholly owned Unrestricted Subsidiaries (as defined), Plains
All American Inc., is both the general partner and majority owner of Plains All
American Pipeline. Because it holds the general partner interest and owns
approximately 18.3 million common and subordinated units, Plains All American
Inc. holds an approximate 54% interest in Plains All American Pipeline. For
financial statement purposes, the assets, liabilities and earnings of Plains All
American Pipeline are included in our consolidated financial statements, with
the public unitholders' interest reflected as a minority interest. The following
chart sets forth the organization relationship of our upstream and midstream
subsidiaries:
[ORGANIZATION CHART APPEARS HERE]
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6
<PAGE>
- --------------------------------------------------------------------------------
What Are Our Upstream Activities?
Our upstream business strategy is to increase our proved reserves and
cash flow by
. exploiting and producing crude oil and associated natural gas
from our existing properties;
. acquiring additional underdeveloped crude oil properties; and
. exploring for significant new sources of reserves.
We concentrate our acquisition and exploitation efforts on mature but
underdeveloped crude oil producing properties that meet our targeted criteria.
Generally, the properties that we consider acquiring and exploiting are owned by
major integrated or large independent oil and natural gas companies, have
produced significant volumes since initial discovery and have significant
estimated remaining reserves in place. Our management believes that it has
developed a proven record in acquiring and exploiting underdeveloped crude oil
properties where we can make substantial reserve additions and cash flow
increases by implementing improved production practices and recovery techniques
and by relatively low risk development drilling. We exploit our crude oil
properties by
. increasing unit operating margins, thereby increasing our cash
flow;
. reducing our unit production expenses; and
. increasing the crude oil price that we realize at the wellhead.
We seek to complement these efforts by pursuing certain higher risk
exploration opportunities that offer potentially higher rewards. As part of our
business strategy, we periodically evaluate selling, and from time to time have
sold, certain of our mature producing properties that we consider to be
nonstrategic or fully valued. These sales enable us to focus on our core
properties, maintain our financial flexibility, control our overhead and
redeploy the sales proceeds to activities that have potentially higher financial
returns. Our marketing of our own crude oil production takes advantage of the
marketing expertise that our midstream activities have developed.
During the five-year period ended December 31, 1998, we incurred
aggregate acquisition, exploitation, development, and exploration costs of
approximately $404.4 million, resulting in proved oil and natural gas reserve
additions (including revisions of estimates but excluding production) of
approximately 124.4 million BOE, or $3.25 per BOE, through implementation of
this business strategy. We spent approximately 97% of this capital in acquiring,
exploiting and developing proved reserves, and we spent approximately 3% on our
exploration activities.
To manage our exposure to commodity price risk, our upstream business
routinely hedges a portion of its crude oil production. For the fourth quarter
of 1999, we have entered into crude oil swap agreements for an average of 16,500
barrels per day at an average NYMEX WTI crude oil price of approximately $18.25
per barrel. These agreements hedge approximately 67% of our third quarter 1999
average daily oil volumes. For 2000, we have entered into various arrangements
under which we will receive an average minimum NYMEX WTI crude oil price of
approximately $16.00 per barrel on 18,500 barrels per day (equivalent to 75% of
third quarter 1999 crude oil production levels). Approximately 10,000 barrels
per day of the volumes that we have hedged in 2000 will participate in price
increases above the $16.00 floor price, subject to a ceiling limitation of
approximately $19.75 per barrel. These NYMEX WTI crude oil prices are before
quality and location differentials. Our management intends to continue to
maintain hedging arrangements for a significant portion of our production. These
contracts may expose us to the risk of financial loss in certain circumstances.
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7
<PAGE>
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What Are Our Midstream Activities?
We conduct our midstream activities through Plains All American
Pipeline L.P., which we formed in 1998 to acquire and operate the business and
assets of our wholly owned midstream subsidiaries. Plains All American Pipeline
engages in interstate and intrastate crude oil transportation, terminalling and
storage, as well as crude oil gathering and marketing activities. This year,
Plains All American Pipeline grew through acquisitions and internal development
to become one of the largest transporters, terminal operators, gatherers and
marketers of crude oil in the United States. It currently transports, terminals,
gathers and markets an aggregate of approximately 850,000 barrels of crude oil
per day. Its operations are concentrated in California, Texas, Oklahoma,
Louisiana and the Gulf of Mexico.
Our midstream business strategy is to capitalize on the regional crude
oil supply and demand imbalances that exist in the continental United States by
combining the strategic location and unique capabilities of our transportation
and terminalling assets with our extensive marketing and distribution expertise
to generate sustainable earnings and cash flow for Plains All American
Pipeline's unitholders. We intend to execute our midstream business strategy by:
. increasing and optimizing the amount of crude oil we transport on
Plains All American Pipeline's various pipeline and gathering
assets;
. realizing cost efficiencies through operational improvements and
potential strategic alliances;
. utilizing Plains All American Pipeline's Cushing Terminal and
other assets to service the needs of refiners and to profit from
merchant activities that take advantage of crude oil pricing and
quality differentials; and
. pursuing strategic and accretive acquisitions of crude oil
pipeline assets, gathering systems and terminalling and storage
facilities that complement our existing asset base and
distribution capabilities.
Crude oil that Plains All American Pipeline currently transports on its
All American Pipeline and SJV Gathering System originates from fields offshore
California and in the San Joaquin Valley of California. Plains All American
Pipeline has long-term contracts to transport production from the Santa Ynez
field, which Exxon operates, and the Point Arguello field, which one of our
subsidiaries operates. Both fields are located offshore and are currently
producing a total of approximately 73,000 barrels of oil per day. We and Exxon,
as well as Texaco and Sun Operating, which are other working interest owners,
are contractually obligated to ship all of our and their production from these
offshore fields on the All American Pipeline through August 2007. Plains All
American Pipeline also has an arrangement with Texaco to transport up to 40,000
barrels per day from the Midway Sunset Field and other onshore fields on Plains
All American Pipeline's SJV Gathering System to its interconnect with another
company's pipeline that transports oil to Los Angeles refiners. These
arrangements extend through October 2003. In West Texas, Plains All American
Pipeline has a contractual arrangement with Chevron USA whereby Chevron has
committed to transport its equity crude oil production from fields connected to
Plains All American Pipeline's West Texas Gathering System through July 2011.
In October 1999, Plains All American Pipeline completed the public
offering of approximately three million common units for net proceeds of
approximately $51 million. The proceeds were used to reduce Plains All American
Pipeline's outstanding debt. This offering reduced Plains All American Inc.'s
interest in Plains All American Pipeline from approximately 59% to 54%.
Plains All American Pipeline has begun implementing plans to sell
approximately 5.2 million barrels of its crude oil linefill that is in the
segment of the All American Pipeline that extends from Emidio, California to
McCamey, Texas. For the twelve months ended September 30, 1999, we reported
gross margin of approximately $4 million from volumes transported on this
segment of the line. We will commence the sale process in December and should
substantially complete it by the end of the first quarter of 2000. We expect
proceeds from the sale of the linefill to be approximately $100 million, net of
associated costs, which will be used to reduce outstanding debt, resulting in an
annual interest expense reduction of approximately $8 million. We estimate that
we will recognize a gain of approximately $40 to 45 million in connection with
the sale of this linefill.
Except for minor third party volumes, a subsidiary of Plains All
American Pipeline has been the sole shipper on this segment of the pipeline
since we acquired the line in July 1998. This section of the line is under
Federal Energy Regulatory Commission jurisdiction and eligible shippers may
initiate their own shipments by providing the 5.2 million barrels of crude oil
linefill required to operate the line, paying the posted tariff and committing
to minimum throughout volumes that are necessary to operate the line. Pending
receipt of third party nominations and the requisite crude oil linefill, we will
suspend shipments on this segment of the line. No other segment of the All
American Pipeline will be affected. Depending on market conditions, we may
replace the linefill at a future date and recommence our own shipments. In the
event this segment of the line remains unused for a reasonable period of time,
we intend to evaluate alternative uses for this segment of the pipeline. We
believe that no impairment of the asset is necessary at this time.
We were incorporated under the laws of the State of Delaware in 1976.
Our executive offices are located at 500 Dallas, Suite 700, Houston, Texas
77002, and our telephone number is (713) 654-1414.
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The Exchange Note Offering
The Outstanding Notes................. We sold the Outstanding Notes on
September 22, 1999, to J.P. Morgan &
Co. and First Union Capital Markets
(the "Initial Purchasers") pursuant to
a Purchase Agreement dated as of
September 15, 1999 (the "Purchase
Agreement"). The Initial Purchasers
later resold the Outstanding Notes to
qualified institutional buyers
pursuant to Rule 144A promulgated
under the Securities Act.
Registration Requirements............. Pursuant to the Purchase Agreement, we
and the Initial Purchasers entered
into the Registration Rights Agreement
which grants the holders of the
Outstanding Notes certain exchange and
registration rights. We intend for the
exchange offer to satisfy such
exchange rights, which terminate once
we complete the exchange offer. If
applicable law or applicable
interpretations of the staff of the
Commission do not permit us to effect
the exchange offer, or in certain
other circumstances, we have agreed to
file a shelf registration covering
resales of Transfer Restricted
Securities (as defined). See "The
Exchange Offer--Can I Resell The
Exchange Notes".
The Exchange Offer
Securities Offered.................... $75,000,000 aggregate principal
amount of 10 1/4% Senior Notes due
2006, Series F.
The Exchange Offer.................... $1,000 principal amount of the
Exchange Notes in exchange for each
$1,000 principal amount of
Outstanding Notes. As of today's
date, $75,000,000 aggregate
principal amount of Outstanding
Notes are outstanding. We will issue
the Exchange Notes on
_________________ (the "Exchange
Date").
Based on an interpretation of the
Commission's staff set forth in no-
action letters issued to third
parties, we believe that you may
offer for resale, resell or
otherwise transfer the Exchange
Notes that we issue you pursuant to
the exchange offer in exchange for
your Outstanding Notes without
compliance with the registration and
prospectus delivery provisions of
the Securities Act, provided that
(1) you acquire the Exchange Notes
in the ordinary course of your
business and that you do not intend
to participate and have no
arrangement or understanding with
any person to participate in the
distribution of such Exchange Notes,
and (2) you are not one of our
"affiliates" within the meaning of
Rule 405 under the Securities Act.
Each Participating Broker-Dealer
must acknowledge that it will
deliver a prospectus whenever it
resells the Exchange Notes. A
broker-dealer that delivers a
prospectus to purchasers when it
resells the Exchange Notes will be
subject to certain of the civil
liability provisions under the
Securities Act and will be bound by
the provisions of the Registration
Rights Agreement (including certain
indemnification rights and
obligations). A broker-dealer may
use this prospectus, as it may be
amended or supplemented from time to
time, to resell Exchange Notes it
receives in exchange for Outstanding
Notes if it acquired those
Outstanding Notes as a result of
market-making activities or other
trading activities. We have agreed
that, if requested by a
Participating Broker-Dealer, we will
use our best efforts to make this
prospectus available to any
Participating Broker-Dealer to
resell such Outstanding Notes for up
to six months or until such earlier
date as that
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Participating Broker-Dealer notifies
us in writing that it resold all
Exchange Notes it acquired in the
exchange offer. See "Plan of
Distribution".
If you tender your Outstanding Notes
in the exchange offer intending to
participate in a distribution of the
Exchange Notes, then you cannot rely
on the position of the Commission's
staff enunciated in Exxon Capital
Holdings Corporation (available April
13, 1989) or similar no-action letters
and, in the absence of an exemption
under the Securities Act, you must
comply with the registration and
prospectus delivery requirements of
the Securities Act in connection with
the resale transaction. If you fail to
comply with these requirements, you
may incur liability under the
Securities Act for which we have not
indemnified you.
Expiration Date....................... 5:00 p.m., New York City time, on
____________________.
Interest on the Notes................. The Exchange Notes will bear interest
from the date we issue them. We will pay
the interest that has accrued and is
unpaid on the Outstanding Notes that you
tender in exchange for the Exchange
Notes through the Exchange Date on or
before March 15, 2000.
Procedures for Tendering
Outstanding Notes.................... If you wish to accept the exchange
offer, then you must complete, sign and
date the accompanying letter of
transmittal, or a facsimile thereof, in
accordance with the instructions
contained herein and therein, and mail
or otherwise deliver the letter of
transmittal, or the facsimile, together
with the Outstanding Notes and any other
required documentation to the Exchange
Agent at the address set forth in this
prospectus. By executing the letter of
transmittal, you represent to us that,
among other things, you or the person
who will receive the Exchange Notes is,
whether or not that person is a holder
of Outstanding Notes or the Exchange
Notes, acquiring the Exchange Notes in
the ordinary course of business and that
neither you nor any other person has any
arrangement or understanding with any
person to participate in the
distribution of the Exchange Notes. In
lieu of physical delivery of the
certificates representing Outstanding
Notes, you may tender your Outstanding
Notes pursuant to the procedure for
book-entry transfer set forth under "The
Exchange Offer--How Do I Tender My
Outstanding Notes?".
Special Procedures for Beneficial
Owners............................... If you beneficially own Outstanding
Notes, and your Outstanding Notes are
registered in the name of a broker-
dealer, commercial bank, trust company
or other nominee, then, if you wish to
tender your Outstanding Notes pursuant
to the exchange offer, you should
contact the registered holder promptly
and instruct the registered holder to
tender on your behalf. If you wish to
tender on your own behalf, you must,
before completing and executing the
letter of transmittal and delivering
your Outstanding Notes, either make
appropriate arrangements to register
ownership of the Outstanding Notes in
your name or obtain a properly
completed bond power from the
registered holder. The transfer of
registered ownership may take
considerable time.
Guaranteed Delivery Procedures........ If you wish to tender your Outstanding
Notes and your Outstanding Notes are
not immediately available or you
cannot deliver your Outstanding Notes,
the letter of transmittal or any other
documents that the letter of
transmittal requires to the Exchange
Agent (or comply with the procedures
for book-entry
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transfer) before the Expiration Date, then you must tender your
Outstanding Notes according to the guaranteed delivery procedures set
forth in "The Exchange Offer--How Do I Take Advantage Of The
Guaranteed Delivery Procedures".
Withdrawal Rights..................... You may withdraw your tender at any time before 5:00 p.m., New York
City time, on the Expiration Date pursuant to the procedures described
under "The Exchange Offer--How Do I Withdraw My Tender?".
Acceptance of Outstanding Notes and
Delivery of Exchange Notes........... Subject to certain conditions, we will accept for exchange any and all
Outstanding Notes that are properly tendered in the exchange offer
before 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the exchange offer will be delivered
on the Exchange Date. See "The Exchange Offer--What Are The Terms Of
The Exchange Offer".
Federal Income Tax
Consequences......................... The exchange pursuant to the exchange offer should not be a taxable
event for federal income tax purposes. See "Certain Federal Income Tax
Consequences".
Private Exchange Notes................ The Registration Rights Agreement provides that if, before we complete
the exchange offer, the Initial Purchasers hold any Outstanding Notes
that they acquired and that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, or if any other holder of Outstanding Notes is not
entitled to participate in the exchange offer, then we, if the Initial
Purchasers or any such holder requests, will at the same time that we
deliver the Exchange Notes in the exchange offer issue and deliver to
the Initial Purchasers and any such holder, in exchange for such
Outstanding Notes that the Initial Purchasers and any such holder
hold, a like principal amount of our debt securities that are
identical in all material respects to the Exchange Notes (the "Private
Exchange Notes") (and which we will issue pursuant to the same
Indenture as the Exchange Notes). The Private Exchange Notes are not
covered by the registration statement of which this prospectus is a
part and we are not offering them by this prospectus. Any Private
Exchange Notes will receive all the rights and will be subject to all
the limitations applicable to them under the Indenture, and will be
subject to the same restrictions on transfer that apply to the
untendered Outstanding Notes. See "The Exchange Offer--What Happens If
My Outstanding Notes Are Not Exchanged?". But pursuant to the
Registration Rights Agreement, holders of Private Exchange Notes have
certain rights to require us to file and maintain a shelf registration
statement that would allow them to resell then Private Exchange Notes.
See "The Exchange Offer--We May Have To File A Shelf Registration
Statement".
Effect on Holders of
Outstanding Notes.................... This exchange offer fulfills one of our obligations under the
Registration Rights Agreement, and, with certain exceptions noted
below, if you do not tender your Outstanding Notes, then you will not
have any further registration rights under the Registration Rights
Agreement or otherwise. If you do not tender any of your Outstanding
Notes, then you will continue to hold the untendered Outstanding Notes
and you will be entitled to all the rights and be subject to all the
limitations applicable to them under the Indenture, except to the
extent such rights or limitations, by their terms, terminate or cease
to have
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further effectiveness as a result of the exchange offer. All
untendered Outstanding Notes will continue to be subject to certain
transfer restrictions. Accordingly, the exchange offer, if any
Outstanding Notes are tendered and accepted, could adversely affect
the trading market of the untendered Outstanding Notes.
Shelf Registration Statement.......... If
. we are unable to consummate the exchange offer because it is not
permitted by any applicable law or applicable interpretation of
the Commission or the staff of the Commission;
. any holder of an Outstanding Note notifies us on or before the
Exchange Date that
. due to a change in law or policy, it is not entitled to
participate in the exchange offer,
. due to a change in law or policy, it may not resell the
Exchange Notes that it would acquire in the exchange offer
to the public without delivering a prospectus and this
prospectus is not appropriate or available for such resales
by such holder or
. it is a broker-dealer that owns Outstanding Notes (including
the Initial Purchasers that hold Outstanding Notes as part
of an unsold allotment from the original offering of the
Outstanding Notes) that it acquired directly from us or one
of our affiliates; or
. any holder of Private Exchange Notes requests within 120 days
after we complete the exchange offer,
then we have agreed to file and maintain a shelf registration
statement that would allow these holders to resell their transfer-
restricted Outstanding Notes, Exchange Notes or Private Exchange
Notes.
Exchange Agent........................ Chase Bank of Texas, National Association.
</TABLE>
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Summary of Terms of the Exchange Notes
<TABLE>
<S> <C>
Securities Offered.................... $75,000,000 principal amount of 10 1/4% Senior Subordinated Notes due
2006, Series F.
Maturity Date......................... March 15, 2006.
Interest Rate and Payment Dates....... The Exchange Notes will bear interest at a rate of 10 1/4% per annum.
Interest on the Exchange Notes will accrue from the date that we issue
them. We will pay accrued interest semi-annually in cash in arrears on
each March 15 and September 15, commencing March 15, 2000.
Optional Redemption................... We may, at our option, redeem the Exchange Notes, in whole or in part,
from time to time on or after March 15, 2001, at the redemption prices
set forth in this prospectus, plus accrued and unpaid interest to the
applicable redemption date. See "Description of the Exchange Notes--We
May Be Able To Or May Be Required To Redeem Or Repurchase The Notes".
Change of Control..................... If a Change of Control (as defined) and a corresponding Rating Decline
(as defined) occur, then we must offer to repurchase the Exchange
Notes at 101% of the principal amount of the Exchange Notes, plus
accrued and unpaid interest to the date of repurchase. See
"Description of the Exchange Notes--A Change of Control May Require Us
To Repurchase The Notes".
Certain Covenants..................... We are offering the Exchange Notes under the Indenture, which contains
covenants that include, but are not limited to, covenants that: (1)
limit the incurrence of additional indebtedness; (2) limit certain
investments; (3) limit restricted payments; (4) limit the disposition
of assets; (5) limit the payment of dividends and other payment
restrictions affecting subsidiaries; (6) limit transactions with
affiliates; (7) limit the creation of liens; and (8) restrict mergers,
consolidations and transfers of assets. See "Description of the
Exchange Notes--The Indenture Contains Certain Covenants".
Ranking............................... The Exchange Notes will be unsecured senior subordinated obligations
of ours and will be subordinated in right of payment to all of our
existing and future Senior Indebtedness, including our obligations
under our Revolving Credit Facility and under our Bank Credit
Agreement (as defined). See "Description of Certain Indebtedness--We
Have A Revolving Credit Facility." The Exchange Notes will rank on
parity with our outstanding 10 1/4% Senior Subordinated Notes due
2006, Series A, 10 1/4% Senior Subordinated Notes due 2006, Series B,
10 1/4% Senior Subordinated Notes due 2006, Series C, and 10 1/4%
Senior Subordinated Notes due 2006, Series D (collectively, the
"Series A-D Notes"). We may not incur any indebtedness senior to the
Exchange Notes that is expressly subordinated to any other Senior
Indebtedness. As of September 30, 1999, (1) we had Senior Indebtedness
outstanding of $52.7 million, (2) the Subsidiary Guarantors had no
Guarantor Senior Indebtedness outstanding (other than $50.1 million,
representing guarantees of parent Senior Indebtedness), (3) $200
million in principal amount of the Series A-D Notes was outstanding
and (4) $75 million in principal amount of the Outstanding Notes. See
"Description of the Exchange Notes--The Notes Are Subordinated To Our
Senior Indebtedness".
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13
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Guarantees............................ The Subsidiary Guarantors will guarantee the Exchange Notes (the
"Guarantees"), which currently are all of our subsidiaries that are
engaged in our upstream business segment. Neither Plains All American
Pipeline nor any of our other midstream subsidiaries will guarantee
the Exchange Notes. The Guarantees will be unsecured senior
subordinated obligations of the Subsidiary Guarantors, will be
subordinated in right of payment to all Guarantor Senior Indebtedness
and on a parity with the obligations of the Subsidiary Guarantors
under the Series A-D Notes. The Guarantees may be released under
certain circumstances. See "Description of the Exchange Notes--The
Notes Are Guaranteed By The Senior Subordinated Guarantees".
</TABLE>
Risk Factors
Please read "Risk Factors" beginning on Page 15 and carefully consider the
risk factors before you decide to participate in the exchange offer.
Forward-Looking Statements and Associated Risks
This prospectus and the documents we have incorporated by reference into
this prospectus include "forward-looking statements" within the meaning of
various provisions of the Securities Act and the Exchange Act. All statements,
other than statements of historical facts, included in this prospectus and the
documents we have incorporated by reference into this prospectus that address
activities, events or developments that we expect or anticipate will or may
occur in the future, including such things as estimated future net revenues from
oil and natural gas reserves and the present value thereof, future capital
expenditures (including the amount and nature thereof), business strategy and
measures to implement strategy, competitive strengths, goals, expansion and
growth of our business and operations, plans, references to future success,
references to intentions as to future matters and other such matters are
forward-looking statements. We base these statements on assumptions and analyses
that we made in light of our experience and our perception of historical trends,
current conditions and expected future developments as well as other factors we
believe are appropriate. But whether actual results and developments will
conform with our expectations and predictions is subject to a number of risks
and uncertainties, including the risk factors discussed in this prospectus,
general economic, market or business conditions, the opportunities (or lack
thereof) that may be presented to and pursued by us, competitive actions by
other oil and natural gas companies, changes in laws or regulations, the
uncertainties inherent in the year 2000 issue and other factors, many of which
we do not control. Consequently, we qualify all of the forward-looking
statements that we make in this prospectus and the documents that we have
incorporated by reference into this prospectus by these cautionary statements,
we cannot assure you that the results or developments that we anticipate will
occur will be realized or, even if substantially realized, will impact and
affect us or our business or operations as we expect that they will.
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<PAGE>
RISK FACTORS
You should carefully examine this entire prospectus and the documents
incorporated by reference herein and you should give particular attention to the
risk factors set forth below.
We Have A Substantial Amount Of Debt.
As of September 30, 1999, our total long-term debt and stockholders' equity
were $653.3 million (including $323.2 million of long-term debt under the credit
facilities of Plains All American Pipeline which is without recourse to us or
the Subsidiary Guarantors) and $88.6 million, respectively. Pro forma for the
linefill sale proceeds and Plains All American Pipeline's October 1999 public
unit offering, our total long-term debt at September 30, 1999 would be reduced
to approximately $503 million. In addition, we may currently incur additional
indebtedness under our credit facilities. Our Revolving Credit Facility
currently consists of a $225 million borrowing base, of which approximately
$50.1 million was outstanding as of September 30, 1999.
Our high level of indebtedness will have several important effects on our
future operations, including
. we must dedicate a substantial portion of our cash flow from
operations to pay interest on indebtedness, and we cannot use these
portions for other purposes;
. covenants and other restrictions contained in our debt obligations
will require us to meet certain financial tests and will limit our
ability to borrow additional funds or to dispose of assets and may
affect our flexibility in planning for, and reacting to, changes in
our business, including possible acquisition activities;
. our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate
purposes or other purposes may be impaired; and
. our ability to meet our debt service obligations and to reduce our
total indebtedness will depend on our future performance, which will
be subject to general economic conditions and to financial, business
and other factors that affect our operations, many of which we do not
control. We cannot assure you that our business will continue to
generate cash flow at or above current levels. If we cannot generate
sufficient cash flow from operations in the future to service our
debt, we may be required to refinance all or a portion of our existing
debt, including the Notes, or to obtain additional financing. We
cannot assure you that any such refinancing would be possible or that
we could obtain any additional financing.
We Must Make Substantial Capital Expenditures.
We make, and will continue to make, substantial capital expenditures, to
acquire, exploit, develop, explore and produce oil and gas reserves.
Historically, we have financed these expenditures primarily with cash generated
by operations, bank borrowings and the sale of notes, common stock and preferred
stock. We intend to make an aggregate of approximately $80 million in capital
expenditures in 1999, excluding acquisitions. This amount includes approximately
$64 million that we plan to spend to develop and exploit our California,
Sunniland Trend and Illinois Basin properties, approximately $3 million that we
plan to spend for our exploration primarily in the Sunniland Trend, and
approximately $13 million that we plan to spend for midstream activities,
primarily related to the expansion of Plains All American Pipeline's Cushing
Terminal and other equipment. In addition, we intend to continue pursuing the
acquisition of underdeveloped producing properties. We believe that we will have
sufficient cash provided by operating activities and borrowings under the
Revolving Credit Facility to fund these planned capital expenditures. We expect
that Plains All American Pipeline will fund the midstream capital expenditures
through working capital, cash flow and draws under the Plains All American
Revolving Credit Facility and the Scurlock Revolving Credit Facility discussed
in "Description of Certain Indebtedness--Plains All American Pipeline Has Its
Own Credit Facilities".
If our revenues or our borrowing base decrease because oil and gas prices
are low, we encounter operating difficulties, our reserves decline or other
reasons, we may have limited ability to expend the capital necessary to
undertake or complete future drilling programs. We cannot assure you that
additional debt or equity financing or cash generated by operations will be
available to meet these requirements.
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<PAGE>
The Notes Are Subordinated To Our Senior Indebtedness And Other Debt.
Our payment of the principal of, premium, if any, and interest on, the
Notes is subordinated in right of payment to the prior payment in full of all
our Senior Indebtedness, whether outstanding at the date of the Indenture or
later incurred. If any default in the payment of the principal or interest with
respect to any Senior Indebtedness occurs, we will not make any payment with
respect to the principal of, premium, if any, or interest on, the Notes unless
and until such default has been cured or waived. In addition, if any other event
of default entitling the holders of Senior Indebtedness to accelerate the
maturity thereof occurs and the Trustee receives written notice of such
occurrence, the holders of Senior Indebtedness can block payment on the Notes
for specified periods. All of our subsidiaries that are currently engaged in our
upstream business segment will initially guarantee payments under the Notes.
Neither Plains All American Pipeline nor any of our other midstream subsidiaries
will guarantee the Notes. Such Guarantees will be subordinated to Guarantor
Senior Indebtedness of our Subsidiary Guarantors and may be released under
certain circumstances, including if we designate a Subsidiary Guarantor as an
Unrestricted Subsidiary (as defined) pursuant to the terms of the Indenture. See
"Description of the Exchange Notes--The Notes Are Guaranteed By The Senior
Subordinated Guarantees".
If any payment or distribution of our assets is made to creditors because
of our dissolution, winding up, liquidation, reorganization, bankruptcy,
insolvency, receivership or assets or because of other proceedings that relate
to us, whether voluntary or involuntary, the holders of Senior Indebtedness will
be entitled first to receive payment in full of all amounts due thereon before
the holders of the Notes will be entitled to receive any payment upon the
principal of, or premium, if any, or interest on, the Notes. Because of such
subordination, if we become insolvent, holders of the Notes may recover less,
ratably, than holders of Senior Indebtedness and other of our creditors or may
recover nothing. The terms and conditions of the subordination provisions
pertinent to the Notes are described in more detail in "Description of the
Exchange Notes--The Notes Are Subordinated To Our Senior Indebtedness".
Our subsidiaries generate substantially all of our operating income. As a
result, we have generally relied, and will continue to rely, on distributions or
advances from our subsidiaries to provide the funds we need to meet our debt
service obligations, including our payment of principal and interest on the
Notes. Should we fail to satisfy any payment obligation under the Notes, the
holders would have a direct claim for our obligations under the Notes against
the Subsidiary Guarantors pursuant to their Guarantees. But the capital stock
of, and substantially all of the assets of, the Subsidiary Guarantors are
pledged to secure their obligations under the Revolving Credit Facility and
related guarantees. Further, none of our midstream subsidiaries will guarantee
the Notes so long as they are Unrestricted Subsidiaries. The Indenture imposes
certain limits on our ability and the ability of our subsidiaries (other than
Unrestricted Subsidiaries) to incur additional indebtedness and to enter into
agreements that would restrict the ability of such subsidiaries to make
distributions, loans or other payments to us. But these limitations are subject
to various qualifications. For additional detail on these Indenture provisions
and the applicable qualifications, see "Description of the Exchange Notes--The
Indenture Contains Certain Covenants."
Substantive Consolidation Or Bankruptcy May Affect Our Payment Of The Notes.
You should carefully consider certain insolvency and bankruptcy
considerations that may affect your investment in the Notes. If we or any
Subsidiary Guarantor becomes a debtor that is subject to insolvency proceedings
under the United States Bankruptcy Code, it would likely cause delays in the
payment of the Notes and in the enforcement of remedies under the Notes or any
Guarantee. Those provisions under the United States Bankruptcy Code or general
principles of equity that could impair your rights include, but are not limited
to, the automatic stay, avoidance of preferential transfers by a trustee or
debtor-in-possession, substantive consolidation, limitations on collectability
of unmatured interest or attorney fees and forced restructuring of the Notes.
Under the United States Bankruptcy Code, a trustee or debtor-in-possession
may generally recover payments or transfers of property of a debtor if such
payment or transfer was
. to or for the benefit of a creditor;
. made in payment of an antecedent debt owed before the transfer was
made;
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. made while the debtor was insolvent;
. made within 90 days (or one year if the payment was to an "insider" of
the debtor) before the filing of the bankruptcy case; and
. enabled the creditor to receive more than it would have received in a
liquidation under Chapter 7 of the United States Bankruptcy Code if
the transfer had not been made and the creditor received payment of
the debt as provided in the United States Bankruptcy Code.
If we suffer a financial failure, it could impair the payment of the Notes
if a bankruptcy court were to "substantively consolidate" us and our
subsidiaries. If a bankruptcy court substantively consolidated us and our
subsidiaries, the assets of each entity would be subject to the claims of
creditors for all entities. Such a consolidation would expose the holders of the
Notes not only to the usual impairments arising from bankruptcy, but also to
potential dilution of the amount ultimately recoverable because of the larger
creditor base.
You could be forced into restructuring the Notes through the "cram-down"
provision of the United States Bankruptcy Code. Under this provision, the Notes
could be restructured over the objections of holders of the Notes, including
your objections, as to their general terms, primarily interest rate and
maturity.
We May Be Required To Repurchase The Notes Upon A Change Of Control Or Asset
Sales.
If a Change of Control and a corresponding Rating Decline occur, we must
offer to purchase all Notes then outstanding at a purchase price equal to 101%
of the principal amount of the Notes, plus accrued interest to the date of
purchase. If we make certain sales or other dispositions of assets, we may be
required under certain limited circumstances to use the Net Available Proceeds
(as defined) to effect a Net Proceeds Offer. See "Description of the Notes--The
Indenture Contains Certain Covenants."
Before we would begin such an offer to purchase, we may be required to (1)
repay in full all of our indebtedness that would prohibit the repurchase of the
Notes, including that under the Revolving Credit Facility, or (2) obtain any
requisite consent to permit the repurchase. If we cannot repay all of such
indebtedness or we cannot obtain the necessary consents, then we will be unable
to offer to purchase the Notes, which would constitute an Event of Default under
the Indenture. We cannot assure you that we will have sufficient funds available
at the time of any Change of Control or Net Proceeds Offer to repurchase the
Notes. Moreover, we can make a Net Proceeds Offer only if we have Net Available
Proceeds remaining after we have applied Net Available Proceeds to purchase all
of the Series A/B Notes and Series C/D Notes that their holders tender pursuant
to a corresponding net proceeds offer.
The events that require a Change of Control or Net Proceeds Offer under the
Indenture may also constitute events of default under our Revolving Credit
Facility or other Senior Indebtedness. Such events may permit the lenders under
such debt instruments to accelerate the debt and, if we do not pay the debt, to
commence litigation that could ultimately result in a sale of substantially all
of our assets to satisfy that debt, thereby limiting our ability to raise cash
to repurchase the Notes and reducing the practical benefit of the offer to
purchase provisions to the holders of the Notes.
Fraudulent Conveyance Laws May Apply To The Subsidiary Guarantees.
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to the Subsidiary Guarantors' issuance of the Guarantees. To the
extent that a court were to find that
. a Subsidiary Guarantor incurred a Guarantee with intent to hinder,
delay or defraud any present or future creditor or the Subsidiary
Guarantor contemplated insolvency with a design to prefer one or more
creditors to the exclusion in whole or in part of others, or
. a Subsidiary Guarantor did not receive fair consideration or
reasonably equivalent value for issuing its Guarantee,
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and such Subsidiary Guarantor
. was insolvent,
. was rendered insolvent because it issued such Guarantee,
. was engaged or about to engage in a business or transaction for which
the remaining assets of such Subsidiary Guarantor constituted
unreasonably small capital to carry on its business or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured,
then the court could avoid or subordinate such Guarantee in favor of the
Subsidiary Guarantor's creditors.
Among other things, a legal challenge of a Guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, that the Subsidiary
Guarantor realizes from our issuance of the Notes. The Indenture contains a
savings clause, which generally limits the obligations of each Subsidiary
Guarantor under its Guarantee to the maximum amount as will, after giving effect
to all of the liabilities of such Subsidiary Guarantor, result in such
obligations not constituting a fraudulent conveyance. To the extent a Guarantee
of any Subsidiary Guarantor was avoided as a fraudulent conveyance or held
unenforceable for any other reason, then the holders of the Notes would cease to
have any claim against that Subsidiary Guarantor and would be creditors solely
of us and any Subsidiary Guarantor whose Guarantee was not avoided or held
unenforceable. If this happened, the claims of the holders of the Notes against
the issuer of an invalid Guarantee would be subject to the prior payment of all
liabilities of that Subsidiary Guarantor. We cannot assure you that, after
providing for all prior claims, there would be sufficient assets to satisfy the
claims of the holders of the Notes relating to any avoided portions of any of
the Guarantees.
The measure of insolvency for purposes of the foregoing considerations will
vary depending on the law applied in any such proceeding. But generally, a
Subsidiary Guarantor may be considered insolvent if the sum of its debts,
including contingent liabilities, was greater than the fair marketable value of
all of its assets at a fair valuation or if the present fair marketable value of
its assets was less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities as they become
absolute and mature.
Based on financial and other information, we and the Subsidiary Guarantors
believe that the Guarantees are being incurred for proper purposes and in good
faith and that each of the Subsidiary Guarantors is solvent and will continue to
be solvent after issuing its Guarantee, will have sufficient capital for
carrying on its business and will be able to pay its respective debts as they
mature. But we cannot assure you that a court passing on such standards would
agree with us.
We May Be Vulnerable To Year 2000 Risks.
The approach of the year 2000 presents significant issues for many
financial information and operational computer systems. Many computer systems
use two digits rather than four digits to identify a year, with the result that
these systems may be unable to distinguish the year 2000 from the year 1900. In
order to address the year 2000 issue, we have an ongoing year 2000 project.
While we believe that our year 2000 project will substantially reduce the
risks associated with the year 2000 issue, there can be no assurance that we
will be successful in completing each and every aspect of the project on
schedule, and if successful, that the project will have the expected results.
Due to the general uncertainty inherent in the year 2000 issue, we cannot
conclude that our failure or the failure of third parties to achieve year 2000
compliance will not adversely affect our financial position, results of
operations or cash flows. Specific factors that might affect the success of our
year 2000 efforts and the occurrence of a year 2000 disruption or expense
include:
. our failure or the failure of our consultants to properly identify
deficient systems;
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. the failure of the selected remedial action to adequately address any
deficiencies;
. our failure or the failure of our consultants to complete the
remediation in a timely manner, due to shortages of qualified labor or
other factors;
. unforeseen expenses related to the remediation of existing systems or
the transition to replacement systems; and
. the failure of third parties to become compliant or to adequately
notify us of potential non-compliance.
Risks Inherent In Our Operations.
Market Conditions And The Volatility Of Oil And Natural Gas Prices May
Materially Affect Our Revenues.
The revenues that our operations generate highly depend on the prices of,
and demand for, oil and natural gas. Historically, the prices for oil and
natural gas have been volatile and are likely to continue to be volatile in the
future. The prices that we receive for our oil and natural gas production and
the level of such production are subject to wide fluctuations and depend on
numerous factors that we do not control, including seasonality, the condition of
the United States economy (particularly the manufacturing sector), foreign
imports, political conditions in other oil-producing and natural gas-producing
countries, the actions of the Organization of Petroleum Exporting Countries and
domestic government regulation, legislation and policies. Decreases in the
prices of oil and natural gas have had, and could have in the future, an adverse
effect on the carrying value of our proved reserves and our revenues,
profitability and cash flow. Although we are not currently experiencing any
significant involuntary curtailment of our natural gas production, market,
economic and regulatory factors may in the future materially affect our ability
to sell our natural gas production.
Revenues From Our Midstream Segment May Experience Financial Losses From
Price Changes.
Any event that disrupts our anticipated physical supplies of crude oil may
expose us to risk of loss resulting from price changes. Generally, as Plains All
American Pipeline purchases crude oil, it establishes a margin by selling crude
oil for physical delivery to third party users, such as independent refiners or
major oil companies, or by entering into a future delivery obligation with
respect to futures contracts on the NYMEX. Through these transactions, we seek
to maintain a position that is substantially balanced between crude oil
purchases, on the one hand, and sales or future delivery obligations, on the
other hand. Our policy is not to acquire and hold crude oil, futures contracts
or derivative products for the purpose of speculating on price changes. But our
price risk management strategies cannot eliminate all price risks. For example,
if we inaccurately forecast the shut-in of production or other supply
interruptions as the result of depressed oil prices, mechanical interruptions,
abrupt production declines or apportionment of pipeline space on common carrier
pipelines, we might be unable to meet our supply commitments with the barrels
purchased at the wellhead. We would be forced to make purchases elsewhere to
meet our commitments, and if prices change adversely, our margins also may be
adversely affected. Moreover, we will be exposed to some risks that are not
hedged, including certain basis risks, such as the risk that price differentials
between delivery points, delivery periods or types of crude oil will change and
price risks on certain portions of our inventory. For accounting purposes, we
may record losses on a portion of the unhedged inventory due to market price
declines, although such losses would have no impact on our cash flow as long as
we are not forced to liquidate such inventory.
Operating Hazards And Uninsured Risks May Have A Material Adverse Affect On
Our Financial Position.
Our operations are subject to all of the risks normally incident to the
exploration for and the production of oil and natural gas, including blowouts,
cratering, oil spills and fires, each of which could damage or destroy oil and
natural gas wells or production facilities or other property, or cause injury to
persons. The relatively deep drilling that we conduct from time to time involves
increased drilling risks of high pressures and mechanical difficulties,
including stuck pipe, collapsed casing and separated cable. Our operations in
California, including transporting crude oil by pipelines within the city of Los
Angeles, are especially susceptible to damage from earthquakes and involve
increased risks of personal injury, property damage and marketing interruptions
because of the area's population density. Although we
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maintain insurance coverage considered to be customary in the industry, we are
not fully insured against certain of these risks, including, in certain
instances, earthquake risk in California, either because such insurance is not
available or because we would incur high premium costs. If a significant event
occurs, and we are not fully insured against it, then it could have a material
adverse effect on our financial position.
Certain Business Risks Of Our Upstream Segment May Affect Our Financial
Position.
We must continually acquire, explore for, develop or exploit new oil and
natural gas reserves to replace those produced or sold. Without successful
drilling, acquisition or exploitation operations, our oil and natural gas
reserves and revenues will decline. Drilling activities are subject to numerous
risks, including the risk that we will not obtain any commercially viable oil or
natural gas production. Whether we decide to purchase, explore, exploit or
develop an interest or property will depend in part on the evaluation of data
obtained through geophysical and geological analyses and engineering studies,
the results of which are often inconclusive or subject to varying
interpretations. The cost of drilling, completing and operating wells is often
uncertain. We may have to curtail, delay or cancel drilling if a number of
events occur, including title problems, weather conditions, compliance with
government permitting requirements, shortages of or delays in obtaining
equipment, reductions in product prices or limitations in the market for
products. The availability of a ready market for our oil and natural gas
production also depends on a number of factors, including the demand for and
supply of oil and natural gas and the proximity of reserves to pipelines or
trucking and terminal facilities. Natural gas wells may be shut in for lack of a
market or due to inadequacy or unavailability of natural gas pipeline or
gathering system capacity.
Our Midstream Segment Has Certain Business Risks.
Our midstream operations depend on demand for crude oil by refiners in the
Midwest and on the Gulf Coast. Any decrease in this demand could adversely
affect our business. Demand also depends on the ability and willingness of
shippers having access to our transportation assets to satisfy their demand by
deliveries through those assets. Any decrease in this demand could adversely
affect our business. Demand for crude oil depends on the impact of future
economic conditions, fuel conservation measures, alternative fuel requirements,
governmental regulation or technological advances in fuel economy and energy
generation devices, all of which could reduce demand.
How much profit our gathering and marketing activities generate depends
primarily on the volumes of crude oil that we purchase and gather. To maintain
the volumes of crude oil we purchase, we must continue to contract for new
supplies of crude oil to offset those volumes lost from natural declines in
crude oil production caused by depleting wells or volumes lost to competitors.
We encounter particular difficulty in replacing lost volumes of crude oil when
crude oil production is low and competition to gather available production is
intense. Generally, because producers experience inconveniences in switching
crude oil purchasers, such as delays in receiving proceeds while awaiting the
preparation of new division orders, producers typically do not change purchasers
on the basis of minor variations in price. Thus, we may experience difficulty
acquiring crude oil at the wellhead in areas where there are existing
relationships between producers and other gatherers and purchasers of crude oil.
Sustained low crude oil prices could lead to a decline in drilling activity
and production levels or the shutting-in or abandonment of marginal wells. To
the extent that low crude oil prices result in lower volumes of crude oil
available for purchase at the wellhead, we may experience lower margins in our
midstream segment as competition for available crude oil intensifies. In
addition, a sustained depression in crude oil prices could result in the
bankruptcy of some producers. Although bankruptcy proceedings are not likely to
terminate production from oil wells, they may disrupt purchasing arrangements
and have other adverse consequences. Alternatively, sustained high crude oil
prices can limit the volume of crude oil that we purchase if sufficient credit
support for our activities is unavailable.
Uncertainties In Estimating Reserves And Future Net Cash Flows May Affect
The Value Of Our Oil And Gas Properties.
There are numerous uncertainties inherent in estimating quantities and
values of proved reserves and in projecting future rates of production and
timing of development expenditures, including many factors that we do not
control. Reserve engineering is a subjective process of estimating the recovery
from underground accumulations of oil
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and natural 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. Because all reserve
estimates are to some degree speculative, the quantities of oil and natural gas
that are ultimately recovered, production and operating costs, the amount and
timing of future development expenditures and future oil and natural gas sales
prices may all differ from those assumed in these estimates. In addition,
different reserve engineers may make different estimates of reserve quantities
and cash flows based on the same available data. Therefore, the Present Value of
Proved Reserves set forth or incorporated by reference in this prospectus only
represents estimates and should not be construed as the current market value of
the estimated oil and natural gas reserves attributable to our properties. In
this regard, the information set forth or incorporated by reference in this
prospectus includes revisions of certain reserve estimates attributable to
proved properties included in the preceding year's estimates. Such revisions
reflect additional information from subsequent activities, production history of
the properties involved and any adjustments in the projected economic life of
such properties resulting from changes in product prices. Any downward revisions
could adversely affect our financial condition, borrowing base under the
Revolving Credit Facility, future prospects and market value of our securities.
Our Midstream Transportation Business Depends On California Crude Oil
Supplies.
A significant portion of the gross margin of Plains All American
Pipeline is derived from the Santa Ynez and Point Arguello fields located
offshore California. During the first nine months of 1999, gross revenues less
fuel and power expenses were $22.2 million from Santa Ynez and $7.8 million from
Point Arguello. Plains All American Pipeline has entered into contracts with the
producers of most of the production from these fields under which they have
agreed to ship all of their production from these fields on the All American
Pipeline through August 2007. But they are not obligated to produce or ship any
minimum volumes. Volumes received from the Santa Ynez and Point Arguello fields
have declined from 92,000 and 60,000 average daily barrels, respectively, in
1995 to 60,000 and 21,000 average daily barrels, respectively, for the first
nine months in 1999. We expect that there will continue to be natural production
declines from each of these fields. In addition, if production is disrupted in
these fields because of production problems, transportation problems or other
reasons, then it would have a material adverse effect on our midstream business.
We Hedge Some Of Our Crude Oil Production.
To manage our exposure to commodity price risk, we routinely enter into
hedging arrangements under which we hedge a portion of our crude oil production.
See "Summary--What Are Our Upstream Activities?" These hedging arrangements
provide us some protection if crude oil prices decline below the prices at which
these hedging arrangements are set. But these hedging arrangements also expose
us to the risk that we will receive lower prices for our hedged production than
we could otherwise realize if crude oil prices rise above the prices at which
these hedging arrangements are set.
We Are Subject To Particular Government Regulations.
Our business is regulated by certain federal, state and local laws and
regulations relating to the development, production, marketing, pricing,
transportation and storage of oil and natural gas. Our business is also subject
to extensive and changing environmental and safety laws and regulations that
govern the plugging and abandonment of oil wells, the discharge of materials
into the environment and other activities relating to environmental protections.
Certain of our properties are located in environmentally sensitive areas that
require special permits to drill.
Costs and liabilities could arise under increasingly strict
environmental and safety laws, including regulations and enforcement policies,
or claims for damages to property or persons resulting from our operations. If
we were unable to recover such resulting costs through insurance or increased
revenues, then our results from operations could be adversely affected. The
production, transportation and storage of crude oil results in a risk that crude
oil and other hydrocarbons may be suddenly or gradually released into the
environment, potentially causing substantial expenditures for a response action,
significant government penalties, liability for natural resources damages to
government agencies, personal injury or property damages to private parties and
significant business interruption.
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During 1997, a segment of the All American Pipeline located in
California leaked an estimated 12,000 barrels of crude oil into the soil.
Immediate action was taken to repair the pipeline leak, contain the spill and to
recover the released crude oil. Plains All American Pipeline has spent
approximately $400,000 to date in connection with this spill and does not expect
any additional expenditures to be material, although we cannot assure you in
that regard.
Before we acquired it in 1996, the Ingleside Terminal leaked refined
petroleum products into the soil and groundwater underlying the site, which was
caused by activities on the property. Plains All American Pipeline is
undertaking a voluntary state-administered remediation of the contamination on
the property to determine whether the contamination extends outside the property
boundaries. We expect that costs associated with the remediation of the
Ingleside Terminal will not exceed $250,000, although we cannot assure you in
that regard.
We Are In A Competitive Industry.
The oil and natural gas industry is highly competitive. We compete to
acquire, explore, exploit and develop oil and natural gas properties, to
purchase and market oil and obtain crude oil storage and terminalling business,
and to obtain sufficient capital to finance these activities. Our competitors
include companies that have greater financial and personnel resources than we
do. Our ability to acquire additional properties and to discover reserves in the
future depends on our ability to evaluate and select suitable properties and to
consummate transactions in a highly competitive environment.
Plains All American Pipeline competes with foreign oil imports and
other pipelines that serve the California market and the refining centers in the
Midwest and on the Gulf Coast. It also encounters intense competition in its
terminalling and storage activities and gathering and marketing activities. The
Pacific Pipeline, a new pipeline connecting the San Joaquin Valley to refinery
markets in the Los Angeles Basin area, was completed and placed in service in
March 1999.
Certain Factors And Procedures With The Exchange Offer May Cause Us Risk.
We will issue the Exchange Notes for your Outstanding Notes after we
have timely received your Outstanding Notes, a properly completed and duly
executed letter of transmittal and all other required documents. Therefore, if
you desire to tender your Outstanding Notes in exchange for Exchange Notes, then
you should allow sufficient time to ensure timely delivery. We are under no duty
to notify you of defects or irregularities with respect to your tender of
Outstanding Notes for exchange. If you do not tender your Outstanding Notes, or
if we do not accept your tender, then those Outstanding Notes will remain
subject to the existing transfer restrictions on them after we complete the
exchange offer. When we complete the exchange offer, the registration rights
under the Registration Rights Agreement will terminate unless any holder of the
Outstanding Notes notifies us on or before the Exchange Date that
. due to a change in law or policy it is not entitled to
participate in the exchange offer;
. due to a change in law or policy it may not resell the
Exchange Notes acquired by it in the exchange offer to the
public without delivering a prospectus and this prospectus is
not appropriate or available for such resales by such holder;
or
. it is a broker-dealer that owns Outstanding Notes (including
an Initial Purchaser that holds Outstanding Notes as part of
an unsold allotment from the original offering of the
Outstanding Notes) that it acquired directly from us or from
one of our affiliates.
We have agreed to file and maintain, for a period of three years, a shelf
registration statement for any holder in these circumstances. See "Exchange
Offer-We May Have To File A Shelf Registration Statement". In addition, any
holder of Outstanding Notes who tenders in the exchange offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration
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and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Outstanding Notes, if it acquired such Outstanding
Notes as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution". To the extent that Outstanding
Notes are tendered and accepted in the exchange offer, the trading market for
untendered and tendered but unaccepted Outstanding Notes could be adversely
affected. See "The Exchange Offer".
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THE EXCHANGE OFFER
Why Are We Making The Exchange Offer?
We sold the Outstanding Notes on September 22, 1999, to the Initial
Purchasers, who then sold the Outstanding Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act. When we sold the
Outstanding Notes to the Initial Purchasers, we, the Subsidiary Guarantors and
the Initial Purchasers entered into the Registration Rights Agreement, which
requires, among other things, that we file with the Commission a registration
statement under the Securities Act and offer to exchange your Outstanding Notes
for a like principal amount of Exchange Notes. We must use our best efforts to
cause that Registration Statement to be declared effective by the Commission
under the Securities Act and to begin the exchange offer, and we must use our
best efforts to issue, on or before the Exchange Date, the Exchange Notes. We
will issue the Exchange Notes without a restrictive legend. A holder of Exchange
Notes may reoffer and resell them without restrictions or limitations under the
Securities Act unless he is one of our "affiliates" within the meaning of Rule
405 under the Securities Act, he participates in the exchange offer intending to
participate in a distribution or he does not acquire the Exchange Notes in the
ordinary course of his business. A copy of the Registration Rights Agreement has
been filed as an exhibit to the Registration Statement of which this prospectus
is a part.
What Are The Terms Of The Exchange Offer?
On the terms and subject to the conditions in this prospectus and in
the letter of transmittal, we will accept any and all Outstanding Notes that you
validly tender and do not withdraw before 5:00 p.m., New York City time, on the
Expiration Date. On the Exchange Date, we will issue to you $1,000 principal
amount of Exchange Notes in exchange for every $1,000 principal amount of
Outstanding Notes that you tender and that we accept in the exchange offer. You
may tender some or all of your Outstanding Notes pursuant to the exchange offer.
You may only tender Outstanding Notes in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and
terms of the Outstanding Notes except that we have registered the Exchange Notes
under the Securities Act and so they will not bear legends restricting their
transfer and the holders of the Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement. The Exchange Notes will evidence
the same debt as the Outstanding Notes and will be entitled to the benefits of
the Indenture.
As of the date of this prospectus, $75,000,000 aggregate principal
amount of the Outstanding Notes was outstanding and registered in the name of
Cede & Co., as nominee for the Depository Trust Company. We have fixed the close
of business on ____________, 1999, as the record date for the exchange offer for
purposes of determining those persons to whom we will initially send this
prospectus and the letter of transmittal.
You do not have any appraisal or dissenters' rights under the General
Corporation Law of Delaware or the Indenture in connection with the exchange
offer. We intend to conduct the exchange offer according to the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder, including Rule 14e-1.
We are deemed to accept validly tendered Outstanding Notes when we
orally or in writing notify the Exchange Agent that we accept those tenders. The
Exchange Agent will act as agent for the tendering Holders for the purpose of
receiving the Exchange Notes from us.
If we do not accept any tendered Outstanding Notes for exchange because
of an invalid tender, because certain other events set forth in this prospectus
occur or for whatever other reason, we will return the certificates for any
unaccepted Outstanding Notes, without expense, to the appropriate tendering
holder as soon as we practically can after the Expiration Date.
If you tender your Outstanding Notes in the exchange offer you will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the exchange offer. We will pay all charges and
expenses, other than transfer taxes
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in certain circumstances, in connection with the exchange offer. See "--Who
Bears The Fees and Expenses Of The Exchange Offer".
When Does Interest Begin Accruing On The Exchange Notes?
The Exchange Notes will bear interest from the date that we issue them.
Interest on the Outstanding Notes will accrue until then. We will pay interest
on the Exchange Notes semi-annually every March 15 and September 15, beginning
on March 15, 2000.
How Do I Tender My Outstanding Notes?
Only a Holder (as defined) of Outstanding Notes may tender Outstanding
Notes in the exchange offer. To tender in the exchange offer, you must
. complete, sign and date the letter of transmittal, or
a facsimile thereof;
. have the signatures on the letter of transmittal
guaranteed if the letter of transmittal so requires;
and
. mail or otherwise deliver the letter of transmittal or
the facsimile, together with your Outstanding Notes
and any other required documents, to the Exchange
Agent before 5:00 p.m., New York City time, on the
Expiration Date.
To tender your Outstanding Notes effectively, the Exchange Agent must
receive the Outstanding Notes, the letter of transmittal and all other required
documents at the address set forth below under "Exchange Agent" before 5:00
p.m., New York City time, on the Expiration Date. You may deliver your
Outstanding Notes by book-entry transfer in accordance with the procedures that
we describe below. The Exchange Agent must receive confirmation of such book-
entry transfer before the Expiration Date.
We understand that the Exchange Agent will make a request promptly
after the date of this prospectus to establish accounts with respect to the
Exchange Notes at DTC to facilitate the exchange offer, and subject to its
establishment, any financial institution that is a participant in DTC's system
may make book-entry delivery of its Outstanding Notes by causing DTC to transfer
its Outstanding Notes into the Exchange Agent's account according to DTC's
procedures. Although you may deliver the Outstanding Notes through book-entry
transfer into the Exchange Agent's account at DTC, you must transmit to and the
Exchange Agent must receive an appropriate letter of transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents at its address set forth below on or before the Expiration
Date, or, if you comply with the guaranteed delivery procedures described below,
within the time period provided under such procedures. However, if you are a
participant in DTC's book-entry system, you may, in accordance with DTC's
Automated Tender Offer Program procedures and in lieu of physical delivery to
the Exchange Agent of a letter of transmittal, electronically acknowledge that
you received and agree to be bound by, the terms of the letter of transmittal.
Just because you deliver documents to DTC does not mean that you have delivered
those documents to the Exchange Agent.
By executing the letter of transmittal, you will represent to us that
the facts are as set forth below in the second paragraph under the heading "Can
I Resell The Exchange Notes".
Your tender and our acceptance will constitute an agreement between you
and us in accordance with the terms and subject to the conditions set forth in
this prospectus and in the letter of transmittal.
YOU CHOOSE AND ELECT AT YOUR OWN RISK THE METHOD YOU DELIVER YOUR
OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS
TO THE EXCHANGE AGENT. WE RECOMMEND AGAINST DELIVERING THESE DOCUMENTS BY MAIL.
WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE
THE
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EXPIRATION DATE. YOU SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR OUTSTANDING
NOTES TO US. YOU MAY REQUEST YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
If you beneficially own Outstanding Notes that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
you wish to tender, you should contact the registered Holder promptly and
instruct the registered Holder to tender on your behalf.
An Eligible Institution (as defined below) must guarantee the
signatures on the letter of transmittal or a notice of withdrawal unless the
Outstanding Notes are tendered:
. by a registered Holder who has not completed the box
entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the letter of
transmittal; or
. for the account of an Eligible Institution.
As used in this prospectus, the term "Eligible Institution" means a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act.
If a person other than the registered Holder of any Outstanding Notes
listed signs the letter of transmittal, then those Outstanding Notes must be
endorsed or accompanied by a properly completed bond power, and signed by that
registered Holder as that registered Holder's name appears on those Outstanding
Notes, and the signature guaranteed by an Eligible Institution.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any Outstanding Notes, then these
persons should so indicate when signing, and unless we waive the requirement,
they must submit with the letter of transmittal evidence that satisfies us that
they have authority to so act.
We will determine in our sole discretion all questions as to the
validity, form, eligibility (including time of receipt), acceptance and
withdrawal of tendered Outstanding Notes and our determination will be final and
binding. We reserve the absolute right to reject any and all Outstanding Notes
not properly tendered or any Outstanding Notes our acceptance of which would, in
the opinion of our counsel, be unlawful. We also reserve the right to waive any
defects, irregularities or conditions of tender as to particular Outstanding
Notes. Our interpretation of the terms and conditions of the exchange offer
(including the instructions in the letter of transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within the amount of
time that we determine. Although we intend to notify you of defects or
irregularities with respect to your tenders of Outstanding Notes, we, the
Exchange Agent or any other person will not incur any liability for failure to
give such notification. You will not be deemed to have tendered your Outstanding
Notes until any such defects or irregularities have been cured or waived. If the
Exchange Agent receives Outstanding Notes that are not properly tendered, and as
to which the defects or irregularities have not been cured or waived, the
Exchange Agent will return them to the tendering Holders, unless otherwise
provided in the letter of transmittal, as soon as practicable after the
Expiration Date.
How Do I Take Advantage Of The Guaranteed Delivery Procedures?
If you wish to tender your Outstanding Notes and your Outstanding Notes
are not immediately available, you cannot deliver your Outstanding Notes, the
letter of transmittal or any other required documents to the Exchange Agent or
you cannot complete the procedures for book-entry transfer, before the
Expiration Date, you may tender if:
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. you tender through an Eligible Institution;
. before the Expiration Date, the Exchange Agent receives
from that Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery by facsimile
transmission, mail or hand delivery setting forth your
name and address, the certificate numbers of your
Outstanding Notes and the principal amount of
Outstanding Notes tendered, stating that you are
tendering thereby and guaranteeing that, within five New
York Stock Exchange trading days after the Expiration
Date, the Eligible Institution will deposit the letter
of transmittal or facsimile thereof, together with the
certificates representing the Outstanding Notes, or a
confirmation of book-entry transfer of such Outstanding
Notes into the Exchange Agent's account at DTC, and any
other documents that the letter of transmittal requires,
with the Exchange Agent; and
. the Exchange Agent receives within five New York Stock
Exchange trading days after the Expiration Date, such
properly completed and executed letter of transmittal or
facsimile thereof, as well as the certificates
representing all tendered Outstanding Notes in proper
form for transfer, or a confirmation of book-entry
transfer of such Outstanding Notes into the Exchange
Agent's account at DTC, and all other documents that the
letter of transmittal requires.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to you if you wish to tender your Outstanding Notes according to
the guaranteed delivery procedures set forth above.
How Do I Withdraw My Tender?
Except as otherwise provided in this prospectus, you may withdraw your
tender of Outstanding Notes at any time before 5:00 p.m., New York City time, on
the Expiration Date.
To withdraw your tender of Outstanding Notes, the Exchange Agent must
receive a written or facsimile transmission notice of withdrawal at its address
set forth in this prospectus before 5:00 p.m., New York City time, on the
Expiration Date. Your notice of withdrawal must
. specify the name of the person who deposited the
the outstanding notes to be withdrawn;
. identify the Outstanding Notes to be withdrawn,
including the certificate numbers and principal amount
of such Outstanding Notes, or, in the case of
Outstanding Notes transferred by book-entry transfer,
the name and number of the account at DTC to be
credited;
. be signed by the Holder in the same manner as the
original signature on the letter of transmittal by which
those Outstanding Notes were tendered including any
required signature guarantees or be accompanied by
documents of transfer sufficient to have the Trustee
with respect to the Outstanding Notes register the
transfer of such Outstanding Notes into the name of the
person withdrawing the tender;
. specify the name in which those Outstanding Notes are
to be registered, if different from that of the
person who deposited the Outstanding Notes; and
. if applicable because the Outstanding Notes have been
tendered pursuant to book-entry procedures, specify the
name and number of the participant's account at DTC to
be credited, if different from that of the person who
deposited the Outstanding Notes.
We will determine all questions as to the validity, form and
eligibility, including time of receipt, of such notices, and our determination
will be final and binding on all parties. Any Outstanding Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the exchange
offer, and we will not issue any Exchange Notes
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<PAGE>
with respect to those Outstanding Notes unless those Outstanding Notes are
validly retendered. We will return to you any Outstanding Notes that you have
tendered and that we do not accept for exchange, without cost to you, as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. Properly withdrawn Outstanding Notes may be retendered by following one
of the procedures described above under "--How Do I Tender My Outstanding
Notes?" at any time before the Expiration Date.
Conditions
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or to issue Exchange Notes for, any Outstanding
Notes, and we may terminate or amend the exchange offer as provided herein
before we accept any Outstanding Notes, if:
. any action or proceeding is instituted or threatened in
any court or by or before any governmental agency with
respect to the exchange offer that might materially
impair our ability to proceed with the exchange offer or
any material adverse development has occurred in any
existing action or proceeding with respect to us or any
of our subsidiaries;
. any change, or any development involving a prospective
change, in our business or financial affairs or any of
our subsidiaries has occurred that might materially
impair our ability to proceed with the exchange offer;
. any law, statute, rule, regulation or interpretation by
the Commissions's staff is proposed, adopted or enacted
that might materially impair our ability to proceed with
the exchange offer or materially impair the contemplated
benefits of the exchange offer to us; or
. we have not obtained any governmental approval that we,
in our sole discretion, deem necessary to consummate the
exchange offer as contemplated in this prospectus.
If we determine in good faith and in the exercise of our reasonable
discretion that any of the conditions are not satisfied, we may
. refuse to accept any Outstanding Notes and return all
tendered Outstanding Notes to the tendering Holders;
. extend the exchange offer and retain all Outstanding
Notes tendered before the exchange offer expires,
subject to the rights of Holders to withdraw their
Outstanding Notes (see "--How Do I Withdraw My Tender");
or
. waive any unsatisfied conditions with respect to the
exchange offer and accept all properly tendered
Outstanding Notes that have not been withdrawn. If such
waiver constitutes a material change to the exchange
offer, we will promptly disclose to you such waiver by
distributing to the registered Holders a prospectus
supplement, and, depending on the significance of the
waiver and the manner of disclosure to the registered
Holders, we will extend the exchange offer for five to
10 business days if the exchange offer would otherwise
expire within five to 10 days after such waiver.
Who Is The Exchange Agent?
Chase Bank of Texas, National Association has been appointed as
Exchange Agent for the exchange offer. You should direct questions and requests
for assistance, requests for additional copies of this prospectus or of the
letter of transmittal and requests for Notice of Guaranteed Delivery to the
Exchange Agent addressed as follows:
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<PAGE>
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Mail or Hand: By Facsimile:
Chase Bank of Texas, National Chase Bank of Texas, National Chase Bank of Texas, National
Association Association Association
Attention: __________________ _____________________________ _____________________________
_____________________________ _____________________________ _____________________________
_____________________________ _____________________________ _____________________________
_____________________________ _____________________________ _____________________________
</TABLE>
Who Bears The Fees And Expenses Of The Exchange Offer?
We will bear the expenses of soliciting tenders pursuant to the
exchange offer. We are principally soliciting tenders by mail; but our officers
and regular employees and those of our affiliates may additionally solicit
tenders by telegraph, telephone or in person.
We have not retained any dealer-manager in connection with the exchange
offer and we will not make any payments to brokers or others soliciting
acceptances of the exchange offer. But we will pay the Exchange Agent reasonable
and customary fees for its services and registration expenses, including fees
and expenses of the Trustee, filing fees, blue sky fees and printing and
distribution expenses.
We will pay all transfer taxes, if any, applicable to the exchange of
the Outstanding Notes pursuant to the exchange offer. But if we are going to
deliver or issue certificates representing the Exchange Notes, or the
Outstanding Notes for the principal amounts not tendered or accepted for
exchange, in the name of, any person other than the person signing the letter of
transmittal, or if a transfer tax is imposed for any reason other than the
exchange of the Outstanding Notes pursuant to the exchange offer, then the
tendering Holder will pay any such transfer taxes (whether imposed on the
registered Holder or any other person).
How Will The Exchange Notes Receive Accounting Treatment?
We will record the Exchange Notes at the same carrying value as the
Outstanding Notes, which is face value as adjusted for original issue premium,
as reflected in our accounting records on the date of exchange. Accordingly, you
will not recognize any gain or loss for accounting purposes. The expenses of the
exchange offer will be amortized over the term of the Exchange Notes.
Can I Resell The Exchange Notes?
Based on an interpretation by the Commission's staff set forth in no-
action letters issued to third parties, we believe that you may offer for
resale, resell and otherwise transfer the Exchange Notes that we issue to you
pursuant to the exchange offer in exchange for Outstanding Notes without needing
to comply with the registration and prospectus delivery provisions of the
Securities Act, provided that
. you acquire such Exchange Notes in the ordinary course of your
business and you do not intend to participate and have no
arrangement or understanding with any person to participate in the
distribution of such Exchange Notes; and
. you are not one of our "affiliates" within the meaning of Rule 405
under the Securities Act.
If you tender in the exchange offer intending to participate, or for the purpose
of participating, in a distribution of the Exchange Notes, then you may not rely
on the position of the Commission's staff enunciated in Exxon Capital Holdings
Corporation (available April 13, 1989) and Morgan Stanley & Co., Incorporated
(June 5, 1991), or similar no-action letters. You must instead comply with the
registration and prospectus delivery requirements of the Securities Act when you
offer or resell your Exchange Notes. In addition, when you resell your Exchange
Notes, an effective registration statement containing the selling security
holders information required by Item 507 of Regulation S-K of the Securities Act
should cover the transaction. Each broker-dealer that receives Exchange Notes
for its own account in exchange for
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<PAGE>
Outstanding Notes, if it acquired those Outstanding Notes as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of those Exchange Notes. See
"Plan of Distribution".
If you tender in the exchange offer, you will represent to us that,
among other things,
. you are acquiring the Exchange Notes in the ordinary
course of the business of the person receiving those
Exchange Notes, whether or not such person is you;
. neither you nor any such other person has an arrangement
or understanding with any person to participate in the
distribution of those Exchange Notes; and
. you and such other person acknowledge that if they
participate in the exchange offer for the purpose of
distributing the Exchange Notes,
- you and such person must, in the absence of an
exemption, comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any resale of
the Exchange Notes and cannot rely on the no-
action letters referenced above and
- if you fail to comply with such requirements,
you may incur liability under the Securities
Act for which we will not indemnify you.
By tendering in the exchange offer, each Holder that may be deemed to
be one of our "affiliates" (as defined under Rule 405 of the Securities Act)
will represent to us that it understands and acknowledges that it may not offer
for resale, resell, or otherwise transfer the Exchange Notes without
registration under the Securities Act or qualifying for an exemption thereunder.
Our affiliates may not rely on the foregoing interpretations of the Commission's
staff with respect to resales of the Exchange Notes without complying with the
registration and prospectus delivery requirements of the Securities Act.
We May Have To Issue Private Exchange Notes.
The Registration Rights Agreement provides that if, before we complete
the exchange offer, the Initial Purchasers hold any Outstanding Notes that they
acquired and that have, or that are reasonably likely to be determined to have,
the status of an unsold allotment in the initial distribution, or any other
holder of Outstanding Notes may not participate in the exchange offer, we must,
if the Initial Purchasers or that Holder requests, issue and deliver to the
Initial Purchasers and that holder, in exchange for such Outstanding Notes,
Private Exchange Notes. We must issue and deliver them at the same time that we
deliver the Exchange Notes in the exchange offer. We will issue any Private
Exchange Notes pursuant to the same Indenture as the Exchange Notes. The
registration statement of which this prospectus is a part does not cover the
Private Exchange Notes and we are not offering them hereby. Any Private Exchange
Notes will receive all the rights and will be subject to all the limitations
applicable to them under the Indenture and will be subject to the same
restrictions on transfer applicable to untendered Outstanding Notes. See "--What
Happens If My Outstanding Notes Are Not Exchanged?". But, pursuant to the
Registration Rights Agreement, holders of Private Exchange Notes have certain
rights to require us to file and maintain a shelf registration statement that
would allow the holders of the Private Exchange Notes to resell their Private
Exchange Notes. See "--We May Have To File A Shelf Registration Statement".
What Happens If My Outstanding Notes Are Not Exchanged?
This exchange offer fulfills one of our obligations under the
Registration Rights Agreement; and, except as described under "--We May Have To
File A Shelf Registration Statement", if you do not tender your Outstanding
Notes, then you will not have any further registration rights under the
Registration Rights Agreement or otherwise. Accordingly, if you do not exchange
your Outstanding Notes for Exchange Notes, then you will continue to hold the
untendered Outstanding Notes and you will be entitled to all the rights and
limitations applicable to them under the
30
<PAGE>
Indenture, except to the extent those rights or limitations, by their terms,
terminate or cease to have further effectiveness as a result of the exchange
offer.
Any Outstanding Notes that you do not exchange for Exchange Notes pursuant
to the exchange offer will remain restricted securities. Accordingly, you may
only resell such Outstanding Notes:
. to us, if we redeem them or otherwise;
. pursuant to an effective registration statement under the
Securities Act;
. so long as the Outstanding Notes are eligible for resale pursuant
to Rule 144A, to a qualified institutional buyer within the
meaning of Rule 144A under the Securities Act in a transaction
meeting the requirements of Rule 144A;
. outside the United States to a foreign person pursuant to the
exemption from the registration requirements of the Securities
Act provided by Regulation S thereunder;
. to an institutional accredited investor that, before such
transfer, furnishes to the Trustee a signed letter containing
certain representations and agreements relating to the
restrictions on transfer of the Outstanding Notes evidenced
thereby (the form of which letter can be obtained from such
trustee); or
. pursuant to another available exemption from the registration
requirements of the Securities Act, in each case in accordance
with any applicable securities laws of any state of the United
States.
Accordingly, the exchange offer, to the extent that we exchange Outstanding
Notes for Exchange Notes, could adversely affect the trading market for the
untendered Outstanding Notes.
We May Have To File A Shelf Registration Statement.
If:
. we may not consummate the exchange offer because any applicable
law or applicable interpretation of the Commission or the
Commission's staff does not permit the exchange offer,
. any holder of an Outstanding Note notifies us on or before the
Exchange Date that
. due to a change in law or policy it is not entitled to
participate in the exchange offer,
. due to a change in law or policy it may not resell the
Exchange Notes that it would acquire in the exchange offer
to the public without delivering a prospectus and this
prospectus is not appropriate or available for such resales
by such holder or
. it is a broker-dealer that owns Outstanding Notes, including
Initial Purchasers that hold Outstanding Notes as part of an
unsold allotment from the original offering of the
Outstanding Notes, acquired directly from us or one of our
affiliates or
. any holder of Private Exchange Notes so requests within 120 days
after we consummate the exchange offer,
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<PAGE>
then we have agreed to file and maintain a registration statement that would
allow resales of transfer-restricted Outstanding Notes, Exchange Notes or
Private Exchange Notes that any of these holders own.
Some Other Matters You Should Consider.
Your participation in the exchange offer is voluntary and we strongly urge
you to carefully consider your decision to participate. We urge you to consult
your financial and tax advisors regarding the exchange offer and to decide for
yourself what action you should take.
We may in the future seek to acquire untendered Outstanding Notes in the
open market or privately negotiated transactions, through later exchange offers
or otherwise. We do not presently plan to acquire any Outstanding Notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered Outstanding Notes, except for the filing, if required,
of a shelf registration statement pursuant to "-We May Have To File A Shelf
Registration Statement".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. We cannot assure you that the
Internal Revenue Service will not take a contrary view, and no ruling from the
Internal Revenue Service has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to you. Certain Holders of the Outstanding Notes (including
insurance companies, tax exempt organizations, financial institutions, broker-
dealers, persons who have hedged the risk of owning an Outstanding Note, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. You should consult your own
tax advisor as to the particular tax consequences of exchanging your Outstanding
Notes for Exchange Notes, including the applicability and effect of any state,
local or foreign tax laws.
Our issuance of the Exchange Notes to Holders of the Outstanding Notes
pursuant to the terms set forth in this prospectus should not constitute a
recognition event for federal income tax purposes. Consequently, you should not
recognize any gain or loss when you receive the Exchange Notes. For purposes of
determining gain or loss if you later sell or exchange the Exchange Notes, your
basis in the Exchange Notes should be the same as your basis in the Outstanding
Notes that you exchange. You should be considered to have held the Exchange
Notes from the time you originally acquired the Outstanding Notes.
USE OF PROCEEDS
We intend that this exchange offer will satisfy certain of our obligations
under the Purchase Agreement and the Registration Rights Agreement. We will not
receive any cash proceeds from our issuance of the Exchange Notes. In
consideration for issuing the Exchange Notes contemplated in this prospectus, we
will receive Outstanding Notes in like principal amount, the form and terms of
which are the same as the form and terms of the Exchange Notes (which they
replace), except as otherwise described in this prospectus. We will retire and
cancel the Outstanding Notes surrendered in exchange for Exchange Notes and we
may not reissue them. Accordingly, our issuance of the Exchange Notes will not
increase or decrease our indebtedness.
The net proceeds that we received when we sold the Outstanding Notes was
approximately $74.6 million. We used these proceeds to reduce indebtedness
outstanding under our $225 million Revolving Credit Facility with a group of
banks. At September 30, 1999, we had approximately $50.1 million outstanding
under the Revolving Credit Facility. The Revolving Credit Facility bears
interest at our option of either LIBOR plus 1 3/8% or the Base Rate. The "Base
Rate" is defined as the higher of the federal funds rate plus 1/2% or Prime. The
average interest rate as of September 30, 1999, of all outstanding indebtedness
under the Revolving Credit Facility was approximately 7.2%. The Subsidiary
Guarantors other than PMCT Inc. guarantee the Revolving Credit Facility and the
oil and gas properties of us and the
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<PAGE>
Subsidiary Guarantors other than PMCT Inc. The stock of the Subsidiary
Guarantors collateralizes the Revolving Credit Facility.
33
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
We and certain of our subsidiaries have established credit facilities with
different commercial lenders to fund working capital requirements, to issue
letters of credit and to fund other obligations to support our crude oil
marketing activities. The following summarizes these credit facilities.
We Have A Revolving Credit Facility.
We have a $225 million Revolving Credit Facility with a group of commercial
lenders (the "Lenders") including First Union National Bank as a Lender and the
agent for the Lenders. The Subsidiary Guarantors (except PMCT Inc.) guarantee
the Revolving Credit Facility, and all of our and the Subsidiary Guarantors'
(except PMCT Inc.) property including oil and gas properties and the stock of
the Subsidiary Guarantors secures the Revolving Credit Facility. The borrowing
base under the Revolving Credit Facility at September 30, 1999, was $225 million
and may be redetermined from time to time by the Lenders in good faith, in the
exercise of their sole discretion, and according to customary practices and
standards in effect from time to time for oil and gas loans to borrowers similar
to us. This borrowing base may be affected by the performance of our oil and gas
properties and changes in oil and gas prices. We incur a commitment fee of 3/8%
per annum on the unused portion of the borrowing base. The borrowing
availability under the Revolving Credit Facility terminates on July 1, 2001, at
which time the then outstanding balance converts to a term loan which is payable
in sixteen equal quarterly installments commencing October 1, 2001, with a final
maturity of July 1, 2005. Borrowings under the Revolving Credit Facility bear
interest, at our option, either at LIBOR plus 1 3/8% or Base Rate (as defined
therein). At September 30, 1999, outstanding borrowings under the Revolving
Credit Facility were approximately $50.1 million.
The Revolving Credit Facility contains covenants which, among other things,
restrict the payment of cash dividends, limit the amount of consolidated debt,
limit our ability to make certain loans and investment and provide that we must
maintain a specified relationship between current assets and current
liabilities.
We Have Issued Series A-D Notes.
We have $200 million principal amount of 10 1/4% Senior Subordinated Notes
due 2006 outstanding which bear a coupon rate of 10 1/4% and consist of
. Series A - $500,000 principal amount;
. Series B - $149.5 million principal amount;
. Series C - $50,000 principal amount; and
. Series D - $49.95 million principal amount.
The covenants and other terms of the Series A-D Notes are substantially the
same as the covenants and other terms of the Notes. See "Description of the
Exchange Notes."
Plains All American Pipeline Has Its Own Credit Facilities.
Plains Scurlock Permian, L.P., a partnership subsidiary of Plains All
American Pipeline, L.P., has a credit facility (the "Scurlock
Revolving Credit Facility") consisting of (1) a five-year $126.6 million term
loan and (2) a three-year $35 million revolving credit facility. This credit
facility is nonrecourse to us, the Subsidiary Guarantors, Plains All American
Pipeline, L.P., Plains Marketing, L.P. and All American Pipeline, L.P. and is
secured by substantially all of the assets of Plains Scurlock Permian, L.P.
Borrowings under the term loan bear interest at LIBOR plus 3% and under the
revolving credit facility at LIBOR plus 2.75%. A commitment fee equal to one-
half of one percent per year is charged on the unused portion of the revolving
credit facility. The Scurlock Revolving Credit Facility, which may be used for
borrowings or letters of credit to support crude oil purchases, matures in May
2002. The term loan provides for principal amortization of $0.7 million annually
beginning May 2000, with a final maturity of May 2004. In addition, Plains
Scurlock has interest rate swap and collar arrangements for an aggregate
notional principal amount of $90 million. As of September 30, 1999, letters
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<PAGE>
of credit of approximately $14.0 million were outstanding under the revolving
credit facility and borrowings of $126.6 million and $8.0 million were
outstanding under the term loan and the revolver, respectively. In October 1999,
the term loan was reduced to $82.6 million with the proceeds of a Plains All
American Pipeline L.P. public offering.
Concurrently with the closing of Plains All American Pipeline's initial
public offering in November 1998, All American Pipeline, L.P., another
partnership subsidiary of Plains All American Pipeline L.P. entered into a $225
million bank credit agreement that includes a $175 million term loan facility
(the "All American Term Loan Facility") and a $50 million revolving credit
facility (the "All American Revolving Credit Facility") with a group of lenders
including Bank Boston, N.A., as a lender and the agent for such lenders. All
American Pipeline, L.P. may borrow up to $50 million under the All American
Revolving Credit Facility for acquisitions, capital improvements, working
capital and general business purposes. At September 30, 1999, this subsidiary
had $175 million outstanding under the All American Term Loan Facility,
representing indebtedness assumed from its general partner, Plains All American
Inc., and $14.3 million outstanding under the All American Revolving Credit
Facility. The All American Term Loan Facility matures in 2005, and no principal
is scheduled for payment before maturity. The All American Term Loan Facility
may be prepaid at any time without penalty. The All American Revolving Credit
Facility expires in November 2000.
Plains Marketing, L.P., another partnership subsidiary of Plains All
American Pipeline L.P., has a $175 million letter of credit and borrowing
facility (the "Letter of Credit Facility") that may be used for (1) standby
letters of credit to support the purchase and exchange of crude oil for resale
and (2) borrowings to finance crude oil inventory that has been hedged against
future price risk or designated as working inventory. Aggregate availability
under the Letter of Credit Facility for direct borrowings and letters of credit
is limited to a borrowing base that is determined monthly based on certain
current assets and current liabilities of Plains Marketing, L.P., primarily
crude oil inventory and accounts receivable and accounts payable related to the
purchase and sale of crude oil. At September 30, 1999, the borrowing base under
the Letter of Credit Facility supported the full $175 million of availability.
The Letter of Credit Facility has a $40 million sublimit for borrowings to
finance hedged inventories of crude oil purchased. At September 30, 1999, there
were letters of credit of approximately $90.7 million and borrowings of $30.3
million outstanding under the Letter of Credit Facility.
Each of the credit facilities of Plains All American Pipeline is without
recourse to us or the Subsidiary Guarantors.
Some Other Matters You Should Consider.
We have total other indebtedness of approximately $2.5 million at September
30, 1999, of which approximately $2.0 million we have classified as other long-
term debt on the Consolidated Balance Sheet as of September 30, 1999. We issued
this indebtedness to Chevron in connection with the December 1995 purchase of a
production payment on the Los Angeles Basin Properties. The indebtedness bears
interest at 8% payable annually, requires equal annual principal payments of
approximately $511,000 and is unsecured.
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DESCRIPTION OF THE EXCHANGE NOTES
In General.
We are going to issue the Exchange Notes as a separate series of notes
under an indenture (the "Indenture") dated as of September 15, 1999 (the
"Indenture Date"), among the Subsidiary Guarantors, Chase Bank of Texas,
National Association, as trustee (the "Trustee"), and us. The Exchange Notes
will be senior unsecured obligations of us and are substantially identical
(including principal amount, interest rate, maturity and redemption rights) to
the Outstanding Notes for which they may be exchanged pursuant to this offer,
except for certain transfer restrictions and registration rights relating to the
Outstanding Notes and except for certain interest provisions relating to such
rights. Under the terms of the Indenture, the covenants and events of default
will apply equally to the Exchange Notes and the Outstanding Notes, and the
Exchange Notes and the Outstanding Notes will be treated as one class for all
actions to be taken by the holders thereof and for determining their respective
rights under the Indenture. Whenever we refer to the Notes we are including the
Exchange Notes, the Outstanding Notes and the Private Placement Notes unless the
context otherwise requires. We issued the Outstanding Notes under the Indenture
on September 15, 1999 in an aggregate principal amount of $75 million. The
Indenture also provides us the flexibility of issuing additional Notes in the
future in principal amount not to exceed $75 million in the aggregate; however,
any issuance of such additional Notes would be subject to the covenants
described in the first paragraph under "--The Indenture Contains Certain
Covenants--We Are Limited In How We Incur Additional Indebtedness". Upon the
issuance of the Exchange Notes or the effectiveness of the exchange offer
Registration Statement, the Indenture will be subject to and governed by the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
following summarizes certain provisions of the Indenture and the Registration
Rights Agreement and does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all of the provisions of the
Indenture and the Registration Rights Agreement, including the definition of
certain terms contained therein and those terms that are made a part of the
Indenture by reference to the Trust Indenture Act. Copies of the form of
Indenture and Registration Rights Agreement have been filed as an exhibit to the
Registration Statement of which this prospectus is a part. Capitalized terms not
otherwise defined below or elsewhere in this prospectus have the meanings given
to them in the Indenture. The definitions of certain capitalized terms used in
the summary are set forth below under "-- Certain Definitions".
What Is The Principal, Maturity And Interest Of The Notes?
The Exchange Notes:
. will be unsecured senior subordinated general obligations of us;
. will mature on March 15, 2006 (the "Maturity Date");
. will be limited in aggregate principal amount to $75 million;
. will be issued in denominations of $1,000 and integral multiples
thereof in fully registered form; and
. will rank on parity with the Series A-D Notes.
The Notes will accrue interest at the rate of 10 1/4% per annum from the
date of issuance, or from the most recent interest payment date to which
interest has been paid or duly provided for, and we will pay accrued and unpaid
interest semi-annually on March 15 and September 15 of each year, commencing
March 15, 2000. Interest accrued and unpaid through the Exchange Date on the
Outstanding Notes that are tendered in exchange for the Exchange Notes will be
payable on or before March 15, 2000. Outstanding Notes that we accept for
exchange will cease to accrue interest on and after the date on which interest
on the Exchange Notes will begin to accrue. Interest will be paid to the person
in whose name the Exchange Note is registered at the close of business on March
1 or September 1 next preceding such interest payment date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. We will pay
both the principal and interest on the Exchange Notes at the office or agency
that we maintain for such purpose within the City and State of New York. In
addition, if the Exchange Notes do not remain in book-entry form, then we may,
at our option, pay interest, by check mailed to the holders of the Exchange
Notes ("Holders") at their respective
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<PAGE>
addresses set forth in the register of Holders. Until we otherwise designate,
our office or agency in New York will be the Trustee's office or agency
maintained for such purpose. Any Outstanding Notes that remain outstanding after
we complete the exchange offer, together with the Exchange Notes that we issue
in connection with the exchange offer and any Private Exchange Notes, will be
treated as a single class of securities under the Indenture.
We May Be Able To Or May Be Required To Redeem Or Repurchase The Notes.
When We Can Optionally Redeem The Notes. We can redeem the Exchange Notes
at our option in whole at any time or in part from time to time, on and after
March 15, 2001 at the following redemption prices (expressed as percentages of
the principal amount) if redeemed during the twelve-month period commencing on
March 15 of the year set forth below, plus, in each case, accrued interest
thereon to the date of redemption:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -------------
<S> <C>
2001................................................... 105.1250%
2002................................................... 103.4167%
2003................................................... 101.7083%
2004 and thereafter.................................... 100.0000%
</TABLE>
If we redeem less than all of the Notes, the Trustee will select the Notes
for redemption pro rata, by lot or by any other method that the Trustee
considers fair and appropriate and, if the Exchange Notes are listed on any
securities exchange, by a method that complies with the requirements of that
exchange. Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Exchange Notes to be
redeemed at such Holder's registered address. On and after the redemption date,
interest will cease to accrue on Exchange Notes or portions thereof called for
redemption (unless we default in the payment of the redemption price or accrued
interest).
When We Must Offer To Purchase The Notes. As described below, (1) upon the
occurrence of a Change of Control and a corresponding Rating Decline, we must
offer to purchase all outstanding Notes at a purchase price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date of purchase and (2) upon certain sales or other dispositions of assets,
we may be obligated to make offers to purchase Notes with a portion of the Net
Proceeds of such sales or other dispositions at a purchase price equal to 100%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of purchase. See "--A Change Of Control May Require Us To
Repurchase The Notes" and "--The Indenture Contains Certain Covenants-We Are
Limited In How We Dispose Our Assets."
A Change of Control May Require Us To Repurchase The Notes.
Upon the occurrence of a Change of Control and a corresponding Rating
Decline, we must offer to purchase all of the then-outstanding Notes (a "Change
of Control Offer"), and we must purchase, on a Business Day (the "Change of
Control Purchase Date") not more than 60 nor less than 30 days after the
occurrence of a Rating Decline following a Change of Control (or, if the Rating
Decline occurs before the corresponding Change of Control not more than 60 nor
less than 30 days after the occurrence of the Change of Control), all of the
then-outstanding Notes validly tendered pursuant to such Change of Control
Offer, at a purchase price (the "Change of Control Purchase Price") equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the Change of Control Purchase Date. We must keep the Change of Control Offer
open for at least 20 Business Days and until the close of business on the fifth
Business Day before the Change of Control Purchase Date.
To effect such Change of Control Offer, we must, not later than the 30th
day after the occurrence of the Rating Decline corresponding to such Change of
Control (or, if the Rating Decline occurs before the corresponding Change of
Control, then not later than the 30th day following the occurrence of the Change
of Control), mail to the Trustee and to each Holder of the Notes notice of the
Change of Control Offer, and this notice shall govern the terms of the Change of
Control Offer and shall state, among other things, the procedures that Holders
of the Notes must follow to accept the Change of Control Offer.
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We, to the extent applicable and if required by law, will comply with
Sections 13 and 14 of the Exchange Act and the provisions of Regulation 14E and
any other tender offer rules under the Exchange Act and any other federal and
state securities laws, rules and regulations that may then be applicable to any
offer by us to purchase the Notes pursuant to the Change of Control covenant.
If a Change of Control and corresponding Rating Decline occur and a
substantial amount of the Notes are presented for purchase, then we cannot
assure you that we would have sufficient financial resources to enable us to
purchase those Notes. If we must purchase Notes pursuant to a Change of Control
Offer, we expect that we would seek third-party financing to the extent we do
not have available funds to meet our purchase obligations. But we cannot assure
you that we could obtain such financing. A Change of Control would constitute an
Event of Default under the Bank Credit Agreement and permit First Union National
Bank, as agent thereunder (in such capacity, the "Credit Facility Agent") to
terminate the commitment of the lenders under the Bank Credit Agreement and
declare all amounts outstanding thereunder to be due and payable, and the rights
of the Holders to receive the Change of Control Purchase Price or any other
amounts due on the Notes would be subordinated to the rights of the holders of
Senior Indebtedness. If the Bank Credit Agreement were not accelerated, we
nevertheless must obtain a consent from the Credit Facility Agent and the
lenders under the present terms of the Bank Credit Agreement to incur any
indebtedness (other than indebtedness under such Bank Credit Agreement) to
repurchase Outstanding Notes pursuant to a Change of Control Offer. See "--What
Are The Events of Default?".
The Indenture provides that a default in the payment of the Change of
Control Purchase Price would constitute an Event of Default under the Indenture
as a remedy for which Holders would be entitled to receive the Change of Control
Purchase Price. If such an Event of Default resulted in a default under Senior
Indebtedness, then the right of the Holders of Notes to receive the Change of
Control Purchase Price (whether at a Change of Control Purchase Date or upon
acceleration) or any other amounts due on acceleration of the Notes would be
subordinated to the rights of the holders of Senior Indebtedness.
The Change of Control provisions of the Indenture as well as the
restrictions in the Indenture on the ability of us and our Subsidiaries to incur
additional Indebtedness, to grant Liens on our property, to make Restricted
Payments and to make Asset Dispositions may make more difficult or discourage a
takeover of us, whether favored or opposed by our current management. To
consummate any such transaction may require in certain circumstances redemption
or repurchase of the Notes, and we cannot assure you that we or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with Related
Persons may, in certain circumstances, make more difficult or discourage any
leveraged buyout of us or any of our Subsidiaries by our management.
The Notes Are Subordinated To Our Senior Indebtedness.
The payment of the principal of, premium, if any, and interest on the Notes
is subordinated in right of payment as set forth in the Indenture to the prior
payment in full of all Senior Indebtedness, whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed or guaranteed. Such
subordination will not prevent the occurrence of an Event of Default, and no
payment on any Guarantee shall constitute payment "on our behalf" within the
meaning of the following paragraphs; provided that a payment by a Subsidiary
Guarantor on a Guarantee shall constitute a payment "on our behalf" within the
meaning of the following paragraphs if any guarantee by such Subsidiary of
Indebtedness under the Bank Credit Agreement shall have been determined by a
court of competent jurisdiction to be invalid or unenforceable, in whole or in
part.
No payment may be made by us or on our behalf on account of principal of or
interest on the Notes or to acquire or repurchase any of the Notes or on account
of the redemption provisions of the Notes (1) upon the maturity of any Senior
Indebtedness by lapse of time, acceleration or otherwise, unless and until all
such Senior Indebtedness is first paid in full or (2) upon the happening of any
default in payment of any principal of or interest on any Senior Indebtedness
when the same becomes due and payable (a "Payment Default"), unless and until
such Payment Default shall have been cured or waived or shall have ceased to
exist.
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Upon the happening of a default (other than a Payment Default) with respect
to any Senior Indebtedness, as such default or event of default is defined
therein or in the instrument or agreement under which it is outstanding, and
upon written notice thereof given to us and the Trustee by any holders of such
Senior Indebtedness or their representative (a "Payment Notice"), then, unless
and until such default or event of default shall have been cured or waived or
shall have ceased to exist or the representative gives its written approval, no
payment shall be made by us or on our behalf on account of principal of or
interest on the Notes or to acquire or repurchase any of the Notes or on account
of the redemption provisions of the Notes; but these provisions will not prevent
the making of any payment for more than 179 days after the due date of the first
principal or interest payment on the Notes after a Payment Notice shall have
been given. Notwithstanding the foregoing, (1) not more than one Payment Notice
shall be given within a period of 360 consecutive days, and (2) a Payment Notice
may only be given (A) if more than $5 million of Senior Indebtedness is
outstanding under the Bank Credit Agreement at the time of such notice, by the
representative or (B) if $5 million or less of Senior Indebtedness is
outstanding under the Bank Credit Agreement at the time of such notice, by a
holder or holders (or the representative of holders) of at least $5 million
principal amount of Senior Indebtedness.
Upon any distribution of the assets of us or payment on the Notes on our
behalf in the event of any Insolvency or Liquidation Proceeding with respect to
us, the holders of Senior Indebtedness will be entitled to receive payment in
full of such Senior Indebtedness before the Holders are entitled to receive any
payment on account of the principal or interest due with respect to the Notes.
Because of these subordination provisions, our creditors who are holders of
Senior Indebtedness may recover more, ratably, than the Holders of the Notes.
The subordination provisions described above will cease to apply to the
Notes upon any legal defeasance or covenant defeasance of the Notes as described
under "--Satisfaction and Discharge of Indenture; Defeasance".
As of September 30, 1999, our total long-term debt and stockholders' equity
were $653.3 million (including $323.2 million of long-term debt under the credit
facilities of Plains All American Pipeline which is without recourse to us or
the Subsidiary Guarantors) and $88.6 million, respectively. Pro forma for the
linefill sale proceeds and Plains All American Pipeline's October 1999 public
unit offering, our total long-term debt at September 30, 1999 would be reduced
to approximately $503 million. In addition, as described below under "--The
Notes Are Guaranteed By The Senior Subordinated Guarantees", at September 30,
1999, the Subsidiary Guarantors had no outstanding Guarantor Senior
Indebtedness, other than $50.1 million representing guarantees of our Senior
Indebtedness. We are a holding company, and the Notes will be structurally
subordinated to, and the Guarantees will be subordinated to, Guarantor Senior
Indebtedness. The foregoing amounts include only liabilities included on our
consolidated balance sheet under GAAP; we and our subsidiaries have other
liabilities, including contingent liabilities, which may be significant.
Although the Indenture will contain limitations on the amount of additional
Indebtedness that we and our Subsidiaries may incur, the amounts of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness, Guarantor Senior Indebtedness or Indebtedness of
Unrestricted Subsidiaries (to which the Notes will be structurally
subordinated). See "The Indenture Contains Certain Covenants -- We Are Limited
In How We Incur Additional Indebtedness".
The Notes Are Guaranteed By The Senior Subordinated Guarantees.
The Subsidiary Guarantors, which consist of all of our upstream
subsidiaries, will unconditionally guarantee, jointly and severally, to each
Holder and the Trustee, the full and prompt performance of our obligations under
the Indenture and the Notes, including the payment of principal of and interest
on the Notes. In addition to the initial Subsidiary Guarantors, we will cause
each Person (other than an Unrestricted Subsidiary) that shall become a Material
Subsidiary after the Indenture Date to execute and deliver a supplement to the
Indenture pursuant to which such Person will guarantee the payment of the Notes
on the same terms and conditions as the Guarantees by the Subsidiary Guarantors.
As described below under "The Indenture Contains Certain Covenants -- We Are
Limited In How We Incur Additional Indebtedness", no Subsidiary that is not
already a Subsidiary Guarantor shall incur any Indebtedness with respect to
Indebtedness of us or another Subsidiary unless such Subsidiary becomes a
guarantor of the Notes.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities (including, but not limited to, Guarantor Senior Indebtedness of
such Subsidiary Guarantor) of such Subsidiary Guarantor and after giving effect
to any collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
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its Guarantee or pursuant to its contribution obligations under the Indenture,
result in the obligations of such Subsidiary Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Subsidiary Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell or
otherwise dispose of all or substantially all of its properties and assets to us
or another Subsidiary Guarantor without limitation, except to the extent any
such transaction is subject to the "We Are Limited In How We May Enter Into A
Transaction Involving A Merger, Consolidation Or Sale Of Substantially All Of
Our Assets" covenant of the Indenture. Each Subsidiary Guarantor may consolidate
with or merge into or sell all or substantially all of its properties and assets
to a Person other than us or another Subsidiary Guarantor (whether or not
affiliated with the Subsidiary Guarantor), provided that (1) if the surviving
Person is not the Subsidiary Guarantor, the surviving Person agrees to assume
such Subsidiary Guarantor's Guarantee and all its obligations pursuant to the
Indenture (except to the extent the following paragraph would result in the
release of such Subsidiary Guarantee) and (2) such transaction does not (a)
violate any of the covenants described below under "-- The Indenture Contains
Certain Covenants" or (b) result in a Default or Event of Default immediately
thereafter that is continuing.
Upon the sale or other disposition (by merger or otherwise) of a Subsidiary
Guarantor (or all or substantially all of its properties and assets) pursuant to
a transaction that is otherwise in compliance with the Indenture (including as
described in the foregoing paragraph), such Subsidiary Guarantor shall be deemed
released from its Subsidiary Guarantee and the related obligations set forth in
the Indenture; but any such termination shall occur only to the extent that all
obligations of such Subsidiary Guarantor under all of its guarantees of, and
under all of its pledges of assets or other security interests that secure,
other Indebtedness of us or any Subsidiary shall also terminate or be released
upon such sale or other disposition. Each Subsidiary Guarantor that is
designated as an Unrestricted Subsidiary in accordance with the Indenture shall
be released from its Subsidiary Guarantee and related obligations set forth in
the Indenture for so long as it remains an Unrestricted Subsidiary.
The Guarantees of each Subsidiary Guarantor are subordinated to the prior
payment in full of all Guarantor Senior Indebtedness of such Subsidiary
Guarantor to substantially the same extent as the Notes are subordinated to
Senior Indebtedness. As of September 30, 1999, the Subsidiary Guarantors had
outstanding no Guarantor Senior Indebtedness, other than $50.1 million
representing guarantees of our Senior Indebtedness.
The Indenture Contains Certain Covenants.
The Indenture contains, among others, the following covenants:
. We Are Limited In How We Incur Additional Indebtedness.
We will not, and will not permit any of the Subsidiaries directly or
indirectly, to issue, incur, assume, guarantee, become liable, contingently or
otherwise, with respect to or otherwise become responsible for the payment of
(collectively, "incur") any Indebtedness (other than Permitted Indebtedness);
but if no Default or Event of Default with respect to the Notes shall have
occurred and be continuing at the time or as a consequence of the incurrence of
such Indebtedness, we and the Subsidiaries or any of us may incur Indebtedness
if on the date of the incurrence, (1) both (a) our Consolidated EBITDA Coverage
Ratio would have been greater than 2.5 to 1.0, and (b) our Adjusted Consolidated
Net Tangible Assets are equal to or greater than 150% of Indebtedness of us and
the Subsidiaries, or (2) our Adjusted Consolidated Net Tangible Assets are equal
to or greater than 200% of Indebtedness of us and the Subsidiaries.
For purposes of determining any particular amount of Indebtedness under
this covenant, guarantees of Indebtedness otherwise included in the
determination of such amount shall not also be included.
Notwithstanding anything to the contrary in this covenant, no Subsidiary
that is not already a Subsidiary Guarantor shall incur any Indebtedness with
respect to any Indebtedness of us or any other Subsidiary unless such
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Subsidiary, we and the Trustee execute and deliver a supplemental indenture
evidencing that Subsidiary's Guarantee of the Notes, such Guarantee to be a
senior subordinated unsecured obligation of such Subsidiary.
For purposes of determining any particular amount of Indebtedness incurred
under this covenant, any Indebtedness incurred by us or any Subsidiary that is
incurred for, or related to, a Person other than another Subsidiary or us, as
applicable, shall be deemed to be in an amount equal to the greater of:
. the lesser of (1) the full amount of the Indebtedness of such other
Person or (2) the fair market value of the assets and properties of us
or such Subsidiary, as to which the holder or holders of such
Indebtedness are expressly limiting the obligations of us or such
Subsidiary, the value of which assets and properties of us or any
Subsidiary, will be as determined in good faith by our Board of
Directors or the Board of Directors of such Subsidiary, as applicable
(which determinations shall be evidenced by a Board Resolution of the
applicable Person); and
. we or such Subsidiary have expressly contractually assumed or
guaranteed the amount of the Indebtedness of such other Person.
. The Subsidiary Guarantors Are Limited In How They Incur Senior Subordinated
Indebtedness.
We will not, directly or indirectly, issue, assume, guarantee, incur or
otherwise become liable for any Indebtedness that is both subordinate or junior
in right of payment to any Senior Indebtedness and senior or superior in right
of payment to the Notes. The Subsidiary Guarantors will not, directly or
indirectly, issue, assume, guarantee, incur or otherwise become liable for any
Indebtedness that is both subordinate or junior in right of payment to any
Guarantor Senior Indebtedness and senior or superior in right of payment to the
Guarantees.
. We Are Limited In How We Make Restricted Payments.
We will not, and will not permit any of the Subsidiaries to, directly or
indirectly, make any Restricted Payment, if at the time of such Restricted
Payment, or on a pro forma basis after giving effect thereto:
(1) a Default or an Event of Default under the Indenture has occurred
and is continuing;
(2) the aggregate amount expended for all Restricted Payments after the
Issue Date exceeds the sum of (without duplication):
(a) 50% of our aggregate Consolidated Net Income (net of
losses resulting from full costs ceiling write downs attributable to any
oil and gas properties or those of any Subsidiary) (or if such
Consolidated Net Income is a loss, minus 100% of that loss) earned on a
cumulative basis during the period beginning on the Series A/B Issue
Date and ending on the last date of our fiscal quarter immediately
preceding such Restricted Payment; plus
(b) 100% of the aggregate Net Proceeds that we receive from any
Person other than a Subsidiary from the issuance and sale after the Series A/B
Issue Date of Qualified Capital Stock (excluding (A) any Qualified Capital Stock
paid as a dividend on any Capital Stock or as interest on any Indebtedness, (B)
the issuance of Qualified Capital Stock upon the conversion of, or in exchange
for, any Qualified Capital Stock and (C) any Qualified Capital Stock with regard
to issuances and sales financed directly or indirectly using funds that we or
any Subsidiary have borrowed, until and to the extent such funds are repaid);
plus
(c) to the extent not otherwise included in Consolidated Net
Income, dividends, repayments of loans or advances, or other transfers of
assets, in each case to us or a Subsidiary after the Series A/B Issue Date from
any Unrestricted Subsidiary or from the redesignation of an Unrestricted
Subsidiary as a Subsidiary (valued in each case as provided in the definition of
Investment) other than amounts constituting Permitted Unrestricted Subsidiary
Investments; and
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(d) $15 million; or
(3) We could not incur $1.00 of additional Indebtedness (excluding
Permitted Indebtedness) as provided in the first paragraph of "-We Are Limited
In How We Incur Additional Indebtedness".
The foregoing provisions of this covenant will not prevent the payment of
any dividend within 60 days after the date of its declaration if the dividend
would have been permitted on the date of declaration; but provided payments made
in accordance with this paragraph shall be counted for purposes of computing
amounts expended pursuant to subclause (2) in the immediately preceding
paragraph.
. We Are Limited In How We Dispose Our Assets.
We will not, and will not permit any Subsidiary to, make any Asset
Disposition unless:
(1) in the case of any Asset Disposition or series of related Asset
Dispositions having a fair market value of more than $10 million, we receive or
such Subsidiary receives consideration at the time of such Asset Disposition at
least equal to the fair market value, the determination of which, including the
value of all non-cash consideration, must be approved in good faith by our Board
of Directors and the Board of Directors of that Subsidiary, if any,
(2) the proceeds from any Asset Disposition (other than any Asset
Disposition or series of related Asset Dispositions that have a value of less
than $1 million) consist of cash and cash equivalents or Permitted Industry
Investments or any combination of the foregoing; provided that we or such
Subsidiary may accept proceeds from that Asset Disposition in other than cash
and cash equivalents or Permitted Industry Investments or any combination of the
foregoing if the aggregate amount of all proceeds from all Asset Dispositions
after the Series A/B Issue Date, that are other than cash and cash equivalents
or Permitted Industry Investments after that Asset Disposition, does not exceed
15% of Adjusted Consolidated Net Tangible Assets at the date of that Asset
Disposition,
(3) within 365 days after the receipt of the Net Available Proceeds from
such Asset Disposition, 100% of the Net Available Proceeds from such Asset
Disposition are applied by us or such Subsidiary:
(a) to the payment of Indebtedness under the Bank Credit Agreement
and the payment of any other Senior Indebtedness;
(b) at our option to the extent that such Net Available Proceeds are
not applied to Senior Indebtedness, to Permitted Industry Investments
made by us or a Subsidiary (or, to the extent not so applied during such
365-day period, to Permitted Industry Investments specifically
identified during such 365- day period reasonably anticipated in good
faith by our Board of Directors to be expended within 180 days after
being specifically identified (such 180-day period, the "Project
Period")); and
(c) to the extent that any Net Available Proceeds are not applied to
Senior Indebtedness or applied or to be applied to Permitted Industry
Investments, to offer to purchase (the "Series A/B Net Proceeds Offer")
(on a business day (the "Series A/B Net Proceeds Payment Date") not
later than the later of (A) 365 days after the receipt of such Net
Available Proceeds or (B) in the case of application of proceeds
intended to be applied under clause (b), 35 business days after any
Project Period) the Series A/B Notes at a price equal to 100% of the
principal amount of the Series A/B Notes plus accrued interest to the
Series A/B Net Proceeds Payment Date; and
(d) to the extent that any Net Available Proceeds are not applied to
Senior Indebtedness or applied or to be applied to Permitted Industry
Investments or to a Series A/B Net Proceeds Offer, to make an offer to
purchase (the "Series C/D Net Proceeds Offer") (on a business day (the
"Series C/D Net Proceeds Payment Date") not later than the later of (1)
365 days following the receipt of such Net Available Proceeds or (2) in
the case of application of proceeds intended to be applied under clause
(b), 35 business days
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following any Project Period or (3) in the case of application of
proceeds intended to be applied under clause (c), 90 business days
following the Series A/B Net Proceeds Payment Date) the Series C/D Notes
at a price equal to 100% of the principal amount of the Series C/D Notes
plus accrued interest to the Series C/D Net Proceeds Payment Date; and
(4) to the extent that any Net Available Proceeds are not applied to
Senior Indebtedness or applied or to be applied to Permitted Industry
Investments or to a Series A/B Net Proceeds Offer or to a Series C/D Net
Proceeds Offer, to make an offer to purchase (the "Net Proceeds Offer") (on
a business day (the "Net Proceeds Payment Date") not later than 90 business
days following the Series C/D Net Proceeds Payment Date) the Notes at a
price equal to 100% of the principal amount of the Notes plus accrued
interest to the Net Proceeds Payment Date.
Notwithstanding the foregoing, we and our Subsidiaries will not be required
to apply any Net Available Proceeds in accordance with such provisions except to
the extent that the Net Available Proceeds from all Asset Dispositions which are
not applied in accordance with such provisions exceed $5 million.
Notice of a Net Proceeds Offer to purchase the Notes will be made on our
behalf not less than 25 business days nor more than 60 business days before the
Net Proceeds Payment Date. Notes tendered to us pursuant to a Net Proceeds Offer
will cease to accrue interest after the Net Proceeds Payment Date. We will not
be entitled to any credit against the above obligations for the principal amount
of Notes that we previously acquired. For purposes of this covenant, the term
"Net Proceeds Offer Amount" means the principal of outstanding Notes in an
aggregate principal amount equal to any remaining Net Available Proceeds.
On the Net Proceeds Payment Date, we will:
. accept for payment Notes or portions thereof tendered pursuant to
the Net Proceeds Offer in an aggregate principal amount equal to the
Net Proceeds Offer Amount or such lesser amount of Notes as has been
tendered;
. deposit with the paying agent money sufficient to pay the purchase
price of all Notes or portions thereof so tendered in an aggregate
principal amount equal to the Net Proceeds Offer Amount or such lesser
amount; and
. deliver or cause to be delivered to the Trustee, Notes so accepted
together with an officers' certificate stating the Notes or portions
thereof tendered to us.
If the aggregate principal amount of Notes tendered exceeds the Net Proceeds
Offer Amount, then the Trustee will select the Notes to be purchased on a pro
rata basis based on the principal amount of Notes so tendered. The paying agent
will promptly mail or deliver to Holders of the Notes so accepted payment in an
amount equal to the purchase price, and we will execute, and the Trustee will
promptly authenticate and mail or make available for delivery to such Holders, a
new Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted will be promptly mailed or delivered to
the Holder thereof. We will publicly announce the results of the Net Proceeds
Offer on or as soon as practicable after the Net Proceeds Payment Date. For
purposes of this covenant, the Trustee or its agent will act as the paying
agent. We and our Subsidiaries may make Asset Dispositions in accordance with
this covenant and receive consideration in the form of equity, partnership or
other ownership interests where we might not control such resulting entity.
Our ability to repurchase Notes in a Net Proceeds Offer is restricted by the
terms of the Bank Credit Agreement and may be prohibited or otherwise limited by
the terms of any then-existing borrowing arrangements and by our financial
resources.
. We Are Limited In How We Incur Liens Securing Indebtedness.
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We will not, and will not permit any of the Subsidiaries to, create, incur,
assume or suffer to exist any Liens (other than Permitted Liens) upon any of
their respective Properties securing (1) any of our Indebtedness, unless the
Notes are equally and ratably secured or (2) any Indebtedness of any Subsidiary
Guarantor, unless the Notes or the Guarantees are equally and ratably secured;
provided that if such Indebtedness is expressly subordinated to the Notes or the
Guarantees, the Lien securing such Indebtedness will be subordinated and junior
to the Lien securing the Notes or the Guarantees, with the same relative
priority as such Subordinated Indebtedness will have with respect to the Notes
or the Guarantees, as the case may be.
. We Are Limited In How We Make Payment Restrictions Affecting Subsidiaries.
We will not, and will not permit any Subsidiary to, directly or indirectly,
create or suffer to exist or allow to become effective any consensual
encumbrance or restriction of any kind (1) on the ability of any of the
Subsidiaries (a) to pay dividends or make other distributions on its Capital
Stock or make payments on any Indebtedness owed to us or any other Subsidiary,
(b) to make loans or advances to us or any other Subsidiary, or (c) to transfer
any of its Property to us or any other Subsidiary; or (2) on the ability of such
Person or any other subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances, or (c) transfers of
Property (any such restriction being referred to herein as a "Payment
Restriction"), except for such encumbrances or restrictions existing under or by
reason of (A) the Bank Credit Agreement as in effect on the Series A/B Issue
Date, (B) customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of us or any Subsidiary, (C) any instrument
governing Indebtedness of a Person acquired by us or a Subsidiary at the time of
such acquisition, which encumbrance or restriction is not applicable to any
Person, other than the Person, or the Property of the Person, so acquired,
provided that such Indebtedness was not incurred in anticipation of such
acquisition, (D) with respect to clauses (1)(c) and (2)(c) above, Purchase Money
Obligations for Property acquired in the ordinary course of business, (E)
Indebtedness existing pursuant to a written agreement in effect on the Series
A/B Issue Date, (F) Indebtedness under the Series A/B Indenture, (G)
Indebtedness under the Series C/D Indenture, (H) Indebtedness under the
Indenture or (I) Indebtedness incurred to refinance, refund, extend or renew
Indebtedness referred to in clauses (A), (C), (D), (E), (F), (G) or (H) above,
provided that the Payment Restrictions contained therein are not materially more
restrictive than those provided for in the Indebtedness being refinanced,
refunded, extended or renewed.
. We Are Limited In How We Enter Into Transactions With Related Persons.
Neither we nor any of the Subsidiaries will (1) sell, lease, transfer or
otherwise dispose of any of our or its Property to, (2) purchase any property
from, (3) make any Investment (other than Permitted Unrestricted Subsidiary
Investments and other Investments that do not breach the covenant described
under the caption "--We Are Limited In How We Make Restricted Payments") in, or
(4) enter into any contract or agreement with or for the benefit of, a Related
Person of us or of any Subsidiary (other than us or any such Subsidiary in which
no Related Person (other than us or another Wholly Owned Subsidiary) owns,
directly or indirectly, an equity interest) (a "Related Person Transaction"),
other than Related Person Transactions that are on terms (which terms are in
writing) no less favorable to us or a Subsidiary, as applicable, than could be
obtained in a comparable arm's length transaction from an unaffiliated party;
provided that, if we enter or any Subsidiary enters into a Related Person
Transaction or series of Related Person Transactions involving or having an
aggregate value of more than $5 million, such Related Person Transaction will
have been approved by a majority of our independent directors. Notwithstanding
anything to the contrary in the foregoing, the foregoing restrictions shall not
apply to (1) Related Person Transactions that are approved by our Board of
Directors and the Board of Directors of such Subsidiary, if applicable, as in
our best interests or the best interests of that Subsidiary, which transactions
together with all other Related Person Transactions in a related series involve
or have an aggregate value not exceeding $1 million in each fiscal year; (2)
fees and compensation paid to or agreements with our officers, directors,
employees or consultants or those of any Subsidiary in each case that are
reasonable, as determined by the Board of Directors or senior management thereof
in good faith; and (3) Restricted Payments that are not prohibited by the "We
Are Limited In How We Make Restricted Payments" covenant.
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. We Are Limited In How We Conduct Our Business.
We and the Subsidiaries will be operated in a manner such that our and
their business activities will be the oil and gas business, including the
exploration for and the development, acquisition, production, processing,
marketing, storage and transportation of, Hydrocarbons and other related energy
and natural resources businesses, and such other businesses as are reasonably
necessary or desirable to facilitate the conduct and operations of the foregoing
businesses.
. We Must Deliver Certain Reports.
We will file on a timely basis with the Commission, to the extent such
filings are accepted by the Commission and whether or not we have a class of
securities registered under the Exchange Act, the annual reports, quarterly
reports and other documents that we would be required to file if we were subject
to Section 13 or 15 of the Exchange Act. We also must (1) file with the Trustee
(with exhibits), and provide to each Holder of Notes (without exhibits), without
cost to such Holder, copies of those reports and documents within 15 days after
the date on which we file those reports and documents with the Commission or the
date on which we would be required to file such reports and documents if we were
so required and (2) if filing such reports and documents with the Commission is
not accepted by the Commission or is prohibited under the Exchange Act, supply
at our cost copies of such reports and documents (including any exhibits
thereto) to any Holder of Notes promptly upon written request.
. Further Designation Of Restricted And Unrestricted Subsidiaries May Affect
The Covenants. The foregoing covenants (including calculation of financial
ratios and the determination of limitations on the incurrence of Indebtedness
and Liens) may be affected by our designation of any of our existing or future
Subsidiaries as an Unrestricted Subsidiary. The definition of "Unrestricted
Subsidiary" set forth under the caption "-Certain Definitions" describes the
circumstances under which one of our Subsidiaries may be designated as an
Unrestricted Subsidiary by our Board of Directors.
We Are Limited In How We May Enter Into A Transaction Involving A Merger,
Consolidation Or Sale Of Substantially All Of Our Assets.
We will not consolidate with or merge with any other Person or convey,
transfer or lease all or substantially all of our Property to any Person,
unless: (1) we survive such merger or the Person formed by that consolidation or
into which we are merged or that acquires by conveyance or transfer, or which
leases, all or substantially all of our Property is a corporation organized and
existing under the laws of the United States of America or any State thereof or
the District of Columbia and expressly assumes, by supplemental indenture, the
due and punctual payment of the principal of (and premium, if any) and interest
on all the Notes and the performance of every other of our covenants and
obligations under the Indenture; (2) immediately before and after giving effect
to such transaction, no Default or Event of Default exists; (3) immediately
after giving effect to such transaction on a pro forma basis, our Consolidated
Net Worth (or the surviving entity if we are not continuing) is equal to or
greater than our Consolidated Net Worth immediately before such transaction and
(4) immediately after giving effect to such transaction on a pro forma basis, we
(or the surviving entity if we are not continuing) could incur $1.00 of
additional Indebtedness (excluding Permitted Indebtedness) under the tests
described in the first paragraph of "We Are Limited In How We Incur Additional
Indebtedness". Upon any such consolidation, merger, conveyance, lease or
transfer in accordance with the foregoing, the successor Person formed by such
consolidation or into which we are merged or to which such conveyance, lease or
transfer is made will succeed to, and be substituted for, and may exercise every
right and power of, us under the Indenture with the same effect as if such
successor had been named as us therein, and thereafter (except in the case of a
lease) the predecessor corporation will be relieved of all further obligations
and covenants under the Indenture and the Notes.
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What Are The Events of Default?
The following will constitute Events of Default under the Indenture:
(1) default in the payment of principal of, or premium, if any, on,
the Notes when due at maturity, upon repurchase, upon
acceleration or otherwise, including our failure to repurchase
the Notes required to be repurchased upon a Change of Control
and corresponding Rating Decline or a Net Proceeds Offer and
our failure to make any optional redemption payment;
(2) default in the payment of any installment of interest on the
Notes when due (including any interest payable in connection
with optional redemption payment) and continuance of such
default for 30 days;
(3) default on any other Indebtedness of us, any Subsidiary
Guarantor or any other Subsidiary if either (a) such default
results from the failure to pay principal of, premium, if any,
or interest on any such Indebtedness when due in excess of $5
million and continuance of such default beyond any applicable
cure, forbearance or notice period, or (b) as a result of such
default, the maturity of such Indebtedness has been
accelerated before its scheduled maturity, without such
default and acceleration having been rescinded or annulled
within a period of 10 days, and the principal amount of such
Indebtedness, together with the principal amount of any other
such indebtedness in default, or the maturity of which has
been so accelerated, aggregates $5 million or more;
(4) default in the performance, or breach, of any other covenant
of us or any Subsidiary Guarantor in the Indenture and failure
to remedy such default within a period of 60 days after
written notice thereof from the Trustee or Holders of 25% in
principal amount of the outstanding Notes;
(5) the entry by a court of one or more judgments or orders against
us, any Subsidiary Guarantor or any other Subsidiary in an
aggregate amount in excess of $10 million and which are not
covered by insurance written by third parties that has not been
vacated, discharged, satisfied or stayed pending appeal within
60 days from the entry thereof;
(6) certain events of bankruptcy, insolvency or reorganization in
respect of us or any Material Subsidiary; or
(7) a Guarantee by a Subsidiary Guarantor that is a Material
Subsidiary shall cease to be in full force and effect (other
than a release of a Guarantee by designation of a Subsidiary
Guarantor as an Unrestricted Subsidiary) or any Subsidiary
Guarantor shall deny or disaffirm its obligations with respect
thereto.
If any Event of Default (other than an Event of Default specified in clause
(6) above) occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Notes then
outstanding may declare the unpaid principal of, and accrued and unpaid interest
on, all the Notes, then outstanding to be due and payable, by a notice in
writing to us (and to the Trustee, if given by Holders) and upon any such
declaration such principal amount, premium, if any, and accrued and unpaid
interest shall become immediately due and payable, notwithstanding anything
contained in the Indenture or the Notes to the contrary. If an Event of Default
specified in clause (6) above occurs, all unpaid principal of, premium, if any,
and accrued interest on, the Notes then outstanding will become due and payable,
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the outstanding Notes, by
written notice to us, the Subsidiary Guarantors and the Trustee, may rescind and
annul a declaration of acceleration and its consequences if (1) we have or any
Subsidiary Guarantor has paid or deposited with such Trustee a sum sufficient to
pay (a) all overdue installments of interest on all the Notes, (b) the principal
of, and premium, if any, on, any Notes that have become due otherwise than by
such declaration of acceleration and interest thereon at the rate or rates
prescribed therefor in the Notes, (c) to the extent that payment of such
interest is lawful, interest on the defaulted interest at the rate or rates
prescribed therefor in the Notes, and (d) all money paid or advanced by the
Trustee thereunder and the reasonable compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel; (2) all
Events of Default, other than the non-payment of the principal of any Notes that
have become due solely by such declaration of acceleration, have been cured or
waived as provided in the Indenture; and (3) the rescission would not conflict
with any judgment or decree of a court of competent jurisdiction. No such
rescission will affect any later Event of Default or impair any right consequent
thereon.
No Holder of any of the Notes will have any right to institute any
proceeding, judicial or otherwise, or for the appointment of a receiver or
trustee or pursue any remedy under the Indenture, unless (1) such Holder has
previously given notice to the Trustee of a continuing Event of Default, (2) the
Holders of not less than 25% in principal amount of the outstanding Notes have
made written request to such Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee under the Indenture, (3) such Holder
or Holders have offered to such Trustee reasonable indemnity against the costs,
expenses and liabilities to be incurred in compliance with such request, (4)
such Trustee for 30 days after it receives such notice, request and offer of
indemnity has failed to institute any such proceeding, and (5) no direction
inconsistent with such written request has been given to such Trustee during
such 30-day period by the Holders of a majority in principal amount of the
outstanding Notes.
The Holder of any Note will have the absolute and unconditional right to
receive payment of the principal of, premium, if any, and interest on such Note
on the stated maturity therefor and to institute suit for the enforcement of any
such payment, and such right may not be impaired without the consent of such
Holder.
The Holders of a majority in principal amount of the Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
such Trustee, provided that (1) such direction is not in conflict with any rule
of law or with the Indenture and (2) the Trustee may take any other action
deemed proper by such Trustee that is not inconsistent with such direction.
How Can We Obtain Modifications And Waivers?
The Indenture may be amended or rights thereunder may be waived with the
consent of us, the Subsidiary Guarantors, and the Holders of at least a majority
of the principal amount of Notes then outstanding, provided that, without the
consent of each Holder of Notes affected thereby, no such modification or waiver
will be made with regard to: (1) a default in the payment of principal, premium
(if any) or interest on the Notes; (2) a reduction of the interest rate on or
principal amount of the Notes, an extension of the maturity schedule of the
Notes, or a modification of the redemption or repurchase provisions of the
Notes; (3) a change that adversely affects subordination rights; (4) a change in
the currency in which the Notes are payable; or (5) a change in the percentage
of Holders of the principal amount of Notes that this provision requires.
Satisfaction And Discharge Of Indenture; Defeasance.
We may at any time terminate our Obligations under the Notes and the
Indenture, and the Subsidiary Guarantors may, at such times, terminate their
corresponding obligations under the Subsidiary Guarantees and the Indenture,
with certain exceptions specified in the Indenture, by irrevocably depositing in
trust cash or obligations of the United States government and its agencies for
payment of principal of, and interest on, the Notes to redemption or maturity,
subject to the satisfaction of certain conditions.
Subject to the conditions described below, at our option, either (1) we and
the Subsidiary Guarantors will be deemed to have been discharged from our and
their obligations with respect to the Notes and Subsidiary Guarantees and the
provisions of the Indenture on the 91st day after the applicable conditions set
forth below have been satisfied or (2) we and the Subsidiary Guarantors will
cease to be under any obligation to comply with certain restrictive covenants,
including those described under "--The Indenture Contains Certain Covenants", at
any time after the applicable conditions set forth below have been satisfied:
. we have or any Subsidiary Guarantor has deposited or caused to be
deposited irrevocably with the Trustee as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders (a) money or (b) United States government
obligations, which through the payment of interest and principal in
respect thereof in accordance with their terms will provide (without
any reinvestment of such interest or
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principal), not later than one day before the due date of any payment,
money or (c) a combination of (a) and (b), in an amount sufficient, in
the opinion (with respect to (b) and (c)) of a nationally recognized
firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee at or before the time of
such deposit, to pay and discharge each installment of principal of,
premium, if any, and interest on, the outstanding Notes on the dates
such installments are due;
. no Default or Event of Default has occurred or is continuing on the
date of such deposit or will occur as a result of such deposit and such
deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which we are or a Subsidiary
Guarantor is or any Subsidiary is a party or by which any of us or them
is bound, as evidenced to the Trustee in an officers' certificate
delivered to the Trustee concurrently with such deposit;
. we have delivered to the Trustee an opinion of counsel (which counsel
may be one of our employees) to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of our exercise of our option described above and will be
subject to federal income tax on the same amount and in the same manner
and at the same time as would have been the case if such option had not
been exercised, and, in the case of the Notes being discharged pursuant
to clause (1) above, accompanied by a ruling to the effect received
from or published by the Internal Revenue Service (it being understood
that (a) such opinion will also state, if applicable, that such ruling
is consistent with the conclusions reached in such opinion and (b) the
Trustee will be under no obligation to investigate the basis of
correctness of such ruling);
. we have delivered to the Trustee an opinion of counsel (which counsel
may be one of our employees) to the effect that our exercise of our
option described above will not result in any of us, the Trustee or the
trust created by our deposit of funds hereunder becoming or being
deemed to be an "investment company" under the Investment Company Act
of 1940, as amended;
. we have or any Subsidiary Guarantor has paid or duly provided for
payment of all amounts then due to the Trustee pursuant to the terms of
the Indenture; and
. we have delivered to the Trustee an officers' certificate and an
opinion of counsel (which counsel may be one of our employees), each
stating that all conditions precedent provided for in the Indenture
relating to the satisfaction and discharge of the Indenture have been
complied with.
We or any Subsidiary Guarantor may make an irrevocable deposit pursuant to
this provision only if at such time it is not prohibited from doing so under the
subordination provisions of the Indenture and we have delivered to the Trustee
and any relevant paying agent an officer's certificate to that effect.
Registration Rights Agreement; Penalty Interest.
If
(1) we are not permitted to consummate the exchange offer because the
exchange offer is not permitted by any applicable law or applicable
interpretation of the Commission or the staff of the Commission or
(2) any holder of a Note notifies us on or before the Exchange Date that
(a) due to a change in law or policy it is not entitled to participate
in the exchange offer, (b) due to a change in law or policy it may not
resell the Exchange Notes acquired by it in the exchange offer to the
public without delivering a prospectus and the prospectus contained in
the Exchange Registration Statement is not appropriate or available
for those resales by that holder or (c) it is a broker-dealer that
owns Notes (including the Initial Purchaser that holds Notes as part
of an unsold allotment from the original offering of the Notes)
acquired directly from an Issuer or an Affiliate of an Issuer or
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(3) any holder of Private Exchange Notes so requests within 120 days after
the consummation of the Private Exchange (each such event referred to
in clauses (1) through (3), a "Shelf Filing Event")
then we shall cause to be filed with the Commission pursuant to Rule 415 a shelf
registration statement (the "Shelf Registration Statement") on or before the
later of (x) _____________, 1999 and (y) 30 days after that Shelf Filing Event
occurs, relating to all Transfer Restricted Securities (the "Shelf
Registration") the holders of which have provided the information required by
the Registration Rights Agreement, and shall use their best efforts to have the
Shelf Registration Statement declared effective by the Commission on or before
90 days after that Shelf Filing Event occurs, provided that if we have not
consummated the exchange offer by _______, 1999, then we must cause the Shelf
Registration Statement to be filed with the Commission on or before ___________,
1999 and we must use our best efforts to have the Shelf Registration Statement
declared effective by the Commission within 60 days of the date of filing
thereof. In such circumstances, we must use our best efforts to keep the Shelf
Registration Statement continuously effective under the Securities Act, until
(A) ________, ____, (subject to extension under certain circumstances) or (B) if
sooner, the date immediately following the date that all Transfer Restricted
Securities covered by the Shelf Registration Statement have been sold pursuant
thereto (the "Effectiveness Period"); but provided that the Effectiveness Period
must be extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 under the Securities Act
in the Registration Rights Agreement.
No holder of Transfer Restricted Securities may include any of its Transfer
Restricted Securities in any Shelf Registration Statement pursuant to this
Agreement unless and until that holder furnishes to us in writing, within 30
days after receipt of a request therefor, such information as we may reasonably
request for use in connection with any Shelf Registration Statement or
prospectus or preliminary prospectus included therein. No holder of Transfer
Restricted Securities shall be entitled to Additional Interest (as defined)
unless and until that holder has provided all such reasonably requested
information. Each holder of Transfer Restricted Securities as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to us all
information required to be disclosed to make the information previously
furnished to us by such holder not materially misleading.
If
(1) the applicable Registration Statement is not filed with the Commission
on or before the date specified for such filing,
(2) the applicable Registration Statement has not been declared effective
by the Commission on or before the date specified for such
effectiveness after such obligation arises,
(3) if the exchange offer is required to be consummated under the
Registration Rights Agreement, we have not exchanged Exchange Notes
for all Notes validly tendered and not validly withdrawn in accordance
with the terms of the exchange offer by the Consummation Date, or
(4) the applicable Registration Statement is filed and declared effective
but shall thereafter cease to be effective without being succeeded
immediately by any additional Registration Statement covering the
Notes, the Exchange Notes or the Private Exchange Notes, as the case
may be, which has been filed and declared effective (each such event
referred to in clauses (1) through (4), a "Registration Default"),
then the interest rate on Transfer Restricted Securities will increase
("Additional Interest"), with respect to the first 90-day period immediately
after that Registration Default occurs, by 0.50% per annum and will increase by
an additional 0.50% per annum with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of 2%
per annum with respect to all Registration Defaults. After the cure of a
Registration Default, the accrual of Additional Interest with respect to such
Registration Default will cease and upon the cure of all Registration Defaults
the interest rate will revert to the original rate.
We must notify the Trustee and paying agent under the Indenture immediately
when each and every Registration Default occurs. We must pay the Additional
Interest due on the Transfer Restricted Securities by depositing with the paying
agent (which cannot be us for these purposes) for the Transfer Restricted
Securities, in trust, for the benefit of
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the holders thereof, before 11:00 A.M. on the next interest payment date
specified by the Indenture (or such other indenture), sums sufficient to pay the
Additional Interest then due. The Additional Interest due shall be payable on
each interest payment date specified by the Indenture (or such other indenture)
to the record holder entitled to receive the interest payment to be made on such
date. Each obligation to pay Additional Interest shall be deemed to accrue from
and including the date of the applicable Registration Default.
What Is The Governing Law?
The Indenture provides that it is governed by, and construed in accordance
with, the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
Who Is The Trustee?
Chase Bank of Texas, National Association ("Chase") is the Trustee under
the Indenture and we have appointed Chase as initial Registrar and paying agent
with respect to the Notes. Chase is also the Trustee under the Series A/B
Indenture and the Series C/D Indenture.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee need perform only those duties that are specifically set
forth (or incorporated by reference) in the Indenture and no others. During the
existence of an Event of Default, the Trustee will exercise such rights and
powers that the Indenture vests in it, and use the same degree of care and skill
in such exercise as a prudent person would exercise or use under the
circumstances in the conduct of that person's own affairs.
The Indenture contains certain limitations on the rights of the Trustee, if
it becomes one of our creditors, to obtain payments of claims in certain cases
or to realize on certain property received in respect of any such claims as
security or otherwise.
Book Entry; Delivery And Form.
Except as described in the next paragraph, the Exchange Notes initially
will be represented by a single, permanent global certificate in definitive,
fully registered form (the "Global Exchange Note"). The Global Exchange Note
will be deposited on the Exchange Date with, or on behalf of, DTC and registered
in the name of a nominee of DTC.
The Global Exchange Note.
We expect that pursuant to procedures established by DTC (1) when we issue
the Global Exchange Note, DTC or its custodian will credit, on its internal
system, the principal amount of Exchange Notes of the individual beneficial
interests represented by such Global Exchange Note to the respective accounts of
exchanging Holders who have accounts with DTC and (2) ownership of beneficial
interests in the Global Exchange Note will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Ownership of beneficial interests in the Global Exchange Note will be limited to
persons who have accounts with DTC ("participants") or persons who invest
through participants. Qualified Institutional Buyers will hold their interests
in the Global Exchange Note directly through DTC, if they are participants in
such system, or indirectly through organizations which are participants in such
system.
So long as DTC or its nominee is the registered owner or holder of the
Exchange Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Exchange
Note for all purposes under the Indenture. No beneficial owners of an interest
in any Global Exchange Note can transfer that interest except in accordance with
DTC's procedures in addition to those provided for under the Indenture.
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Payment on the Global Exchange Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. We, the Trustee or any of our
paying agents will have no responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Exchange Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
We expect that DTC or its nominee, when it receives any payment of
principal, premium, if any, or interest in respect of the Global Exchange Note,
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Exchange Note as shown on the records of DTC or its nominee. We also expect that
payments by participants to owners of beneficial interests in the Global
Exchange Note held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in immediately available funds.
If a Holder requires physical delivery of Exchange Notes in registered
certificated form ("Certificated Securities") for any reason, including to sell
Exchange Notes to persons in states that require physical delivery of the
Certificated Securities, or to pledge those Certificated Securities, that Holder
must transfer its interest in the Global Exchange Note in accordance with the
normal procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised us that it will take any action permitted to be taken by a
holder of Outstanding Notes (including the presentation of Outstanding Notes for
exchange pursuant to the exchange offer) only at the direction of one or more
participants to whose account the interests in the Outstanding Global Note are
credited and only in respect of such portion of the aggregate principal amount
of Outstanding Notes as to which such participant or participants have given
such direction. But if there is an Event of Default under the Indenture, DTC
will exchange the Global Exchange Note for Certificated Securities, which it
will distribute to its participants.
DTC has informed us that it:
. is a limited purpose trust company organized under laws of the State
of New York;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the Uniform Commercial
Code;
. a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act; and
. was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates.
DTC's participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Exchange Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. We, the Initial Purchasers or the Trustee will not
have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
When Will We Issue Certificated Securities?
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If DTC at any time will not or cannot continue as a depositary for the
Global Exchange Note and we do not appoint a successor depositary within 90
days, or at our election at any time, we will issue Certificated Securities in
exchange for the Global Exchange Note.
Certain Definitions.
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (1) the sum of (a) discounted future net cash
flows from our proved oil and gas reserves and those of our consolidated
Subsidiaries, calculated in accordance with Commission guidelines (before any
state or federal income tax), as estimated by independent petroleum engineers as
of a date no earlier than the date of our latest annual consolidated financial
statements (or, in the case that the date of determination is after the end of
the first fiscal quarter of our fiscal year, as estimated by our engineers as of
a date no earlier than the end of the most recent fiscal quarter, which
estimates shall be confirmed in writing by a report by independent petroleum
engineers in accordance with Commission guidelines in the event of a Material
Change if the amount of Adjusted Consolidated Net Tangible Assets is required to
be computed under the Indenture), (b) the Net Working Capital on a date no
earlier than the date of our latest consolidated annual or quarterly financial
statements, and (c) with respect to each other tangible asset of us or our
consolidated Subsidiaries, the greater of (i) the net book value of such other
tangible asset on a date no earlier than the date of our latest consolidated
annual or quarterly financial statements, and (ii) the appraised value, as
estimated by a qualified independent appraiser, of such other tangible asset, as
of a date no earlier than the date that is three years before the date of
determination (or such later date on which we shall have a reasonable basis to
believe that there has occurred a material decrease in value since the
determination of such appraised value), minus (2) minority interests and, to the
extent not otherwise taken into account in determining Adjusted Consolidated Net
Tangible Assets, any of our gas balancing liabilities and those of our
consolidated Subsidiaries. In addition to, but without duplication of, the
foregoing, for purposes of this definition, "Adjusted Consolidated Net Tangible
Assets" shall be calculated after giving effect, on a pro forma basis, to (1)
any Investment not prohibited by the Indenture, to and including the date of the
transaction giving rise to the need to calculate Adjusted Consolidated Net
Tangible Assets (the "Assets Transaction Date"), in any other Person that, as a
result of such Investment, becomes a Subsidiary, (2) the acquisition, to and
including the Assets Transaction Date (by merger, consolidation or purchase of
stock or assets), of any business or assets, including, without limitation,
Permitted Industry Investments, and (3) any sales or other dispositions of
assets permitted by the Indenture (other than sales of Hydrocarbons or other
mineral products in the ordinary course of business) occurring on or before the
Assets Transaction Date. For purposes of calculating the ratio of our Adjusted
Consolidated Net Tangible Assets to Indebtedness of us and our Subsidiaries,
Indebtedness of a Subsidiary that is not a Wholly Owned Subsidiary (which
Indebtedness is non-recourse to us or any other Subsidiary or any of our or
their assets) shall be included only to the extent of our pro rata ownership
interest in such Subsidiary.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (1) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Guarantee, of such Subsidiary Guarantor at such date and
(2) the present fair saleable value of the assets of such Subsidiary Guarantor
at such date exceeds the amount that will be required to pay the probable
liability of such Subsidiary Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date and
after giving effect to any collection from any Subsidiary of such Subsidiary
Guarantor in respect of the obligations of such Subsidiary under the Guarantee),
excluding debt in respect of the Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Asset" means each of the assets that are owned by us or a Subsidiary on
the Issue Date or that are acquired by us or a Subsidiary after the Issue Date.
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"Asset Disposition" means any sale, lease, transfer, exchange or other
disposition (or series of related sales, leases, transfers, exchanges or
dispositions) of shares of Capital Stock of a Subsidiary (other than directors'
qualifying shares), or of property or assets (including any interests therein)
(each referred to for purposes of this definition as a "disposition") by us or
any of our Subsidiaries, including any disposition by means of a merger,
consolidation or similar transaction (other than (1) by us to a Subsidiary or by
a Subsidiary to us or a Subsidiary (in the case of a transfer to a Subsidiary
that is not a Wholly Owned Subsidiary, dispositions shall be excluded pursuant
to clause (1) only to the extent of our interest in such Subsidiary after giving
effect to such transfer), (2) any Investment in an Unrestricted Subsidiary not
prohibited under the provisions described in the "We Are Limited In How We Make
Restricted Payments" covenant, (3) a disposition of Hydrocarbons or other
mineral products in the ordinary course of business, and (4) the disposition of
all or substantially all of our assets in compliance with the "We Are Limited In
How We May Enter Into A Transaction Involving Merger, Consolidation or Sale of
Substantially All Assets" covenant).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (1) the sum of the products of
(a) the number of years from such date to the date of each successive scheduled
principal payment of such Indebtedness multiplied by (b) the amount of such
principal payment by (2) the sum of all such principal payments.
"Bank Credit Agreement" means the Fourth Amended and Restated Credit
Agreement, dated May 22, 1998, among us, First Union National Bank, BankBoston,
N.A., Den norske Bank ASA, Wells Fargo Bank (Texas), National Association, Chase
Bank of Texas, National Association, Comerica Bank-Texas, MeesPierson Capital
Corp., Bank of Scotland, U.S. Bank National Association, Hibernia National Bank,
General Electric Capital Corporation, and First Union National Bank, as agent,
as amended, modified (without limitation as to amount), supplemented, extended,
restated, replaced, renewed or refinanced from time to time in whole or in part
in one or more credit agreements, loan agreements, instruments or similar
agreements, as such may be further amended, modified (without limitation as to
amount), supplemented, extended, restated, replaced, renewed or refinanced) from
time to time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the board of directors of such
Person duly authorized to act on behalf of the board of directors of such
Person.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock and any and all warrants, options and rights with respect thereto,
including each class of common stock and preferred stock of such Person.
"Capitalized Lease Obligation" means the discounted present value of the
rental obligations of any Person under any lease of Property, which in
accordance with GAAP, is required to be capitalized on the balance sheet of such
Person.
"Change of Control" means (1) an event or series of events by which any
Person or other entity or group of Persons or other entities acting in concert
as a partnership or other group (a "Group of Persons") shall, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases,
merger, consolidation or otherwise, have become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the combined
voting power of our then-outstanding Voting Stock, (2) during any period of two
consecutive years, Continuing Directors cease for any reason to constitute a
majority of the Board of Directors then in office, or (3) the direct or indirect
sale, lease, exchange or other transfer of all or substantially all of the
Assets to any Person or Group of Persons.
"Company Properties" means all Properties, and equity, partnership or other
ownership interests therein, that are related or incidental to, or used or
useful in connection with, the conduct or operation of any of our business
activities or the business activities of the Subsidiaries, which business
activities are not prohibited by the terms of the Indenture.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period increased (to the extent
deducted in determining Consolidated Net Income) by the sum of: (1) all income
taxes of such Person and its subsidiaries paid or accrued according to GAAP for
such period (other than income taxes attributable to extraordinary, unusual or
non-recurring gains or losses), (2) all interest expense of such Person and its
subsidiaries paid or accrued in accordance with GAAP for such period (including
amortization of original issue
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discount and the interest portion of deferred payment obligations), (3)
depreciation and depletion of such Person and its subsidiaries, (4) amortization
of such Person and its subsidiaries including, without limitation, amortization
of capitalized debt issuance costs and (v) any other non-cash charges to the
extent deducted from Consolidated Net Income.
"Consolidated EBITDA Coverage Ratio" means, with respect to any Person, the
ratio of (1) Consolidated EBITDA of such Person for the period (the "Pro Forma
Period") consisting of the most recent four full fiscal quarters for which
financial information in respect thereof is available immediately before the
date of the transaction giving rise to the need to calculate the Consolidated
EBITDA Coverage Ratio (the "Transaction Date") to (2) the aggregate Fixed
Charges which such Person will accrue during the fiscal quarter in which the
Transaction Date occurs and the three fiscal quarters immediately after such
fiscal quarter (the "Forward Period") on the aggregate amount of Indebtedness
outstanding on the Transaction Date, including any Indebtedness proposed to be
incurred on such date and excluding any Indebtedness repaid with the proceeds of
such Indebtedness (as though all such Indebtedness was incurred or repaid on the
first day of the quarter in which the Transaction Date occurred). In addition
to, but without duplication of, the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated after giving effect (without
duplication), on a pro forma basis for the Pro Forma Period (but no longer), to
(1) any Investment, during the period commencing on the first day of the Pro
Forma Period to and including the Transaction Date (the "Reference Period"), in
any other Person that, as a result of such Investment, becomes a subsidiary of
such Person, (2) the acquisition, during the Reference Period (by merger,
consolidation or purchase of stock or assets) of any business or assets, which
acquisition is not prohibited by the Indenture, including but not limited to
Permitted Industry Investments, as if such acquisition had occurred on the first
day of the Reference Period, (3) any sales or other dispositions of assets
(other than sales of Hydrocarbons and other mineral products in the ordinary
course of business) occurring during the Reference Period, in each case as if
such incurrence, Investment, repayment, acquisition or asset sale had occurred
on the first day of the Reference Period and (4) interest income that we
reasonably anticipate to receive during the Pro Forma Period from Investments in
Permitted Obligations, which Investments exist on the Transaction Date or will
exist as a result of the transaction giving rise to the need to calculate the
Consolidated EBITDA Coverage Ratio. For purposes of this definition, "Fixed
Charges" must be calculated after giving effect (without duplication), on a pro
forma basis for the Forward Period, to any Indebtedness incurred or repaid on or
after the first day of the Forward Period and before the Transaction Date. For
purposes of calculating our Consolidated EBITDA Coverage Ratio, Indebtedness of
a Subsidiary that is not a Wholly Owned Subsidiary (which Indebtedness is non-
recourse to us or any other Subsidiary or any of their assets) shall be included
only to the extent of our pro rata ownership interest in such Subsidiary.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP, provided
that (1) the net income of (a) any Unrestricted Subsidiary and (b) any other
Person in which such Person or any subsidiary thereof has an interest (which
interest, in the case of those Persons referred to in clause (b), does not cause
the net income of such other Person to be consolidated with the net income of
such Person in accordance with GAAP) will be included only to the extent of the
amount of dividends or distributions actually paid to such Person or its
subsidiaries by such other Person in such period; (2) the net income of any
subsidiary of such Person that is subject to any Payment Restriction will be
excluded to the extent of such Payment Restriction; and (3) (a) the net income
(or loss) of any other Person acquired in a pooling of interests transaction for
any period before the date of such acquisition, (b) any net gain (but not loss)
on the sale or other disposition by such Person or any of its subsidiaries of
assets and of the Capital Stock of any subsidiary of such Person, and (c) items
that are extraordinary, will each be excluded; provided, in no event shall the
computation of our Consolidated Net Income include or take into effect the
premium or write-off of debt issuance costs, if any, that we optionally pay to
redeem or otherwise prepay the 12% Notes issued pursuant to the Prior Indenture
or the Series A-D Notes.
"Consolidated Net Worth" as of any date means with respect to any Person
the amount by which the assets of such Person and its subsidiaries on a
consolidated basis exceed (1) the total liabilities of such Person and its
subsidiaries on a consolidated basis, plus (2) Disqualified Capital Stock of
such Person or Disqualified Capital Stock of any subsidiary of such Person
issued to any Person other than such Person or another wholly owned Subsidiary
of such Person, in each case determined in accordance with GAAP.
"Contango Market Transaction" means a transaction in which we or any
Subsidiary either (1) establish or establishes a position using New York
Mercantile Exchange Crude Oil Futures contracts to purchase Hydrocarbons for
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future delivery to us or it, or (2) purchase or purchases or commit or commits
to purchase Hydrocarbons for future delivery to us or it, and contemporaneous
with such purchase transaction either (y) establishes one or more positions
using New York Mercantile Exchange Crude Oil Futures contracts to resell at a
date after such delivery date, or (z) enters into a contract with that Person or
another Person to resell at a date after such delivery date, a similar aggregate
quantity and quality of Hydrocarbons as so purchased by us or such Subsidiary,
as applicable, and at an aggregate price greater than the Indebtedness incurred
for the Hydrocarbons so purchased by us or such Subsidiary.
"Continuing Directors" means any member of our Board of Directors on the
Series A/B Issue Date, any director elected since the date thereof in any annual
meeting of the stockholders upon the recommendation of our Board of Directors
and any other member of our Board of Directors who will be recommended or
elected to succeed a Continuing Director by a majority of Continuing Directors
who are then members of our Board of Directors.
"Currency Agreement" means the obligations of any Person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person or any of its subsidiaries against
fluctuations in currency values.
"Default" means any event that is, or after notice or passage of time would
be, an Event of Default.
"Disqualified Capital Stock" means, with respect to any Person, any Capital
Stock of such Person or its subsidiaries that, by its terms, by the terms of any
agreement related thereto or by the terms of any security into which,
mandatorily or at the option of the holder, it is convertible or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased by such Person or its subsidiaries, including at
the option of the holder, in whole or in part, or has, upon the happening of an
event or the passage of time would have, a redemption or similar payment due, in
each such case on or before the Maturity Date.
"Fixed Charges" means, with respect to any Person, for any period, the
aggregate amount of (1) interest, whether expensed or capitalized, paid, accrued
or scheduled to be paid or accrued during such period (except to the extent
accrued in a prior period) in respect of all Indebtedness of such Person and its
consolidated subsidiaries (including (a) original issue discount on any
Indebtedness and (b) the interest portion of all deferred payment obligations,
calculated in accordance with the effective interest method, in each case to the
extent attributable to such period) and (2) dividend requirements on
Disqualified Capital Stock of such Person and its consolidated subsidiaries
(whether in cash or otherwise (except dividends payable in shares of Qualified
Capital Stock) (non-cash dividends being valued as determined in good faith by
the Board of Directors of such Person, as evidenced by a Board Resolution))
paid, accrued or scheduled to be paid or accrued during such period (except to
the extent accrued in a prior period) and excluding items eliminated in
consolidation.
For purposes of the definition of Fixed Charges, (1) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Board of Directors of such Person (as evidenced by
a Board Resolution) to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP; (2) interest on Indebtedness that is
determined on a fluctuating basis shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest of such Indebtedness in effect on
the date Fixed Charges are being calculated, subject to the proviso in clause
(3); (3) interest on Indebtedness that may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rate, shall be deemed to have been based upon
the rate actually chosen, or, if none, then based upon such optional rate chosen
as we may designate, (provided that, for the period following the date on which
the rate actually chosen ceases to be in effect, we may designate an optional
rate other than that actually chosen, which optional rate shall be deemed to
accrue at a fixed per annum equal to the rate of interest on such optional rate
in effect on the date Fixed Charges are being calculated); and (4) Fixed Charges
shall be increased or reduced by the net cost (including amortization of
discount) or benefit associated with obligations under Interest Rate Agreements
attributable to such period.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of any date of determination.
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"Guarantor Senior Indebtedness" means all Indebtedness of a Subsidiary
Guarantor (present and future) created, incurred, assumed or guaranteed by the
Subsidiary Guarantor (and all renewals, extensions, increases or refundings
thereof) (including the principal of, interest on and fees, premiums, expenses
(including costs of collection), indemnities and other amounts payable in
connection with such Indebtedness, and including any Post-Commencement Amounts),
unless the instrument governing such Indebtedness expressly provides that such
Indebtedness is not senior or superior in right of payment to the Guarantee.
Notwithstanding the foregoing, Guarantor Senior Indebtedness does not include
(1) any Indebtedness of the Subsidiary Guarantor to us or any Subsidiary or any
Unrestricted Subsidiary, and (2) any amounts payable or other liabilities to
trade creditors.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all constituents, elements or compounds thereof and products refined or
processed therefrom.
"Indebtedness" means, with respect to any Person, without duplication, any
liability, contingent or otherwise, of such Person (i) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures
or similar instruments, (iii) representing the deferred and unpaid balance of
the purchase price of any property or interest therein (other than any such
balance that represents an account payable or any other monetary obligation to a
trade creditor created, incurred, assumed or guaranteed by such Person in the
ordinary course of business of such Person in connection with obtaining goods,
materials or services and due within twelve months (or such longer period for
payment as is customarily extended by such trade creditor) of the incurrence
thereof, which account is not overdue by more than 150 days, according to the
original terms of sale, unless such account payable is being contested in good
faith or has been extended), (iv) for the payment of a Capitalized Lease
Obligation of such Person, (v) with respect to the reimbursement of any letter
of credit, banker's acceptance or similar credit transaction, (vi) with respect
to Indebtedness (as otherwise defined in this definition) of another Person
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person (provided that if the obligations so secured have not
been assumed in full by such Person or are not otherwise such Person's legal
liability in full, then such obligations shall be deemed to be in an amount
equal to the greater of (A) the lesser of (1) the full amount of such
obligations, and (2) the fair market value of such assets, as determined in good
faith by the Board of Directors of such Person, which determination shall be
evidenced by a Board Resolution, and (B) the amount of obligations as have been
assumed by such Person or which are otherwise such Person's legal liability),
(vii) with respect to production payments in connection with oil and gas
properties of such Person, other than any Permitted Production Payment
Obligations, (viii) to the extent not otherwise included, under Currency
Agreements and Interest Rate Agreements entered into other than in the ordinary
course of such Person's business, (ix) in the case of such Person, the
liquidation preference and any mandatory redemption payment obligations in
respect of Disqualified Capital Stock, and, in the case of a subsidiary of such
Person, the liquidation preference and any mandatory redemption payment
obligations in respect of preferred stock of such subsidiary, and (x) in respect
of all Indebtedness of others which such Person has guaranteed, endorsed with
recourse (otherwise than for collection, deposit or other similar transactions
in the ordinary course of business), agreed to purchase or repurchase or in
respect of which such Person has agreed contingently to supply or advance funds
or for which such Person has otherwise become liable; provided, however,
Indebtedness arising pursuant to clause (iii)(A) of this definition as a result
of such account payable becoming overdue by more than 150 days shall only be
deemed to be incurred at a time when Indebtedness, other than such Indebtedness,
is incurred.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
(1) an insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization proceeding or other similar case or proceeding,
relative to such Person or to its creditors, as such, or its assets, (2) any
liquidation, dissolution, or reorganization proceeding of such Person, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (3) any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of such Person.
"Interest Rate Agreement" means the obligations of any Person pursuant to
any interest swap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in interest rates.
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"Investment" means, in respect of any Person, any investment in another
Person, whether by means of a share purchase, capital contribution, loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
similar credit extension constituting Indebtedness of such other Person and any
guaranty of Indebtedness of any other Person. For purposes of the "We Are
Limited In How We Make Restricted Payments" covenant and the definition of
Permitted Unrestricted Subsidiary Investments, (1) an "Investment" in an
Unrestricted Subsidiary shall be deemed to include and be valued at the fair
market value of the net assets of any Subsidiary at the time that such
Subsidiary is designated an Unrestricted Subsidiary, and (2) any Investment in
an Unrestricted Subsidiary shall be valued at fair market value at the time of
such Investment (except however, when such Investment consists of a loan or
advance by a Person to another Person that is of an intercompany or similar
nature between such Persons and arises pursuant to an agreement or understanding
in the ordinary course of business relating to tax sharing, administrative or
other similar arrangements, then such Investment shall be valued at fair market
value at the time that the investing Person shall have paid monies or
transferred other consideration to another Person for the benefit of the Person
in whom the agreement to make such loan or advance was made), in each case as
determined by our Board of Directors and the Board of Directors of such
Subsidiary, as applicable, in good faith.
"Issue Date" means the date of first issuance of the Outstanding Notes
under the Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction).
"Material Change" means an increase or decrease of more than 10% during a
fiscal quarter in the discounted future net cash flows (excluding changes that
result solely from changes in prices) from our proved oil and gas reserves and
the proved oil and gas reserves of the consolidated Subsidiaries (before any
state or federal income tax); provided, however, that the following will be
excluded from the Material Change calculation: (1) any acquisitions during the
quarter of oil and gas reserves that have been estimated by independent
petroleum engineers and on which a report or reports exist, (2) any reserves
added during the quarter attributable to the drilling or recompletion of wells
not included in previous reserve estimates, but which will be included in future
quarters, and (3) any disposition of properties existing at the beginning of
such quarter that have been disposed of as provided in "We Are Limited In How We
Dispose Our Assets".
"Material Subsidiary" means any Subsidiary that, as of the relevant date of
determination, would be a "significant subsidiary" as defined in Reg. ss.
230.405 promulgated pursuant to the Securities Act as in effect on the Series
A/B Issue Date, assuming that we are the "registrant" referred to in such
definition, except that the 10% amounts referred to in such definition shall be
deemed to be 5%.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" means, with respect to any Asset Disposition of
any Person, cash proceeds received (including any cash proceeds received by way
of deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, and excluding any other consideration
until such time as such consideration is converted into cash) therefrom, in each
case net of all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all federal, state or local taxes required to be
accrued as a liability as a consequence of such Asset Disposition, and in each
case net of all Indebtedness which is secured by such Assets, in accordance with
the terms of any Lien upon or with respect to such Assets, or which must, by its
terms or in order to obtain a necessary consent to such Asset Disposition or by
applicable law, be repaid out of the proceeds from such Asset Disposition and
which is actually so repaid.
"Net Proceeds" means (1) in the case of any sale by us of Qualified
Capital Stock, the aggregate net cash proceeds that we receive, after payment of
expenses, commissions and the like incurred in connection therewith, and (2) in
the
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case of any exchange, exercise, conversion or surrender of any outstanding
securities or Indebtedness of us for or into shares of Qualified Capital Stock
of us, the net book value of such outstanding securities or Indebtedness as
adjusted on our books on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder of such
Indebtedness or securities to us upon such exchange, exercise, conversion or
surrender and less any and all payments made to the holders of such Indebtedness
or securities, and all other expenses that we incur).
"Net Working Capital" means (1) all our current assets and the current
assets of our consolidated Subsidiaries, minus (2) all of our current
liabilities and the current liabilities of our consolidated Subsidiaries, except
current liabilities included in Indebtedness.
"Non-Recourse Indebtedness" means Indebtedness that, under the terms
thereof or pursuant to applicable law, neither we nor any Subsidiary (other than
a Subsidiary being designated as an Unrestricted Subsidiary) is directly or
indirectly liable for and there is no recourse against any of our assets or
properties or the assets or properties of such Subsidiary.
"Obligations" mean the due and punctual payment of principal of and
interest on the Securities when due, whether at maturity, by acceleration, by
redemption or otherwise, and all of our other monetary obligations under the
Indenture and the Notes and the due and punctual performance of all of our other
obligations under the Indenture and the Notes.
"Oil and Gas Properties" means all Properties, including equity or other
ownership interests therein, owned by such Person which have been assigned
"proved oil and gas reserves" as defined in Rule 4-10 of Regulation S-X of the
Securities Act as in effect on the Series A/B Issue Date.
"Permitted Acquisition Indebtedness" means Indebtedness of us or any
Subsidiary to the extent such Indebtedness is incurred to finance the
acquisition of Oil and Gas Properties (and development costs related thereto)
and does not exceed the principal amount of $50 million with respect to any such
acquisition transaction or series of related acquisition transactions, if on the
date of the incurrence (1) (a) the Adjusted Consolidated Net Tangible Assets
acquired are equal to or greater than 200% of the Indebtedness incurred, and (b)
our Adjusted Consolidated Net Tangible Assets (after giving effect to such
acquisition) are equal to or greater than 125% of the consolidated Indebtedness
of us and our Subsidiaries, or (2) (a) the Property Net Revenue Coverage Ratio
would have been equal to or greater than 2.5 to 1.0, (b) the Adjusted
Consolidated Net Tangible Assets acquired are equal to or greater than 150% of
the Indebtedness incurred, and (c) our Adjusted Consolidated Net Tangible Assets
(after giving effect to such acquisition) are equal to or greater than 125% of
the consolidated Indebtedness of us and our Subsidiaries.
"Permitted Contango Market Transaction Obligations" means Indebtedness of
us or any Subsidiary under letter of credit or borrowed money obligations, or in
lieu of or in addition to such letters of credit or borrowed money, guarantees
of such Indebtedness or other obligations of us or any Subsidiary by us or any
other Subsidiary, as applicable, related to a Contango Market Transaction,
provided that, (1) if we have or such Subsidiary has entered into such a
contract to resell at a subsequent date, as distinguished from establishing a
position using New York Mercantile Exchange Crude Oil Future contracts to resell
at a subsequent date, (a) the Person with which we have or such Subsidiary has
such contract to sell has an investment grade credit rating by S&P or Moody's,
or in lieu thereof, a Person guaranteeing the payment of such obligated Person
has an investment grade credit rating by S&P or Moody's, or (b) such Person
posts a letter of credit in favor of us or such Subsidiary with respect to such
contract and (2) for the period commencing on the date we are or such Subsidiary
is obligated to take delivery of such Hydrocarbons so purchased by it and until
and including the date on which delivery to the purchaser is fulfilled, we have
or such Subsidiary has the right and ability to store such quantity and quality
of Hydrocarbons in storage facilities owned, leased, operated or otherwise
controlled by us or any Subsidiary.
"Permitted Indebtedness" means (1) Indebtedness under the Outstanding Notes
and any Exchange Note issued in exchange for Outstanding Notes of equal
principal amount; (2) Indebtedness outstanding in an aggregate principal amount
at any one time outstanding not to exceed $100 million under the Bank Credit
Agreement, plus all interest and fees under such agreements and any guarantee of
any such Indebtedness; (3) the Guarantees of the Notes and the Series A-D Notes
(and any assumption of the obligations guaranteed thereby); (4) Permitted
Refinancing Indebtedness;
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(5) Indebtedness of us to any Wholly Owned Subsidiary, and any Indebtedness of
any Wholly Owned Subsidiary to us or to any Wholly Owned Subsidiary of us;
provided, that in each case, such Indebtedness has not been incurred in
contemplation of any subsequent issuance or transfer of any Capital Stock or any
other event which would result in any such Wholly Owned Subsidiary ceasing to be
a Wholly Owned Subsidiary or any other subsequent transfer of any such
Indebtedness (except to us or a Wholly Owned Subsidiary), and if incurred in
contemplation of any of the foregoing events, then such Indebtedness shall be
deemed to be incurred and shall be treated as an incurrence of Indebtedness for
purposes of the "We Are Limited In How We Incur Additional Indebtedness"
covenant at the time the Wholly Owned Subsidiary in question ceased to be a
Wholly Owned Subsidiary; (6) Permitted Marketing Obligations and Permitted
Contango Market Transaction Obligations; (7) Permitted Acquisition Indebtedness;
(8) Permitted Operating Obligations; (9) other Indebtedness outstanding at any
time in an aggregate principal amount not to exceed the greater of $15 million
or 2.5% of our Adjusted Consolidated Net Tangible Assets; and (10) Indebtedness
outstanding on the Series A/B Issue Date. Permitted Refinancing Indebtedness
that constitutes a refinancing of amounts referred to in clauses (2) and (9)
shall be deemed to be incurred pursuant to and subject to the limitations in
clauses (2) and (9), respectively. We may elect at any time that amounts of
Indebtedness incurred under clauses (2) or (9) be deemed to be incurred pursuant
to the first paragraph of the "We Are Limited In How We Incur Additional
Indebtedness" covenant (if then permitted to be so incurred), in which event
such amounts so incurred shall be deemed not to be incurred under clause (2) or
(9); but provided that any such Indebtedness deemed not to be incurred under
clause (2) shall still be treated as Indebtedness under and governed by the Bank
Credit Agreement for purposes of all other provisions of the Indenture.
"Permitted Industry Investments" means (1) capital expenditures, including,
without limitation, acquisitions of Company Properties and interests therein;
(2)(a) entry into operating agreements, joint ventures, working interests,
royalty interests, mineral leases, unitization agreements, pooling arrangements
or other similar or customary agreements, transactions, properties, interests or
arrangements, and Investments and expenditures in connection therewith or
pursuant thereto, in each case made or entered into in the ordinary course of
the oil and gas business, or (b) exchanges of Company Properties for other
Company Properties of at least equivalent value as determined in good faith by
our Board of Directors; (3) Investments by us or any Subsidiary in any
Subsidiary (or in any Person that becomes a Subsidiary as a result of such
Investment) that are not subject to any Payment Restriction; (4) Investments in
us or another Subsidiary that are not subject to any Payment Restriction by any
Subsidiary; and (5) Investments of operating funds on behalf of co-owners of Oil
and Gas Properties of us or the Subsidiaries pursuant to joint operating
agreements.
"Permitted Investments" means Permitted Obligations and Permitted Industry
Investments (in each case, other than Investments in Unrestricted Subsidiaries).
"Permitted Liens" means (1) Liens for taxes, assessments and governmental
charges not yet delinquent or being contested in good faith and for such
adequate reserves have been established to the extent required by GAAP, (2)
landlord's, carriers, warehouseman's, storage, mechanics', workmen's,
materialmen's, operator's or similar Liens arising in the ordinary course of
business, (3) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of Company Properties or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case materially
detract from the Company Properties subject thereto or interfere with the
ordinary conduct of our business or the business of the Subsidiaries, (4) Liens
on, or related to, Properties to secure all or part of the costs incurred in the
ordinary course of business of exploration, drilling, development, production,
processing, transportation, marketing or storage, or operation thereof, (5)
Liens on pipeline or pipeline facilities, Hydrocarbons or Company Properties
that arise out of operation of law, (6) judgment and attachment Liens not giving
rise to an Event of Default or Liens created by or existing from any litigation
or legal proceeding that are currently being contested in good faith by
appropriate proceedings and for which adequate reserves have been made, (7) (a)
Liens upon any Property of any Person existing at the time that we acquired that
Property, (b) Liens upon any Property of a Person existing at the time such
Person is merged or consolidated with us or any Subsidiary or existing at the
time of the sale or transfer of any such Property of such Person to us or any
Subsidiary, or (c) Liens upon any Property of a Person existing at the time such
Person becomes a Subsidiary; provided that in each case such Lien has not been
created in contemplation of such sale, merger, consolidation, transfer or
acquisition, and provided further that in each such case no such Lien shall
extend to or cover any Property of us or any Subsidiary other than the Property
being acquired and improvements thereon, (8) Liens existing on the Series A/B
Issue Date, (9) Liens on deposits made in the ordinary course of business,
including, without limitation, pledges or deposits under worker's
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compensation, unemployment insurance and other social security legislation and
deposits to secure the performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a similar nature incurred in the
ordinary course of business, (10) Liens in favor of collecting or payor banks
having a right of setoff, revocation, refund or chargeback with respect to money
or instruments of us or any Subsidiary on deposit with or in possession of such
bank, (11) royalties, overriding royalties, revenue interests, net revenue
interests, net profit interests, reversionary interests, production payments,
production sales contracts, operating agreements and other similar interests,
properties, arrangements and agreements, all as ordinarily exist with respect to
Company Properties, (12) Liens upon any Property which were created solely for
the purpose of securing Indebtedness representing, or incurred to finance,
refinance or refund, the cost (including the cost of construction) of such
Property; provided that no such Lien shall extend to or cover any Property of
ours or any Subsidiary other than the Property so acquired and improvements
thereon, (13) Liens securing Senior Indebtedness or Guarantor Senior
Indebtedness, whether in whole or part thereof, (14) with respect to any Company
Properties, Liens arising under, or in connection with, or related to, farm-out,
farm-in, joint operating, area of mutual interest agreements and/or other
similar or customary arrangements, agreements or interests that we determine or
any Subsidiary determines in good faith to be necessary for the economic
development of such Property, and (15) Liens upon any Property securing
obligations under hedging agreements, swap agreements or other similar
agreements entered into for the purpose of protecting against fluctuations in
oil or natural gas prices.
"Permitted Marketing Obligations" means, other than Permitted Operating
Obligations or Indebtedness relating to Contango Market Transactions,
Indebtedness of us or any Subsidiary under letter of credit or borrowed money
obligations, or in lieu of or in addition to such letters of credit or borrowed
money, guarantees of such Indebtedness or other obligations of us or any
Subsidiary by any other Subsidiary or us, as applicable, related to the purchase
by us or any Subsidiary of Hydrocarbons for which we have or such Subsidiary has
contracts to sell; provided, that if such Indebtedness or obligations are
guaranteed by us or any Subsidiary, then either (1) the Person with which we
have or such Subsidiary has contracts to sell has an investment grade credit
rating from S&P or Moody's, or in lieu thereof, a Person guaranteeing the
payment of such obligated Person has an investment grade credit rating from S&P
or Moody's, or (2) such Person posts, or has posted for it, a letter of credit
in favor of us and such Subsidiary with respect to all of such Person's
obligations to us or such Subsidiary under such contracts.
"Permitted Obligations" means (1) the following kinds of instruments if,
in the case of instruments referred to in clauses (a)-(d) below, on the date of
purchase or other acquisition of any such instrument by us or any Subsidiary,
the remaining term to maturity is not more than one year: (a) readily marketable
obligations issued or unconditionally guaranteed as to principal and interest by
the United States of America or by any agency or authority controlled or
supervised by and acting as an instrumentality of the United States of America;
(b) repurchase obligations for instruments of the type described in clause (a)
for which delivery of the instrument is made against payment; (c) obligations
(including, but not limited to, demand or time deposits, bankers' acceptances
and certificates of deposit) issued by a depository institution or trust company
incorporated or doing business under the laws of the United States of America,
any state thereof or the District of Columbia or a branch or subsidiary of any
such depository institution or trust company operating outside the United
States, provided that such depository institution or trust company has, at the
time of our or such Subsidiary's investment therein or contractual commitment
providing for such investment, capital, surplus or undivided profits (as of the
date of such institution's most recently published financial statements), in
excess of $100,000,000; and (d) commercial paper issued by any Person, if such
commercial paper has, at the time of our or any Subsidiary's investment therein
or contractual commitment providing for such investment, credit ratings of A-1
by S&P and P-1 by Moody's; and (2) money market mutual or similar funds having
assets in excess of $100,000,000.
"Permitted Operating Obligations" means Indebtedness of us or any
Subsidiary in respect of one or more standby letters of credit, bid, performance
or surety bonds, or other reimbursement obligations, issued for the account of,
or entered into by, us or any Subsidiary in the ordinary course of business
(excluding obligations related to the purchase by us or any Subsidiary of
Hydrocarbons for which we have or such Subsidiary has contracts to sell), or in
lieu of any thereof or in addition to any thereto, guarantees and letters of
credit supporting any such obligations and Indebtedness (in each case, other
than for an obligation for borrowed money, other than borrowed money represented
by any such letter of credit, bid, performance or surety bond, or reimbursement
obligation itself, or any guarantee and letter of credit related thereto).
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"Permitted Production Payment Obligations" means obligations with respect
to production payments entered into in the ordinary course of our or any
Subsidiary's business, which obligations are non-recourse to us and our
Subsidiaries other than to Hydrocarbon production from the properties subject to
such obligations.
"Permitted Refinancing Indebtedness" means (1) Senior Indebtedness of us or
any Subsidiary, the net proceeds of which are used solely to renew, extend,
refinance, refund or repurchase the Notes, including the amount of reasonable
fees and expenses and premium, if any, incurred by us or such Subsidiary in
connection therewith; or (2) Indebtedness of us or any Subsidiary, the net
proceeds of which are used to renew, extend, refinance, refund or repurchase
(including, without limitation, pursuant to a Change of Control Offer as
required by the terms of the Notes) outstanding Indebtedness of us or any
Subsidiary, provided that (1) if the Indebtedness (including the Notes) being
renewed, extended, refinanced, refunded or repurchased is pari passu with or
subordinated in right of payment to either the Notes or the Subsidiary
Guarantees, then such Indebtedness is pari passu with or subordinated in right
of payment to, as the case may be, the Notes or the Subsidiary Guarantees at
least to the same extent as the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, (2) such Indebtedness is scheduled to
mature no earlier than the Indebtedness being renewed, extended, refinanced,
refunded or repurchased, and (3) such Indebtedness has an Average Life at the
time such Indebtedness is incurred that is greater than the Average Life of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased;
provided, further, that such Indebtedness (to the extent that such Indebtedness
constitutes Permitted Refinancing Indebtedness) is in an aggregate principal
amount (or, if such Indebtedness is issued at a price less than the principal
amount thereof, the aggregate amount of gross proceeds therefrom is) not in
excess of the aggregate principal amount then outstanding of the Indebtedness
being renewed, extended, refinanced, refunded or repurchased (or if the
Indebtedness being renewed, extended, refinanced, refunded or repurchased was
issued at a price less than the principal amount thereof, then not in excess of
the amount of liability in respect thereof determined in accordance with GAAP)
plus the amount of reasonable fees and expenses and premium, if any, incurred by
us or such Subsidiary in connection therewith.
"Permitted Unrestricted Subsidiary Investments" means Investments in
Unrestricted Subsidiaries in a cumulative aggregate amount (in cash or the fair
market value of property other than cash, as determined in good faith by our
Board of Directors) not to exceed the sum of (1) $25 million and (2) cash or
cash equivalent distributions made from any Unrestricted Subsidiary and
received, after the Series A/B Issue Date, as such by us, provided that any
amount included in this clause (2) shall be deducted from any amounts referred
to in clause (2)(c) of the "We Are Limited In How We Make Restricted Payments"
covenant. Notwithstanding the foregoing, Permitted Unrestricted Subsidiary
Investments shall also include any Investments in Unrestricted Subsidiaries to
the extent such Investment consists of (1) our Qualified Capital Stock or (2)
amounts referred to in clause (2)(b) of the "We Are Limited In How We Make
Restricted Payments" covenant, which Investments shall be excluded from the sum
in the previous sentence, provided that the amount of any Investments pursuant
to clause (2) shall be deducted from amounts referred to in clause (2)(c) of the
"We Are Limited In How We Make Restricted Payments" covenant.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Post-Commencement Amounts" means all interest and fees accrued or accruing
after the commencement of any Insolvency or Liquidation Proceeding in accordance
with and at the contract rate (including, without limitation, any non-usurious
rate applicable upon default) and all premiums, expenses (including costs of
collection), indemnities and other amounts that would have accrued or been
incurred after the commencement of any Insolvency or Liquidation Proceeding in
any case as specified in any agreement or instrument creating, evidencing, or
governing any Senior Indebtedness or any Guarantor Senior Indebtedness, as the
case may be, whether or not, pursuant to applicable law or otherwise, the claim
for such interest, fees, premiums, expenses, indemnities or other amounts is
allowed and non-avoidable as a claim in such Insolvency or Liquidation
Proceeding.
"Prior Indenture" means the Indenture dated as of October 1, 1992, among
us, the "Subsidiary Guarantors" (as therein defined) and Texas Commerce Bank
National Association, successor to Ameritrust Texas National Association, as
trustee, and providing for the issue of our 12% Senior Subordinated Notes due
1999 in the aggregate principal amount of $100 million.
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"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of the Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act, as amended.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock, partnership
interests and other equity or ownership interests in any other Person.
"Property Net Revenue Coverage Ratio" means, with respect to Property to be
acquired by us or any Subsidiary, the ratio of (1) the amount equal to (a) the
revenues attributable to the sale of Hydrocarbons from such Property for the
most recent four full fiscal quarters for which financial information is
available immediately before the acquisition date, (the "Pro Forma Period")
minus (b) the production and general and administrative expenses attributable to
such Property during the Pro Forma Period (the "Property Net Revenue") to (2)
the aggregate Fixed Charges we or any Subsidiary will accrue during the fiscal
quarter in which the acquisition date occurs and the three fiscal quarters
immediately after such fiscal quarter as a result of Indebtedness incurred for
the purpose of making such acquisition (as though all such Indebtedness was
incurred or repaid on the first day of the quarter in which the acquisition date
occurs). For purposes of this definition, Property Net Revenue shall be
calculated, after giving effect on a pro forma basis for the Pro Forma Period,
to (1) any adjustments in revenues from the sale of Hydrocarbons as a result of
fixed price or other contract arrangements entered into as of the acquisition
date and (2) any adjustments in production and general and administrative
expenses which are fixed or determinable as of the acquisition date.
"Public Equity Offering" means an underwritten public offer and sale of our
common stock (that is Qualified Capital Stock) pursuant to a registration
statement that the Commission has declared effective pursuant to the Securities
Act (other than a registration statement on Form S-8 or otherwise relating to
equity securities issuable under one of our employee benefit plans).
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Rating Agency" means S&P and Moody's or, if S&P or Moody's shall have
ceased to be a "nationally recognized statistical rating organization" (as
defined in Rule 436 under the Act) or shall have ceased to make publicly
available a rating on any outstanding securities of any company engaged
primarily in the oil and gas business, such other organization or organizations,
as the case may be, then making publicly available a rating on the Notes that we
select.
"Rating Date" means, in respect of each Change of Control, the date that is
immediately before the date of the first public announcement of an event or
series of events that results in a Change of Control.
"Rating Decline" means the occurrence on any date following the Rating Date
and before a date that is 90 days after the occurrence of a corresponding Change
of Control (which period shall be deemed to be extended so long as before the
end of such 90-day period and continuing thereafter the rating of the Notes is
under publicly announced consideration for possible downgrade by either Rating
Agency) of either of the following: (1) the rating of the Notes by either Rating
Agency within such period shall be at least one gradation below the rating of
the Notes by such Rating Agency on the Rating Date, or (2) either Rating Agency
shall withdraw its ratings of the Notes. A gradation shall include changes
within rating categories (e.g., with respect to S&P a decline in a rating from
BB+ to BB, or from B to B-, will constitute a decrease of one gradation).
"Related Person" means (1) one of our Affiliates, (2) any individual or
other Person who directly or indirectly holds 10% or more of the combined voting
power of our then-outstanding Voting Stock, (3) any relative of any individual
referred to in clauses (1), (2) and (4) hereof by blood, marriage or adoption
not more remote than first cousin and (4) one of our officers or directors.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by us or a
Subsidiary, before the scheduled maturity or before any scheduled repayment of
principal or sinking fund payment, as the case may be, in respect of
Indebtedness of us or any Subsidiary that is subordinate in right to the Notes
or the Guarantees, but provided that any such acquisition shall be deemed not to
be a Restricted Debt Prepayment to the extent it is made (1)
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in exchange for or with the proceeds from the substantially concurrent issuance
of Qualified Capital Stock or (2) in exchange for or with the proceeds from the
substantially concurrent issuance of Indebtedness, in a principal amount (or, if
such Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon the acceleration thereof, with an original issue
price) not to exceed the lesser of (a) the principal amount of Indebtedness
being acquired in exchange therefor (or with the proceeds therefrom) and (b) if
such Indebtedness being acquired was issued at an original issue discount, the
original issue price thereof plus amortization of the original issue discount at
the time of the incurrence of the Indebtedness being issued in exchange therefor
(or the proceeds of which will finance such acquisition), and provided further
that any such Indebtedness shall have an Average Life not less than the Average
Life of the Indebtedness being acquired, and shall contain subordination and
default provisions no less favorable, in any material respect, to holders of the
Securities than those contained in such Indebtedness being acquired.
"Restricted Payment" means any (1) Stock Payment, (2) Investment (other
than Permitted Investments and other than Permitted Unrestricted Subsidiary
Investments) or (3) Restricted Debt Prepayment.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Senior Indebtedness" means all of our Indebtedness (present and future)
created, incurred, assumed or guaranteed by us (and all renewals, extensions or
refundings thereof) (including the principal of, interest on and fees, premiums,
expenses (including costs of collection), indemnities and other amounts payable
in connection with such Indebtedness, and including any Post-Commencement
Amounts), unless the instrument governing such Indebtedness expressly provides
that such Indebtedness is not senior or superior in right of payment to the
Securities. Notwithstanding the foregoing, our Senior Indebtedness does not
include (1) any Indebtedness of us to any Subsidiary or any Unrestricted
Subsidiary, and (2) any amounts payable or other liabilities to trade creditors.
"Series A Notes" means the "Notes" designated "Series A" issued and sold
pursuant to the Series A/D Indenture.
"Series A/B Indenture" means the Indenture dated as of March 15, 1996,
among us, the "Subsidiary Guarantors" (as defined therein) and Texas Commerce
Bank National Association, as trustee, and providing for the issue of our 10
1/4% Senior Subordinated Notes due 2006 in the aggregate principal amount of
$150 million.
"Series A/B Notes" means the "Notes" issued by us pursuant to the Series
A/B Indenture.
"Series A/B Issue Date" means the date of the first issuance of Series A
Notes under the Series A/B Indenture, March 19, 1996.
"Series A-D Notes" means the Series A/B Notes and the Series C/D Notes.
"Series C/D Indenture" means the Indenture dated as of July 21, 1997, among
us, the "Subsidiary Guarantors" (as therein defined) And Texas Commerce Bank
National Association, as trustee, and providing for the issuance of our 10 1/4%
Senior Subordinated Notes due 2006 in the aggregate principal amount of $50
million.
"Series C/D Notes" means the "Securities" that we issued pursuant to the
Series C/D Indenture.
"Stock Payment" means, with respect to any Person, (1) the declaration or
payment by such Person, either in cash or in property, of any dividend on
(except, in the case of us, dividends payable solely in our Qualified Capital
Stock), or the making by such Person or any of its subsidiaries of any other
distribution in respect of, such Person's Capital Stock or any warrants, rights
or options to purchase or acquire shares of any class of such Capital Stock
(except for the issuance of Qualified Capital Stock pursuant to the exercise
thereof), or (2) the redemption, repurchase, retirement or other acquisition for
value by such Person or any of its subsidiaries, directly or indirectly, of such
Person's or any of its subsidiaries' Capital Stock or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock other
than, in the case of us, through the issuance in exchange therefor solely of our
Qualified Capital Stock; but provided that in the case of a Subsidiary, the term
"Stock Payment" shall not include (1) any such payment with respect to its
Capital Stock or warrants, rights or options to purchase or acquire shares of
any class of its Capital Stock payable
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to us or a Wholly Owned Subsidiary, or (2) the payment of pro rata dividends to
holders of minority interests in Capital Stock of a Subsidiary.
A "subsidiary" of any Person means (1) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more wholly owned subsidiaries of such Person or by such Person and one
or more wholly owned subsidiaries of such Person, (2) a partnership in which
such Person or a wholly owned subsidiary of such Person is, at the date of
determination, a general or limited partner of such partnership, but only if
such Person or its wholly owned subsidiary is entitled to receive more than
fifty percent of the assets of such partnership upon its dissolution, or (3) any
other Person (other than a corporation or partnership) in which such Person, a
wholly owned subsidiary of such Person or such Person and one or more wholly
owned subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has (a) at least a majority ownership interest or (b) the
power to elect or direct the election of a majority of the directors or other
governing body of such Person.
"Subsidiary" means any one of our subsidiaries; provided, that an
Unrestricted Subsidiary shall not be deemed one of our subsidiaries for purposes
of the Indenture.
"Subsidiary Guarantor" means (1) Arguello Inc., a Delaware corporation,
Calumet Florida, Inc., a Delaware corporation, Plains Illinois Inc., a Delaware
corporation, Plains Resources International Inc., a Delaware corporation, PMCT
Inc., a Delaware corporation, Stocker Resources, Inc., a California corporation,
and Stocker Resources, L.P., a California limited partnership, (2) each of our
Subsidiaries that becomes a guarantor of the Notes in compliance with the
provisions of the Indenture and (3) each of our Subsidiaries executing a
supplemental indenture in which such Subsidiary agrees to be bound by the terms
of the Indenture.
"Unrestricted Subsidiary" means (1) each of (a) Plains All American Inc., a
Delaware corporation, PAAI LLC, a Delaware limited liability company, Plains All
American Pipeline, L.P., a Delaware limited partnership, Plains Marketing, L.P.,
a Delaware limited partnership, All American Pipeline, L.P., a Texas limited
partnership, Plains Scurlock Permian, L.P., a Delaware limited partnership,
Scurlock Permian LLC, a Delaware limited liability company, and Scurlock Permian
Pipe Line LLC, a Delaware limited liability company, and (b) any other of our
subsidiaries that at the time of determination shall be an Unrestricted
Subsidiary (as designated by our Board of Directors, as provided below) and (2)
any subsidiary of an Unrestricted Subsidiary. Our Board of Directors may
designate any of our subsidiaries (including any newly acquired or newly formed
subsidiary or a Person becoming a subsidiary through merger or consolidation or
Investment therein) to be an Unrestricted Subsidiary only if: (a) such
subsidiary does not own any Capital Stock of, or own or hold any Lien on any
property of, any other of our subsidiaries that is not a subsidiary of the
subsidiary to be so designated or otherwise an Unrestricted Subsidiary; (b) all
the Indebtedness of such subsidiary shall at the date of designation, and will
at all times thereafter, consist of Non-Recourse Indebtedness; (c) we certify
that such designation complies with the "We Are Limited In How We Make
Restricted Payments" covenant; and (d) such subsidiary, either alone or in the
aggregate with all other Unrestricted Subsidiaries, does not operate, directly
or indirectly, all or substantially all of our and the Subsidiaries' business.
Any such designation by our Board of Directors shall be evidenced to the Trustee
by filing with the Trustee a Board Resolution of our Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions. If, at any time, such
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred as of such date. Our Board of Directors may
designate any Unrestricted Subsidiary to be a Subsidiary; provided that
immediately after giving effect to such designation, we could incur at least
$1.00 of additional Indebtedness (excluding Permitted Indebtedness) pursuant to
the first paragraph of the "We Are Limited In How We Incur Additional
Indebtedness" covenant on a pro forma basis taking into account such
designation.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
board of directors or other governing body of such Person.
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"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock (other
than directors' qualifying shares, if applicable) of which we own or another
Wholly Owned Subsidiary owns.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. A broker-dealer
may use this prospectus, as it may be amended or supplemented from time to time,
to resell Exchange Notes that it received in exchange for Outstanding Notes if
it acquired those Outstanding Notes as a result of market-making activities or
other trading activities. We have agreed that for 90 days after the Expiration
Date, we will make this prospectus, as amended or supplemented, available to any
broker-dealer to use in connection with any such resale. In addition, until
_______________, all dealers effecting transactions in the Exchange Notes may be
required to deliver a prospectus.
We will not receive any proceeds from any sales of the Exchange Notes by
broker-dealers. Broker-dealers may sell Exchange Notes that they receive for
their own account pursuant to the exchange offer from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to or through brokers or dealers who may receive
commissions or concessions from any such broker-dealer and/or the purchasers of
any such Exchange Notes. Any broker-dealer that resells the Exchange Notes that
it received for its own account pursuant to the exchange offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any of these persons may be deemed to be underwriting compensation under the
Securities Act. A broker-dealer that delivers such a prospectus to purchasers in
connection with such resales will be subject to certain of the civil liability
provisions under the Securities Act and will be bound by the provisions of the
Registration Rights Agreement (including certain indemnification rights and
obligations).
For 90 days after the Expiration Date, we will promptly send additional
copies of this prospectus and any amendment or supplement to this prospectus to
any broker-dealer that requests such documents in the letter of transmittal. We
have agreed to pay certain expenses incident to the exchange offer, other than
commissions or concession of any brokers or dealers, and will indemnify the
holders of the Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
By accepting this exchange offer, each broker-dealer that receives Exchange
Notes for its own account pursuant to the exchange offer agrees that, when it
receives notice from us in which (1) we state that an event has happened that
makes any statement in this prospectus untrue in any material respect or (2) we
propose changes to the prospectus to make the statements we make in this
prospectus not misleading (and we agree to deliver this notice promptly to such
broker-dealer), such broker-dealer will not use the prospectus until we have
amended or supplemented this prospectus to correct such misstatement or omission
and we have furnished copies of the amended or supplemental prospectus to such
broker-dealer. If we do notify such broker-dealers to suspend their use of the
prospectus, it shall extend the 90-day period referred to above by the number of
days equal to the time from when broker-dealers receive this notice and when
they receive an amended prospectus.
66
<PAGE>
LEGAL MATTERS
Michael R. Patterson, Esq., our general counsel, and Fulbright & Jaworski
L.L.P., Houston, Texas will pass on the validity of the Exchange Notes for us.
Mr. Patterson beneficially owns 134,316 shares of our Common Stock.
EXPERTS
The financial statements incorporated in this Registration Statement by
reference to the Annual Report on Form 10-K/A of Plains Resources Inc. for the
year ended December 31, 1998 and the historical financial statements of Scurlock
Permian Businesses (a division of Marathon Ashland Petroleum LLC) and of
Scurlock Permian Corporation (the predecessor entity to the Scurlock Permian
Businesses) included on pages F-6 to F-19 of Plains Resources Inc.'s current
report on Form 8-K dated June 28, 1999, have been so incorporated in reliance on
the reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
Information relating to the estimated proved reserves of oil and natural
gas and the related estimates of future net revenues and present values thereof
for certain periods has been prepared by H. J. Gruy and Associates, Inc.,
Netherland, Sewell & Associates, Inc. and Ryder Scott Company independent
petroleum engineers, and we have incorporated it by reference into this
prospectus in reliance on the authority of those firms as experts in petroleum
engineering.
67
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification Of Directors And Officers
Article Tenth of our Second Restated Certificate of Incorporation provides that
we must indemnify to the full extent authorized or permitted by law any person
made, or threatened to be made, a party to any action, suit or proceeding
(whether civil, criminal or otherwise) by reason of fact that he, his testator
or intestate, is or was one of our directors or officers or by reason of the
fact that such director or officer, at our request, is or was serving any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, in any capacity. The rights to indemnification set forth above are
not exclusive of any other rights to which such person may be entitled under any
statute, provision of our Second Restated Certificate of Incorporation or
bylaws, agreements, vote of stockholders or disinterested directors or
otherwise.
Additionally, Article VIII of our Bylaws provides for mandatory indemnification
to at least the extent specifically allowed by Section 145 of the General
Corporation Law of the State of Delaware (the "GCL"). Our Bylaws generally
follow the language of Section 145 of the GCL, but in addition specify that any
director, officer, employee or agent may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under the Bylaws, notwithstanding any contrary
determination denying indemnification made by the Board, by independent legal
counsel, or by the stockholders, and notwithstanding the absence of any
determination with respect to indemnification. The Bylaws also specify certain
circumstances in which a finding is required that the person seeking
indemnification acted in good faith, for purposes of determining whether
indemnification is available. Under the Bylaws, a person shall be deemed to have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to our best interests, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on our records or books of account or those of another
enterprise, or on information supplied to him by our officers or the officers of
another enterprise in the course of their duties, or on the advice of our legal
counsel or the legal counsel of another enterprise or on information or records
given or reports made to us or to another enterprise by an independent certified
public accountant or by an appraiser or other expert selected with reasonable
care by us or another enterprise.
Pursuant to Section 145 of the GCL, we generally have the power to indemnify our
current and former directors, officers, employees and agents against expenses
and liabilities that they incur in connection with any suit to which they are,
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, our best interests, and with respect to
any criminal action, they had no reasonable cause to believe their conduct was
unlawful. With respect to suits by or in our right, however, indemnification is
generally limited to attorneys' fees and other expenses and is not available if
such person is adjudged to be liable to us unless the court determines that
indemnification is appropriate. The statute expressly provides that the power to
indemnify authorized thereby is not exclusive of any rights granted under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
We also have the power to purchase and maintain insurance for such persons.
The above discussion of our Second Restated Certificate of Incorporation and
Bylaws and Section 145 of the GCL is not intended to be exhaustive and is
qualified in its entirety by each of those documents and that statute.
We have entered into an employment agreement containing indemnification
provisions with Mr. Greg L. Armstrong, our President and Chief Executive
Officer. Pursuant to that agreement, we have agreed to indemnify and hold him
harmless to the fullest extent permitted by law, from any loss, damage or
liability incurred in the course of his employment. The amount that we pay is
reducible by the amount of insurance paid to or on behalf of such officer with
respect to any event giving rise to indemnification. Such officer's right to
indemnification is to survive his death or termination of employment and the
termination of his employment agreement. Our Board of Directors have also
authorized employment agreements with Messrs. William C. Egg, Jr. and Harry N.
Pefanis, who are two of our Executive Vice Presidents, which will have
indemnification provisions substantially the same as those of Mr. Armstrong's
agreement described above.
II-1
<PAGE>
Item 21. Exhibits And Financial Statement Schedules
<TABLE>
<CAPTION>
SEQUENTIAL NUMBERED
EXHIBIT PAGE
NUMBER
<S> <C> <C>
4(a) - Indenture dated as of September 15, 1999, among Plains
Resources Inc., the Subsidiary Guarantors named therein and
Chase Bank of Texas, National Association, as Trustee
(incorporated by reference to Exhibit 4(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1999).
4(b) - Registration Rights Agreement dated as of September 22, 1999,
among Plains Resources, Inc., the Subsidiary Guarantors named
therein, J.P. Morgan Securities Inc. and First Union Capital
Markets Corp. (incorporated by reference to Exhibit 4(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999).
5* - Opinion of Michael R. Patterson, Esq.
12* - Computation of Ratio of Earnings to Fixed Charges.
23(a)* - Consent of Michael R. Patterson, Esq. (contained in Exhibit 5).
23(b)* - Consents of PricewaterhouseCoopers LLP
23(c)* - Consent of Netherland, Sewell & Associates, Inc.
23(d)* - Consent of H. J. Gruy and Associates, Inc.
23(e)* - Consent of Ryder Scott Company
24* - Powers of Attorney (contained on pages II-4 through II-15 of
this Registration Statement).
25* - Statement of Eligibility of Trustee.
99* - Form of Letter of Transmittal.
</TABLE>
*Filed herewith.
II-2
<PAGE>
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of Form S-4 within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the 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 policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phillip D. Kramer and Michael R. Patterson, and
each of them, either one of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post- effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of any or all of them, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 17th day of November, 1999.
PLAINS RESOURCES INC.
By: GREG L. ARMSTRONG
Name: Greg L. Armstrong
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 17th day of November, 1999.
Signature Title
--------- -----
GREG L. ARMSTRONG President, Chief Executive Officer and
Director
Greg L. Armstrong (Principal Executive Officer)
CYNTHIA A. FEEBACK Vice President-Accounting and Assistant
Treasurer
Cynthia A. Feeback (Principal Accounting Officer)
PHILLIP D. KRAMER Executive Vice President, Chief Financial
Officer and Treasurer (Principal Financial
Phillip D. Kramer Officer)
JERRY L. DEES Director
Jerry L. Dees
TOM H. DELIMITROS Director
Tom H. Delimitros
WILLIAM M. HITCHCOCK Director
William M. Hitchcock
DAN M. KRAUSSE
Dan M. Krausse Chairman of the Board and Director
JOHN H. LOLLAR Director
John H. Lollar
II-4
<PAGE>
ROBERT V. SINNOTT Director
Robert V. Sinnott
J. TAFT SYMONDS Director
J. Taft Symonds
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phillip D. Kramer and Michael R. Patterson, and
each of them, either one of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post- effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of any or all of them, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 17th day of November, 1999.
ARGUELLO INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 17th day of November, 1999.
Signature Title
--------- -----
GREG L. ARMSTRONG President and Director (Principal
Greg L. Armstrong Executive Officer)
WILLIAM C. EGG, JR. Vice President and Director
William C. Egg, Jr.
PHILLIP D. KRAMER Vice President and Treasurer
Phillip D. Kramer (Principal Financial Officer and
Principal Accounting Officer)
MICHAEL R. PATTERSON Vice President, Secretary and Director
Michael R. Patterson
II-6
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phillip D. Kramer and Michael R. Patterson, and
each of them, either one of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post- effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of any or all of them, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 17th day November, 1999.
CALUMET FLORIDA, INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 17th day of November, 1999.
Signature Title
--------- -----
GREG L. ARMSTRONG Director
Greg L. Armstrong
PHILIP E. HART President (Principal Executive Officer)
Philip E. Hart
PHILLIP D. KRAMER Vice President and Director
Phillip D. Kramer (Principal Financial Officer)
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
HARRY N. PEFANIS Director
Harry N. Pefanis
II-7
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phillip D. Kramer and Michael R. Patterson, and
each of them, either one of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post- effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of any or all of them, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 17th day of November, 1999.
PLAINS ILLINOIS INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President (Principal Financial
Officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 17th day of November, 1999.
Signature Title
--------- -----
GREG L. ARMSTRONG Director
Greg L. Armstrong
PHILIP E. HART President (Principal Executive Officer)
Philip E. Hart
PHILLIP D. KRAMER Vice President (Principal Financial Officer)
Phillip D. Kramer
WILLIAM C. EGG, JR. Director
William C. Egg, Jr.
MICHAEL R. PATTERSON Vice President, Secretary and Director
Michael R. Patterson
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
II-8
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phillip D. Kramer and Michael R. Patterson, and
each of them, either one of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post- effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of any or all of them, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 17th day of November, 1999.
PLAINS RESOURCES INTERNATIONAL INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President (Principal
Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 17th day of November, 1999.
Signature Title
--------- -----
GREG L. ARMSTRONG President and Chief Executive Officer and
Greg L. Armstrong Director
PHILLIP D. KRAMER Vice President and Director
Phillip D. Kramer
MICHAEL R. PATTERSON Vice President, Secretary and Director
Michael R. Patterson
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
II-9
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phillip D. Kramer and Michael R. Patterson, and
each of them, either one of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post- effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of any or all of them, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 17th day of November, 1999.
PMCT INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 17th day of November, 1999.
Signature Title
--------- -----
HARRY N. PEFANIS President (Principal Executive Officer)
Harry N. Pefanis and Director
PHILLIP D. KRAMER Vice President and Director
Phillip D. Kramer (Chief Financial Officer)
GREG L. ARMSTRONG Director
Greg L. Armstrong
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
II-10
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phillip D. Kramer and Michael R. Patterson, and
each of them, either one of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post- effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of any or all of them, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on the 17th day of November, 1999.
STOCKER RESOURCES, INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 17th day of November, 1999.
Signature Title
--------- -----
/s/ LARRY T. MORTON
Larry T. Morton President and Chief Executive Officer
/s/ PHILLIP D. KRAMER
Phillip D. Kramer Vice President and Chief Financial Officer
/s/ GREG L. ARMSTRONG
Greg L. Armstrong Director
/s/ WILLIAM C. EGG, JR.
William C. Egg, Jr. Director
/s/ MICHAEL R. PATTERSON
Michael R. Patterson Vice President, Secretary and Director
/s/ CYNTHIA A. FEEBACK
Cynthia A. Feeback Treasurer (Principal Accounting Officer)
II-11
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phillip D. Kramer and Michael R. Patterson, and
each of them, either one of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post- effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of any or all of them, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 17th day of November, 1999.
STOCKER RESOURCES, L.P., BY STOCKER
RESOURCES, INC., ITS GENERAL PARTNER
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 17th day of November, 1999.
Signature Title
--------- -----
LARRY T. MORTON President and Chief Executive Officer
Larry T. Morton
PHILLIP D. KRAMER Vice President and Chief Financial Officer
Phillip D. Kramer
GREG L. ARMSTRONG Director
Greg L. Armstrong
WILLIAM C. EGG, JR. Director
William C. Egg, Jr.
MICHAEL R. PATTERSON Vice President, Secretary and Director
Michael R. Patterson
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
II-12
<PAGE>
INDEX TO EXHIBITS
SEQUENTIAL NUMBERED
EXHIBIT PAGE
NUMBER
4(a) - Indenture dated as of September 15, 1999, among
Plains Resources Inc., the Subsidiary Guarantors
named therein and Chase Bank of Texas, National
Association, as Trustee (incorporated by
reference to Exhibit 4(a) to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999).
4(b) - Registration Rights Agreement dated as of
September 22, 1999, among Plains Resources,
Inc., the Subsidiary Guarantors named therein,
J.P. Morgan Securities Inc. and First Union
Capital Markets Corp. (incorporated by reference
to Exhibit 4(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1999).
5* - Opinion of Michael R. Patterson, Esq.
12* - Computation of Ratio of Earnings to Fixed
Charges.
23(a)* - Consent of Michael R. Patterson, Esq. (contained
in Exhibit 5).
23(b)* - Consents of PriceWaterhouseCoopers LLP
23(c)* - Consent of Netherland, Sewell & Associates, Inc.
23(d)* - Consent of H. J. Gruy and Associates, Inc.
23(e)* - Consent of Ryder Scott Company
24* - Powers of Attorney (contained on pages II-4
through II-15 of this Registration Statement).
25* - Statement of Eligibility of Trustee.
99* - Form of Letter of Transmittal.
*Filed herewith.
II-13
<PAGE>
EXHIBIT 5
___________________, 1999
Plains Resources Inc.
Arguello, Inc.
Calumet Florida, Inc.
Plains Illinois Inc.
Plains Resources International Inc.
PMCT INC.
Stocker Resources, Inc.
Stocker Resources L.P.
500 Dallas Street
Houston, Texas 77002
Dear Sirs:
I have acted as counsel for Plains Resources Inc., a Delaware
corporation (the "Company"), and the Subsidiary Guarantors (defined below) in
connection with the proposed offer by the Company to exchange (the "Exchange
Offer") for all outstanding 10 1/4% Senior Subordinated Notes Due 2006, Series E
($75 million principal amount outstanding) (the "Outstanding Notes") 10 1/4%
Senior Subordinated Notes Due 2006, Series F ($75 million principal amount) (the
"Exchange Notes"). The Outstanding Notes have been, and the Exchange Notes will
be, issued pursuant to an Indenture dated as of September 15, 1999, (the
"Indenture"), among the Company, the Subsidiary Guarantors and Chase Bank of
Texas, National Association, as trustee (the "Trustee"). Arguello, Inc., Calumet
Florida, Inc., Plains Illinois Inc., Plains Resources International Inc., PMCT
INC., Stocker Resources, Inc., and Stocker Resources L.P. are collectively
referred to as the "Subsidiary Guarantors", and the guarantees by the Subsidiary
Guarantors with respect to the Exchange Notes are collectively referred to as
the "Guarantees".
In connection with such matters I have examined the Indenture, the
Registration Statement on Form S-4, filed by the Company with the Securities and
Exchange Commission, for the registration of the Exchange Notes and the
Guarantees thereof (collectively referred to as the "Securities") under the
Securities Act of 1933 (the Registration Statement as amended at the time it
becomes effective being referred to as the "Registration Statement") and such
corporate records of the Company and the Subsidiary Guarantors, certificates of
public officials and such other documents as I have deemed necessary or
appropriate for the purpose of this opinion.
Based upon the foregoing, subject to the qualifications hereinafter set
forth, and having regard for such legal considerations as I deem relevant, I
am of the opinion that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware;
(ii) Each of the Subsidiary Guarantors has been duly incorporated or
organized and is validly existing as a corporation or
partnership in good standing under the laws of the jurisdiction
in which it is incorporated or organized; and
(iii) The Securities proposed to be issued pursuant to the Exchange
Offer have been duly authorized for issuance and, subject to the
Registration Statement becoming effective under
<PAGE>
_____________, 1999
Page 2
the Securities Act of 1933, and to compliance with any
applicable state securities laws, when issued, delivered and
sold in accordance with the Exchange Offer and the Indenture,
will be valid and legally binding obligations of the Company and
the Subsidiary Guarantors, enforceable against the Company and
the Subsidiary Guarantors in accordance with their respective
terms.
The opinions expressed herein are subject to the following:
-- The enforceability of the Securities may be limited or affected by
(i) bankruptcy, insolvency, reorganization, moratorium, liquidation,
rearrangement, fraudulent transfer, fraudulent conveyance and other
similar laws (including court decisions) now or hereafter in effect
and affecting the rights and remedies of creditors generally or
providing for the relief of debtors, (ii) the refusal of a
particular court to grant equitable remedies, including without
limitation, specific performance and injunctive relief, and (iii)
general principles of equity (regardless of whether such remedies
are sought in a proceeding in equity or at law).
-- I express no opinion as to the enforceability of any provisions of
the Securities that would require the performance thereof in the
presence of fraud or illegality on the part of the holders of the
Securities or the Trustee.
The opinions expressed herein are limited exclusively to the laws of the
State of Texas and the General Corporation Law of the State of Delaware.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to me under "Legal Matters" in the
Prospectus forming a part of the Registration Statement.
Sincerely,
/s/ Michael R. Patterson
Michael R. Patterson
Vice President & General Counsel
<PAGE>
EXHIBIT 12
PLAINS RESOURCES INC.
COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES
Earnings
Net income (loss) before taxes
and minority interest $ 571 $ 2,652 $17,754 $22,586 $ (99,465) $ 8,942 $38,024
Fixed charges 16,416 17,936 22,177 26,752 40,709 28,126 38,685
Less capitalized interest (2,728) (3,093) (3,613) (3,280) (3,683) (2,728) (3,203)
------- ------- ------- ------- --------- ------- -------
Total earnings available for
fixed charges $14,259 $17,495 $36,318 $46,058 $ (62,439) $34,340 $73,506
======= ======= ======= ======= ========= ======= =======
Fixed charges
Interest expense $12,585 $13,606 $17,286 $22,012 $ 35,730 $24,385 $32,668
Capitalized interest 2,728 3,093 3,613 3,280 3,683 2,728 3,203
Interest portion on rentals 110 109 102 110 133 93 462
Amortization of debt issue
costs 993 1,128 1,176 1,350 1,163 920 2,352
------- ------- ------- ------- --------- ------- -------
Total fixed charges $16,416 $17,936 $22,177 $26,752 $ 40,709 $28,126 $38,685
======= ======= ======= ======= ========= ======= =======
Earnings in excess of (required to
cover) fixed charges $(2,157) $ (441) $14,141 $19,306 $(103,148) $ 6,214 $34,821
Earnings to fixed charges 0.9 1.0 1.6 1.7 (1.5)(A) 1.2 1.9
</TABLE>
(A) Included in earnings for 1998 was a non-recurring gain of $60.8 million
before income taxes relating to the formation of the partnership and a
non-cash full cost ceiling writedown of $173.9 million before income taxes.
If such events had not occurred, the ratio of earnings to fixed charges
would have been 1.2.
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Plains Resources Inc. of our report dated March 29,
1999, except as to Note 22 which is as of September 20, 1999, relating to the
financial statements appearing in Plains Resources Inc.'s Annual Report on Form
10-K/A for the year ended December 31, 1998. We also consent to the reference
to us under the headings "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Houston, Texas
November 17, 1999
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Plains Resources Inc. of our report dated April 30,
1999 relating to the financial statements of the Scurlock Permian Businesses (a
division of Marathon Ashland Petroleum LLC) and our report dated April 30, 1999
relating to the financial statements of Scurlock Permian Corporation (the
predecessor entity to the Scurlock Permian Businesses), which appears in the
Current Report on Form 8-K of Plains Resources Inc. dated June 28, 1999. We
also consent to the reference to us under the headings "Experts" in such
Registration Statement.
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
November 17, 1999
<PAGE>
EXHIBIT 23(c)
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
---------------------------------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our reserve report to the interest of Plains Resources
Inc. and its subsidiary, Calumet Florida, Inc. (collectively, the "Company")
dated March 19, 1999, relating to the estimated quantities of certain of the
Company's proved reserves of oil and gas located in Florida and Louisiana and
the related estimates of future net revenue and present values thereof for
certain periods, included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, as well as in the Notes to the Consolidated
Financial Statements of the Company in such annual report. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
NETHERLAND, SEWELL & ASSOCIATES, INC.
Dallas, Texas
November 17, 1999
<PAGE>
EXHIBIT 23(d)
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
------------------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our reserve reports to the interest of Stocker
Resources Inc, a subsidiary of Plains Resources Inc. (the Company) dated March
3, 1999 and March 8, 1999, relating to the estimated quantities of certain of
the Company's proved reserves of oil and gas and the related estimates of future
net revenue and present values thereof for certain periods, included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, as
well as in the Notes to the Consolidated Financial Statements of the Company in
such annual report. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
H. J. GRUY AND ASSOCIATES, INC.
Houston, Texas
November 15, 1999
<PAGE>
EXHIBIT 23(e)
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
------------------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our reserve reports to the interest of Plains Resources
Inc. and its subsidiary Plains Illinois Inc. (collectively, the "Company") dated
February 8, 1999, March 1, 1999 and March 9, 1999, relating to the estimated
quantities of certain of the Company's proved reserves of oil and gas and the
related estimates of future net revenue and present values thereof for certain
periods, included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, as well as in the Notes to the Consolidated Financial
Statements of the Company in such annual report. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
RYDER SCOTT COMPANY PETROLEUM ENGINEERS
Houston, Texas
November 15, 1999
<PAGE>
EXHIBIT 25
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM T- 1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
_______________
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
74-0800980
(I.R.S. Employer
Identification No.)
712 Main Street
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
LEE BOOCKER, 712 MAIN STREET, 26TH FLOOR
HOUSTON, TEXAS 77002 (713) 216-2448
(Name, address and telephone number of agent for service)
___________________
PLAINS RESOURCES INC.
(Exact name of obligor as specified in its charter)
See Table of Additional Obligors Below
Delaware 13-2898764
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Dallas
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
10 1/4% Senior Subordinated Notes due 2006, Series F
(Title of the indenture securities)
================================================================================
<PAGE>
TABLE OF ADDITIONAL OBLIGORS
<TABLE>
<CAPTION>
==================================================================================================
ADDRESS, INCLUDING ZIP
CODE, AND TELEPHONE
NUMBER, INCLUDING AREA
STATE OR OTHER CODE, OF REGISTRANT'S
JURISDICTION OF PRINCIPAL EXECUTIVE
NAME INCORPORATION IRS EMPLOYER ID NO. OFFICES
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arguello Inc. Delaware 76-0608465 0
- ---------------------------------------------------------------------------------------------------
Calumet Florida, Inc. Delaware 35-1880416 *
- ---------------------------------------------------------------------------------------------------
Plains Illinois Inc. Delaware 76-0487569 *
- ---------------------------------------------------------------------------------------------------
Plains Resources International Inc. Delaware 76-0040974 *
- ---------------------------------------------------------------------------------------------------
PMCT Inc. Delaware 76-0410281 *
- ---------------------------------------------------------------------------------------------------
Stocker Resources, Inc. California 33-0421175 *
- ---------------------------------------------------------------------------------------------------
Stocker Resources, L.P. California 33-0430755 *
===================================================================================================
</TABLE>
* 500 Smith Street, Houston, Texas 77002, telephone (713) 654-1414.
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of The Federal Reserve System, Washington,
D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
(See Note on Page 5.)
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting
securities of the trustee:
Col. A Col. B
Title of Class Amount outstanding
-------------- ------------------
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other
indenture.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of Section 310(b)(1)
of the Act arises as a result of the trusteeship under any such other
indenture, including a statement as to how the indenture securities will
rank as compared with the securities issued under such other indenture.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
<PAGE>
Item 5. Interlocking directorates and similar relationships with the obligor
or underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee or representative
of the obligor or of any underwriter for the obligor, identify each such person
having any such connection and state the nature of each such connection.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
Item 6. Voting securities of the trustee owned by the obligor or its
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner and
executive officer of the obligor.
Col. A Col. B Col. C Col. D
Percentage of
voting securities
represented by
Amount owned amount given
Name of owner Title of class beneficially in Col. C
------------- -------------- ------------ -----------------
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
Item 7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner and executive officer of each such underwriter.
Col. A Col. B Col. C Col. D
Percentage of
voting securities
represented by
Amount owned amount given
Name of owner Title of class beneficially in Col. C
------------- -------------- ------------ -----------------
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
Item 8. Securities of the obligor owned or held by the trustee.
Furnish the following information as to securities of the obligor
owned beneficially or held as collateral security for obligations in default by
the trustee.
Col. A Col. B Col. C Col. D
Whether the Amount owned
securities beneficially or held Percent of class
are voting as collateral security represented by
or nonvoting for obligations amount given
Title of class securities in default in Col. C
-------------- ------------- -------------------- ----------------
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
<PAGE>
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor, furnish
the following information as to each class of securities of such underwriter any
of which are so owned or held by the trustee.
Col. A Col. B Col. C Col. D
Amount owned
beneficially or held Percent of class
as collateral security represented by
Name of issuer and Amount for obligations in amount given
title of class outstanding default by trustee in Col. C
------------------ ----------- ------------------ -------------
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
Item 10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the knowledge of
the trustee (1) owns 10 percent or more of the voting securities of the obligor
or (2) is an affiliate, other than a subsidiary, of the obligor, furnish the
following information as to the voting securities of such person:
Col. A Col. B Col. C Col. D
Amount owned
beneficially or held Percent of class
as collateral security represented by
Name of issuer and Amount for obligations in amount given
title of class outstanding default by trustee in Col. C
---------------- ----------- ------------------ ----------------
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
Item 11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of the
trustee, owns 50 percent or more of the voting securities of the obligor,
furnish the following information as to each class of securities of such person
any of which are so owned or held by the trustee.
Col. A Col. B Col. C Col. D
Amount owned
beneficially or held Percent of class
as collateral security represented by
Name of issuer and Amount for obligations in amount given
title of class outstanding default by trustee in Col. C
------------------ ----------- ---------------------- ----------------
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
<PAGE>
Item 12. Indebtedness of the obligor to the trustee.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
Col. A Col. B Col. C
Nature of Amount
Indebtedness Outstanding Date Due
------------ ----------- --------
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
Item 13. Defaults by the obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such default.
There is not, nor has there been, a default with respect to the
securities under this indenture. (See Note on Page 5.)
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
There has not been a default under any such indenture or series. (See
Note on Page 5.)
Item 14. Affiliations with the underwriters.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
Item 15. Foreign trustee.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be qualified
under the Act.
Not applicable.
<PAGE>
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility.
.1 -- A copy of the articles of association of the trustee as now in
effect.
#2 -- A copy of the certificate of authority of the
trustee to commence business.
*3 -- A copy of the authorization of the trustee to exercise
corporate trust powers.
.4 -- A copy of the existing by-laws of the trustee.
5 -- Not applicable.
*6 -- The consent of the trustee required by Section 321(b) of the
Act.
-7 -- A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
8 -- Not applicable.
9 -- Not applicable.
_____
. Incorporated by reference to exhibit bearing the same
designation and previously filed with the Securities and
Exchange Commission as an exhibit to the Form T-1 File No.
333-63643.
# Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission
as an exhibit to the Form S-3 File No. 33-42814.
* Incorporated by reference to exhibit bearing the same
designation and previously filed with the Securities and
Exchange Commission as exhibits to the Form S-11 File No. 33-
25132.
- Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission
as an exhibit to the Form T-1 File No. 333-90379.
_______________________________
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Items 2 and 13, the
answers to said Items are based on incomplete information. Such Items may,
however, be considered as correct unless amended by an amendment to this Form
T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, Chase Bank of Texas, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of Houston
and State of Texas, on the 12th day of November, 1999.
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By: /s/ Mauri J. Cowen
---------------------------
Mauri J. Cowen
Vice President
<PAGE>
Exhibit 99
FORM OF
LETTER OF TRANSMITTAL
PLAINS RESOURCES INC.
Offer to Exchange its 10 1/4% Senior Subordinated Notes due 2006, Series F
for any and all of its outstanding
10 1/4% Senior Subordinated Notes due 2006, Series E
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON ________________,
UNLESS THE OFFER IS EXTENDED
Deliver to Chase Bank of Texas, National Association
(the "Exchange Agent")
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT MAIL OR HAND:
<S> <C>
Chase Bank of Texas, National Association Chase Bank of Texas, National Association
Attention: ____________, Registered Bond Attention: _____________, Registered Bond
_______________________________ _______________________________
_______________________________ _______________________________
_______________________________ _______________________________
</TABLE>
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
Chase Bank of Texas, National Association
___________________
Confirm: __________________
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONES LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU SHOULD READ CAREFULLY THE
INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL BEFORE YOU COMPLETE THIS
LETTER OF TRANSMITTAL.
The undersigned hereby acknowledges receipt of the Prospectus dated
_______________ (the "Prospectus") of Plains Resources Inc. (the "Company") and
this Letter of Transmittal, which together constitute the Company's offer (the
"Exchange Offer") to exchange $1,000 principal amount of its 10 1/4% Senior
Subordinated Notes due 2006, Series F (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for each
$1,000 principal amount of its outstanding 10 1/4% Senior Subordinated Notes due
2006, Series E (the "Notes"). The term "Expiration Date" shall mean 5:00 p.m.,
New York City time, on _______________, unless the Company, in its sole
discretion, extends the Exchange Offer, in which case the term shall mean the
latest date and time to which the Exchange Offer is extended. Capitalized terms
used but not defined herein have the meaning given to them in the Prospectus.
<PAGE>
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS RELATING TO THE PROCEDURE FOR TENDERING AND REQUESTS FOR ADDITIONAL
COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE
EXCHANGE AGENT. QUESTIONS RELATING TO THE EXCHANGE OFFER AND REQUESTS FOR
ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF
TRANSMITTAL MAY BE DIRECTED TO THE COMPANY.
List below the Notes to which this Letter of Transmittal relates. If the
space indicated below is inadequate, the Certificate Numbers and Principal
amounts should be listed on a separately signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF NOTES TENDERED HEREBY
<S> <C> <C> <C>
==============================================================================================================
Aggregate Principal
Name(s) and Address(es) of Registered Holder(s) Exactly Amount Principal
as Name(s) Appear(s) on Notes Registration Represented by Amount
(Please fill in) Numbers* Notes Tendered**
- --------------------------------------------------------------------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
Total
==============================================================================================================
</TABLE>
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Notes. All tenders must
be in integral multiples of $1,000.
This Letter of Transmittal is to be used (i) if certificates of Notes are
to be forwarded herewith, (ii) if delivery of Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company ("DTC"), pursuant to the procedures set forth in "The Exchange Offer--
How Do I Tender My Outstanding Notes?" in the Prospectus or (iii) tender of the
Notes is to be made according to the guaranteed delivery procedures described in
the Prospectus under the caption "The Exchange Offer--How Do I Take Advantage Of
The Guaranteed Delivery Procedures?" See Instruction 2. Delivery of documents
to a book-entry transfer facility does not constitute delivery to the Exchange
Agent. It is understood that participants in DTC's book-entry system will, in
accordance with DTC's Automated Tender Offer Program procedures and in lieu of
physical delivery to the Exchange Agent of a Letter of Transmittal,
electronically acknowledge receipt of, and agreement to be bound by, the terms
of this Letter of Transmittal.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Notes are registered on the books of the Company or any other person
who has obtained a
2
<PAGE>
properly completed bond power from the registered holder. The undersigned has
completed, executed and delivered this Letter of Transmittal to indicate the
action the undersigned desires to take with respect to the Exchange Offer.
Holders who wish to tender their Notes must complete this letter in its
entirety.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _____________________________________________
[ ] The Depository Trust Company
Account Number ____________________________________________________________
Transaction Code Number ___________________________________________________
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date must tender their Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the caption "The Exchange
Offer--How Do I Take Advantage Of The Guaranteed Delivery Procedures?" See
Instruction 2.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery ___________________________
Name of Eligible Institution that Guaranteed Delivery ________________________
If delivered by book-entry transfer:
Account Number __________________________________________________________
Transaction Code Number _________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name _________________________________________________________________________
Address ______________________________________________________________________
3
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such Notes tendered hereby, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to such Notes as are being tendered hereby, including all rights to accrued
and unpaid interest thereon as of the Expiration Date. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company in connection with the Exchange
Offer) to cause the Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim.
The undersigned represents to the Company that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, and (ii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. If the undersigned or the person
receiving the Exchange Notes covered hereby is a broker-dealer that is receiving
the Exchange Notes for its own account in exchange for Notes that were acquired
as a result of market-making activities or other trading activities, the
undersigned acknowledges that it or such other person will deliver a prospectus
in connection with any resale of such Exchange Notes. The undersigned and any
such other person acknowledge that, if they are participating in the Exchange
Offer for the purpose of distributing the Exchange Notes, (i) they cannot rely
on the position of the staff of the Securities and Exchange Commission
enunciated in Exxon Capital Holdings Corporation (available April 13, 1989),
Morgan Stanley & Co., Inc. (available June 5, 1991) or similar no-action letters
and, in the absence of an exemption therefrom, must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
the resale transaction and (ii) failure to comply with such requirements in such
instance could result in the undersigned or any such other person incurring
liability under the Securities Act for which such persons are not indemnified by
the Company. If the undersigned or the person receiving the Exchange Notes
covered by this letter is an affiliate (as defined under Rule 405 of the
Securities Act) of the Company, the undersigned represents to the Company that
the undersigned understands and acknowledges that such Exchange Notes may not be
offered for resale, resold or otherwise transferred by the undersigned or such
other person without registration under the Securities Act or an exemption
therefrom.
4
<PAGE>
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a Book-Entry Transfer Facility. The undersigned further agrees
that acceptance of any tendered Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement and that the
Company shall have no further obligations or liabilities thereunder for the
registration of the Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The
undersigned recognizes that as a result of these conditions (which may be
waived, in whole or in part, by the Company), as more particularly set forth in
the Prospectus, the Company may not be required to exchange any of the Notes
tendered hereby and, in such event, the Notes not exchanged will be returned to
the undersigned at the address shown below the signature of the undersigned.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Notes may be withdrawn at any time
prior to the Expiration Date.
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Notes, and any Notes delivered herewith but not exchanged, will be
registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If an
Exchange Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the Exchange Note is to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address different than the address
shown on this Letter of Transmittal, the appropriate boxes of this Letter of
Transmittal should be completed. IF NOTES ARE SURRENDERED BY HOLDER(S) THAT
HAVE COMPLETED EITHER THE BOX ENTITLED "SPECIAL REGISTRATION INSTRUCTIONS" OR
THE BOX ENTITLED "SPECIAL DELIVERY INSTRUCTIONS" IN THIS LETTER OF TRANSMITTAL,
SIGNATURE(S) ON THIS LETTER OF TRANSMITTAL MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION (SEE INSTRUCTION 4).
5
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<TABLE>
<S> <C>
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 5) (See Instruction 5)
To be completed ONLY if the Exchange Notes are to be To be completed ONLY if the Exchange Notes are to be sent to someone
issued in the name of someone other than the undersigned. other than the undersigned, or to the undersigned at an address other
Issue Exchange Note to: than that shown under "Description of Notes Tendered Hereby."
Mail Exchange Note to:
Name: _____________________________________________ Name: ____________________________________________________
Address: __________________________________________ Address: _________________________________________________
(Please print or type) (Please print or type)
===================================================================================================================================
REGISTERED HOLDER(S) OF NOTES SIGN HERE
(In addition, complete Substitute Form W-9 Below)
X _________________________________________________________________________________________________________________________________
X _________________________________________________________________________________________________________________________________
(Signature(s) of Registered Holder(s))
Must be signed by registered holder(s) exactly as name(s) appear(s) on the Notes or on a security position listing as the
owner of the Notes or by person(s) authorized to become registered holder(s) by properly completed bond powers transmitted herewith.
If signature is by attorney-in-fact, trustee, executor, administrator, guardian, officer of a corporation or other person acting in
a fiduciary capacity, please provide the following information (Please print or type):
Name and Capacity (full title): ___________________________________________________________________________________________________
Address (including zip): __________________________________________________________________________________________________________
Area Code and Telephone Number: ___________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
Dated: ___________________________________
Signature Guarantee (If required -- See Instruction 4)
Authorized Signature: _____________________________________________________________________________________________________________
(Signature of Representative of Signature Guarantor)
Name and Title: ___________________________________________________________________________________________________________________
Name of Firm: _____________________________________________________________________________________________________________________
Area Code and Telephone Number: ___________________________________________________________________________________________________
(Please print or type)
Dated: ___________________________________
===================================================================================================================================
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Payor's Name: Chase Bank of Texas, National Association
THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
Please provide your social security number or other taxpayer identification number on the following Substitute Form W-9 and
certify therein that you are not subject to backup withholding.
SUBSTITUTE Part 1 -- Please provide your TIN in the box at right
FORM W-9 and certify by signing and dating below. ________________________
Department of the Treasury Social Security
Internal Revenue Service Number or
Part 2 -- Check the box if you are not subject to backup Employer
withholding under the provisions of Section 3406(a)(1)(C) Identification
of the Internal Revenue Code because (1) you have not been Number
notified that you are subject to backup withholding as a
result of failure to report all interest or dividends or
(2) the Internal Revenue Service has notified you that you
are no longer subject to backup withholding. [ ]
-------------------------------------------------------------------------------------------------
Certification: Under the penalties of perjury, I certify
that the information provided on this form is true, correct Part 3 --
and complete.
Payor's Request for Taxpayer
Identification Number ("TIN") Signature: ______________________ Dated: ______________ Awaiting TIN [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY CASH PAYMENTS IN EXCESS OF $10.00
MADE TO YOU.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
- -----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have
mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or
Social Security Administration Office, or (b) I intend to mail or deliver an application in the near future. I understand that if I
do not provide a taxpayer identification number within 60 days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
_______________________________________________________________ _________________________________________________________
Signature Date
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered Notes or any confirmation of a book-entry transfer
to the Exchange Agent's account at a Book-Entry Transfer Facility of Notes
tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date (as defined in the Prospectus). THE METHOD OF DELIVERY OF THIS
LETTER OF TRANSMITTAL, THE NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, BE USED.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH HEREIN, OR INSTRUCTIONS VIA A
FACSIMILE NUMBER OTHER THAN THE ONES SET FORTH HEREIN, WILL NOT CONSTITUTE A
VALID DELIVERY.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes,
but whose Notes are not immediately available and thus cannot deliver their
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent (or comply with the procedures for book-entry transfer) prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the registration
number(s) of such Notes and the principal amount of Notes tendered,
stating that the tender is being made thereby and guaranteeing that,
within five New York Stock Exchange trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof), together with
the Notes (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility) and
any other documents required by the Letter
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<PAGE>
of Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility) and
all other documents required by the Letter of Transmittal, are received
by the Exchange Agent within five New York Stock Exchange trading days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above. Any holder who wishes to tender Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery relating to such
Notes prior to the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the validity or effect a
revocation of any Letter of Transmittal form properly completed and executed by
a Holder who attempted to use the guaranteed delivery procedures.
3. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Notes evidenced by a submitted
certificate is tendered, the tendering holder should fill in the principal
amount tendered in the column entitled "Principal Amount Tendered" of the box
entitled "Description of Notes Tendered Hereby". A newly issued Note for the
principal amount of Notes submitted but not tendered will be sent to such holder
as soon as practicable after the Expiration Date. All Notes delivered to the
Exchange Agent will be deemed to have been tendered in full unless otherwise
indicated. Tenders of Notes will be accepted only in integral multiples of
$1,000.
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date, after which tenders of Notes are irrevocable. To
be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Notes to
be withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn
(including the registration number(s) and principal amount of such Notes, or, in
the case of Notes transferred by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited), (iii) be signed by
the Holder in the same manner as the original signature on this Letter of
Transmittal (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Notes
register the transfer of such Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Notes are to be registered,
if different from that of the Depositor. All questions as to the validity, form
and eligibility (including time of receipt) of such notices will be determined
by the Company, whose determination shall be final and binding on all parties.
Any Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with respect
thereto unless the Notes so withdrawn are validly retendered. Any Notes that
9
<PAGE>
have been tendered but not accepted for exchange, will be returned to the Holder
thereof without cost to such Holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder(s) of the Notes tendered hereby, the signature must correspond
with the name(s) as written on the face of the certificates without alteration
or enlargement or any change whatsoever. If this Letter of Transmittal is
signed by a participant in the Book-Entry Transfer Facility, the signature must
correspond with the name as it appears on the security position listing as the
holder of the Notes.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it will be
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are different registrations of Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Notes
tendered hereby are tendered (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or Holders
of Notes (which term, for the purposes described herein, shall include a
participant in the Book-Entry Transfer Facility whose name appears on a security
listing as the holder of the Notes) listed and tendered hereby, no endorsements
of the tendered Notes or separate written instruments of transfer or exchange
are required. In any other case, the registered Holder (or acting Holder) must
either properly endorse the Notes or transmit properly completed bond powers
with this Letter of Transmittal (in either case, executed exactly as the name(s)
of the registered Holder(s) appear(s) on the Notes, and, with respect to a
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Notes, exactly as the name of the participant
appears on such security position listing), with the signature on the Notes or
bond power guaranteed by an Eligible Institution (except where the Notes are
tendered for the account of an Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
10
<PAGE>
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at the Book-Entry Transfer Facility) in which the Exchange
Notes or substitute Notes for principal amounts not tendered or not accepted for
exchange are to be issued (or deposited), if different from the names and
addresses or accounts of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the employer identification number or
social security number of the person named must also be indicated and the
tendering Holder should complete the applicable box.
If no instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the Notes or deposited at such Holder's account at the Book-Entry
Transfer Facility.
6. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Notes to it or its order pursuant to the Exchange
Offer. If a transfer tax is imposed for any other reason other than the
transfer and exchange of Notes to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered Holder or any other person) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exception therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Notes listed in this Letter of Transmittal.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part, any
of the conditions to the Exchange Offer set forth in the Prospectus.
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any holder whose Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to the Company at 500 Dallas Street, Houston,
Texas 77002, Attention: Investor Relations Department (telephone: (713) 654-
1414).
11
<PAGE>
10. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify Holders of defects or irregularities with respect to tenders of Notes,
neither the Company, the Exchange Agent nor any other person shall incur any
liability for failure to give such notification. Tenders of Notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering Holders as soon as
practicable following the Expiration Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Notes is required to
provide the Exchange Agent with such holder's correct TIN on Substitute Form W-9
below. If such Holder is an individual, the TIN is the Holder's social security
number. The Certificate of Awaiting Taxpayer Identification Number should be
completed if the tendering Holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future. If the Exchange
Agent is not provided with the correct TIN, the Holder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Holder with respect to tendered Notes may be subject to backup
withholding.
Certain Holders (including, among others, all corporations and certain
foreign individuals and foreign entities) are not subject to these backup
withholding and reporting requirements. In order for such a Holder to qualify
as an exempt recipient, that holder must submit to the Exchange Agent a properly
completed Internal Revenue Service Form W-8, signed under penalties of perjury,
attesting to that Holder's exempt status. Such forms can be obtained from the
Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the Holder. Backup withholding is not
an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
12
<PAGE>
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a Holder with
respect to Notes tendered for exchange, the Holder is required to notify the
Exchange Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
Holder is awaiting a TIN) and that (i) such Holder has not been notified by the
Internal Revenue Service that he or she is subject to backup withholding as a
result of failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified such Holder that he or she is no longer subject to
backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the Notes.
If Notes are in more than one name or are not in the name of the actual Holder,
consult the instructions on Internal Revenue Service Form W-9, which may be
obtained from the Exchange Agent, for additional guidance on which number to
report.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
If the tendering holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
THEREOF (TOGETHER WITH NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
13
