<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-9808
PLAINS RESOURCES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-2898764
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
500 DALLAS STREET
HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(713) 654-1414
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- ------
17,917,036 shares of common stock $0.10 par value, issued and outstanding at
November 5, 1999.
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<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
PART I. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets:
September 30, 1999 and December 31,1998........................... 3
Consolidated Statements of Income:
For the three and nine months ended September 30, 1999 and 1998... 4
Consolidated Statements of Cash Flows:
For the nine months ended September 30, 1999 and 1998............. 5
Notes to Consolidated Financial Statements.......................... 6
MANAGEMENT'S DISCUSSION AND ANALYSIS................................ 19
PART II. OTHER INFORMATION.......................................... 34
Page 2
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---------------- ----------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,872 $ 6,544
Accounts receivable 432,547 128,875
Inventory 96,793 42,520
Prepaid expenses and other 5,986 1,527
----------- ----------
Total current assets 539,198 179,466
----------- ----------
PROPERTY AND EQUIPMENT
Oil and natural gas properties - full cost method
Subject to amortization 646,170 596,203
Not subject to amortization 61,152 54,545
Crude oil pipeline, gathering and terminal assets 555,332 378,254
Other property and equipment 10,585 8,606
----------- ----------
1,273,239 1,037,608
Less allowance for depreciation, depletion and amortization (399,205) (375,882)
----------- ----------
874,034 661,726
----------- ----------
OTHER ASSETS 143,502 133,075
----------- ----------
$ 1,556,734 $ 974,267
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 487,209 $ 170,985
Interest payable 5,047 7,950
Royalties payable 4,175 4,211
Notes payable and other current obligations 31,411 10,261
----------- ----------
Total current liabilities 527,842 193,407
BANK DEBT 50,100 52,000
BANK DEBT OF A SUBSIDIARY 323,200 175,000
SUBORDINATED DEBT 277,988 202,427
OTHER LONG-TERM DEBT 2,044 2,556
OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS 18,533 13,967
----------- ----------
1,199,707 639,357
----------- ----------
MINORITY INTEREST 179,659 173,461
----------- ----------
SERIES E CUMULATIVE CONVERTIBLE PREFERRED STOCK,
STATED AT LIQUIDATION PREFERENCE 88,813 88,487
----------- ----------
NON-REDEEMABLE PREFERRED STOCK, COMMON STOCK
AND OTHER STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred Stock, $1.00 par value, 46,600 shares
authorized, issued and outstanding, net of discount of $346,000 and
$1,354,000, respectively 22,954 21,946
Common Stock, $0.10 par value, 50,000,000 shares authorized;
issued and outstanding 17,900,891 and 16,881,938 shares, respectively 1,790 1,688
Additional paid-in capital 132,308 124,679
Accumulated deficit (68,497) (75,351)
----------- ----------
88,555 72,962
----------- ----------
$ 1,556,734 $ 974,267
=========== ==========
</TABLE>
See notes to consolidated financial statements
Page 3
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited) (in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ 34,654 $ 26,008 $ 80,985 $ 77,719
Marketing, transportation, storage and terminalling revenues 1,260,420 367,591 $2,578,030 698,274
Interest and other income 359 120 666 739
----------- --------- ----------- ---------
1,295,433 393,719 2,659,681 776,732
----------- --------- ----------- ---------
EXPENSES
Production expenses 16,326 12,931 39,989 38,604
Marketing, transportation, storage and terminalling expenses 1,228,505 353,677 2,500,885 675,160
General and administrative 8,898 2,883 20,615 7,696
Noncash compensation expense 1,947 - 1,947 -
Depreciation, depletion and amortization 10,108 8,352 25,553 21,945
Interest expense 13,151 11,519 32,668 24,385
----------- --------- ----------- ---------
1,278,935 389,362 2,621,657 767,790
----------- --------- ----------- ---------
Income before income taxes and minority interest 16,498 4,357 38,024 8,942
Minority interest 4,940 - 14,776 -
----------- --------- ----------- ---------
Income before income taxes 11,558 4,357 23,248 8,942
Income tax expense (benefit):
Current - (11) - 11
Deferred 4,508 743 9,067 2,457
----------- --------- ----------- ---------
NET INCOME 7,050 3,625 14,181 6,474
Less: cumulative preferred stock dividends 2,493 1,733 7,327 2,361
----------- --------- ----------- ---------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 4,557 $ 1,892 $ 6,854 $ 4,113
=========== ========= =========== =========
Earnings per common share:
Basic $ 0.26 $ 0.11 $ 0.40 $ 0.24
=========== ========= =========== =========
Diluted $ $ 0.24 $ 0.10 $ 0.37 $ 0.22
+========== ========= =========== =========
</TABLE>
See notes to consolidated financial statements
Page 4
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 14,181 $ 6,474
Items not affecting cash flows from operating activities:
Depreciation, depletion and amortization 25,553 21,945
Minority interest in income of a subsidiary 14,776 -
Deferred income taxes 9,067 2,457
Noncash compensation expense 1,947 -
Other non-cash items 1,221 72
Change in assets and liabilities from operating activities:
Accounts receivable (155,102) 38,271
Inventory (37,453) (3,685)
Prepaid expenses and other (4,459) (893)
Pipeline linefill (3) (1,872)
Accounts payable and other current liabilities 129,994 (26,753)
Interest payable (2,593) 174
Royalties payable (36) (677)
Deferred gain on termination of interest rate swap 10,873 -
------------ -----------
Net cash provided by operating activities 7,966 35,513
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for midstream acquisitions (see Note 3) (173,070) (393,891)
Payments for crude oil pipeline, gathering and terminal assets (7,785) (3,398)
Payments for acquisition, exploration and developments costs (57,692) (62,674)
Payments for additions to other property and other assets (469) (2,365)
------------ -----------
Net cash used in investing activities (239,016) (462,328)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 508,321 471,160
Proceeds from short-term debt 42,150 28,800
Proceeds from issuance of preferred stock - 85,000
Proceeds from warrant exercise 4,500 -
Principal payments of long-term debt (286,132) (111,660)
Principal payments of short-term debt (21,650) (35,300)
Debt issue costs (4,652) (6,138)
Distributions to unitholders (14,465) -
Other 306 (874)
------------ -----------
Net cash provided by financing activities 228,378 430,988
------------ -----------
Net (decrease) increase in cash and cash equivalents (2,672) 4,173
Cash and cash equivalents, beginning of period 6,544 3,714
------------ -----------
Cash and cash equivalents, end of period $ 3,872 $ 7,887
============ ===========
</TABLE>
See notes to consolidated financial statements
Page 5
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Plains Resources
Inc. (the "Company"), its wholly-owned subsidiaries and Plains All American
Pipeline, L.P. ("PAA") in which the Company has an approximate 54% ownership
interest. The operations of PAA are conducted through Plains Marketing, L.P.,
All American Pipeline, L.P. and Plains Scurlock Permian, L.P. ("Plains
Scurlock"). Plains All American Inc. ("PAAI"), a wholly owned subsidiary of the
Company, is the general partner ("General Partner") of PAA.
The accompanying consolidated financial statements at September 30, 1999 and
for three and nine months ended September 30, 1999 are unaudited and have been
prepared in accordance with the instructions to interim financial reporting as
prescribed by the Securities and Exchange Commission ("SEC"). For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K and Form 10-K/A for the
year ended December 31, 1998, filed with the SEC.
All material adjustments, consisting only of normal recurring adjustments,
which in the opinion of management were necessary for a fair statement of the
results for the interim periods have been reflected. The results for the three
and nine months ended September 30, 1999 are not necessarily indicative of the
final results to be expected for the full year. Certain reclassifications have
been made to the prior year to conform to the current year presentation. The
Company evaluates the capitalized costs of its oil and natural gas properties on
an ongoing basis and has utilized the most recently available information to
estimate its reserves at September 30, 1999, in order to determine the
realizability of such capitalized costs. Future events, including drilling
activities, product prices and operating costs, may affect future estimates of
such reserves.
Recent Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. For fair-value hedge transactions in which the Company is hedging
changes in an asset's, liability's, or firm commitment's fair value, changes in
the fair value of the derivative instrument will generally be offset in the
income statement by changes in the hedged item's fair value. For cash-flow hedge
transactions, in which the Company is hedging the variability of cash flows
related to a variable-rate asset, liability, or a forecasted transaction,
changes in the fair value of the derivative instrument will be reported in other
comprehensive income. The gains and losses on the derivative instrument that are
reported in other comprehensive income will be reclassified as earnings in the
periods in which earnings are affected by the variability of the cash flows of
the hedged item. This statement was amended by Statement of Financial Accounting
Standards No. 137, Accounting for Derivative Instruments and Hedging Activities
- - Deferral of the Effective Date of FASB Statement No. 133 ("SFAS 137") issued
in June 1999. SFAS 137 defers the effective date of SFAS 133 to fiscal years
beginning after June 15, 2000. The Company is required to adopt this statement
beginning in 2001. The Company has not yet determined the impact that the
adoption of SFAS 133 will have on its earnings or financial position.
NOTE 2 - INVENTORY AND OTHER ASSETS
Inventory consists of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(in thousands)
<S> <C> <C>
Crude oil $92,191 $37,702
Materials and supplies 4,602 4,818
------- -------
$96,793 $42,520
======= =======
</TABLE>
Page 6
<PAGE>
Other assets consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(in thousands)
<S> <C> <C>
Pipeline linefill $ 70,572 $ 54,511
Deferred tax asset 39,648 47,785
Land 8,853 8,853
Debt issue costs 22,149 18,668
Other 10,623 8,245
-------- --------
151,845 138,062
Accumulated amortization (8,343) (4,987)
-------- --------
$143,502 $133,075
======== ========
</TABLE>
NOTE 3 - ACQUISITIONS
Scurlock Acquisition
On May 12, 1999, Plains Scurlock, a limited partnership of which PAAI is the
general partner and Plains Marketing, L.P. is the limited partner, completed the
acquisition of Scurlock Permian LLC ("Scurlock") and certain other pipeline
assets (the "Scurlock Acquisition") from Marathon Ashland Petroleum LLC ("MAP").
Including working capital adjustments and associated closing and financing
costs, the cash purchase price was approximately $142 million.
Scurlock, previously a wholly owned subsidiary of MAP, is engaged in crude oil
transportation, gathering and marketing, operating in 14 states with
approximately 2,300 miles of active pipelines, numerous storage terminals and a
fleet of more than 250 trucks. Its largest asset is an 800-mile pipeline and
gathering system located in the Spraberry Trend in West Texas that extends into
Andrews, Glasscock, Martin, Midland, Regan and Upton Counties, Texas. The assets
acquired also included approximately one million barrels of crude oil linefill.
Financing for the Scurlock Acquisition was provided through (i) borrowings of
approximately $92 million under Plains Scurlock's limited recourse bank facility
with BankBoston, N.A. (the "Plains Scurlock Credit Facility"), (ii) the sale to
the General Partner of 1.3 million Class B Common Units ("Class B Units") of PAA
at $19.125 per unit, the price equal to the market value of PAA's common units
("Common Units") on May 12, 1999, for a total cash consideration of $25 million
and (iii) a $25 million draw under PAA's existing revolving credit agreement.
The funds for the purchase of the Class B Units by the General Partner were
provided through a capital contribution by the Company, which was financed by
the Company's revolving credit facility (the "Revolving Credit Facility").
The Plains Scurlock Credit Facility consists of (i) a five-year $126.6 million
term loan and (ii) a three-year $35 million revolving credit facility. The
Plains Scurlock Credit Facility is nonrecourse to PAA, Plains Marketing, L.P.
and All American Pipeline, L.P. and is secured by the assets acquired.
Borrowings under the term loan bear interest at the London Interbank Offering
Rate ("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 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 of credit of approximately $14.0 million were
outstanding under the revolver and borrowings of $126.6 and $8.0 million were
outstanding under the term loan and revolver, respectively. The term loan was
reduced to $82.6 million in connection with PAA's October 1999 public unit
offering (See Note 8).
The Class B Units are initially pari passu with Common Units with respect to
distributions, and after November 12, 1999 are convertible into Common Units
upon approval of a majority of Common Unitholders. After November 12, 1999, the
Class B Unitholder may request that PAA call a meeting of Common Unitholders to
consider approval of the conversion of Class B Units into Common Units. If the
approval of such conversion by the Common Unitholders is not obtained within 120
days of such request (the "Initial Approval Period"), the Class B Unitholders
will be entitled to receive distributions, on a per Unit basis, equal to 110% of
the amount of distributions paid on a Common Unit, with such distribution right
increasing to 115% if such approval is not secured within 90 days after the end
of the Initial Approval Period. Except for the vote to approve the conversion,
Class B Units have the same voting rights as the Common Units.
Page 7
<PAGE>
The assets, liabilities and results of operations of Scurlock are included in
the Consolidated Financial Statements of the Company effective May 1, 1999. The
Scurlock Acquisition has been accounted for using the purchase method of
accounting and the purchase price was allocated in accordance with Accounting
Principles Board Opinion No. 16, Business Combinations ("APB 16") as follows:
<TABLE>
<S> <C>
(in thousands)
Crude oil pipeline, gathering and terminal assets $125,067
Other property and equipment 1,546
Pipeline linefill 16,057
Other assets (debt issue costs) 3,100
Environmental accrual (1,000)
Net working capital items (3,090)
--------
Cash paid $141,680
========
</TABLE>
The purchase price allocation was based on preliminary estimates of fair value
and is subject to adjustment as additional information becomes available and is
evaluated. The purchase accounting entries include a $1.0 million accrual for
estimated environmental remediation costs. Under the agreement for the sale of
Scurlock by MAP to Plains Scurlock, MAP has agreed to indemnify and hold
harmless Scurlock and Plains Scurlock for claims, liabilities and losses
(collectively "Losses") resulting from any act or omission attributable to
Scurlock's business or properties occurring prior to the date of the closing of
such sale to the extent the aggregate amount of such losses exceed $1.0 million;
provided however, that claims for such Losses must individually exceed $25,000
and must be asserted by Scurlock against MAP on or before May 15, 2003.
West Texas Gathering System Acquisition
On July 15, 1999, Plains Scurlock completed the acquisition of a West Texas
crude oil pipeline and gathering system from Chevron Pipe Line Company for
approximately $36 million including transaction costs. The total acquisition
cost was approximately $38.9 million including costs to address certain issues
identified in the due diligence process. The principal assets acquired include
approximately 450 miles of crude oil transmission mainlines, approximately 400
miles of associated gathering and lateral lines and approximately 2.9 million
barrels of crude oil storage and terminalling capacity in Crane, Ector, Midland,
Upton, Ward and Winkler Counties, Texas. Financing for the amounts paid at
closing was provided by a draw under the term loan portion of the Plains
Scurlock Credit Facility.
Pro Forma Results for the Scurlock Acquisition and All American Acquisition
The following unaudited pro forma data is presented to show pro forma
revenues, net income and basic and diluted net income per share as if the
Scurlock Acquisition, which was effective May 1, 1999, and the acquisition of
the All American Pipeline and Celeron Gathering System (the "All American
Acquisition"), which was effective July 30, 1998, had both occurred on January
1, 1998.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Revenues $3,042,556 $2,186,291
========== ==========
Net income $ 16,315 $ 7,662
========== ==========
Net income per share:
Basic $ 0.53 $ 0.04
========== ==========
Diluted $ 0.49 $ 0.04
========== ==========
</TABLE>
Page 8
<PAGE>
Point Arguello Acquisition
On July 1, 1999, Arguello Inc., a wholly owned subsidiary of the Company,
acquired Chevron's interests in Point Arguello. The interests acquired
include Chevron's 26% working interest in the Point Arguello Unit and associated
onshore processing facilities, Chevron's right to participate in surrounding
leases and certain fee acreage onshore. The acquisition, which was funded from
the Company's working capital, has an effective date of July 1, 1999. Chevron
retained the obligation of (i) removing, dismantling, and disposing of all
existing offshore platforms (ii) removing and disposing of all existing
pipelines and (iii) removing, dismantling, disposing and remediation of all
existing onshore facilities. The Company assumed its 26% share of (i) plugging
and abandoning all existing well bores, (ii) removing conductors, (iii) flushing
all lines and vessels, and (iv) removing/abandoning all structures, fixtures and
conditions created subsequent to closing.
Arguello Inc. is the operator of record for the Point Arguello Unit and has
entered into an outsourcing agreement with a unit of Torch Energy Advisors, Inc.
for the conduct of certain field operations and other professional services.
Venice Terminal Acquisition
On September 3, 1999, Plains Scurlock completed the acquisition of a Louisiana
crude oil terminal facility and associated pipeline system from MAP for
approximately $1.5 million. The principal assets acquired include approximately
300,000 barrels of crude oil storage and terminalling capacity and a six-mile
crude oil transmission system near Venice, Louisiana.
NOTE 4 - EARNINGS PER SHARE
The following is a reconciliation of the numerators and the denominators of
the basic and diluted earnings per share ("EPS") computations for income from
continuing operations for the three and nine months ended September 30, 1999 and
1998, as required by Statement of Financial Accounting Standards No. 128,
Earnings Per Share.
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
--------------------------------------------------------------------
1999 1998
--------------------------------- ----------------------------------
Income Shares Per Income Shares Per
(Numera- (Denomi- Share (Numera- (Denomi- Share
tor) nator) Amount tor) nator) Amount
----------- ---------- --------- ------------ ----------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 7,050 $ 3,625
Less: preferred stock dividends (2,493) (1,733)
-------- --------
Income available to common
stockholders 4,557 17,311 $ 0.26 1,892 16,850 $ 0.11
====== ======
Effect of dilutive securities:
Employee stock options - 1,186 - 1,116
Warrants - 378 - 549
------- ------ ------- -------
Income available to common
stockholders assuming dilution $ 4,557 18,875 $ 0.24 $ 1,892 18,515 $ 0.10
======= ====== ====== ======= ====== ======
For the Nine Months Ended September 30,
--------------------------------------------------------------------
1999 1998
--------------------------------- ----------------------------------
Income Shares Per Income Shares Per
(Numera- (Denomi- Share (Numera- (Denomi- Share
tor) nator) Amount tor) nator) Amount
----------- ---------- --------- ------------ ----------- ---------
(in thousands, except per share data)
Net income $ 14,181 $ 6,474
Less: preferred stock dividends (7,327) (2,361)
-------- -------
Income available to common
stockholders 6,854 17,040 $ 0.40 4,113 16,792 $ 0.24
====== ======
Effect of dilutive securities:
Employee stock options - 983 - 1,097
Warrants - 439 - 551
-------- ------ ------- ------
Income available to common
stockholders assuming dilution $ 6,854 18,462 $ 0.37 $ 4,113 18,440 $ 0.22
======= ====== ====== ======= ====== ======
</TABLE>
Page 9
<PAGE>
Certain options and warrants to purchase shares of the Company's common stock
("Common Stock") were not included in the computations of diluted EPS because
the exercise prices were greater than the average market price of the Common
Stock during the periods of the EPS calculations, resulting in antidilution. In
addition, the Company's preferred stock is convertible into Common Stock but was
not included in the computation of diluted EPS because the effect was
antidilutive.
NOTE 5 - OPERATING SEGMENTS
The Company's operations consist of three operating segments: (i) Upstream
Operations - engages in the acquisition, exploitation, development, exploration
and production of crude oil and natural gas, (ii) Midstream Operations - engages
in pipeline transportation, purchases and resales of crude oil at various points
along the distribution chain and the leasing of certain terminalling and storage
assets and (iii) Corporate - reflects certain amounts that are not directly
attributable to Upstream or Midstream Operations. The Company evaluates segment
performance based on gross margin, gross profit and income (loss) before income
taxes and minority interest.
<TABLE>
<CAPTION>
(in thousands) Upstream Midstream Corporate Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the Three Months Ended September 30, 1999
Revenues:
External Customers $34,654 $1,260,420 $ - $1,295,074
Intersegment (a) - 388 - 388
Other income 29 330 - 359
------- ---------- ------- ----------
Total revenues of reportable segments $34,683 $1,261,138 $ - $1,295,821
======= ========== ======= ==========
Segment gross margin (b) $18,328 $ 31,915 $ - $ 50,243
Segment gross profit (c) 16,777 24,568 - 41,345
Segment income (loss) before income taxes
and minority interest 5,270 11,597 (369) 16,498
- --------------------------------------------------------------------------------------------------------------
For the Three Months Ended September 30, 1998
Revenues:
External Customers $26,008 $ 367,591 $ - $ 393,599
Intersegment (a) - - - -
Other income 55 65 - 120
------- ---------- ------- ----------
Total revenues of reportable segments $26,063 $ 367,656 $ - $ 393,719
======= ========== ======= ==========
Segment gross margin (b) $13,077 $ 13,914 $ - $ 26,991
Segment gross profit (c) 11,714 12,394 - 24,108
Segment income (loss) before income taxes
and minority interest (745) 5,102 - 4,357
- --------------------------------------------------------------------------------------------------------------
For the Nine Months Ended September 30, 1999
Revenues:
External Customers $80,985 $2,578,030 $ - $2,659,015
Intersegment (a) - 1,062 - 1,062
Other income 48 618 - 666
------- ---------- ------- ----------
Total revenues of reportable segments $81,033 $2,579,710 $ - $2,660,743
======= ========== ======= ==========
Segment gross margin (b) $40,996 $ 77,145 $ - $ 118,141
Segment gross profit (c) 36,462 61,564 (500) 97,526
Segment income (loss) before income taxes
and minority interest 4,822 34,298 (1,096) 38,024
- --------------------------------------------------------------------------------------------------------------
For the Nine Months Ended September 30, 1998
Revenues:
External Customers $77,719 $ 698,274 $ - $ 775,993
Intersegment (a) - - - -
Other income 93 646 - 739
------- ---------- ------- ----------
Total revenues of reportable segments $77,812 $ 698,920 $ - $ 776,732
======= ========== ======= ==========
Segment gross margin (b) $39,115 $ 23,114 $ - $ 62,229
Segment gross profit (c) 34,980 19,553 - 54,533
Segment income (loss) before income taxes
and minority interest (1,451) 10,393 - 8,942
- -------------------------------------------------------------------------------------------------------------
</TABLE>
a) Intersegment sales were conducted on an arm's length basis.
b) Gross margin is calculated as revenues less cost of sales and operations
expenses.
c) Gross profit is calculated as revenues less costs of sales and operations
and general and administrative expenses.
Page 10
<PAGE>
NOTE 6 -- SERIES E PREFERRED STOCK
On September 9, 1999, 3,408 shares of Series E Preferred Stock, including
accrued dividends, were converted into 98,613 shares of Common Stock at a
conversion price of $18.00 per share. After such conversion, there were 177,625
shares of the Series E Preferred Stock outstanding with a liquidation value of
approximately $88.8 million.
On October 1, 1999, the Company paid a cash dividend of approximately $4.2
million on the Series E Preferred Stock for the period April 1, 1999 through
September 30, 1999.
NOTE 7 -- SUBORDINATED DEBT ISSUANCE AND CONSOLIDATING FINANCIAL STATEMENTS
On September 22, 1999, the Company sold $75 million principal amount of Senior
Subordinated Notes due 2006, Series E, bearing a coupon rate of 10.25% (the
"Series E Notes"). Such notes were issued pursuant to a Rule 144A private
placement at approximately 101% of par, for a yield-to-worst of 9.97%. The
stated coupon rate of interest and maturity date are the same as those of the
Company's existing $200 million principal amount of senior subordinated notes.
Net proceeds to the Company, after costs of the transaction, were approximately
$74.6 million, and were used to reduce the outstanding balance on the Revolving
Credit Facility.
The Series E Notes are redeemable, at the option of the Company, on or after
March 15, 2001 at 105.13% of the principal amount thereof, at decreasing prices
thereafter prior to March 15, 2004, and thereafter at 100% of the principal
amount thereof plus accrued interest to the date of redemption.
The Indenture contains covenants including, but not limited to the following:
(i) limitations on incurrence of additional indebtedness; (ii) limitations of
certain investments; (iii) limitations on restricted payments; (iv) limitations
on disposition of assets; (v) limitations on the payment of dividends and other
payment restrictions affecting subsidiaries; (vi) limitations on transactions
with affiliates; (vii) limitations on the creation of liens; and (viii)
restrictions on mergers, consolidations and transfers of assets.
The Series E Notes are unsecured senior subordinated obligations of the
Company and are subordinated in right of payment to all existing and future
senior indebtedness of the Company. All of the Company's subsidiaries engaged in
its upstream business segment will initially guarantee payment under the Series
E Notes on a full, unconditional, joint and several basis. The Series E Notes
are not guaranteed by PAA or any of the Company's other midstream subsidiaries.
The following financial information presents consolidating financial
statements which include:
. the parent company only ("Parent");
. the guarantor subsidiaries on a combined basis ("Guarantor Subsidiaries");
. the nonguarantor subsidiaries on a combined basis ("Nonguarantor
Subsidiaries");
. elimination entries necessary to consolidate the Parent, the Guarantor
Subsidiaries and the Nonguarantor Subsidiaries; and
. the Company on a consolidated basis.
Page 11
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET (unaudited) (in thousands)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4 $ 423 $ 3,445 $ - $ 3,872
Accounts receivable 257 10,585 423,800 (2,095) 432,547
Inventory - 4,593 92,200 - 96,793
Prepaid expenses and other 1,636 1,264 3,086 - 5,986
------------ ------------- -------------- -------------- ------------
Total current assets 1,897 16,865 522,531 (2,095) 539,198
------------ ------------- -------------- -------------- ------------
PROPERTY AND EQUIPMENT 238,221 477,457 557,561 - 1,273,239
Less allowance for depreciation,
depletion and amortization (219,944) (113,334) (10,541) (55,386) (399,205)
------------ ------------- -------------- -------------- ------------
18,277 364,123 547,020 (55,386) 874,034
------------ ------------- -------------- -------------- ------------
INVESTMENTS IN SUBSIDIARIES AND
INTERCOMPANY ADVANCES 325,084 (226,919) (31,867) (66,298) -
OTHER ASSETS 39,830 8,176 95,496 - 143,502
------------ ------------- -------------- -------------- ------------
$ 385,088 $ 162,245 $ 1,133,180 $ (123,779) $ 1,556,734
============ ============= ============== ============== ============
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C> <C> <C> <C>
Accounts payable and other current liabilities $ 24,015 $ 20,740 $ 449,550 $ 2,126 $ 496,431
Notes payable and other current obligations - 511 30,900 - 31,411
------------ ------------- -------------- -------------- ------------
Total current liabilities 24,015 21,251 480,450 2,126 527,842
BANK DEBT 50,100 - - - 50,100
BANK DEBT OF A SUBSIDIARY - - 323,200 - 323,200
SUBORDINATED DEBT 277,988 - - - 277,988
OTHER LONG-TERM DEBT - 2,044 - - 2,044
OTHER LONG-TERM LIABILITIES 5,956 618 11,959 - 18,533
------------ ------------- -------------- -------------- ------------
358,059 23,913 815,609 2,126 1,199,707
------------ ------------- -------------- -------------- ------------
MINORITY INTEREST (68,237) - 247,896 - 179,659
------------ ------------- -------------- -------------- ------------
SERIES E CUMULATIVE CONVERTIBLE
PREFERRED STOCK, STATED AT
LIQUIDATION PREFERENCE 88,813 - - - 88,813
------------ ------------- -------------- -------------- ------------
NON-REDEEMABLE PREFERRED STOCK,
COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred Stock 22,954 - - - 22,954
Common Stock 1,790 78 - (78) 1,790
Additional paid-in capital 132,308 3,952 65,537 (69,489) 132,308
Retained earnings (accumulated deficit) (150,599) 134,302 4,138 (56,338) (68,497)
------------ ------------- -------------- -------------- ------------
6,453 138,332 69,675 (125,905) 88,555
------------ ------------- -------------- -------------- ------------
$ 385,088 $ 162,245 $ 1,133,180 $ (123,779) $ 1,556,734
============ ============= ============== ============== ============
</TABLE>
Page 12
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET (in thousands)
DECEMBER 31,1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 142 $ 194 $ 6,408 $ (200) $ 6,544
Accounts receivable 276 8,549 120,050 - 128,875
Inventory - 4,809 37,711 - 42,520
Prepaid expenses and other 561 361 605 - 1,527
--------- -------- --------- --------- ---------
Total current assets 979 13,913 164,774 (200) 179,466
--------- -------- --------- --------- ---------
PROPERTY AND EQUIPMENT 234,127 424,646 378,835 - 1,037,608
Less allowance for depreciation,
depletion and amortization (228,579) (91,118) (799) (55,386) (375,882)
--------- -------- --------- --------- ---------
5,548 333,528 378,036 (55,386) (661,726)
--------- -------- --------- --------- ---------
INVESTMENTS IN SUBSIDIARIES AND
INTERCOMPANY ADVANCES 246,581 (179,716) (2,847) (64,018) -
OTHER ASSETS 47,391 8,177 77,507 - 133,075
--------- -------- --------- --------- ---------
$ 300,499 $175,902 $ 617,470 $(119,604) $ 974,267
========= ======== ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 18,425 $ 26,207 $138,714 $ (200) $ 183,146
Notes payable and other current obligations - 511 9,750 - 10,261
--------- -------- --------- --------- ---------
Total current liabilities 18,425 26,718 148,464 (200) 193,407
BANK DEBT 52,000 - - - 52,000
BANK DEBT OF A SUBSIDIARY - - 175,000 - 175,000
SUBORDINATED DEBT 202,427 - - - 202,427
OTHER LONG-TERM DEBT - 2,556 - - 2,556
OTHER LONG-TERM LIABILITIES 5,743 8,179 45 - 13,967
--------- -------- --------- --------- ---------
278,595 37,453 323,509 (200) 639,357
--------- -------- --------- --------- ---------
MINORITY INTEREST (70,037) - 243,498 - 173,461
--------- -------- --------- --------- ---------
SERIES E CUMULATIVE CONVERTIBLE
PREFERRED STOCK STATED AT
LIQUIDATION PREFERENCE 88,487 - - - 88,487
--------- -------- --------- --------- ---------
NON-REDEEMABLE PREFERRED STOCK,
COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred Stock 21,946 - - - 21,946
Common Stock 1,688 77 - (77) 1,688
Additional paid-in capital 124,679 3,954 38,727 (42,681) 124,679
Retained earnings (accumulated deficit) (144,859) 134,418 11,736 (76,646) (75,351)
--------- -------- --------- --------- ---------
3,454 138,449 50,463 (119,404) 72,962
--------- -------- --------- --------- ---------
$ 300,499 $ 175,902 $ 617,470 $(119,604) $ 974,267
========= ========= ========= ========= =========
</TABLE>
Page 13
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (unaudited) (in thousands)
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999
---------------------------------------------------------------------
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ -- $34,266 $ -- $ 388 $ 34,654
Marketing, transportation, storage and terminalling -- -- 1,260,808 (388) 1,260,420
Interest and other income 17 12 330 -- 359
------- ------- ---------- ----- ----------
17 34,278 1,261,138 -- 1,295,433
------- ------- ---------- ----- ----------
EXPENSES
Production expenses -- 16,326 -- -- 16,326
Marketing, transportation, storage and terminalling -- -- 1,228,505 -- 1,228,505
General and administrative 338 1,213 7,347 -- 8,898
Noncash compensation expense -- -- 1,947 -- 1,947
Depreciation, depletion and amortization 538 4,835 4,735 -- 10,108
Interest expense 2,194 4,338 6,619 -- 13,151
------- ------- ---------- ----- ----------
3,070 26,712 1,249,153 -- 1,278,935
------- ------- ---------- ----- ----------
Income (loss) before income taxes and minority interest (3,053) 7,566 11,985 -- 16,498
Minority interest -- -- 4,940 -- 4,940
------- ------- ---------- ----- ----------
Income (loss) before income taxes (3,053) 7,566 7,045 -- 11,558
Income tax expense (benefit)
Current (5,049) -- 5,049 -- --
Deferred 6,232 (50) (1,674) -- 4,508
------- ------- ---------- ----- ----------
NET INCOME (LOSS) (4,236) 7,616 3,670 -- 7,050
Less: cumulative preferred stock dividends 2,493 -- -- -- 2,493
------- ------- ---------- ----- ----------
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS $(6,729) $ 7,616 $ 3,670 $ -- $ 4,557
======= ======= ========== ===== ==========
1998
---------------------------------------------------------------------
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ -- $26,008 $ -- $ -- $ 26,008
Marketing, transportation, storage and terminalling -- -- 367,591 -- 367,591
Interest and other income 43 12 65 -- 120
------- ------- ---------- ----- ----------
43 26,020 367,656 -- 393,719
------- ------- ---------- ----- ----------
EXPENSES
Production expenses -- 12,931 -- -- 12,931
Marketing, transportation, storage and terminalling -- -- 353,677 -- 353,677
General and administrative 382 981 1,520 -- 2,883
Depreciation, depletion and amortization 1,360 5,008 1,984 -- 8,352
Interest expense 3,296 2,850 5,373 -- 11,519
------- ------- ---------- ----- ----------
5,038 21,770 362,554 -- 389,362
------- ------- ---------- ----- ----------
Income (loss) before income taxes (4,995) 4,250 5,102 -- 4,357
Income tax expense (benefit)
Current 343 3 (357) -- (11)
Deferred (523) (193) 1,459 -- 743
------- ------- ---------- ----- ----------
NET INCOME (LOSS) (4,815) 4,440 4,000 -- 3,625
Less: cumulative preferred stock dividends 1,733 -- -- -- 1,733
------- ------- ---------- ----- ----------
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS $(6,548) $ 4,440 $ 4,000 $ -- $ 1,892
======= ======= ========== ===== ==========
</TABLE>
Page 14
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (unaudited) (in thousands)
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999
---------------------------------------------------------------------
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ -- $79,923 $ -- $ 1,062 $ 80,985
Marketing, transportation, storage and terminalling -- -- 2,579,092 (1,062) 2,578,030
Interest and other income 14 34 618 -- 666
-------- ------- ---------- ------- ----------
14 79,957 2,579,710 -- 2,659,681
-------- ------- ---------- ------- ----------
EXPENSES
Production expenses -- 39,989 -- -- 39,989
Marketing, transportation, storage and terminalling -- -- 2,500,885 -- 2,500,885
General and administrative 1,226 3,809 15,580 -- 20,615
Noncash compensation expense -- -- 1,947 -- 1,947
Depreciation, depletion and amortization 1,798 12,349 11,406 -- 25,553
Interest expense 4,807 13,329 14,532 -- 32,668
-------- ------- ---------- ------- ----------
7,831 69,476 2,544,350 -- 2,621,657
-------- ------- ---------- ------- ----------
Income (loss) before income taxes and minority interest (7,817) 10,481 35,360 -- 38,024
Minority interest -- -- 14,776 -- 14,776
-------- ------- ---------- ------- ----------
Income (loss) before income taxes (7,817) 10,481 20,584 -- 23,248
Income tax expense (benefit)
Current (8,205) -- 8,205 -- --
Deferred 9,244 -- (177) -- 9,067
-------- ------- ---------- ------- ----------
NET INCOME (LOSS) (8,856) 10,481 12,556 -- 14,181
Less: cumulative preferred stock dividends 7,327 -- -- -- 7,327
-------- ------- ---------- ------- ----------
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS $(16,183) $10,481 $ 12,556 $ -- $ 6,854
======== ======= ========== ======= ==========
1998
---------------------------------------------------------------------
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ -- $77,719 $ -- $ -- $ 77,719
Marketing, transportation, storage and terminalling -- -- 698,274 -- 698,274
Interest and other income 45 48 646 -- 739
-------- ------- ---------- ------- ----------
45 77,767 698,920 -- 776,732
-------- ------- ---------- ------- ----------
EXPENSES
Production expenses -- 38,604 -- -- 38,604
Marketing, transportation, storage and terminalling -- -- 675,160 -- 675,160
General and administrative 1,155 2,980 3,561 -- 7,696
Depreciation, depletion and amortization 4,093 15,247 2,605 -- 21,945
Interest expense 8,990 8,194 7,201 -- 24,385
-------- ------- ---------- ------- ----------
14,238 65,025 688,527 -- 767,790
-------- ------- ---------- ------- ----------
Income (loss) before income taxes (14,193) 12,742 10,393 -- 8,942
Income tax expense (benefit):
Current (1,983) -- 1,994 -- 11
Deferred 10,312 (9,237) 1,382 -- 2,457
-------- ------- ---------- ------- ----------
NET INCOME (LOSS) (22,522) 21,979 7,017 -- 6,474
Less: cumulative preferred stock dividends 2,361 -- -- -- 2,361
-------- ------- ---------- ------- ----------
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS $(24,883) $21,979 $ 7,017 $ -- $ 4,113
======== ======= ========== ======= ==========
</TABLE>
Page 15
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (unaudited) (in thousands)
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (8,856) $ 10,481 $ 12,556 $ - $ 14,181
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 1,798 12,349 11,406 - 25,553
Minority interest in income - - 14,776 - 14,776
Deferred income tax 9,244 - (177) - 9,067
Noncash compensation expense - - 1,947 - 1,947
Other non-cash items 1,216 (211) 216 - 1,221
Change in assets and liabilities resulting from
operating activities:
Accounts receivable 19 60 (155,181) - (155,102)
Inventory - 216 (37,669) - (37,453)
Pipeline linefill - - (3) - (3)
Prepaids and other (1,075) (3,400) 16 - (4,459)
Accounts payable and other current liabilities 5,590 (12,852) 134,427 200 127,365
Deferred gain from termination
of interest rate swap - - 10,873 - 10,873
--------- -------- --------- ------ ---------
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING ACTIVITIES 7,936 6,643 (6,813) 200 7,966
--------- -------- --------- ------ ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Payments for midstream acquisitions (See Note 3) - - (173,070) - (173,070)
Payments for acquisition, exploration,
and development costs (4,223) (53,469) - - (57,692)
Payments for crude oil pipeline, gathering
and terminal assets - - (7,785) - (7,785)
Payments for additions to other property
and other assets 140 (340) (269) - (469)
--------- -------- --------- ------ ---------
NET CASH USED IN INVESTING ACTIVITIES (4,083) (53,809) (181,124) - (239,016)
--------- -------- --------- ------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances/investments with affiliates (76,165) 47,395 28,770 - -
(Payment) proceeds from issuance of
Class B Common Units (25,000) - 25,000 - -
Proceeds from long-term debt 226,350 - 281,971 - 508,321
Proceeds from short-term debt - - 42,150 - 42,150
Proceeds from warrant exercise 4,500 - - - 4,500
Principal payments of long-term debt (153,011) - (133,121) - (286,132)
Principal payments of short-term debt - - (21,650) - (21,650)
Debt issue costs (1,125) - (3,527) - (4,652)
Distribution to unitholders 20,154 - (34,619) - (14,465)
Other 306 - - - 306
--------- -------- --------- ------ ---------
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES (3,991) 47,395 184,974 - 228,378
--------- -------- --------- ------ ---------
Net increase (decrease) in cash and cash equivalents (138) 229 (2,963) 200 (2,672)
Cash and cash equivalents, beginning of period 142 194 6,408 (200) 6,544
--------- -------- --------- ------ ---------
Cash and cash equivalents, end of period $ 4 $ 423 $ 3,445 $ - $ 3,872
========= ======== ========= ====== =========
</TABLE>
Page 16
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (unaudited) (in thousands)
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (22,522) $ 21,979 $ 7,017 $ - $ 6,474
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 4,093 15,247 2,605 - 21,945
Deferred income tax 10,312 (9,237) 1,382 - 2,457
Other non-cash items 72 (124) 124 - 72
Change in assets and liabilities resulting from
operating activities:
Accounts receivable (390) 583 38,078 - 38,271
Inventory - 1,436 (5,121) - (3,685)
Pipeline linefill - - (1,872) - (1,872)
Prepaids and other 233 27 (1,153) - (893)
Accounts payable and other current liabilities (6,423) (3,867) (19,878) 2,912 (27,256)
--------- -------- --------- ------ ---------
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING ACTIVITIES (14,625) 26,044 21,182 2,912 35,513
--------- -------- --------- ------ ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Payments for midstream acquisitions (See Note 3) - - (393,891) - (393,891)
Payments for crude oil pipeline, gathering
and terminal assets - - (3,398) - (3,398)
Payments for acquisition, exploration,
and development costs (4,169) (58,505) - - (62,674)
Payments for additions to other property
and other assets (371) (1,260) (734) - (2,365)
--------- -------- --------- ------ ---------
NET CASH USED IN INVESTING ACTIVITIES (4,540) (59,765) (398,023) - (462,328)
--------- -------- --------- ------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances/investments with affiliates (34,158) 33,725 433 - -
Proceeds from long-term debt 153,860 - 317,300 - 471,160
Proceeds from short-term debt - - 28,800 - 28,800
Proceeds from issuance of preferred stock 85,000 - - - 85,000
Principal payments of long-term debt (79,360) - (32,300) - (111,660)
Principal payments of short-term debt - - (35,300) - (35,300)
Debt issue costs incurred in connection with acquisition - - (6,138) - (6,138)
Capital contribution from Parent (113,700) - 113,700 - -
Dividend to Parent 3,557 - (3,557) - -
Other (874) - - - (874)
--------- -------- --------- ------ ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,325 33,725 382,938 - 430,988
--------- -------- --------- ------ ---------
Net increase (decrease) in cash and cash equivalents (4,840) 4 6,097 2,912 4,173
Cash and cash equivalents, beginning of period 4,911 263 1,452 (2,912) 3,714
--------- -------- --------- ------ ---------
Cash and cash equivalents, end of period $ 71 $ 267 $ 7,549 $ - $ 7,887
========= ======== ========= ====== =========
</TABLE>
Page 17
<PAGE>
NOTE 8 -- SUBSEQUENT EVENTS
Plains All American Pipeline Public Offering
In October 1999, PAA completed a public offering of an additional 2,990,000
Common Units, representing limited partner interests in PAA, at $18.00 per unit.
Net proceeds to PAA were approximately $50.8 million after deducting
underwriters' discounts and commissions and offering expenses of approximately
$3.1 million. These proceeds, together with the Company's capital contribution
of approximately $0.5 million to maintain its 2% general partner interest, were
used to reduce outstanding debt. Approximately $44 million was used to reduce
the term loan portion of the Plains Scurlock Credit Facility and the remainder
was used to reduce the balance outstanding on PAA's other revolving credit
facility. The Company's ownership was reduced from 57% to 54% as a result of the
offering.
Sale of Crude Oil Linefill
PAA has begun implementing plans to sell approximately 5.2 million barrels of
crude oil linefill owned by PAA. The sale process will commence in December and
should be substantially completed by the end of the first quarter of 2000.
Proceeds from the sale of the linefill are expected to be approximately $100
million, net of associated costs, and will be used to reduce outstanding debt.
If the transaction had occurred on January 1, 1999, interest expense would have
decreased by approximately $6 million for the nine months ended September 30,
1999, based on a LIBOR rate of 6.5% plus an average interest rate margin of
1.5%. PAA estimates that it will recognize a gain of approximately $40 to 45
million in connection with the sale of the linefill.
At September 30, 1999, the Company's long-term debt was $653 million. Pro
forma for the linefill sale proceeds and PAA's October 1999 public unit
offering, the Company's total long-term debt at September 30, 1999 would have
been approximately $503 million, and the Company's pro forma debt-to-total
capitalization would approximate 55% as compared to 65% at September 30, 1999.
PAA owns 100% of the 5.2 million barrels of crude oil linefill located in the
segment of the All American Pipeline that extends from Emidio, California, to
McCamey, Texas. Except for minor third party volumes, a subsidiary of PAA has
been the sole shipper on this segment of the pipeline since its predecessor
acquired the line from the Goodyear Tire & Rubber Company in July 1998. This
section of the line is under FERC 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 throughput volumes that are necessary to operate the pipeline.
Pending receipt of third party nominations and the requisite crude oil linefill,
All American Pipeline will suspend shipments on this segment of the line. No
other segment of the All American Pipeline will be affected. For the twelve
months ended September 30, 1999, PAA reported gross margin of approximately $4
million from volumes transported on this segment of the line.
The line will initially be kept in a state of readiness to service any third
party shippers that elect to transport crude oil on this segment of the line,
subject to their providing the required 5.2 million barrels of crude oil
linefill. Depending on market conditions, PAA may replace the linefill at a
future date and recommence its own shipments. In the event this segment of the
line remains unused for a reasonable period of time, PAA intends to evaluate
alternative uses for this segment of the pipeline. PAA believes that no
impairment of the asset is necessary at this time.
Page 18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are an independent energy company engaged in the acquisition, exploitation,
development, exploration and production of crude oil and natural gas. Through
our majority ownership in Plains All American Pipeline, L.P., we are engaged in
the midstream activities of marketing, gathering, transportation, terminalling
and storage of crude oil.
On November 23, 1998, Plains All American Pipeline, L.P. completed its initial
public offering of 13.1 million common units representing limited partner
interests. Their results are consolidated into our results with the public's
ownership reflected as a minority interest deduction from income. Their
operations are conducted through Plains Marketing, L.P., All American Pipeline,
L.P. and Plains Scurlock Permian, L.P. Plains All American Inc., our wholly
owned subsidiary, is the general partner. Plains All American Pipeline, L.P was
formed to acquire our midstream crude oil business and assets, including the All
American Pipeline and the SJV Gathering System, which we purchased from Goodyear
in July 1998.
RECENT DEVELOPMENTS
On May 12, 1999, Plains All American Pipeline, L.P. completed the acquisition
of Scurlock Permian LLC and certain other pipeline assets from Marathon Ashland
Petroleum LLC. Including working capital adjustments and associated closing and
financing costs, the cash purchase price was approximately $142 million. The
assets, liabilities and results of operations of the Scurlock acquisition are
included in our Consolidated Financial Statements effective May 1, 1999.
Scurlock, previously a wholly owned subsidiary of Marathon Ashland Petroleum,
is engaged in crude oil transportation, gathering and marketing, and has
approximately 2,300 miles of active pipelines, numerous storage terminals and a
fleet of more than 250 trucks. Its largest asset is an 800-mile pipeline and
gathering system located in the Spraberry Trend in West Texas that extends into
Andrews, Glasscock, Martin, Midland, Regan and Upton Counties, Texas. The assets
acquired also included approximately one million barrels of crude oil linefill.
On July 1, 1999, Arguello Inc., our wholly owned subsidiary, acquired
Chevron's interests in Point Arguello. The interests acquired include Chevron's
26% working interest in the Point Arguello Unit and associated onshore
processing facilities, Chevron's right to participate in surrounding leases and
certain fee acreage onshore. The acquisition, which was funded from our working
capital, has an effective date of July 1, 1999. Chevron retained the obligation
of (i) removing, dismantling, and disposing of all existing offshore platforms
(ii) removing and disposing of all existing pipelines and (iii) removing,
dismantling, disposing and remediation of all existing onshore facilities. We
assumed its 26% share of (i) plugging and abandoning all existing well bores,
(ii) removing conductors, (iii) flushing all lines and vessels, and (iv)
removing/abandoning all structures, fixtures and conditions created subsequent
to closing.
Arguello Inc. is the operator of record for the Point Arguello Unit and has
entered into an outsourcing agreement with a unit of Torch Energy Advisors, Inc.
for the conduct of daily field operations and other professional services.
On July 15, 1999, Plains All American Pipeline, L.P. completed the acquisition
of the West Texas Gathering System from Chevron Pipe Line Company for
approximately $36 million, including transaction costs. The total acquisition
cost was approximately $38.9 million including costs to address certain issues
identified in the due diligence process. The assets acquired include
approximately 450 miles of crude oil transmission mainlines, approximately 400
miles of associated gathering and lateral lines, and approximately 2.9 million
barrels of tankage located along the system. The West Texas Gathering System
provides Plains All American Pipeline access to the Midland, Texas crude oil
interchange.
On September 3, 1999, Plains All American Pipeline, L.P. completed the
acquisition of a Louisiana crude oil terminal facility and associated pipeline
system from Marathon Ashland Petroleum LLC for approximately $1.5 million. The
principal assets acquired include approximately 300,000 barrels of crude oil
storage and terminalling capacity and a six-mile crude oil transmission system
near Venice, Louisiana.
Page 19
<PAGE>
RESULTS OF OPERATIONS
Three months ended September 30, 1999 and 1998
We reported net income for the third quarter of 1999 of $7.1 million, or $0.26
per common share ($0.24 assuming dilution) as compared with net income of $3.6
million, or $0.11 per common share ($0.10 assuming dilution) in the 1998 third
quarter. Cash flow from operations (net income after minority interest plus
noncash expenses) increased approximately 88% to $23.9 million in the 1999
period as compared to $12.7 million in the third quarter of 1998. Earnings
before interest, taxes, depreciation, amortization, minority interest and
noncash compensation expense increased 72% to $41.7 million versus $24.2 million
in the third quarter of 1998. The current period results were affected by a $1.0
million severance-related restructuring charge and a $1.9 million noncash
incentive compensation charge, both of which occurred at the Plains All American
level and affect our consolidated results. The primary drivers for the
improvement in our financial results were:
. an approximate 20% increase in oil and gas production;
. stronger oil prices, which resulted in higher unit margins;
. a lower upstream depreciation, depletion and amortization rate, and
. continued growth in profitability from our midstream subsidiary, Plains All
American Pipeline, L.P.
Upstream Results
The following table reflects certain of our upstream operating information for
the periods presented:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1999 1998
---------- -----------
(in thousands)
<S> <C> <C>
Average Daily Production Volumes
Barrels of oil equivalent ("BOE")
California (approximately 90% oil) 15.9 13.8
Offshore California (100% oil) 4.5 -
Gulf Coast (100% oil) 2.9 4.8
Illinois Basin (100% oil) 3.0 3.3
------- -------
Total (approximately 94% oil) 26.3 21.9
======= =======
Unit Economics
Average sales price per BOE $14.34 $12.92
Production expense per BOE 6.75 6.42
------- -------
Gross margin per BOE 7.59 6.50
Upstream G&A expense per BOE 0.64 0.68
------- -------
Gross profit per BOE $ 6.95 $ 5.82
======= =======
</TABLE>
Total oil equivalent production increased approximately 20% to an average of
26,300 BOE per day as compared to the third quarter 1998 average of 21,900 BOE
per day. The increase is attributable to our ongoing acquisition and
exploitation activities. The Point Arguello Unit, which we acquired from Chevron
in July, accounted for approximately 4,500 barrels per day of the increase.
Net daily production in California increased approximately 15% to 15,900 BOE
in the third quarter of 1999 compared to 13,800 BOE in the same quarter of 1998
due to the acquisition of the Mt. Poso Field in December 1998 and ongoing
exploitation activities. Excluding production from the Mt. Poso Field, total
California production increased approximately 9% from the comparative prior year
quarter. Net daily production for our Gulf Coast properties averaged
approximately 2,900 barrels per day during the third quarter of 1999, compared
to 4,800 barrels per day in the 1998 comparative period. The Gulf Coast
production decrease is due primarily to mechanical downtime. This is our most
volatile area in terms of maintaining production levels. In July, production
averaged approximately 3,400 barrels per day. In mid-August, we had mechanical
problems in the area's highest rate well and have just recently completed the
work to resume production from this well. Net daily production in the Illinois
Basin averaged approximately 3,000 barrels per day during the third quarter of
1999, a decrease of approximately 9% as compared to the 1998 third quarter
average of 3,300 barrels per day. The Illinois Basin production decrease is
primarily attributable to well shut-ins and natural decline.
Oil and natural gas revenues were $34.7 million for the third quarter of 1999,
an approximate 33% increase from the 1998 third quarter amount of $26.0 million
due to higher prices and increased production. Our average product price, which
Page 20
<PAGE>
represents a combination of fixed and floating price sales arrangements and
incorporates location and quality discounts from the benchmark NYMEX price was
$14.34 per BOE, up 11% as compared to the 1998 third quarter average wellhead
price of $12.92 per BOE. The NYMEX benchmark WTI crude oil price averaged $21.71
per barrel during the third quarter of 1999, approximately 53% above the $14.18
per barrel amount in the prior year period. The NYMEX price increase was offset
by a lower hedge price this year ($18.25 per barrel versus $19.80 per barrel
last year) as well as a higher quality and location differential. The
differential during last year's third quarter was approximately $4.30 per
barrel, compared to approximately $5.00 per barrel in the third quarter of 1999.
The higher differential reflects generally a weaker California market as well as
the impact of a higher differential from the Point Arguello property. During the
third quarter, the Point Arguello differential averaged approximately $8.15 per
barrel. Effective November 1, 1999, we have lowered the Point Arguello
differential to approximately $7.00 per barrel for a period of three years. We
maintained hedges on approximately 67% and 60% of our crude oil production in
the third quarter of 1999 and 1998, respectively. Hedging transactions had the
effect of decreasing our average price by $2.19 per BOE in the third quarter of
1999 and increasing our average price by $3.16 per BOE in the third quarter of
1998.
Unit gross margin in the upstream segment was $7.59 per BOE, a 17% increase as
compared to $6.50 per BOE reported for the third quarter of 1998. Upstream unit
gross profit, which deducts all pre-interest cash costs, was $6.95 per BOE, 19%
above the 1998 amount of $5.82 per BOE. The overall improvement in unit
economics was generally due to higher wellhead price realizations and slightly
lower general and administrative costs per barrel, offset somewhat by higher
unit production expenses, due principally to the acquisition of Point Arguello.
Unit production expenses averaged $6.75 per BOE for the third quarter of 1999,
an approximate 5% increase over the 1998 third quarter average of $6.42 per BOE.
Total production expenses were $16.3 million, as compared to $12.9 million for
the third quarter of 1998. Unit general and administrative expenses in the
upstream segment were $0.64 per BOE in the third quarter of 1999, compared to
$0.68 per BOE in the prior year comparative quarter.
Total upstream depreciation, depletion, and amortization expense was $5.4
million in the third quarter of 1999, compared to $6.4 million in the 1998
comparative quarter due to a lower per unit DD&A rate, offset somewhat by
increased production volumes. Depreciation, depletion and amortization was $2.10
per BOE for the third quarter of 1999 compared to $3.00 per BOE in the 1998
comparative quarter. This decrease is primarily due to a $174 million reduction
in the carrying cost of our proved oil and natural gas properties recorded in
the 1998 fourth quarter due to low crude oil prices, and the impact of
subsequent price recovery on proved reserve volumes. The NYMEX WTI price was
$12.05 per barrel at December 31, 1998, compared to $24.51 per barrel at
September 30, 1999.
Midstream Results
The following table reflects certain of our midstream operating information
for the periods presented:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1999 1998
------------ ------------
(in thousands)
<S> <C> <C>
Operating Results:
Gross margin
Pipeline $14,539 $ 8,110
Gathering and marketing and
terminalling and storage 17,376 5,804
------- -------
Total 31,915 13,914
General and administrative expense (7,347) (1,520)
------- -------
Gross profit $24,568 $12,394
======= =======
Net income $11,597 $ 5,102
======= =======
Average Daily Volumes (barrels):
Pipeline Activities:
All American
Tariff activities 93 117
Margin activities 52 42
Other 106 -
------- -------
Total 251 159
======= =======
Lease gathering 318 91
Bulk purchases 181 77
------- -------
Total 499 168
======= =======
Terminal throughput 68 88
======= =======
</TABLE>
Page 21
<PAGE>
Pipeline Operations. Gross margin from pipeline operations was $14.5 million
for the third quarter of 1999 compared to $8.1 million for the third quarter of
last year. The increase resulted primarily from increased margins from our
pipeline merchant activities, the benefits of the Scurlock and West Texas
Gathering System acquisitions, and a full quarter of results from the All
American Pipeline and SJV Gathering System, which were acquired effective July
30, 1998.
The margin between revenue and direct cost of crude purchased was $10.2
million for the third quarter of 1999, compared to $2.6 million for the 1998
comparative period. Pipeline tariff revenues were approximately $11.7 million in
the current year quarter compared to approximately $9.5 million for the third
quarter of 1998. The increase resulted primarily from an increase in tariff
transport volumes due to the two 1999 acquisitions, and a full quarter of
results from the All American Pipeline. Pipeline operations and maintenance
expenses were approximately $7.1 million for the third quarter of 1999 as
compared to $4.0 million for the third quarter of 1998.
Tariff transport volumes on the All American Pipeline decreased from an
average of 117,000 barrels per day in the third quarter of 1998 to 93,000
barrels per day in the current year quarter due primarily to a decrease in
shipments of offshore California production, which decreased from approximately
91,000 barrels per day in the 1998 third quarter to 75,000 barrels per day in
the 1999 comparative period. Barrels associated with our merchant activities on
the All American Pipeline increased from 42,000 barrels per day to 52,000
barrels per day in the third quarter of 1999. Tariff volumes shipped on the
Scurlock and West Texas Gathering Systems averaged approximately 106,000 barrels
per day during the third quarter of 1999.
The following reflects the All American Pipeline average deliveries per day
within and outside California for the three months ended September 30, 1999 and
1998:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Deliveries:
Average daily volumes (thousand barrels):
Within California 93 113
Outside California 52 46
--- ---
Total 145 159
=== ===
</TABLE>
Gathering and Marketing Activities and Terminalling and Storage Activities.
Gross margin from gathering, marketing, terminalling and storage activities was
approximately $17.4 million for the third quarter of 1999 compared to $5.8
million in the prior year comparative period. The Scurlock acquisition
contributed approximately $10.2 million to third quarter 1999 gross margin. The
increase in gross margin is due to an increase in lease gathering and bulk
purchase volumes, primarily as a result of the Scurlock acquisition, and an
increase in storage capacity leased at our Cushing Terminal. Lease gathering
volumes increased from an average of 91,000 barrels per day for the third
quarter of 1998 to approximately 318,000 barrels per day in the current year
quarter. Bulk purchase volumes increased from approximately 77,000 barrels per
day in last year's quarter to approximately 181,000 barrels per day in the third
quarter of 1999. Throughput volumes at our terminals were down approximately
20,000 barrels per day in the current year quarter. This decrease was offset by
increased leased terminal capacity which increased from approximately 1.4
million barrels per month in last year's quarter to 1.7 million barrels per
month during the current year quarter.
General
Total general and administrative expenses, including midstream activities,
were approximately $8.9 million for the three months ended September 30, 1999,
an increase of $6.0 million as compared to the 1998 comparative period.
Approximately $5.8 million of the increase is attributable to our midstream
activities, and substantially all of that is associated with the May 1999
Scurlock acquisition, the July 1998 All American Pipeline acquisition and the
expansion of our business activities. In the upstream segment, general and
administrative expense was up about $0.2 million, but on a per unit basis
decreased from $0.68 per BOE to approximately $0.64 per BOE.
Interest expense for the 1999 third quarter was $13.2 million, an increase of
$1.6 million over last year's third quarter, as the result of the interest
associated with the debt incurred for acquisitions that have been made during
1998 and 1999 by Plains All American Pipeline. Interest at the corporate level
was about $0.4 million below the prior year amount. In October of this year,
Plains All American Pipeline completed an equity offering for net proceeds of
approximately $50.8 million which were used to reduce debt. We should see the
benefit of the debt reduction on interest expense in the fourth quarter.
Page 22
<PAGE>
Capitalized interest was approximately $1.1 million and $0.9 million for the
three months ended September 30, 1999 and 1998, respectively.
Our total tax provision for the quarter ended September 30, 1999, was
approximately $4.5 million, as compared to the third quarter 1998 tax provision
of approximately $0.7 million. The increase is due to the increase in income
before taxes between the two periods and a lower effective tax rate in the 1998
period. As a result of the actual utilization of certain tax assets and the
reversal of an associated valuation allowance in 1998, our effective tax rate
for the 1998 third quarter was 17% as compared to a 39% effective tax rate in
the current year period. In both periods, substantially all of our income tax
provision was deferred.
During the third quarter of 1999, we incurred a charge of $1.9 million related
to noncash incentive compensation paid to certain officers and key employees of
Plains All American Inc., the general partner of Plains All American Pipeline.
In 1998, Plains All American Inc. granted the employees the right to earn
ownership in common units of Plains All American Pipeline owned by Plains All
American Inc. The units vest over a three-year period subject to Plains All
American Pipeline paying distributions on their common and subordinated units.
In addition, a $1.0 million restructuring charge was incurred during the third
quarter, primarily associated with severance-related expenses, was also incurred
by Plains All American Pipeline.
Nine months ended September 30, 1999 and 1998
We reported net income for the first nine months of 1999 of $14.2 million, or
$0.40 per common share ($0.37 assuming dilution), as compared with net income of
$6.5 million, or $0.24 per common share ($0.22 assuming dilution) in the first
nine months of 1998. Cash flow from operations (net income after minority
interest plus noncash expenses) increased approximately 68% to $52.0 million in
the 1999 period as compared to $30.9 million in the first nine months of 1998.
Earnings before interest, taxes, depreciation, amortization, minority interest
and noncash compensation expense increased 78% to $98.2 million versus $55.3
million in the first nine months of 1998. The current period results were
affected by a $1.4 million severance-related restructuring charge and a $1.9
million noncash incentive compensation charge, both of which occurred at the
Plains All American level and affect our consolidated results. Net cash provided
by operating activities, as reported in the Consolidated Statements of Cash
Flows was $8.0 million for the nine months ended September 30, 1999, as compared
to $35.5 million for the 1998 comparative period. The decrease in the current
year period is primarily due to increased inventory levels associated with
hedged inventory transactions.
The primary drivers for the improvement in our financial results were:
. stronger oil prices, which resulted in higher unit margins;
. a lower upstream depreciation, depletion and amortization rate; and
. continued growth in profitability from our midstream subsidiary, Plains All
American Pipeline, L.P.
Upstream Results
The following table reflects certain of our upstream operating information for
the periods presented:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Average Daily Production Volumes:
Barrels of oil equivalent
California (approximately 91% oil) 15.5 13.7
Offshore California (100% oil) 1.5 -
Gulf Coast (100% oil) 2.7 5.0
Illinois Basin (100% oil) 3.1 3.6
------ ------
Total (approximately 94% oil) 22.8 22.3
====== ======
Unit Economics:
Average sales price per BOE $12.99 $12.77
Production expense per BOE 6.41 6.35
------ ------
Gross margin per BOE 6.58 6.42
Upstream G&A expense per BOE 0.73 0.68
------ ------
Gross profit per BOE $ 5.85 $ 5.74
====== ======
</TABLE>
Page 23
<PAGE>
Total oil equivalent production increased approximately 2% to an average of
22,800 BOE per day as compared to the first nine months 1998 average of 22,300
BOE per day. The increase is attributable to our ongoing acquisition and
exploitation activities in California which were offset by production declines
in our other areas. The Point Arguello Unit, which was acquired from Chevron in
July, averaged approximately 1,500 barrels per day for the nine month period.
Net daily production in California increased approximately 13% to 15,500 BOE
in the first nine months of 1999 compared to 13,700 BOE in the same period of
1998 due to the acquisition of the Mt. Poso Field in December 1998 and ongoing
exploitation activities. Excluding production from the Mt. Poso Field, total
California production increased approximately 6% from the comparative prior year
period. Net daily production for our Gulf Coast properties averaged
approximately 2,700 barrels per day during the first nine months of 1999,
compared to 5,000 barrels per day in the 1998 comparative period. The Gulf Coast
production decrease is due to mechanical downtime, voluntary shut-ins, and the
effects of natural decline. This is our most volatile area in terms of
maintaining production levels. In July, production averaged approximately 3,400
barrels per day. In mid-August, we had mechanical problems in the area's highest
rate well and have just recently completed the work to resume production from
this well. Net daily production in the Illinois Basin averaged approximately
3,100 barrels per day during the first nine months of 1999, a decrease of
approximately 14% as compared to the 1998 first nine month average of 3,600
barrels per day. The Illinois Basin production decrease is primarily
attributable to well shut-ins and natural decline.
Oil and natural gas revenues were $81.0 million for the first nine months of
1999, an increase of approximately 4% from the comparable 1998 amount of $77.7
million due to higher prices and increased production. Our average product
price, which represents a combination of fixed and floating price sales
arrangements and incorporates location and quality discounts from the benchmark
NYMEX price was $12.99 per BOE, an increase of approximately 2% as compared to
the 1998 first nine month average wellhead price of $12.77 per BOE. The NYMEX
WTI crude oil price averaged $17.47 per barrel during the first nine months of
1999, compared to $14.95 per barrel in the prior year period. The NYMEX price
increase was offset by a lower hedge price this year ($17.97 per barrel versus
$19.80 per barrel last year). Our location and quality differential during the
first nine months of last year was approximately $4.75 per barrel, compared to
approximately $4.50 per barrel for the first nine months in 1999. We maintained
hedges on approximately 61% and 59% of our crude oil production in the first
nine months of 1999 and 1998, respectively. Hedging transactions had the effect
of decreasing our average price by $0.22 per BOE in the first nine months of
1999 and increasing our average price by $2.67 per BOE in the first nine months
of 1998.
Unit gross margin in the upstream segment was $6.58 per BOE, a 2% increase as
compared to $6.42 per BOE for the first nine months of 1998. Upstream unit gross
profit, which deducts all pre-interest cash costs, was $5.85 per BOE, also 2%
above the 1998 amount of $5.74 per BOE. Unit production expenses averaged $6.41
per BOE, a 1% increase as compared to the 1998 first nine months average of
$6.35 per BOE due primarily to the acquisition of Point Arguello. Total
production expenses were $40.0 million, as compared to $38.6 million for the
first nine months of 1998. Unit general and administrative expenses in the
upstream segment were $0.73 per BOE in the first nine months of 1999, compared
to $0.68 per BOE in the prior year comparative period.
Total upstream DD&A expense was $14.1 million in the first nine months of
1999, compared to $19.3 million in the 1998 comparative period due to a lower
per unit DD&A rate, offset somewhat by increased production volumes. DD&A per
BOE was $2.10 for the first nine months of 1999 compared to $3.00 per BOE in the
1998 comparative period. This decrease is primarily due to a $174 million
reduction in the carrying cost of our proved oil and natural gas properties
recorded in the 1998 fourth quarter due to low crude oil prices, and the impact
of subsequent price recovery on proved reserve volumes. The NYMEX WTI price was
$12.05 per barrel at December 31, 1998, compared to $24.51 per barrel at
September 30, 1999.
Page 24
<PAGE>
Midstream Results
The following table reflects certain of our midstream operating information
for the periods presented:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1999 1998
------------ ------------
(in thousands)
<S> <C> <C>
Operating Results:
Gross margin:
Pipeline $ 39,338 $ 8,110
Gathering and marketing and
terminalling and storage 37,807 15,004
-------- -------
Total 77,145 23,114
General and administrative expense (15,581) (3,561)
-------- -------
Gross profit $ 61,564 $19,553
======== =======
Net income $ 34,298 $10,393
======== =======
Average Daily Volumes (barrels):
Pipeline Activities:
All American
Tariff activities 106 117
Margin activities 54 42
Other 43 -
-------- -------
Total 203 159
======== =======
Lease gathering 216 85
Bulk purchases 138 94
-------- -------
Total 354 179
======== =======
Terminal throughput 75 79
======== =======
</TABLE>
Pipeline Operations. Gross margin from pipeline operations was $39.3 million
for the first nine months of 1999 compared to $8.1 million for the comparative
1998 period. The increase resulted primarily from increased margins from our
pipeline merchant activities, the benefits of the Scurlock and West Texas
Gathering System acquisitions and a full nine months of results from the All
American Pipeline and SJV Gathering System, which were acquired effective July
30, 1998.
The margin between revenue and direct cost of crude purchased was $24.1
million for the first nine months of 1999, compared to $2.6 million for the
comparative 1998 period. Pipeline tariff revenues were approximately $34.8
million in the first nine months of 1999 compared to approximately $9.5 million
for the same period of 1998. The increase in tariff revenues resulted primarily
from an increase in tariff transport volumes due to the two 1999 acquisitions
and a full nine months of results from the All American Pipeline. Pipeline
operations and maintenance expenses were approximately $20.1 million for the
first nine months of 1999 as compared to $4.0 million for the first nine months
of 1998.
Tariff transport volumes on the All American Pipeline decreased from an
average of 117,000 barrels per day in the first nine months of 1998 to 106,000
barrels per day in the comparable current year period due primarily to a
decrease in shipments of offshore California production, which decreased from
approximately 91,000 barrels per day in the first nine months of 1998 to 81,000
barrels per day in the 1999 comparative period. Barrels associated with our
merchant activities on the All American Pipeline increased from 42,000 barrels
per day to 54,000 barrels per day in the first nine months of 1999. Tariff
volumes shipped on the Scurlock and West Texas Gathering Systems averaged
approximately 43,000 barrels per day during the first nine months of 1999.
Page 25
<PAGE>
The following table sets forth the All American Pipeline average deliveries
per day within and outside California for the nine months ended September 30,
1999 and 1998:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Deliveries:
Average daily volumes (thousand barrels):
Within California 102 113
Outside California 58 46
--- ---
Total 160 159
=== ===
</TABLE>
Gathering and Marketing Activities and Terminalling and Storage Activities.
Gross margin from gathering, marketing, terminalling and storage activities was
approximately $37.8 million for the first nine months of 1999 compared to $15.0
million in the prior year comparative period. The Scurlock acquisition
contributed approximately $16.5 million to gross margin. The increase in gross
margin is due to an increase in lease gathering and bulk purchase volumes,
primarily as a result of the Scurlock acquisition, and an increase in storage
capacity leased at our Cushing Terminal. Lease gathering volumes increased from
an average of 85,000 barrels per day for the first nine months of 1998 to
approximately 216,000 barrels per day in the current year period. Bulk purchase
volumes increased from approximately 94,000 barrels per day in the first nine
months of 1998 to approximately 138,000 barrels per day in the current year
period. Throughput volumes at our terminals were down approximately 4,000
barrels per day in the current year period. This decrease was offset by
increased leased terminal capacity which increased from approximately 1.1
million barrels per month in last year's first nine months to 1.9 million
barrels per month during the current year period. The 1.1 million barrel
expansion of our Cushing Terminal was placed in service in the second quarter of
1999.
General
Total general and administrative expenses, including midstream activities,
were approximately $20.6 million for the nine months ended September 30, 1999,
an increase of $12.9 million as compared to the 1998 comparative period.
Approximately $12.0 million of the increase is attributable to our midstream
activities, and substantially all of that is associated with the May 1999
Scurlock acquisition, the July 1998 All American Pipeline acquisition, the
expansion of our business activities and the operations of Plains All American
Pipeline as a separate public entity. In the upstream segment, general and
administrative expense was up about $0.4 million, and on a per unit basis
increased from $0.68 per BOE last year to approximately $0.73 per BOE this year.
Interest expense for first nine months of 1999 was $32.7 million, an increase
of $8.3 million from last year's comparable period, as the result of the
interest associated with the debt incurred for acquisitions that were made
during 1998 and 1999 by Plains All American Pipeline. Interest at the corporate
level was about $0.9 million above prior year amount. In October of this year,
Plains All American Pipeline completed an equity offering for net proceeds of
approximately $50.8 million which were used to reduce debt. We should see the
benefit of the debt reduction on interest expense in the fourth quarter.
Capitalized interest was approximately $3.2 million and $2.7 million for the
nine months ended September 30, 1999 and 1998, respectively.
Our total tax provision for the nine months ended September 30, 1999, was
approximately $9.1 million, as compared to the comparative period 1998 tax
provision of approximately $2.5 million. The increase is due to the increase in
income before taxes between the two periods and a lower effective tax rate in
the 1998 period. As a result of the actual utilization of certain tax assets and
the reversal of an associated valuation allowance in 1998, our effective tax
rate for the first nine months of 1998 was 28% as compared to a 39% effective
tax rate in the current year period. In both periods, substantially all of our
income tax provision was deferred.
During the first nine months of 1999, we incurred a charge of $1.9 million
related to noncash incentive compensation paid to certain officers and key
employees of Plains All American Inc., the general partner of Plains All
American Pipeline. In 1998, Plains All American Inc. granted the employees the
right to earn ownership in common units of Plains All American Pipeline owned by
Plains All American Inc. The units vest over a three-year period subject to
Plains All American Pipeline paying distributions on their common and
subordinated units. In addition, a $1.4 million restructuring charge, primarily
associated with severance-related expenses, was also incurred by Plains All
American Pipeline. As a result of the restructuring, Plains All American
Pipeline expects to reduce costs by approximately $1.3 million per year.
Page 26
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if so, the type of hedge
transaction. For fair value hedge transactions in which we are hedging changes
in an asset's, liability's, or firm commitment's fair value, changes in the fair
value of the derivative instrument will generally be offset in the income
statement by changes in the hedged item's fair value. For cash flow hedge
transactions, in which we are hedging the variability of cash flows related to a
variable-rate asset, liability, or a forecasted transaction, changes in the fair
value of the derivative instrument will be reported in other comprehensive
income. The gains and losses on the derivative instrument that are reported in
other comprehensive income will be reclassified as earnings in the periods in
which earnings are affected by the variability of the cash flows of the hedged
item. This statement was amended by Statement of Financial Accounting Standards
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133 ("SFAS 137") issued in June
1999. SFAS 137 defers the effective date of SFAS 133 to fiscal years beginning
after June 15, 2000. We are required to adopt this statement beginning in 2001.
We have not yet determined the effect that the adoption of SFAS 133 will have on
its financial position or results of operations.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
Subordinated Debt Issuance
On September 22, 1999, we sold $75 million principal amount of Senior
Subordinated Notes due 2006, Series E, bearing a coupon rate of 10.25%. The
Series E Notes were issued pursuant to a Rule 144A private placement at
approximately 101% of par, for a yield-to-worst of 9.97%. The stated coupon rate
of interest and maturity date are the same as those of our existing $200 million
principal amount of senior subordinated notes. Our net proceeds, after costs of
the transaction, were approximately $74.6 million, and were used to reduce the
outstanding balance on our revolving credit facility.
The Series E Notes are redeemable, at our option, on or after March 15, 2001
at 105.13% of the principal amount thereof, at decreasing prices thereafter
prior to March 15, 2004, and thereafter at 100% of the principal amount thereof
plus accrued interest to the date of redemption.
Plains All American Pipeline Public Offering
In October 1999, Plains All American Pipeline completed a public offering of
an additional 2,990,000 Common Units, representing limited partner interests in
Plains All American Pipeline, at $18.00 per unit. Net proceeds to Plains All
American Pipeline were approximately $50.8 million after deducting underwriters'
discounts and commissions and offering expenses of approximately $3.1 million.
These proceeds, together with our capital contribution of approximately $0.5
million to maintain our 2% general partner interest, were used to reduce
outstanding debt. Approximately $44 million was used to reduce the term loan
portion of the Plains Scurlock credit facility and the remainder was used to
reduce the balance outstanding on Plains All American Pipeline's other revolving
credit facility.
Sale of Crude Oil Linefill
Plains All American Pipeline has begun implementing plans to sell
approximately 5.2 million barrels of crude oil linefill owned by Plains All
American Pipeline. The sale process will commence in December and should be
substantially completed by the end of the first quarter of 2000. Proceeds from
the sale of the linefill are expected to be approximately $100 million, net of
associated costs, and will be used to reduce outstanding debt. We estimate that
as a result, annual interest expense will decrease by approximately $8 million.
Plains All American Pipeline estimates that it will recognize a gain of
approximately $40 to 45 million in connection with the sale of the linefill.
At September 30, 1999, our long-term debt was $653 million. Pro forma for the
linefill sale proceeds and Plains All American Pipeline's October 1999 public
unit offering, our total long-term debt will be reduced to approximately $503
million. As a result, our debt-to-total capitalization will improve to
approximately 55% as compared to 65% at September 30, 1999.
Plains All American Pipeline owns 100% of the 5.2 million barrels of crude oil
linefill located in the segment of the All American Pipeline that extends from
Emidio, California, to McCamey, Texas. 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 its predecessor
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<PAGE>
acquired the line from the Goodyear Tire & Rubber Company in July 1998. This
section of the line is under FERC 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 throughput volumes that are necessary to operate the pipeline.
Pending receipt of third party nominations and the requisite crude oil linefill,
All American Pipeline will suspend shipments on this segment of the line. No
other segment of the All American Pipeline will be affected. For the twelve
months ended September 30, 1999, Plains All American Pipeline reported gross
margin of approximately $4 million from volumes transported on this segment of
the line.
The line will initially be kept in a state of readiness to service any third
party shippers that elect to transport crude oil on this segment of the line,
subject to their providing the required 5.2 million barrels of crude oil
linefill. Depending on market conditions, Plains All American Pipeline may
replace the linefill at a future date and recommence its own shipments. In the
event this segment of the line remains unused for a reasonable period of time,
Plains All American Pipeline intends to evaluate alternative uses for this
segment of the pipeline. Plains All American Pipeline believes that no
impairment of the asset is necessary at this time.
Scurlock Acquisition
On May 12, 1999, Plains Scurlock Permian, L.P., a limited partnership of which
Plains All American Inc. is the general partner and Plains Marketing, L.P. is
the limited partner, completed the Scurlock acquisition. Including working
capital adjustments and associated closing and financing costs, the cash
purchase price was approximately $142 million.
Financing for the Scurlock acquisition was provided through:
. borrowings of approximately $92 million under Plains Scurlock's limited
recourse bank facility with BankBoston, N.A.;
. the sale to the general partner of 1.3 million Class B common units of
Plains All American Pipeline for a total cash consideration of $25 million
representing a purchase price of $19.125 per unit, the price equal to the
market value of our common units on May 12, 1999; and
. a $25 million draw under our existing revolving credit agreement.
The Class B common units are pari passu with common units with respect to
quarterly distributions, and after November 12, 1999 are convertible into common
units upon approval by a majority of the common units voting at a meeting of
unitholders. If the approval of a conversion by the common unitholders is not
obtained within 120 days of a request by the Class B unitholders, the Class B
unitholders will be entitled to receive distributions, on a per unit basis,
equal to 110% of the amount of distributions paid on a common unit, with such
distribution right increasing to 115% if such approval is not secured within 90
days after the end of the initial 120 day period. Except for the vote to approve
the conversion, the Class B units have the same voting rights as the common
units.
West Texas Gathering System Acquisition
On July 15, 1999, Plains Scurlock Permian, L.P. completed the acquisition of a
West Texas crude oil pipeline and gathering system from Chevron Pipe Line
Company for approximately $36 million, including transaction costs. The total
acquisition cost was approximately $38.9 million including costs to address
certain issues identified in the due diligence process. The principal assets
acquired include approximately 450 miles of crude oil transmission mainlines,
approximately 400 miles of associated gathering and lateral lines and
approximately 2.9 million barrels of crude oil storage and terminalling capacity
in Crane, Ector, Midland, Upton, Ward and Winkler Counties, Texas. Financing for
amounts paid at closing was provided by a draw under the term loan portion of
the Plains Scurlock credit facility.
Plains All American Pipeline Distributions
On November 12, 1999, Plains All American Pipeline paid a cash distribution of
$0.48125 per unit on their outstanding common units, Class B units and
subordinated units. The distribution was paid to unitholders of record on
November 1, 1999. The total distribution paid was approximately $17.1 million,
with approximately $7.7 million paid to public unitholders and the remainder
paid to us for our limited and general partner interests. This distribution
represents an increase of $.01875 per unit over the previous quarter's
distribution. This current distribution level represents an increase of 6.9%
over the minimum quarterly distribution specified in the partnership agreement
of $0.45 per unit.
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<PAGE>
Series E Preferred Stock
On September 9, 1999, 3,408 shares of Series E Preferred Stock, including
accrued dividends, were converted into 98,613 shares of Common Stock at a
conversion price of $18.00 per share. After such conversion, there were 177,625
shares of the Series E Preferred Stock outstanding with a liquidation value of
approximately $88.8 million.
On October 1, 1999, we paid a cash dividend of approximately $4.2 million on
the Series E Preferred Stock for the period April 1, 1999 through September 30,
1999.
Credit Facilities
We have a $225 million revolving credit facility with a group of banks. The
revolving credit facility is guaranteed by all of our upstream subsidiaries and
is collateralized by our oil and gas properties and the guaranteeing
subsidiaries and the stock of all upstream subsidiaries. The borrowing base
under the revolving credit facility at September 30, 1999, is $225 million and
is subject to redetermination from time to time by the lenders in good faith, in
the exercise of the lenders' sole discretion, and in accordance with customary
practices and standards in effect from time to time for oil and natural gas
loans to borrowers similar to our company. Our borrowing base may be affected
from time to time by the performance of our oil and natural gas properties and
changes in oil and natural gas prices. We incur a commitment fee of 3/8% per
annum on the unused portion of the borrowing base. The revolving credit
facility, as amended, matures on July 1, 2001, at which time the remaining
outstanding balance converts to a term loan which is repayable in sixteen equal
quarterly installments commencing October 1, 2001, with a final maturity of July
1, 2005. The revolving credit facility bears interest, at our option of either
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 Plains Scurlock credit facility consists of a five-year $126.6 million
term loan and a three-year $35 million revolving credit facility. The Plains
Scurlock credit facility is nonrecourse to Plains All American Pipeline, 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. and its subsidiaries,
including the Scurlock assets and the West Texas Gathering System. 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 0.5% per year is
charged on the unused portion of the revolving credit facility. The 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 of credit of approximately $14.0 million were
outstanding under the revolver and borrowings of $126.6 and $8.0 million were
outstanding under the term loan and revolver, respectively. The term loan was
reduced to $82.6 million in connection with Plains All American Pipeline's
October 1999 public unit offering.
Concurrently with the closing of Plains All American Pipeline's initial public
offering, All American Pipeline, L.P. entered into a $225 million bank credit
agreement that includes a $175 million term loan facility and a $50 million
revolving credit facility. The bank credit agreement is secured by a lien on
substantially all of Plains All American Pipeline's assets except the assets
which secure the Plains Scurlock credit facility. All American Pipeline, L.P.
may borrow up to $50 million under the revolving credit facility for
acquisitions, capital improvements, working capital and general business
purposes. At September 30, 1999, All American Pipeline, L.P. had $175 million
outstanding under the term loan facility, representing indebtedness assumed from
the general partner and $14.3 million outstanding under the revolving credit
facility. The term loan facility matures in 2005, and no principal is scheduled
for payment prior to maturity. The term loan facility may be prepaid at any time
without penalty. The revolving credit facility expires in November 2000.
In August 1999, we terminated a swap arrangement on an aggregate notional
principal amount of $175 million which was used to hedge the interest rate under
the All American Pipeline term loan facility. We received consideration of
approximately $10.9 million, which is being amortized over the life of the loan
as a reduction in interest expense. The balance of this transaction has been
classified on our Consolidated Balance Sheet under Other Long-Term Liabilities
and Deferred Credits. Additionally, All American Pipeline entered into new
interest rate collar arrangements on a notional principal amount of $125
million.
Plains Marketing, L.P. has a $175 million letter of credit and borrowing
facility, the purpose of which is to provide standby letters of credit to
support the purchase and exchange of crude oil for resale and borrowings to
finance crude oil inventory which 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 which is determined monthly based on certain of Plains Marketing,
L.P.'s current assets and current liabilities, primarily crude oil inventory and
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<PAGE>
accounts receivable and accounts payable related to the purchase and sale of
crude oil. This facility is secured by a lien on substantially all of Plains All
American Pipeline's assets except the assets which secure the Plains Scurlock
credit facility. 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. At September 30, 1999, there were letters of credit of
approximately $90.7 million and borrowings of $30.3 million outstanding under
this facility.
Plains All American Pipeline intends to amend or replace its existing credit
facilities, except for the $175 million letter of credit and borrowing facility,
to enable it to consolidate its various credit facilities and increase the size
to approximately $450 million to $500 million. This will increase the unused
availability of the credit facilities and, therefore, Plains All American
Pipeline's liquidity and flexibility. At September 30, 1999, pro forma for
Plains All American Pipeline's October public offering, the aggregate balance of
long-term debt outstanding on all of Plains All American Pipeline's existing
facilities was approximately $273 million. While Plains All American Pipeline is
in discussions with its principal lenders under each of their credit facilities,
we cannot assure you that they will be successful in obtaining borrowing
capacity in excess of what is currently available or that the terms under any
new or amended facility will be as or more favorable than those contained in
Plains All American Pipeline 's existing facilities.
Investing and Financing Activities
Net cash flows used in investing activities were $239.0 million and $462.3
million for the nine months ended September 30, 1999 and 1998, respectively. In
1999 these amounts include:
. approximately $136.4 million paid in connection with the Scurlock
acquisition (net of Scurlock cash on hand at the acquisition date);
. approximately $35.3 million paid in connection with the acquisition of the
West Texas Gathering System;
. payments of approximately $7.8 million for crude oil pipeline, gathering
and terminal assets, including approximately $4.8 million related to the
expansion of Plains All American Pipeline's Cushing Terminal facility; and
. payments for upstream acquisition, exploration, exploitation and
development costs of approximately $57.7 million.
In 1998 these amounts include:
. approximately $393.9 million paid in connection with the acquisition of
the All American Pipeline and the SJV Gathering System;
. payments for upstream acquisition, exploration, exploitation and
development costs of $62.7 million;
. payments of approximately $3.4 million for crude oil pipeline, gathering
and terminal assets;
. payments of approximately $2.4 million for other property additions.
Net cash provided by financing activities were $228.4 million and $431.0 million
for the nine months ended September 30, 1999 and 1998, respectively. In 1999
these amounts include:
. proceeds of approximately $74.6 million from the issuance of our Series E
Senior Subordinated Notes ;
. proceeds of $117.0 million borrowed under Plains All American Pipeline's
credit facilities to fund the Scurlock acquisition;
. proceeds of approximately $36.6 million borrowed under Plains All American
Pipeline's credit facilities to fund the West Texas Gathering System
acquisition;
. borrowings and repayments of approximately $128.4 million and $133.1
million, respectively, under Plains All American Pipeline's revolving
credit facilities to fund its operating cash requirements;
. borrowings and repayments of approximately $125.6 million and $78.0
million, respectively, under our revolving credit facility to fund our
upstream acquisition, exploration, exploitation and development
activities;
. short-term borrowings and repayments under Plains All American Pipeline's
letter of credit and borrowing facility of approximately $42.2 million and
$21.7 million, respectively, for hedged inventory transactions; and
. cash distributions paid to Plains All American Pipeline's public
unitholders of approximately $14.5 million.
In 1998 these amounts include the following amounts related to the acquisition
of the All American Pipeline and the SJV Gathering System:
. approximately $300 million in borrowings and $15 million of repayments
under Plains All American Inc.'s credit facility;
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<PAGE>
. proceeds of $85 million from the issuance of our Series E Preferred Stock;
. borrowings of approximately $16 million under our revolving credit
facility to fund our capital contribution to Plains All American Inc.; and
. debt issue costs of approximately $6.1 million.
In 1998 financing activities also include:
. borrowings and repayments of approximately $155.2 million and $96.7
million, respectively, under our revolving credit facility to fund our
upstream acquisition, exploration, exploitation and development
activities; and
. short-term borrowings and repayments of approximately $28.8 million and
$35.3 million, respectively, for hedged inventory transactions.
CHANGING OIL AND NATURAL GAS PRICES
Our upstream activities are affected by changes in crude oil prices which have
historically been volatile. Although we have routinely hedged a substantial
portion of our crude oil production and intend to continue this practice,
substantial future crude oil price declines would adversely affect our overall
results, and therefore our liquidity. Furthermore, low crude oil prices could
affect our ability to raise capital on favorable terms. In order to manage our
exposure to commodity price risk, we have routinely hedged a portion of our
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. This hedge position is
equivalent to approximately 67% of third quarter 1999 average daily crude oil
volumes. For 2000, we have entered into various arrangements which will provide
for us to receive an average minimum NYMEX WTI 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
hedged in 2000 will participate in price increases above the $16.00 per barrel
floor price, subject to a ceiling limitation of $19.75 per barrel. The foregoing
NYMEX WTI crude oil prices are before quality and location differentials.
Management intends to continue to maintain hedging arrangements for a
significant portion of our production. Such contracts may expose us to the risk
of financial loss in certain circumstances.
YEAR 2000
Year 2000 Issue. Some software applications, hardware and equipment, and
embedded chip systems identify dates using only the last two digits of the year.
These products may be unable to distinguish between dates in the year 2000 and
dates in the year 1900. That inability, if not addressed, could cause
applications, equipment or systems to fail or provide incorrect information
after December 31, 1999, or when using dates after December 31, 1999. This in
turn could have an adverse effect on us because we directly depend on our own
applications, equipment and systems and indirectly depend on those of third
parties with which we do business. Our key applications, equipment, and
automated systems consist of:
. financial systems applications;
. computer hardware and equipment;
. embedded chip systems; and
. third-party developed software.
Year 2000 Project. In order to address the year 2000 issue, we have
established a year 2000 project team. As we evaluate new properties for
acquisition, we perform a pre-acquisition assessment to determine year 2000
readiness. Upon acquisition, we incorporate these properties into the year 2000
project. The project team coordinates the five phases of the year 2000 project.
Those phases are:
. assessment;
. remediation;
. testing;
. implementation of the necessary modifications; and
. contingency planning.
The year 2000 project also includes the evaluation of the extent and status of
the year 2000 compliance efforts of third parties who are material to our
operations and business units. In conjunction with our internal efforts, we
retained a year 2000 consulting firm to review certain operations of all our
business units and to perform an assessment of certain field equipment which has
embedded chip systems. We have substantially completed performing the necessary
remediation, testing and modification of embedded chip systems which are
critical to our field operations.
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<PAGE>
Year 2000 Project Status. All phases of our year 2000 project are
substantially complete for all key applications, equipment, and automated
systems.
An integral part of the year 2000 project is communication with our critical
suppliers and key customers and partners to determine whether their operations
and/or services or products will be year 2000 ready. We have contacted all of
these third parties requesting information on the status of their year 2000
efforts and have substantially completed our evaluation of their responses. We
are making additional inquiries as needed.
Contingency Planning. We have developed appropriate contingency plans for each
material "at risk" business activity to provide an alternative means of
functioning in an attempt to minimize the effect of the potential year 2000
disruptions, both internally and with third parties. The contingency plans are
expected to be completed by December 1, 1999. Communication with business
partners that are critical to our business will continue throughout the
remainder of 1999 and our contingency plans address any concerns regarding the
year 2000 readiness of these third parties to the extent we believe it is
necessary.
Costs of the Year 2000 Project. Through September 30, 1999, we have incurred
approximately $1.8 million for our year 2000 project, approximately $0.8 million
of which were costs paid to third parties. While the total cost of our year 2000
project is still being evaluated, we currently estimate that the costs of the
project to be incurred in the remainder of 1999 and 2000 is between $0.5 million
and $0.7 million. We anticipate that approximately $0.4 million will be paid to
third parties. We expect to fund these expenditures with cash from operations or
borrowings.
Risk of Non-Compliance. The items that pose the greatest year 2000 risks for
us if implementation of the year 2000 project is not successful are our
financial systems applications, our pipeline supervisory control and data
acquisition ("SCADA") systems and embedded chip systems in our field equipment.
The potential problems if the year 2000 project is not successful with respect
to the financial systems applications are disruptions of our revenue gathering
from and distribution to our customers and vendors and the inability to perform
our other financial and accounting functions. Failures of SCADA systems or
embedded chip systems in our field equipment or our customers' equipment could
disrupt our upstream exploitation and production activities and our midstream
crude oil transportation, terminalling and storage activities and our gathering
and marketing activities.
While we believe that the 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;
. 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.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are exposed to various market risks, including volatility in crude oil
commodity prices and interest rates. To manage our exposure, we monitor our
inventory levels, current economic conditions and our expectations of future
commodity prices and interest rates when making decisions with respect to risk
management. We do not enter into derivative transactions for speculative trading
purposes. Substantially all of our derivative contracts are exchanged or traded
with major financial institutions and the risk of credit loss is considered
remote.
Commodity Price Risk. The fair value of outstanding derivative commodity
instruments and the change in fair value that would be expected from a 10
percent adverse price change are shown in the table below:
<TABLE>
<CAPTION>
Change in Fair
Fair Value from 10%
Value Adverse Price Change
--------- ----------------------
<S> <C> <C>
At September 30, 1999 (in millions)
Crude Oil:
Swaps $(18.2) $(8.5)
Futures and option contracts (6.9) (12.8)
</TABLE>
Interest Rate Risk. Our debt instruments are sensitive to market fluctuations
in interest rates. The table below presents principal payments and the related
weighted average interest rates by expected maturity dates for debt outstanding
at September 30, 1999. Our variable rate debt bears interest at LIBOR plus the
applicable margin. The average interest rates presented below are based upon
rates in effect at September 30, 1999. The carrying value of variable rate bank
debt approximates fair value as interest rates are variable, based on prevailing
market rates. The fair value of fixed rate debt was based on quoted market
prices based on trades of subordinated debt. The fair value of the Redeemable
Preferred Stock approximates its liquidation value at September 30, 1999.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Expected Year of Maturity
--------------------------------------------------------------------------- Fair
1999 2000 2001 2002 2003 Thereafter Total Value
--------- -------- ------- ------- ------- ----------- --------- ---------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities:
Short-term debt - variable rate $30.3 $ - $ - $ - $ - $ - $ 30.3 $ 30.3
Average interest rate 6.88% 6.88%
Long-term debt - variable rate - 15.0 3.8 21.2 13.2 320.8 374.0 374.0
Average interest rate - 8.26% 7.41% 8.00% 7.25% 7.71% 7.73%
Long-term debt - fixed rate - - - - - 275.0 275.0 276.4
Average interest rate - - - - - 10.25% 10.25%
Redeemable Preferred Stock - - - - - 88.8 88.8 88.8
</TABLE>
Interest rate swaps and collars are used to hedge the interest rate on
underlying debt obligations. These instruments hedge the interest rate on
specific debt issuances and qualify for hedge accounting. The interest rate
differential is reflected as an adjustment to interest expense over the life of
the instruments. At September 30, 1999, we had interest rate swap and collar
arrangements for an aggregate notional principal amount of $240 million. We
would pay approximately $50,000 if such arrangements were terminated as of such
date.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
All statements, other than statements of historical facts, included in this
report which address activities, events or developments that we expect or
anticipate will or may occur in the future are forward-looking statements. These
forward-looking statements are subject to risks and uncertainties including,
among other things, market conditions, drilling and operating hazards,
uncertainties inherent in estimating oil and natural gas reserves, uncertainties
inherent in the year 2000 issue, environmental liabilities not covered by an
indemnity or insurance and other factors discussed in our Annual Report on Form
10-K and Form 10-K/A for the year ended December 31, 1998.
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<PAGE>
PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4 & 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits
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.
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.
10(q) Fourth Amendment to Fourth Amended and Restated Credit Agreement
dated September 15, 1999 among the Company and First Union National
Bank.
27. Financial Data Schedule
B. Reports on Form 8-K
A Form 8-K with respect to the News Release announcing the completion
of the sale of $75 million principal amount of Senior Subordinated
Notes Due 2006 was filed on September 23, 1999.
Amendment No. 2 to Current Report was filed on September 16, 1999, on
Form 8-K/A which amends the financial statements, exhibits or other
portions of the Current Report on Form 8-K filed with the Securities
and Exchange Commission on May 27, 1999, with respect to the PAA's
acquisition of Scurlock Permian LLC and certain other pipeline assets
from Marathon Ashland Petroleum LLC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
PLAINS RESOURCES INC.
Date: November 15, 1999 By: /s/ Cynthia A. Feeback
--------------------------------
Cynthia A. Feeback, Vice President
- Accounting and Assistant Treasurer
(Principal Accounting Officer)
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<PAGE>
================================================================================
PLAINS RESOURCES INC.,
SUBSIDIARY GUARANTORS
Named Herein
and
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
Trustee
INDENTURE
Dated as of September 15, 1999
$150,000,000
10 1/4% Senior Subordinated Notes due 2006, Series E
10 1/4% Senior Subordinated Notes due 2006, Series F
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Indenture Section
<S> <C>
310(a)(1)............................................ 7.10
(a)(2)............................................ 7.10
(a)(3)............................................ N.A.
(a)(4)............................................ N.A.
(a)(5)............................................ 7.08
(b)............................................... 7.08; 7.10
(c)............................................... N.A.
311(a)............................................... 7.11
(b)............................................... 7.11
(c)............................................... N.A.
312(a)............................................... 2.05
(b)............................................... 13.03
(c)............................................... 13.03
313(a)............................................... 7.06
(b)(1)............................................ N.A.
(b)(2)............................................ 7.06
(c)............................................... 7.06; 13.02
(d)............................................... 7.06
314(a)............................................... 4.02; 4.03; 13.02
(b)............................................... N.A.
(c)(1)............................................ 13.04
(c)(2)............................................ 13.04
(c)(3)............................................ N.A.
(d)............................................... N.A.
(e)............................................... 13.05
(f)............................................... N.A.
315(a)............................................... 7.01(b)
(b)............................................... 7.05; 13.02
(c)............................................... 7.01(a)
(d)............................................... 7.01(c)
(e)............................................... 6.11
316(a)(last sentence)................................ 2.09
(a)(1)(A)......................................... 6.05
(a)(1)(B)......................................... 6.02; 6.04; 9.02
(a)(2)............................................ N.A.
(b)............................................... 6.07
(c)............................................... N.A.
317(a)(1)............................................ 6.08
(a)(2)............................................ 6.09
(b)............................................... 2.04
318(a)............................................... 13.01
318(c)............................................... 13.01
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N.A. means Not Applicable.
NOTE: This Cross-Reference table shall not, for any purpose, be deemed to be
part of this Indenture.
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TABLE OF CONTENTS
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.................................................... 2
SECTION 1.02. Other Definitions.............................................. 23
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.............. 24
SECTION 1.04. Rules of Construction.......................................... 25
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating................................................ 25
SECTION 2.02. Execution and Authentication................................... 26
SECTION 2.03. Registrar and Paying Agent..................................... 28
SECTION 2.04. Paying Agent to Hold Money in Trust............................ 28
SECTION 2.05. Holder Lists................................................... 28
SECTION 2.06. Transfer and Exchange.......................................... 29
SECTION 2.07. Book-Entry Provisions for Global Securities.................... 32
SECTION 2.08. Replacement Securities......................................... 33
SECTION 2.09. Outstanding Securities......................................... 33
SECTION 2.10. Treasury Securities............................................ 33
SECTION 2.11. Temporary Securities........................................... 34
SECTION 2.12. Cancellation................................................... 34
SECTION 2.13. Defaulted Interest............................................. 34
SECTION 2.14. Private Placement Legend....................................... 34
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notice to Trustee.............................................. 35
SECTION 3.02. Selection of Securities To Be Redeemed......................... 35
SECTION 3.03. Notice of Redemption........................................... 35
SECTION 3.04. Effect of Notice of Redemption................................. 36
SECTION 3.05. Deposit of Redemption Price.................................... 36
SECTION 3.06. Securities Redeemed in Part.................................... 37
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.......................................... 37
SECTION 4.02. SEC Reports.................................................... 37
SECTION 4.03. Compliance Certificate......................................... 38
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SECTION 4.04. Maintenance of Office or Agency................................ 38
SECTION 4.05. Corporate Existence............................................ 39
SECTION 4.06. Waiver of Stay, Extension or Usury Laws........................ 39
SECTION 4.07. Payment of Taxes and Other Claims.............................. 39
SECTION 4.08. Maintenance of Properties and Insurance........................ 39
SECTION 4.09. Limitation on Incurrence of Additional Indebtedness............ 40
SECTION 4.10. Limitation on Senior Subordinated Indebtedness................. 41
SECTION 4.11. Limitation on Restricted Payments.............................. 41
SECTION 4.12. Limitation on Disposition of Assets............................ 42
SECTION 4.13. Limitation on Liens Securing Indebtedness...................... 44
SECTION 4.14. Limitation on Payment Restrictions Affecting Subsidiaries...... 45
SECTION 4.15. Limitation on Transactions with Related Persons................ 45
SECTION 4.16. Limitation on Conduct of Business.............................. 46
SECTION 4.17. Change of Control.............................................. 46
SECTION 4.18. Provision of Financial Information............................. 48
SECTION 4.19. Registration Rights Agreement.................................. 48
SECTION 4.20. Qualification of Indenture..................................... 48
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, etc.................................... 49
SECTION 5.02. Successor Corporation Substituted.............................. 49
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.............................................. 50
SECTION 6.02. Acceleration................................................... 51
SECTION 6.03. Other Remedies................................................. 52
SECTION 6.04. Waiver of Past Defaults........................................ 52
SECTION 6.05. Control by Majority............................................ 52
SECTION 6.06. Limitation on Remedies......................................... 53
SECTION 6.07. Rights of Holders To Receive Payment........................... 53
SECTION 6.08. Collection Suit by Trustee..................................... 53
SECTION 6.09. Trustee May File Proofs of Claim............................... 54
SECTION 6.10. Priorities..................................................... 54
SECTION 6.11. Undertaking for Costs.......................................... 54
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.............................................. 55
SECTION 7.02. Rights of Trustee.............................................. 56
SECTION 7.03. Individual Rights of Trustee................................... 56
SECTION 7.04. Trustee's Disclaimer........................................... 57
SECTION 7.05. Notice of Defaults............................................. 57
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SECTION 7.06. Reports by Trustee to Holders.................................. 57
SECTION 7.07. Compensation and Indemnity..................................... 57
SECTION 7.08. Replacement of Trustee......................................... 58
SECTION 7.09. Successor Trustee by Merger, etc............................... 59
SECTION 7.10. Eligibility; Disqualification.................................. 59
SECTION 7.11. Preferential Collection of Claims Against Company.............. 59
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations........................... 59
SECTION 8.02. Application of Trust Money..................................... 61
SECTION 8.03. Repayment to Company........................................... 61
SECTION 8.04. Reinstatement.................................................. 61
SECTION 8.05. Survival of Certain Obligations................................ 62
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND
WAIVERS
SECTION 9.01. Without Consent of Holders..................................... 62
SECTION 9.02. With Consent of Holders........................................ 62
SECTION 9.03. Compliance with Trust Indenture Act............................ 63
SECTION 9.04. Revocation and Effect of Consents.............................. 63
SECTION 9.05. Notation on or Exchange of Securities.......................... 64
SECTION 9.06. Trustee Protected.............................................. 64
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Securities Subordinated to Senior Indebtedness................. 64
SECTION 10.02. Company Not To Make Payments with Respect
to Securities in Certain Circumstances......................... 65
SECTION 10.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization
of Company..................................................... 66
SECTION 10.04. Holders To Be Subrogated to Rights of Holders of
Senior Indebtedness............................................ 67
SECTION 10.05. Obligations of the Company Unconditional....................... 67
SECTION 10.06. Trustee Entitled To Assume Payments Not Prohibited in
Absence of Notice.............................................. 68
SECTION 10.07. Application by Trustee of Monies Deposited with It............. 68
SECTION 10.08. Subordination Rights Not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness................... 68
SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of
Securities..................................................... 69
SECTION 10.10. Right of Trustee To Hold Senior Indebtedness................... 69
SECTION 10.11. Article Ten Not To Prevent Events of Default................... 69
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SECTION 10.12. Payment........................................................ 69
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. Unconditional Guarantee........................................ 70
SECTION 11.02. Subsidiary Guarantors May Consolidate, etc., on
Certain Terms.................................................. 71
SECTION 11.03. Release of a Subsidiary Guarantor.............................. 72
SECTION 11.04. Limitation of Subsidiary Guarantor's Liability................. 72
SECTION 11.05. Contribution................................................... 72
SECTION 11.06. Execution and Delivery of Guarantee............................ 73
SECTION 11.07. Severability................................................... 73
ARTICLE TWELVE
SUBORDINATION OF GUARANTEES
SECTION 12.01. Guarantees Subordinated to Guarantor Senior Indebtedness....... 73
SECTION 12.02. Subsidiary Guarantors Not To Make Payments with
Respect to Guarantees in Certain Circumstances................. 74
SECTION 12.03. Guarantees Subordinated to Prior Payment of All Guarantor
Senior Indebtedness on Dissolution, Liquidation or
Reorganization of Subsidiary Guarantor......................... 75
SECTION 12.04. Holders To Be Subrogated to Rights of Holders of Guarantor
Senior Indebtedness............................................ 76
SECTION 12.05. Obligations of the Subsidiary Guarantors Unconditional......... 76
SECTION 12.06. Trustee Entitled To Assume Payments Not Prohibited in
Absence of Notice.............................................. 77
SECTION 12.07. Application by Trustee of Monies Deposited with It............. 77
SECTION 12.08. Subordination Rights Not Impaired by Acts or Omissions of
Subsidiary Guarantors or Holders of Guarantor Senior
Indebtedness................................................... 77
SECTION 12.09. Holders Authorize Trustee To Effectuate Subordination of
Guarantee...................................................... 78
SECTION 12.10. Right of Trustee To Hold Guarantor Senior Indebtedness......... 78
SECTION 12.11. Article Twelve Not To Prevent Events of Default................ 78
SECTION 12.12. Payment........................................................ 78
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls................................... 79
SECTION 13.02. Notices........................................................ 79
SECTION 13.03. Communication by Holders with Other Holders.................... 80
SECTION 13.04. Certificate and Opinion as to Conditions Precedent............. 80
SECTION 13.05. Statements Required in Certificate or Opinion.................. 80
SECTION 13.06. Rules by Trustee and Agents.................................... 81
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SECTION 13.07. Legal Holidays................................................. 81
SECTION 13.08. Governing Law.................................................. 81
SECTION 13.09. No Adverse Interpretation of Other Agreements.................. 81
SECTION 13.10. No Recourse Against Others..................................... 81
SECTION 13.11. Successors..................................................... 81
SECTION 13.12. Duplicate Originals............................................ 81
SECTION 13.13. Severability................................................... 82
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SIGNATURES
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THIS INDENTURE, dated as of September 15, 1999, is among PLAINS RESOURCES INC.,
a Delaware corporation (hereinafter called the "Company"), the SUBSIDIARY
GUARANTORS (as defined hereinafter) and CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an initial issue of 10 1/4%
Senior Subordinated Notes due 2006, Series E and an initial issue of 10 1/4%
Senior Subordinated Notes due 2006, Series F (such two initial issues and any
subsequent issues, as amended or supplemented from time to time in accordance
with the terms hereof, being herein collectively called the "Securities"), of
substantially the tenor and in the aggregate principal amount hereinafter set
forth, and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture.
The 10 1/4% Senior Notes due 2006, Series E are to be issued and sold from
time to time in transactions exempt from registration under the Securities Act,
pursuant to a Purchase Agreement, and the 10 1/4% Senior Subordinated Notes due
2006, Series F are to be issued from time to time in exchange for the 10 1/4%
Senior Subordinated Notes due 2006, Series E, pursuant to a Registration Rights
Agreement.
The Company owns, directly or indirectly, all of the equity ownership of the
outstanding Voting Stock of each initial Subsidiary Guarantor, and each initial
Subsidiary Guarantor is engaged in businesses related to the businesses of the
Company and the other Subsidiary Guarantors. Each initial Subsidiary Guarantor
will derive direct and indirect benefit from the issuance of the Securities;
accordingly, each initial Subsidiary Guarantor has authorized its guarantee of
the Company's obligations under this Indenture and the Securities, and to
provide therefor the initial Subsidiary Guarantors have duly authorized the
execution and delivery of this Indenture.
All things necessary have been done on the part of the Company and the initial
Subsidiary Guarantors to make the Securities, when issued against consideration
received and executed by the Company and authenticated and delivered by the
Trustee as herein provided, the valid obligations of the Company, without
priority of any Securities over any other as a result of date of issue, to make
the Guarantees, when the notations thereof on the Securities are executed by the
initial Subsidiary Guarantors, the valid obligation of the initial Subsidiary
Guarantors, without priority of any Guarantees over any other as a result of
date of issue, and to make this Indenture a valid agreement of the Company, the
initial Subsidiary Guarantors and the Trustee, in accordance with their
respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
(together with the related Guarantees) by the Holders thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders of
the Securities (together with the related Guarantees), without preference of one
series of Securities over the other, as follows:
<PAGE>
ARTICLE ONE
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (A) the sum of (i) discounted future net cash
flows from proved oil and gas reserves of the Company and its consolidated
Subsidiaries, calculated in accordance with SEC guidelines (before any state or
federal income tax), as estimated by independent petroleum engineers as of a
date no earlier than the date of the Company's latest annual consolidated
financial statements (or, in the case that the date of determination is after
the end of the first fiscal quarter of the fiscal year of the Company, as
estimated by Company engineers as of a date no earlier than the end of the most
recent fiscal quarter, which estimates shall be confirmed in writing by a report
by independent petroleum engineers in accordance with SEC guidelines in the
event of a Material Change if the amount of Adjusted Consolidated Net Tangible
Assets is required to be computed under this Indenture), (ii) the Net Working
Capital on a date no earlier than the date of the Company's latest consolidated
annual or quarterly financial statements and (iii) with respect to each other
tangible asset of the Company or its consolidated Subsidiaries, the greater of
(a) the net book value of such other tangible asset on a date no earlier than
the date of the Company's latest consolidated annual or quarterly financial
statements, and (b) the appraised value, as estimated by a qualified independent
appraiser, of such other tangible asset, as of a date no earlier than the date
that is three years prior to the date of determination (or such later date on
which the Company shall have a reasonable basis to believe that there has
occurred a material decrease in value since the determination of such appraised
value), minus (B) minority interests and, to the extent not otherwise taken into
account in determining Adjusted Consolidated Net Tangible Assets, any gas
balancing liabilities of the Company and its consolidated Subsidiaries. In
addition to, but without duplication of, the foregoing, for purposes of this
definition, "Adjusted Consolidated Net Tangible Assets" shall be calculated
after giving effect, on a pro forma basis, to (1) any Investment not prohibited
by this Indenture, to and including the date of the transaction giving rise to
the need to calculate Adjusted Consolidated Net Tangible Assets (the "Assets
Transaction Date"), in any other Person that, as a result of such Investment,
becomes a Subsidiary of the Company, (2) the acquisition, to and including the
Assets Transaction Date (by merger, consolidation or purchase of stock or
assets), of any business or assets, including, without limitation, Permitted
Industry Investments, and (3) any sales or other dispositions of assets
permitted by this Indenture (other than sales of Hydrocarbons or other mineral
products in the ordinary course of business) occurring on or prior to the Assets
Transaction Date. For purposes of calculating the ratio of the Company's
Adjusted Consolidated Net Tangible Assets to Indebtedness of the Company and its
Subsidiaries, Indebtedness of a Subsidiary that is not a Wholly Owned Subsidiary
(which Indebtedness is non-recourse to the Company or any other Subsidiary or
any of their assets) shall be included only to the extent of the Company's pro
rata ownership interest in such Subsidiary.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities
2
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under the Guarantee, of such Subsidiary Guarantor at such date and (y) the
present fair saleable value of the assets of such Subsidiary Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
such Subsidiary Guarantor on its debts (after giving effect to all other fixed
and contingent liabilities incurred or assumed on such date and after giving
effect to any collection from any Subsidiary of such Subsidiary Guarantor in
respect of the obligations of such Subsidiary under the Guarantee), excluding
debt in respect of the Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset" means each of the assets that are owned by the Company or a
Subsidiary on the Issue Date or that are acquired by the Company or a Subsidiary
after the Issue Date.
"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 the
Company or any of its Subsidiaries, including any disposition by means of a
merger, consolidation or similar transaction (other than (A) by the Company to a
Subsidiary or by a Subsidiary to the Company or a Subsidiary (in the case of a
transfer to a Subsidiary that is not a Wholly Owned Subsidiary, dispositions
shall be excluded pursuant to clause (A) only to the extent of the Company's
interest in such Subsidiary after giving effect to such transfer), (B) any
Investment in an Unrestricted Subsidiary not prohibited under the provisions of
Section 4.11, (C) a disposition of Hydrocarbons or other mineral products in the
ordinary course of business, and (D) the disposition of all or substantially all
of the assets of the Company in compliance with Article Five of this Indenture).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(x) the number of years from such date to the date of each successive scheduled
principal payment of such Indebtedness multiplied by (y) the amount of such
principal payment by (ii) the sum of all such principal payments.
"Bank Credit Agreement" means the Fourth Amended and Restated Credit
Agreement, dated May 22, 1998, among the Company, 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
3
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amended, modified (without limitation as to amount), supplemented, extended,
restated, replaced, renewed or refinanced) from time to time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the board of directors of such
Person duly authorized to act on behalf of the board of directors of such
Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day on which the New York Stock Exchange is open
for trading and which is not a Legal Holiday.
"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.
"Cash Equivalents" shall mean Permitted Obligations.
"Change of Control" means (i) an event or series of events by which any
Person or other entity or group of Persons or other entities acting in concert
as a partnership or other group (a "Group of Persons") shall, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases,
merger, consolidation or otherwise, have become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the combined
voting power of the then outstanding Voting Stock of the Company, (ii) during
any period of two consecutive years, Continuing Directors cease for any reason
to constitute a majority of the Board of Directors then in office, or (iii) the
direct or indirect sale, lease, exchange or other transfer of all or
substantially all of the Assets to any Person or Group of Persons.
"Company" means the party named as such above, until a successor replaces
such Person in accordance with the terms of this Indenture, and thereafter means
such successor.
"Company Properties" means all Properties, and equity, partnership or other
ownership interests therein, that are related or incidental to, or used or
useful in connection with, the conduct or operation of any business activities
of the Company or the Subsidiaries, which business activities are not prohibited
by the terms of this Indenture.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period increased (to the extent
deducted in determining Consolidated Net Income) by the sum of: (i) all income
taxes of such Person and its subsidiaries paid or accrued according to GAAP for
such period (other than income taxes attributable to
4
<PAGE>
extraordinary, unusual or non-recurring gains or losses), (ii) all interest
expense of such Person and its subsidiaries paid or accrued in accordance with
GAAP for such period (including amortization of original issue discount and the
interest portion of deferred payment obligations), (iii) depreciation and
depletion of such Person and its subsidiaries, (iv) amortization of such Person
and its subsidiaries including, without limitation, amortization of capitalized
debt issuance costs 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 prior to the
date of the transaction giving rise to the need to calculate the Consolidated
EBITDA Coverage Ratio (the "Transaction Date") to (2) the aggregate Fixed
Charges which such Person will accrue during the fiscal quarter in which the
Transaction Date occurs and the three fiscal quarters immediately subsequent to
such fiscal quarter (the "Forward Period") on the aggregate amount of
Indebtedness outstanding on the Transaction Date, including any Indebtedness
proposed to be incurred on such date and excluding any Indebtedness repaid with
the proceeds of such Indebtedness (as though all such Indebtedness was incurred
or repaid on the first day of the quarter in which the Transaction Date
occurred). In addition to, but without duplication of, the foregoing, for
purposes of this definition, "Consolidated EBITDA" shall be calculated after
giving effect (without duplication), on a pro forma basis for the Pro Forma
Period (but no longer), to (a) any Investment, during the period commencing on
the first day of the Pro Forma Period to and including the Transaction Date (the
"Reference Period"), in any other Person that, as a result of such Investment,
becomes a subsidiary of such Person, (b) the acquisition, during the Reference
Period (by merger, consolidation or purchase of stock or assets) of any business
or assets, which acquisition is not prohibited by this Indenture, including but
not limited to Permitted Industry Investments, as if such acquisition had
occurred on the first day of the Reference Period, (c) any sales or other
dispositions of assets (other than sales of Hydrocarbons and other mineral
products in the ordinary course of business) occurring during the Reference
Period, in each case as if such incurrence, Investment, repayment, acquisition
or asset sale had occurred on the first day of the Reference Period and (d)
interest income reasonably anticipated by the Company to be received during the
Pro Forma Period from Investments in Permitted Obligations, which Investments
exist on the Transaction Date or will exist as a result of the transaction
giving rise to the need to calculate the Consolidated EBITDA Coverage Ratio.
For purposes of this definition, "Fixed Charges" shall be calculated after
giving effect (without duplication), on a pro forma basis for the Forward
Period, to any Indebtedness incurred or repaid on or after the first day of the
Forward Period and prior to the Transaction Date. For purposes of calculating
the Company's Consolidated EBITDA Coverage Ratio, Indebtedness of a Subsidiary
that is not a Wholly Owned Subsidiary (which Indebtedness is non-recourse to the
Company or any other Subsidiary or any of their assets) shall be included only
to the extent of the Company's pro rata ownership interest in such Subsidiary.
"Consolidated Net Income" 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 (a) the net income of (i) any Unrestricted Subsidiary and (ii) any other
Person in which such Person or any subsidiary thereof has an interest (which
interest, in the case of those Persons referred to in clause (ii), does not
cause the net income of such other Person to be consolidated with the net income
of such Person in accordance with GAAP) will be included only to the extent of
the amount of dividends or distributions actually paid to such Person
5
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or its subsidiaries by such other Person in such period; (b) the net income of
any subsidiary of such Person that is subject to any Payment Restriction will be
excluded to the extent of such Payment Restriction; and (c) (i) the net income
(or loss) of any other Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition, (ii) any net gain (but not
loss) on the sale or other disposition by such Person or any of its subsidiaries
of assets and of the Capital Stock of any subsidiary of such Person, and (iii)
items which are extraordinary, will each be excluded; provided that in no event
shall the computation of Consolidated Net Income of the Company include or take
into effect the premium or write-off of debt issuance costs, if any, paid by the
Company optionally to redeem or otherwise prepay the 12% Senior Subordinated
Notes due 1999 issued pursuant to the Prior Indenture or the Series A-D
Securities.
"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 (i) the total liabilities of such Person and its
subsidiaries on a consolidated basis, plus (ii) Disqualified Capital Stock of
such Person or Disqualified Capital Stock of any subsidiary of such Person
issued to any Person other than such Person or another wholly owned Subsidiary
of such Person, in each case determined in accordance with GAAP.
"Contango Market Transaction" a transaction in which the Company or any
Subsidiary either (i) establishes a position using New York Mercantile Exchange
Crude Oil Futures contracts to purchase Hydrocarbons for future delivery to it,
or (ii) purchases or commits to purchase Hydrocarbons for future delivery to it,
and contemporaneously with such purchase either (a) establishes one or more
positions using New York Mercantile Exchange Crude Oil Futures contracts to
resell at a date subsequent to such delivery date, or (b) enters into a contract
with that Person or another Person to resell at a date subsequent to such
delivery date, a similar aggregate quantity and quality of Hydrocarbons as so
purchased by the Company or such Subsidiary, as applicable, and at an aggregate
price greater than the Indebtedness incurred by the Hydrocarbons so purchased by
the Company or such Subsidiary.
"Continuing Directors" means any member of the Board of Directors of the
Company 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 the
Board of Directors of the Company and any other member of the Board of Directors
of the Company who will be recommended or elected to succeed a Continuing
Director by a majority of Continuing Directors who are then members of the Board
of Directors of the Company.
"Currency Agreement" means the obligations of any Person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person or any of its subsidiaries against
fluctuations in currency values.
"Default" means any event which 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
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redeemed or repurchased by such Person or its subsidiaries, including at the
option of the holder, in whole or in part, or has, upon the happening of an
event or the passage of time would have, a redemption or similar payment due, in
each such case on or prior to the Maturity Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Exchange Offer" means the offer by the Company, pursuant to an effective
registration statement filed with the SEC, to exchange for any and all of an
issue of the Series E Securities a like aggregate principal amount of Series F
Securities in accordance with the terms and provisions of the applicable
Registration Rights Agreement.
"Exchange Offer Consummation Date" means the date on which an Exchange
Offer is consummated in accordance with the terms and provisions of the
applicable Registration Rights Agreement.
"Fixed Charges" means, with respect to any Person, for any period, the
aggregate amount of (i) interest, whether expensed or capitalized, paid, accrued
or scheduled to be paid or accrued during such period (except to the extent
accrued in a prior period) in respect of all Indebtedness of such Person and its
consolidated subsidiaries (including (a) original issue discount on any
Indebtedness and (b) the interest portion of all deferred payment obligations,
calculated in accordance with the effective interest method, in each case to the
extent attributable to such period) and (ii) 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, (a) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Board of Directors of such Person (as evidenced by
a Board Resolution) to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP; (b) interest on Indebtedness that is
determined on a fluctuating basis shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest of such Indebtedness in effect on
the date Fixed Charges are being calculated, subject to the proviso in clause
(c); (c) interest on Indebtedness that may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rate, shall be deemed to have been based upon
the rate actually chosen, or, if none, then based upon such optional rate chosen
as the Company may designate, (provided that, for the period following the date
on which the rate actually chosen ceases to be in effect, the Company may
designate an optional rate other than that actually chosen, which optional rate
shall be deemed to accrue at a fixed per annum equal to the rate of interest on
such optional rate in effect on the date Fixed Charges are being calculated);
and (d) Fixed Charges shall be increased or reduced by the net cost (including
amortization of discount) or benefit associated with obligations under Interest
Rate Agreements attributable to such period.
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"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of any date of determination.
"Guarantee" means, individually and collectively, the guarantees given by
the Subsidiary Guarantors pursuant to Article Eleven hereof, including a
notation in the Securities substantially in the form attached hereto as Exhibit
A-1.
"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
(i) any Indebtedness of the Subsidiary Guarantor to the Company or any
Subsidiary or any Unrestricted Subsidiary, and (ii) any amounts payable or other
liabilities to trade creditors.
"Holder" means a Person in whose name a Security is registered on the
Registrar's books.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all constituents, elements or compounds thereof and products refined or
processed therefrom.
"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
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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.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Independent Director" means, with respect to a Related Person Transaction,
any director of the Company who is neither (i) an executive officer or an
employee of the Company or of any of its Subsidiaries or Affiliates, nor (ii) a
Related Person who has a direct or indirect financial interest in such Related
Person Transaction (other than as a holder of Capital Stock of the Company).
"Initial Purchasers" means the initial purchasers of the Original
Securities, J.P. Morgan Securities Inc. and First Union Capital Markets Corp.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
(a) an insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization proceeding or other similar case or proceeding,
relative to such Person or to its creditors, as such, or its assets, or (b) any
liquidation, dissolution, or reorganization proceeding of such Person, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of such Person.
"Interest Rate Agreement" means the obligations of any Person pursuant to
any interest swap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in interest rates.
"Investment" means, in respect of any Person, any investment in another
Person, whether by means of a share purchase, capital contribution, loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
similar credit extension constituting Indebtedness of such other Person and any
guaranty of Indebtedness of any other Person. For purposes of Section 4.11 and
the definition of Permitted Unrestricted Subsidiary Investments, (i) an
"Investment" in an Unrestricted Subsidiary shall be deemed to include and be
valued at the fair market value of the net assets of any Subsidiary at the time
that such Subsidiary is designated an Unrestricted Subsidiary, and (ii) any
Investment in an Unrestricted Subsidiary shall be valued at fair market value at
the time of such Investment (except, however, when such Investment consists of a
loan or advance by a Person to another Person that is of an intercompany or
similar nature between such Persons and arises pursuant to an
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agreement or understanding in the ordinary course of business relating to tax
sharing, administrative or similar arrangements, then such Investment shall be
valued at fair market value at the time that the investing Person shall have
paid monies or transferred other consideration to another Person for the benefit
of the Person in whom the agreement to make such loan or advance was made), in
each case as determined by the Board of Directors of the Company and such
Subsidiary, as applicable, in good faith.
"Issue Date" means the date of first issuance of the Series E Securities
under this Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction).
"Material Change" means an increase or decrease of more than 10% during a
fiscal quarter in the discounted future net cash flows (excluding changes that
result solely from changes in prices) from proved oil and gas reserves of the
Company and consolidated Subsidiaries (before any state or federal income tax);
provided, however, that the following will be excluded from the Material Change
calculation: (i) any acquisitions during the quarter of oil and gas reserves
that have been estimated by independent petroleum engineers and on which a
report or reports exist, (ii) any reserves added during the quarter attributable
to the drilling or recompletion of wells not included in previous reserve
estimates, but which will be included in future quarters, and (iii) any
disposition of properties existing at the beginning of such quarter that have
been disposed of as provided in Section 4.12.
"Material Subsidiary" means any Subsidiary of the Company which, as of the
relevant date of determination, would be a "significant subsidiary" as defined
in Reg. (S) 230.405 promulgated pursuant to the Securities Act as in effect on
the Series A/B Issue Date, assuming the Company is the "registrant" referred to
in such definition, except that the 10% amounts referred to in such definition
shall be deemed to be 5%.
"Maturity Date" means March 15, 2006.
"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
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must, by its terms or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such Asset
Disposition and which is actually so repaid.
"Net Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock, the aggregate net cash proceeds received by the
Company, after payment of expenses, commissions and the like incurred in
connection therewith, and (b) in the case of any exchange, exercise, conversion
or surrender of any outstanding securities or Indebtedness of the Company for or
into shares of Qualified Capital Stock of the Company, the net book value of
such outstanding securities or Indebtedness as adjusted on the books of the
Company on the date of such exchange, exercise, conversion or surrender (plus
any additional amount required to be paid by the holder of such Indebtedness or
securities to the Company upon such exchange, exercise, conversion or surrender
and less any and all payments made to the holders of such Indebtedness or
securities, and all other expenses incurred by the Company in connection
therewith).
"Net Working Capital" means (i) all current assets of the Company and its
consolidated Subsidiaries, minus (ii) all current liabilities of the Company and
its consolidated Subsidiaries, except current liabilities included in
Indebtedness.
"Non-Recourse Indebtedness" means Indebtedness that, under the terms
thereof or pursuant to applicable law, neither the Company nor any Subsidiary of
the Company (other than a Subsidiary being designated as an Unrestricted
Subsidiary) is directly or indirectly liable for and there is no recourse
against any of the assets or properties of the Company or such Subsidiary.
"Obligations" mean the due and punctual payment of principal of and
interest on the Securities when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Company under
this Indenture and the Securities and the due and punctual performance of all
other obligations of the Company under this Indenture and the Securities.
"Officer" means, with respect to any Person, the Chairman of the Board, the
President, any Vice President, the Chief Financial Officer or the Treasurer of
such Person.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Officers or by an Officer and either a Secretary, Assistant
Secretary or Assistant Treasurer of such Person.
"Oil and Gas 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.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company (or any Subsidiary Guarantor, if applicable).
"Original Securities" has the meaning set forth in Section 2.02.
"Permitted Acquisition Indebtedness" means Indebtedness of the Company or
any Subsidiary to the extent such Indebtedness is incurred to finance the
acquisition of Oil and Gas Properties (and
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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 (i) (A) the
Adjusted Consolidated Net Tangible Assets acquired are equal to or greater than
200% of the Indebtedness incurred, and (B) the Adjusted Consolidated Net
Tangible Assets of the Company (after giving effect to such acquisition) are
equal to or greater than 125% of the consolidated Indebtedness of the Company
and its Subsidiaries or (ii) (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) the Adjusted Consolidated Net Tangible Assets of the Company
(after giving effect to such acquisition) are equal to or greater than 125% of
the consolidated Indebtedness of the Company and its Subsidiaries.
"Permitted Contango Market Transaction Obligations" means Indebtedness of
the Company 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 the Company or
any Subsidiary by the Company or any other Subsidiary, as applicable, related to
a Contango Market Transaction, provided that, (1) if the Company 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 the Company 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 the
Company or such Subsidiary with respect to such contract and (2) for the period
commencing on the date the Company 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, the Company 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 the Company or any Subsidiary.
"Permitted Indebtedness" means (i) Indebtedness under the Original
Securities and any Series F Securities issued in exchange for Series E
Securities of equal principal amount; (ii) 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; (iii) the Guarantees of
the Securities and the Series A-D Securities (and any assumption of the
obligations guaranteed thereby); (iv) Permitted Refinancing Indebtedness; (v)
Indebtedness of the Company to any Wholly Owned Subsidiary, and any Indebtedness
of any Wholly Owned Subsidiary to the Company or to any Wholly Owned Subsidiary
of the Company; provided, that in each case, such Indebtedness has not been
incurred in contemplation of any subsequent issuance or transfer of any Capital
Stock or any other event 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 the Company or a Wholly Owned Subsidiary), and if
incurred in contemplation of any of the foregoing events, then such Indebtedness
shall be deemed to be incurred and shall be treated as an incurrence of
Indebtedness for purposes of the "Limitation on Indebtedness" covenant at the
time the Wholly Owned Subsidiary in question ceased to be a Wholly Owned
Subsidiary; (vi) Permitted Marketing Obligations and Permitted Contango Market
Transaction Obligations; (vii) Permitted Acquisition Indebtedness; (viii)
Permitted Operating Obligations; (ix) other Indebtedness outstanding at any time
in an aggregate principal
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amount not to exceed the greater of $15 million or 2.5% of Adjusted Consolidated
Net Tangible Assets of the Company; and (x) Indebtedness outstanding on the
Series A/B Issue Date. Permitted Refinancing Indebtedness that constitutes a
refinancing of amounts referred to in clauses (ii) and (ix) shall be deemed to
be incurred pursuant to and subject to the limitations in clauses (ii) and (ix),
respectively. The Company may elect at any time that amounts of Indebtedness
incurred under clauses (ii) or (ix) be deemed to be incurred pursuant to the
first paragraph of the "Limitation on Incurrence of Additional Indebtedness"
covenant (if then permitted to be so incurred), in which event such amounts so
incurred shall be deemed not to be incurred under clause (ii) or (ix); provided,
however, any such Indebtedness deemed not to be incurred under clause (ii) shall
still be treated as Indebtedness under and governed by the Bank Credit Agreement
for purposes of all other provisions of this Indenture.
"Permitted Industry Investments" means (i) capital expenditures, including,
without limitation, acquisitions of Company Properties and interests therein;
(ii) (a) entry into operating agreements, joint ventures, working interests,
royalty interests, mineral leases, unitization agreements, pooling arrangements
or other similar or customary agreements, transactions, properties, interests or
arrangements, and Investments and expenditures in connection therewith or
pursuant thereto, in each case made or entered into in the ordinary course of
the oil and gas business, or (b) exchanges of Company Properties for other
Company Properties of at least equivalent value as determined in good faith by
the Board of Directors of the Company; (iii) Investments by the Company or any
Subsidiary in any Subsidiary (or in any Person that becomes a Subsidiary as a
result of such Investment) that are not subject to any Payment Restriction; (iv)
Investments in the Company or another Subsidiary that are not subject to any
Payment Restriction by any Subsidiary; and (v) Investments of operating funds on
behalf of co-owners of Oil and Gas Properties of the Company or the Subsidiaries
pursuant to joint operating agreements.
"Permitted Investments" means Permitted Obligations and Permitted Industry
Investments (in each case, other than Investments in Unrestricted Subsidiaries).
"Permitted Liens" means (i) Liens for taxes, assessments and governmental
charges not yet delinquent or being contested in good faith and for such
adequate reserves have been established to the extent required by GAAP, (ii)
landlord's, carriers, warehouseman's, storage, mechanics', workmen's,
materialmen's, operator's or similar Liens arising in the ordinary course of
business, (iii) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of Company Properties or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case materially
detract from the Company Properties subject thereto or interfere with the
ordinary conduct of the business of the Company or the Subsidiaries, (iv) Liens
on, or related to, Properties to secure all or part of the costs incurred in the
ordinary course of business of exploration, drilling, development, production,
processing, transportation, marketing or storage, or operation thereof, (v)
Liens on pipeline or pipeline facilities, Hydrocarbons or Company Properties
which arise out of operation of law, (vi) judgment and attachment Liens not
giving rise to an Event of Default or Liens created by or existing from any
litigation or legal proceeding that are currently being contested in good faith
by appropriate proceedings and for which adequate reserves have been made, (vii)
(a) Liens upon any Property of any Person existing at the time of acquisition
thereof by the Company, (b) Liens upon any Property of a Person existing at the
time such Person is merged or consolidated with the
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Company or any Subsidiary or existing at the time of the sale or transfer of any
such Property of such Person to the Company or any Subsidiary, or (c) Liens upon
any Property of a Person existing at the time such Person becomes a Subsidiary;
provided that in each case such Lien has not been created in contemplation of
such sale, merger, consolidation, transfer or acquisition, and provided further
that in each such case no such Lien shall extend to or cover any Property of the
Company or any Subsidiary other than the Property being acquired and
improvements thereon, (viii) Liens existing on the Series A/B Issue Date, (ix)
Liens on deposits made in the ordinary course of business, including, without
limitation, pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation and deposits to secure the
performance of bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a similar nature incurred in the ordinary course of business, (x)
Liens in favor of collecting or payor banks having a right of setoff,
revocation, refund or chargeback with respect to money or instruments of the
Company or any Subsidiary on deposit with or in possession of such bank, (xi)
royalties, overriding royalties, revenue interests, net revenue interests, net
profit interests, reversionary interests, production payments, production sales
contracts, operating agreements and other similar interests, properties,
arrangements and agreements, all as ordinarily exist with respect to Company
Properties, (xii) Liens upon any Property 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 the Company
or any Subsidiary other than the Property so acquired and improvements thereon,
(xiii) Liens securing Senior Indebtedness or Guarantor Senior Indebtedness,
whether in whole or part thereof, (xiv) with respect to any Company Properties,
Liens arising under, or in connection with, or related to, farm-out, farm-in,
joint operating, area of mutual interest agreements and/or other similar or
customary arrangements, agreements or interests that the Company or any
Subsidiary determines in good faith to be necessary for the economic development
of such Property, and (xv) Liens upon any Property securing obligations under
hedging agreements, swap agreements or other similar agreements entered into for
the purpose of protecting against fluctuations in oil or natural gas prices.
"Permitted Marketing Obligations" means, other than Permitted Operating
Obligations or Indebtedness relating to Contango Market Transactions,
Indebtedness of the Company 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 the
Company or any Subsidiary by any other Subsidiary or the Company, as applicable,
related to the purchase by the Company or any Subsidiary of Hydrocarbons for
which the Company or such Subsidiary has contracts to sell; provided, that in
the event that such Indebtedness or obligations are guaranteed by the Company or
any Subsidiary, then either (i) the Person with which the Company 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
(ii) such Person posts, or has posted for it, a letter of credit in favor of the
Company and such Subsidiary with respect to all of such Person's obligations to
the Company or such Subsidiary under such contracts.
"Permitted Obligations" means the following kinds of instruments if, in the
case of instruments referred to in clauses (i) through (iv) below, on the date
of purchase or other acquisition of any such instrument by the Company or any
Subsidiary, the remaining term to maturity is not more than one year: (i)
readily marketable obligations issued or unconditionally guaranteed as to
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principal and interest by the United States of America or by any agency or
authority controlled or supervised by and acting as an instrumentality of the
United States of America; (ii) repurchase obligations for instruments of the
type described in clause (i) for which delivery of the instrument is made
against payment; (iii) obligations (including, but not limited to, demand or
time deposits, bankers' acceptances and certificates of deposit) issued by a
depository institution or trust company incorporated or doing business under the
laws of the United States of America, any state thereof or the District of
Columbia or a branch or subsidiary of any such depository institution or trust
company operating outside the United States, provided that such depository
institution or trust company has, at the time of the Company's or such
Subsidiary's investment therein or contractual commitment providing for such
investment, capital, surplus or undivided profits (as of the date of such
institution's most recently published financial statements), in excess of
$100,000,000; (iv) commercial paper issued by any Person, if such commercial
paper has, at the time of the Company's or any Subsidiary's investment therein
or contractual commitment providing for such investment, credit ratings of A-1
by S&P and P-1 by Moody's; and (v) money market mutual or similar funds having
assets in excess of $100,000,000.
"Permitted Operating Obligations" means Indebtedness of the Company or any
Subsidiary in respect of one or more standby letters of credit, bid, performance
or surety bonds, or other reimbursement obligations, issued for the account of,
or entered into by, the Company or any Subsidiary in the ordinary course of
business (excluding obligations related to the purchase by the Company or any
Subsidiary of Hydrocarbons for which the Company or such Subsidiary has
contracts to sell), or in lieu of any thereof or in addition to any thereto,
guarantees and letters of credit supporting any such obligations and
Indebtedness (in each case, other than for an obligation for borrowed money,
other than borrowed money represented by any such letter of credit, bid,
performance or surety bond, or reimbursement obligation itself, or any guarantee
and letter of credit related thereto).
"Permitted Production Payment Obligations" means obligations with respect
to production payments entered into in the ordinary course of the Company's or
any Subsidiary's business, which obligations are non-recourse to the Company and
its Subsidiaries other than to Hydrocarbon production from the properties
subject to such obligations.
"Permitted Refinancing Indebtedness" means (a) Senior Indebtedness of the
Company or any Subsidiary, the net proceeds of which are used solely to renew,
extend, refinance, refund or repurchase outstanding Securities, including the
amount of reasonable fees and expenses and premium, if any, incurred by the
Company or such Subsidiary in connection therewith; or (b) Indebtedness of the
Company or any Subsidiary, the net proceeds of which are used to renew, extend,
refinance, refund or repurchase (including, without limitation, pursuant to a
Change of Control Offer as required by the terms of the Securities) outstanding
Indebtedness of the Company, provided that (i) if the Indebtedness (including
the Securities) being renewed, extended, refinanced, refunded or repurchased is
pari passu with or subordinated in right of payment to either the Securities or
the Guarantees, then such Indebtedness is pari passu with or subordinated in
right of payment to, as the case may be, the Securities or the Guarantees at
least to the same extent as the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, (ii) such Indebtedness is scheduled to
mature no earlier than the Indebtedness being renewed, extended, refinanced,
refunded or repurchased, and (iii) such Indebtedness has an Average Life at the
time such Indebtedness is incurred that is greater than the Average Life of the
Indebtedness being renewed,
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extended, refinanced, refunded or repurchased; provided, further, that such
Indebtedness (to the extent that such Indebtedness constitutes Permitted
Refinancing Indebtedness) is in an aggregate principal amount (or, if such
Indebtedness is issued at a price less than the principal amount thereof, the
aggregate amount of gross proceeds therefrom is) not in excess of the aggregate
principal amount then outstanding of the Indebtedness being renewed, extended,
refinanced, refunded or repurchased (or if the Indebtedness being renewed,
extended, refinanced, refunded or repurchased was issued at a price less than
the principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees and expenses and premium, if any, incurred by the Company or
such Subsidiary in connection therewith.
"Permitted Unrestricted Subsidiary Investments" means Investments in
Unrestricted Subsidiaries in a cumulative aggregate amount (in cash or the fair
market value of property other than cash, as determined in good faith by the
Board of Directors of the Company) not to exceed the sum of (i) $25 million and
(ii) cash or cash equivalent distributions made from any Unrestricted Subsidiary
and received, after the Series A/B Issue Date, as such by the Company, provided
that any amount included in this clause (ii) shall be deducted from any amounts
referred to in clause (y)(3) of Section 4.11. Notwithstanding the foregoing,
Permitted Unrestricted Subsidiary Investments shall also include any Investments
in Unrestricted Subsidiaries to the extent such Investment consists of (A)
Qualified Capital Stock of the Company or (B) amounts referred to in clause
(y)(2) of Section 4.11, which Investments shall be excluded from the sum in the
previous sentence, provided that the amount of any Investments pursuant to
clause (B) shall be deducted from amounts referred to in clause (y)(2) of
Section 4.11.
"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 the
Company, 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 the Company's 12% Senior Subordinated
Notes due 1999 in the aggregate principal amount of $100 million.
"Preferred Stock" of an entity means the Capital Stock of that entity which
is preferred as to the payment of dividends or the distribution of assets on any
voluntary or involuntary liquidation, over the shares of any other class or
series of Capital Stock of said entity.
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The term "principal" of a debt security means the principal amount of the
security plus the premium, if any, on the security.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Exhibit A attached hereto.
The term "pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock, partnership
interests and other equity or ownership interests in any other Person.
"Property Net Revenue Coverage Ratio" means, with respect to Property to be
acquired by the Company or any Subsidiary, the ratio of (i) 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 prior to 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 (ii)
the aggregate Fixed Charges the Company or any Subsidiary will accrue during the
fiscal quarter in which the acquisition date occurs and the three fiscal
quarters immediately subsequent to 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 (a) 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 (b) 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
common stock (that is Qualified Capital Stock) of the Company pursuant to a
registration statement that has been declared effective by the SEC pursuant to
the Securities Act (other than a registration statement on Form S-8 or otherwise
relating to equity securities issuable under any employee benefit plan of the
Company).
"Purchase Agreement" means, with respect to the Original Securities, the
Purchase Agreement dated September 15, 1999, among the Company, the Subsidiary
Guarantors and the Initial Purchasers, or, with respect to Series E Securities
other than the Original Securities, the Purchase Agreement dated the date of
pricing thereof, among the Company, the Subsidiary Guarantors named therein and
the Purchaser or Purchasers, as applicable, named therein.
"Purchaser" means each initial purchaser of Series E Securities named in
the applicable Purchase Agreement.
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"Purchase Money Obligations" means indebtedness evidenced by a note,
debenture, bond or other security or investment (whether or not secured by any
lien or other security interest) issued to or assumed in favor of a vendor as
all or part of the purchase price of property acquired by the Company or any
Subsidiary; provided, however, that such term shall not include any account
payable or any other indebtedness incurred, created or assumed in the ordinary
course of business in connection with the obtaining of material, products or
services.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Institutional Buyer" has the meaning attributed thereto in Rule
144A under the Securities Act.
"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 Securities as
is selected by the Company.
"Rating Date" means, in respect of each Change of Control, the date that is
immediately prior to 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 prior to 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 prior
to the end of such 90-day period and continuing thereafter the rating of the
Securities is under publicly announced consideration for possible downgrade by
either Rating Agency) of either of the following: (i) the rating of the
Securities by either Rating Agency within such period shall be at least one
gradation below the rating of the Securities by such Rating Agency on the
Rating Date, or (ii) either Rating Agency shall withdraw its ratings of the
Securities. 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).
"Registration Default" shall have the meaning ascribed thereto in the
applicable Registration Rights Agreement.
"Registration Rights Agreement" means, with respect to the Original
Securities, the Registration Rights Agreement dated the Issue Date, among the
Company, the Subsidiary Guarantors and the Initial Purchasers, or, with respect
to the Series E Securities other than the Original Securities, the Registration
Rights Agreement dated the date of issue thereof, among the Company, the
Subsidiary Guarantors named therein and the Purchaser or Purchasers, as
applicable, named therein.
"Regulation S" means Regulation S under the Securities Act.
"Related Person" means (i) any Affiliate of the Company, (ii) any
individual or other Person who directly or indirectly holds 10% or more of the
combined voting power of the then outstanding Voting Stock of the Company, (iii)
any relative of any individual referred to in clauses (i), (ii) and
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(iv) hereof by blood, marriage or adoption not more remote than first cousin and
(iv) any officer or director of the Company.
"Representative" means the indenture trustee or other trustee, agent or
representative for any issue of Senior Indebtedness or Guarantor Senior
Indebtedness.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Subsidiary, prior to the scheduled maturity or prior to any scheduled repayment
of principal or sinking fund payment, as the case may be, in respect of
Indebtedness of the Company or any Subsidiary that is subordinate in right to
the Securities or the Guarantees, provided, however, that any such acquisition
shall be deemed not to be a Restricted Debt Prepayment to the extent it is made
(x) in exchange for or with the proceeds from the substantially concurrent
issuance of Qualified Capital Stock or (y) in exchange for or with the proceeds
from the substantially concurrent issuance of Indebtedness, in a principal
amount (or, if such Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon the acceleration thereof, with an
original issue price) not to exceed the lesser of (i) the principal amount of
Indebtedness being acquired in exchange therefor (or with the proceeds
therefrom) and (ii) if such Indebtedness being acquired was issued at an
original issue discount, the original issue price thereof plus amortization of
the original issue discount at the time of the incurrence of the Indebtedness
being issued in exchange therefor (or the proceeds of which will finance such
acquisition), and provided further that any such Indebtedness shall have an
Average Life not less than the Average Life of the Indebtedness being acquired,
and shall contain subordination and default provisions no less favorable, in any
material respect, to holders of the Securities than those contained in such
Indebtedness being acquired.
"Restricted Payment" means any (i) Stock Payment, (ii) Investment (other
than Permitted Investments and other than Permitted Unrestricted Subsidiary
Investments) or (iii) Restricted Debt Prepayment.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group and its successors.
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Series E Securities or any Series F Securities
authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Indebtedness" means all Indebtedness of the Company (present and
future) created, incurred, assumed or guaranteed by the Company (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
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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, Senior
Indebtedness of the Company does not include (i) any Indebtedness of the Company
to any Subsidiary or any Unrestricted Subsidiary and (ii) any amounts payable or
other liabilities to trade creditors.
"Series A Securities" means the 10 1/4% Senior Subordinated Notes due 2006,
Series A, issued and sold pursuant to the Series A/B Purchase Agreement and the
Series A/B Indenture.
"Series A/B Indenture" means the Indenture dated as of March 15, 1996 among
the Company, the "Subsidiary Guarantors" (as therein defined) and Texas Commerce
Bank National Association, as trustee, and providing for the issuance of the
Company's 10 1/4% Senior Subordinated Notes due 2006 in the aggregate principal
amount of $150 million.
"Series A/B Issue Date" means the first date on which the Series A
Securities were issued under the Series A/B Indenture, March 19, 1996.
"Series A/B Registration Rights Agreement" means the Registration Rights
Agreement dated March 14, 1996, among the Company, the "Subsidiary Guarantors"
(as therein defined) and the "Purchasers" (as therein defined).
"Series A/B Securities" means any Series A Securities or any Series B
Securities authenticated and delivered under the Series A/B Indenture.
"Series A-D Securities" means the Series A/B Securities and the Series C/D
Securities.
"Series B Securities" means the 10 1/4% Senior Subordinated Notes due 2006,
Series B, issued and sold pursuant to the Series A/B Registration Rights
Agreement and the Series A/B Indenture.
"Series C Securities" means the 10 1/4% Senior Subordinated Notes due 2006,
Series C, issued and sold pursuant to the Series C/D Purchase Agreement and the
Series C/D Indenture.
"Series C/D Indenture" means the Indenture dated as of July 21, 1997, among
the Company, the "Subsidiary Guarantors" (as therein defined) and Texas Commerce
Bank National Association, as trustee, and providing for the issuance of the
Company's 10 1/4% Senior Subordinated Notes due 2006 in the aggregate principal
amount of $50 million.
"Series C/D Purchase Agreement" means the Purchase Agreement dated July 18,
1997, among the Company, the "Subsidiary Guarantors" (as therein defined) and
"Purchaser" (as therein defined).
"Series C/D Registration Rights Agreement" means the Registration Rights
Agreement dated July 23, 1997, among the Company, the "Subsidiary Guarantors"
(as therein defined) and the "Purchaser" (as therein defined).
"Series C/D Securities" means any Series C Securities or any Series D
Securities authenticated and delivered under the Series C/D Indenture.
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"Series D Securities" means the 10 1/4% Senior Subordinated Notes due 2006,
Series D, issued and sold pursuant to the Series C/D Registration Rights
Agreement and the Series C/D Indenture.
"Series E Securities" means the 10 1/4% Senior Subordinated Notes due 2006,
Series E, that are issued and sold pursuant to the applicable Purchase Agreement
and this Indenture.
"Series F Securities" means the 10 1/4% Senior Subordinated Notes due 2006,
Series F, that are issued and sold pursuant to the applicable Registration
Rights Agreement and this Indenture.
"Stock Payment" means, with respect to any Person, (a) the declaration or
payment by such Person, either in cash or in property, of any dividend on
(except, in the case of the Company, dividends payable solely in Qualified
Capital Stock of the Company), or the making by such Person or any of its
subsidiaries of any other distribution in respect of, such Person's Capital
Stock or any warrants, rights or options to purchase or acquire shares of any
class of such Capital Stock (except for the issuance of Qualified Capital Stock
pursuant to the exercise thereof), or (b) the redemption, repurchase, retirement
or other acquisition for value by such Person or any of its subsidiaries,
directly or indirectly, of such Person's or any of its subsidiaries' Capital
Stock or any warrants, rights or options to purchase or acquire shares of any
class of such Capital Stock other than, in the case of the Company, through the
issuance in exchange therefor solely of Qualified Capital Stock of the Company;
provided, however, that in the case of a Subsidiary, the term "Stock Payment"
shall not include (i) any such payment with respect to its Capital Stock or
warrants, rights or options to purchase or acquire shares of any class of its
Capital Stock payable to the Company or a Wholly Owned Subsidiary, or (ii) the
payment of pro rata dividends to holders of minority interests in Capital Stock
of a Subsidiary.
A "subsidiary" of any Person means (i) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more wholly owned subsidiaries of such Person or by such Person and one
or more wholly owned subsidiaries of such Person, (ii) a partnership in which
such Person or a wholly owned subsidiary of such Person is, at the date of
determination, a general or limited partner of such partnership, but only if
such Person or its wholly owned subsidiary is entitled to receive more than
fifty percent of the assets of such partnership upon its dissolution, or (iii)
any other Person (other than a corporation or partnership) in which such Person,
a wholly owned subsidiary of such Person or such Person and one or more wholly
owned subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has (x) at least a majority ownership interest or (y) the
power to elect or direct the election of a majority of the directors or other
governing body of such Person.
"Subsidiary" means any subsidiary of the Company; provided, that an
Unrestricted Subsidiary shall not be deemed a subsidiary of the Company for
purposes of this Indenture.
"Subsidiary Guarantor" means (i) 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, (ii) each of the
Company's Subsidiaries that becomes a guarantor of the Securities in compliance
with the provisions of Article Eleven hereof and (iii) each of the Company's
Subsidiaries executing a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of this Indenture.
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"Transfer Restricted Security" has the meaning attributed thereto in the
applicable Registration Rights Agreement; provided, however, that the Trustee
shall be entitled to request and conclusively rely upon an Opinion of Counsel
with respect to whether or not any Security is a Transfer Restricted Security.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended and in force at the date as of which this Indenture was executed until
such time as this Indenture is qualified under the TIA, and thereafter as in
effect on the date on which this Indenture is qualified under the TIA, except as
provided in Section 9.03 hereof.
"Trust Officer" means any officer or assistant officer within the corporate
trust department of the Trustee assigned by the Trustee to administer its
corporate trust matters.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor.
"U.S. Legal Tender" means such coin or currency of the United States as at
the time of payment shall be legal tender for the payment of public and private
debts.
"United States" means the United States of America.
"Unrestricted Subsidiary" means (1) 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
subsidiary of the Company which at the time of determination shall be an
Unrestricted Subsidiary (as designated by the Board of Directors of the Company,
as provided below) and (2) any subsidiary of an Unrestricted Subsidiary. The
Board of Directors of the Company may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary
through merger or consolidation or Investment therein) to be an Unrestricted
Subsidiary only if: (A) such Subsidiary does not own any Capital Stock of, or
own or hold any Lien on any property of, any other Subsidiary of the Company
which is not a Subsidiary of the Subsidiary to be so designated or otherwise an
Unrestricted Subsidiary; (B) all the Indebtedness of such Subsidiary shall at
the date of designation, and will at all times thereafter, consist of Non-
Recourse Indebtedness; (C) the Company certifies that such designation complies
with Section 4.11; and (D) such Subsidiary, either alone or in the aggregate
with all other Unrestricted Subsidiaries, does not operate, directly or
indirectly, all or substantially all of the business of the Company and the
Subsidiaries. Any such designation by the Board of Directors of the Company
shall be evidenced to the Trustee by filing with the Trustee a Board Resolution
of the Board of Directors of the Company giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions. If, at any time, such Unrestricted Subsidiary would fail
to meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred as of
such date. The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Subsidiary; provided that immediately after giving effect to
such designation, the Company could
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incur at least $1.00 of additional Indebtedness (excluding Permitted
Indebtedness) pursuant to the first paragraph of Section 4.09 on a pro forma
basis taking into account such designation.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
board of directors or other governing body of such Person.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock (other
than directors' qualifying shares, if applicable) of which is owned by the
Company or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
Term Defined in Section
"Agent Members".......................... 2.07
"Bankruptcy Law"......................... 6.01
"Change of Control Offer"................ 4.17
"Change of Control Notice"............... 4.17
"Change of Control Purchase Date"........ 4.17
"Custodian".............................. 6.01
"DTC".................................... 4.12
"Event of Default"....................... 6.01
"Funding Guarantor"...................... 11.05
"Global Security"........................ 2.01
"Legal Holiday".......................... 13.07
"Net Proceeds Offer"..................... 4.12
"Net Proceeds Offer Amount".............. 4.12
"Net Proceeds Payment Date".............. 4.12
"Paying Agent"........................... 2.03
"Payment Default"........................ 10.02
"Payment Notice"......................... 10.02
"Payment Restriction".................... 4.14
"Physical Securities".................... 2.01
"Project Period"......................... 4.12
"Registrar".............................. 2.03
"Related Person Transaction"............. 4.15
"Security Register"...................... 2.06
"Series A/B Net Proceeds Offer".......... 4.12
"Series A/B Net Proceeds Offer Amount"... 4.12
"Series A/B Net Proceeds Payment Date"... 4.12
"Series C/D Net Proceeds Offer".......... 4.12
"Series C/D Net Proceeds Offer Amount"... 4.12
"Series C/D Net Proceeds Payment Date"... 4.12
"Subsidiary Guarantor Payment Default"... 12.02
"Subsidiary Guarantor Payment Notice".... 12.02
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"U.S. Government Obligations"............ 8.02
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms, if used in this Indenture, have the following meanings:
"indenture securities" means the Securities and the Guarantees.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Subsidiary Guarantors and any other obligor on the Securities or the
Guarantees.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them therein.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) any gender used in this Indenture shall be deemed to include
the neuter, masculine or feminine genders;
(6) provisions apply to successive events and transactions;
(7) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other Subdivision; and
(8) when used with reference to the Securities, the expression
"of like tenor" refers to Securities of the same series.
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ARTICLE TWO
The Securities
SECTION 2.01. Form and Dating.
The definitive Securities shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities or notations of Guarantees, as the
case may be, as evidenced by their execution of such Securities or notations of
Guarantees, as the case may be.
Except as indicated in the next succeeding paragraph, Securities (including
the notations thereon relating to the Guarantees and the Trustee's certificate
of authentication) shall be issued initially in the form of one or more
permanent global Securities substantially in the form set forth in Exhibits A,
A-1 and A-2 (each being herein called a "Global Security") deposited with the
Trustee, as custodian for DTC, duly executed by the Company and authenticated by
the Trustee as hereinafter provided, and each shall bear the legend set forth on
Exhibit A hereto. Subject to the limitation set forth in Section 2.02, the
principal amounts of the Global Securities may be increased or decreased from
time to time by adjustments made on the records of the Trustee, as custodian for
DTC, as hereinafter provided.
Securities (including the notations thereon relating to the Guarantees and
the Trustee's certificate of authentication) originally issued and sold in
reliance on any exemption from registration under the Securities Act other than
Rule 144A shall be issued, and Securities originally offered and sold in
reliance on Rule 144A may be issued, in the form of permanent certificated
securities in registered form in substantially the form set forth in Exhibits A
and A-1 ("Physical Securities"). The Securities may also have such insertions,
omissions, substitutions and variations as may be permitted by or consistent
with this Indenture. The provisions of Exhibits A, A-1 and A-2 are part of this
Indenture. The Securities may have notations, legends and endorsements required
by law, stock exchange rule or usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on them. Each Security shall
be dated the date of its authentication.
The terms and provisions contained in the Securities and the Guarantees
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company, the Subsidiary Guarantors and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
SECTION 2.02. Execution and Authentication.
One Officer and the Secretary or an Assistant Secretary of the Company
shall sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be reproduced on the Physical Securities.
If an Officer whose signature is on a Security no longer holds that office
at the time the Security is authenticated, the Security shall be valid
nevertheless.
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A Security shall not be valid until the Trustee or an authenticating agent
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Series E Securities for original issue
on the Issue Date in the aggregate amount of $75,000,000 (the "Original
Securities"), (ii) Series E Securities for original issue after the Issue Date
in such additional principal amounts, not to exceed $75,000,000 in the
aggregate, as may be set forth in an Officers' Certificate described as follows
and (iii) Series F Securities from time to time for issue only in exchange for a
like principal amount of Series E Securities, in each case upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of Securities to be
authenticated, the series, form and type of Securities, the date on which the
Securities are to be authenticated and the date from which interest on such
Securities shall accrue.
The aggregate principal amount of Series E Securities which may be
authenticated and delivered under this Indenture for original issue from time to
time is limited to $150,000,000, and the aggregate principal amount of Series F
Securities which may be authenticated and delivered under this Indenture for
original issue from time to time is limited to $150,000,000. The aggregate
principal amount of Securities outstanding at any one time may not exceed
$150,000,000 except as provided in Section 2.08 hereof.
The Series E Securities and the Series F Securities shall be considered
collectively to be a single class for all purposes of this Indenture, including,
without limitation, waivers, amendments, redemptions and offers to purchase.
As provided in the applicable Registration Rights Agreement and subject to
the limitations set forth therein, at the option of the Holders, the Series E
Securities shall be exchangeable for Series F Securities of like aggregate
principal amount pursuant to an Exchange Offer.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Series E Securities executed by the Company
and having the notations of Guarantees executed by the Subsidiary Guarantors to
the Trustee for authentication, together with a request from the Company for the
authentication and delivery of such Series E Securities, and the Trustee in
accordance with such request shall authenticate and deliver such Series E
Securities with the notations of Guarantees thereon as provided in this
Indenture. Such request from the Company shall specify the principal amount of
the Series E Securities to be authenticated and the date on which the original
issue of Series E Securities is to be authenticated. In addition, on or prior
to each Exchange Offer Consummation Date, the Company may deliver Series F
Securities executed by the Company and having the notations of Guarantees
executed by the Subsidiary Guarantors to the Trustee for authentication,
together with a request from the Company for the authentication and delivery of
such Series F Securities, and the Trustee in accordance with such request shall
authenticate and deliver such Series F Securities with the notations of
Guarantees thereon as provided in this Indenture. Such request from the Company
shall specify the principal amount of the Series F Securities to be
authenticated and the date on which the Series F Securities are to be exchanged
for an equal principal amount of Series E Securities.
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In connection with the transfer of an entire Global Security to beneficial
owners pursuant to this Section, the Global Security shall be deemed to be
surrendered to the Trustee for cancellation, and the Company shall execute, and
the Trustee shall upon a request from the Company authenticate and deliver, to
each beneficial owner identified by DTC, in exchange for its beneficial interest
in the Global Security, an equal aggregate principal amount of Physical
Securities of authorized denominations.
The Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
The Trustee may appoint an authenticating agent to authenticate Securities.
An authenticating agent may authenticate Securities whenever the Trustee may do
so except on original issuance. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
its Affiliates.
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency designated pursuant to
Section 4.04 where Securities may be presented for registration of transfer or
for exchange (the "Registrar") and an office or agency designated pursuant to
Section 4.04 where Securities may be presented for payment (the "Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture. Such agency agreement shall provide for
reasonable compensation for such services. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent and shall furnish
the Trustee with an executed counterpart of any such agency agreement. If the
Company fails to maintain or act as Registrar or Paying Agent, the Trustee shall
act as such and shall be duly compensated therefor.
The Registrar or a co-registrar and a Paying Agent shall be maintained by
the Company in the City of New York. The Company initially designates the
Trustee as the Registrar and Paying Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust.
On or prior to each due date of the principal and interest on any Security,
the Company shall deposit with the Paying Agent immediately available funds
sufficient to pay such principal and interest becoming due. The Company shall
require each Paying Agent other than the Trustee to hold in trust for the
benefit of Holders or the Trustee all money held by such Paying Agent for the
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payment of principal or interest on the Securities, and to notify the Trustee of
any Default by the Company or any Subsidiary Guarantor in making any such
payment. While any such Default continues, the Trustee may require the Paying
Agent to pay all money held by it to the Trustee. Except as provided in the
immediately preceding sentence, the Company at any time may require a Paying
Agent to pay all money held by it to the Trustee. Upon doing so, such Paying
Agent (other than the Company or a Subsidiary) shall have no further liability
for the money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold as separate trust funds all money held by it as Paying Agent.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the name and addresses of
Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not
the Registrar, the Company shall furnish or cause to be furnished to the Trustee
at least five Business Days before each semiannual interest payment date, and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Holders, and the Company shall otherwise comply with TIA (S) 312(a).
SECTION 2.06. Transfer and Exchange.
The Company shall cause to be kept a register (the "Security Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of Securities.
The Security Register shall be in written form or any other form capable of
being converted into written form within a reasonable time. At all reasonable
times and during normal business hours, the Security Register shall be open to
inspection by the Trustee.
Subject to the provisions of this Section 2.06 and Section 2.07 hereof,
upon surrender for registration of transfer of any Security at the office or
agency of the Company designated pursuant to Section 4.04 hereof, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of like
tenor and of any authorized denomination and of a like aggregate principal
amount, each such Security having the notation of Guarantees thereon.
Furthermore, any Holder of a Global Security shall, by acceptance of such
Global Security, be deemed to have agreed that transfers of beneficial interests
in such Global Security may be effected only through a book-entry system
maintained by DTC (or its agent), and that ownership of a beneficial interest in
a Global Security shall be required to be reflected in book entry form.
At the option of any Holder, Securities may be exchanged for other
Securities of like tenor and of any authorized denomination and of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at
the office or agency of the Company designated pursuant to Section 4.04 hereof.
Further, at the option of any Holder Series E Securities may be exchanged,
pursuant to an Exchange Offer, for Series F Securities of like aggregate
principal amount, upon surrender of the Series E Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, the Subsidiary Guarantors shall execute notations of
Guarantees on, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
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All Securities and the Guarantees noted thereon issued upon any
registration of transfer or exchange of Securities shall be the valid
obligations of the Company and the respective Subsidiary Guarantors, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. As a special condition to
registration of transfer or exchange of any Transfer Restricted Securities
involving removal of a Private Placement Legend (other than pursuant to an
effective registration statement under the Securities Act), the Holder
requesting such registration of transfer or exchange shall furnish the Opinion
of Counsel called for by Section 2.14 hereof. The following additional special
conditions shall apply to the indicated types of transfers or exchanges:
(a) Respecting any requested registration of transfer or exchange
of Transfer Restricted Securities in the form of Physical Securities, such
Physical Securities shall be accompanied, in the sole discretion of the
Company, by the following additional information and documents, as
applicable:
(1) if such Physical Security is being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
substantially the form of Exhibit A-3 hereto); or
(2) if such Physical Security is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A under the
Securities Act, a certification to that effect (in substantially the
form of Exhibit A-3 hereto); or
(3) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification to that
effect (in substantially the form of Exhibit A-3 hereto), a Transferee
Certificate for Institutional Accredited Investors in the form of
Exhibit A-4 hereto and an Opinion of Counsel to the effect that such
transfer is in compliance with the Securities Act; or
(4) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit A-3 hereto), a Transferor
Certificate for Regulation S Transfers in the form of Exhibit A-5
hereto and an Opinion of Counsel to the effect that such transfer is
in compliance with the Securities Act; or
(5) if such Physical Security is being transferred in
reliance on Rule 144, delivery of a certification to that effect
(substantially in the form of Exhibit A-3 hereto) and an Opinion of
Counsel to the effect that such transfer is in compliance with the
Securities Act; or
(6) if such Physical Security is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit A-3 hereto) and an Opinion of Counsel to the
effect that such transfer is in compliance with the Securities Act.
(b) Respecting any requested exchange of a Physical Security for
a beneficial interest in a Global Security, such Physical Security shall be
accompanied, in the sole discretion of the Company, by the following
additional information and documents:
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(1) a certification, substantially in the form of Exhibit A-
3 hereto, that such Physical Security is being transferred to a
Qualified Institutional Buyer; and
(2) written instructions directing the Registrar to make, or
to direct DTC to make, an endorsement on the Global Security to
reflect an increase in the aggregate amount of the Securities
represented by the Global Security;
whereupon the Registrar shall cancel such Physical Security and cause, or
direct DTC to cause, in accordance with the standing instructions and
procedures existing between DTC and the Registrar, the aggregate principal
amount of Securities represented by the Global Security to be increased
accordingly. If no Global Security is then outstanding, the Company shall
issue and the Trustee shall upon a request from the Company authenticate a
new Global Security in the appropriate amount.
(c) Any Person having a beneficial interest in a Global Security
may upon request to the Registrar exchange such beneficial interest for a
Physical Security. Upon receipt by the Registrar of written instructions
(or such other form of instructions as is customary for DTC) from DTC or
its nominee on behalf of any Person having a beneficial interest in a
Global Security and upon receipt by the Registrar of a written order or
such other form of instructions as is customary for DTC or the Person
designated by DTC as having such a beneficial interest containing
registration instructions and, in the case of any such transfer or exchange
of a beneficial interest in Transfer Restricted Securities, the following
additional information and documents:
(1) if such beneficial interest is being transferred to the
Person designated by DTC as being the beneficial owner, a
certification from such Person to that effect (in substantially the
form of Exhibit A-3 hereto); or
(2) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A under the
Securities Act, a certification to that effect (in substantially the
form of Exhibit A-3 hereto); or
(3) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of a certification to that
effect (substantially in the form of Exhibit A-3 hereto), a Transferee
Certificate for Institutional Accredited Investors in the form of
Exhibit A-4 hereto and an Opinion of Counsel to the effect that such
transfer is in compliance with the Securities Act; or
(4) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit A-3 hereto), a Transferor
Certificate for Regulation S Transfers in the form of Exhibit A-5
hereto and an Opinion of Counsel to the effect that such transfer is
in compliance with the Securities Act; or
(5) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of Exhibit A-3
hereto) and an Opinion of Counsel to the effect that such transfer is
in compliance with the Securities Act; or
(6) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit A-3 hereto) and an Opinion of Counsel to the
effect that such transfer is in compliance with the Securities Act,
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then the Registrar will cause, in accordance with the standing instructions
and procedures existing between DTC and the Registrar, the aggregate
principal amount of the Global Security to be reduced and, following such
reduction, the Company will execute and, upon receipt of a request from the
Company, the Trustee will authenticate and deliver to the transferee a
Physical Security. Securities issued in exchange for a beneficial interest
in a Global Security pursuant to this Section 2.06(c) shall be registered
in such names and in such authorized denominations as DTC, pursuant to
instructions from Agent Members or otherwise, shall instruct the Registrar
in writing. The Registrar shall deliver such Physical Securities to the
Persons in whose names such Physical Securities are so registered.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to an Exchange Offer or Section 2.11, 3.06 or 9.05
hereof not involving any transfer.
Neither the Trustee, the Registrar nor the Company shall be required (i) to
issue, register the transfer of or exchange any Physical Security during a
period of 30 days before a selection of Securities to be redeemed, or (ii) to
register the transfer of or exchange any Physical Security so selected for
redemption in whole or in part, except the unredeemed portion of any such
Security being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Securities.
Each Global Security shall be (i) registered in the name of DTC or its
nominee, (ii) delivered to the Trustee as custodian for DTC and (iii) bear the
legend set forth in Exhibit A-2 hereto.
Members of, or participants in, DTC ("Agent Members") shall have no rights
under this Indenture with respect to any Global Security held on their behalf by
DTC, or the Trustee as its custodian, or under such Global Security, and DTC may
be treated by the Company, the Subsidiary Guarantors, the Trustee and any agent
of the Company, the Subsidiary Guarantors or the Trustee as the absolute owner
of such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Subsidiary Guarantors,
the Trustee or any agent of the Company, the Subsidiary Guarantors or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by DTC or shall impair, as between DTC and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a holder of any Security.
Transfers of a Global Security shall be limited to transfers of such Global
Security in whole, but not in part, to DTC, its successors or their respective
nominees. Interests of beneficial owners in a Global Security may be transferred
or exchanged for Physical Securities in accordance with the rules and procedures
of DTC and the provisions of Section 2.06 hereof. In addition, Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in a Global Security if, and only if, either (1) DTC
notifies the Company that it is unwilling or unable to continue as depositary
for the Global Security and a successor depositary is not appointed by the
Company within 90 days of such notice, (2) an Event of Default has occurred and
is continuing and the Registrar has received a request from DTC to issue
Physical Securities in lieu of all or a portion of the Global Security (in which
case the Company shall deliver Physical Securities within 30 days of such
request) or (3) the Company determines not to have the Securities represented by
the Global Security and notifies DTC and the Registrar thereof.
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In connection with the transfer of an entire Global Security to beneficial
owners pursuant to this Section, the Global Security shall be deemed to be
surrendered to the Trustee for cancellation, and the Company shall execute, and
the Trustee shall upon request of the Company authenticate and deliver, to each
beneficial owner identified by DTC, in exchange for its beneficial interest in
the Global Security, an equal aggregate principal amount of Physical Securities
of authorized denominations.
The Holders of a Global Security may grant proxies or otherwise authorize
any Persons, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
SECTION 2.08. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or the Registrar or
if the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the requirements of the Trustee are met. An indemnity
bond may be required by the Trustee, the Company or any Subsidiary Guarantor
that is sufficient in the judgment of the Company, the Subsidiary Guarantors and
the Trustee to protect the Company, the Subsidiary Guarantors, the Trustee or
any Agent from any loss which any of them may suffer if a Security is replaced.
The Company may charge for its expenses (including fees and expenses of the
Trustee) in replacing a Security.
SECTION 2.09. Outstanding Securities.
Securities outstanding at any time are all Securities authenticated by the
Trustee except for those cancelled by it, those delivered to it for cancellation
and those described in this Section 2.09 as not outstanding. Except as set
forth in Section 2.10, a Security does not cease to be outstanding because the
Company, the Subsidiary Guarantors or any of their respective Subsidiaries or
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under Section
4.01, it ceases to be outstanding and interest on it ceases to accrue.
SECTION 2.10. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, any Subsidiary Guarantor or an Affiliate of the Company shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded.
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SECTION 2.11. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may prepare
and, upon written order of the Company, the Trustee shall authenticate temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate and deliver definitive
Securities in exchange for temporary Securities surrendered to it.
SECTION 2.12. Cancellation.
The Company or any Subsidiary Guarantor at any time may deliver Securities
to the Trustee for cancellation. The Registrar and Paying Agent shall forward
to the Trustee any Securities surrendered to them for transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration,
transfer, exchange, payment or cancellation and shall destroy cancelled
Securities or retain cancelled Securities in accordance with the Trustee's
standard retention policy unless the Company directs their return to the
Company. Except as provided in Section 2.08, the Company may not issue new
Securities to replace Securities that it has paid or delivered to the Trustee
for cancellation.
Securities that are mandatorily or optionally redeemed by the Company or
that are purchased by the Company pursuant to a Net Proceeds Offer, or pursuant
to a Change of Control Offer, or that are otherwise acquired by the Company,
will be surrendered to the Trustee for cancellation.
SECTION 2.13. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner (plus interest on such
defaulted interest to the extent lawful) to the persons who are Holders on a
subsequent special record date, in each case at the rate provided in the
Securities and in Section 4.01 hereof. The Company shall fix the special record
date and payment date. At least 10 days before the special record date, the
Company shall mail to each Holder a notice that states the special record date,
the payment date and the amount of defaulted interest to be paid.
SECTION 2.14. Private Placement Legend.
(a) All Series E Securities issued hereunder shall bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar shall deliver only
Securities that bear the Private Placement Legend unless, and the Trustee is
hereby authorized to deliver Securities without the Private Placement Legend if,
(i) there is delivered to the Trustee an Opinion of Counsel to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act, which fact has been certified to the Trustee in an
Officers' Certificate. Upon the transfer, exchange or replacement of Securities
not bearing the Private Placement Legend, the Registrar shall deliver Securities
that do not bear the Private Placement Legend.
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(b) By its acceptance of any Security bearing the Private Placement Legend,
each Holder of such a Security acknowledges the restrictions on transfer of such
Security set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Security only as provided in this Indenture.
ARTICLE THREE
Redemption
SECTION 3.01. Notice to Trustee.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the redemption price and the
principal amount of Securities to be redeemed.
The Company shall give each notice provided for in this Section at least 35
days before the redemption date (unless a shorter notice period shall be
satisfactory to the Trustee). Any notice given pursuant to this Section 3.01
may be cancelled at any time prior to notice of such redemption being mailed to
any Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed in multiples of $1,000 pro rata, by lot or
by any other method that the Trustee considers fair and appropriate and, if the
Securities are listed on any securities exchange, by a method that complies with
the requirements of such exchange. The Trustee shall make the selection from
outstanding Securities not previously called for redemption. The Trustee may
select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them it selects
shall be in amounts of $1,000 or whole multiples of $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company
promptly of the Securities or portions of Securities to be called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail a notice of redemption by first-class mail to each Holder of
Securities to be redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
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(4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in the payment of the
redemption price or accrued interest, interest on Securities called for
redemption ceases to accrue on and after the redemption date;
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued; and
(7) the subparagraph of paragraph 5 of the Securities pursuant to
which the Securities called for redemption are being redeemed.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the redemption date
at the redemption price. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price, plus accrued interest to the redemption
date.
SECTION 3.05. Deposit of Redemption Price.
On or before the redemption date, the Company shall deposit with the Paying
Agent immediately available funds sufficient to pay the redemption price of, and
accrued interest on, the Securities to be redeemed on that date. The Paying
Agent shall promptly return to the Company any money so deposited which is not
required for that purpose upon the written request of the Company, except with
respect to monies owed as obligations to the Trustee pursuant to Article Seven.
If any Security called for redemption shall not be so paid upon redemption
because of the failure of the Company to comply with the preceding paragraph,
interest will continue to be payable on the unpaid principal, including from the
redemption date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided in
the Securities and in Section 4.01 hereof.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Security or Securities equal in
aggregate amount to the unredeemed portion of the Security surrendered.
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ARTICLE FOUR
Covenants
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities on
the dates and in the manner provided in the Securities and this Indenture.
Principal of and interest on the Securities shall be considered paid on the date
due if, subject to Articles Ten and Twelve hereof, the Trustee or Paying Agent
holds on that date money deposited by the Company designated for and sufficient
to pay all principal and interest then due.
The Company shall pay interest on overdue principal at the rate borne by
the Securities and shall pay interest on overdue installments of interest at the
same rate to the extent lawful.
The Company shall notify the Trustee and any Paying Agent immediately upon
the occurrence of any Registration Default and, with respect to Additional
Interest payments pursuant to Section 4 of the applicable Registration Rights
Agreement, the Company shall notify the Trustee and any Paying Agent prior to
the date of any interest payment of the amount of Additional Interest payable to
each Holder.
SECTION 4.02. SEC Reports.
(a) Each of the Company and the Subsidiary Guarantors shall file with the
Trustee within 15 days after it files them with the SEC copies of the annual
reports and of the information, documents, and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which each of the Company and the Subsidiary Guarantors is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If
the Company is not subject to the requirements of such Section 13 or 15(d) of
the Exchange Act, the Company shall file with the Trustee such reports,
information and other documents as required pursuant to Section 4.18 hereof.
The Company and each of the Subsidiary Guarantors also shall comply with the
other provisions of TIA (S) 314(a).
(b) So long as any of the Securities remain outstanding, the Company shall
cause each annual, quarterly and other financial report mailed or otherwise
furnished by it generally to stockholders to be filed with the Trustee and
mailed to the Holders at their addresses appearing in the register of Securities
maintained by the Registrar, in each case at the time of such mailing or
furnishing to stockholders.
(c) The Company and the Subsidiary Guarantors shall provide the Trustee
with a sufficient number of copies of all reports and other documents and
information that the Trustee may be required to deliver to Holders under this
Section 4.02.
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SECTION 4.03. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
such Officer's knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which such Officer may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and that
to the best of such Officer's knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Securities are prohibited. Such Officers' Certificate
shall comply with TIA (S) 314(a)(4).
(b) The Company and the Subsidiary Guarantors will, so long as any of the
Securities are outstanding, deliver to the Trustee forthwith upon any Officer
becoming aware of any Default or Event of Default or default in the performance
of any covenant, agreement or condition contained in this Indenture, an
Officers' Certificate specifying such Default or Event of Default and what
action the Company or any Subsidiary Guarantor proposes to take with respect
thereto.
(c) The Company shall promptly deliver to the Trustee an Officers'
Certificate notifying the Trustee of any refunding, refinancing or replacement
of each Bank Credit Agreement.
SECTION 4.04. Maintenance of Office or Agency.
The Company will maintain in the City of New York, an office or agency
where Securities may be surrendered for registration of transfer or exchange or
for presentation for payment and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee's agent
set forth in Section 13.02.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided that
no such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the City of New York, for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
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SECTION 4.05. Corporate Existence.
Subject to Article Five, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate, partnership or other existence of each Material Subsidiary in
accordance with the respective organizational documents of the Company and each
Material Subsidiary and the material rights (charter and statutory) and material
franchises of the Company and the Material Subsidiaries; provided, that the
Company shall not be required to preserve any such right or franchise, or the
corporate existence of any Material Subsidiary, if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and that the loss thereof is not, and
will not be, adverse to the payment and performance of the obligations under the
Securities and otherwise under this Indenture.
SECTION 4.06. Waiver of Stay, Extension or Usury Laws.
The Company and each Subsidiary Guarantor covenants (to the extent that
each may lawfully do so) that it will not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension, or usury law or other law, which would prohibit or forgive the
Company or any Subsidiary Guarantor from paying all or any portion of the
principal of and/or interest on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company and each Subsidiary Guarantor hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 4.07. Payment of Taxes and Other Claims.
The Company and each Material Subsidiary will pay or discharge or cause to
be paid or discharged, before the same shall become delinquent, (1) all taxes,
assessments and governmental charges levied or imposed upon the Company or any
Material Subsidiary or upon the income, profits or property of the Company or
any Material Subsidiary other than any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which appropriate provision has been made in
accordance with GAAP, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a Lien (other than a Permitted
Lien) upon the property of the Company or any Material Subsidiary, in each case
except to the extent the failure to do so would have, in the judgment of the
Company, a material adverse effect on the Company and the Subsidiaries taken as
a whole.
SECTION 4.08. Maintenance of Properties and Insurance.
(a) The Company shall cause all material Property used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order (ordinary wear and tear
excepted) and supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however,
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that nothing in this Section shall prevent the Company or any Subsidiary from
discontinuing the operation or maintenance of any such Property, or disposing of
it, if such discontinuance or disposal is, in the judgment of the Company or
such Subsidiary, desirable in the conduct of its business and not adverse to the
payment and performance of the obligations under the Securities and otherwise
under this Indenture.
(b) The Company shall provide or cause to be provided, for itself and each
of its Subsidiaries, insurance (including appropriate self-insurance) against
loss or damage of the kinds that, in the reasonable, good faith opinion of the
Company are adequate and appropriate for the conduct of the business of the
Company and such Subsidiaries in a prudent manner, with reputable insurers or
with the government of the United States or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such methods as shall be
either (i) consistent with past practices of the Company or the applicable
Subsidiary or (ii) customary, in the reasonable, good faith opinion of the
Company, for corporations similarly situated in the industry, unless the failure
to provide such insurance (together with all other such failures) would not have
a material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
SECTION 4.09. Limitation on Incurrence of Additional Indebtedness.
The Company will not, and will not permit any of the Subsidiaries directly
or indirectly, to issue, incur, assume, guarantee, become liable, contingently
or otherwise, with respect to or otherwise become responsible for the payment of
(collectively, "incur") any Indebtedness (other than Permitted Indebtedness);
provided, however, that if no Default or Event of Default with respect to the
Securities shall have occurred and be continuing at the time or as a consequence
at the incurrence of such Indebtedness, the Company and the Subsidiaries or any
of them may incur Indebtedness if on the date of the incurrence, (i) both (A)
the Company's Consolidated EBITDA Coverage Ratio would have been greater than
2.5 to 1.0 and (B) the Company's Adjusted Consolidated Net Tangible Assets are
equal to or greater than 150% of Indebtedness of the Company and the
Subsidiaries, or (ii) the Company's Adjusted Consolidated Net Tangible Assets
are equal to or greater than 200% of Indebtedness of the Company and the
Subsidiaries.
For purposes of determining any particular amount of Indebtedness incurred
under this Section 4.09, (i) guarantees of Indebtedness otherwise included in
the determination of such amount shall not also be included and (ii) any
Indebtedness incurred by the Company or any Subsidiary incurred for, or related
to, a Person other than another Subsidiary or the Company, as applicable, shall
be deemed to be in an amount equal to the greater of (i) the lesser of (A) the
full amount of the Indebtedness of such other Person or (B) the fair market
value of the assets and properties of the Company or such Subsidiary, as to
which the holder or holders of such Indebtedness are expressly limiting the
obligations of the Company or such Subsidiary, the value of which assets and
properties of the Company or any Subsidiary will be determined in good faith by
the Board of Directors of the Company or such Subsidiary, as applicable (which
determination shall be evidenced by a Board Resolution of the applicable
Person), and (ii) the amount of the Indebtedness of such other Person as has
been expressly contractually assumed or guaranteed by the Company or such
Subsidiary.
Notwithstanding anything to the contrary in this Section 4.09, no
Subsidiary that is not already a Subsidiary Guarantor shall incur any
Indebtedness with respect to any Indebtedness of the
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Company or any other Subsidiary unless such Subsidiary, the Company and the
Trustee execute and deliver a supplemental indenture evidencing such
Subsidiary's Guarantee of the Securities, such Guarantee to be a senior
subordinated unsecured obligation of such Subsidiary.
SECTION 4.10. Limitation on Senior Subordinated Indebtedness.
The Company will not, directly or indirectly, issue, assume, guarantee,
incur or otherwise become liable for any Indebtedness which is both subordinate
or junior in right of payment to any Senior Indebtedness and senior or superior
in right of payment to the Securities. The Subsidiary Guarantors will not,
directly or indirectly, issue, assume, guarantee, incur or otherwise become
liable for any Indebtedness which 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.
SECTION 4.11. Limitation on Restricted Payments.
The Company will not, and will not permit any of the Subsidiaries to,
directly or indirectly, make any Restricted Payment, if at the time of such
Restricted Payment, or on a pro forma basis after giving effect thereto:
(x) a Default or an Event of Default under this Indenture has
occurred and is continuing;
(y) the aggregate amount expended for all Restricted Payments
subsequent to the Issue Date exceeds the sum of (without duplication):
(1) 50% of aggregate Consolidated Net Income (net of losses
resulting from full costs ceiling writedowns attributable to any oil
and gas properties of the Company or any Subsidiary) of the Company
(or if such Consolidated Net Income is a loss, minus 100% of such
loss) earned on a cumulative basis during the period beginning on the
Series A/B Issue Date and ending on the last date of the Company's
fiscal quarter immediately preceding such Restricted Payment; plus
(2) 100% of the aggregate Net Proceeds, received by the
Company from any Person other than a Subsidiary from the issuance and
sale subsequent to the 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 borrowed from the Company or any Subsidiary, until and to the
extent such borrowing is repaid); plus
(3) to the extent not otherwise included in Consolidated Net
Income, dividends, repayments of loans or advances, or other transfers
of assets, in each case to the Company or a Subsidiary after the
Series A/B Issue Date from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Subsidiary
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(valued in each case as provided in the definition of Investment)
other than amounts constituting Permitted Unrestricted Subsidiary
Investments; and
(4) $15 million; or
(z) the Company would not be able to incur $1.00 of additional
Indebtedness (excluding Permitted Indebtedness) as provided in the first
paragraph of Section 4.09.
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; provided, however, that
payments made in accordance with this paragraph shall be counted for purposes of
computing amounts expended pursuant to subclause (y) in the immediately
preceding paragraph.
SECTION 4.12. Limitation on Disposition of Assets.
The Company will not, and will not permit any Subsidiary to, make any Asset
Disposition unless:
(i) in the case of any Asset Disposition or series of related Asset
Dispositions having a fair market value of more than $10 million, the
Company 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 the Board of Directors of the Company and such Subsidiary,
if any,
(ii) 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 the
Company or such Subsidiary may accept proceeds from such 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 such
Asset Disposition does not exceed 15% of Adjusted Consolidated Net Tangible
Assets at the date of such Asset Disposition,
(iii) within 365 days following the receipt of the Net Available
Proceeds from such Asset Disposition, 100% of the Net Available Proceeds
from such Asset Disposition are applied by the Company or such Subsidiary:
(a) to the payment of Indebtedness under the Bank Credit
Agreement and the payment of any other Senior Indebtedness;
(b) at the Company's option to the extent that such Net
Available Proceeds are not applied to Senior Indebtedness, to
Permitted Industry Investments made by the Company or a Subsidiary
(or, to the extent not so applied during such 365 day period, to
Permitted Industry Investments specifically identified during such
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365 day period reasonably anticipated in good faith by the Board of
Directors of the Company to be expended within 180 days after being
specifically identified (such 180-day period, the "Project Period"));
(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 make an 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 (1) 365 days
following the receipt of such Net Available Proceeds or (2) in the
case of application of proceeds intended to be applied under clause
(b), 35 business days following any Project Period) the Series A/B
Securities at a price equal to 100% of the principal amount of the
Series A/B Securities 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 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 Securities at
a price equal to 100% of the principal amount of the Series C/D
Securities plus accrued interest to the Series C/D Net Proceeds
Payment Date, and
(iv) 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 Securities at
a price equal to 100% of the principal amount of the Securities plus
accrued interest to the Net Proceeds Payment Date.
Notwithstanding the foregoing, the Company and its Subsidiaries will not be
required to apply any Net Available Proceeds in accordance with such provisions
except to the extent that the Net Available Proceeds from all Asset Dispositions
which are not applied in accordance with such provisions exceed $5 million.
Notice of a Net Proceeds Offer to purchase the Securities will be made on
behalf of the Company not less than 25 business days nor more than 60 business
days before the Net Proceeds Payment Date. Securities tendered to the Company
pursuant to a Net Proceeds Offer will cease to accrue interest after the Net
Proceeds Payment Date. The Company will not be entitled to any credit against
the above obligations for the principal amount of Securities previously acquired
by the Company. For purposes of this covenant, the term "Net Proceeds Offer
Amount" means the principal of outstanding Securities in an aggregate principal
amount equal to any remaining Net Available Proceeds.
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To exercise the repurchase right, the Holder must deliver on or before the
fifth calendar day prior to the Net Proceeds Payment Date, written notice to the
Company (or an agent designated by the Company for such purpose) of the Holder's
exercise of such right, together with (i) the Security or Securities with
respect to which the right is being exercised, duly endorsed for transfer with
the form entitled "Option of Holder to Elect Purchase" on the reverse side of
the Security completed, and (ii) if the Net Proceeds Payment Date falls between
any record date for the payment of interest on the Securities and the next
succeeding interest payment date, an amount equal to the interest which the
Holder is entitled to receive on such interest payment date; provided, however,
that with respect to Securities held of record by The Depository Trust Company
("DTC") or its nominee, the Company or its designated agent may accept as
tendered for repurchase pursuant to this Section Securities tendered by means of
book entry in accordance with the normal procedures of DTC, provided that any
such interest amount shall be delivered by the Holder to the Company or its
designated agent.
On the Net Proceeds Payment Date, the Company will (i) accept for payment
Securities or portions thereof tendered pursuant to the Net Proceeds Offer in an
aggregate principal amount equal to the Net Proceeds Offer Amount or such lesser
amount of Securities as has been tendered, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Securities or portions thereof
so tendered in an aggregate principal amount equal to the Net Proceeds Offer
Amount or such lesser amount, and (iii) deliver or cause to be delivered to the
Trustee, Securities so accepted together with an Officers' Certificate stating
the Securities or portions thereof tendered to the Company. If the aggregate
principal amount of Securities tendered exceeds the Net Proceeds Offer Amount,
the Trustee will select the Securities to be purchased on a pro rata basis based
on the principal amount of Securities so tendered. The Paying Agent will
promptly mail or deliver to Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Company will execute and the Trustee
will promptly authenticate and mail or make available for delivery to such
Holders of Physical Securities a new Security equal in principal amount to any
unpurchased portion of the Security surrendered. Any Securities not so accepted
will be promptly mailed or delivered to the Holder thereof. The Company will
publicly announce the results of the Net Proceeds Offer on or as soon as
practicable after the Net Proceeds Payment Date. For purposes of this Section
4.12, the Trustee will act as the Paying Agent.
SECTION 4.13. Limitation on Liens Securing Indebtedness.
The Company will not, and will not permit any of the Subsidiaries to,
create, incur, assume or suffer to exist any Liens (other than Permitted Liens)
upon any of their respective Properties securing (i) any Indebtedness of the
Company, unless the Securities are equally and ratably secured or (ii) any
Indebtedness of any Subsidiary Guarantor, unless the Securities or the
Guarantees, as the case may be, are equally and ratably secured; provided that
if such Indebtedness is expressly subordinated to the Securities or the
Guarantees, the Lien securing such Indebtedness will be subordinated and junior
to the Lien securing the Securities or the Guarantees, with the same relative
priority as such Subordinated Indebtedness will have with respect to the
Securities or the Guarantees, as the case may be.
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SECTION 4.14. Limitation on Payment Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any Subsidiary to, directly or
indirectly, create or suffer to exist or allow to become effective any
consensual encumbrance or restriction of any kind (i) on the ability of any of
the Subsidiaries (a) to pay dividends or make other distributions on its Capital
Stock or make payments on any Indebtedness owed to the Company or any other
Subsidiary, (b) to make loans or advances to the Company or any other
Subsidiary, or (c) to transfer any of its Property to the Company or any other
Subsidiary; or (ii) on the ability of such Person or any other subsidiary of
such Person to receive or retain any such (a) dividends, distributions or
payments, (b) loans or advances, or (c) transfers of Property (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 the Company or any Subsidiary, (C) any instrument
governing Indebtedness of a Person acquired by the Company or a Subsidiary at
the time of such acquisition, which encumbrance or restriction is not applicable
to any Person, other than the Person, or the Property of the Person, so
acquired, provided that such Indebtedness was not incurred in anticipation of
such acquisition, (D) with respect to clauses (i)(c) and (ii)(c) 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 this
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.
SECTION 4.15. Limitation on Transactions with Related Persons.
Neither the Company nor any of the Subsidiaries will (i) sell, lease,
transfer or otherwise dispose of any of its Property to, (ii) purchase any
property from, (iii) make any Investment (other than Permitted Unrestricted
Subsidiary Investments and other Investments in accordance with the provisions
of Section 4.11) in, or (iv) enter into any contract or agreement with or for
the benefit of, a Related Person of the Company or any Subsidiary (other than
the Company or any such Subsidiary in which no Related Person (other than the
Company or another Wholly Owned Subsidiary) owns, directly or indirectly, an
equity interest) (a "Related Person Transaction"), other than Related Person
Transactions which are on terms (which terms are in writing) no less favorable
to the Company or a Subsidiary, as applicable, than could be obtained in a
comparable arm's length transaction from an unaffiliated party; provided that,
if the Company or any Subsidiary enters into a Related Person Transaction or
series of Related Person Transactions involving or having an aggregate value of
more than $5 million, such Related Person Transaction will have been approved by
a majority of the Independent Directors of the Company. Notwithstanding
anything to the contrary in the foregoing, the foregoing restrictions shall not
apply to (i) Related Person Transactions that are approved by the Board of
Directors of the Company and such Subsidiary, if applicable, as in the best
interests of the Company or such Subsidiary, which transactions together with
all other Related Person Transactions in a related series involve or have an
aggregate value not exceeding $1 million in each fiscal year; (ii) fees and
compensation paid to or agreements with officers, directors, employees or
consultants of the Company or any Subsidiary in each case that are reasonable,
as determined by the Board of
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Directors or senior management thereof in good faith; and (iii) Restricted
Payments that are not prohibited by Section 4.11.
SECTION 4.16. Limitation on Conduct of Business.
The Company and the Subsidiaries will be operated in a manner such that
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.
SECTION 4.17. Change of Control.
(a) Upon the occurrence of a Change of Control and a corresponding Rating
Decline, the Company shall be obligated to make an offer to purchase (a "Change
of Control Offer") all of the then outstanding Securities from the Holders of
such Securities, at a purchase price (the "Change of Control Purchase Price")
equal to 101% of the aggregate principal amount of such Securities, plus accrued
and unpaid interest, if any, to the Change of Control Purchase Date (as defined
below), in accordance with the procedures set forth in paragraphs (b), (c) and
(d) of this Section. The Company shall, subject to the provisions described
below, be required to purchase all Securities properly tendered pursuant to a
Change of Control Offer and not withdrawn.
(b) The Change of Control Offer shall remain open for at least 20 Business
Days and until the close of business on the fifth Business Day prior to the
Change of Control Purchase Date (as defined below).
(c) Not later than the 30th day following the occurrence of the Rating
Decline corresponding to any Change of Control (or, in the event the Rating
Decline occurs prior to the corresponding Change of Control, not later than the
30th day following the occurrence of the Change of Control), the Company shall
mail to the Trustee and to each Holder of the Securities a notice (the "Change
of Control Notice") stating:
(1) that a Change in Control and corresponding Rating Decline has
occurred and that such Holder has the right to require the Company to
repurchase such Holder's Securities, or portion thereof, at the Change of
Control Purchase Price;
(2) any information regarding such Change of Control required to be
furnished pursuant to Rule 13e-1 under the Exchange Act and any other
securities laws and regulations thereunder;
(3) a purchase date (the "Change of Control Purchase Date") which
shall be on a Business Day and no earlier than 30 days nor later than 60
days after the occurrence of a Rating Decline that follows a Change of
Control (or, in the event the Rating Decline occurs prior to the
corresponding Change of Control, no earlier than 30 days nor later than 60
days following the occurrence of the Change of Control);
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(4) that any Security, or portion thereof, not tendered or accepted
for payment will continue to accrue interest:
(5) that unless the Company defaults in making payments therefor, or
payment is otherwise prevented, any Security, or portion thereof, accepted
for payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date; and
(6) the instructions a Holder must follow in order to have his
Securities repurchased in accordance with paragraph (d) of this Section.
No failure of the Company to give the foregoing notice shall limit any
Holder's right to exercise a repurchase right.
(d) To exercise the repurchase right, the Holder must deliver, on or before
the fifth calendar day prior to the Change of Control Purchase Date, written
notice to the Company (or an agent designated by the Company for such purpose)
of the Holder's exercise of such right, together with (i) the Security or
Securities with respect to which the right is being exercised, duly endorsed for
transfer with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, and (ii) if the Change of Control Purchase
Date falls between any record date for the payment of interest on the Securities
and the next succeeding interest payment date, an amount equal to the interest
which the Holder is entitled to receive on such interest payment date; provided,
however, that with respect to Securities held of record by DTC, the Company or
its designated agent may accept as tendered for repurchase pursuant to this
Section Securities tendered by means of a book entry in accordance with the
normal procedures of DTC, provided that any such interest amount shall be
delivered by the Holder to the Company or its designated agent. Notwithstanding
the foregoing, if prior to the date that a Change of Control Notice is required
to be mailed, a notice of optional redemption of all of the outstanding
Securities has been mailed in accordance with the terms of this Indenture, the
Company's obligation to send the Change of Control Notice shall be suspended
(unless the Company shall default in the payment of the redemption price or
accrued interest).
(e) On the Change of Control Purchase Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Notice, (ii) if the Company appoints a depository or Paying Agent,
deposit with such depository or Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof tendered to the Company.
DTC, the Company or the Paying Agent, as the case may be, shall promptly mail to
the Holder of Securities so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail to such Holders of
Physical Securities a new Security equal in principal amount to any unpurchased
portion of the Security surrendered. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Purchase Date. For purposes of this Section 4.17, the Trustee
shall act as the Paying Agent.
(f) The Company, to the extent applicable and if required by law, will
comply with Sections 13 and 14 of the Exchange Act and the provisions of
Regulation 14E and any other tender
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offer rules under the Exchange Act and any other federal and state securities
laws, rules and regulations which may then be applicable to any offer by the
Company to purchase the Securities pursuant to the provisions of this Section
4.17.
SECTION 4.18. Provision of Financial Information.
The Company shall file on a timely basis with the SEC, to the extent such
filings are accepted by the SEC and whether or not the Company has a class of
securities registered under the Exchange Act, the annual reports, quarterly
reports and other documents that the Company would be required to file if it
were subject to Section 13 or 15 of the Exchange Act. The Company shall also
file with the Trustee (with exhibits), and provide to each Holder of Securities
(without exhibits), without cost to such Holder, copies of such reports and
documents within 15 days after the date on which the Company files such reports
and documents with the SEC or the date on which the Company would be required to
file such reports and documents if the Company were so required and, if filing
such reports and documents with the SEC is not accepted by the SEC or is
prohibited under the Exchange Act, the Company shall supply at its cost copies
of such reports and documents (including any exhibits thereto) to any Holder of
Securities promptly upon written request.
SECTION 4.19. Registration Rights Agreement.
The Company will comply with all of the terms and provisions of each
Registration Rights Agreement, including, without limitation, its obligation to
pay Additional Interest (as defined therein) and to notify the Trustee
immediately of the occurrence of any Registration Default (as defined therein)
thereunder.
SECTION 4.20. Qualification of Indenture.
The Company shall qualify this Indenture under the TIA in accordance with
the terms and conditions of the applicable Registration Rights Agreement and
shall pay all costs and expenses (including attorneys' fees for the Company and
the Trustee) incurred in connection therewith. In connection with any such
qualification of this Indenture under the TIA, the Trustee shall be entitled to
receive from the Company any such Officers' Certificates, Opinions of Counsel or
other documentation as it may reasonably request.
ARTICLE FIVE
Successor Corporation
SECTION 5.01. When Company May Merge, etc.
The Company shall not consolidate with or merge with any Person or convey,
transfer or lease all or substantially all of its Property to any Person,
unless:
(1) the Company survives such merger or the Person formed by such
consolidation or into which the Company is merged or that acquires by
conveyance or transfer, or which leases, all or substantially all of the
Property of the Company is a corporation organized and existing under the
laws of the United States, any state thereof or
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the District of Columbia and expressly assumes, by supplemental indenture,
the due and punctual payment of the principal of and interest on all the
Securities and the performance of every other covenant and obligation of
the Company under this Indenture;
(2) immediately before and after giving effect to such transaction no
Default or Event of Default exists;
(3) immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the Company (or, if not the Company,
the surviving or transferee entity) is equal to or greater than the
Consolidated Net Worth of the Company immediately before such transaction;
and
(4) immediately after giving effect to such transaction on a pro forma
basis, the Company (or, if not the Company, the surviving or transferee
entity) would be able to incur $1.00 of additional Indebtedness (excluding
Permitted Indebtedness) under the test described in the first paragraph of
Section 4.09.
The Company shall deliver to the Trustee prior to the consummation of the
proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, merger, lease, conveyance or transfer in accordance
with Section 5.01, the successor Person formed by such consolidation or into
which the Company is merged or to which such lease, conveyance or transfer is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor had been named as the Company herein and thereafter (except in the
case of a lease) the predecessor corporation will be relieved of all further
obligations and covenants under this Indenture and the Securities.
ARTICLE SIX
Defaults and Remedies
SECTION 6.01. Events of Default.
An "Event of Default" occurs upon:
(1) default in the payment of principal of the Securities when due at
maturity, upon repurchase, upon acceleration or otherwise, including
failure of the Company to repurchase the Securities required to be
repurchased, at the required purchase price, upon a Change of Control and
corresponding Rating Decline or in the event of a Net Proceeds Offer, and
failure to make any optional redemption payment, whether or not such
payment is prohibited by Articles Ten or Twelve;
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(2) default in the payment of any installment of interest on the
Securities when due (including any interest payable in connection with
optional redemption payments) and continuance of such default for 30 days,
whether or not such payment is prohibited by Articles Ten or Twelve;
(3) default on any other Indebtedness of the Company, any Subsidiary
Guarantor or any other Subsidiary if either (a) such default results from
the failure to pay principal of or interest on any such Indebtedness when
due which aggregates 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 prior to its scheduled maturity, without such default and
acceleration having been rescinded or annulled within a period of 10 days,
and the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default, or the maturity of which
has been so accelerated, aggregates $5 million or more;
(4) default in the performance, or breach, of any other covenant of
the Company or any Subsidiary Guarantor in this Indenture and failure to
remedy such default within a period of 60 days after written notice thereof
from the Trustee or Holders of 25% in principal amount of the outstanding
Securities;
(5) the entry by a court of one or more judgments or orders against
the Company, any Subsidiary Guarantor or any other Subsidiary in an
aggregate amount in excess of $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) a Guarantee by a Subsidiary Guarantor that is a Material
Subsidiary shall cease to be in full force and effect (other than a release
of a Guarantee by designation of a Subsidiary Guarantor as an Unrestricted
Subsidiary) or any Subsidiary Guarantor shall deny or disaffirm its
obligations with respect thereto;
(7) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) admits in writing that it generally is unable to pay its
debts as the same become due;
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(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief (with respect to the petition commencing such
case) against the Company or any Material Subsidiary in an involuntary
case or proceeding,
(B) appoints a Custodian of the Company or any Material
Subsidiary or for all or substantially all of its respective property,
or
(C) orders the liquidation of the Company or any Material
Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in clauses
(7) and (8)) under Section 6.01 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
outstanding Securities may declare the unpaid principal of (or the Change of
Control purchase price if the Event of Default includes failure to pay the
Change of Control purchase price), and accrued and unpaid interest on, all the
Securities then outstanding to be due and payable, by a notice in writing to the
Company (and to the Trustee, if given by Holders) and upon any such declaration
such principal and accrued and unpaid interest shall become immediately due and
payable, notwithstanding anything contained in this Indenture or the Securities
to the contrary. If an Event of Default specified in clauses (7) or (8) above
occurs, all unpaid principal of, and accrued interest on, the Securities then
outstanding will become due and payable, without any declaration or other act on
the part of the Trustee or any Holder. Except as set forth in the first
sentence of this paragraph, the Company hereby waives presentment, demand,
notice of dishonor, notice of acceleration, notice of intent to accelerate, and
all other notices and demands.
The Holders of a majority in principal amount of the then outstanding
Securities, by written notice to the Company, the Subsidiary Guarantors and the
Trustee, may rescind and annul a declaration of acceleration and its
consequences if (1) the Company or any Subsidiary Guarantor has paid or
deposited with such Trustee a sum sufficient to pay (A) all overdue installments
of interest on all the Securities, (B) the principal of any Securities that has
become due otherwise than by such declaration of acceleration and interest
thereon at the rate or rates prescribed therefor in the Securities, (C) to the
extent that payment of such interest is lawful, interest on the defaulted
interest at the rate or rates prescribed therefor in the Securities, and (D) all
money paid or advanced by the Trustee thereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; (2) all Events of Default, other than the non-payment of the
principal of any Securities that have become due solely by such declaration of
acceleration, have been cured or waived as provided in this Indenture; and (3)
the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. No such rescission will affect any subsequent Event of
Default or impair any right consequent thereon.
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SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue, in
its own name and as trustee of an express trust, any available remedy by
proceeding at law or in equity to collect the payment of principal or interest
on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of
any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of at least a majority in
principal amount of Securities then outstanding by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default or Event of Default in payment of principal or interest on the
Securities, including any optional redemption payments or Change of Control or
Net Proceeds Offer payments.
SECTION 6.05. Control by Majority.
The Holders of a majority in principal amount of the Securities will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or 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 this Indenture and (2) the Trustee may take any other action
deemed proper by such Trustee that is not inconsistent with such direction.
SECTION 6.06. Limitation on Remedies.
No Holder of any of the Securities will have any right to institute any
proceeding, judicial or otherwise, or for the appointment of a receiver or
trustee or pursue any remedy under this Indenture, unless:
(1) such Holder has previously given notice to the Trustee of a
continuing Event of Default,
(2) the Holders of not less than 25% in principal amount of the
outstanding Securities have made written request to such Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee under this Indenture,
(3) such Holder or Holders have offered to such Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request,
(4) such Trustee for 30 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding, and
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(5) no direction inconsistent with such written request has been given
to such Trustee during such 30-day period by the Holders of a majority in
principal amount of the outstanding Securities.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over other Holders.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the Holder of any
Securities will have the right, which is absolute and unconditional, to receive
payment of the principal of and interest on such Securities on the stated
maturity therefor and to institute suit for the enforcement of any such payment,
and such right may not be impaired without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of interest or principal specified in
Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any Subsidiary Guarantor for the whole amount of principal of and interest on
the Securities remaining unpaid and such further amounts as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation and expenses of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
(a) The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
the Holders allowed in any judicial proceedings relative to the Company, the
Subsidiary Guarantors, their creditors or their property and may collect and
receive any money or other property payable or deliverable on any such claims
and to distribute the same.
(b) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article Six, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders of Senior Indebtedness to the extent required by
Article Ten;
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Third: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Fourth: To the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07, or a suit by Holders of more than 10% in principal amount of the then
outstanding Securities.
ARTICLE SEVEN
Trustee
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such rights and powers vested in it by this Indenture and use the
same degree of care and skill in such exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth (or incorporated by reference) in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine such certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph (c) does not limit the effect of paragraph (b) of
this Section.
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(2) The Trustee shall not be liable for any error of judgment made in
good faith by an officer of the Trustee, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to action it takes or
omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 or any other direction permitted by this
Indenture, and the Trustee shall be entitled from time to time to request
such a direction.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall be under no obligation and may refuse to perform any
duty or exercise any right or power unless it receives indemnity satisfactory to
it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on and shall be protected in acting or refraining
from acting upon any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney, to the
extent reasonably required by such inquiry or investigation.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete
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authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(f) For all purposes under this Indenture, the Trustee shall not be deemed
to have notice or knowledge of any Event of Default (other than under Section
6.01(1) or (2)) unless a Trust Officer knows of such Event of Default or unless
written notice of any Event of Default (other than under Section 6.01(1) or (2))
is received by the Trustee at its address in Section 13.02 hereof and such
notice references the Securities generally, the Company or this Indenture.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or its
Subsidiaries or Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's use
of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than its certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to each Holder pursuant to Section 13.02 a notice of the
Default within 90 days after it occurs. Except in the case of a Default in any
payment on any Security, the Trustee may withhold the notice if and so long as
the board of directors, executive committee or a trust committee of its
directors and/or officers in good faith determines that withholding the notice
is in the interests of Holders.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after each March 15, beginning with March 15, 2000, the
Trustee shall mail to each Holder a brief report dated as of such May 15 that
complies with TIA (S) 313(a), but only if such report is required in any year
under TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and
313(c).
A copy of each report at the time of its mailing to Holders shall be filed
with the SEC and each stock exchange on which the Securities are listed. The
Company shall notify the Trustee in writing if the Securities become listed on
any national securities exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay the Trustee from time to time reasonable compensation
(including compensation for extraordinary services relating to default
administration) for its services (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee
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of an express trust). The Company shall reimburse the Trustee upon request for
all reasonable out-of-pocket expenses, disbursements and advances incurred by
it. Such expenses may include the reasonable compensation and expenses of the
Trustee's agents and counsel.
The Trustee shall not be under any obligation to institute any suit, or
take any remedial action under this Indenture, or to enter any appearance or in
any way defend any suit in which it may be a defendant, or to take any steps in
the execution of the trusts created hereby or thereby or in the enforcement of
any rights and powers under this Indenture, until it shall be indemnified to its
satisfaction against any and all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture, including compensation for services, costs, expenses, outlays,
counsel fees and other disbursements, and against all liability not due to its
negligence or willful misconduct. The Company shall indemnify the Trustee
against any loss or liability incurred by it in connection with the acceptance
and administration of the trust and its duties hereunder as Trustee, Registrar
and/or Paying Agent, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. The Trustee shall notify the Company of
any claim for which it may seek indemnity; however, unless the position of the
Company is prejudiced by such failure, the failure of the Trustee to promptly
notify the Company shall not limit its right to indemnification. The Company
shall defend each such claim and the Trustee shall cooperate in the defense.
The Trustee may retain separate counsel and the Company shall reimburse the
Trustee for the reasonable fees and expenses of such counsel. The Company need
not pay for any settlement made without its consent.
The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through the Trustee's negligence or willful
misconduct.
To satisfy the Company's payment obligations in this Section, the Trustee
shall have a claim prior to that of the Holders of the Securities on all money
or property held or collected by the Trustee, except that held in trust to pay
principal of and interest on particular Securities.
When the Trustee incurs expenses or renders services after the occurrence
of any Event of Default specified in Sections 6.01(7) or (8), the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities may remove the Trustee by so
notifying the Trustee, in writing. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
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(4) the Trustee becomes incapable of acting as Trustee hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the claim provided for in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Holder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee. Any successor Trustee shall comply with TIA
(S) 310(a)(5).
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust assets to, another corporation, the
successor corporation without any further act shall be the successor Trustee;
provided such corporation or association shall be otherwise eligible and
qualified under this Article.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a). The Trustee shall always have a combined capital and surplus
of at least $100,000,000 as set forth in its most recent published annual report
of condition. The Trustee shall also comply with TIA (S) 310(b). For purposes
of this Indenture, the Series A/B Indenture and the Series C/D Indenture shall
be excluded from the operation of TIA (S)310(b).
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA (S) 311(a). A Trustee who has resigned
or been removed shall be subject to TIA (S) 311(a) to the extent indicated
therein.
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ARTICLE EIGHT
Discharge of Indenture
SECTION 8.01. Termination of Company's Obligations.
(a) This Indenture shall cease to be of further effect (subject to Section
8.05) when all outstanding Securities theretofore authenticated and issued
hereunder have been delivered (other than any Securities which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as provided
in Section 2.07) to the Trustee for cancellation and the Company has paid all
sums payable hereunder and under the Securities.
(b) In addition to the provisions of Section 8.01(a), at the Company's
option, either (i) the Company and the Subsidiary Guarantors shall be deemed to
have been discharged from their obligations with respect to the Securities and
the provisions of this Indenture (subject to Section 8.05) on the 91st day after
the applicable conditions set forth below have been satisfied or (ii) the
Company and the Subsidiary Guarantors shall cease to be under any obligation to
comply with any term, provision or condition set forth in Sections 4.02, 4.03,
4.07 through 4.18, 5.01 and the last paragraph of Section 11.01 with respect to
the Securities at any time after the applicable conditions set forth below have
been satisfied:
(1) the Company or any Subsidiary Guarantor shall have deposited or
caused to be deposited irrevocably with the Trustee as trust funds in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders (i) money, or (ii) U.S. Government Obligations,
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide (without any reinvestment of such
interest or principal), not later than one day before the due date of any
payment, money or (iii) a combination of (i) and (ii), in an amount
sufficient, in the opinion (with respect to (ii) and (iii)) of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee at or prior to the time of
such deposit, to pay and discharge each installment of principal of and
interest on the outstanding Securities on the dates such installments are
due;
(2) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company or a
Subsidiary Guarantor or any Subsidiary is a party or by which any of them
is bound, as evidenced to the Trustee in an Officers' Certificate delivered
to the Trustee concurrently with such deposit;
(3) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that Holders will not recognize income, gain or loss
for federal income tax purposes as a result of the Company's exercise of
its option under this Section 8.01 and will be subject to federal income
tax on the same amount and in the same manner and at the same time as would
have been the case if such option had not been exercised, and, in the case
of the Securities being discharged pursuant to clause (i) of this Section
8.01(b), accompanied by a ruling to that effect received from or published
by the Internal Revenue Service (it being
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understood that (A) such Opinion of Counsel shall also state, if
applicable, that such ruling is consistent with the conclusions reached in
such Opinion of Counsel and (B) the Trustee shall be under no obligation to
investigate the basis of correctness of such ruling);
(4) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Company's exercise of its option under this
Section 8.01 will not result in any of the Company, the Trustee or the
trust created by the Company's deposit of funds hereunder becoming or being
deemed to be an "investment company" under the Investment Company Act of
1940, as amended;
(5) the Company or any Subsidiary Guarantor shall have paid or duly
provided for payment of all amounts then due to the Trustee pursuant to
Section 7.07; and
(6) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for in this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with.
(c) The Company or any Subsidiary Guarantor may make an irrevocable deposit
pursuant to this Section 8.01 only if at such time it is not prohibited from
doing so under the provisions of Articles Ten and Twelve of this Indenture and
the Company shall have delivered to the Trustee and any Paying Agent an
Officers' Certificate to that effect.
SECTION 8.02. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with the provisions of the Securities and this Indenture to the
payment of principal of and interest on the Securities. Money and securities so
held in trust are not subject to the subordination provisions of Articles Ten or
Twelve and need not be segregated from other funds except to the extent required
by law.
The term "U.S. Government Obligations" means direct obligations of the
United States for the payment of which the full faith and credit of the United
States is pledged.
SECTION 8.03. Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any money or securities held by them at any time in excess of amounts
required to pay principal of or interest on the Securities. The Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for one year;
provided, however, that the Trustee or such Paying Agent before being required
to make any such repayment, may at the expense of the Company cause to be
published once in a newspaper of general circulation in the City of New York or
mail to each such Holder notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication or mailing any unclaimed balance of such money then
remaining will be paid to the Company. After repayment to the Company, any
Holder entitled to such money shall thereafter,
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as an unsecured general creditor, look (unless an applicable law designates
another Person) only to the Company for payment, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease.
SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and the Subsidiary Guarantors' obligations under this Indenture and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.01; provided, however, that if the Company or any Subsidiary
Guarantor has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company or such Subsidiary
Guarantor shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
SECTION 8.05. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture and of the
Securities referred to in Section 8.01(a) and (b)(i), the respective obligations
of the Company, the Subsidiary Guarantors and the Trustee under Sections 2.02,
2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 4.01 (with respect to Section 8.01(a)),
4.04, 6.07, 7.07, 7.08, 8.02, 8.03, 8.04, 11.03, and 11.04 shall survive until
the Securities are no longer outstanding, and thereafter the obligations of the
Company and the Trustee under Sections 7.07, 8.02, 8.03 and 8.04 shall survive.
Nothing contained in this Article Eight shall abrogate any of the obligations or
duties of the Trustee under this Indenture.
ARTICLE NINE
Amendments, Supplements and Waivers
SECTION 9.01. Without Consent of Holders.
The Company and the Trustee may amend or supplement this Indenture or the
Securities without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Sections 5.01 or 11.02;
(3) to provide for uncertificated Securities in addition to
certificated Securities;
(4) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
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(5) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder.
Notwithstanding the above, the Trustee and the Company may not make any
change that adversely affects the legal rights of any Holders hereunder.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee may amend or supplement this Indenture or the
Securities with the written consent of the Subsidiary Guarantors and the Holders
of at least a majority of the principal amount of the Securities then
outstanding, and the Holders of a majority in principal amount of the
Securities, together with the Subsidiary Guarantors, may waive compliance by the
Company with any provision of this Indenture or the Securities. However,
without the consent of each Holder affected, an amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of interest on the Securities;
(3) reduce the principal amount of the Securities or extend the
maturity schedule of the Securities or modify the redemption or repurchase
provisions of the Securities;
(4) waive a default in the payment of the principal or interest on the
Securities;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in the subordination of the Securities in a manner
that is adverse to the Holders; or
(7) make any change in Section 6.04 or Section 6.07 hereof or in this
sentence of this Section 9.02.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof. Any amendment, waiver or consent shall be deemed effective upon
receipt by the Trustee of the necessary consents and shall not require execution
of any supplemental indenture to be effective.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of each Security affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such amendment, waiver, consent or supplemental indenture. Except as
otherwise provided in Section 6.04 and this Section 9.02, the Holders of a
majority in aggregate principal amount of the
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Securities then outstanding may waive compliance in a particular instance by the
Company or the Subsidiary Guarantors with any provisions of this Indenture or
the Securities.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
A consent to an amendment, supplement or waiver by a Holder of a Security
shall bind the Holder and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security, even
if notation of the consent is not made on any Security. However, until an
amendment, supplement or waiver becomes effective, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of a Security. For
such revocation to be effective, the Trustee must receive the notice of
revocation before the date the amendment, supplement or waiver becomes
effective.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder unless it makes a change described in any of clauses (1) through
(7) of Section 9.02. In that case the amendment, supplement or waiver shall bind
each Holder of a Security who has consented to it and every subsequent Holder of
a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
SECTION 9.06. Trustee Protected.
The Trustee shall sign any amendment or supplement or waiver authorized
pursuant to this Article if the amendment or supplement or waiver does not
adversely affect the rights of the Trustee. If it does adversely affect the
rights of the Trustee, the Trustee may but need not sign it. In signing such
amendment or supplement or waiver the Trustee shall be entitled to receive, and
(subject to Article Seven) shall be fully protected in relying upon, an Opinion
of Counsel stating that such amendment or supplement or waiver is authorized or
permitted by and complies with this Indenture. The Company may not sign an
amendment or supplement until the Board of Directors of the Company approves it.
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ARTICLE TEN
Subordination
SECTION 10.01. Securities Subordinated to Senior Indebtedness.
The Company agrees, and each Holder by its acceptance thereof likewise
agrees, that the payment of principal of and interest on the Securities is
subordinated in right of payment, to the extent and in the manner provided in
this Article, to the prior payment in full of all Senior Indebtedness, whether
outstanding on the date of this Indenture or thereafter created, incurred,
assumed or guaranteed. No payment on any Guarantee shall constitute payment "on
behalf of" the Company within the meaning of this Article Ten; provided that a
payment by a Subsidiary Guarantor on a Guarantee shall constitute a payment "on
behalf of" the Company within the meaning of this Article Ten in the event that
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.
This Article Ten shall constitute a continuing offer to all Persons who, in
reliance upon such provisions, become holders of, or continue to hold, Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Senior Indebtedness, and such holders and/or each of them may enforce such
provisions. No amendment of any provision of this Article Ten shall be
effective as against any holder of Senior Indebtedness who has not consented
thereto.
SECTION 10.02. Company Not To Make Payments with Respect to Securities in
Certain Circumstances.
(a) No payment may be made by the Company or on behalf of the Company on
account of principal of or interest on the Securities or to acquire or
repurchase any of the Securities or on account of the redemption provisions of
the Securities (i) 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 (ii) 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.
(b) Upon the happening of a default or event of 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 under which it is
outstanding, and, upon written notice thereof given to the Company 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 or on behalf of the
Company on account of principal of or interest on the Securities or to acquire
or repurchase any of the Securities or on account of the redemption provisions
of the Securities; provided, however, that 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 Securities after a Payment Notice shall
have been given. Notwithstanding the foregoing, (i) not more than one Payment
Notice shall be given within a period of 360 consecutive days and (ii) a Payment
Notice may only be given
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(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.
(c) In the event that, notwithstanding the provisions of this Section
10.02, the Company shall make any payment to the Trustee or the Holders on
account of any principal of or interest on the Securities, or to acquire or
repurchase any of the Securities or on account of the redemption provisions of
the Securities, after the happening of a Payment Default or after receipt by the
Company and the Trustee of a Payment Notice as provided in this Section 10.02,
then, unless and until such default or event of default shall have been cured or
waived or shall have ceased to exist, such payment (subject to the provisions of
Sections 10.06 and 10.07) shall be held by the Trustee or Holders, as the case
may be, in trust for the benefit of, and shall be paid over and delivered to,
the holders of Senior Indebtedness (pro rata as to each of such holders on the
basis of the respective amounts of Senior Indebtedness held by them) or their
Representative as their respective interests may appear, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms, after giving
effect to any concurrent payment or distribution or provision therefor to the
holders of Senior Indebtedness. The Company shall give prompt written notice to
the Trustee of any default under any Senior Indebtedness or under any agreement
pursuant to which Senior Indebtedness may have been issued.
SECTION 10.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of
Company.
Upon any distribution of assets of the Company or payment on behalf of the
Company with respect to the Securities in the event of any Insolvency or
Liquidation Proceeding with respect to the Company:
(a) the holders of Senior Indebtedness shall be entitled to receive
payment in full of such Senior Indebtedness before the Holders are entitled
to receive any direct or indirect payment or distribution of any cash,
property or security on account of the principal of or interest on or any
other payment with respect to the Securities;
(b) any direct or indirect payment or distribution of assets of or on
behalf of the Company of any kind or character, whether in cash, property
or securities, to which the Holders or the Trustee on behalf of the Holders
would be entitled except for the provisions of this Article Ten (including
specifically, without limitation, any payment or distribution which may be
payable or deliverable by reason of the payment of any other Indebtedness
of the Company being subordinated to the payment of the Securities, which
may be payable or deliverable in respect of the Securities in any such
Insolvency or Liquidation Proceeding), shall be paid by the liquidating
trustee or agent or other person making such payment or distribution
directly to the holders of Senior Indebtedness or their Representative, to
the extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, whether or not due, including specifically, without
limitation, all Post-Commencement Amounts, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness; and
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(c) in the event that notwithstanding the foregoing provisions of this
Section 10.03, any direct or indirect payment or distribution of assets of
or on behalf of the Company of any kind or character, whether in cash,
property or securities, shall be received by the Trustee or the Holders on
account of any principal of or interest on the Securities (including
specifically, without limitation, any payment or distribution which may be
payable or deliverable by reason of the payment of any other Indebtedness
of the Company being subordinated to the payment of the Securities, which
may be payable or deliverable in respect of the Securities in any such
Insolvency or Liquidation Proceeding) before all Senior Indebtedness is
paid in full, whether or not due, including specifically, without
limitation, all Post-Commencement Amounts, such payment or distribution
(subject, with regard to the Trustee, to the provisions of Sections 10.06
and 10.07) shall be received and held in trust for and shall be paid over
to the holders of the Senior Indebtedness remaining unpaid or their
Representative, for application to the payment of such Senior Indebtedness
until all such Senior Indebtedness shall have been paid in full whether or
not due, including specifically, without limitation, all Post-Commencement
Amounts, after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness.
The Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Company.
SECTION 10.04. Holders To Be Subrogated to Rights of Holders of Senior
Indebtedness.
After the payment in full of all Senior Indebtedness, the Holders shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness (equally and ratably with the holders of all other Indebtedness of
the Company which by its express terms is subordinate and subject in right of
payment to Senior Indebtedness of the Company to substantially the same extent
as the Securities are so subordinate and subject in right of payment and which
is entitled to like rights and subrogation as a result of payments made to the
holders of such Senior Indebtedness), until all amounts owing on the Securities
shall be paid in full, and for the purpose of such subrogation no payments or
distributions to the holders of the Senior Indebtedness by or on behalf of the
Company or by or on behalf of the Holders by virtue of this Article which
otherwise would have been made to the Holders shall, as between the Company and
the Holders, be deemed to be payment by the Company to or on account of the
Senior Indebtedness, it being understood that the provisions of this Article Ten
are and are intended solely for the purpose of defining the relative rights of
the Holders, on the one hand, and the holders of the Senior Indebtedness, on the
other hand. Nothing in this Section 10.04 shall be deemed to give the Holders
the benefits of any rights to any collateral securing such Senior Indebtedness
as to which such Holders may become subrogated pursuant to this Section 10.04.
SECTION 10.05. Obligations of the Company Unconditional.
Nothing contained in this Article Ten or elsewhere in this Indenture or in
any Security is intended to or shall impair, as between the Company and the
Holders, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders the principal of and interest on the Securities as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee
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or any Holder from exercising all remedies otherwise permitted by applicable law
upon Default under this Indenture, subject to the rights, if any, under this
Article Ten of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such remedy. Upon
any distribution of assets of the Company referred to in this Article Ten, the
Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Ten.
SECTION 10.06. Trustee Entitled To Assume Payments Not Prohibited in Absence of
Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee or the taking of any other action by the Trustee, unless, subject to
Section 10.07 hereof, it shall have received at its corporate trust department
written notice thereof from the Company or from one or more holders of Senior
Indebtedness or from any Representative thereof; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Article Seven
and Section 10.07 below, shall be entitled to assume conclusively that no such
facts exist. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior
Indebtedness (or a Representative on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness or a
Representative on behalf of any such holder or holders.
SECTION 10.07. Application by Trustee of Monies Deposited with It.
Except as provided in Section 8.02, any deposit of monies by the Company
with the Trustee or any Paying Agent (whether or not in trust) for the payment
of the principal of or interest on any Securities shall be subject to the
provisions of Sections 10.01, 10.02, 10.03 and 10.04 except that, if prior to
12:00 noon, New York City time, on the first Business Day prior to the date on
which by the terms of this Indenture any such monies may become payable for any
purpose (including, without limitation, the payment of either the principal or
the interest on any Security) the Trustee or, in the case of any such deposit of
monies with a Paying Agent, the Paying Agent shall not have received with
respect to such monies the notice provided for in Section 10.06, then the
Trustee or such Paying Agent, as the case may be, shall have full power and
authority to receive such monies and to apply the same to the purpose for which
they were received, and shall not be affected by any notice to the contrary
which may be received by it on or after such first Business Day. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article Ten, the
Trustee may request such person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by such
person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article Ten, and if such evidence is not furnished the Trustee
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment.
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The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness but shall have only such obligations to such holders as are
expressly set forth in this Article Ten.
SECTION 10.08. Subordination Rights Not Impaired by Acts or Omissions of Company
or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act by any such holder, or by any noncompliance by
the Company with the terms of this Indenture, regardless of any knowledge
thereof which any such holder may have or be otherwise charged with. Without
limiting the foregoing, the holders of Senior Indebtedness of the Company may
extend, renew, modify or amend the terms of the Senior Indebtedness of the
Company or any security therefor or guaranty thereof and release, sell or
exchange such security and release such guaranty and otherwise deal freely with
the Company, all without affecting the provisions of this Article Ten.
SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of
Securities.
Each Holder by his acceptance thereof authorizes and expressly directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Article Ten and appoints the
Trustee his attorney-in-fact for such purpose, including, in the event of any
Insolvency or Liquidation Proceeding with respect to the Company, the immediate
filing of a claim for the unpaid balance of its or his Securities in the form
required in said proceedings and the causing of said claim to be approved. If
the Trustee does not file a proper claim or proof of debt in the form required
in such proceeding prior to 30 days before the expiration of the time to file
such claims, then the holders of Senior Indebtedness are hereby authorized to
have the right to file and are hereby authorized to file an appropriate claim
for and on behalf of such Holder.
SECTION 10.10. Right of Trustee To Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article Ten in respect of any Senior Indebtedness at any time held by it to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as such
holder.
SECTION 10.11. Article Ten Not To Prevent Events of Default.
The failure to make a payment on account of principal or interest by reason
of any provision in this Article Ten shall not be construed as preventing the
occurrence of an Event of Default under Section 6.01.
SECTION 10.12. Payment.
For purposes of this Article Ten, a payment with respect to any Security or
with respect to principal of or interest on any Security shall include, without
limitation, payment of principal of and interest on any Security, any depositing
of funds under Article Eight, any payment on account of any
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mandatory or optional repurchase or redemption of any Security (including
payments pursuant to Article Three or Section 4.01, 4.12 or 4.17) and any
payment or recovery on any claim (whether for rescission or damages and whether
based on contract, tort, duty imposed by law, or any other theory of liability)
relating to or arising out of the offer, sale or purchase of any Security.
ARTICLE ELEVEN
Guarantees
SECTION 11.01. Unconditional Guarantee.
Each Subsidiary Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Guarantee") to each
Holder of Securities authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, the full and prompt performance of the
Company's obligations under this Indenture and the Securities and that:
(1) the principal of and interest on the Securities will be promptly
paid in full when due, whether at maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal of and interest on the
Securities, if any, to the extent lawful, and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in accordance with the terms hereof
and thereof; and
(2) in case of any extension of time of payment or renewal of any
Securities or of any such other obligations, that same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or
otherwise,
subject, however, in the case of clauses (1) and (2) above, to the limitations
set forth in Section 11.04.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Subsidiary Guarantors will be jointly and
severally obligated to pay the same immediately. Each Subsidiary Guarantor
hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Securities or
this Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Securities with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any action to enforce
the same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each Subsidiary Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice, notice of intent to
accelerate, notice of acceleration, and all other notices and all demands
whatsoever and covenants that this Guarantee will not be discharged except by
complete performance of the obligations contained in the Securities, this
Indenture and in this Guarantee. If any Holder or the Trustee is required by
any court or otherwise to return to the Company, any Subsidiary Guarantor, or
any custodian, trustee, liquidator or other similar official acting in relation
to the Company or any Subsidiary Guarantor, any amount paid by the Company or
any Subsidiary Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore
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discharged, shall be reinstated in full force and effect. Each Subsidiary
Guarantor agrees it shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Subsidiary Guarantor
further agrees that, as between each Subsidiary Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for
the purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Subsidiary Guarantor for the
purpose of this Guarantee.
The Company agrees to cause each Person (other than an Unrestricted
Subsidiary) that shall become a Material Subsidiary after the Issue Date or that
is required to Guarantee the Securities pursuant to Section 4.09 to execute and
deliver a supplement to this Indenture pursuant to which such Person will
guarantee the payment of the Securities on the same terms and conditions as the
Guarantees by the Subsidiary Guarantors.
SECTION 11.02. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.
(a) Except as set forth in Articles Four and Five, nothing contained in
this Indenture or in any of the Securities shall prevent any consolidation or
merger of a Subsidiary Guarantor with or into the Company or another Subsidiary
Guarantor or shall prevent any sale or conveyance of the property of a
Subsidiary Guarantor as an entirety or substantially as an entirety, to the
Company or another Subsidiary Guarantor.
(b) Except as set forth in Articles Four and Five hereof, nothing contained
in this Indenture or in any of the Securities shall prevent any consolidation or
merger of a Subsidiary Guarantor with or into a corporation or corporations
other than the Company or a Subsidiary Guarantor (whether or not affiliated with
the Subsidiary Guarantor), or successive consolidations or mergers in which a
Subsidiary Guarantor or its successor or successors shall be a party or parties,
or shall prevent any sale or conveyance of the property of a Subsidiary
Guarantor as an entirety or substantially as an entirety, to a corporation other
than the Company or another Subsidiary Guarantor (whether or not affiliated with
the Subsidiary Guarantor) authorized to acquire and operate the same; provided,
however, that, subject to Section 11.02(a) and 11.03, (i) immediately after such
transaction, and giving effect thereto, no Default or Event of Default shall
have occurred as a result of such transaction and be continuing, (ii) such
transaction shall not violate any of the covenants in Sections 4.01 through
4.17, and (iii) each Subsidiary Guarantor hereby covenants and agrees that, upon
any such consolidation, merger, sale or conveyance, such Subsidiary Guarantor's
Guarantee set forth in this Article Eleven, and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
performed by such Subsidiary Guarantor, shall be expressly assumed (in the event
that the Subsidiary Guarantor is not the surviving corporation in the merger),
by supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee, by the corporation formed by such consolidation, or
into which the Subsidiary Guarantor shall have merged, or by the corporation
that shall have acquired such property. In the case of any such consolidation,
merger, sale or conveyance and upon the assumption by the successor corporation,
by supplemental indenture executed and delivered to the Trustee and satisfactory
in form to the Trustee of the due and punctual performance of all of the
covenants and conditions of this Indenture
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to be performed by the Subsidiary Guarantor, such successor corporation shall
succeed to and be substituted for the Subsidiary Guarantor with the same effect
as if it had been named herein as a Subsidiary Guarantor.
SECTION 11.03. Release of a Subsidiary Guarantor.
Upon the sale or disposition of a Subsidiary Guarantor (or substantially
all of its assets), which is otherwise in compliance with the terms of this
Indenture, including but not limited to the provisions of Section 11.02, such
Subsidiary Guarantor shall be deemed released from all of its Guarantee and
related obligations in this Indenture; provided that any such termination shall
occur only to the extent that all obligations of such Subsidiary Guarantor under
all of its guarantees of, and under all of its pledges of assets or other
security interests which secure, other Indebtedness of the Company or any
Subsidiary shall also terminate or be released upon such sale or transfer. Each
Subsidiary Guarantor that is designated as an Unrestricted Subsidiary in
accordance with this Indenture shall be released from all of its Guarantee and
related obligations set forth in this Indenture for so long as it remains an
Unrestricted Subsidiary. The Trustee shall deliver an appropriate instrument
evidencing such release upon receipt of a request by the Company accompanied by
an Officers' Certificate and an Opinion of Counsel certifying that such sale or
other disposition was made by the Company in accordance with the provisions of
this Indenture. Any Subsidiary Guarantor not so released remains liable for the
full amount of principal of and interest on the Securities as provided in this
Article Eleven.
SECTION 11.04. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Subsidiary Guarantor pursuant to its Guarantee not constitute a fraudulent
transfer or conveyance for purposes of any federal or state law. To effectuate
the foregoing intention, the Holders and each Subsidiary Guarantor hereby
irrevocably agree that the obligations of each Subsidiary Guarantor under the
Guarantee shall be limited to the maximum amount as will, after giving effect to
all other contingent and fixed liabilities (including, but not limited to,
Guarantor Senior Indebtedness of each 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 its Guarantee or pursuant to Section
11.05, result in the obligations of such Subsidiary Guarantor under the
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. This Section 11.04 is for the benefit of the creditors of
each Subsidiary Guarantor, and, for purposes of applicable fraudulent transfer
and fraudulent conveyance law, any Indebtedness of a Subsidiary Guarantor
pursuant to the Bank Credit Agreement shall be deemed to have been incurred
prior to the incurrence by such Subsidiary Guarantor of its liability under the
Guarantee.
SECTION 11.05. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under the Guarantee, such Funding Guarantor shall be
entitled to a contribution from each other Subsidiary Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Subsidiary Guarantor (including
the Funding Guarantor) for all
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payments, damages and expenses incurred by that Funding Guarantor in discharging
the Company's obligations with respect to the Securities or any other Subsidiary
Guarantor's obligations with respect to the Guarantee.
SECTION 11.06. Execution and Delivery of Guarantee.
To evidence its Guarantee set forth in Section 11.01, each Subsidiary
Guarantor hereby agrees to execute the Guarantee in substantially the form of
Exhibit A-1 to be endorsed on each Security ordered to be authenticated and
delivered by the Trustee and each Subsidiary Guarantor agrees that this
Indenture shall be executed on behalf of each Subsidiary Guarantor by its
President or one of its Vice Presidents and attested to by an Officer. Each
Subsidiary Guarantor hereby agrees that its Guarantee set forth in Section 11.01
shall remain in full force and effect notwithstanding any failure to endorse on
each Security a notation of such Guarantee. Each such Guarantee shall be signed
on behalf of each Subsidiary Guarantor by one Officer, (who shall have been duly
authorized by all requisite corporate actions) prior to the authentication of
the Security on which it is endorsed, and the delivery of such Security by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of the Guarantee set forth in this Indenture on behalf of the
Subsidiary Guarantors. Such signatures upon the Guarantee may be by manual or
facsimile signature of such officers and may be imprinted or otherwise
reproduced on the Guarantee, and in case any such officer who shall have signed
the Guarantee shall cease to be such officer before the Security on which such
Guarantee is endorsed shall have been authenticated and delivered by the Trustee
or disposed of by the Company, such Security nevertheless may be authenticated
and delivered or disposed of as though the person who signed the Guarantee had
not ceased to be such officer of the Subsidiary Guarantor.
SECTION 11.07. Severability.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, that portion of such provision that is not invalid, illegal or
unenforceable shall remain in effect, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
ARTICLE TWELVE
Subordination of Guarantees
SECTION 12.01. Guarantees Subordinated to Guarantor Senior Indebtedness.
The Subsidiary Guarantors agree, and each Holder by its acceptance thereof
likewise agrees, that the payments by the Subsidiary Guarantors in respect of
the Guarantees are subordinated in right of payment, to the extent and in the
manner provided in this Article Twelve, to the prior payment in full of all
Guarantor Senior Indebtedness, whether outstanding on the date of this Indenture
or thereafter created, incurred, assumed or guaranteed.
This Article Twelve shall constitute a continuing offer to all persons who,
in reliance upon such provisions, become holders of, or continue to hold,
Guarantor Senior Indebtedness, and such provisions are made for the benefit of
the holders of Guarantor Senior Indebtedness, and such
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holders and/or each of them may enforce such provisions. No amendment of any
provision of this Article Twelve shall be effective as against any holder of
Guarantor Senior Indebtedness who has not consented thereto.
SECTION 12.02. Subsidiary Guarantors Not To Make Payments with Respect to
Guarantees in Certain Circumstances.
(a) No payment may be made by the Subsidiary Guarantors in respect of the
Guarantees (i) upon the maturity of any Guarantor Senior Indebtedness by lapse
of time, acceleration or otherwise, unless and until all such Guarantor Senior
Indebtedness is first paid in full or (ii) upon the happening of any default in
respect of the payment of any Guarantor Senior Indebtedness when the same
becomes due and payable (a "Subsidiary Guarantor Payment Default"), unless and
until such Subsidiary Guarantor Payment Default shall have been cured or waived
or shall have ceased to exist.
(b) Upon the happening of a default or event of default (other than a
Subsidiary Guarantor Payment Default) with respect to any Guarantor Senior
Indebtedness, as such default or event of default is defined therein or in the
instrument under which it is outstanding, and, upon written notice thereof given
to the Subsidiary Guarantors and the Trustee by any holders of such Guarantor
Senior Indebtedness or their Representative (a "Subsidiary Guarantor 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 the Subsidiary Guarantors in
respect of the Guarantees; provided, however, that these provisions will not
prevent the making of any payment for more than 179 days after the due date of
payment on the Guarantees after a Subsidiary Guarantor Payment Notice shall have
been given. Notwithstanding the foregoing, (i) not more than one Subsidiary
Guarantor Payment Notice shall be given within a period of 360 consecutive days
and (ii) a Subsidiary Guarantor Payment Notice may only be given (A) if more
than $5 million of Guarantor 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 Guarantor 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 Guarantor
Senior Indebtedness.
(c) In the event that, notwithstanding the provisions of this Section
12.02, the Subsidiary Guarantors shall make any payment in respect of the
Guarantees, after the happening of a Subsidiary Guarantor Payment Default or
after receipt by the Subsidiary Guarantors and the Trustee of a Subsidiary
Guarantor Payment Notice as provided in this Section 12.02, then, unless and
until such default or event of default shall have been cured or waived or shall
have ceased to exist, such payment (subject to the provisions of Sections 12.06
and 12.07) shall be held by the Trustee or Holders, as the case may be, in trust
for the benefit of, and shall be paid over and delivered to, the holders of
Guarantor Senior Indebtedness (pro rata as to each of such holders on the basis
of the respective amounts of Guarantor Senior Indebtedness held by them) or
their Representative, as their respective interests may appear, for application
to the payment of all Guarantor Senior Indebtedness remaining unpaid to the
extent necessary to pay all Guarantor Senior Indebtedness in full in accordance
with its terms, after giving effect to any concurrent payment or distribution or
provision therefor to the holders of Guarantor Senior Indebtedness. The
Subsidiary Guarantors shall give
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prompt written notice to the Trustee of any default under any Guarantor Senior
Indebtedness or under any agreement pursuant to which Guarantor Senior
Indebtedness may have been issued.
SECTION 12.03. Guarantees Subordinated to Prior Payment of All Guarantor Senior
Indebtedness on Dissolution, Liquidation or Reorganization of
Subsidiary Guarantor.
Upon any distribution of assets of any Subsidiary Guarantor in the event of
any Insolvency or Liquidation Proceeding with respect to any Subsidiary
Guarantor:
(a) the holders of Guarantor Senior Indebtedness shall be entitled to
receive payment in full of such Guarantor Senior Indebtedness before the
Holders are entitled to receive any direct or indirect payment or
distribution of any cash, property or security on account of any payment in
respect of the Guarantees;
(b) any direct or indirect payment or distribution of assets of the
Subsidiary Guarantors of any kind or character, whether in cash, property
or securities, to which the Holders or the Trustee, on behalf of the
Holders, would be entitled except for the provisions of this Article Twelve
(including specifically, without limitation, any payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of such Subsidiary Guarantor being subordinated to any payment
in respect of the Guarantees, which may be payable or deliverable in
respect of the Guarantees in any such Insolvency or Liquidation
Proceeding), shall be paid by the liquidating trustee or agent or other
person making such payment or distribution directly to the holders of
Guarantor Senior Indebtedness or their Representative, to the extent
necessary to make payment in full of all Guarantor Senior Indebtedness
remaining unpaid whether or not due, including specifically, without
limitation, all Post-Commencement Amounts, after giving effect to any
concurrent payment or distribution to the holders of such Guarantor Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of
this Section 12.03, any direct or indirect payment or distribution of
assets of any Subsidiary Guarantor of any kind or character, whether in
cash, property or securities, shall be received by the Trustee or the
Holders (including specifically, without limitation, any payment or
distribution which may be payable or deliverable by reason of the payment
of any other Indebtedness of such Subsidiary Guarantor being subordinated
to the payment of the Guarantees, which may be payable or deliverable in
respect of the Guarantees in any such Insolvency or Liquidation Proceeding)
before all Guarantor Senior Indebtedness is paid in full, whether or not
due, including specifically, without limitation, all Post-Commencement
Amounts, such payment or distribution (subject, with regard to the Trustee,
to the provisions of Sections 12.06 and 12.07) shall be received and held
in trust for and shall be paid over to the holders of the Guarantor Senior
Indebtedness remaining unpaid or their Representative, for application to
the payment of such Guarantor Senior Indebtedness until all such Guarantor
Senior Indebtedness shall have been paid in full, whether or not due,
including specifically, without limitation, all Post-Commencement Amounts,
after giving effect to any concurrent payment or distribution to the
holders of such Guarantor Senior Indebtedness.
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The Company or the Subsidiary Guarantors shall give prompt written
notice to the Trustee of any dissolution, winding up, liquidation or
reorganization of any Subsidiary Guarantor.
SECTION 12.04. Holders To Be Subrogated to Rights of Holders of Guarantor Senior
Indebtedness.
After the payment in full of all Guarantor Senior Indebtedness, the Holders
shall be subrogated, to the rights of the holders of Guarantor Senior
Indebtedness to receive payments or distributions of assets of the Subsidiary
Guarantors applicable to the Guarantor Senior Indebtedness (equally and ratably
with the holders of all other Indebtedness which by its express terms is
subordinate and subject in right of payment to Guarantor Senior Indebtedness to
substantially the same extent as the Guarantees are so subordinate and subject
in right of payment and which is entitled to like rights and subrogation as a
result of payments made to the holders of such Senior Indebtedness) until all
amounts owing on the Securities shall be paid in full, and for the purpose of
such subrogation no payments or distributions to the holders of the Guarantor
Senior Indebtedness by or on behalf of the Subsidiary Guarantors or by or on
behalf of the Holders by virtue of this Article Twelve which otherwise would
have been made to the Holders shall, as between the Subsidiary Guarantors and
the Holders, be deemed to be payment by the Subsidiary Guarantors to or on
account of the Guarantor Senior Indebtedness, it being understood that the
provisions of this Article Twelve are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
the Guarantor Senior Indebtedness, on the other hand. Nothing in this Section
12.04 shall be deemed to give the Holders the benefits of any rights to any
collateral securing such Senior Indebtedness as to which such Holders may become
subrogated pursuant to this Section 12.04.
SECTION 12.05. Obligations of the Subsidiary Guarantors Unconditional.
Nothing contained in this Article Twelve or elsewhere in this Indenture or
in any Security is intended to or shall impair, as between the Subsidiary
Guarantors and the Holders, the obligation of the Subsidiary Guarantors under
the Guarantees, or is intended to or shall affect the relative rights of the
Holders and creditors of the Subsidiary Guarantors other than the holders of the
Guarantor Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon Default under this Indenture, subject to the rights, if any,
under this Article Twelve of the holders of Guarantor Senior Indebtedness in
respect of cash, property or securities of the Subsidiary Guarantors received
upon the exercise of any such remedy. Upon any distribution of assets of the
Subsidiary Guarantors referred to in this Article Twelve, the Trustee, subject
to the provisions of Sections 7.01 and 7.02, and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which such dissolution, winding up, liquidation or reorganization proceedings
are pending, or a certificate of the liquidating trustee or agent or other
person making any distribution to the Trustee or to the Holders of the
Securities, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Guarantor Senior Indebtedness and other
indebtedness of the Subsidiary Guarantors, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article Twelve.
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SECTION 12.06. Trustee Entitled To Assume Payments Not Prohibited in Absence of
Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee, unless, subject to Section 12.07 below, it shall have received at
its corporate trust department written notice thereof from the Subsidiary
Guarantors or from one or more holders of Guarantor Senior Indebtedness or from
any Representative thereof; and, prior to the receipt of any such written
notice, the Trustee, subject to the provisions of Article Seven and Section
12.07 below, shall be entitled to assume conclusively that no such facts exist.
The Trustee shall be entitled to rely on the delivery to it of a written notice
by a person representing himself to be a holder of Guarantor Senior Indebtedness
(or a Representative on behalf of such holder) to establish that such notice has
been given by a holder of Guarantor Senior Indebtedness or a Representative on
behalf of any such holder or holders.
SECTION 12.07. Application by Trustee of Monies Deposited with It.
Except as provided in Section 8.02, any deposit of monies by the Subsidiary
Guarantor with the Trustee or any Paying Agent (whether or not in trust) for any
payment in respect of the Guarantees shall be subject to the provisions of
Sections 12.01, 12.02, 12.03 and 12.04 except that, if prior to 12:00 noon, New
York City time, on the first Business Day prior to the date on which by the
terms of this Indenture any such monies may become payable for any purpose, the
Trustee or, in the case of any such deposit of monies with a Paying Agent, the
Paying Agent shall not have received with respect to such monies the notice
provided for in Section 12.06, then the Trustee or such Paying Agent, as the
case may be, shall have full power and authority to receive such monies and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such first Business Day. In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of any person as a
holder of Guarantor Senior Indebtedness to participate in any payment or
distribution pursuant to this Article Twelve, the Trustee may request such
person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Guarantor Senior Indebtedness held by such person, the extent to
which such person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such person under this Article
Twelve, and if such evidence is not furnished the Trustee may defer any payment
to such person pending judicial determination as to the right of such person to
receive such payment.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Guarantor Senior Indebtedness but shall have only such obligations to such
holders as are expressly set forth in this Article Twelve.
SECTION 12.08. Subordination Rights Not Impaired by Acts or Omissions of
Subsidiary Guarantors or Holders of Guarantor Senior
Indebtedness.
No right of any present or future holders of any Guarantor Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Subsidiary Guarantor or by any act or failure to act by any such holder, or
by any noncompliance by any Subsidiary Guarantor with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have or
be otherwise charged with. Without limiting the foregoing, the holders of
Guarantor Senior Indebtedness may extend, renew,
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modify or amend the terms of the Guarantor Senior Indebtedness or any security
therefor or guaranty thereof and release, sell or exchange such security and
release such guaranty and otherwise deal freely with any Subsidiary Guarantor,
all without affecting the provisions of this Article Twelve.
SECTION 12.09. Holders Authorize Trustee To Effectuate Subordination of
Guarantee.
Each Holder by his acceptance thereof authorizes and expressly directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Article Twelve and appoints the
Trustee his attorney-in-fact for such purpose, including, in the event of any
Insolvency or Liquidation Proceeding with respect to any Subsidiary Guarantor,
the immediate filing of a claim for the unpaid balance of its or his Securities
pursuant to the Guarantee in the form required in said proceedings and the
causing of said claim to be approved. If the Trustee does not file a proper
claim or proof of debt in the form required in such proceeding prior to 30 days
before the expiration of the time to file such claims, then the holders of
Guarantor Senior Indebtedness are hereby authorized to have the right to file
and are hereby authorized to file an appropriate claim for and on behalf of such
Holder.
SECTION 12.10. Right of Trustee To Hold Guarantor Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article Twelve in respect of any Guarantor Senior Indebtedness at any time held
by it to the same extent as any other holder of Guarantor Senior Indebtedness,
and nothing in this Indenture shall be construed to deprive the Trustee of any
of its rights as such holder.
SECTION 12.11. Article Twelve Not To Prevent Events of Default.
The failure to make a payment on account of the Guarantees by reason of any
provision in this Article Twelve shall not be construed as preventing the
occurrence of an Event of Default under Section 6.01.
SECTION 12.12. Payment.
For purposes of this Article Twelve, a payment with respect to any
Guarantee or with respect to principal of or interest on any Security or any
Guarantee shall include, without limitation, payment of principal of and
interest on any Security, any depositing of funds under Article Eight, any
payment on account of any mandatory or optional repurchase or redemption of any
Security (including payments pursuant to Article Three or Section 4.01, 4.12 or
4.17) and any payment or recovery on any claim (whether for rescission or
damages and whether based on contract, tort, duty imposed by law, or any other
theory of liability) relating to or arising out of the offer, sale or purchase
of any Security.
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ARTICLE THIRTEEN
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with the
duties imposed by operation of TIA (S) 318(c), the imposed duties shall control.
SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in writing and
delivered in person or mailed by certified or registered mail (return receipt
requested) addressed as follows or by facsimile transmission:
If to the Company or any Subsidiary Guarantor:
Plains Resources Inc.
500 Dallas Street
Suite 700
Houston, Texas 77002
Telecopy No.: (713) 654-1523
Attention: Secretary and Chief Financial Officer
If to the Trustee:
Chase Bank of Texas, National Association
600 Travis Street, 11th Floor
Houston, Texas 77002
Telecopy No.: (713) 216-5476
Attention: Vice President, Corporate Trust Department
For purposes of the Company's obligation hereunder to maintain an office or
agency in the City of New York for purposes of surrendering Securities, the
address of the Trustee's agent is:
The Chase Manhattan Bank, New York
55 Water Street, Room 234
Windows 20 and 21
New York, New York 10041
Attention: Vice President, Corporate Trust Department
for Chase Bank of Texas, National Association
The Company or any Subsidiary Guarantor or the Trustee by notice to the
other may designate additional or different addresses for subsequent notices or
communications.
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Any notice or communication mailed to a Holder shall be mailed to him by
first-class mail at his address as it appears on the registration books of the
Registrar and shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it. If the Company mails notice or communications
to Holders it shall mail a copy to the Trustee and each Agent at the same time.
All notices or communications shall be in writing.
SECTION 13.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Securities. The Company,
the Subsidiary Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company and/or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Company
and/or such Subsidiary Guarantor, as the case may be, shall furnish to the
Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, the conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
person, such covenant or condition has been complied with.
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SECTION 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules for its
functions.
SECTION 13.07. Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday, or a day on which banks and
trust companies in the City of New York are not required by law or executive
order to be open. If a payment date is a Legal Holiday at a place of payment,
payment may be made at the place on the next succeeding day that is not a Legal
Holiday, without additional interest.
SECTION 13.08. Governing Law.
THIS INDENTURE AND THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT
THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 13.10. No Recourse Against Others.
All liability described in paragraph 19 of the Securities of any director,
officer, employee or stockholder, as such, of the Company, the Subsidiary
Guarantors or the Trustee is waived and released.
SECTION 13.11. Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
SECTION 13.12. Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
instrument.
SECTION 13.13. Severability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any
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way be affected or impaired thereby, and a Holder shall have no claim therefor
against any party hereto.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
Dated: September 15, 1999
PLAINS RESOURCES INC.
By______________________________
Michael R. Patterson
Vice President
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, Trustee
By______________________________
Mauri J. Cowen
Vice President and Trust Officer
SUBSIDIARY GUARANTORS:
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
STOCKER RESOURCES, L.P.,
a California limited partnership
BY: STOCKER RESOURCES, INC.,
a California corporation,
General Partner
By_______________________________
Michael R. Patterson
Vice President
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EXHIBIT A
[Form of Security]
[If a Series E Security or a Series F Security constituting a Transfer
Restricted Security--
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR"); (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THE NOTES EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE NOTES
EVIDENCED HEREBY, EXCEPT (A) TO PLAINS RESOURCES INC. (THE "COMPANY"), (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, AS TRUSTEE, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THE NOTES EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE UNITED STATES TO FOREIGN PURCHASERS
IN OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTES EVIDENCED HEREBY ARE
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THE NOTES EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF SUCH NOTES, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THIS CERTIFICATE TO CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, AS REGISTRAR. IF
THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AND CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, AS REGISTRAR, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED AFTER THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE
NOTES EVIDENCED HEREBY IF THE PROVISIONS OF SECTION 2.14(a)(i) OF THE INDENTURE
ARE SATISFIED. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM IN
REGULATION S UNDER THE SECURITIES ACT.
A-1
<PAGE>
REGISTERED
10 1/4% SENIOR SUBORDINATED NOTE DUE 2006
No. R- $
PLAINS RESOURCES INC.
(a Delaware corporation)
promises to pay to ______________________________
or registered assigns
the principal sum of ____________________ Dollars on March 15, 2006
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Dated: PLAINS RESOURCES INC.
Attest: By:
_______________________ ________________________
Secretary President
[Seal]
Authenticated:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By ___________________________
Authorized Signatory
OR
as Authenticating Agent
By ___________________________
Authorized Signatory
A-2
<PAGE>
[Reverse Side of Security]
PLAINS RESOURCES INC.
10 1/4% Senior Subordinated Note due 2006
1. Interest.
Plains Resources Inc., a Delaware corporation (the "Company"), promises to
pay interest on the principal amount of this Security at the rate per annum
shown above. The Company will pay interest semiannually on March 15 and
September 15 of each year, commencing [if an Original Security - on March 15,
2000 and continuing semiannually thereafter, on March 15 and September 15 in
each year, from September 15, 1999] [if a Series E Security other than an
Original Security - on the first March 15 or September 15 following the original
issuance of such Series E Security and continuing semiannually thereafter, on
March 15 and September 15 in each year, from ___________________] [if a Series F
Security - on the first March 15 or September 15 following the original issuance
of such Series F Securities and continuing semiannually thereafter, on March 15
and September 15 in each year, from the date of the original issuance of such
Series F Security], or from the most recent date to which interest has been paid
or duly provided for, until the principal hereof is paid or duly provided for.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Accrued but unpaid interest on any Series E Security that is exchanged
for a Series F Security pursuant to a Registration Rights Agreement shall be
paid on or before the first interest payment date on the Series F Securities.
The interest rate on the Securities is subject to increase under certain
circumstances described in the applicable Registration Rights Agreement.
The Company shall pay interest on overdue principal of and interest on
overdue installments of interest, to the extent lawful, at a rate equal to the
rate of interest otherwise payable on the Securities.
2. Method of Payment.
The Company will pay interest on the Securities to the persons who are
registered holders of Securities at the close of business on the March 1 or
September 1 immediately preceding the interest payment date even though
Securities are cancelled after the record date and on or before the interest
payment date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal of and interest on the
Securities in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
interest by check payable in such money or by wire transfer of immediately
available funds. It may mail an interest check to a Holder's registered
address.
<PAGE>
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-registrar without notice. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture dated as of September
15, 1999 (the "Indenture") among the Company, the Subsidiary Guarantors, and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. The Securities are
general unsecured subordinated obligations of the Company limited to
$150,000,000 aggregate principal amount, except as otherwise provided in the
Indenture. Payment on each Security is guaranteed on a senior subordinated
basis, jointly and severally, by the Subsidiary Guarantors pursuant to Articles
Eleven and Twelve of the Indenture.
5. Optional Redemption.
At any time on or after March 15, 2001, the Company may, at its option,
redeem all or any portion of the Securities at the redemption prices (expressed
as percentages of the principal amount of the Securities) set forth below, plus,
in each case, accrued interest thereon to the applicable redemption date, if
redeemed during the 12-month period beginning March 15, of the years indicated
below:
Year Percentage
2001 105.1250%
2002 103.4167%
2003 101.7083%
2004 and thereafter 100.0000%
In the case of any redemption of Securities, interest installments due
and payable on or prior to the date of redemption will be payable to Holders of
such Securities of record at the close of business on the relevant Record Date
referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the date of redemption. In the event of
redemption or purchase of this Series __ Security in part only, a new Series __
Security or Securities for the unredeemed or unpurchased portion hereof shall be
issued in the name of the Holder hereof upon the cancellation hereof.
The Securities do not have the benefit of any sinking fund
obligations.
A-4
<PAGE>
6. Notice of Redemption.
Notice of redemption will be mailed to the Holder's registered address
at least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed. If less than all Securities are to be
redeemed, the Trustee shall select pro rata the Securities to be redeemed in
multiples of $1,000. Securities in denominations larger than $1,000 may be
redeemed in part.
7. Subordination.
The Securities are subordinated to Senior Indebtedness. To the extent
provided in the Indenture, Senior Indebtedness must be paid before the
Securities may be paid. The Company agrees, and each Holder by accepting a
Security agrees, to such subordination and authorizes the Trustee to give it
effect.
8. Change of Control.
Upon the occurrence of a Change of Control and a corresponding Rating
Decline, the Company shall be obligated to make an offer to purchase all of the
then outstanding Securities (a "Change of Control Offer"), and shall purchase,
on a Business Day (the "Change of Control Purchase Date") not more than 60 nor
less than 30 days following the occurrence of a Rating Decline following a
Change of Control (or, in the event the Rating Decline occurs prior to the
corresponding Change of Control not more than 60 nor less than 30 days following
the occurrence of the Change of Control), all of the then outstanding Notes
validly tendered pursuant to such Change of Control Offer, at a purchase price
(the "Change of Control Purchase Price") equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the fifth Business Day
prior to the Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Company shall,
not later than the 30th day after the occurrence of the Rating Decline
corresponding to such Change of Control (or, in the event the Rating Decline
occurs prior to the corresponding Change of Control, 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, which notice
shall govern the terms of the Change of Control Offer and shall state, among
other things, the procedures that Holders of the Notes must follow to accept the
Change of Control Offer.
9. Net Proceeds Offer.
In the event of certain Asset Dispositions, the Company may be
required to make a Net Proceeds Offer to purchase all or any portion of each
Holder's Securities, at 100% of the principal amount of the Securities plus
accrued interest to the Net Proceeds Payment Date.
A-5
<PAGE>
10. Restrictive Covenants.
The Indenture imposes certain limitations on, among other things, the
ability of the Company to merge or consolidate with any other Person or sell,
lease or otherwise transfer all or substantially all of its properties or
assets, the ability of the Company or the Subsidiaries to dispose of certain
assets, to pay dividends and make certain other distributions and payments, to
make certain investments or redeem, retire, repurchase or acquire for value
shares of capital stock, to incur additional Indebtedness or incur encumbrances
against certain property, to engage in other business activities, and to enter
into certain transactions with Related Persons, all subject to certain
limitations described in the Indenture.
11. Denominations, Transfer, Exchange.
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not transfer or exchange any Securities selected
for redemption. Also, it need not transfer or exchange any Securities for a
period of 30 days before a selection of Securities to be redeemed.
12. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes and neither the Company, the Trustee nor any Agent shall be
affected by notice to the contrary.
13. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for one year, the Trustee or Paying Agent will pay the money back to the Company
at its request. After that, all liability of the Trustee and such Paying Agents
with respect to such money shall cease.
14. Amendment, Supplement, Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Securities, and any past default or noncompliance
with any provision may be waived with the consent of the Holders of a majority
in principal amount of the Securities. Without the consent of any Holder, the
Company may amend or supplement the Indenture or the Securities to, among other
things, cure any ambiguity, defect or inconsistency or to provide for
uncertificated Securities in addition to certificated Securities or to make any
change that does not adversely affect the rights of any Holder.
A-6
<PAGE>
15. Successor Corporation.
When a successor corporation assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor corporation
will be released from those obligations.
16. Defaults and Remedies.
An event of default generally is: default in payment of principal on
the Securities; default for 30 days in payment of interest on the Securities;
failure by the Company or any Subsidiary Guarantor for 60 days after notice to
comply with any of its other agreements in the Indenture; certain defaults under
or acceleration prior to maturity of other indebtedness; certain final judgments
against the Company or Subsidiaries; a failure of any Guarantee of a Material
Subsidiary to be in full force and effect or denial by any Subsidiary Guarantor
of its obligations with respect thereto; and certain events of bankruptcy or
insolvency. Subject to certain limitations in the Indenture, if an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Securities may declare all the
Securities to be due and payable immediately, except that in the case of an
Event of Default arising from certain events of bankruptcy, insolvency or
reorganization relating to the Company, all outstanding Securities shall become
due and payable immediately without further action or notice. Holders may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in principal amount of the Securities may direct the Trustee in its
exercise of any trust or power. The Company must furnish an annual compliance
certificate to the Trustee.
17. Trustee Dealings with Company.
Chase Bank of Texas, National Association, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with the Company or its
Subsidiaries or Affiliates with the same rights it would have if it were not
Trustee.
18. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company,
any Subsidiary Guarantor or the Trustee, shall not have any liability for any
obligations of the Company, any Subsidiary Guarantor or the Trustee, under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or an
authenticating agent signs the certificate of authentication on the other side
of this Security.
A-7
<PAGE>
20. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors
Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to Holders. No representation is
made as to the accuracy of such numbers as printed on the Securities and
reliance may be placed only on the other identification numbers printed hereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to: Secretary,
Plains Resources Inc., 500 Dallas Street, Suite 700, Houston, Texas 77002.
22. Exchange Option.
[If a Series E Security -- At the option of the Holders hereof, the
Series E Securities may be exchanged, pursuant to the Registration Rights
Agreement, for a like aggregate principal amount of Series F Securities.]
A-8
<PAGE>
[Form of Assignment]
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
_________________________________________________
_________________________________________________
(Insert assignee's soc. sec. or tax ID no.)
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
_________________________________________________
_________________________________________________
Your Signature:_________________________________________________
(Sign exactly as your name appears on the other
side of this Security)
Date: _______________________
Signature Guarantee: __________________________________________
A-9
<PAGE>
[Form of Option of Holder to Elect Purchase]
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.12 or Section 4.17 of the Indenture, check the appropriate
box:
Section 4.12 [ ]
Section 4.17 [ ]
If you want to have only part of this Security purchased by the
Company pursuant to Section 4.12 or 4.17 of the Indenture, state the amount (in
integral multiples of $1,000):
$_____________________________
Date: ________________________ Signature: _____________________________________
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee: ____________________________
A-10
<PAGE>
EXHIBIT A-1
[Form of Notation on Security
Relating to Guarantee]
GUARANTEE
Subject to the limitations set forth in the Indenture, the Subsidiary
Guarantors (as defined in the Indenture referred to in the Security upon which
this notation is endorsed and each hereinafter referred to as a "Subsidiary
Guarantor," which term includes any successor or additional Subsidiary Guarantor
under the Indenture) have unconditionally guaranteed (a) the due and punctual
payment of the principal of and interest on the Securities, whether at maturity,
acceleration, redemption or otherwise, (b) the due and punctual payment of
interest on the overdue principal of and interest on the Securities, if any, to
the extent lawful, (c) the due and punctual performance of all other obligations
of the Company to the Holders or the Trustee, all in accordance with the terms
set forth in the Indenture, and (d) in case of any extension of time of payment
or renewal of any Securities or any of such other obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Capitalized terms used herein have the meanings assigned to them in the
Indenture unless otherwise indicated.
No stockholder, officer, director or incorporator, as such, past,
present or future, of the Subsidiary Guarantors shall have any personal
liability under this Guarantee by reason of his or its status as such
stockholder, officer, director or incorporator.
This Guaranty shall be binding upon each Subsidiary Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof and
in the Indenture.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Security upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
A-1-1
<PAGE>
The obligations of the Subsidiary Guarantors to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly subordinated
to all Guarantor Senior Indebtedness to the extent set forth in Article Twelve
of the Indenture and reference is hereby made to such Indenture for the precise
terms of such subordination.
Subsidiary Guarantors:
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
STOCKER RESOURCES, L.P., a California
limited partnership
By: STOCKER RESOURCES, INC., a
California corporation, General Partner
By________________________________________
Vice President
A-1-2
<PAGE>
EXHIBIT A-2
[Form of Legend For Global Securities]
Any Global Security authenticated and delivered hereunder shall bear a
legend in addition to the Private Placement Legend, if required pursuant to
Section 2.14, in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER
OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A-2-1
<PAGE>
EXHIBIT A-3
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10 1/4% Senior Subordinated Notes due 2006, Series E, and
10 1/4% Senior Subordinated Notes due 2006, Series F
(the "Securities"), of Plains Resources Inc.
-----------------------------------------------
This Certificate relates to $_______ principal amount of Securities held in
the form of *[ ] a beneficial interest in a Global Security or *[ ] Physical
Securities by _______________ (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in exchange
for its beneficial interest in the Global Security held by DTC a Physical
Security or Physical Securities in definitive, registered form of authorized
denominations and in an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[ ] has requested that the Registrar by written order exchange or register
the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such Security, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Securities and the restrictions on
transfers thereof as provided in Section 2.06 of such Indenture, and that the
transfer of these Securities does not require registration under the Securities
Act of 1933, as amended (the "Act") because *:
[ ] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of subparagraph (a)(1) or (c)(1) of Section
2.06 of the Indenture).
[ ] Such Security is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Act), in reliance on Rule 144A.
[ ] Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule
501 under the Act).
[ ] Such Security is being transferred in reliance on Regulation S under
the Act.
[ ] Such Security is being transferred in reliance on Rule 144 under the
Act.
A-3-1
<PAGE>
[ ] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 or Regulation S under the Act to a person other than an
institutional "accredited investor."
____________________________________
[INSERT NAME OF TRANSFEROR]
By: ________________________________
[Authorized Signatory]
Date: _____________________________________________
- ---------
* Check applicable box.
A-3-2
<PAGE>
EXHIBIT A-4
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS TO
INSTITUTIONAL ACCREDITED INVESTORS
----------------------------------
___________________________, _______
Chase Bank of Texas, National Association
600 Travis Street, 11th Floor
Houston, Texas 77002
Re: Plains Resources Inc. Indenture (the "Indenture")
relating to 10 1/4% Senior Subordinated Notes due 2006, Series E,
or 10 1/4% Senior Subordinated Notes due 2006, Series F
-------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of 10 1/4% Senior Subordinated
Notes due 2006, Series E, or 10 1/4% Senior Subordinated Notes due 2006, Series
F (the "Securities"), of Plains Resources Inc. (the "Company"), we confirm that:
1. We have received such information as we deem necessary in order to
make our investment decision.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture and
the undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities may not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities, we will do so only (A) to the
Company or any subsidiary thereof, (B) inside the United States in accordance
with Rule 144A under the Securities Act to a "qualified institutional buyer" (as
defined therein), (C) inside the United States to an institutional "accredited
investor" (as defined below) that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to the Trustee a signed letter
substantially in the form hereof, (D) outside the United States in accordance
with Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing Securities from us a
notice advising such purchaser that resales of the Securities are restricted as
stated herein.
A-4-1
<PAGE>
4. We understand that, on any proposed resale of Securities, we will be
required to furnish to you and the Company, such certification, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We further
understand that the Securities purchased by us will bear a legend to the
foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be, for an indefinite period.
6. We are acquiring the Securities purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion, for investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act.
You and the Company and your and their respective counsel are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: __________________________________
[Authorized Signatory]
A-4-2
<PAGE>
EXHIBIT A-5
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION
WITH REGULATION S TRANSFERS
---------------------------
______________________________, _______
Chase Bank of Texas, National Association
600 Travis Street, 11th Floor
Houston, Texas 77002
Re: Plains Resources Inc. ("the Company")
10 1/4% Senior Subordinated Notes due 2006, Series E, and
10 1/4% Senior Subordinated Notes due 2006, Series F (the "Securities")
-----------------------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $__________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knew that the transaction had been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
A-5-1
<PAGE>
You and the Company and your and their respective counsel are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy thereof to any interested party in any administrative or legal proceeding
or official inquiry with respect to the matters covered hereby. Defined terms
used herein without definition have the respective meanings provided in
Regulation S.
Very truly yours,
[Name of Transferor]
By: ______________________________
[Authorized Signature]
A-5-2
<PAGE>
================================================================================
10 1/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES E
REGISTRATION RIGHTS AGREEMENT
Dated September 22, 1999
by and among
PLAINS RESOURCES INC.,
ARGUELLO INC.,
CALUMET FLORIDA, INC.,
PLAINS ILLINOIS INC.,
PLAINS RESOURCES INTERNATIONAL INC.,
PMCT INC.
STOCKER RESOURCES, INC.,
and STOCKER RESOURCES, L.P.
and
J.P. MORGAN SECURITIES INC.
FIRST UNION CAPITAL MARKETS CORP.
================================================================================
<PAGE>
This Registration Rights Agreement is made and entered into this 22nd day
of September, 1999, by and among Plains Resources Inc., a Delaware corporation
(the "Company"), 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 (the "Subsidiary Guarantors"
and, together with the Company, the "Issuers") and J.P. Morgan Securities Inc.
and First Union Capital Markets Corp. (the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated September
15, 1999, among the Company, the Subsidiary Guarantors and the Initial
Purchasers (the "Purchase Agreement"). In order to induce the Initial Purchasers
to enter into the Purchase Agreement, the Issuers have agreed to provide the
registration rights provided for in this Agreement to the Initial Purchasers and
their respective direct and indirect transferees. The execution and delivery of
this Agreement is a condition to the closing of the transactions contemplated by
the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings:
Additional Interest: As defined in Section 4(a) hereof.
Advice: As defined in the last paragraph of Section 5 hereof.
Affiliate: With respect to any specified person, "Affiliate" shall mean
any other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For the purposes
of this definition, "control," when used with respect to any person, means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
Agreement: This Registration Rights Agreement, as the same may be amended,
supplemented or modified from time to time in accordance with the terms hereof.
Business Day: Any day except a Saturday, a Sunday or a day on which
banking institutions in New York, New York generally are required or authorized
by law or other government action to be closed.
Company: As defined in the preamble hereof.
Consummate or consummate: When used to qualify the term "Exchange Offer"
shall mean validly and lawfully to issue and deliver the Exchange Notes pursuant
to the Exchange Offer for all Notes validly tendered and not validly withdrawn
pursuant thereto in accordance with the terms of this Agreement.
<PAGE>
Consummation Date: The date that is 30 Business Days immediately following
the date that the Exchange Registration Statement shall have been declared
effective by the SEC.
Effectiveness Period: As defined in Section 3(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the SEC pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
Exchange Notes: The 10 1/4% Senior Subordinated Notes due 2006, Series F,
of the Company, unconditionally guaranteed on a joint and several basis by each
of the Subsidiary Guarantors, issued pursuant to the Indenture, and that are
identical to the Notes in all material respects, except that the provisions
regarding restrictions on transfer shall be modified, as appropriate, and the
issuance thereof pursuant to the Exchange Offer shall have been registered
pursuant to an effective Registration Statement in compliance with the
Securities Act.
Exchange Offer: An offer to issue, in exchange for any and all of the
Notes, a like aggregate principal amount of Exchange Notes, which offer shall be
made by the Company pursuant to Section 2 hereof.
Exchange Registration Statement: As defined in Section 2(a) hereof.
Indemnified Person: As defined in Section 7(a) hereof.
Indenture: The Indenture, dated as of September 15, 1999, among the
Issuers and Chase Bank of Texas, National Association, as trustee thereunder,
pursuant to which the Notes are issued, as amended or supplemented from time to
time in accordance with the terms thereof.
Issue Date: As defined in Section 2(a).
Issuers: As defined in the preamble hereof.
Notes: The 10 1/4% Senior Subordinated Notes due 2006, Series E, of the
Company, unconditionally guaranteed on a joint and several basis by each of the
Subsidiary Guarantors and, issued pursuant to the Indenture.
Participating Broker-Dealer: As defined in Section 2(e) hereof.
Private Exchange: As defined in Section 2(c) hereof.
Private Exchange Notes: As defined in Section 2(c) hereof.
-2-
<PAGE>
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Notes, Exchange Notes or Private
Exchange Notes covered by such Registration Statement, and all other amendments
and supplements to any such prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference, if any, in such prospectus.
Registration Default: As defined in Section 4(a) hereof.
Registration Statement: Any registration statement of the Company and the
Subsidiary Guarantors that covers any of the Notes, Exchange Notes or Private
Exchange Notes pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference, if any, in such registration statement.
Rule 144: Rule 144 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC as a replacement thereto having substantially the
same effect as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 158: Rule 158 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC as a replacement thereto having substantially the
same effect as such Rule.
Rule 174: Rule 174 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC as a replacement thereto having substantially the
same effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC as a replacement thereto having substantially the
same effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC as a replacement thereto having substantially the
same effect as such Rule.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations promulgated by the SEC thereunder.
-3-
<PAGE>
Shelf Registration: As defined in Section 3 hereof.
Shelf Registration Statement: As defined in Section 3 hereof.
Special Counsel: Vinson & Elkins L.L.P., special counsel to the holders of
Transfer Restricted Securities, or such other counsel as shall be agreed upon by
the Issuers and holders of a majority in aggregate principal amount of Transfer
Restricted Securities, the expenses of which holders of Transfer Restricted
Securities will be reimbursed by the Issuers pursuant to Section 6.
Subsidiary Guarantors: As defined in the preamble hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Securities: The Notes, upon original issuance thereof,
and at all times subsequent thereto, each Exchange Note as to which Section
3(a)(ii) hereof is applicable upon original issuance and at all times subsequent
thereto and each Private Exchange Note upon original issuance thereof and at all
times subsequent thereto, until in the case of any such Note, Exchange Note or
Private Exchange Note, as the case may be, the earliest to occur of (i) the date
on which any such Note has been exchanged by a person other than a Participating
Broker-Dealer for an Exchange Note (other than with respect to an Exchange Note
as to which Section 3(a)(ii) hereof applies) pursuant to the Exchange Offer,
(ii) with respect to Exchange Notes received by Participating Broker-Dealers in
the Exchange Offer, the earlier of (x) the date on which such Exchange Note has
been sold by such Participating Broker-Dealer by means of the Prospectus
contained in the Exchange Registration Statement and (y) the date on which the
Exchange Registration Statement has been effective under the Securities Act for
a period of 6 months after the Consummation Date, (iii) a Shelf Registration
Statement covering such Note, Exchange Note or Private Exchange Note has been
declared effective by the SEC and such Note, Exchange Note or Private Exchange
Note, as the case may be, has been disposed of in accordance with such effective
Shelf Registration Statement, (iv) the date on which such Note, Exchange Note or
Private Exchange Note, as the case may be, is distributed to the public pursuant
to Rule 144 (or any similar provisions then in effect) or is saleable pursuant
to Rule 144(k) promulgated by the SEC pursuant to the Securities Act or (v) the
date on which such Note, Exchange Note or Private Exchange Note, as the case may
be, ceases to be outstanding for purposes of the Indenture or any other
indenture under which such Exchange Note or Private Exchange Note was issued.
Trustee: The trustee under the Indenture.
Underwritten Registration or Underwritten Offering: A registration in
connection with which securities are sold to an underwriter for reoffering to
the public pursuant to an effective Registration Statement.
2. Exchange Offer
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the SEC or the staff of the SEC, the Issuers shall (A) prepare
and, on or prior to 60 days after the date of original issuance of the Notes
(the "Issue Date"), file with the SEC a Registration Statement under
-4-
<PAGE>
the Securities Act with respect to an offer by the Company to the holders of the
Notes to issue and deliver to such holders, in exchange for Notes, a like
principal amount of Exchange Notes, (B) use their best efforts to cause the
Registration Statement relating to the Exchange Offer to be declared effective
by the SEC under the Securities Act on or prior to 120 days after the Issue
Date, and (C) commence the Exchange Offer and use best efforts to issue, on or
prior to the Consummation Date, the Exchange Notes. The offer and sale of the
Exchange Notes pursuant to the Exchange Offer shall be registered pursuant to
the Securities Act on the appropriate form (the "Exchange Registration
Statement") and duly registered or qualified under all applicable state
securities or Blue Sky laws and will comply with all applicable tender offer
rules and regulations under the Exchange Act and state securities or Blue Sky
laws. The Exchange Offer shall not be subject to any condition, other than that
the Exchange Offer does not violate any applicable law or interpretation of the
SEC or the staff of the SEC. Upon consummation of the Exchange Offer in
accordance with this Section 2, the Issuers shall have no further registration
obligations other than with respect to (i) Private Exchange Notes, (ii) Exchange
Notes held by Participating Broker-Dealers and (iii) Notes or Exchange Notes as
to which Section 3(a)(ii) hereof applies. No securities shall be included in the
Exchange Registration Statement other than the Exchange Notes.
(b) The Issuers may require each holder of Notes as a condition to its
participation in the Exchange Offer to represent to the Issuers and their
counsel in writing (which may be contained in the applicable letter of
transmittal) that at the time of the consummation of the Exchange Offer (i) any
Exchange Notes received by such holder will be acquired in the ordinary course
of its business, (ii) such holder will 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 (iii) such holder is not an Affiliate
of an Issuer, or if it is an Affiliate of an Issuer, it will comply with the
registration and prospectus delivery requirements of the Securities Act, to the
extent applicable.
(c) To the extent not prohibited by any applicable law or applicable
interpretation of the SEC or the Staff of the SEC, if, prior to consummation of
the Exchange Offer, an Initial Purchaser holds any Notes acquired by it and
having, or which are reasonably likely to be determined to have, the status of
an unsold allotment in the initial distribution, or any other holder of Notes is
not entitled to participate in the Exchange Offer, the Company upon the request
of such Initial Purchaser or any such holder shall, simultaneously with the
delivery of the Exchange Notes in the Exchange Offer, issue and deliver to such
Initial Purchaser and any such holder, in exchange (the "Private Exchange") for
such Notes held by such Initial Purchaser and any such holder, a like principal
amount of debt securities of the Company, guaranteed by each of the Subsidiary
Guarantors on an unsecured senior subordinated basis, that are identical in all
material respects to the Exchange Notes (the "Private Exchange Notes"). The
Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any applicable law
or interpretation of the SEC or the staff of the SEC, the Company shall mail the
Exchange Offer Prospectus and appropriate accompanying documents, including
appropriate letters of transmittal, to each holder of Notes providing, in
addition to such other disclosures as are required by applicable law:
-5-
<PAGE>
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted for
exchange;
(ii) the date of acceptance for exchange (the "Exchange Date"),
which date shall in no event be later than the Consummation Date (unless
otherwise required by applicable law);
(iii) that holders of Notes electing to have a Note exchanged
pursuant to the Exchange Offer will be required to surrender such Note,
together with the enclosed letters of transmittal, to the institution and
at the address (located in the city of New York) specified in the notice
prior to the close of business on the Exchange Date; and
(iv) that holders of Notes that do not tender all such securities
pursuant to the Exchange Offer may no longer have any registration rights
hereunder with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof validly
tendered and not validly withdrawn pursuant to the Exchange Offer or the
Private Exchange; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by the
Company, and issue, cause the Trustee under the Indenture (or the indenture
pursuant to which the Exchange Notes are issued) to authenticate, and
deliver to each holder of Notes, Exchange Notes equal in principal amount
to the principal amount of the Notes surrendered by such holder.
(e) The Issuers and the Initial Purchasers acknowledge that the staff of
the SEC has taken the position that any broker-dealer that owns Exchange Notes
that were received by such broker-dealer for its own account in the Exchange
Offer (a "Participating Broker-Dealer") may be deemed to be an "underwriter"
within the meaning of the Securities Act and must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes (other than a resale of an unsold allotment resulting from the
original offering of the Notes).
The Issuers and the Initial Purchasers also acknowledge that it is the SEC
staff's position that if the Prospectus contained in the Exchange Registration
Statement includes a plan of distribution containing a statement to the above
effect and the means by which Participating Broker-Dealers may resell the
Exchange Notes, without naming the Participating Broker Dealers or specifying
the amount of Exchange Notes owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligations
under the Securities Act in connection with resales of Exchange Notes for their
own accounts, so long as the Prospectus otherwise meets the requirements of the
Securities Act.
In light of the foregoing, if requested by a Participating Broker-Dealer,
the Issuers agree (x) to use their best efforts to keep the Exchange
Registration Statement continuously effective for a
-6-
<PAGE>
period of up to 6 months or such earlier date as each Participating Broker-
Dealer shall have notified the Company in writing that such Participating Broker
- -Dealer has resold all Exchange Notes acquired in the Exchange Offer, (y) to
comply with the provisions of Section 5 of this Agreement, as they relate to the
Exchange Offer and the Exchange Registration Statement, and (z) to deliver to
such Participating Broker-Dealer a "cold comfort" letter of the independent
public accountants of the Issuers and a legal opinion as to matters reasonably
requested by such Participating Broker-Dealer relating to the Exchange
Registration Statement and the related Prospectus and any amendments or
supplements thereto.
(f) The Initial Purchasers shall have no liability to any Participating
Broker-Dealer with respect to any request made pursuant to Section 2(e).
(g) Accrued but unpaid interest on any Note that is exchanged for an
Exchange Note or a Private Exchange Note pursuant to this Agreement shall be
paid on or before the first interest payment date on the Exchange Notes and the
Private Exchange Notes, as the case may be.
(h) The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event shall provide that the Exchange Notes shall not
be subject to the transfer restrictions set forth in the Indenture, except in
any case where an Exchange Note constitutes a Transfer Restricted Security. The
Indenture or such indenture shall provide that the Exchange Notes, the Private
Exchange Notes and the Notes shall vote and consent together on all matters as
one class and that neither the Exchange Notes, the Private Exchange Notes nor
the Notes will have the right to vote or consent as a separate class on any
matter.
3. Shelf Registration
(a) If (i) the Company is not permitted to file the Exchange Offer
Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by any applicable law or applicable interpretation of the
SEC or the staff of the SEC or (ii) any holder of a Note notifies the Company on
or prior to 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 such
resales by such holder or (C) it is a broker-dealer that owns Notes (including
an 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 (iii) 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 (i) through (iii), a "Shelf Filing Event"), the Issuers
shall cause to be filed with the SEC pursuant to Rule 415 a shelf registration
statement (the "Shelf Registration Statement") on or prior to the later of (x)
60 days after the Issue Date and (y) 30 days after the occurrence of such Shelf
Filing Event, relating to all Transfer Restricted Securities (the "Shelf
Registration") the holders of which have provided the information required
pursuant to Section 3(b) hereof, and shall use their best efforts to have the
Shelf Registration Statement declared effective by the SEC on or prior to 90
days after the occurrence of such Shelf Filing Event, provided that if the
Company has not consummated the Exchange Offer within 180 days of the Issue
Date, then the
-7-
<PAGE>
Issuers shall cause the Shelf Registration Statement to be filed with the SEC on
or prior to the 181st day after the Issue Date and shall use their best efforts
to have the Shelf Registration Statement declared effective by the SEC within 60
days of the date of filing thereof. In such circumstances, the Issuers shall use
their best efforts to keep the Shelf Registration Statement continuously
effective under the Securities Act, until (A) the third anniversary of the Issue
Date (subject to extension pursuant to Section 5 hereof) 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"); provided, however, that the Effectiveness Period shall
be extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 and as otherwise
provided herein.
(b) 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 such holder furnishes to the Company in writing,
within 30 days after receipt of a request therefor, such information as the
Company 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 pursuant
to Section 4 hereof unless and until such holder shall have 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 the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such holder not
materially misleading.
4. Additional Interest
(a) The parties hereto agree that the holders of Transfer Restricted
Securities will suffer damages if the Issuers fail to fulfill their obligations
pursuant to Section 2 or Section 3, as applicable, and that it would not be
feasible to ascertain the extent of such damages. Accordingly, in the event that
(i) the applicable Registration Statement is not filed with the SEC on or prior
to the date specified herein for such filing, (ii) the applicable Registration
Statement has not been declared effective by the SEC on or prior to the date
specified herein for such effectiveness after such obligation arises, (iii) if
the Exchange Offer is required to be Consummated hereunder, the Company has 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 (iv) 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 (i) through
(iv), a "Registration Default"), then the interest rate on Transfer Restricted
Securities will increase ("Additional Interest"), with respect to the first 90-
day period immediately following the occurrence of such Registration Default, 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. Following 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.
-8-
<PAGE>
(b) The Company shall notify the Trustee and paying agent under the
Indenture (or the trustee and paying agent under such other indenture under
which the Transfer Restricted Securities are issued) immediately upon the
happening of each and every Registration Default. The Company shall pay the
Additional Interest due on the Transfer Restricted Securities by depositing with
the paying agent (which shall not be the Company for these purposes) for the
Transfer Restricted Securities, in trust, for the benefit of the holders
thereof, prior to 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.
(c) The parties hereto agree that the Additional Interest provided for in
this Section 4 constitutes a reasonable estimate of the damages that will be
suffered by holders of Transfer Restricted Securities by reason of the happening
of any Registration Default.
5. Registration Procedures
In connection with the Issuers' registration obligations hereunder, the
Issuers shall effect such registrations on the appropriate form available for
the sale of the Notes, the Exchange Notes or Private Exchange Notes, as
applicable, to (i) in the case of the Exchange Offer, permit the exchange of
Exchange Notes for Notes in the Exchange Offer and, if applicable, resales of
Exchange Notes by Participating Broker-Dealers and (ii) in the case of a Shelf
Registration, permit the sale of the applicable Transfer Restricted Securities
in accordance with the method or methods of disposition thereof specified by the
holders of such Transfer Restricted Securities, and pursuant thereto the Issuers
shall as expeditiously as possible:
(a) in the case of a Shelf Registration, a reasonable period of time
prior to the initial filing of a Shelf Registration Statement or Prospectus
and a reasonable period of time prior to the filing of any amendment or
supplement thereto (including any document that would be incorporated or
deemed to be incorporated therein by reference), furnish to the holders of
the Transfer Restricted Securities included in such Shelf Registration
Statement, their Special Counsel and the managing underwriters, if any,
copies of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference) will be
subject to the review of such holders, their Special Counsel and such
underwriters, if any, and cause the officers and directors of the Issuers,
counsel to the Issuers and independent certified public accountants to the
Issuers to respond to such reasonable inquiries as shall be necessary, in
the opinion of respective counsel to such holders and such underwriters, to
conduct a reasonable investigation within the meaning of the Securities
Act; provided, however, that the foregoing inspection and information
gathering shall be coordinated by the Initial Purchasers and on behalf of
any other persons by one counsel designated by and on behalf of such other
persons; and provided, further, that the Issuers shall not be deemed to
have kept a Shelf Registration Statement effective during the applicable
period if any of them voluntarily takes or fails to take any reasonable
action that results in holders of the Transfer Restricted Securities
covered thereby not being able to sell such Transfer Restricted Securities
pursuant to Federal securities laws during that period
-9-
<PAGE>
(and the time period during which such Shelf Registration Statement is
required to remain effective hereunder shall be extended by the number of
days during which such holders of Transfer Restricted Securities are not
able to sell such Transfer Restricted Securities). The Issuers shall not
file any such Shelf Registration Statement or related Prospectus or any
amendments or supplements thereto to which the holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included
in such Shelf Registration Statement shall reasonably object on a timely
basis;
(b) prepare and file with the SEC such amendments, including post-
effective amendments, to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable
time period required hereunder; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement as so amended or in such
Prospectus as so supplemented;
(c) notify the holders of Transfer Restricted Securities to be sold
or, in the case of Transfer Restricted Securities tendered for in an
Exchange Offer, their Special Counsel and the managing underwriters, if
any, promptly, and (if requested by any such person), confirm such notice
in writing, (i)(A) when a Prospectus or any Prospectus supplement or post-
effective amendment is proposed to be filed, and (B) with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the SEC or any other Federal or
state governmental authority for amendments or supplements to a
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC, any state securities commission, any
other governmental agency or any court of any stop order, order or
injunction suspending or enjoining the use of a Prospectus or the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Notes, Exchange Notes or Private
Exchange Notes for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, and (v) of the happening of
any event or information becoming known that makes any statement made in a
Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires the making of any changes in such Registration
Statement, Prospectus or documents so that it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and that in the case of a Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(d) use their best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of any order enjoining or suspending the use of a
Prospectus or the effectiveness of a Registration Statement or the lifting
of any suspension of the qualification (or exemption
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from qualification) of any of the Notes, Exchange Notes or Private Exchange
Notes for sale in any jurisdiction, at the earliest practicable moment;
(e) if a Shelf Registration Statement is filed pursuant to Section 3
hereof and if requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold pursuant to such Shelf Registration
Statement, (i) promptly incorporate in a Prospectus supplement or post-
effective amendment such information as the managing underwriters, if any,
and such holders reasonably believe should be included therein, and (ii)
make all required filings of such Prospectus supplement or such post-
effective amendment under the Securities Act as soon as practicable after
the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided, however,
that the Issuers shall not be required to take any action pursuant to this
Section 5(e) that would, in the opinion of counsel for the Issuers, violate
applicable law;
(f) upon written request to the Company, furnish to each holder of
Notes, Exchange Notes or Private Exchange Notes to be exchanged or sold
pursuant to a Registration Statement, their Special Counsel and each
managing underwriter, if any, without charge, at least one conformed copy
of such Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to
be incorporated therein by reference, and all exhibits to the extent
requested (including those previously furnished or incorporated by
reference) as soon as practicable after the filing of such documents with
the SEC;
(g) deliver to each holder of Notes, Exchange Notes or Private
Exchange Notes to be exchanged or sold pursuant to a Registration
Statement, their Special Counsel, and the underwriters, if any, without
charge, as many copies of the Prospectus (including each form of
prospectus) and each amendment or supplement thereto as such persons
reasonably request; and the Issuers hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
holders of Transfer Restricted Securities and the underwriters, if any, in
connection with the offering and sale of the Transfer Restricted Securities
covered by such Prospectus and any amendment or supplement thereto;
(h) prior to any public offering of Notes, Exchange Notes or Private
Exchange Notes, use their best efforts to register or qualify or cooperate
with the holders of Notes, Exchange Notes or Private Exchange Notes to be
sold or tendered for the underwriters, if any, and their respective counsel
in connection with the registration or qualification (or exemption from
such registration or qualification) of such Notes, Exchange Notes or
Private Exchange Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any such holder or
underwriter reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective hereunder and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Notes, Exchange Notes or Private
Exchange Notes covered by the applicable Registration Statement; provided,
however, that the Issuers shall not be required to (i) qualify generally to
do business in any jurisdiction where they are not then so qualified or
(ii) take
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any action which would subject them to general service of process or to
taxation in any jurisdiction where they are not so subject;
(i) in connection with any sale or transfer of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the holders thereof and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company and to enable such
Transfer Restricted Securities to be in such authorized denominations and
registered in such names as the managing underwriters, if any, or such
holders may request at least two Business Days prior to any sale of
Transfer Restricted Securities;
(j) upon the occurrence of any event contemplated by Section 5(c)(v),
as promptly as practicable, prepare a supplement or amendment, including,
if appropriate, a post-effective amendment, to each Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, such Prospectus will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(k) prior to the effective date of the Exchange Registration
Statement, to provide a CUSIP number for the Exchange Notes (and Private
Exchange Notes if applicable);
(l) if a Shelf Registration Statement is filed pursuant to Section 3
hereof, enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in underwritten offerings) and
take all such other reasonable actions in connection therewith (including
those reasonably requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold) in order to expedite or facilitate the
disposition of such Transfer Restricted Securities, and, whether or not an
underwriting agreement is entered into and whether or not the registration
is an underwritten registration, (i) make such representations and
warranties to the holders of such Transfer Restricted Securities and the
underwriters, if any, with respect to the business of the Company and its
subsidiaries (including with respect to businesses or assets acquired or to
be acquired by any of them), and the Shelf Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated
by reference therein, in each case, with respect to such matters as are
customarily addressed in representations and warranties made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Issuers and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and Special
Counsel to the holders of the Transfer Restricted Securities being sold),
addressed to each selling holder of Transfer Restricted Securities and each
of the underwriters, if any, covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such Special Counsel and underwriters; (iii) use
their best
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efforts to obtain customary "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be,
included in the Shelf Registration Statement), addressed (where reasonably
possible) to each selling holder of Transfer Restricted Securities and each
of the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters
in connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling holders and the
underwriters, if any, than those set forth in Section 7 hereof (or such
other provisions and procedures acceptable to holders of a majority in
aggregate principal amount of Transfer Restricted Securities covered by
such Shelf Registration Statement and the managing underwriters, if any);
and (v) deliver such documents and certificates as may be reasonably
requested by the holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold, their Special Counsel and the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Issuers;
(m) in the case of a Shelf Registration, make available for inspection
by a representative of the holders of Transfer Restricted Securities being
sold, any underwriter participating in any such disposition of Transfer
Restricted Securities, and any attorney, consultant or accountant retained
by such selling holders or underwriter, at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries (including with respect to businesses and assets acquired or
to be acquired to the extent that such information is available to the
Company), and cause the officers, directors, agents and employees of the
Company and its subsidiaries (including with respect to businesses and
assets acquired or to be acquired to the extent that such information is
available to the Company) to supply all information in each case reasonably
requested by any such representative, underwriter, attorney, consultant or
accountant in connection with such Shelf Registration; provided, however,
that such persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the Company
in writing as confidential at the time of delivery of such information
shall be kept confidential by such persons, unless (i) disclosure of such
information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements
pursuant to Federal securities laws in connection with the filing of the
Shelf Registration Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard such information by such
person or (iv) such information becomes available to such person from a
source other than the Company and its subsidiaries and such source is not
bound by a confidentiality agreement; and provided, further, that the
foregoing inspection and information gathering shall be coordinated by the
Initial Purchasers and on behalf of any other persons, by one counsel
designated by and on behalf of such other persons;
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<PAGE>
(n) provide an indenture trustee for the Notes and/or the Exchange
Notes and Private Exchange Notes, as the case may be, and cause an
indenture to be qualified under the TIA not later than the effective date
of the first Registration Statement relating to the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be; and if such
indenture shall be the Indenture, in connection therewith, cooperate with
the Trustee and the holders of the Notes and/or the Exchange Notes and
Private Exchange Notes, to effect such changes to the Indenture as may be
required for the Indenture to be (or to remain) so qualified in accordance
with the terms of the TIA; and execute, and use its best efforts to cause
the Trustee to execute, all customary documents as may be required to
effect such changes, and all other forms and documents required to be filed
with the SEC to enable the Indenture to be (or to remain) so qualified in a
timely manner;
(o) comply with all applicable rules and regulations of the SEC and
make generally available to their security holders earning statements
satisfying the provisions of Section ll(a) of the Securities Act and Rule
158, no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm commitment or reasonable
efforts underwritten offering and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter after
the effective date of a Registration Statement, which statement shall cover
said period, consistent with the requirements of Rule 158; and
(p) cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc.
The Issuers may require a holder of Transfer Restricted Securities to be
included in a Registration Statement to furnish to the Issuers such information
regarding the distribution of such Transfer Restricted Securities as is required
by law to be disclosed in such Registration Statement and the Issuers may
exclude from such Registration Statement the Transfer Restricted Securities of
any holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If any such Registration Statement refers to any holder by name or
otherwise as the holder of any securities of an Issuer, then such holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such holder, to the effect that the holding
by such holder of such securities is not to be construed as a recommendation by
such holder of the investment quality of the Issuers' securities covered thereby
and that such holding does not imply that such holder will assist in meeting any
future financial requirements of the Issuers, or (ii) in the event that such
reference to such holder by name or otherwise is not required by the Securities
Act, the deletion of the reference to such holder in any amendment or supplement
to the Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
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<PAGE>
In the case of a Shelf Registration pursuant to Section 3 hereof, each
holder of Transfer Restricted Securities agrees by acquisition of such Transfer
Restricted Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii),
5(c)(iv) or 5(c)(v) hereof, such holder will forthwith discontinue disposition
of such Transfer Restricted Securities covered by such Registration Statement or
Prospectus until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any such
notice, the Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each holder of Transfer Restricted Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y)
the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
6. Registration Expenses
All fees and expenses incident to the performance of or compliance with
this Agreement by the Issuers shall be borne by the Issuers whether or not any
Registration Statement is filed or becomes effective and whether or not any
Notes, Exchange Notes or Private Exchange Notes are issued or sold pursuant to
any Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the National Association of Securities Dealers, Inc.
(the "NASD") and (B) in compliance with securities or Blue Sky laws), (ii)
printing expenses (including, without limitation, expenses of printing
Prospectuses), (iii) reasonable fees and disbursements of counsel for the
Issuers and the Special Counsel, (iv) fees and disbursements of all independent
certified public accountants referred to in Section 2(e) and Section 5(1)(iii)
hereof (including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance), (v) if
required by applicable law, including the rules of the NASD, the reasonable fees
and expenses of any "qualified independent underwriter" and its counsel and (vi)
fees and expenses of all other persons retained by the Issuers. In addition, the
Issuers shall pay their internal expenses (including, without limitation, all
salaries and expenses of their respective officers and employees performing
legal or accounting duties), the expense of any annual audit, and the fees and
expenses incurred in connection with the listing of the Notes, Exchange Notes or
Private Exchange Notes to be registered on any securities exchange.
Notwithstanding the foregoing or anything in this Agreement to the contrary,
each holder of Transfer Restricted Securities shall pay all underwriting
discounts and commissions of any underwriters or dealers with respect to any
Notes, Exchange Notes or Private Exchange Notes sold by it.
7. Indemnification
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless (i) each Initial Purchaser, each holder of Notes, Exchange Notes and
Private Exchange Notes and each
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Participating Broker-Dealer, (ii) each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) any of the
foregoing (any of the persons referred to in this clause (ii) being hereinafter
referred to as a ("controlling person")) and (iii) the respective officers,
directors, partners, employees, representatives and agents of each Initial
Purchaser, each holder of Notes, Exchange Notes and Private Exchange Notes, each
Participating Broker-Dealer and any controlling person (any person referred to
in clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified
Person"), from and against any and all losses, claims, damages, liabilities and
judgments arising out of or relating to any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary prospectus or in any amendment or supplement thereto, or arising
out of or relating to any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or preliminary prospectus or supplement
thereto, in light of the circumstances under which they were made) not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any Indemnified Person
furnished in writing to the Issuers by or on behalf of such Indemnified Person
expressly for use therein; provided, that the indemnity agreement contained in
this Section 7(a) with respect to any preliminary prospectus or amended
preliminary prospectus shall not inure to the benefit of any Indemnified Person
from whom the person asserting any such loss, expense, liability or claim
purchased the securities which is the subject thereof, if the Prospectus
corrected any such alleged untrue statement or omission and if such Indemnified
Person failed to send or give a copy of the Prospectus, excluding any documents
incorporated by reference, to such person at or prior to the written
confirmation of the sale of securities to such person, provided that the Issuers
have delivered the Prospectus to the Initial Purchasers in requisite quantity on
a timely basis to permit such delivery or sending.
(b) In case any action shall be brought against any Indemnified Person,
based upon any Registration Statement or any such Prospectus or preliminary
prospectus or any amendment or supplement thereto and with respect to which
indemnity may be sought against the Issuers hereunder, such Indemnified Person
shall promptly notify the Issuers in writing and the Company shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Person and payment of all fees and expenses. Any Indemnified
Person shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless (i) the employment of
such counsel shall have been specifically authorized in writing by the Issuers,
(ii) the Company shall have failed to assume the defense and employ counsel or
pay all such fees and expenses or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Person and an
Issuer and such Indemnified Person shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to any such Issuer (in which case the Company
shall not have the right to direct the defense of such action on behalf of such
Indemnified Person, it being understood, however, that the Issuers shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such reasonable fees and expenses shall be
reimbursed as they are
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incurred). The Issuers shall not be liable for any settlement of any such action
effected without their written consent but if settled with the written consent
of the Issuers, the Issuers agree, jointly and severally, to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement. No Issuer shall, without the prior written consent of
each Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is a party and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
(c) In connection with any Registration Statement pursuant to which a
holder of Transfer Restricted Securities offers or sells Transfer Restricted
Securities, such holder agrees, severally and not jointly, to indemnify and hold
harmless the Issuers, their respective directors and officers and any person
controlling an Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Issuers to each Indemnified Person but only with respect to information
relating to such holder furnished in writing by or on behalf of such holder
expressly for use in such Registration Statement. In any such case in which any
action shall be brought against an Issuer, any director or officer of an Issuer
or any person controlling an Issuer based on such Registration Statement and in
respect of which indemnity may be sought against a holder of Transfer Restricted
Securities, such holder shall have the rights and duties given to the Issuers
(except that if an Issuer shall have assumed the defense thereof, such holder
shall not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such holder), and the Issuers, their respective
directors and officers and any person controlling an Issuer shall have the
rights and duties given to the Indemnified Persons by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is unavailable to
an indemnified party in respect of any losses, claims, damages, liabilities or
judgments referred to herein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by each indemnifying party on the one hand and
the indemnified party on the other hand from the offering of the Notes, the
Exchange Notes or the Private Exchange Notes, as the case may be (it being
expressly understood and agreed that the relative benefits received by the
Issuers from the offering of the Notes, Exchange Notes or Private Exchange
Notes, as the case may be, shall be the amount of the net proceeds received by
the Company from the sale of the Notes to the Initial Purchasers), or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each indemnifying
party on the one hand and the indemnified party on the other hand in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of each indemnifying party on the one hand
and the indemnified party on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
an indemnifying party or such indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
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The Issuers and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Indemnified Person were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Indemnified Person shall be
required to contribute any amount in excess of the amount by which the net
profits received by it in connection with the sale of the Notes, Exchange Notes
or Private Exchange Notes contemplated by this Agreement exceeds the amount of
any damages which such Indemnified Person has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section ll(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Indemnified Person's obligations to contribute pursuant to this Section 7(d) are
several in proportion to the respective amount of Notes, Exchange Notes or
Private Exchange Notes included in any such Registration Statement by each
Indemnified Person and not joint.
8. Rules 144 and 144A
Each of the Issuers shall use its best efforts to file the reports required
to be filed by it under the Securities Act and the Exchange Act in a timely
manner and, if at any time it is not required to file such reports but in the
past had been required to or did file such reports, it will, upon the request of
any holder of Transfer Restricted Securities, make available other information
as required by, and so long as necessary to permit, sales of its Transfer
Restricted Securities pursuant to Rule 144A. Notwithstanding the foregoing,
nothing in this Section 8 shall be deemed to require an Issuer to register any
of its securities pursuant to the Exchange Act.
9. Underwritten Registrations
If any of the Transfer Restricted Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the holders of a majority in aggregate principal amount of
such Transfer Restricted Securities included in such offering, subject to the
consent of the Company (which will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such Transfer Restricted Securities on the basis
reasonably provided in any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
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10. Miscellaneous
(a) Remedies. In the event of a breach by an Issuer or by a holder of
Notes, Exchange Notes or Private Exchange Notes of any of its obligations under
this Agreement, each holder of Notes, Exchange Notes or Private Exchange Notes
and each Issuer, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. Subject to Section 4 hereof, the Issuers and
each holder of Notes, Exchange Notes and Private Exchange Notes agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach of any of the provisions of this Agreement and each hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Issuers will not enter into any
agreement with respect to their securities that is inconsistent with the rights
granted to the holders of Notes, Exchange Notes and Private Exchange Notes and
Indemnified Persons in this Agreement or otherwise conflicts with the provisions
hereof. Without the written consent of the holders of a majority in aggregate
principal amount of the outstanding Transfer Restricted Securities, the Issuers
shall not grant to any person any rights which conflict with or are inconsistent
with the provisions of this Agreement.
(c) No Piggyback on Registrations. The Issuers shall not grant to any of
their security holders (other than the holders of Transfer Restricted Securities
in such capacity) the right to include any of their securities in any
Registration Statement other than Transfer Restricted Securities.
(d) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, otherwise than with the prior written consent of the holders of not less
than a majority of the then outstanding aggregate principal amount of Transfer
Restricted Securities; provided, however, that, for the purposes of this
Agreement, Transfer Restricted Securities that are owned, directly or
indirectly, by the Issuers or any of their Affiliates are not deemed
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of holders of Transfer Restricted Securities whose securities are being
sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other holders of Transfer Restricted Securities
may be given by holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold by such holders pursuant to such
Registration Statement; and provided, further, that the provisions of this
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence. Notwithstanding the
foregoing, no amendment, modification, supplement, waiver or consent with
respect to Section 7 shall be made or given otherwise than with the prior
written consent of each Indemnified Person affected thereby.
(e) Notices. All notices and other communications provided for herein
shall be made in writing by hand-delivery, next-day air courier, certified
first-class mail, return receipt requested, telex or telecopier:
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(i) if to the Issuers, as provided in the Purchase Agreement,
(ii) if to the Initial Purchasers, as provided in the Purchase
Agreement, or
(iii) if to any other person who is then the registered holder of
Notes, Exchange Notes or Private Exchange Notes, to the address of such
holder as it appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given: when delivered by hand, if personally
delivered; one Business Day after being timely delivered to a next-day air
courier; five Business Days after being deposited in the mail, postage prepaid,
if mailed; when answered back, if telexed; and when receipt is acknowledged by
the recipient's telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each holder of Notes, Exchange Notes and
Private Exchange Notes. The Issuers may not assign any of their rights or
obligations hereunder without the prior written consent of each holder of
Transfer Restricted Securities and each Indemnified Person. Notwithstanding the
foregoing, no successor or assignee of an Issuer shall have any of the rights
granted under this Agreement until such person shall acknowledge its rights and
obligations hereunder by a signed written statement of such person's acceptance
of such rights and obligations.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(h) Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. THE
ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY
COMPETENT NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY
OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY
OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS.
(i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining
-20-
<PAGE>
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
PLAINS RESOURCES INC.
By: _____________________________
Michael R. Patterson
Vice President
ARGUELLO INC.
CALUMET FLORIDA, INC.
PLAINS ILLINOIS INC.
PLAINS RESOURCES INTERNATIONAL INC.
PMCT INC.
STOCKER RESOURCES, INC.
STOCKER RESOURCES, L.P.
By: Stocker Resources, Inc.,
its general partner
By: _____________________________
Michael R. Patterson
Vice President
J.P. MORGAN SECURITIES INC.
FIRST UNION CAPITAL MARKETS CORP.
By: J.P. MORGAN SECURITIES INC.
By: _____________________________
James Condon
Vice President
-22-
<PAGE>
EXHIBIT 10(Q)
FOURTH AMENDMENT TO
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") dated as of the 15/th/ day of September, 1999, by and among PLAINS
RESOURCES INC., a Delaware corporation (the "Company"), FIRST UNION NATIONAL
BANK (assignee of ING (U.S.) Capital LLC, successor in interest to ING (U.S.)
Capital Corporation), as Agent ("Agent"), and the Lenders under the Original
Agreement (as defined herein).
W I T N E S S E T H:
WHEREAS, the Company, Agent and Lenders entered into that certain Fourth
Amended and Restated Credit Agreement dated as of May 22, 1998, as amended by a
First Amendment to Fourth Amended and Restated Credit Agreement dated November
17, 1998, a Second Amendment to Fourth Amended and Restated Credit Agreement
dated March 15, 1999 and a Third Amendment to Fourth Amended and Restated Credit
Agreement dated June 21, 1999 (as amended, the "Original Agreement") for the
purposes and consideration therein expressed, pursuant to which Lenders became
obligated to make and made loans to the Company as therein provided; and
WHEREAS, the Company, Agent and Lenders desire to amend the Original
Agreement for the purposes described herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement, in consideration
of the loans which may hereafter be made by Lenders to the Company, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I. -- Definitions and References
(S) 1.1. Terms Defined in the Original Agreement. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.
(S) 1.2. Other Defined Terms. Unless the context otherwise requires, the
following terms when used in this Amendment shall have the meanings assigned to
them in this (S) 1.2.
"Amendment" means this Fourth Amendment to Fourth Amended and Restated
Credit Agreement.
"Amendment Documents" means this Amendment.
"Credit Agreement" means the Original Agreement as amended hereby.
1
<PAGE>
ARTICLE II. -- Amendments
(S) 2.1. Definitions. The definitions of "Senior Subordinated Indenture"
and "Senior Subordinated Notes" set forth in Section 1.01 of the Original
Agreement are hereby amended in their entirety to read as follows:
"Senior Subordinated Indenture" shall mean (i) that certain Indenture
dated as of March 15, 1996 among the Company, "Subsidiary Guarantors" (as
defined therein) and Chase Bank of Texas, National Association (f/k/a Texas
Commerce Bank National Association), as Trustee, (ii) that certain
Indenture dated as of July 21, 1997 among the Company, "Subsidiary
Guarantors" (as defined therein) and Chase Bank of Texas, National
Association (f/k/a Texas Commerce Bank National Association), as Trustee,
and (iii) that certain Indenture dated as of September 15, 1999 among the
Company, "Subsidiary Guarantors" (as defined therein) and Chase Bank of
Texas, National Association, as Trustee, in each case as amended or
modified from time to time in compliance with Section 8.23
"Senior Subordinated Notes" shall mean (i) the 10 1/4% senior
subordinated notes due 2006 in the aggregate principal amount of
$150,000,000 issued by the Company pursuant to the Senior Subordinated
Indenture dated as of March 15, 1996, (ii) the 10 1/4% senior subordinated
notes due 2006 in the aggregate principal amount of $50,000,000 issued by
the Company pursuant to the Senior Subordinated Indenture dated as of July
21, 1997, and (iii) the 10 1/4% senior subordinated notes due 2006 in the
aggregate principal amount of $75,000,000 to be dated on or about September
22, 1999 issued by the Company pursuant to the Senior Subordinated
Indenture dated as of September 15, 1999.
(S) 2.2. Subordinated Indebtedness. Section 8.14(b) of the Original
Agreement are hereby amended in its entirety to read as follows:
(b) The Company may offer to purchase and redeem Senior Subordinated
Notes in the amount and under the circumstances described in Section
4.12(iii)(c) of the Senior Subordinated Indenture dated as of March 15,
1996, Section 4.12(iv) of the Senior Subordinated Indenture dated as of
July 21, 1997, and Section 4.12(iv) of the Senior Subordinated Indenture
dated as of September 15, 1999, provided that: (i) the Company shall have
given Agent and each Lender written notice of its intent to so purchase and
redeem (collectively "redeem") the Senior Subordinated Notes at least 25
days prior to the date (the "Net Proceeds Payment Date") that it will
become obligated to so redeem such Senior Subordinated Notes pursuant to
such Section 4.12(iii)(c), Section 4.12(iv) or Section 4.12(iv), as
appropriate, such notice to specify the Net Proceeds Payment Date and,
based upon the proceeds available for such redemption, the maximum amount
of Senior Subordinated Notes that may be so redeemed, (ii) the Company
shall have provided to Agent and each Lender such information as Agent
shall have reasonably requested with regard to such redemption, (iii) no
Default or Event of Default shall have occurred and be continuing at the
time of any such redemption, and (iv) if elected by Majority Lenders, by
written notice to the Company during the 25 day period after such notice is
given, a new Borrowing Base shall have been determined by Majority Lenders
in
2
<PAGE>
the manner specified by Section 2.08 hereof and the outstanding aggregate
principal balance of the Notes shall not exceed such Adjusted Borrowing
Base as so redetermined.
(S) 2.3. Waiver and Consent - Issuance of Senior Subordinated Notes. The
Company proposes to issue its Senior Subordinated Notes due 2006 (as more
particularly described in clause (iii) of the definition of "Senior Subordinated
Notes") in the aggregate principal amount of $75,000,000, as set forth in an
Offering Circular relating thereto substantially in the form previously
furnished to Agent and Lenders, which are to be guaranteed by Subsidiary
Guarantors. The Company intends to use the proceeds of such Senior Subordinated
Notes to prepay the Loans. Lenders hereby consent to, and waive any Default or
Event of Default occurring as a result of, the issuance of such new Senior
Subordinated Notes and the guarantee of such new Senior Subordinated Notes by
Subsidiary Guarantors; provided the subordination provisions of the Senior
Subordinated Indenture dated as of September 15, 1999 pursuant to which such new
Senior Subordinated Notes are to be issued and the guaranties of such new Senior
Subordinated Notes by Subsidiary Guarantors are to be made shall be identical in
all material respects to those provisions set forth in Articles Ten, Eleven and
Twelve of the Senior Subordinated Indenture dated as of March 15, 1996 and the
Senior Subordinated Indenture dated as of July 21, 1997.
(S) 2.4. Waiver and Consent - Prepayment of Eurodollar Loans. The Company
proposes to use the proceeds of the new Senior Subordinated Notes to prepay the
Loans, which may include Eurodollar Loans. Such proposed prepayment may violate
Section 2.07(a)(ii) of the Credit Agreement, which permits the prepayment of a
Eurodollar Loan only on the last day of an Interest Period for such Eurodollar
Loan. Lenders hereby consent to, and waive any Default or Event of Default
under Section 2.07 of the Credit Agreement occurring as a result of, the
prepayment of such Loans; provided the Company shall, pursuant to Section 5.05
of the Credit Agreement, promptly pay to each Lender any breakage costs
associated with the prepayment of any Eurodollar Loans.
ARTICLE III. -- Conditions of Effectiveness
(S) 3.1. Effective Date. This Amendment shall become effective as of the
date first above written when and only when (i) Agent shall have received, at
Agent's office, a counterpart of this Amendment executed and delivered by the
Company and Majority Lenders, and (ii) Agent shall have additionally received
all of the following documents, each document (unless otherwise indicated) being
dated the date of receipt thereof by Agent, duly authorized, executed and
delivered, and in form and substance satisfactory to Agent:
(A) Officer's Certificate. A certificate of a duly authorized officer
of the Company to the effect that all of the representations and warranties
set forth in Article IV hereof are true and correct at and as of the date
thereof.
(B) Supporting Documents. Such supporting documents as Agent may
reasonably request.
3
<PAGE>
ARTICLE IV. -- Representations and Warranties
(S) 4.1. Representations and Warranties of the Company. In order to
induce Agent and Lenders to enter into this Amendment, the Company represents
and warrants to Agent and Lenders that:
(a) The representations and warranties contained in Section 7 of the
Original Agreement, are true and correct at and as of the time of the
effectiveness hereof, subject to the amendment of certain of the Schedules
to the Credit Agreement as attached hereto. No Default has occurred and is
continuing.
(b) The Company and the Subsidiaries are duly authorized to execute
and deliver this Amendment and the other Amendment Documents to the extent
a party thereto, and the Company is and will continue to be duly authorized
to borrow and perform its obligations under the Credit Agreement. The
Company and the Subsidiaries have duly taken all corporate action necessary
to authorize the execution and delivery of this Amendment and the other
Amendment Documents, to the extent a party thereto, and to authorize the
performance of their respective obligations thereunder.
(c) The execution and delivery by the Company and the Subsidiaries of
this Amendment and the other Amendment Documents, to the extent a party
thereto, the performance by the Company and the Subsidiaries of their
respective obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby, do not and will not
conflict with any provision of law, statute, rule or regulation or of the
certificate or articles of incorporation and bylaws of the Company or any
Subsidiary, or of any material agreement, judgment, license, order or
permit applicable to or binding upon the Company or any Subsidiary, or
result in the creation of any lien, charge or encumbrance upon any assets
or properties of the Company or any Subsidiary, except in favor of Agent
for the benefit of Lenders. Except for those which have been duly
obtained, no consent, approval, authorization or order of any court or
governmental authority or third party is required in connection with the
execution and delivery by the Company or any Subsidiary of this Amendment
or any other Amendment Document, to the extent a party thereto, or to
consummate the transactions contemplated hereby and thereby.
(d) When this Amendment and the other Amendment Documents have been
duly executed and delivered, each of the Basic Documents, as amended by
this Amendment and the other Amendment Documents, will be a legal and
binding instrument and agreement of the Company and the Subsidiaries, to
the extent a party thereto, enforceable in accordance with its terms,
(subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency and similar laws applicable to creditors' rights generally and
to general principles of equity).
4
<PAGE>
ARTICLE V. -- Miscellaneous
(S) 5.1. Ratification of Agreements. The Original Agreement, as hereby
amended, is hereby ratified and confirmed in all respects. The Basic Documents,
as they may be amended or affected by this Amendment and/or the other Amendment
Documents, are hereby ratified and confirmed in all respects. Any reference to
the Credit Agreement in any Basic Document shall be deemed to refer to this
Amendment also. The execution, delivery and effectiveness of this Amendment and
the other Amendment Documents shall not, except as expressly provided herein or
therein, operate as a waiver of any right, power or remedy of Agent or any
Lender under the Credit Agreement or any other Basic Document nor constitute a
waiver of any provision of the Credit Agreement or any other Basic Document.
(S) 5.2. Ratification of Security Documents. The Company, Agent and
Lenders each acknowledge and agree that any and all indebtedness, liabilities or
obligations arising under or in connection with the Notes are Obligations and is
secured indebtedness under, and is secured by, each and every Security Document
to which the Company is a party. The Company hereby re-pledges, re-grants and
re-assigns a security interest in and lien on every asset of the Company
described as collateral in any Security Document.
(S) 5.3. Survival of Agreements. All representations, warranties,
covenants and agreements of the Company herein and in the other Amendment
Documents shall survive the execution and delivery of this Amendment and the
other Amendment Documents and the performance hereof and thereof, including
without limitation the making or granting of each Loan, and shall further
survive until all of the Obligations are paid in full. All statements and
agreements contained in any certificate or instrument delivered by the Company
or any Subsidiary hereunder, under the other Amendment Documents or under the
Credit Agreement to Agent or any Lender shall be deemed to constitute
representations and warranties by, or agreements and covenants of, the Company
under this Amendment and under the Credit Agreement.
(S) 5.4. Basic Documents. This Amendment and each of the other Amendment
Documents is a Basic Document, and all provisions in the Credit Agreement
pertaining to Basic Documents apply hereto and thereto.
(S) 5.5. GOVERNING LAW. THIS AMENDMENT AND THE OTHER AMENDMENT DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA IN ALL
RESPECTS, INCLUDING CONSTRUCTION, VALIDITY AND PERFORMANCE.
(S) 5.6. Counterparts. This Amendment and each of the other Amendment
Documents may be separately executed in counterparts and by the different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to constitute one and the same Amendment or Amendment Document, as the
case may be.
5
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
PLAINS RESOURCES INC.
By: /s/ Michael R. Patterson
-----------------------------------------------
Name: Michael R. Patterson
Title: Vice President
FIRST UNION NATIONAL BANK,
as Agent, LC Issuer and a Lender
By: /s/ Paul N. Riddle
-----------------------------------------------
Name: Paul N. Riddle
Title: Senior Vice President
BANKBOSTON, N.A., Lender
By: /s/ Terrence Ronan
-----------------------------------------------
Terrence Ronan, Vice President
DEN NORSKE BANK ASA, Lender
By: /s/ Byron L. Cooley
-----------------------------------------------
Name: Byron L. Cooley
Title: Senior Vice President
By: /s/ Charles E. Hall
-----------------------------------------------
Name: Charles E. Hall
Title: Senior Vice President
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, Lender
By: /s/ Ann Rhoads
-----------------------------------------------
Name: Ann Rhoads
Title: Vice President
CHASE BANK OF TEXAS, N.A., Lender
By: /s/ Russell A. Johnson
-----------------------------------------------
Name: Russell A. Johnson
Title: Vice President
6
<PAGE>
COMERICA BANK-TEXAS, Lender
By: /s/ Daniel G. Steele
-----------------------------------------------
Name: Daniel G. Steele
Title: Senior Vice President
MEESPIERSON CAPITAL CORP., Lender
By: /s/ Darrell W. Holley
-----------------------------------------------
Name: Darrell W. Holley
Title: Senior Vice President
By: /s/ Karel Louman
-----------------------------------------------
Name: Karel Louman
Title: Managing Director
BANK OF SCOTLAND, Lender
By: /s/ Annie Glynn
-----------------------------------------------
Name: Annie Glynn
Title: Senior Vice President
U.S. BANK NATIONAL ASSOCIATION, Lender
By: /s/ Monte E. Deckerd
-----------------------------------------------
Name: Monte E. Deckerd
Title: Vice President
HIBERNIA NATIONAL BANK
By: /s/
-----------------------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
-----------------------------------------------
Name:
Title:
7
<PAGE>
CONSENT AND AGREEMENT
Each of the undersigned Subsidiary Guarantors hereby consents to the
provisions of this Amendment and the transactions contemplated herein and hereby
(i) acknowledges and agrees that any and all indebtedness, liabilities or
obligations arising under or in connection with the Notes are Obligations and
are secured indebtedness under, and are secured by, each and every Security
Document to which it is a party, (ii) re-pledges, re-grants and re-assigns a
security interest in and lien on all of its assets described as collateral in
any Security Document, (iii) ratifies and confirms its Amended and Restated
Guaranty dated May 22, 1998 made by it for the benefit of Agent and Lenders, and
(iv) expressly acknowledges and agrees that such Subsidiary Guarantor guarantees
all indebtedness, liabilities and obligations arising under or in connection
with the Notes pursuant to the terms of such Amended and Restated Guaranty, and
agrees that its obligations and covenants thereunder are unimpaired hereby and
shall remain in full force and effect.
PLAINS RESOURCES INTERNATIONAL INC.
STOCKER RESOURCES, INC.
CALUMET FLORIDA, INC.
PLAINS ILLINOIS INC.
By: /s/ Michael R. Patterson
-----------------------------------------------
Name: Michael R. Patterson
Title: Vice President
STOCKER RESOURCES, L.P.
By: Stocker Resources, Inc.,
its General Partner
By: /s/ Michael R. Patterson
-----------------------------------------------
Name: Michael R. Patterson
Title: Vice President
8
<PAGE>
The undersigned Subsidiary Guarantor hereby consents to the provisions of
this Agreement and the transactions contemplated herein and hereby (i)
acknowledges and agrees that any and all indebtedness, liabilities or
obligations arising under or in connection with the Notes are Obligations and
are secured indebtedness under, and are secured by, each and every Security
Document to which it is a party, (ii) re-pledges, re-grants and re-assigns a
security interest in and lien on all of its assets described as collateral in
any Security Document, (iii) ratifies and confirms its Guaranty dated July 1,
1999 made by it for the benefit of Agent and Lenders, and (iv) expressly
acknowledges and agrees that such Subsidiary Guarantor guarantees all
indebtedness, liabilities and obligations arising under or in connection with
the Notes pursuant to the terms of such Guaranty, and agrees that its
obligations and covenants thereunder are unimpaired hereby and shall remain in
full force and effect.
ARGUELLO, INC.
By: /s/ Michael R. Patterson
-----------------------------------------------
Name: Michael R. Patterson
Title: Vice President
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLAINS
RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30,
1999 AND CNSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,872
<SECURITIES> 0
<RECEIVABLES> 432,547
<ALLOWANCES> 0
<INVENTORY> 96,793
<CURRENT-ASSETS> 539,198
<PP&E> 1,273,239
<DEPRECIATION> 399,205
<TOTAL-ASSETS> 1,556,734
<CURRENT-LIABILITIES> 527,842
<BONDS> 0
88,813
22,954
<COMMON> 1,790
<OTHER-SE> 63,811
<TOTAL-LIABILITY-AND-EQUITY> 1,556,734
<SALES> 2,659,015
<TOTAL-REVENUES> 2,659,681
<CGS> 2,540,874
<TOTAL-COSTS> 2,621,657
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,668
<INCOME-PRETAX> 23,248
<INCOME-TAX> 9,067
<INCOME-CONTINUING> 14,181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,181
<EPS-BASIC> 0.40
<EPS-DILUTED> 0.37
</TABLE>
