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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
REGISTRATION NO. 333-50223
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CANADIAN FOREST FOREST OIL
OIL LTD. CORPORATION
(Exact name of Registrant (Exact name of Registrant
as specified in its charter) as specified in its charter)
ALBERTA, CANADA NEW YORK
(State of other jurisdiction (State of other jurisdiction
of incorporation or organization) of incorporation or organization)
N/A 25-0484900
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
1311 1311
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
DANIEL L. MCNAMARA
CORPORATE COUNSEL AND SECRETARY
800 6TH AVENUE S.W., SUITE 600 FOREST OIL CORPORATION
CALGARY T2P3G3 1600 BROADWAY, SUITE 2200
CANADA DENVER, COLORADO 80202
(403) 292-8000 (303) 812-1400
(Address, including zip code, and (Name, Address, including zip code,
telephone number, and telephone number,
including area code, of Canadian including area code, of Forest Oil
Forest Oil Ltd.'s principal executive Corporation's principal
offices) executive offices and agent for
service for each registrant)
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COPY TO:
ALAN P. BADEN
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER
HOUSTON, TEXAS 77002-6760
(713) 758-2430
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED JUNE 5, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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PROSPECTUS
CANADIAN FOREST OIL LTD.
OFFER TO EXCHANGE
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ALL OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007,
1998 SERIES
PAYMENT UNCONDITIONALLY GUARANTEED ON A SENIOR SUBORDINATED BASIS BY
FOREST OIL CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON JULY 10, 1998, UNLESS EXTENDED
Canadian Forest Oil Ltd., an Alberta, Canada corporation ("Canadian Forest" or
the "Issuer"), and Forest Oil Corporation, a New York corporation and the parent
of the Issuer ("Forest" or the "Company"), hereby offer, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
letter of transmittal (the "Letter of Transmittal," and together with this
Prospectus, the "Exchange Offer"), to exchange $1,000 principal amount of the
8 3/4% Senior Subordinated Notes due 2007 of the Issuer and which are
unconditionally guaranteed on a senior subordinated basis by Forest (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement (as
defined herein) of which this Prospectus constitutes a part, for each $1,000
principal amount of the outstanding 8 3/4% Senior Subordinated Notes due 2007,
1998 Series of the Issuer and which are unconditionally guaranteed on a senior
subordinated basis by Forest (the "Old Notes"), of which $75,000,000 principal
amount is outstanding. The form and terms of the Exchange Notes are identical in
all material respects to the form and terms of the Old Notes except for certain
transfer restrictions and registration rights relating to the Old Notes. The
Exchange Notes will evidence the same debt as the Old Notes and will be issued
under and be entitled to the benefits of the Indenture (as defined herein). The
Issuer currently has outstanding $125 million aggregate principal amount of
8 3/4% Senior Subordinated Notes due 2007 (the "1997 Notes" and, together with
the Exchange Notes and the Old Notes, the "Notes"), the terms of which are
substantially the same as the Exchange Notes.
The Notes are unsecured senior subordinated obligations of the Issuer. The
payment of the principal of, premium, if any, on and interest on the Notes is
subordinated in right of payment to the payment when due in cash of all Senior
Indebtedness (as defined herein) of the Issuer. The Notes rank subordinate in
right of payment to all existing and future Senior Indebtedness of the Issuer,
PARI PASSU with any future PARI PASSU Indebtedness (as defined herein) of the
Issuer and senior to any future Subordinated Indebtedness (as defined herein) of
the Issuer. The Notes are unconditionally guaranteed on a senior subordinated
basis (the "Company Guarantee") by the Company. The Company Guarantee ranks
subordinate in right of payment to all existing and future Senior Indebtedness
of the Company, PARI PASSU with any existing and future Pari Passu Indebtedness
of the Company and senior to any future Subordinated Indebtedness of the
Company.
(COVER CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE 13 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
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The Issuer and the Company will accept for exchange any and all Old Notes
that are validly tendered on or prior to 5:00 p.m., New York City time, on the
date the Exchange Offer expires, which will be July 10, 1998, unless the
Exchange Offer is extended. See "The Exchange Offer -- Expiration Date;
Extensions; Amendments." Tenders of Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the business day prior to the Expiration
Date (as defined herein), unless previously accepted for exchange. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Issuer and the Company and to the terms
and provisions of the Registration Agreement (as defined herein). Old Notes may
be tendered only in denominations of $1,000 principal amount and integral
multiples thereof. The Issuer and the Company have agreed to pay the expenses of
the Exchange Offer. See "The Exchange Offer."
The Exchange Notes will bear interest at the rate of 8 3/4% per annum,
payable semi-annually on March 15 and September 15 of each year to holders of
record on the March 1 and September 1 immediately preceding such interest
payment date. Holders of Exchange Notes of record on September 1, 1998 will
receive interest on September 15, 1998 from the date of issuance of the Exchange
Notes, plus an amount equal to the accrued interest on the Old Notes from March
15, 1998, to the date of exchange thereof. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of the Exchange Notes.
The Old Notes were sold by the Issuer and the Company on February 2, 1998 to
the Initial Purchaser (as defined herein) in a transaction not registered under
the Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchaser only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and other institutional "accredited investors" (as defined in Rule 501
(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and pursuant
to offers and sales that occurred outside the United States within the meaning
of Regulation S under the Securities Act, each of whom agreed to comply with
certain transfer restrictions and other conditions. Accordingly, the Old Notes
may not be offered, resold or otherwise transferred unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereunder in order to satisfy the obligations of the Company and the
Issuer under the Registration Agreement entered into with the Initial Purchaser
in connection with the offering of the Old Notes. See "Exchange Offer;
Registration Rights."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission" or "SEC") to third parties, including
EXXON CAPITAL HOLDINGS CORPORATION, SEC No-Action Letter (available April 13,
1989), MORGAN STANLEY & CO. INC., SEC No-Action Letter (available June 5, 1991)
(the "Morgan Stanley Letter") and MARY KAY COSMETICS, INC., SEC No-Action Letter
(available June 5, 1991), the Issuer and the Company believe that the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by the respective holders thereof (other than a
"Restricted Holder," being (i) a broker-dealer who purchased Old Notes exchanged
for such Exchange Notes directly from the Company to resell pursuant to Rule
144A or any other available exemption under the Securities Act or (ii) a person
that is an affiliate of the Issuer or the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder is not participating in, and has no arrangement with any person to
participate in, the distribution (within the meaning of the Securities Act) of
such Exchange Notes. Eligible holders wishing to accept the Exchange Offer must
represent to the Issuer and the Company that such conditions have been met.
Holders who tender Old Notes in the Exchange Offer with the intention to
participate in a distribution of the Exchange Notes may not rely upon the Morgan
Stanley Letter or similar no-action letters. See "The Exchange Offer --
General." Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the
2
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Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Exchange Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company and the Issuer have agreed that, starting on the
Expiration Date and ending on the close of business 180 days after the
Expiration Date, they will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
Neither the Issuer nor the Company will receive any proceeds from the
Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes or as to the ability of the
holders of Exchange Notes to sell their Exchange Notes or the price at which
such holders would be able to sell their Exchange Notes. Future trading prices
of the Exchange Notes will depend on many factors, including, among others,
prevailing interest rates, the operating results of the Issuer and the Company
and the market for similar securities. The Issuer and the Company do not intend
to apply for listing of the Exchange Notes on any securities exchange. Morgan
Stanley Dean Witter (the "Initial Purchaser") has informed the Issuer and the
Company that it currently intends to make a market for the Exchange Notes.
However, it is not so obligated, and any such market making may be discontinued
at any time without notice. Accordingly, no assurance can be given that an
active public or other market will develop for the Exchange Notes or as to the
liquidity of or the trading market for the Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY OR THE ISSUER
ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
3
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TABLE OF CONTENTS
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PAGE NO.
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Available Information.............................................................. 4
Incorporation of Certain Documents by Reference.................................... 5
Prospectus Summary................................................................. 6
Forward-Looking Statements......................................................... 13
Risk Factors....................................................................... 13
Private Placement.................................................................. 16
Use of Proceeds.................................................................... 16
Capitalization..................................................................... 17
Description of Bank Credit Facility................................................ 18
The Exchange Offer................................................................. 20
Description of the Notes........................................................... 27
Certain United States and Canadian Federal Income Tax Considerations............... 66
Exchange Offer; Registration Rights................................................ 69
Plan of Distribution............................................................... 71
Transfer Restrictions on Old Notes................................................. 71
Legal Matters...................................................................... 74
Experts............................................................................ 74
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AVAILABLE INFORMATION
The Company, but not the Issuer, is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files periodic reports, proxy and information
statements and other information with the Commission. Such reports and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the following regional offices
of the Commission: Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained by mail from the
Public Reference Section of the Commission, at Judiciary Plaza, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at prescribed rates. In
addition, the Commission maintains a site on the World Wide Web that contains
reports, proxy and information statements and other information filed
electronically by the Company with the Commission which can be accessed over the
Internet at http://www.sec.gov. While any Old Notes remain outstanding, the
Company and the Issuer will make available, upon request, to any holder and any
prospective purchaser of Old Notes, the information required pursuant to Rule
144A(d)(4) under the Securities Act during any period in which the Company is
not subject to Section 13 or 15(d) of the Exchange Act. Any such request should
be directed to Daniel L. McNamara, Corporate Counsel and Secretary, Forest Oil
Corporation at 1600 Broadway, Suite 2200, Denver Colorado 80202.
This Prospectus constitutes part of a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Issuer and the Company with the
Commission under the Securities Act. This Prospectus omits certain of the
information set forth in the Registration Statement. Reference is hereby made to
the Registration Statement and to the exhibits relating thereto for further
information with respect to the Issuer and the Company and the securities
offered hereby. Statements contained herein concerning the provisions of
contracts or other documents are not necessarily complete, and each such
statement is qualified in its entirety by reference to the copy of the
applicable contract or other document filed with the Commission. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the public reference facilities
of the Commission described above.
4
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
pursuant to the Exchange Act (File No. 0-4597) and are incorporated herein by
reference:
(1) the Company's Annual Report on Form 10-K and 10-K/A, as amended, for
the fiscal year ended December 31, 1997 (the "1997 10-K");
(2) the Company's Current Report on Form 8-K/A dated January 28, 1997;
(3) the Company's Current Report on Form 8-K dated January 7, 1998;
(4) the Company's Current Report on Form 8-K dated January 12, 1998;
(5) the Company's Current Report on Form 8-K dated January 28, 1998;
(6) the Company's Current Report on Form 8-K dated February 3, 1998;
(7) the Company's Current Report on Form 8-K/A dated February 3, 1998;
(8) the Company's Current Report on Form 8-K dated April 6, 1998;
(9) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998; and
(10) the Company's Proxy Statement for the Company's 1998 annual meeting
of shareholders.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
thereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Issuer and the Company hereby undertake to provide without charge to
each person, including any beneficial owner to whom a copy of this Prospectus
has been delivered, upon the written or oral request of such person, a copy of
any or all of the information that has been incorporated by reference in this
Prospectus (not including exhibits to the information that is incorporated by
reference herein unless such exhibits are specifically incorporated by reference
in such information). Requests for such copies should be directed to Daniel L.
McNamara, Corporate Counsel and Secretary, Forest Oil Corporation at 1600
Broadway, Suite 2200, Denver, Colorado 80202.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER,
THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR THE COMPANY SINCE THE DATE
HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR
BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
5
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) INCLUDED
ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE. UNLESS THE CONTEXT REQUIRES OTHERWISE, REFERENCES IN THIS PROSPECTUS
TO (I)"CANADIAN FOREST" OR THE "ISSUER" ARE TO CANADIAN FOREST OIL LTD. (THE
ISSUER OF THE NOTES) AND ITS SUBSIDIARIES, AND (II) "FOREST" OR THE "COMPANY"
ARE TO FOREST OIL CORPORATION (THE CORPORATE PARENT OF THE ISSUER AND THE
GUARANTOR OF THE NOTES) AND ITS CONSOLIDATED SUBSIDIARIES.
THE COMPANY
Forest Oil Corporation and its subsidiaries (Forest or the Company) are
engaged in the acquisition, exploration, development, production and marketing
of natural gas and crude oil in North America. The Company was incorporated in
New York in 1924, the successor to a company formed in 1916, and has been a
publicly held company since 1969. The Company is active in several of the major
exploration and producing areas in and offshore the United States and in Canada.
Forest's principal reserves and producing properties are located in the
onshore and offshore Gulf of Mexico region, West Texas, Wyoming and Alberta,
Canada. Approximately 56% of the Company's oil and gas reserves are in the
United States and 44% are in Canada. Approximately 61% of total 1997 production
was in the United States and approximately 39% was in Canada. The Company
currently operates 39 offshore platforms in the Gulf of Mexico, and 1997
production from this area accounted for approximately 47% of the Company's
reported production on an MCFE basis. (An MCF is one thousand cubic feet of
natural gas. MMCF is used to designate one million cubic feet of natural gas and
BCF refers to one billion cubic feet of natural gas. MCFE means thousands of
cubic feet of natural gas equivalents, using a conversion ratio of one barrel of
liquids to 6 MCF of natural gas. BCFE means billions of cubic feet of natural
gas equivalents. With respect to liquids, the term BBL means one barrel of
liquids whereas MBBLS is used to designate one thousand barrels of liquids. The
term liquids is used to describe oil, condensate and natural gas liquids.)
The Company operates from production offices located in Lafayette,
Louisiana; Denver, Colorado; and Calgary, Alberta. Forest's corporate
headquarters are located in Denver, Colorado. On December 31, 1997 Forest had
267 employees, of whom 202 were salaried and 65 were hourly. Of the salaried
employees, 17 are dedicated to the Company's marketing and processing business.
For financial information relating to the Company's industry segments, see Note
16 of Notes to Consolidated Financial Statements in the Company's annual report
on Form 10-K for the year ended December 31, 1997 which is incorporated herein
by reference.
RECENT DEVELOPMENT
On April 6, 1998, the Company entered into an agreement with The Anschutz
Corporation ("Anschutz") to acquire certain oil and gas assets of Anschutz (the
"Anschutz Transaction"). These assets include Anschutz' interests in the
Anschutz Ranch East Field, certain Canadian properties and other international
projects. As consideration for these assets, the Company will issue to Anschutz
an aggregate of 5,950,000 shares of Common Stock. The Anschutz Transaction is
contingent upon the Company receiving shareholder approval at the Company's 1998
annual meeting of shareholders.
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THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Issuer on February 2, 1998 to the Initial
Purchaser and were thereupon offered and sold by the Initial Purchaser only to
qualified institutional buyers, certain other institutional "accredited
investors" and to purchasers outside the United States. The net proceeds of
$75.0 million received by the Issuer in connection with the sale of the Old
Notes were used to finance a portion of the purchase price of 13 oil and natural
gas properties located onshore Louisiana from a private company for total
consideration of approximately $231 million (the "Louisiana Acquisition").
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $75,000,000 principal
amount of Exchange Notes for up to $75,000,000 principal amount of Old Notes.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and will not contain certain transfer
restrictions and hence are not entitled to the benefits of the Registration
Agreement relating to the contingent increases in the interest rate provided for
pursuant thereto. See "Exchange Offer; Registration Rights." The Exchange Notes
will evidence the same debt as the Old Notes and will be issued under and be
entitled to the benefits of the Indenture governing the Old Notes. See
"Description of the Notes."
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THE EXCHANGE OFFER................ Each $1,000 principal amount of Exchange Notes will be
issued in exchange for each $1,000 principal amount of
outstanding Old Notes. As of the date hereof,
$75,000,000 principal amount of Old Notes are issued and
outstanding. The Company will issue the Exchange Notes
to tendering holders of Old Notes on or promptly after
the Expiration Date.
RESALE............................ The Company believes that the Exchange Notes issued
pursuant to the Exchange Offer generally will be freely
transferable by the holders thereof without registration
or any prospectus delivery requirement under the
Securities Act, except for certain Restricted Holders
who may be required to deliver copies of this Prospectus
in connection with any resale of the Exchange Notes
issued in exchange for such Old Notes. See "The Exchange
Offer -- General" and "Plan of Distribution."
EXPIRATION DATE................... 5:00 p.m., New York City time, on July 10, 1998, unless
the Exchange Offer is extended, in which case the term
"Expiration Date" means the latest date to which the
Exchange Offer is extended. See "The Exchange Offer --
Expiration Date; Extensions; Amendments."
INTEREST ON THE NOTES............. The Exchange Notes will bear interest payable
semi-annually on March 15 and September 15 of each year.
Holders of Exchange Notes of record on September 1, 1998
will receive interest on September 15, 1998 from the
date of issuance of the Exchange Notes, plus an amount
equal to the accrued interest on the Old Notes from
March 15, 1998, to the date of exchange thereof.
Consequently, holders who exchange their Old Notes for
Exchange Notes will receive the same interest payment on
September 15, 1998 that they would have received had
they not accepted the Exchange Offer. Interest on the
Old Notes accepted for exchange will cease to accrue
upon issuance of
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the Exchange Notes. See "The Exchange Offer -- Interest
on the Exchange Notes."
PROCEDURES FOR TENDERING OLD
NOTES........................... Each holder of Old Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or such
facsimile, or an Agent's Message (as defined herein)
together with the Old Notes to be exchanged and any
other required documentation to the Exchange Agent at
the address set forth herein and therein or effect a
tender of Old Notes pursuant to the procedures for
book-entry transfer as provided for herein. See "The
Exchange Offer -- Procedures for Tendering."
SPECIAL PROCEDURES FOR BENEFICIAL
HOLDERS......................... Any beneficial holder whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender in the
Exchange Offer should contact such registered holder
promptly and instruct such registered holder to tender
on the beneficial holder's behalf. If such beneficial
holder wishes to tender directly, such beneficial holder
must, prior to completing and executing the Letter of
Transmittal and delivering the Old Notes, either make
appropriate arrangements to register ownership of the
Old Notes in such holder's name or obtain a properly
completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
See "The Exchange Offer -- Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES.... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes and a properly completed
Letter of Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis and
deliver an Agent's Message, may tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS................. Tenders of Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the business day
prior to the Expiration Date, unless previously accepted
for exchange. See "The Exchange Offer -- Withdrawal of
Tenders."
TERMINATION OF THE EXCHANGE
OFFER........................... The Issuer and the Company may terminate the Exchange
Offer if they determine that the Exchange Offer violates
any applicable law or interpretation of the staff of the
SEC. Holders of Old Notes will have certain rights
against the Issuer and the Company under the
Registration Agreement should the Issuer
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and the Company fail to consummate the Exchange Offer.
See "Exchange Offer; Registration Rights."
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF EXCHANGE NOTES...... Subject to certain conditions (as summarized above in
"Termination of the Exchange Offer" and described more
fully in "The Exchange Offer -- Termination"), the
Issuer and the Company will accept for exchange any and
all Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time,
on the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer -- General."
EXCHANGE AGENT.................... Marine Midland Bank is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange Offer.
The mailing address of the Exchange Agent is and hand
deliveries and deliveries by overnight courier should be
sent to: Marine Midland Bank, 140 Broadway -- Level A,
New York, New York 10005-1180, Attention: Corporate
Trust Services. For information with respect to the
Exchange Offer, the telephone number for the Exchange
Agent is (212) 658-5931 and the facsimile number for the
Exchange Agent is (212) 658-2292. See "The Exchange
Offer -- Exchange Agent."
USE OF PROCEEDS................... There will be no cash proceeds payable to the Issuer or
the Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer. See "Use of Proceeds."
For a discussion of the use of the net proceeds received
by the Issuer and the Company from the sale of the Old
Notes, see "Private Placement."
TERMS OF THE NOTES
SECURITIES OFFERED................ $75,000,000 aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2007.
ISSUER............................ Canadian Forest Oil Ltd.
MATURITY DATE..................... September 15, 2007.
INTEREST PAYMENT DATES............ March 15 and September 15 of each year.
COMPANY GUARANTEE................. The Notes will be unconditionally guaranteed on a senior
subordinated basis by Forest Oil Corporation (the
"Company Guarantee").
SUBSIDIARY GUARANTEES............. Under certain circumstances, the Notes will in the
future be unconditionally guaranteed (the "Subsidiary
Guarantees") on a senior subordinated basis by
Restricted Subsidiaries of the Company (the "Subsidiary
Guarantors"). The terms of such subordination will be
the same as those for the Notes and the Company
Guarantee. See "Description of the Notes -- Subsidiary
Guarantees."
OPTIONAL REDEMPTION............... Except as otherwise described below, the Notes will not
be
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
redeemable at the Issuer's option prior to September 15,
2002. Thereafter, the Notes will be subject to
redemption at the option of the Issuer, in whole or in
part, at the redemption prices set forth herein, plus
accrued and unpaid interest thereon to the applicable
redemption date. In addition, prior to September 15,
2000, the Issuer may, at its option, on any one or more
occasions, redeem up to 33 1/3% of the original
aggregate principal amount of the Notes at a redemption
price equal to 108.75% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the
redemption date with all or a portion of the net
proceeds of public sales of Common Stock of Forest;
provided that at least 66 2/3% of the original aggregate
principal amount of the Notes remains outstanding
immediately after the occurrence of such redemption. See
"Description of the Notes -- Optional Redemption."
ADDITIONAL AMOUNTS................ All payments made by the Issuer under or with respect to
the Notes, by the Company under or with respect to the
Company Guarantee and by any Subsidiary Guarantor under
or with respect to its Subsidiary Guarantee will be made
free and clear of, and without withholding or deduction
for Canadian taxes unless required by law or by the
interpretation or administration thereof by the relevant
government authority or agency, in which case the
Issuer, the Company and the Subsidiary Guarantors will
pay such additional amounts as may be necessary so that
the net amount received by holders of the Notes (other
than certain excluded holders of the Notes) after such
withholding or deduction will not be less than the
amount that would have been received in the absence of
such withholding or deduction. See "Description of the
Notes -- Additional Amounts."
OPTIONAL TAX REDEMPTION........... In the event of certain changes affecting Canadian
withholding taxes, the Notes will be subject to
redemption as a whole, but not in part, at the option of
the Issuer at any time, at 100% of the principal amount
thereof, plus accrued and unpaid interest thereon (if
any) to but excluding the redemption date. See
"Description of the Notes -- Redemption for Changes in
Canadian Withholding Taxes."
SUBORDINATION..................... The Notes are unsecured senior subordinated obligations
of the Issuer. The payment of the principal of, premium,
if any, on and interest on the Notes is subordinated in
right of payment to the payment when due in cash of all
Senior Indebtedness (as defined) of the Issuer. The
Notes rank subordinate in right of payment to all
existing and future Senior Indebtedness of the Issuer,
PARI PASSU with any future Pari Passu Indebtedness (as
defined) of the Issuer and senior to any future
Subordinated Indebtedness (as defined) of the Issuer.
The Company Guarantee and the Subsidiary Guarantee of
any Subsidiary Guarantor will rank subordinate in right
of payment to all existing and future Senior
Indebtedness, PARI PASSU with any future Pari Passu
Indebtedness and senior to any future
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Subordinated Indebtedness of the Company of such
Subsidiary Guarantor, as applicable. At December 31,
1997, the Issuer had no outstanding Senior Indebtedness
and the Company had $85.6 million of outstanding Senior
Indebtedness (not including borrowing capacity available
under the Bank Credit Facilities (as defined) which, if
borrowed, would be Senior Indebtedness of the Issuer or
the Company) and the Issuer and the Company had no
outstanding Pari Passu Indebtedness or Subordinated
Indebtedness other than the Old Notes, the 1997 Notes
and the Company's approximately $8.7 million of
principal amount of 11 1/4% Senior Subordinated Notes
due 2003 (the "11 1/4% Notes"). See "Description of the
Notes -- Certain Covenants" and "-- Limitation on
Indebtedness", "Risk Factors -- Subordination" and "--
Possible Limitations on Enforceability of Subsidiary
Guarantees" and "Description of the Notes --
Subordination." The Indenture under which the Old Notes
were, and the Exchange Notes will be, issued permits the
Issuer, the Company and the Restricted Subsidiaries (as
defined) to incur additional indebtedness, including
Senior Indebtedness and Pari Passu Indebtedness.
CHANGE OF CONTROL................. Upon the occurrence of a Change of Control (as defined),
the Issuer will be required to offer to repurchase all
or a portion of each Holder's Notes, at an offer price
in cash equal to 101% of the aggregate principal amount
of such Notes plus accrued and unpaid interest, if any,
thereon to the date of repurchase, and to repurchase all
Notes tendered pursuant to such offer. The Bank Credit
Facilities prohibit the Issuer and the Company from
repurchasing any Notes pursuant to a Change of Control
offer prior to the repayment in full of the Senior
Indebtedness of the Issuer and the Company under the
Bank Credit Facilities. In the event of a Change of
Control, there can be no assurance that the Company and
the Issuer will have sufficient funds to repurchase any
of the Notes or be permitted under the terms of any
other indebtedness to repurchase or redeem the Notes.
See "Risk Factors -- Payment Upon a Change of Control,"
"Description of Other Debt" and "Description of the
Notes -- Repurchase at the Option of Holders Upon a
Change of Control."
CERTAIN COVENANTS................. The Old Notes were and the Exchange Notes will be issued
pursuant to an indenture (the "Indenture") that contains
certain covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries,
including the Issuer, to incur additional indebtedness,
pay dividends, make distributions, make investments,
make certain other Restricted Payments (as defined),
enter into certain transactions with affiliates, dispose
of certain assets, incur liens securing Indebtedness (as
defined) of any kind other than Permitted Liens (as
defined) and engage in mergers and consolidations. See
"Description of the Notes -- Certain Covenants."
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
EXCHANGE OFFER; REGISTRATION
RIGHTS.......................... The Company agreed to use its reasonable best efforts to
file and cause to become effective the Exchange Offer
Registration Statement (as defined) relating to the
Exchange Offer for the Old Notes or, in lieu thereof, to
file and cause to become effective the Shelf
Registration Statement (as defined) for the resale of
the Old Notes. If (i) neither the Exchange Registration
Statement nor the Shelf Registration Statement has been
filed with the Commission on or prior to the 75th day
following the original issuance of the Old Notes, (ii)
neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement has been declared
effective by the Commission on or prior to the 135th day
following the original issuance of the Old Notes, (iii)
neither the Exchange Offer has been consummated nor the
Shelf Registration Statement has been declared effective
on or prior to the 150th day following the original
issuance of the Old Notes or (iv) after either the
Exchange Offer Registration Statement or the Shelf
Registration Statement has been declared effective, such
registration statement thereafter ceases to be effective
or usable (subject to certain exceptions) in connection
with resales of Old Notes or Exchange Notes in
accordance with and during the periods specified in the
Registration Agreement (as defined), then Special
Interest (in addition to the stated interest on the Old
Notes and the Exchange Notes) will accrue on the Old
Notes and the Exchange Notes. Upon the consummation of
the Registered Exchange Offer or the declaration of
effectiveness of such Shelf Registration Statement with
respect to the Old Notes, the Special Interest will
cease accruing. See "Exchange Offer; Registration
Rights."
ABSENCE OF A PUBLIC MARKET FOR THE
NOTES........................... The Exchange Notes will be a new issue of securities for
which there is currently no market. The Issuer and the
Company do not intend to apply for listing of the Notes
on any securities exchange or stock market. Although the
Initial Purchasers have informed the Issuers and the
Company that they each currently intend to make a market
in the Notes and, if issued, the Exchange Notes, they
are not obligated to do so, and any such market making
may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the Notes.
The Old Notes currently trade in The Portal Market.
</TABLE>
RISK FACTORS
Prior to making an investment decision, prospective investors in the Notes
should consider all the information set forth in the Prospectus and should
carefully evaluate the considerations set forth in "Risk Factors."
12
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical facts included in this Prospectus and in the documents
incorporated herein by reference regarding planned capital expenditures, the
availability of capital resources to fund capital expenditures, estimates of
proved reserves, the number of anticipated wells to be drilled in 1998 and
thereafter, the Company's financial position, business strategy and other plans
and objectives for future operations, are forward-looking statements. Although
the Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. There are numerous uncertainties inherent in
estimating quantities of proved oil and natural gas reserves and in projecting
future rates of production and timing of development expenditures, including
many factors beyond the control of the Company. Reserve engineering is a
subjective process of estimating underground accumulations of oil and natural
gas that cannot be measured in an exact way, and the accuracy of any reserve
estimate is a function of the quality of available data and of engineering and
geological interpretation and judgment. As a result, estimates made by different
engineers often vary from one another. In addition, results of drilling, testing
and production subsequent to the date of an estimate may justify revisions of
such estimate and such revisions, if significant, would change the schedule of
any further production and development drilling. Accordingly, reserve estimates
are generally different from the quantities of oil and natural gas that are
ultimately recovered. Additional important factors that could cause actual
results to differ materially from the Company's expectations are disclosed under
"Risk Factors" both in this Prospectus and in the 1997 10-K (which is
incorporated herein by reference) and elsewhere in this Prospectus. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by such factors.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS
AND INCORPORATED HEREIN BY REFERENCE, THE FOLLOWING FACTORS RELATING TO THE
NOTES AND THE EXCHANGE OFFER SHOULD BE CAREFULLY CONSIDERED WHEN EVALUATING AN
INVESTMENT IN THE NOTES.
SUBORDINATION OF NOTES
The Indenture governing the Notes limits, but does not prohibit, the
incurrence by the Company of additional indebtedness that is senior in right of
payment to the Notes. In the event of bankruptcy, liquidation, reorganization or
other winding up of the Company, the assets of the Company will be available to
pay the Company's obligations on the Notes only after all Senior Indebtedness
(as defined herein) has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on the Notes. In addition, under certain
circumstances, no payments may be made with respect to principal of, premium, if
any, or interest on the Notes if a default exists with respect to any Senior
Indebtedness. See "Description of the Notes -- Subordination."
In addition, the Notes are effectively subordinated to any indebtedness and
liabilities (including trade payables) of the Company's Subsidiaries that are
not Subsidiary Guarantors.
The Indenture imposes limits on the ability of the Company and its future
Restricted Subsidiaries (as defined herein) to incur additional indebtedness and
liens and to enter into agreements that would restrict the ability of such
future Restricted Subsidiaries to make distributions, loans or other payments to
the Company. These limitations are subject to various qualifications. Subject to
certain limitations, the Company and its Subsidiaries may incur additional
secured indebtedness. For additional details of these provisions and the
applicable qualifications, see "Description of the Notes -- Subordination" and
"-- Certain Covenants."
13
<PAGE>
PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes may
require the Issuer to purchase all or a portion of such holder's Notes at 101%
of the principal amount of the Notes, together with accrued and unpaid interest,
if any, to the date of purchase. Prior to any such repurchase of the Notes, the
Company may be required to (i) repay or cause to be repaid all or a portion of
the outstanding indebtedness under the Bank Credit Facilities or other
indebtedness of the Company and its subsidiaries which ranks senior to or PARI
PASSU with the Notes, the Company Guarantee or any Subsidiary Guarantee
containing similar change of control provisions, or (ii) obtain any requisite
consent to permit the repurchase of the Notes. If the Company is unable to repay
or cause to be repaid all of such indebtedness or is unable to obtain the
necessary consents, the Issuer would be unable to offer to repurchase the Notes,
which would constitute an Event of Default under the Indenture. There can be no
assurance that the Company and the Issuer will have sufficient funds available
at the time of any Change of Control to make any debt payment (including
repurchase of Notes) as described above. The definition of "Change of Control"
in the Indenture includes a sale, lease, conveyance or other disposition of "all
or substantially all" of the assets of the Company and the Restricted
Subsidiaries, taken as a whole, to a person or group of persons. There is little
case law interpreting the phrase "all or substantially all" in the context of an
indenture. Because there is no precise established definition of this phrase,
the ability of a holder of the Notes to require the Issuer to repurchase such
Notes as a result of a sale, lease, conveyance or transfer of all or
substantially all of the Company's assets to a person or group of persons may be
uncertain. See "Description of the Notes -- Certain Covenants -- Repurchase at
the Option of Holders Upon a Change of Control."
The events that constitute a Change of Control under the Indenture may also
be events of default under the Bank Credit Facilities or other senior
indebtedness of the Company and its subsidiaries. Such events may permit the
lenders under the Bank Credit Facilities to reduce the borrowing base thereunder
or permit such lenders or other holders of indebtedness to accelerate such
indebtedness and, if the indebtedness is not paid, to enforce security interests
in, or commence litigation that could ultimately result in a sale of,
substantially all of the assets of the Company, thereby limiting the Issuer's
ability to raise cash to repurchase the Notes.
POSSIBLE LIMITATIONS ON ENFORCEABILITY OF SUBSIDIARY GUARANTEES
The Issuer's obligations under the Notes may under certain circumstances be
guaranteed on an unsecured senior subordinated basis by the Subsidiary
Guarantors. Various fraudulent conveyance laws have been enacted for the
protection of creditors and may be utilized by a court of competent jurisdiction
to subordinate or void any Subsidiary Guarantee issued by a Subsidiary
Guarantor. It is also possible that under certain circumstances a court could
hold that the direct obligations of a Subsidiary Guarantor could be superior to
the obligations under its Subsidiary Guarantee.
To the extent that a court were to find that at the time a Subsidiary
Guarantor entered into a Subsidiary Guarantee either (x) the Subsidiary
Guarantee was incurred by the Subsidiary Guarantor with the intent to hinder,
delay or defraud any present or future creditor or that the Subsidiary Guarantor
contemplated insolvency with a design to favor one or more creditors to the
exclusion in whole or in part of others or (y) the Subsidiary Guarantor did not
receive fair consideration or reasonably equivalent value for issuing the
Subsidiary Guarantee and, at the time it issued the Subsidiary Guarantee, the
Subsidiary Guarantor (i) was insolvent or rendered insolvent by reason of the
issuance of the Subsidiary Guarantee, (ii) was engaged or about to engage in a
business or transaction for which the remaining assets of the Subsidiary
Guarantor constituted unreasonably small capital or (iii) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured, the court could void or subordinate the Subsidiary Guarantee in favor
of the Subsidiary Guarantor's other creditors. Among other things, a legal
challenge of a Subsidiary Guarantee issued by a Subsidiary Guarantor on
fraudulent conveyance grounds may focus on the benefits, if any, realized by the
Subsidiary Guarantor
14
<PAGE>
as a result of the issuance by the Company of the Notes. To the extent that
proceeds from the Offering are used to refinance the indebtedness of the
Company, a court might find that the Subsidiary Guarantors did not benefit from
incurrence of the indebtedness represented by the Notes.
The measure of insolvency for purposes of determining whether a transfer is
voidable as a fraudulent transfer varies depending upon the law of the
jurisdiction that is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its debts, including contingent
liabilities, was greater than the value of all its assets at a fair valuation or
if the present fair saleable value of the debtor's assets was less than the
amount required to repay its probable liability on its debts, including
contingent liabilities, as they become absolute and mature.
To the extent that a Subsidiary Guarantee is voided as a fraudulent
conveyance or found unenforceable for any other reason, holders of the Notes
would cease to have any claim in respect of the applicable Subsidiary Guarantor.
In such event, the claims of the holders of the Notes against such Subsidiary
Guarantor would be subject to the prior payment of all liabilities and preferred
stock claims of such Subsidiary Guarantor. There can be no assurance that, after
providing for all prior claims and preferred stock interests, if any, there
would be sufficient assets to satisfy the claims of the holders of the Notes
relating to any voided portion of such Subsidiary Guarantee.
ENFORCEABILITY OF JUDGMENTS
Since substantially all of the assets of the Issuer are outside the United
States, any judgments obtained in the United States against the Issuer,
including judgments with respect to the payments of principal, interest,
redemption price, Change of Control Payment or other amounts payable under the
Notes, may not be collectible within the United States.
The Issuer has been informed by its Canadian counsel, Bennett Jones
Verchere, that the laws of the Province of Alberta and the federal laws of
Canada applicable therein permit an action to be brought in a court of competent
jurisdiction in the Province of Alberta (a "Canadian Court") on any final and
conclusive judgment in personam of any federal or state court located in the
Borough of Manhattan in the City of New York (a "New York Court") that is not
impeachable as void or voidable under the internal laws of the State of New York
for a sum certain in respect of the enforcement of the Indenture or the Notes if
(i) the court rendering such judgment had jurisdiction over the judgment debtor,
as recognized by the Canadian Court (and submission by the Issuer in the
Indenture to the jurisdiction of the New York Court will be sufficient for the
purpose), (ii) the judgment debtor was properly served in connection with any
action leading to final judgment, (iii) such judgment was not obtained by fraud
or in a manner contrary to natural justice and the enforcement thereof would not
be inconsistent with public policy, as that term is applied by a Canadian Court,
or contrary to any order made by the Attorney General of Canada under the
FOREIGN EXTRATERRITORIAL MEASURE ACT (Canada) or the Competition Tribunal under
the Competition Act (Canada), (iv) the enforcement of such judgment does not
constitute, directly or indirectly, the enforcement of foreign revenue,
expropriatory or penal laws and (v) the action to enforce such judgment is
commenced within the applicable limitation period. The Issuer has been advised
by Bennett Jones Verchere that it knows of no reason, based upon public policy
under the laws of the Province of Alberta and the federal laws of Canada
applicable therein for avoiding recognition of a judgment of a New York Court to
enforce the Indenture or the Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESTRICTIONS ON RESALE OF OLD NOTES
The Old Notes not exchanged for Exchange Notes have not been registered
under the Securities Act or any state securities laws and, unless so registered,
may not be offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws. See "Transfer Restrictions on Old Notes."
Because the Issuer and the Company anticipated that most holders of Old Notes
will elect to exchange such Old Notes for Exchange Notes due to the general lack
of restrictions on the resale of Exchange Notes under the
15
<PAGE>
Securities Act, the Issuer and the Company anticipate that the liquidity of the
market for any Old Notes remaining after the consummation of the Exchange Offer
may be substantially limited. Additionally, holders (other than Restricted
Holders) of any Old Notes not tendered in the Exchange Offer prior to the
Expiration Date will not be entitled to require the Issuer and the Company to
file the Shelf Registration Statement and the stated interest rate on such Old
Notes will remain at its initial level of 8 3/4%. See "Exchange Offer;
Registration Rights."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes will be new securities for which currently there is no
trading market. The Company does not intend to apply for listing of the Exchange
Notes on any securities exchange or stock market. Although the Initial
Purchasers have informed the Company that they currently intend to make a market
in the Exchange Notes, the Initial Purchasers are not obligated to do so, and
any such market making may be discontinued at any time without notice. The
liquidity of any market for the Exchange Notes will depend upon the number of
Holders of the Exchange Notes, the interest of securities dealers in making a
market in the Exchange Notes and other factors. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes, and even if a market does develop, the price at which the holders of
Exchange Notes will be able to sell such Exchange Notes is not assured and the
Exchange Notes could trade at a price above or below either their purchase price
or face value.
PRIVATE PLACEMENT
On February 2, 1998, the Company completed the private sale to the Initial
Purchaser of $75,000,000 principal amount of the Old Notes at a price of 100.05%
of the principal amount thereof in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Initial
Purchasers thereupon offered and resold the Old Notes only to "Qualified
Institutional Buyers" (as defined in Rule 144A under the Securities Act) in
compliance with Rule 144A and other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Securities Act at an initial price
to such purchasers of 100.375% of the principal amount thereof. The net proceeds
of $75.0 million received by the Issuer in connection with the sale of the Old
Notes were used to finance a portion of the Louisiana Acquisition.
USE OF PROCEEDS
Neither the Issuer nor the Company will receive any cash proceeds from the
issuance of the Exchange Notes offered hereby. In consideration for issuing the
Exchange Notes as contemplated in this Prospectus, the Issuer and the Company
will receive in exchange a like principal amount of Old Notes, the terms of
which are identical in all material respects to the Exchange Notes. The Old
Notes surrendered in exchange for the Exchange Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any change in capitalization of the Company.
16
<PAGE>
CAPITALIZATION
The following table sets forth (i) the historical capitalization of the
Company as of March 31, 1998 and (ii) pro forma capitalization of the Company
giving effect to the issuance to Anschutz of 5,950,000 shares of Common Stock,
the assumption of $44,000,000 principal amount of 8.5% Senior Notes associated
with the Anschutz Ranch East Field and the use of $31,000,000 of cash to be
received in the Anschutz Transaction to repay a portion of Forest's U.S. Credit
Facility.
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------
(IN THOUSANDS)
(UNAUDITED)
HISTORICAL PRO FORMA(1)
------------ ---------------
<S> <C> <C>
Long-term debt, including current portion:
U.S. Credit Facility................................................... $ 227,300 196,300
Canadian Credit Facility............................................... -- --
Saxon Credit Facility.................................................. 27,157 27,157
8 1/2% Senior Notes.................................................... -- 44,000
8 3/4% Senior Subordinated Notes....................................... 199,974 199,974
11 1/4% Senior Subordinated Notes...................................... 8,676 8,676
Production payment obligation.......................................... 9,966 9,966
------------ ---------------
Total long-term debt, including current portion...................... 473,073 486,073
Minority interest (2).................................................... 12,927 12,927
Shareholders' equity:
Common Stock, par value $.10 per share issued and outstanding: (3)
37,320,644 shares historical and 43,270,644 shares pro forma......... 3,732 4,327
Capital surplus........................................................ 503,058 570,028
Accumulated deficit.................................................... (224,463) (224,463)
Accumulated other comprehensive loss................................... (7,017) (7,017)
------------ ---------------
Total shareholders' equity........................................... 275,310 342,875
------------ ---------------
Total capitalization..................................................... $ 761,310 841,875
------------ ---------------
------------ ---------------
</TABLE>
- ------------------------
(1) Reflects the issuance to Anschutz of 5,950,000 shares of Common Stock in
exchange for certain oil and gas assets in the 1998 Anschutz Transaction,
the assumption of $44,000,000 principal amount of 8.5% Senior Notes
associated with the Anschutz Ranch East Field and the use of $31,000,000 of
cash to be received in the transaction to repay a portion of Forest's U.S.
Credit Facility.
(2) Represents a 35% minority economic interest in Saxon.
(3) Does not include a total of 1,933,060 shares reserved for issuance upon
exercise of outstanding stock options.
17
<PAGE>
DESCRIPTION OF BANK CREDIT FACILITY
At December 31, 1997 the Company and its subsidiaries, Canadian Forest and
Producers Marketing Ltd. ("ProMark"), had a $250,000,000 global credit facility
(the "Global Credit Facility") which provided for a global borrowing base of
$130,000,000 through a syndicate of banks led by The Chase Manhattan Bank and
The Chase Manhattan Bank of Canada. Under the Global Credit Facility, the
Company can allocate the global borrowing base between the United States and
Canada, subject to specified limitations. Funds borrowed under the Global Credit
Facility can be used for general corporate purposes.
On February 3, 1998, the Company amended the Global Credit Facility. The
primary purpose of the amendment was to increase the credit facility to
$300,000,000 and the borrowing base to $260,000,000 in order to finance the
Louisiana Acquisition. Under the amended Global Credit Facility, the maximum
credit facility allocations in the United States and Canada are $275,000,000 and
$25,000,000, respectively. The borrowing base is currently allocated
$250,000,000 to the United States and $10,000,000 to Canada.
SECURITY. The Global Credit Facility is secured by a lien on, and a
security interest in, a portion of the Company's U.S. proved oil and gas
properties, related assets, pledges of accounts receivable and a pledge of 66%
of the capital stock of Canadian Forest. The Global Credit Facility is also
indirectly secured by substantially all of the assets of Canadian Forest.
INTEREST. U.S. borrowings under the Global Credit Facility bear interest at
a floating rate based (at Forest's option) upon (i) the Base Rate with respect
to Base Rate loans, plus the Applicable Margin for Base Rate loans or (ii) the
London Interbank Offered Rate for one, two, three or six months, plus the
Applicable Margin for Eurodollar loans. The Base Rate is the greater of (i) the
Prime Rate or (ii) the Federal Funds Rate plus 1/2 of 1%. The Applicable Margin
for Base Rate loans varies from 0.00% to 0.50% depending on the Borrowing Base
Usage Ratio; and the Applicable Margin for Eurodollar loans varies from 1.00% to
1.50% depending on the Borrowing Base Usage Ratio. Borrowing Base Usage is a
ratio of (i) outstanding loans, letters of credit, swing-line loans and bankers'
acceptances under both the U.S. Credit Facility and the Canadian Credit Facility
to (ii) the then effective borrowing base. Interest on Base Rate loans is
payable quarterly in arrears and interest on Eurodollar loans is payable on the
last day of the interest period therefor and, if longer than three months, at
three month intervals.
Canadian borrowings under the Global Credit Facility bear interest at a
floating rate based (at Forest's option) upon (i) the Bankers' Acceptance rate
for bankers' acceptances having a maturity of 30, 60, 90 or 180 days, plus a
discount rate, (ii) the Canadian Prime Rate with respect to Canadian Prime Rate
loans, plus the Applicable Margin for Canadian Prime Rate loans, (iii) the Base
Rate with respect to Base Rate loans, plus the Applicable Margin for Base Rate
loans, or (iv) the London Interbank Offered Rate for one, two, three or six
months, plus the Applicable Margin for Eurodollar loans. The Applicable Margin
for Canadian Prime Rate loans and Base Rate loans will vary from 0.00% to 0.50%
depending on the Borrowing Base Usage Ratio; and the discount fee for Bankers'
Acceptances and Applicable Margin for Eurodollar loans will vary from 1.00% to
1.50% depending on the Borrowing Base Usage Ratio. Interest on Canadian Prime
Rate loans and Base Rate loans will be payable quarterly in arrears and interest
on Eurodollar loans will be payable on the last day of the interest period
therefor and, if longer than three months, at three month intervals.
MATURITY. The Global Credit Facility will terminate on August 19, 2001. The
Global Credit Facility provides that loans may be borrowed, repaid and
reborrowed from time to time until such termination date, subject to the
satisfaction of certain conditions on the date of any such borrowing and, in the
case of repayment of Eurodollar loans and Bankers' Acceptances, compliance with
certain yield protection provisions.
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SCHEDULED PAYMENTS AND PREPAYMENTS. The Bank Credit Facility does not
require any scheduled payments of principal. The Global Credit Facility provides
for mandatory repayments of loans (i) if, following any redetermination of the
Borrowing Base, the aggregate principal amount of the loans, the letters of
credit, swing-line loans and bankers' acceptances under the Global Credit
Facility exceed the Borrowing Base, (ii) with the net cash proceeds in excess of
$5,000,000 from any asset sale or sales, and (iii) with the net casualty
proceeds in excess of $2,500,000 from any casualty event. In the case of clause
(i), such prepayment must be within 90 days of the date such deficiency is
determined to exist.
Amounts under the Global Credit Facility may be voluntarily prepaid without
premium or penalty, subject to certain notice requirements, certain required
minimum prepayment amounts and, in the case of Eurodollar loans and Bankers'
Acceptances, certain yield protection provisions.
COMMITMENT AND LETTER OF CREDIT FEES. Commitment fees are due and payable
to the Lender Group based on the committed undrawn amount of the lesser of their
respective aggregate commitments or the then effective Allocated U.S. Borrowing
Base or Allocated Canadian Borrowing Base (as applicable) during the preceding
quarter equal to a percent which varies from 0.30% to 0.375% depending on the
Borrowing Base Usage Ratio. Such commitment fees will be payable in arrears on a
quarterly basis. Forest is also required to pay letter of credit fees as
follows: (i) to the Banks, an amount equal to the Applicable Margin for
Eurodollar loans for the daily aggregate amount available to be drawn under each
letter of credit outstanding; and (ii) to the Agent for the account of the
Issuing Bank, an issuance fee equal to the greater of $1,000 or 0.5% of the
stated amount of each letter of credit. Fees payable under clause (i) will be
payable quarterly in arrears and fees payable under clause (ii) will be payable
on the issuance date.
COVENANTS. The Global Credit Facility requires Forest and its subsidiaries
to meet certain financial tests, including meeting a minimum interest coverage
ratio and current ratio. The Global Credit Facility also contains covenants
which, among other things, will limit the incurrence of additional indebtedness,
the nature of the business of Forest and its subsidiaries, investments, leases
of assets, ownership of subsidiaries, dividends, transactions with affiliates,
asset sales, acquisitions, mergers and consolidations, Liens and other matters
customarily restricted in such agreements. The Global Credit Facility contains
additional covenants which will require Forest to maintain its properties and
those of its subsidiaries, together with insurance thereon, to provide certain
information to the Lender Group, including financial statements, notices and
reports and to permit inspections of the books and records of Forest and its
subsidiaries, to comply with applicable laws, including environmental laws and
ERISA, to pay taxes and contractual obligations and to use the proceeds of the
loans for working capital and other general corporate purposes.
EVENTS OF DEFAULT. The Global Credit Facility contains customary events of
default, including payment defaults, breach of representations, warranties and
covenants (subject to certain cure periods), cross-defaults to certain other
indebtedness, certain events of bankruptcy and insolvency, judgment defaults in
excess of $1 million and the failure of any of the loan documents to be in full
force and effect.
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THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights under the Registration
Agreement. The Exchange Notes are being offered hereunder in order to satisfy
the obligations of the Issuer and the Company under the Registration Agreement.
See "-- Registration Rights."
For each $1,000 principal amount of Old Notes surrendered to the Issuer and
the Company pursuant to the Exchange Offer, the holder of such Old Notes will
receive $1,000 principal amount of Exchange Notes. Upon the terms and subject to
the conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, the Company and the Issuer will accept all Old Notes properly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date. Holders
may tender some or all of their Old Notes pursuant to the Exchange Offer in
integral multiples of $1,000 principal amount.
Under existing interpretations of the staff of the SEC, including EXXON
CAPITAL HOLDINGS CORPORATION, SEC No-Action Letter (available April 13, 1989),
the Morgan Stanley Letter and MARY KAY COSMETICS, INC., SEC No-Action Letter
(available June 5, 1991), the Issuer and the Company believe that the Exchange
Notes would in general be freely transferable after the Exchange Offer without
further registration under the Securities Act by the respective holders thereof
(other than a "Restricted Holder," being (i) a broker-dealer who purchased Old
Notes exchanged for such Exchange Notes directly from the Company or the Issuer
to resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an affiliate of the Issuer or the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of such Exchange Notes. Eligible holders
wishing to accept the Exchange Offer must represent to the Issuer and the
Company that such conditions have been met. Any holder of Old Notes who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes could not rely on the interpretation by the staff of the SEC
enunciated in the Morgan Stanley Letter and similar no-action letters, and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange Notes
in the Exchange Offer will be required to make certain representations,
including that (i) it is not an affiliate of the Issuer or the Company nor a
broker-dealer tendering Old Notes acquired directly from the Issuer or the
Company for its own account, (ii) any Exchange Notes to be received by it are
being acquired in the ordinary course of its business and (iii) it is not
participating in, and it has no arrangement with any person to participate in,
the distribution (within the meaning of the Securities Act) of the Exchange
Notes. In addition, in connection with any resales of Exchange Notes, any
broker-dealer (a "Participating Broker-Dealer") who acquired Old Notes for its
own account as a result of market-making activities or other trading activities
must acknowledge that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such Exchange Notes. The
staff of the SEC has taken the position in no-action letters issued to third
parties including SHEARMAN & STERLING, SEC No-Action Letter (available July 2,
1993), that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sale of Old Notes) with this Prospectus, as
it may be amended or supplemented from time to time. Under the Registration
Agreement, the Issuer and the Company are required to allow Participating
Broker-Dealers to use this Prospectus, as it may be amended or supplemented from
time to time, in connection with the resale of such Exchange Notes. See "Plan of
Distribution."
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The Exchange Offer shall be deemed to have been consummated upon the earlier
to occur of (i) the Issuer and the Company having exchanged Exchange Notes for
all outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to the Exchange Offer and (ii) the Issuer and the Company having
exchanged, pursuant to the Exchange Offer, Exchange Notes for all Old Notes that
have been tendered and not withdrawn on the Expiration Date. In such event,
holders of Old Notes seeking liquidity in their investment would have to rely on
exemptions to registration requirements under the securities laws, including the
Securities Act.
As of the date of this Prospectus, $75,000,000 aggregate principal amount of
Old Notes are issued and outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes to be eligible for trading in the
Private Offering, Resale and Trading through Automated Linkages (PORTAL) Market,
the National Association of Securities Dealers' screen based, automated market
trading of securities eligible for resale under Rule 144A.
The Issuer and the Company shall be deemed to have accepted for exchange
validly tendered Old Notes when, as and if the Issuer and the Company have given
oral or written notice thereof to the Exchange Agent. See "-- Exchange Agent."
The Exchange Agent will act as agent for the tendering holders of Old Notes for
the purpose of receiving Exchange Notes from the Company and the Issuer and
delivering Exchange Notes to such holders. If any tendered Old Notes are not
accepted for exchange because of an invalid tender or the occurrence of certain
other events set forth herein, certificates for any such unaccepted Old Notes
will be returned, without expense, to the tendering holder thereof as promptly
as practicable after the Expiration Date. Holders of Old Notes who tender in the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Old Notes pursuant to the Exchange Offer. The Company
and the Issuer will pay all charges and expenses, other than certain applicable
taxes, in connection with the Exchange Offer. See "-- Fees and Expenses."
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of the date of this Prospectus.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean July 10, 1998 unless the Issuer and
the Company, in their sole discretion, extend the Exchange Offer, in which case
the term "Expiration Date" shall mean the latest date to which the Exchange
Offer is extended. In order to extend the Expiration Date, the Issuer and the
Company will notify the Exchange Agent of any extension by oral or written
notice and will mail to the record holders of Old Notes an announcement thereof,
each prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Such announcement may state that the
Company and the Issuer are extending the Exchange Offer for a specified period
of time. The Issuer and the Company reserve the right (i) to delay acceptance of
any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer
and to refuse to accept Old Notes not previously accepted, if any of the
conditions set forth herein under "-- Termination" shall have occurred and shall
not have been waived by the Company (if permitted to be waived by the Issuer and
the Company), by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, and (ii) to amend the terms of the Exchange
Offer in any manner deemed by it to be advantageous to the holders of the Old
Notes. Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof. If the
Exchange Offer is amended in a manner determined by the Issuer and the Company
to constitute a material change, the Issuer and the Company will promptly
disclose such amendment in a manner reasonably calculated to inform the holders
of the Old Notes of such amendment. Without limiting the manner in which the
Issuer and the Company may choose to make public announcements of any delay in
acceptance, extension, termination or amendment of the Exchange Offer, the
Issuer and the Company shall have no obligation to
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publish, advertise, or otherwise communicate any such public announcement, other
than by making a timely release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest payable semi-annually on March 15 and
September 15 of each year. Holders of Exchange Notes of record on September 1,
1998 will receive interest on September 15, 1998 from the date of issuance of
the Exchange Notes, plus an amount equal to the accrued interest on the Old
Notes from March 15, 1998, to the date of exchange thereof. Consequently,
holders who exchange their Old Notes for Exchange Notes will receive the same
interest payment on September 15, 1998 that they would have received had they
not accepted the Exchange Offer. Interest on the Old Notes accepted for exchange
will cease to accrue upon issuance of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or an Agent's Message,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In
addition, either (i) the certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent along with an Agent's Message prior to the Expiration Date or
(iii) the Holder must comply with the guaranteed delivery procedures described
below. The tender by a holder of Old Notes will constitute an agreement between
such holder and the Issuer and the Company in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address set
forth herein. Holders may also request that their respective brokers, dealers,
commercial banks, trust companies or nominees effect such tender for such
holders.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Issuer and the Company may
enforce such agreement against such participant.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Issuer or the Company. Only a holder of Old Notes may tender such
Old Notes in the Exchange Offer. The term "holder" with respect to the Exchange
Offer means any person in whose name Old Notes are registered on the books of
the Issuer or any other person who has obtained a properly completed stock power
from the registered holder.
Any beneficial holder whose Old Notes are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on behalf of the registered holder. If such
beneficial holder wishes to tender directly, such beneficial holder must, prior
to completing and executing the Letter of Transmittal and delivering his Old
Notes, either make appropriate
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arrangements to register ownership of the Old Notes in such holder's name or
obtain a properly completed bond power from the registered holder. The transfer
of record ownership may take considerable time. If the Letter of Transmittal is
signed by the record holder(s) of the Old Notes tendered thereby, the signature
must correspond with the name(s) written on the face of the Old Notes without
alteration, enlargement or any change whatsoever. If the Letter of Transmittal
is signed by a participant in Depositary Trust Company ("DTC"), the signature
must correspond with the name as it appears on the security position listing as
the holder of the Old Notes. Signatures on a Letter of Transmittal or a notice
of withdrawal, as the case may be, must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution")
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder (or by a participant in DTC whose name appears on a security position
listing as the owner) who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
and the Exchange Notes are being issued directly to such registered holder (or
deposited into the participant's account at DTC) or (ii) for the account of an
Eligible Institution. If the Letter of Transmittal is signed by a person other
than the registered holder of any Old Notes listed therein, such Old Notes must
be endorsed or accompanied by appropriate bond powers which authorize such
person to tender the Old Notes on behalf of the registered holder, in either
case signed as the name of the registered holder or holders appears on the Old
Notes. If the Letter of Transmittal or any Old Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC with an Agent's Message) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes (or a timely confirmation received of a book-entry
transfer of Old Notes into the Exchange Agent's account at DTC with an Agent's
Message) with the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Issuer and the Company reserve the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Company's acceptance of
which would, in the opinion of the Company or its counsel, be unlawful. The
Issuer and the Company also reserve the absolute right to waive any conditions
of the Exchange Offer or defects or irregularities in tender as to particular
Old Notes. The Issuer and the Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Issuer and the Company shall determine. Neither the
Issuer, the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date. In addition, the Company reserves the right in its sole
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discretion to (i) purchase or make offers for any Old Notes that remain
outstanding subsequent to the Expiration Date, or, as set forth under "--
Termination," to terminate the Exchange Offer and (ii) to the extent permitted
by applicable law, purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
may differ from the terms of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Old Notes
at DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account in accordance with DTC's procedure for such transfer. Although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an Agent's Message must be transmitted to and
received by the Exchange Agent on or prior to the Expiration Date at one of its
addresses set forth below under "-- Exchange Agent", or the guaranteed delivery
procedure described below must be complied with. DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All references in this
Prospectus to deposit or delivery of Old Notes shall be deemed to include DTC's
book-entry delivery method.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer on
a timely basis and deliver an Agent's Message, may effect a tender if: (i) the
tender is made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder of the Old Notes, the registration number or numbers of such Old Notes
(if applicable), and the total principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, the Letter of Transmittal, together
with the Old Notes in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC with an Agent's
Message) and any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal, together with the
certificate(s) representing all tendered Old Notes in proper form for transfer
(or a confirmation of such a book-entry transfer) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
five business days after the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.
Old Notes tendered in exchange for Exchange Notes (or a timely confirmation
of a book-entry transfer of such Old Notes into the Exchange Agent's account at
DTC) must be received by the Exchange Agent, with the Letter of Transmittal or
an Agent's Message and any other required documents, by the Expiration Date or
within the time periods set forth above pursuant to a Notice of
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Guaranteed Delivery from an Eligible Institution. Each holder tendering the Old
Notes for exchange sells, assigns and transfers the Old Notes to the Exchange
Agent, as agent of the Company, and irrevocably constitutes and appoints the
Exchange Agent as the holder's agent and attorney-in-fact to cause the Old Notes
to be transferred and exchanged. The holder warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Old Notes and to
acquire the Exchange Notes issuable upon the exchange of such tendered Old
Notes, that the Exchange Agent, as agent of the Issuer and the Company, will
acquire good and unencumbered title to the tendered Old Notes, free and clear of
all liens, restrictions, charges and encumbrances, and that the Old Notes
tendered for exchange are not subject to any adverse claims when accepted by the
Exchange Agent, as agent of the Company. The holder also warrants and agrees
that it will, upon request, execute and deliver any additional documents deemed
by the Issuer, the Company or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment and transfer of the Old Notes. All
authority conferred or agreed to be conferred in the Letter of Transmittal by
the holder will survive the death, incapacity or dissolution of the holder and
any obligation of the holder shall be binding upon the heirs, personal
representatives, successors and assigns of such holder.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange. To withdraw a
tender of Old Notes in the Exchange Offer, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including, if applicable, the registration number
or numbers and total principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Old Notes to register the transfer of
such Old Notes into the name of the Depositor withdrawing the tender, (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor and (v) if applicable because the Old Notes have been
tendered pursuant to the book-entry procedures, specify the name and number of
the participant's account at DTC to be credited, if different than that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Issuer and
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company and the
Issuer will not be required to accept for exchange any Old Notes not theretofore
accepted for exchange, and may terminate the Exchange Offer if they determine
that the Exchange Offer violates any applicable law or interpretation of the
staff of the SEC.
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If the Issuer and the Company determine that they may terminate the Exchange
Offer, as set forth above, the Issuer and the Company may (i) refuse to accept
any Old Notes and return any Old Notes that have been tendered to the holders
thereof, (ii) extend the Exchange Offer and retain all Old Notes tendered prior
to the Expiration of the Exchange Offer, subject to the rights of such holders
of tendered Old Notes to withdraw their tendered Old Notes or (iii) waive such
termination event with respect to the Exchange Offer and accept all properly
tendered Old Notes that have not been withdrawn. If such waiver constitutes a
material change in the Exchange Offer, the Issuer and the Company will disclose
such change by means of a supplement to this Prospectus that will be distributed
to each registered holder of Old Notes, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the significance
of the waiver and the manner of disclosure to the registered holders of the Old
Notes, if the Exchange Offer would otherwise expire during such period. Holders
of Old Notes will have certain rights against the Company and the Issuer under
the Registration Agreement should the Issuer and the Company fail to consummate
the Exchange Offer.
EXCHANGE AGENT
Marine Midland Bank has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance and requests for additional copies
of this Prospectus or of the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail: By Overnight Courier:
MARINE MIDLAND BANK MARINE MIDLAND BANK
140 Broadway -- Level A 140 Broadway -- Level A
New York, New York 10005-1180 New York, New York 10005-1180
Attention: Corporate Trust Services Attention: Corporate Trust Services
(registered or certified mail recommended)
By Hand: Facsimile Transmission:
MARINE MIDLAND BANK (212) 658-2292
140 Broadway -- Level A Confirm by Telephone:
New York, New York 10005-1180 (212) 658-5931
Attention: Corporate Trust Services
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuer and the Company. The principal solicitation for tenders
pursuant to the Exchange Offer is being made by mail. Additional solicitations
may be made by officers and regular employees of the Issuer and the Company and
their affiliates in person, by telegraph or telephone. The Issuer and the
Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Issuer and the Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse the Exchange Agent for its reasonable out-of-pocket
expenses in connection therewith. The Issuer and the Company may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for exchange.
The other expenses incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, will be paid by the Issuer and the
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Company. The Issuer and the Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange Notes or Old Notes not tendered or accepted for exchange are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Notes tendered, or if tendered Old
Notes are registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Issuer or
the Company upon the consummation of the Exchange Offer. The expenses of the
Exchange Offer will be amortized by the Issuer over the term of the Exchange
Notes under generally accepted accounting principles.
DESCRIPTION OF THE NOTES
The Exchange Notes will be issued and the Old Notes and the 1997 Notes were
issued under an indenture dated as of September 29, 1997 (the "Indenture")
between the Company, the Issuer, and State Street Bank and Trust Company, as
trustee (the "Trustee"). A copy of the Indenture is available upon request. The
following summary of the material provisions of the Indenture does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Indenture, including the definitions of certain
terms contained therein. The definitions of certain capitalized terms used in
the following summary are set forth below under "-- Certain Definitions."
It is expected that the Old Notes, the Exchange Notes and the 1997 Notes
will constitute a single series of debt securities under the Indenture. If the
Exchange Offer is consummated, Holders of Old Notes who do not exchange their
Old Notes for Exchange Notes will vote together with Holders of the Exchange
Notes and the 1997 Notes for all relevant purposes under the Indenture. In that
regard, the Indenture requires that certain actions by the Holders thereunder
(including acceleration following an Event of Default) must be taken, and
certain rights must be exercised, by specified minimum percentages of the
aggregate principal amount of the outstanding securities issued under the
Indenture. In determining whether Holders of requisite percentage in principal
amount have given any notice, consent or waiver or taken any other action
permitted under the Indenture, any Old Notes that remain outstanding after the
Exchange Offer will be aggregated with the Exchange Notes and the 1997 Notes,
and the Holders of the Old Notes, the Exchange Notes and the 1997 Notes will
vote together as a single series for all such purposes. Accordingly, all
references herein to specified percentages in aggregate principal amount of the
outstanding Notes shall be deemed to mean, at any time after the Exchange Offer
is consummated, such percentages in aggregate principal amount of the Old Notes,
the Exchange Notes and the 1997 Notes then outstanding.
The terms of the Notes will include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"1939 Act"). The following summary of certain terms and provisions of the Notes
and the Indenture does not purport to be complete and is qualified in its
entirety by reference to the 1939 Act, the Notes and the Indenture. A copy of
the Indenture and the form of Notes is available upon request to the Issuer at
the address set forth above under "Available Information."
The definitions of certain capitalized terms used in the following summary
are set forth below under "Certain Definitions." Capitalized terms used in this
summary and not otherwise defined below have the meanings assigned to them in
the Indenture. For purposes of this "Description of the Notes," references
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<PAGE>
to the "Issuer" shall mean Canadian Forest Oil Ltd., excluding its subsidiaries,
and references to the "Company" shall mean Forest Oil Corporation, excluding its
subsidiaries.
GENERAL
The Notes will mature on September 15, 2007, and will be limited to an
aggregate principal amount of $200.0 million. The Notes will bear interest at
the rate of 8 3/4% per annum from the most recent interest payment date to which
interest has been paid. Interest on the Notes will be payable semiannually on
March 15 and September 15 of each year, to the Person in whose name the Note (or
any predecessor Note) is registered at the close of business on the immediately
preceding March 1 or September 1, as the case may be. See "The Exchange Offer --
Interest on the Exchange Notes." Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
The obligations of the Issuer under the Notes will be unconditionally
guaranteed on a senior subordinated and unsecured basis by the Company and,
under the circumstances described below, certain Restricted Subsidiaries of the
Company. See "-- Company Guarantee" and "-- Subsidiary Guarantees."
Principal of, premium, if any, on and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at an office or agency of
the Issuer, one of which will be maintained for such purpose in The City of New
York (which initially will be an office of the Trustee) or such other office or
agency permitted under the Indenture. At the option of the Issuer, payment of
interest may be made by check mailed to the person entitled thereto as shown on
the Security Register. The Notes will be issued in denominations of $1,000 and
integral multiples thereof.
The interest rate on the Old Notes is subject to increase in certain
circumstances (such additional interest being referred to as "Special Interest")
if the Issuer and the Company do not file a registration statement relating to
the Registered Exchange Offer on a timely basis, if such registration statement
is not declared effective on a timely basis or if certain other conditions are
not satisfied, all as further described under "Exchange Offer; Registration
Rights." All references herein to interest shall include such Special Interest,
if appropriate.
COMPANY GUARANTEE
Pursuant to the Company Guarantee, the Company will unconditionally
guarantee, on an unsecured senior subordinated basis, to each Holder of Notes
and the Trustee, the full and prompt performance of the Issuer's obligations
under the Indenture and the Notes, including the payment of principal of and
interest, premium, if any, Special Interest, if any, and Additional Amounts, if
any, on the Notes. The Company Guarantee will be subordinated as described under
"-- Subordination."
SUBSIDIARY GUARANTEES
Under the circumstances described below under "-- Certain Covenants --
Future Subsidiary Guarantors," the Issuer's payment obligations under the Notes
will be jointly and severally guaranteed by one or more Subsidiary Guarantors.
The Subsidiary Guarantee of each Subsidiary Guarantor will be an unsecured
senior subordinated obligation of such Subsidiary Guarantor. See "--
Subordination."
Certain mergers, consolidations and dispositions of Property may result in
the addition of additional Subsidiary Guarantors or the release of Subsidiary
Guarantors. See "-- Merger, Consolidation and Sale of Substantially All Assets."
Any Subsidiary Guarantor that is designated an Unrestricted Subsidiary in
accordance with the terms of the Indenture shall be released from and relieved
of its obligations under its Subsidiary Guarantee upon execution and delivery of
a supplemental indenture satisfactory to the Trustee.
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Each of the Issuer, the Company and any Subsidiary Guarantor will agree to
contribute to the Company or any Subsidiary Guarantor which makes payments
pursuant to the Company Guarantee or its Subsidiary Guarantee, as applicable, an
amount equal to the Issuer's, the Company's or such Subsidiary Guarantor's
proportionate share of such payment, based on the net worth of the Issuer, the
Company or such Subsidiary Guarantor relative to the aggregate net worth of the
Issuer, the Company and the Subsidiary Guarantors.
SUBORDINATION
The Notes will be unsecured senior subordinated obligations of the Issuer.
The payment of the principal of, premium, if any, on and interest on the Notes
will be subordinated in right of payment, as set forth in the Indenture, to the
payment when due in cash of all Senior Indebtedness of the Issuer. The Notes
will rank subordinate in right of payment to all existing and future Senior
Indebtedness of the Issuer, PARI PASSU with any future Pari Passu Indebtedness
of the Issuer and senior to any future Subordinated Indebtedness of the Issuer.
The Company Guarantee and the Subsidiary Guarantee of any Subsidiary Guarantor
will rank subordinate in right of payment to all existing and future Senior
Indebtedness, PARI PASSU with any future Pari Passu Indebtedness and senior to
any future Subordinated Indebtedness of the Company or such Subsidiary
Guarantor, as applicable.
At December 31, 1997, the Issuer had no outstanding Senior Indebtedness and
the Company had outstanding Senior Indebtedness of $85.6 million (not including
borrowing capacity available to the Company and the Issuer under the Bank Credit
Facilities which, if borrowed, would be Senior Indebtedness of either the Issuer
or the Company). As of such date, the Issuer had no outstanding Pari Passu
Indebtedness or Subordinated Indebtedness, other than the Notes. As of such
date, the Company had no outstanding Subordinated Indebtedness. The
approximately $8.7 million principal amount of 11 1/4% Notes which remains
outstanding constitutes Pari Passu Indebtedness of the Company. Although the
Indenture contains limitations on the amount of additional Indebtedness that the
Company and its Restricted Subsidiaries, including the Issuer, may Incur, the
amounts of such Indebtedness could be substantial and such Indebtedness may be
Senior Indebtedness or Pari Passu Indebtedness. In addition, any Subsidiary
Guarantees could be effectively subordinated to all the obligations of the
Subsidiary Guarantors under certain circumstances. The Notes, the Company
Guarantee and any Subsidiary Guarantees will also be effectively subordinated to
any secured Indebtedness of the Issuer, the Company and the Subsidiary
Guarantors that is not otherwise Senior Indebtedness. See "-- Certain Covenants
- -- Limitation on Indebtedness" and "Risk Factors -- Subordination" and "--
Possible Limitations on Enforceability of Guarantees."
Neither the Issuer nor the Company may pay principal of, premium, if any, on
or interest on, the Notes or the Company Guarantee or make any deposit pursuant
to the provisions of the Indenture described under "-- Defeasance and Covenant
Defeasance" or repurchase, redeem or otherwise retire any Notes (collectively,
"pay the Notes") if (i) any principal, premium, interest or other amounts due in
respect of any Senior Indebtedness of the Issuer or the Company is not paid
within any applicable grace period (including at maturity) or (ii) any other
default on Senior Indebtedness of the Issuer or the Company occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Senior Indebtedness has been paid in
full; PROVIDED, HOWEVER, that the Issuer or the Company, as applicable, may pay
the Notes without regard to the foregoing if the Issuer or the Company and the
Trustee receive written notice approving such payment from the Representative of
each issue of Designated Senior Indebtedness of the Issuer or the Company.
During the continuance of any default (other than a default described in clause
(i) or clause (ii) of the preceding sentence) with respect to any Designated
Senior Indebtedness of the Issuer or the Company pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration), neither the Issuer nor
the Company, as applicable, may pay the Notes for a period (a "Payment Blockage
Period") commencing
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<PAGE>
upon the receipt by the Issuer or the Company and the Trustee of written notice
of such default from the Representative of the holders of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period (a
"Payment Blockage Notice") and ending 179 days after receipt of such notice by
the Issuer or the Company and the Trustee unless earlier terminated (a) by
written notice to the Issuer or the Company and the Trustee from the
Representative which gave such Payment Blockage Notice, (b) because such default
is no longer continuing or (c) because such Designated Senior Indebtedness has
been repaid in full in cash. Notwithstanding the provisions described in the
immediately preceding sentence, unless the holders of such Designated Senior
Indebtedness or the Representative of such holders have accelerated the maturity
of such Designated Senior Indebtedness and not rescinded such acceleration, the
Issuer or the Company, as applicable, may (unless otherwise prohibited as
described in the first sentence of this paragraph) resume payments on the Notes
after the end of such Payment Blockage Period. No more than one Payment Blockage
Notice may be given in any consecutive 360-day period regardless of the number
of defaults with respect to one or more issues of Senior Indebtedness of the
Issuer or the Company.
Upon any payment or distribution of the assets of the Issuer or the Company
upon a total or partial liquidation, dissolution or winding up of the Issuer or
the Company or in a bankruptcy, reorganization, insolvency, receivership, or
similar proceeding relating to the Issuer or the Company or its property, the
holders of Senior Indebtedness of the Issuer or the Company will be entitled to
receive payment in full in cash before the Holders of the Notes are entitled to
receive any payment of principal of, or premium, if any, or interest on, the
Notes or the Company Guarantee. In addition, until the Senior Indebtedness of
the Issuer or the Company is paid in full, any distribution made by or on behalf
of the Issuer or the Company to which Holders of Notes would be entitled but for
the subordination provisions of the Indenture will be made to holders of the
Senior Indebtedness of the Issuer or the Company, except that Holders of Notes
may receive and retain shares of stock and any debt securities that are
subordinated to all Senior Indebtedness of the Issuer or the Company to at least
the same extent as the Notes or the Company Guarantee.
The Subsidiary Guarantee of any Subsidiary Guarantor will be subordinated to
Senior Indebtedness of such Subsidiary Guarantor to the same extent and in the
same manner as the Notes and the Company Guarantee are subordinated to Senior
Indebtedness of the Issuer and the Company.
The Indenture provides that the subordination provisions of the Indenture
applicable to the Notes, the Company Guarantee and any Subsidiary Guarantees may
not be amended, waived or modified in a manner that would adversely affect the
rights of the holders of any Designated Senior Indebtedness unless the holders
of such Indebtedness consent in writing (in accordance with the provisions of
such Indebtedness) to such amendment, waiver or modification.
OPTIONAL REDEMPTION
Except as provided in the next succeeding paragraph, the Notes are not
redeemable prior to September 15, 2002. At any time on or after September 15,
2002, the Notes are redeemable at the option of the Issuer, in whole or in part
(equal to $1,000 in principal amount or an integral multiple thereof), on not
less than 30 nor more than 60 days' prior notice, at the following redemption
prices (expressed as percentages of principal amount), plus accrued and unpaid
interest, if any, to the date of redemption (subject to the right of Holders of
record on the relevant record date to receive interest due on the
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relevant interest date), if redeemed during the 12-month period commencing on
September 15 of the years indicated below.
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---------------------------------------------------------------------- ------------
<S> <C>
2002.................................................................. 104.375%
2003.................................................................. 102.917%
2004.................................................................. 101.458%
2005 and thereafter................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to September 15, 2000 the Issuer may,
at any time or from time to time, redeem up to 33 1/3% of the aggregate
principal amount of the Notes originally issued at a redemption price of 108.75%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of redemption (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), with the net proceeds of one or more Equity Offerings of the Company,
PROVIDED that at least 66 2/3% of the aggregate principal amount of the Notes
originally issued remains outstanding after the occurrence of such redemption
and PROVIDED, FURTHER, that such redemption shall occur not later than 90 days
after the date of the closing of any such Equity Offering. The redemption shall
be made in accordance with procedures set forth in the Indenture.
If less than all the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate.
REDEMPTION FOR CHANGES IN CANADIAN WITHHOLDING TAXES
The Notes will be subject to redemption as a whole, but not in part, at the
option of the Issuer at any time, on not less than 30 nor more than 60 days'
prior written notice, at 100% of the principal amount thereof, plus accrued and
unpaid interest thereon (if any) to the redemption date, in the event that any
Obligor (as defined in "-- Additional Amounts") has become, or would become,
obligated to pay, on the next date on which any amount would be payable with
respect to the Notes, any Additional Amounts (as defined in "-- Additional
Amounts") as a result of a change in the laws (including any regulations
promulgated thereunder) of Canada (or any political subdivision or taxing
authority thereof or therein), or any change in any official position regarding
the application or interpretation of such laws or regulations, which change is
announced or becomes effective on or after the Issue Date; PROVIDED, HOWEVER,
that (a) no such notice of redemption shall be given earlier than 60 days prior
to the earliest date on which such Obligor would be obligated to pay such
Additional Amounts if a payment in respect of the Notes were then due, and (b)
at the time any such redemption notice is given, such obligation to pay
Additional Amounts must remain in effect. Prior to any redemption of the Notes,
the Issuer shall deliver to the Trustee or any paying agent an Officer's
Certificate stating that the Issuer is entitled to effect such redemption and
setting forth a statement of facts showing that the conditions precedent to the
right of redemption have occurred.
ADDITIONAL AMOUNTS
All payments made by the Issuer under or with respect to the Notes, by the
Company under or with respect to the Company Guarantee and by any Subsidiary
Guarantor under or with respect to its Subsidiary Guarantee (the Issuer, the
Company and any such Subsidiary Guarantor being referred to for purposes of this
section "Additional Amounts" individually as an "Obligor" and collectively as
the "Obligors") will be made free and clear of, and without withholding or
deduction for or on account of, any present or future tax, duty, levy, impost,
assessment or other governmental charge imposed or levied by or on behalf of the
Government of Canada or of any province or territory thereof or by any authority
or agency therein or thereof having power to tax (or the jurisdiction of
incorporation of any successor of any
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Obligor) (hereunder "Taxes"), unless the applicable Obligor or any successor, as
the case may be, is required to withhold or deduct Taxes by law or by the
interpretation or administration thereof by the relevant governmental authority
or agency. If any Obligor or any successor, as the case may be, is so required
to withhold or deduct any amount for or on account of Taxes from any payment
made under or with respect to the Notes, the Company Guarantee or any Subsidiary
Guarantee, such Obligor will pay such additional amounts ("Additional Amounts")
as may be necessary so that the net amount received by each Holder (including
Additional Amounts) after such withholding or deduction will not be less than
the amount the Holder would have received if such Taxes had not been withheld or
deducted; PROVIDED that no Additional Amounts will be payable with respect to a
payment made to a Holder (an "Excluded Holder") in respect of a beneficial owner
(i) with which the Issuer does not deal at arm's length (within the meaning of
the Income Tax Act (Canada)) at the time of making such payment or (ii) which is
subject to such Taxes by reason of its being connected with Canada or any
province or territory thereof otherwise than by the mere acquisition, holding or
disposition of Notes or the receipt of payments thereunder. The Obligors will
also (i) make such withholding or deduction and (ii) remit the full amount
deducted or withheld to the relevant government authority in accordance with
applicable law. The Obligors will furnish to the Holders, within 30 days after
the date the payment of any Taxes is due pursuant to applicable law, certified
copies of tax receipts evidencing such payment. The Obligors will, jointly and
severally, indemnify and hold harmless each Holder (other than an Excluded
Holder) and upon written request reimburse each such Holder for the amount of
(i) any Taxes so levied or imposed and paid by such Holder as a result of
payments made under or with respect to the Notes, the Company Guarantee or any
Subsidiary Guarantee, (ii) any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, and (iii) any Taxes imposed
with respect to any reimbursement under (i) or (ii) so that the net amount
received by such Holder after such reimbursement will not be less than the net
amount the Holder would have received if Taxes on such reimbursement had not
been imposed.
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Issuer will be obligated to pay
Additional Amounts with respect to such payment, the Issuer will deliver to the
Trustee an Officers' Certificate stating the fact that such Additional Amounts
will be payable, the amounts so payable and will set forth such other
information necessary to enable the Trustee to pay such Additional Amounts to
Holders on the payment date. Whenever in the Indenture there is mentioned, in
any context, the payment of principal (and premium, if any), redemption price,
Change of Control Payment, Prepayment Offer, purchase price, interest or any
other amount payable under or with respect to any Note, such mention shall be
deemed to include mention of the payment of Additional Amounts to the extent
that, in such context, Additional Amounts are, were or would be payable in
respect thereof.
The Issuer will pay any present or future stamp, court or documentary taxes
or any other excise or property taxes, charges or similar levies that arise in
any jurisdiction from the execution, delivery, enforcement or registration of
the Notes or any other document or instrument in relation thereto, or the
receipt of any payments with respect to the Notes, excluding such taxes, charges
or similar levies imposed by any jurisdiction outside of Canada, the
jurisdiction of incorporation of any successor of the Issuer or any jurisdiction
in which a paying agent is located, and has agreed to indemnify the Holders for
any such taxes paid by such Holders.
The foregoing obligations shall survive any termination, defeasance or
discharge of the Indenture.
For a discussion of the exemption from Canadian withholding taxes applicable
to payments under or with respect to the Notes and the Subsidiary Guarantees,
see "Certain United States and Canadian Federal Income Tax Considerations --
Certain Canadian Federal Income Tax Considerations."
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
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<PAGE>
REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require the Issuer to repurchase all or any part (equal to $1,000
in principal amount or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase, subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date (the "Change of Control Payment").
Within 30 days following any Change of Control, the Issuer shall mail a
notice to each Holder stating, among other things: (i) that a Change of Control
has occurred and a Change of Control Offer is being made pursuant to the
Indenture and that all Notes (or portions thereof) properly tendered will be
accepted for payment; (ii) the purchase price and the purchase date, which shall
be, subject to any contrary requirements of applicable law, no fewer than 30
days nor more than 60 days from the date the Issuer mails such notice (the
"Change of Control Payment Date"); (iii) that any Note (or portion thereof)
accepted for payment (and duly paid on the Change of Control Payment Date)
pursuant to the Change of Control Offer shall cease to accrue interest on the
Change of Control Payment Date; (iv) that any Notes (or portions thereof) not
properly tendered will continue to accrue interest; (v) a description of the
transaction or transactions constituting the Change of Control; (vi) the
procedures that Holders of Notes must follow in order to tender their Notes (or
portions thereof) for payment and the procedures that Holders of Notes must
follow in order to withdraw an election to tender Notes (or portions thereof)
for payment; and (vii) all other instructions and materials necessary to enable
Holders to tender Notes pursuant to the Change of Control Offer. Prior to the
mailing of the notice to Holders of Notes described above, but in any event
within 30 days following any Change of Control, the Company covenants to (i)
repay or cause to be repaid in full all Indebtedness of the Company, the Issuer
and any Subsidiary Guarantor that would prohibit the repurchase of the Notes
pursuant to such Change of Control Offer or (ii) obtain any requisite consents
under instruments governing any such Indebtedness of the Company, the Issuer and
any Subsidiary Guarantor to permit the repurchase of the Notes. The Company
shall first comply with the covenant in the preceding sentence before it shall
repurchase Notes pursuant to this "Repurchase at the Option of Holders Upon a
Change of Control" covenant.
If the Company is unable to repay or cause to be repaid all Indebtedness
that would prohibit the repurchase of the Notes or is unable to obtain the
consents of the Holders of Indebtedness, if any, outstanding at the time of a
Change of Control whose consent would be so required to permit the repurchase of
the Notes validly tendered, then the Company will have breached such covenant.
This breach will constitute an Event of Default under the Indenture if it
continues for a period of 30 consecutive days after written notice is given to
the Company by the Trustee or the Holders of at least 25% in aggregate principal
amounts of the Notes outstanding. In addition, the failure by the Issuer to
repurchase Notes at the conclusion of the Change of Control Offer will
constitute an Event of Default under the Indenture without any waiting period or
notice requirements. Such Event of Default would, in turn, constitute a default
under the existing Bank Credit Facilities and may constitute a default under the
terms of any other Indebtedness of the Issuer, the Company or any Subsidiary
Guarantor then outstanding. In such circumstances, the subordination provisions
in the Indenture would likely prohibit payments to Holders of Notes. See "--
Subordination."
The Company and the Issuer will comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the purchase of Notes in connection with a Change
of Control. To the extent that the provisions of any securities laws or
regulations conflict with the provisions relating to the Change of Control
Offer, the Company and the Issuer will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
described above by virtue thereof.
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<PAGE>
The Issuer's obligation to repurchase the Notes upon a Change of Control
will be guaranteed on a senior subordinated basis by the Company pursuant to the
Company Guarantee and, to the extent any Restricted Subsidiary becomes a
Subsidiary Guarantor, by such Subsidiary Guarantor pursuant to its Subsidiary
Guarantee.
If a Change of Control were to occur, there can be no assurance that the
Issuer, the Company and the Subsidiary Guarantors, if any, would have sufficient
financial resources, or would be able to arrange financing, to repay any
Indebtedness that would prohibit the repurchase of the Notes and pay the
purchase price for all Notes tendered by the Holders thereof. In addition, as of
the Issue Date the existing Bank Credit Facilities will, and any future Bank
Credit Facilities or other agreements relating to indebtedness (including Senior
Indebtedness or Pari Passu Indebtedness) to which the Issuer, the Company or a
Subsidiary Guarantor becomes a party may, contain restrictions on the purchase
of Notes. The provisions under the Indenture related to the Issuer's obligation
to make an offer to repurchase the Notes as a result of a Change of Control may
be waived or modified (at any time prior to the occurrence of such Change of
Control) with the written consent of the Holders of a majority in principal
amount of the Notes, PROVIDED that the written consent of all the Holders of
outstanding Notes is required with respect to any such waiver or modification
that would result in the imposition of any Taxes or the payment of any
Additional Amounts.
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party (including the Company or another Subsidiary
of the Company) makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Issuer and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
A "Change of Control" shall be deemed to occur if (i) any "person" or
"group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange
Act or any successor provision to either of the foregoing, including any group
acting for the purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person will be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) of more than 50% of the total
voting power of all classes of the Voting Stock of the Company or, unless such
person is a Restricted Subsidiary, the Issuer or currently exercisable warrants
or options to acquire such Voting Stock, (ii) the sale, lease, conveyance or
transfer of all or substantially all the assets of the Company and the
Restricted Subsidiaries taken as a whole (other than to any Wholly Owned
Subsidiary) shall have occurred, (iii) the shareholders of the Company or the
Issuer shall have approved any plan of liquidation or dissolution of the Company
or the Issuer, (iv) the Company or the Issuer consolidates with or merges into
another Person or any Person consolidates with or merges into the Company or the
Issuer in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company or the Issuer is reclassified into or exchanged for
cash, securities or other property, other than any such transaction where the
outstanding Voting Stock of the Company or the Issuer is reclassified into or
exchanged for Voting Stock of the surviving corporation that is Capital Stock
and the holders of the Voting Stock of the Company or the Issuer immediately
prior to such transaction own, directly or indirectly, not less than a majority
of the Voting Stock of the surviving corporation immediately after such
transaction in substantially the same proportion as before the transaction or
(v) during any period of two consecutive years, individuals who at the beginning
of such period constituted the Company's or the Issuer's Board of Directors
(together with any new directors whose election or appointment by such Board or
whose nomination for election by the shareholders of the Company or the Issuer
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Company's or the Issuer's Board of Directors then
in office.
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The definition of Change of Control includes a phrase relating to the sale,
lease, conveyance or transfer of "all or substantially all" the Company's and
its Restricted Subsidiaries' assets taken as a whole. The Indenture will be
governed by New York law, and there is no established quantitative definition
under New York law of "substantially all" the assets of a corporation.
Accordingly, if the Company and its Restricted Subsidiaries were to engage in a
transaction in which they disposed of less than all the assets of the Company
and its Restricted Subsidiaries taken as a whole, a question of interpretation
could arise as to whether such disposition was of "substantially all" their
assets and whether the Issuer was required to make a Change of Control Offer.
Except as described above with respect to a Change of Control, the Indenture
does not contain any other provisions that permit the Holders of the Notes to
require that the Issuer repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
BOOK-ENTRY SYSTEM
The Notes will initially be issued in the form of one or more Global
Securities held in book-entry form. The Notes will be deposited with the Trustee
as custodian for the Depository, and the Depository or its nominee will
initially be the sole registered holder of the Notes for all purposes under the
Indenture. Except as set forth below, a Global Security may not be transferred
except as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository.
Upon the issuance of a Global Security, the Depository or its nominee will
credit, on its internal system, the accounts of persons holding through it with
the respective principal amounts of the individual beneficial interests
represented by such Global Security purchased by such persons in the Offering.
Such accounts shall initially be designated by the Initial Purchasers with
respect to Notes placed by the Initial Purchasers for the Issuer. Ownership of
beneficial interests in a Global Security will be limited to persons that have
accounts with the Depository ("participants") or persons that may hold interests
through participants. Any Person acquiring an interest in a Global Security
through an offshore transaction in reliance on Regulation S of the Securities
Act may hold such interest through Cedel or Euroclear. Ownership of beneficial
interests by participants in a Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depository or its nominee for such Global Security. Ownership
of beneficial interests in such Global Security by persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
Payment of principal of, premium, if any, on and interest on Notes
represented by any such Global Security will be made to the Depository or its
nominee, as the case may be, as the sole registered owner and the sole Holder of
the Notes represented thereby for all purposes under the Indenture. None of the
Issuer, the Company, the Trustee, any agent of the Issuer or the Company and the
Initial Purchasers will have any responsibility or liability for any aspect of
the Depository's reports relating to or payments made on account of beneficial
ownership interests in a Global Security representing any Notes or for
maintaining, supervising or reviewing any of the Depository's records relating
to such beneficial ownership interests.
The Issuer has been advised by the Depository that upon receipt of any
payment of principal of, premium, if any, on or interest on any Global Security,
the Depository will immediately credit, on its book-entry registration and
transfer system, the accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal or face
amount of such Global Security, as shown on the records of the Depository. The
Issuer expects that payments by participants to owners of beneficial interests
in a Global Security held through such participants will be governed by standing
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instructions and customary practices as is now the case with securities held for
customer accounts registered in "street name" and will be the sole
responsibility of such participants.
So long as the Depository or its nominee is the registered owner or holder
of such Global Security, the Depository or such nominee, as the case may be,
will be considered the sole owner or holder of the Notes represented by such
Global Security for the purposes of receiving payment on the Notes, receiving
notices and for all other purposes under the Indenture and the Notes. Beneficial
interests in Notes will be evidenced only by, and transfers thereof will be
effected only through, records maintained by the Depository and its
participants. Except as provided above, owners of beneficial interests in a
Global Security will not be entitled to and will not be considered the holders
of such Global Security for any purposes under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Security must rely on the
procedures of the Depository and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the Indenture. The Issuer understands that
under existing industry practices, if the Issuer requests any action of holders
or that an owner of a beneficial interest in a Global Security desires to give
or take any action that a Holder is entitled to give or take under the
Indenture, the Depository would authorize the participants holding the relevant
beneficial interest to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
The Depository has advised the Issuer that it will take any action permitted
to be taken by a Holder of Notes (including the presentation of Notes for
exchange as described below) only at the direction of one or more participants
to whose account with the Depository interests in a Global Security are credited
and only in respect of such portion of the aggregate principal amount of the
Notes as to which such participant or participants has or have given such
direction.
The Depository has advised the Issuer that the Depository is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. The Depository was created to hold the
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (including the
Initial Purchasers), banks, trust companies, clearing corporations and certain
other organizations some of whom (or their representatives) own the Depository.
Access to the Depository's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
CERTIFICATED NOTES
The Notes represented by a Global Security are exchangeable for certificated
Notes only if (i) the Depository notifies the Issuer that it is unwilling or
unable to continue as a depository for such Global Security or if at any time
the Depository ceases to be a clearing agency registered under the Exchange Act,
and a successor depository is not appointed by the Company within 90 days, (ii)
the Issuer executes and delivers to the Trustee a notice that such Global
Security shall be so transferable, registrable and exchangeable, and such
transfer shall be registrable, or (iii) there shall have occurred and be
continuing a Default or Event of Default with respect to the Notes represented
by such Global Security. Any Global Security that is exchangeable for
certificated Notes pursuant to the preceding sentence will be transferred to,
and registered and exchanged for, certificated Notes in authorized denominations
and registered in such names as the Depository or its nominee holding such
Global Security may direct. Subject to the foregoing, a Global Security is not
exchangeable, except for a Global Security of like denomination
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to be registered in the name of the Depository or its nominee. If a Global
Security becomes exchangeable for certificated Notes, (i) certificated Notes
will be issued only in fully registered form in denominations of $1,000 or an
integral multiple thereof, (ii) payment of principal of, and premium, any
repurchase price and interest on, the certificated Notes will be payable, and
the transfer of the certificated Notes will be registrable, at the office or
agency of the Issuer maintained for such purposes and (iii) no service charge
will be made for any issuance of the certificated Notes, although the Issuer may
require payment of a sum sufficient to cover any transfer tax, assessment or
similar governmental charge imposed in connection therewith. In addition,
certificates representing the Old Notes will bear the legend referred to under
"Notice to Investors" (unless the Issuer determines otherwise in accordance with
applicable law) subject, with respect to such Notes, to the provisions of such
legend.
CERTAIN COVENANTS
LIMITATION ON INDEBTEDNESS. The Indenture provides that the Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness unless, after giving pro forma effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, no Default or Event of Default would occur as a consequence of, or be
continuing following, such Incurrence and application and either (a) after
giving pro forma effect to such Incurrence and application, the Consolidated
Interest Coverage Ratio would exceed 2.5 to 1.0 or (b) such Indebtedness is
Permitted Indebtedness.
"PERMITTED INDEBTEDNESS" means any and all of the following: (i)
Indebtedness arising under the Indenture with respect to the Old Notes and the
Exchange Notes and the Company Guarantee and any Subsidiary Guarantees relating
thereto; (ii) Indebtedness (including guarantees) under Bank Credit Facilities,
PROVIDED that the aggregate principal amount of all Indebtedness under Bank
Credit Facilities, together with all Indebtedness Incurred pursuant to clause
(x) of this paragraph in respect of Indebtedness previously Incurred under Bank
Credit Facilities, at any one time outstanding does not exceed the greater of
(a) $150.0 million, which amount shall be permanently reduced by the amount of
Net Available Cash from Asset Sales used to permanently repay Indebtedness under
Bank Credit Facilities and not subsequently reinvested in Additional Assets or
used to permanently reduce other Indebtedness to the extent permitted pursuant
to the provisions of the Indenture described under "-- Limitation on Asset
Sales" and (b) an amount equal to the sum of (1) $35.0 million and (2) 25% of
Adjusted Consolidated Net Tangible Assets determined as of the date of the
Incurrence of such Indebtedness; (iii) Indebtedness to the Company or any Wholly
Owned Subsidiary by any of its Restricted Subsidiaries or Indebtedness of the
Company to any of its Wholly Owned Subsidiaries (but only so long as such
Indebtedness is held by the Company or a Wholly Owned Subsidiary); (iv)
Indebtedness in respect of bid, performance, reimbursement or surety obligations
issued by or for the account of the Company or any Restricted Subsidiary in the
ordinary course of business, including Guarantees and letters of credit
functioning as or supporting such bid, performance, reimbursement or surety
obligations (in each case other than for an obligation for money borrowed); (v)
Indebtedness under Permitted Hedging Agreements; (vi) in-kind obligations
relating to oil or gas balancing positions arising in the ordinary course of
business; (vii) Indebtedness outstanding on the Issue Date not otherwise
permitted in clauses (i) through (vi) above; (viii) Non-recourse Purchase Money
Indebtedness; (ix) Indebtedness not otherwise permitted to be Incurred pursuant
to this paragraph (excluding any Indebtedness Incurred pursuant to clause (a) of
the immediately preceding paragraph), PROVIDED that the aggregate principal
amount of all Indebtedness Incurred pursuant to this clause (ix), together with
all Indebtedness Incurred pursuant to clause (x) of this paragraph in respect of
Indebtedness previously Incurred pursuant to this clause (ix), at any one time
outstanding does not exceed $30.0 million; (x) Indebtedness Incurred in exchange
for, or the proceeds of which are used to refinance, (a) Indebtedness referred
to in clauses (i), (ii), (vii), (viii) and (ix) of this paragraph (including
Indebtedness previously Incurred pursuant to this clause (x)) and (b)
Indebtedness Incurred pursuant to clause (a) of the immediately preceding
paragraph, PROVIDED that, in the case of each of the foregoing clauses (a) and
(b), such Indebtedness is Permitted Refinancing
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Indebtedness and (xi) Indebtedness consisting of obligations in respect of
purchase price adjustments, indemnities or Guarantees of the same or similar
matters in connection with the acquisition or disposition of Property.
LIMITATION ON LIENS. The Indenture provides that the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter
into, create, Incur, assume or suffer to exist any Lien on or with respect to
any Property of the Company or such Restricted Subsidiary, whether owned on the
Issue Date or acquired after the Issue Date, or any interest therein or any
income or profits therefrom, unless the Notes, the Company Guarantee or any
Subsidiary Guarantee of such Restricted Subsidiary, as applicable, are secured
equally and ratably with (or prior to) any and all other obligations secured by
such Lien, except that the Company and its Restricted Subsidiaries may enter
into, create, incur, assume or suffer to exist Liens securing Senior
Indebtedness and Permitted Liens.
LIMITATION ON RESTRICTED PAYMENTS.
(a) The Indenture provides that the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, make any Restricted
Payment if, at the time of and after giving effect to the proposed Restricted
Payment, (i) any Default or Event of Default would have occurred and be
continuing, (ii) the Company could not Incur at least $1.00 of additional
Indebtedness pursuant to clause (a) of the first paragraph under "-- Limitation
on Indebtedness" or (iii) the aggregate amount expended or declared for all
Restricted Payments from the Issue Date would exceed the sum (without
duplication) of the following:
(A) 50% of the aggregate Consolidated Net Income of the Company accrued
on a cumulative basis commencing on the last day of the fiscal quarter
immediately preceding the Issue Date, and ending on the last day of the
fiscal quarter ending on or immediately preceding the date of such proposed
Restricted Payment (or, if such aggregate Consolidated Net Income shall be a
loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds, or the Fair Market Value of
Property other than cash, received by the Company on or after the Issue Date
from the issuance or sale (other than to a Subsidiary of the Company) of
Capital Stock of the Company or any options, warrants or rights to purchase
Capital Stock of the Company, plus
(C) the aggregate net cash proceeds, or the Fair Market Value of
Property other than cash, received by the Company as capital contributions
to the Company (other than from a Subsidiary of the Company) on or after the
Issue Date, plus
(D) the aggregate net cash proceeds received by the Company from the
issuance or sale (other than to any Subsidiary of the Company) on or after
the Issue Date of convertible Indebtedness that has been converted into or
exchanged for Capital Stock of the Company, together with the aggregate cash
received by the Company at the time of such conversion or exchange or
received by the Company from any such conversion or exchange of convertible
Indebtedness issued or sold (other than to any Subsidiary of the Company)
prior to the Issue Date, plus
(E) to the extent not otherwise included in the Company's Consolidated
Net Income, an amount equal to the net reduction in Investments made by the
Company and its Restricted Subsidiaries subsequent to the Issue Date in any
Person resulting from (1) payments of interest on debt, dividends,
repayments of loans or advances or other transfers or distributions of
Property, in each case to the Company or any Restricted Subsidiary from any
Person other than the Company or a Restricted Subsidiary, and in an amount
not to exceed the book value of such Investments previously made in such
Person that were treated as Restricted Payments, or (2) the designation of
any Unrestricted Subsidiary as a Restricted Subsidiary, and in an amount not
to exceed the lesser of
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(x) the book value of all Investments previously made in such Unrestricted
Subsidiary that were treated as Restricted Payments and (y) the Fair Market
Value of such Unrestricted Subsidiary, plus
(F) $25.0 million.
(b) The limitations set forth in paragraph (a) above will not prevent the
Company or any Restricted Subsidiary from making the following Restricted
Payments so long as, at the time thereof, no Default or Event of Default shall
have occurred and be continuing (except in the case of clause (i) below under
which the payment of a dividend is permitted):
(i) the payment of any dividend on Capital Stock or Redeemable Stock of
the Company or any Restricted Subsidiary within 60 days after the
declaration thereof, if at such declaration date such dividend could have
been paid in compliance with paragraph (a) above;
(ii) the repurchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Subsidiaries held by
any current or former officers, directors or employees of the Company or any
of its Subsidiaries pursuant to the terms of agreements (including
employment agreements) or plans approved by the Company's Board of
Directors, including any such repurchase, redemption, acquisition or
retirement of shares of such Capital Stock that is deemed to occur upon the
exercise of stock options or similar rights if such shares represent all or
a portion of the exercise price or are surrendered in connection with
satisfying United States or Canadian Federal income tax obligations;
PROVIDED, HOWEVER, that the aggregate amount of such repurchases,
redemptions, acquisitions and retirements shall not exceed the sum of (a)
$1.0 million in any twelve-month period and (b) the aggregate net proceeds,
if any, received by the Company during such twelve-month period from any
issuance of such Capital Stock pursuant to such agreements or plans;
(iii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock or Redeemable Stock of the Company or any
Restricted Subsidiary, in exchange for, or out of the aggregate net cash
proceeds of, a substantially concurrent issuance and sale (other than to a
Subsidiary of the Company or an employee stock ownership plan or trust
established by the Company or any of its Subsidiaries, for the benefit of
their employees) of Capital Stock of the Company;
(iv) the making of any principal payment on or the repurchase,
redemption, legal defeasance or other acquisition or retirement for value,
prior to any scheduled principal payment, scheduled sinking fund payment or
maturity, of any Subordinated Indebtedness (other than Redeemable Stock) in
exchange for, or out of the aggregate net cash proceeds of, a substantially
concurrent issuance and sale (other than to a Subsidiary of the Company or
an employee stock ownership plan or trust established by the Company or any
of its Subsidiaries, for the benefit of their employees) of Capital Stock of
the Company;
(v) the making of any principal payment on or the repurchase,
redemption, legal defeasance or other acquisition or retirement for value of
Subordinated Indebtedness in exchange for, or out of the aggregate net cash
proceeds of a substantially concurrent Incurrence (other than a sale to a
Subsidiary of the Company) of Subordinated Indebtedness so long as such new
Indebtedness is Permitted Refinancing Indebtedness and (A) has an Average
Life that is longer than the Average Life of the Notes and (B) has a Stated
Maturity for its final scheduled principal payment that is more than one
year after the Stated Maturity of the final scheduled principal payment of
the Notes; and
(vi) loans made to officers, directors or employees of the Company or
any Restricted Subsidiary approved by the Board of Directors (or a duly
authorized officer), the net cash proceeds of which are used solely (A) to
purchase common stock of the Company in connection with a restricted stock
or employee stock purchase plan, or to exercise stock options received
pursuant to an employee or director stock option plan or other incentive
plan, in a principal amount not to exceed the exercise
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price of such stock options or (B) to refinance loans, together with accrued
interest thereon, made pursuant to item (A) of this clause (vi).
The actions described in clauses (i) and (ii) of this paragraph (b) shall be
included in the calculation of the amount of Restricted Payments. The actions
described in clauses (iii), (iv), (v) and (vi) of this paragraph (b) shall be
excluded in the calculation of the amount of Restricted Payments, PROVIDED that
the net cash proceeds from any issuance or sale of Capital Stock of the Company
pursuant to such clauses (iii), (iv) or (vi) shall be excluded from any
calculations pursuant to clauses (B) or (C) under the immediately preceding
paragraph (a).
LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not (a) permit any
Restricted Subsidiary to issue any Capital Stock or Redeemable Stock other than
to the Company or one of its Wholly Owned Subsidiaries or (b) permit any Person
other than the Company or a Wholly-Owned Subsidiary to own any Capital Stock or
Redeemable Stock of any other Restricted Subsidiary (other than directors'
qualifying shares), except, in each case, for (i) the sale of the Capital Stock
or Redeemable Stock of a Restricted Subsidiary owned by the Company or any other
Restricted Subsidiary effected in accordance with the provisions of the
Indenture described under "-- Limitation on Asset Sales"; (ii) the issuance of
Capital Stock or Redeemable Stock by a Restricted Subsidiary to a Person other
than the Company or a Restricted Subsidiary and (iii) the Capital Stock or
Redeemable Stock of a Restricted Subsidiary owned by a Person at the time such
Restricted Subsidiary became a Restricted Subsidiary or acquired by such Person
in connection with the formation of the Restricted Subsidiary, or transfers
thereof; PROVIDED, that the Issuer shall at all times remain a Restricted
Subsidiary; PROVIDED FURTHER, that any sale or issuance of Capital Stock of a
Restricted Subsidiary shall be deemed to be an Asset Sale to the extent the
percentage of the total outstanding Voting Stock of such Restricted Subsidiary
owned directly and indirectly by the Company is reduced as a result of such sale
or issuance; PROVIDED, FURTHER that if a Person whose Capital Stock was issued
or sold in a transaction described in this paragraph is, as a result of such
transaction, no longer a Restricted Subsidiary, then the Fair Market Value of
Capital Stock of such Person retained by the Company and the other Restricted
Subsidiaries shall be treated as an Investment for purposes of the provisions of
the Indenture described under "-- Limitation on Restricted Payments". In the
event of the consummation of a sale of all the Capital Stock of a Restricted
Subsidiary pursuant to the foregoing clause (i) and the execution and delivery
of a supplemental indenture in form satisfactory to the Trustee, any such
Restricted Subsidiary that is also a Subsidiary Guarantor shall be released from
all its obligations under its Subsidiary Guaranty.
LIMITATION ON ASSET SALES. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale
unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the Property subject to such Asset Sale and (ii) all of the
consideration paid to the Company or such Restricted Subsidiary in connection
with such Asset Sale is in the form of cash, cash equivalents, Liquid
Securities, Exchanged Properties or the assumption by the purchaser of
liabilities of the Company (other than liabilities of the Company that are by
their terms subordinated to the Company Guarantee) or liabilities of any
Restricted Subsidiary that made such Asset Sale (other than liabilities of the
Issuer that are by their terms subordinated to the Notes or liabilities of any
Subsidiary Guarantor that are by their terms subordinated to such Subsidiary
Guarantor's Subsidiary Guarantee), in each case as a result of which the Company
and its remaining Restricted Subsidiaries are no longer liable for such
liabilities ("Permitted Consideration"); PROVIDED, HOWEVER, that the Company and
its Restricted Subsidiaries shall be permitted to receive Property other than
Permitted Consideration, so long as the aggregate Fair Market Value of all such
Property other than Permitted Consideration received from Asset Sales and held
by the Company and the Restricted Subsidiaries at any one time shall not exceed
10.0% of Adjusted Consolidated Net Tangible Assets.
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The Net Available Cash from Asset Sales by the Company or a Restricted
Subsidiary may be applied by the Company or such Restricted Subsidiary, to the
extent the Company or such Restricted Subsidiary elects (or is required by the
terms of any Senior Indebtedness of the Issuer, the Company or a Subsidiary
Guarantor), to (i) prepay, repay or purchase Senior Indebtedness of the Issuer,
the Company or a Subsidiary Guarantor (in each case excluding Indebtedness owed
to the Company or an Affiliate of the Company other than Indebtedness owed by
the Issuer to 611852 Saskatchewan Ltd. pursuant to the Canadian Credit
Facility), (ii) to reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Company or another Restricted Subsidiary) or (iii) purchase
Notes or purchase both Notes and one or more series or issues of other Pari
Passu Indebtedness on a pro rata basis (excluding Notes and Pari Passu
Indebtedness owned by the Company or an Affiliate of the Company).
Any Net Available Cash from an Asset Sale not applied in accordance with the
preceding paragraph within 365 days from the date of such Asset Sale shall
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, an offer to purchase Notes having an aggregate principal
amount equal to the aggregate amount of Excess Proceeds (the "Prepayment Offer")
must be made by the Issuer or the Company at a purchase price equal to 100% of
the principal amount of such Notes plus accrued and unpaid interest, if any, to
the Purchase Date (as defined) in accordance with the procedures (including
prorating in the event of oversubscription) set forth in the Indenture, but, if
the terms of any Pari Passu Indebtedness require that a Pari Passu Offer be made
contemporaneously with the Prepayment Offer, then the Excess Proceeds shall be
prorated between the Prepayment Offer and such Pari Passu Offer in accordance
with the aggregate outstanding principal amounts of the Notes and such Pari
Passu Indebtedness, and the aggregate principal amount of Notes for which the
Prepayment Offer is made shall be reduced accordingly. If the aggregate
principal amount of Notes tendered by Holders thereof exceeds the amount of
available Excess Proceeds, then such Excess Proceeds will be allocated pro rata
according to the principal amount of the Notes tendered and the Trustee will
select the Notes to be purchased in accordance with the Indenture. To the extent
that any portion of the amount of Excess Proceeds remains after compliance with
the second sentence of this paragraph and PROVIDED that all Holders of Notes
have been given the opportunity to tender their Notes for purchase as described
in the following paragraph in accordance with the Indenture, the Company and its
Restricted Subsidiaries may use such remaining amount for purposes permitted by
the Indenture and the amount of Excess Proceeds will be reset to zero.
Within 30 days after the 365th day following the date of an Asset Sale, the
Company or the Issuer shall, if it is obligated to make an offer to purchase the
Notes pursuant to the preceding paragraph, send a written Prepayment Offer
notice, by first-class mail, to the Holders of the Notes (the "Prepayment Offer
Notice"), accompanied by such information regarding the Company and its
Subsidiaries as the Company believes will enable such Holders of the Notes to
make an informed decision with respect to the Prepayment Offer. The Prepayment
Offer Notice will state, among other things, (i) that the Company or the Issuer
is offering to purchase Notes pursuant to the provisions of the Indenture, (ii)
that any Note (or any portion thereof) accepted for payment (and duly paid on
the Purchase Date) pursuant to the Prepayment Offer shall cease to accrue
interest on the Purchase Date, (iii) that any Notes (or portions thereof) not
properly tendered will continue to accrue interest, (iv) the purchase price and
purchase date, which shall be, subject to any contrary requirements of
applicable law, no less than 30 days nor more than 60 days after the date the
Prepayment Offer Notice is mailed (the "Purchase Date"), (v) the aggregate
principal amount of Notes to be purchased, (vi) a description of the procedure
which Holders of Notes must follow in order to tender their Notes and the
procedures that Holders of Notes must follow in order to withdraw an election to
tender their Notes for payment and (vii) all other instructions and materials
necessary to enable Holders to tender Notes pursuant to the Prepayment Offer.
The Company and the Issuer will comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
or regulations thereunder to the extent
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such laws and regulations are applicable in connection with the purchase of
Notes as described above. To the extent that the provisions of any securities
laws or regulations conflict with the provisions relating to the Prepayment
Offer, the Company or the Issuer will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations
described above by virtue thereof.
INCURRENCE OF LAYERED INDEBTEDNESS. The Indenture provides that (i) the
Issuer will not Incur any Indebtedness which is subordinated or junior in right
of payment to any Senior Indebtedness of the Issuer unless such Indebtedness
constitutes Indebtedness junior to, or PARI PASSU with, the Notes in right of
payment, (ii) the Company will not Incur any Indebtedness which is subordinated
or junior in right of payment to any Senior Indebtedness of the Company unless
such Indebtedness constitutes Indebtedness which is junior to, or PARI PASSU
with, the Company Guarantee in right of payment and (iii) no Subsidiary
Guarantor will Incur any Indebtedness that is subordinated or junior in right of
payment to any Senior Indebtedness of such Subsidiary Guarantor unless such
Indebtedness constitutes Indebtedness which is junior to, or PARI PASSU with,
such Subsidiary Guarantor's Subsidiary Guarantee in right of payment.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, conduct any business or enter into any transaction or
series of transactions (including the sale, transfer, disposition, purchase,
exchange or lease of Property, the making of any Investment, the giving of any
Guarantee or the rendering of any service) with or for the benefit of any
Affiliate of the Company (other than the Company or a Restricted Subsidiary),
unless (i) such transaction or series of transactions is on terms no less
favorable to the Company or such Restricted Subsidiary than those that could be
obtained in a comparable arm's-length transaction with a Person that is not an
Affiliate of the Company or such Restricted Subsidiary, and (ii) with respect to
a transaction or series of transactions involving aggregate payments by or to
the Company or such Restricted Subsidiary having a Fair Market Value equal to or
in excess of (a) $1.0 million but less than $7.5 million, an officer of the
Company or, in the case of any such transaction or series of transactions
involving the Issuer, an officer of the Issuer, certifies that such transaction
or series of transactions complies with clause (i) of this paragraph, as
evidenced by an Officer's Certificate delivered to the Trustee, (b) $7.5 million
but less than $30.0 million, the Board of Directors of the Company or, in the
case of any such transaction or series of transactions involving the Issuer, the
Board of Directors of the Issuer (including a majority of the disinterested
members of such Board of Directors) approves such transaction or series of
transactions and certifies that such transaction or series of transactions
complies with clause (i) of this paragraph, as evidenced by a certified
resolution delivered to the Trustee or (c) $30.0 million, (1) the Company or, in
the case of any such transaction or series of transactions involving the Issuer,
the Issuer receives from an independent, nationally recognized investment
banking firm or appraisal firm, in either case specializing or having a
specialty in the type and subject matter of the transaction (or series of
transactions) at issue, a written opinion that such transaction (or series of
transactions) is fair, from a financial point of view, to the Company or such
Restricted Subsidiary and (2) the Board of Directors of the Company or, in the
case of any such transaction or series of transactions involving the Issuer, the
Board of Directors of the Issuer (including a majority of the disinterested
members of such Board of Directors) approves such transaction or series of
transactions and certifies that such transaction or series of transactions
complies with clause (i) of this paragraph, as evidenced by a certified
resolution delivered to the Trustee.
The limitations of the preceding paragraph do not apply to (i) the payment
of reasonable and customary regular fees to directors of the Company or any of
its Restricted Subsidiaries who are not employees of the Company or any of its
Restricted Subsidiaries, (ii) indemnities of officers and directors of the
Company or any Subsidiary consistent with such Person's charter, bylaws and
applicable statutory provisions, (iii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors of the Company, (iv) loans made (a) to
officers, directors or
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employees of the Company or any Restricted Subsidiary approved by the Board of
Directors (or by a duly authorized officer) of the Company, the proceeds of
which are used solely to purchase common stock of the Company in connection with
a restricted stock or employee stock purchase plan, or to exercise stock options
received pursuant to an employee or director stock option plan or other
incentive plan, in a principal amount not to exceed the exercise price of such
stock options, or (b) to refinance loans, together with accrued interest
thereon, made pursuant to this clause (iv), (v) advances and loans to officers,
directors and employees of the Company or any Subsidiary, PROVIDED such loans
and advances (excluding loans or advances made pursuant to the preceding clause
(iv)) do not exceed $5.0 million at any one time outstanding, (vi) any
Restricted Payment permitted to be paid pursuant to the provisions of the
Indenture described under "-- Limitations on Restricted Payments," (vii) any
transaction or series of transactions between the Company and one or more
Restricted Subsidiaries or between two or more Restricted Subsidiaries in the
ordinary course of business, PROVIDED that no more than 10% of the total voting
power of the Voting Stock of any such Restricted Subsidiary is owned by an
Affiliate of the Company (other than a Restricted Subsidiary), (viii) the
payment of Indebtedness outstanding under, or the extension, revision, amendment
or modification of, or any guarantee of, the Canadian Credit Facility, or (ix)
any transaction or series of transactions pursuant to any agreement or
obligation of the Company or any of its Restricted Subsidiaries in effect on the
Issue Date.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the legal right of any Restricted Subsidiary to
(i) pay dividends, in cash or otherwise, or make any other distributions on or
in respect of its Capital Stock or Redeemable Stock, or pay any Indebtedness or
other obligation owed, to the Company or any other Restricted Subsidiary, (ii)
make loans or advances to the Company or any other Restricted Subsidiary or
(iii) transfer any of its Property to the Company or any other Restricted
Subsidiary. Such limitation will not apply (a) with respect to clauses (i), (ii)
and (iii), to encumbrances and restrictions (1) in Bank Credit Facilities and
other agreements and instruments, in each case as in effect on the Issue Date,
(2) relating to Indebtedness of a Restricted Subsidiary and existing at the time
it became a Restricted Subsidiary if such encumbrance or restriction was not
created in anticipation of or in connection with the transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or (3) which
result from the renewal, refinancing, extension or amendment of an agreement
that is the subject of clause (a)(1) or (2) above or clause (b)(1) or (2) below,
PROVIDED that such encumbrance or restriction is not materially less favorable
to the Holders of Notes than those under or pursuant to the agreement so
renewed, refinanced, extended or amended, and (b) with respect to clause (iii)
only, to (1) any restriction on the sale, transfer or other disposition of
Property relating to Indebtedness that is permitted to be Incurred and secured
under the provisions of the Indenture described under "-- Limitation on
Indebtedness" and "-- Limitation on Liens," (2) any encumbrance or restriction
applicable to Property at the time it is acquired by the Company or a Restricted
Subsidiary, so long as such encumbrance or restriction relates solely to the
Property so acquired and was not created in anticipation of or in connection
with such acquisition, (3) customary provisions restricting subletting or
assignment of leases and customary provisions in other agreements that restrict
assignment of such agreements or rights thereunder and (4) customary
restrictions contained in asset sale agreements limiting the transfer of such
assets pending the closing of such sale.
FUTURE SUBSIDIARY GUARANTORS. The Company shall cause each Restricted
Subsidiary having an aggregate of $10.0 million or more of Indebtedness and
Preferred Stock outstanding at any time to promptly execute and deliver to the
Trustee a Subsidiary Guarantee, PROVIDED that (i) Saxon Petroleum Inc. shall not
be required to execute and deliver a Subsidiary Guarantee until such time as it
becomes a Wholly Owned Subsidiary and (ii) in determining the outstanding
Indebtedness and Preferred Stock for purposes of this covenant of (a) Producers
Marketing Limited, Indebtedness described in clause (vii) of the definition of
Indebtedness shall be excluded and (b) Forest I Development Company ("Forest
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Development"), Indebtedness pursuant to the Production Payment Agreement dated
February 1, 1992, as amended on April 30, 1995, between Forest Development and
Bank of America, National Association, as successor to Strake Jesuit College
Preparatory, Inc. shall be excluded.
RESTRICTED AND UNRESTRICTED SUBSIDIARIES. Unless defined or designated as
an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company
or any of its Restricted Subsidiaries shall be classified as a Restricted
Subsidiary subject to the provisions of the next paragraph. The Company may
designate a Subsidiary (other than the Issuer) (including a newly formed or
newly acquired Subsidiary) of the Company or any of its Restricted Subsidiaries
as an Unrestricted Subsidiary if (i) such Subsidiary does not at such time own
any Capital Stock or Indebtedness of, or own or hold any Lien on any Property
of, the Company or any other Restricted Subsidiary, (ii) such Subsidiary does
not at such time have any Indebtedness or other obligations which, if in
default, would result (with the passage of time or notice or otherwise) in a
default on any Indebtedness of the Company or any Restricted Subsidiary and
(iii)(a) such designation is effective immediately upon such Subsidiary becoming
a Subsidiary of the Company or of a Restricted Subsidiary, (b) the Subsidiary to
be so designated has total assets of $1,000 or less or (c) if such Subsidiary
has assets greater than $1,000, then such redesignation as an Unrestricted
Subsidiary is deemed to constitute a Restricted Payment in an amount equal to
the Fair Market Value of the Company's direct and indirect ownership interest in
such Subsidiary and such Restricted Payment would be permitted to be made at the
time of such designation under the provisions of the Indenture described under
"-- Limitation on Restricted Payments." Notwithstanding the foregoing, Saxon
Petroleum Inc. (i) may be designated as an Unrestricted Subsidiary until such
time as it becomes a Wholly Owned Subsidiary and (ii) shall be designated as a
Restricted Subsidiary at such time as it becomes a Wholly Owned Subsidiary.
Except as provided in the second sentence of this paragraph, no Restricted
Subsidiary may be redesignated as an Unrestricted Subsidiary. The designation of
an Unrestricted Subsidiary or removal of such designation shall be made by the
Board of Directors of the Company or a committee thereof pursuant to a certified
resolution delivered to the Trustee and shall be effective as of the date
specified in the applicable certified resolution, which shall not be prior to
the date such certified resolution is delivered to the Trustee.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, take any action or enter into any transaction or series of transactions that
would result in a Person becoming a Restricted Subsidiary (whether through an
acquisition or otherwise) unless, after giving effect to such action,
transaction or series of transactions, on a pro forma basis, (i) the Company
could Incur at least $1.00 of additional Indebtedness pursuant to clause (a) of
the first paragraph under "-- Limitation on Indebtedness" and (ii) no Default or
Event of Default would occur or be continuing.
THE ISSUER. The Company will ensure that the Issuer remains a Restricted
Subsidiary so long as any of the Notes remain outstanding.
MERGER, CONSOLIDATION AND SALE OF SUBSTANTIALLY ALL ASSETS
The Company shall not consolidate with or merge with or into any Person, or
convey, transfer or lease, in one transaction or a series of transactions, all
or substantially all the Property of the Company and its Restricted
Subsidiaries, taken as a whole, unless: (i) the resulting, surviving or
transferee person (the "Successor Company") shall be a Person organized or
existing under the laws of (a) the United States of America, any State thereof
or the District of Columbia or (b) Canada or any province thereof; (ii) a
supplemental indenture is executed and delivered to the Trustee, in form
satisfactory to the Trustee, by the Successor Company expressly assuming, if the
Successor Company is neither the Company nor the Issuer, or confirming, if the
Successor Company is the Company, the obligations of the Company to pay the
principal of and interest on the Notes pursuant to the Company Guarantee and to
perform all the covenants of the Company under the Indenture; (iii) each
Subsidiary Guarantor shall execute and deliver to the Trustee a supplemental
indenture, in form satisfactory to the Trustee, confirming the obligation of
such Subsidiary Guarantor to pay the principal of and interest on the Notes
pursuant to such Subsidiary
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Guarantor's Subsidiary Guarantee; (iv) in the case of a conveyance, transfer or
lease of all or substantially all the Property of the Company and its Restricted
Subsidiaries, taken as a whole, such Property shall have been so conveyed,
transferred or leased as an entirety or virtually as an entirety to one Person;
(v) immediately after giving effect to such transaction (and treating, for
purposes of this clause (v) and clauses (vi) and (vii) below, any Indebtedness
which becomes or is anticipated to become an obligation of the Successor Company
or any Restricted Subsidiary as a result of such transaction as having been
Incurred by such Successor Company or such Restricted Subsidiary at the time of
such transaction), no Default or Event of Default shall have occurred and be
continuing; (vi) other than with respect to the consolidation of the Company
with or merger of the Company with or into, or the conveyance, transfer or lease
of all or substantially all the Property of the Company and its Restricted
Subsidiaries, taken as a whole, to, the Issuer or a Wholly Owned Subsidiary,
immediately after giving effect to such transaction, the Successor Company would
be able to Incur an additional $1.00 of Indebtedness pursuant to clause (a) of
the first paragraph under "-- Limitation on Indebtedness;" (vii) other than with
respect to the consolidation of the Company with or merger of the Company with
or into, or the conveyance, transfer or lease of all or substantially all the
Property of the Company and its Restricted Subsidiaries, taken as a whole, to,
the Issuer or a Wholly Owned Subsidiary, immediately after giving effect to such
transaction, the Successor Company shall have Consolidated Net Worth in an
amount that is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; (viii) the Company shall have delivered
to the Trustee an Officer's Certificate, stating that such consolidation, merger
or transfer and such supplemental indenture (if any) comply with the Indenture;
and (ix) the Trustee shall have received an opinion of counsel to the effect
that such consolidation, merger, conveyance, transfer or lease will not result
in the Company (or the Successor Company, if the Company is not the Successor
Company) being required to make any deduction for or on account of Taxes (as
defined under "Additional Amounts") from payments made under or in respect of
the Company Guarantee.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of
the Company under the Indenture, and, except in the case of the lease of all or
substantially all the Property of the Company and its Restricted Subsidiaries,
taken as a whole, the Company shall be released from its obligations under the
Company Guarantee and the Indenture.
The Issuer shall not consolidate with or merge with or into any Person,
except that the Issuer may consolidate with or merge into any Person so long as:
(i) the Successor Company shall be the Issuer, the Company or a Wholly Owned
Subsidiary; (ii) if the Company or a Wholly Owned Subsidiary is the Successor
Company, the Successor Company shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Issuer to pay the principal of and interest
on the Notes and to perform all the covenants of the Issuer under the Indenture
(in which case the Successor Company shall be considered as the issuer of the
Notes); (iii) unless the Company shall be the Successor Company, the Company
shall have executed and delivered to the Trustee, in form satisfactory to the
Trustee, a supplemental indenture confirming the obligations of the Company to
pay the principal of and interest on the Notes pursuant to the Company Guarantee
and to perform all the covenants of the Company under the Indenture; (iv) each
Subsidiary Guarantor shall have executed and delivered to the Trustee, in form
satisfactory to the Trustee, a supplemental indenture confirming such Subsidiary
Guarantor's obligations to pay the principal of and interest on the Notes
pursuant to its Subsidiary Guarantee; (v) the Successor Company (if not the
Issuer) shall be a Person organized or existing under the laws of (a) the United
States of America, any State thereof or the District of Columbia or (b) Canada
or any province thereof; (vi) immediately after giving effect to such
transaction (and treating, for purposes of this clause (vi) and clauses (vii)
and (viii) below, any Indebtedness which becomes or is anticipated to become an
obligation of the Issuer or any Restricted Subsidiary as a result of such
transaction as having been Incurred by the Issuer or such Restricted Subsidiary
at the time of such transaction) no Default or Event of Default shall have
occurred
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or be continuing; (vii) other than with respect to the consolidation of the
Issuer with or the merger of the Issuer with or into the Company or a Wholly
Owned Subsidiary, immediately after giving effect to such transaction the
Company would be able to Incur an additional $1.00 of Indebtedness pursuant to
clause (a) of the first paragraph under "Limitation on Indebtedness;" (viii)
other than with respect to the consolidation of the Issuer with or the merger of
the Issuer with or into the Company or a Wholly Owned Subsidiary, immediately
after giving effect to such transaction, the Company shall have Consolidated Net
Worth in an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; (ix) the Issuer shall have
delivered to the Trustee an Officer's Certificate stating that such
consolidation, merger or transfer complies with the Indenture; and (x) the
Trustee shall have received an opinion of counsel to the effect that such
consolidation, merger, conveyance, transfer or lease will not result in the
Issuer being required to make any deduction for or on account of Taxes from
payments made under or in respect of the Notes. The Issuer shall not convey,
transfer or lease, in one transaction or a series of transactions, any of its
Property other than in a transaction or series of transactions which comply with
the provisions of the Indenture described under "-- Limitation on Asset Sales,"
PROVIDED that a conveyance, transfer or lease of all or substantially all the
Property of the Issuer shall be subject to the provisions of the first paragraph
of this covenant to the extent that such transaction constitutes the conveyance,
transfer or lease of all or substantially all the Property of the Company and
its Restricted Subsidiaries, taken as a whole.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will file with the Commission and furnish to the Holders of Notes all quarterly
and annual financial information required to be contained in a filing with the
Commission on Forms 10-Q and 10-K, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual consolidated financial statements only, a report thereon by the
Company's independent auditors.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"ADDITIONAL ASSETS" means (i) any Property (other than cash, Permitted
Short-Term Investments or securities) used in the Oil and Gas Business or any
business ancillary thereto, (ii) Investments in any other Person engaged in the
Oil and Gas Business or any business ancillary thereto (including the
acquisition from third parties of Capital Stock of such Person) as a result of
which such other Person becomes a Restricted Subsidiary in compliance with the
provisions of the Indenture described under "-- Certain Covenants -- Restricted
and Unrestricted Subsidiaries," (iii) the acquisition from third parties of
Capital Stock of a Restricted Subsidiary or (iv) Permitted Business Investments.
"ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS" means (without duplication), as
of the date of determination, the remainder of:
(i) the sum of (a) discounted future net revenues from proved oil and gas
reserves of the Company and its Restricted Subsidiaries calculated in accordance
with Commission guidelines before any provincial, territorial, state, federal or
foreign income taxes, as estimated by the Company and confirmed by a nationally
recognized firm of independent petroleum engineers in a reserve report prepared
as of the end of the Company's most recently completed fiscal year for which
audited financial statements are available, as increased by, as of the date of
determination, the estimated discounted future net revenues from (1) estimated
proved oil and gas reserves acquired since such year-end, which reserves were
not reflected in such year-end reserve report, and (2) estimated oil and gas
reserves attributable to upward
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revisions of estimates of proved oil and gas reserves since such year-end due to
exploration, development or exploitation activities, in each case calculated in
accordance with Commission guidelines (utilizing the prices utilized in such
year-end reserve report), and decreased by, as of the date of determination, the
estimated discounted future net revenues from (3) estimated proved oil and gas
reserves produced or disposed of since such year-end and (4) estimated oil and
gas reserves attributable to downward revisions of estimates of proved oil and
gas reserves since such year-end due to changes in geological conditions or
other factors which would, in accordance with standard industry practice, cause
such revisions, in each case calculated in accordance with Commission guidelines
(utilizing the prices utilized in such year-end reserve report); PROVIDED that,
in the case of each of the determinations made pursuant to clauses (1) through
(4), such increases and decreases shall be as estimated by the Company's
petroleum engineers, unless there is a Material Change as a result of such
acquisitions, dispositions or revisions, in which event the discounted future
net revenues utilized for purposes of this clause (i)(a) shall be confirmed in
writing by a nationally recognized firm of independent petroleum engineers, (b)
the capitalized costs that are attributable to oil and gas properties of the
Company and its Restricted Subsidiaries to which no proved oil and gas reserves
are attributable, based on the Company's books and records as of a date no
earlier than the date of the Company's latest available annual or quarterly
financial statements, (c) the Net Working Capital on a date no earlier than the
date of the Company's latest annual or quarterly financial statements and (d)
the greater of (1) the net book value on a date no earlier than the date of the
Company's latest annual or quarterly financial statements and (2) the appraised
value, as estimated by independent appraisers, of other tangible assets
(including, without duplication, Investments in unconsolidated Restricted
Subsidiaries) of the Company and its Restricted Subsidiaries, as of the date no
earlier than the date of the Company's latest audited financial statements,
minus
(ii) the sum of (a) minority interests, (b) any net gas balancing
liabilities of the Company and its Restricted Subsidiaries reflected in the
Company's latest audited financial statements, (c) to the extent included in
(i)(a) above, the discounted future net revenues, calculated in accordance with
Commission guidelines (utilizing the prices utilized in the Company's year-end
reserve report), attributable to reserves which are required to be delivered to
third parties to fully satisfy the obligations of the Company and its Restricted
Subsidiaries with respect to Volumetric Production Payments (determined, if
applicable, using the schedules specified with respect thereto) and (d) the
discounted future net revenues, calculated in accordance with Commission
guidelines, attributable to reserves subject to Dollar-Denominated Production
Payments which, based on the estimates of production and price assumptions
included in determining the discounted future net revenues specified in (i)(a)
above, would be necessary to fully satisfy the payment obligations of the
Company and its Restricted Subsidiaries with respect to Dollar-Denominated
Production Payments (determined, if applicable, using the schedules specified
with respect thereto). If the Company changes its method of accounting from the
full cost method to the successful efforts method or a similar method of
accounting, "Adjusted Consolidated Net Tangible Assets" will continue to be
calculated as if the Company were still using the full cost method of
accounting.
"AFFILIATE" of any specified Person means any other Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person or (ii)
which beneficially owns or holds directly or indirectly 10% or more of any class
of the Voting Stock of such specified Person or of any Subsidiary of such
specified Person. For the purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the management and
policies of such Person directly or indirectly, whether through the ownership of
Voting Stock, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"ASSET SALE" means, with respect to any Person, any transfer, conveyance,
sale, lease or other disposition (collectively, "dispositions," and including
dispositions pursuant to any consolidation or merger) by such Person in any
single transaction or series of transactions of (i) shares of Capital Stock or
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other ownership interests of another Person (including Capital Stock of
Restricted Subsidiaries and Unrestricted Subsidiaries) or (ii) any other
Property of such Person; PROVIDED, HOWEVER, that the term "Asset Sale" shall not
include: (a) the disposition of Permitted Short-Term Investments, inventory,
accounts receivable, surplus or obsolete equipment or other Property (excluding
the disposition of oil and gas in place and other interests in real property
unless made in connection with a Permitted Business Investment) in the ordinary
course of business; (b) the abandonment, assignment, lease, sublease or farm-out
of oil and gas properties, or the forfeiture or other disposition of such
properties pursuant to standard form operating agreements, in each case in the
ordinary course of business in a manner that is customary in the Oil and Gas
Business; (c) the disposition of Property received in settlement of debts owing
to such Person as a result of foreclosure, perfection or enforcement of any Lien
or debt, which debts were owing to such Person in the ordinary course of its
business; (d) any disposition that constitutes a Restricted Payment made in
compliance with the provisions of the Indenture described under "-- Certain
Covenants -- Limitation on Restricted Payments;" (e) when used with respect to
the Company, any disposition of all or substantially all of the Property of such
Person permitted pursuant to the provisions of the Indenture described under "--
Merger, Consolidation and Sale of Substantially All Assets;" (f) the disposition
of any Property by such Person to the Company or a Wholly Owned Subsidiary; (g)
the disposition of any asset with a Fair Market Value of less than $2.0 million;
or (h) any Production Payments and Reserve Sales, PROVIDED that any such
Production Payments and Reserve Sales, other than incentive compensation
programs on terms that are reasonably customary in the Oil and Gas Business for
geologists, geophysicists and other providers of technical services to the
Company or a Restricted Subsidiary, shall have been created, Incurred, issued,
assumed or Guaranteed in connection with the financing of, and within 60 days
after the acquisition of, the Property that is subject thereto.
"AVERAGE LIFE" means, with respect to any Indebtedness, at any date of
determination, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including
any sinking fund or mandatory redemption payment requirements) of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"BANK CREDIT FACILITIES" means, with respect to any Person, one or more debt
facilities or commercial paper facilities with banks or other institutional
lenders (including pursuant to the Second Amended and Restated Credit Agreement
dated as of January 31, 1997, as amended on April 1, 1997, August 19, 1997 and
September 26, 1997, among the Company, the Lenders named therein and The Chase
Manhattan Bank, as agent, and the Second Amended and Restated Credit Agreement
dated as of April 1, 1997, as amended on August 19, 1997 and September 26, 1997,
among 611852 Saskatchewan Ltd., the Lenders named therein and The Chase
Manhattan Bank of Canada, as agent) providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or trade letters of credit, together with any
extensions, revisions, amendments, modifications, refinancings or replacements
thereof by a lender or syndicate of lenders.
"CAPITAL LEASE OBLIGATION" means any obligation which is required to be
classified and accounted for as a capital lease obligation in accordance with
GAAP, and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with GAAP, and
the Stated Maturity thereof shall be the date of the last payment date of rent
or any other amount due in respect of such obligation.
"CAPITAL STOCK" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person; PROVIDED, HOWEVER, that "Capital Stock" shall not
include Redeemable Stock.
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"COMPANY GUARANTEE" means an unconditional, unsecured senior subordinated
Guarantee of the Notes given by the Company pursuant to the terms of the
Indenture.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount
of EBITDA of the Company and its consolidated Restricted Subsidiaries for the
four full fiscal quarters immediately prior to the Transaction Date for which
financial statements are available to (ii) the aggregate Consolidated Interest
Expense of the Company and its Restricted Subsidiaries that is anticipated to
accrue during a period consisting of the fiscal quarter in which the Transaction
Date occurs and the three fiscal quarters immediately subsequent thereto (based
upon the pro forma amount and maturity of, and interest payments in respect of,
Indebtedness of the Company and its Restricted Subsidiaries expected by the
Company to be outstanding on the Transaction Date), assuming for the purposes of
this measurement the continuation of market interest rates prevailing on the
Transaction Date and base interest rates in respect of floating interest rate
obligations equal to the base interest rates on such obligations in effect as of
the Transaction Date; PROVIDED, that if the Company or any of its Restricted
Subsidiaries is a party to any Interest Rate Protection Agreement which would
have the effect of changing the interest rate on any Indebtedness of the Company
or any of its Restricted Subsidiaries for such four quarter period (or a portion
thereof), the resulting rate shall be used for such four quarter period or
portion thereof; PROVIDED FURTHER that any Consolidated Interest Expense with
respect to Indebtedness Incurred or retired by the Company or any of its
Restricted Subsidiaries during the fiscal quarter in which the Transaction Date
occurs shall be calculated as if such Indebtedness was so Incurred or retired on
the first day of the fiscal quarter in which the Transaction Date occurs. In
addition, if since the beginning of the four full fiscal quarter period
preceding the Transaction Date, (a) the Company or any of its Restricted
Subsidiaries shall have engaged in any Asset Sale, EBITDA for such period shall
be reduced by an amount equal to the EBITDA (if positive), or increased by an
amount equal to the EBITDA (if negative), directly attributable to the assets
which are the subject of such Asset Sale for such period calculated on a pro
forma basis as if such Asset Sale and any related retirement of Indebtedness had
occurred on the first day of such period or (b) the Company or any of its
Restricted Subsidiaries shall have acquired any material assets, EBITDA shall be
calculated on a pro forma basis as if such asset acquisitions had occurred on
the first day of such four fiscal quarter period.
"CONSOLIDATED INTEREST EXPENSE" means with respect to any Person for any
period, without duplication, (i) the sum of (a) the aggregate amount of cash and
noncash interest expense (including capitalized interest) of such Person and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP in respect of Indebtedness (including (1) any amortization
of debt discount, (2) net costs associated with Interest Rate Protection
Agreements (including any amortization of discounts), (3) the interest portion
of any deferred payment obligation, (4) all accrued interest and (5) all
commissions, discounts, commitment fees, origination fees and other fees and
charges owed with respect to any Bank Credit Facilities and other Indebtedness)
paid, accrued or scheduled to be paid or accrued during such period; (b)
Redeemable Stock dividends of such Person (and of its Restricted Subsidiaries if
paid to a Person other than such Person or its Restricted Subsidiaries) and
Preferred Stock dividends of such Person's Restricted Subsidiaries if paid to a
Person other than such Person or its other Restricted Subsidiaries; (c) the
portion of any rental obligation of such Person or its Restricted Subsidiaries
in respect of any Capital Lease Obligation allocable to interest expense in
accordance with GAAP; (d) the portion of any rental obligation of such Person or
its Restricted Subsidiaries in respect of any Sale and Leaseback Transaction
that is Indebtedness allocable to interest expense (determined as if such
obligation were treated as a Capital Lease Obligation); and (e) to the extent
any Indebtedness of any other Person (other than Restricted Subsidiaries) is
Guaranteed by such Person or any of its Restricted Subsidiaries, the aggregate
amount of interest paid, accrued or scheduled to be paid or accrued by such
other Person during such period attributable to any such Indebtedness; less (ii)
to the extent included in (i) above, amortization or write-off of deferred
financing costs of such Person and its Restricted Subsidiaries during such
period; in the case of both (i) and (ii) above, after elimination of
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intercompany accounts among such Person and its Restricted Subsidiaries and as
determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" of any Person means, for any period, the aggregate
net income (or net loss, as the case may be) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; PROVIDED that there shall be excluded therefrom, without duplication,
(i) items classified as extraordinary gains or losses net of taxes (less all
fees and expenses relating thereto), including, with respect to the Company, any
loss realized in connection with the purchase of the 11 1/4% Notes; (ii) any
gain or loss net of taxes (less all fees and expenses relating thereto),
realized on the sale or other disposition of Property, including the Capital
Stock of any other Person (but in no event shall this clause (ii) apply to any
gains or losses on the sale in the ordinary course of business of oil, gas or
other hydrocarbons produced or manufactured); (iii) the net income of any
Restricted Subsidiary of such specified person to the extent the transfer to
that Person of that income is restricted by contract or otherwise, except for
any cash dividends or cash distributions actually paid by such Restricted
Subsidiary to such Person during such period; (iv) the net income (or loss) of
any other Person in which such Person or any of its Restricted Subsidiaries has
an interest (which interest does not cause the net income of such other Person
to be consolidated with the net income of such Person in accordance with GAAP or
is an interest in a consolidated Unrestricted Subsidiary), except to the extent
of the amount of cash dividends or other cash distributions actually paid to
such Person or its consolidated Restricted Subsidiaries by such other Person
during such period; (v) for the purposes of "-- Certain Covenants -- Limitation
on Restricted Payments" only, the net income of any Person acquired by such
Person or any of its Restricted Subsidiaries in a pooling-of-interests
transaction for any period prior to the date of such acquisition; (vi) any gain
or loss, net of taxes, realized on the termination of any employee pension
benefit plan; (vii) any adjustments of a deferred tax liability or asset
pursuant to Statement of Financial Accounting Standards No. 109 which result
from changes in enacted tax laws or rates; (viii) the cumulative effect of a
change in accounting principles; (ix) any write-downs of non-current assets,
PROVIDED that any ceiling limitation write-downs under Commission guidelines
shall be treated as capitalized costs, as if such write-downs had not occurred;
and (x) any non-cash compensation expense realized for grants of performance
shares, stock options or stock awards to officers, directors and employees of
such Person or any of its Restricted Subsidiaries.
"CONSOLIDATED NET WORTH" of any Person means the stockholders' equity of
such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less (to the extent included in stockholders'
equity) amounts attributable to Redeemable Stock of such Person or its
Restricted Subsidiaries.
"DEFAULT" means any event, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Bank Credit Facilities of the
Company or the Issuer and (ii) any other Senior Indebtedness of the Company or
Senior Indebtedness of the Issuer which has, at the time of determination, an
aggregate principal amount outstanding of at least $10.0 million that is
specifically designated in the instrument evidencing such Indebtedness and is
designated in a notice delivered by the Company or the Issuer, as applicable, to
the holders or a Representative of the holders of such Senior Indebtedness of
the Company or the Issuer and the Trustee as "Designated Senior Indebtedness."
"DOLLAR-DENOMINATED PRODUCTION PAYMENTS" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"EBITDA" means, with respect to any Person for any period, an amount equal
to the Consolidated Net Income of such Person for such period, plus (i) the sum
of, to the extent reflected in the consolidated income statement of such Person
and its Restricted Subsidiaries for such period from which Consolidated
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Net Income is determined and deducted in the determination of such Consolidated
Net Income, without duplication, (a) income tax expense (but excluding income
tax expense relating to sales or other dispositions of Property, including the
Capital Stock of any other Person, the gains from which are excluded in the
determination of such Consolidated Net Income), (b) Consolidated Interest
Expense, (c) depreciation and depletion expense, (d) amortization expense, (e)
exploration expense (if applicable), and (f) any other noncash charges including
unrealized foreign exchange losses (excluding, however, any such other noncash
charge which requires an accrual of or reserve for cash charges for any future
period); less (ii) the sum of, to the extent reflected in the consolidated
income statement of such Person and its Restricted Subsidiaries for such period
from which Consolidated Net Income is determined and added in the determination
of such Consolidated Net Income, without duplication (a) income tax recovery
(excluding, however, income tax recovery relating to sales or other dispositions
of Property, including the Capital Stock of any other Person, the losses from
which are excluded in the determination of such Consolidated Net Income) and (b)
unrealized foreign exchange gains.
"EQUITY OFFERING" means a bona fide underwritten sale to the public of
common stock of the Company pursuant to a registration statement (other than a
Form S-8 or any other form relating to securities issuable under any employee
benefit plan of the Company) that is declared effective by the Commission
following the Issue Date.
"EXCHANGED PROPERTIES" means properties used or useful in the Oil and Gas
Business received by the Company or a Restricted Subsidiary in trade or as a
portion of the total consideration for other such properties or assets.
"EXCHANGE RATE CONTRACT" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or any combination thereof, entered into by such
Person in the ordinary course of its business for the purpose of limiting or
managing exchange rate risks to which such Person is subject.
"FAIR MARKET VALUE" means, with respect to any assets to be transferred
pursuant to any Asset Sale or Sale and Leaseback Transaction or any noncash
consideration or property transferred or received by any Person, the fair market
value of such consideration or other property as determined by (i) any officer
of the Company if such fair market value is less than $7.5 million and (ii) the
Board of Directors of the Company as evidenced by a certified resolution
delivered to the Trustee if such fair market value is equal to or in excess of
$7.5 million.
"GAAP" means United States generally accepted accounting principles as in
effect on the date of the Indenture, unless stated otherwise.
"GOVERNMENT OBLIGATIONS" means securities that are (i) direct obligations of
the United States of America or Canada for the timely payment of which the full
faith and credit of the United States of America or Canada is pledged or (ii)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or Canada, the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or Canada which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian, with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; PROVIDED, HOWEVER, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
principal of or interest on the Government Obligation evidenced by such
depository receipt.
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"GUARANTEE" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including any Lien on the assets of such Person
securing obligations to pay Indebtedness of the primary obligor and any
obligation of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase or payment of) any security for the payment of
such Indebtedness, (ii) to purchase Property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); PROVIDED, HOWEVER, that a Guarantee by any Person shall not include
(a) endorsements by such Person for collection or deposit, in either case, in
the ordinary course of business or (b) a contractual commitment by one Person to
invest in another Person for so long as such Investment is reasonably expected
to constitute a Permitted Investment under clause (ii) of the definition of
Permitted Investments.
"HOLDER" means the Person in whose name a Note is registered on the
Securities Register.
"INCUR" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or become liable in respect of such Indebtedness or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such
Indebtedness or obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); PROVIDED, HOWEVER, that a change in GAAP that
results in an obligation of such Person that exists at such time, and is not
theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed an Incurrence of such Indebtedness. For purposes of this definition,
Indebtedness of the Company or a Restricted Subsidiary held by a Wholly Owned
Subsidiary shall be deemed to be Incurred by the Company or such Restricted
Subsidiary in the event such Wholly Owned Subsidiary ceases to be a Wholly Owned
Subsidiary or in the event such Indebtedness is transferred to a Person other
than the Company or a Wholly Owned Subsidiary. For purposes of this definition,
any non-interest bearing or other discount Indebtedness shall be deemed to have
been Incurred (in an amount equal to its aggregate principal amount at its
Stated Maturity) only on the date of original issue thereof.
"INDEBTEDNESS" means at any time (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person,
and whether or not contingent, (i) any obligation of such Person for borrowed
money, (ii) any obligation of such Person evidenced by bonds, debentures, notes,
Guarantees or other similar instruments, including any such obligations Incurred
in connection with the acquisition of Property, assets or businesses, (iii) any
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) any obligation of such Person issued or assumed as the deferred
purchase price of Property or services (other than Trade Accounts Payable), (v)
any Capital Lease Obligation of such Person, (vi) the maximum fixed redemption
or repurchase price of Redeemable Stock of such Person at the time of
determination, (vii) any payment obligation of such Person under Exchange Rate
Contracts, Interest Rate Protection Agreements, Oil and Gas Hedging Contracts or
under any similar agreements or instruments, (viii) any obligation to pay rent
or other payment amounts of such Person with respect to any Sale and Leaseback
Transaction to which such Person is a party and (ix) any obligation of the type
referred to in clauses (i) through (viii) of this paragraph of another Person
and all dividends of another Person the payment of which, in either case, such
Person has Guaranteed or is responsible or liable, directly or indirectly, as
obligor, Guarantor or otherwise; PROVIDED, HOWEVER, that Indebtedness shall not
include Production Payments and Reserve Sales. For purposes of this definition,
the maximum fixed repurchase price of any Redeemable Stock that does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable
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Stock were repurchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture; PROVIDED, HOWEVER, that if such Redeemable
Stock is not then permitted to be repurchased, the repurchase price shall be the
book value of such Redeemable Stock. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability at such date in respect
of any contingent obligations described above.
"INTEREST RATE PROTECTION AGREEMENT" means, with respect to any Person, any
interest rate swap agreement, forward rate agreement, interest rate cap or
collar agreement or other financial agreement or arrangement entered into by
such Person in the ordinary course of its business for the purpose of limiting
or managing interest rate risks to which such Person is subject.
"INVESTMENT" means, with respect to any Person (i) any amount paid by such
Person, directly or indirectly, to any other Person for Capital Stock or other
Property of, or as a capital contribution to, any other Person or (ii) any
direct or indirect loan or advance to any other Person (other than accounts
receivable of such Person arising in the ordinary course of business); PROVIDED,
HOWEVER, that Investments shall not include (a) in the case of clause (i) as
used in the definition of "Restricted Payments" only, any such amount paid
through the issuance of Capital Stock of the Company and (b) in the case of
clause (i) or (ii), extensions of trade credit on commercially reasonable terms
in accordance with normal trade practices and any increase in the equity
ownership in any Person resulting from retained earnings of such Person.
"ISSUE DATE" means the date on which the Old Notes first were issued under
the Indenture.
"LIEN" means, with respect to any Property, any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, security interest, lien
(statutory or other), charge, easement, encumbrance, preference, priority or
other security or similar agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including any conditional
sale or other title retention agreement having substantially the same economic
effect as any of the foregoing). For purposes of the provisions of the Indenture
described under "-- Certain Covenants -- Limitation on Liens," a Capital Lease
Obligation shall be deemed to be secured by a Lien on the property being leased.
"LIQUID SECURITIES" means securities (i) of an issuer that is not an
Affiliate of the Company, (ii) that are publicly traded on the New York Stock
Exchange, the American Stock Exchange, the Toronto Stock Exchange or the Nasdaq
National Market and (iii) as to which the Company or the Restricted Subsidiary
holding such securities is not subject to any restrictions on sale or transfer
(including any volume restrictions under Rule 144 under the Securities Act or
any other restrictions imposed by the Securities Act) or as to which a
registration statement under the Securities Act covering the resale thereof is
in effect for as long as the securities are held; PROVIDED that securities
meeting the requirements of clauses (i), (ii) and (iii) above shall be treated
as Liquid Securities from the date of receipt thereof until and only until the
earlier of (x) the date on which such securities are sold or exchanged for cash
or Permitted Short-Term Investments and (y) 180 days following the date of
receipt of such securities. If such securities are not sold or exchanged for
cash or Permitted Short-Term Investments within 180 days of receipt thereof, for
purposes of determining whether the transaction pursuant to which the Company or
a Restricted Subsidiary received the securities was in compliance with the
provisions of the Indenture described under "--Certain Covenants--Limitation on
Asset Sales," such securities shall be deemed not to have been Liquid Securities
at any time. Notwithstanding the foregoing, securities meeting the requirements
of clauses (i) and (ii) above received by the Company or a Wholly Owned
Subsidiary in connection with the disposition, in whole or in part, of the
capital stock of Saxon Petroleum Inc. shall be treated as Liquid Securities from
the date of receipt thereof until the earlier of (1) the date on which such
securities are sold or exchanged for cash or Permitted Short-Term Investments
and (2) 24 months following the date of receipt of such securities.
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"MATERIAL CHANGE" means an increase or decrease (except to the extent
resulting from changes in prices) of more than 30% during a fiscal quarter in
the estimated discounted future net revenues from proved oil and gas reserves of
the Company and its Restricted Subsidiaries, calculated in accordance with
clause (i)(a) of the definition of Adjusted Consolidated Net Tangible Assets;
PROVIDED, HOWEVER, that the following will be excluded from the calculation of
Material Change: (i) any acquisitions during the quarter of oil and gas reserves
with respect to which the Company's estimate of the discounted future net
revenues from proved oil and gas reserves has been confirmed by independent
petroleum engineers; and (ii) any dispositions of Properties during such quarter
that were disposed of in compliance with the provisions of the Indenture
described under "-- Certain Covenants -- Limitation on Asset Sales."
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET AVAILABLE CASH" from an Asset Sale means cash proceeds received
therefrom (including (i) 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 (ii) the Fair Market Value of Liquid Securities and
Permitted Short-Term Investments, and excluding (a) any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to the Property that is the subject of such Asset
Sale and (b) except to the extent subsequently converted to cash, Liquid
Securities or Permitted Short-Term Investments within 240 days after such Asset
Sale, consideration constituting Exchanged Properties or consideration other
than as identified in the immediately preceding clauses (i) and (ii)), in each
case net of (a) all legal, title and recording expenses, commissions and other
fees and expenses incurred, and all federal, state, foreign and local taxes
required to be paid or accrued as a liability under GAAP as a consequence of
such Asset Sale, (b) all payments made on any Indebtedness (but specifically
excluding Indebtedness of the Company and its Restricted Subsidiaries assumed in
connection with or in anticipation of such Asset Sale) which is secured by any
assets subject to such Asset Sale, in accordance with the terms of any Lien upon
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Sale or by applicable law, be repaid out of the proceeds
from such Asset Sale, PROVIDED that such payments are made in a manner that
results in the permanent reduction in the balance of such Indebtedness and, if
applicable, a permanent reduction in any outstanding commitment for future
incurrences of Indebtedness thereunder, (c) all distributions and other payments
required to be made to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Sale and (d) the deduction of appropriate
amounts to be provided by the seller as a reserve, in accordance with GAAP,
against any liabilities associated with the assets disposed of in such Asset
Sale and retained by the Company or any Restricted Subsidiary after such Asset
Sale; PROVIDED, HOWEVER, that if any consideration for an Asset Sale (which
would otherwise constitute Net Available Cash) is required to be held in escrow
pending determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Available Cash only at
such time as it is released to the Company or any Restricted Subsidiary from
escrow.
"NET WORKING CAPITAL" means (i) all current assets of the Company and its
Restricted Subsidiaries, less (ii) all current liabilities of the Company and
its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in consolidated financial statements of
the Company prepared in accordance with GAAP.
"NON-RECOURSE PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than
Capital Lease Obligations) of the Company or any Restricted Subsidiary Incurred
in connection with the acquisition by the Company or such Restricted Subsidiary
in the ordinary course of business of fixed assets used in the Oil and Gas
Business (including office buildings and other real property used by the Company
or such Restricted Subsidiary in conducting its operations) with respect to
which (i) the holders of such Indebtedness agree that they will look solely to
the fixed assets so acquired which secure such Indebtedness, and neither the
Company nor any Restricted Subsidiary (a) is directly or indirectly liable for
such Indebtedness or (b) provides credit support, including any undertaking,
Guarantee, agreement or instrument that would constitute Indebtedness (other
than the grant of a Lien on such acquired fixed
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assets), and (ii) no default or event of default with respect to such
Indebtedness would cause, or permit (after notice or passage of time or
otherwise), any holder of any other Indebtedness of the Company or a Restricted
Subsidiary to declare a default or event of default on such other Indebtedness
or cause the payment, repurchase, redemption, defeasance or other acquisition or
retirement for value thereof to be accelerated or payable prior to any scheduled
principal payment, scheduled sinking fund payment or maturity.
"OFFICERS' CERTIFICATE" means a certificate signed by (i) the President or
the Chief Executive Officer and (ii) the Chief Financial Officer, the Chief
Accounting Officer or the Treasurer, of the Issuer and delivered to the Trustee,
which shall comply with the Indenture.
"OIL AND GAS BUSINESS" means the business of exploiting, exploring for,
developing, acquiring, operating, producing, processing, gathering, marketing,
storing, selling, hedging, treating, swapping, refining and transporting
hydrocarbons and other related energy businesses.
"OIL AND GAS HEDGING CONTRACT" means, with respect to any Person, any
agreement or arrangement, or any combination thereof, relating to oil and gas or
other hydrocarbon prices, transportation or basis costs or differentials or
other similar financial factors, that is customary in the Oil and Gas Business
and is entered into by such Person in the ordinary course of its business for
the purpose of limiting or managing risks associated with fluctuations in such
prices, costs, differentials or similar factors.
"OIL AND GAS LIENS" means (i) Liens on any specific property or any interest
therein, construction thereon or improvement thereto to secure all or any part
of the costs incurred for surveying, exploration, drilling, extraction,
development, operation, production, construction, alteration, repair or
improvement of, in, under or on such property and the plugging and abandonment
of wells located thereon (it being understood that, in the case of oil and gas
producing properties, or any interest therein, costs incurred for "development"
shall include costs incurred for all facilities relating to such properties or
to projects, ventures or other arrangements of which such properties form a part
or which relate to such properties or interests); (ii) Liens on an oil or gas
producing property to secure obligations Incurred or guarantees of obligations
Incurred in connection with or necessarily incidental to commitments for the
purchase or sale of, or the transportation or distribution of, the products
derived from such property; (iii) Liens arising under partnership agreements,
oil and gas leases, overriding royalty agreements, net profits agreements,
production payment agreements, royalty trust agreements, incentive compensation
programs on terms that are reasonably customary in the Oil and Gas Business for
geologists, geophysicists and other providers of technical services to the
Company or a Restricted Subsidiary, master limited partnership agreements,
farmout agreements, farmin agreements, division orders, contracts for the sale,
purchase, exchange, transportation, gathering or processing of oil, gas or other
hydrocarbons, unitizations and pooling designations, declarations, orders and
agreements, development agreements, operating agreements, production sales
contracts, area of mutual interest agreements, gas balancing or deferred
production agreements, injection, repressuring and recycling agreements, salt
water or other disposal agreements, seismic or geophysical permits or
agreements, and other agreements which are customary in the Oil and Gas
Business; PROVIDED, HOWEVER, in all instances that such Liens are limited to the
assets that are the subject of the relevant agreement, program, order or
contract; (iv) Liens arising in connection with Production Payments and Reserve
Sales; and (v) Liens on pipelines or pipeline facilities that arise by operation
of law.
"PARI PASSU INDEBTEDNESS" means any Indebtedness of the Issuer, the Company
or a Subsidiary Guarantor that is PARI PASSU in right of payment to the Notes,
the Company Guarantee or a Subsidiary Guarantee, as applicable.
"PARI PASSU OFFER" means an offer by the Issuer, the Company or a Subsidiary
Guarantor to purchase all or a portion of Pari Passu Indebtedness to the extent
required by the indenture or other agreement or instrument pursuant to which
such Pari Passu Indebtedness was issued.
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"PERMITTED BUSINESS INVESTMENTS" means Investments and expenditures made in
the ordinary course of, and of a nature that is or shall have become customary
in, the Oil and Gas Business as a means of actively engaging therein through
agreements, transactions, interests or arrangements which permit one to share
risks or costs, comply with regulatory requirements regarding local ownership or
satisfy other objectives customarily achieved through the conduct of Oil and Gas
Business jointly with third parties, including (i) ownership interests in oil
and gas properties or gathering, transportation, processing, storage or related
systems and (ii) Investments and expenditures in the form of or pursuant to
operating agreements, processing agreements, farmin agreements, farmout
agreements, development agreements, area of mutual interest agreements,
unitization agreements, pooling arrangements, joint bidding agreements, service
contracts, joint venture agreements, partnership agreements (whether general or
limited), and other similar agreements (including for limited liability
companies) with third parties, excluding however, Investments in corporations
other than Restricted Subsidiaries.
"PERMITTED HEDGING AGREEMENTS" means (i) Exchange Rate Contracts and Oil and
Gas Hedging Contracts and (ii) Interest Rate Protection Agreements but only to
the extent that the stated aggregate notional amount thereunder does not exceed
100% of the aggregate principal amount of the Indebtedness of the Company or a
Restricted Subsidiary covered by such Interest Rate Protection Agreements at the
time such agreements were entered into.
"PERMITTED INVESTMENTS" means any and all of the following: (i) Permitted
Short-Term Investments; (ii) Investments in property, plant and equipment used
in the ordinary course of business and Permitted Business Investments; (iii)
Investments by any Restricted Subsidiary in the Company; (iv) Investments by the
Company or any Restricted Subsidiary in any Restricted Subsidiary; (v)
Investments by the Company or any Restricted Subsidiary in (a) any Person that
will, upon the making of such Investment, become a Restricted Subsidiary or (b)
any Person if as a result of such Investment such Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
Property to, the Company or a Restricted Subsidiary; (vi) Investments in the
form of securities received from Asset Sales, PROVIDED that such Asset Sales are
made in compliance with the provisions of the Indenture described under "--
Certain Covenants -- Limitation on Asset Sales;" (vii) Investments in negotiable
instruments held for collection; lease, utility and other similar deposits; and
stock, obligations or other securities received in settlement of debts
(including under any bankruptcy or other similar proceeding) owing to the
Company or any of its Restricted Subsidiaries as a result of foreclosure,
perfection or enforcement of any Liens or Indebtedness, in each of the foregoing
cases in the ordinary course of business of the Company or such Restricted
Subsidiary; (viii) relocation allowances for, and advances and loans to,
officers, directors and employees of the Company or any of its Restricted
Subsidiaries; PROVIDED such items do not exceed in the aggregate $5.0 million at
any one time outstanding; (ix) Investments intended to promote the Company's
strategic objectives in the Oil and Gas Business in an aggregate amount not to
exceed 7.5% of Adjusted Consolidated Net Tangible Assets (determined as of the
date of the making of any such Investment) at any one time outstanding (which
Investments shall be deemed to be no longer outstanding only upon the return of
capital thereof); (x) Investments made for the purpose of acquiring gas
marketing contracts in an aggregate amount not to exceed $10.0 million at any
one time outstanding; (xi) Investments made pursuant to Permitted Hedging
Agreements of the Company and the Restricted Subsidiaries; and (xii) Investments
pursuant to any agreement or obligation of the Company or any of its Restricted
Subsidiaries as in effect on the Issue Date (other than Investments described in
clauses (i) through (x) above).
"PERMITTED LIENS" means any and all of the following: (i) Liens existing as
of the Issue Date; (ii) Liens securing the Notes, the Company Guarantee, any
Subsidiary Guarantees and other obligations arising under the Indenture; (iii)
any Lien existing on any Property of a Person at the time such Person is merged
or consolidated with or into the Issuer, the Company or a Restricted Subsidiary
or becomes a Restricted Subsidiary (and not incurred in anticipation of or in
connection with such transaction), PROVIDED that such Liens are not extended to
other Property of the Issuer, the Company or the Restricted Subsidiaries; (iv)
any Lien existing on any Property at the time of the acquisition thereof (and
not incurred in
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anticipation of or in connection with such transaction), PROVIDED that such
Liens are not extended to other Property of the Issuer, the Company or the
Restricted Subsidiaries; (v) any Lien incurred in the ordinary course of
business incidental to the conduct of the business of the Company or the
Restricted Subsidiaries or the ownership of their Property (including (a)
easements, rights of way and similar encumbrances, (b) rights or title of
lessors under leases (other than Capital Lease Obligations), (c) rights of
collecting banks having rights of setoff, revocation, refund or chargeback with
respect to money or instruments of the Company or the Restricted Subsidiaries on
deposit with or in the possession of such banks, (d) Liens imposed by law,
including Liens under workers' compensation or similar legislation and
mechanics', carriers', warehousemen's, materialmen's, suppliers' and vendors'
Liens, (e) Liens incurred to secure performance of obligations with respect to
statutory or regulatory requirements, performance or return-of-money bonds,
surety bonds or other obligations of a like nature and incurred in a manner
consistent with industry practice and (f) Oil and Gas Liens, in each case which
are not incurred in connection with the borrowing of money, the obtaining of
advances or credit or the payment of the deferred purchase price of Property
(other than Trade Accounts Payable); (vi) Liens for taxes, assessments and
governmental charges not yet due or the validity of which are being contested in
good faith by appropriate proceedings, promptly instituted and diligently
conducted, and for which adequate reserves have been established to the extent
required by GAAP as in effect at such time; (vii) Liens incurred to secure
appeal bonds and judgment and attachment Liens, in each case in connection with
litigation or legal proceedings that are being contested in good faith by
appropriate proceedings so long as reserves have been established to the extent
required by GAAP as in effect at such time and so long as such Liens do not
encumber assets by an aggregate amount (together with the amount of any unstayed
judgments against the Company or any Restricted Subsidiary but excluding any
such Liens to the extent securing insured or indemnified judgments or orders) in
excess of $15.0 million; (viii) Liens securing Permitted Hedging Agreements of
the Company and its Restricted Subsidiaries; (ix) Liens securing purchase money
Indebtedness or Capital Lease Obligations, PROVIDED that such Liens attach only
to the Property acquired with the proceeds of such purchase money Indebtedness
or the Property which is the subject of such Capital Lease Obligations; (x)
Liens securing Non-recourse Purchase Money Indebtedness granted in connection
with the acquisition by the Company or any Restricted Subsidiary in the ordinary
course of business of fixed assets used in the Oil and Gas Business (including
office buildings and other real property used by the Company or such Restricted
Subsidiary in conducting its operations), PROVIDED that (a) such Liens attach
only to the fixed assets acquired with the proceeds of such Non-recourse
Purchase Money Indebtedness and (b) such Non-recourse Purchase Money
Indebtedness is not in excess of the purchase price of such fixed assets; (xi)
Liens resulting from the deposit of funds or evidences of Indebtedness in trust
for the purpose of decreasing or legally defeasing Indebtedness of the Company
or any Restricted Subsidiary so long as such deposit of funds is permitted by
the provisions of the Indenture described under "-- Limitation on Restricted
Payments;" (xii) Liens resulting from a pledge of Capital Stock of a Person that
is not a Restricted Subsidiary to secure obligations of such Person and any
refinancings thereof; (xiii) Liens to secure any permitted extension, renewal,
refinancing, refunding or exchange (or successive extensions, renewals,
refinancings, refundings or exchanges), in whole or in part, of or for any
Indebtedness secured by Liens referred to in clauses (i), (ii), (iii), (iv),
(ix) and (x) above; PROVIDED, HOWEVER, that (a) such new Lien shall be limited
to all or part of the same Property (including future improvements thereon and
accessions thereto) subject to the original Lien and (b) the Indebtedness
secured by such Lien at such time is not increased to any amount greater than
the sum of (1) the outstanding principal amount or, if greater, the committed
amount of the Indebtedness secured by such original Lien immediately prior to
such extension, renewal, refinancing, refunding or exchange and (2) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement; (xiv) Liens in favor
of the Company, the Issuer, or a Restricted Subsidiary; and (xv) Liens not
otherwise permitted by clauses (i) through (xiv) above incurred in the ordinary
course of business of the Company and its Restricted Subsidiaries and
encumbering Property having an aggregate Fair Market Value not in excess of $5.0
million at any one time. Notwithstanding anything in this paragraph to the
contrary, the
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term "Permitted Liens" shall not include Liens resulting from the creation,
incurrence, issuance, assumption or Guarantee of any Production Payments and
Reserve Sales other than (a) any such Liens existing as of the Issue Date, (b)
Production Payments and Reserve Sales in connection with the acquisition of any
Property after the Issue Date, PROVIDED that any such Lien created in connection
therewith is created, incurred, issued, assumed or Guaranteed in connection with
the financing of, and within 60 days after the acquisition of, such Property and
(c) Production Payments and Reserve Sales, other than those described in clauses
(a) and (b) of this sentence, to the extent such Production Payments and Reserve
Sales constitute Asset Sales made pursuant to and in compliance with the
provisions of the Indenture described under "-- Limitation on Asset Sales" and
(d) incentive compensation programs for geologists, geophysicists and other
providers of technical services to the Company and any Restricted Subsidiary;
PROVIDED, HOWEVER, that, in the case of the immediately foregoing clauses (a),
(b), (c) and (d), any Lien created in connection with any such Production
Payments and Reserve Sales shall be limited to the Property that is the subject
of such Production Payments and Reserve Sales.
"PERMITTED REFINANCING INDEBTEDNESS" means Indebtedness ("new Indebtedness")
Incurred in exchange for, or proceeds of which are used to refinance, other
Indebtedness ("old Indebtedness"); PROVIDED, HOWEVER, that (i) such new
Indebtedness is in an aggregate principal amount not in excess of the sum of (a)
the aggregate principal amount then outstanding of the old Indebtedness (or, if
such old Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration thereof, such
lesser amount as of the date of determination), and (b) an amount necessary to
pay any fees and expenses, including premiums, related to such exchange or
refinancing, (ii) such new Indebtedness has a Stated Maturity no earlier than
the Stated Maturity of the old Indebtedness, (iii) such new Indebtedness has an
Average Life at the time such new Indebtedness is Incurred that is equal to or
greater than the Average Life of the old Indebtedness at such time, (iv) such
new Indebtedness is subordinated in right of payment to the Notes (or, if
applicable, the Company Guarantee or the relevant Subsidiary Guarantee) to at
least the same extent, if any, as the old Indebtedness and (v) if such old
Indebtedness is Non-recourse Purchase Money Indebtedness or Indebtedness that
refinanced Non-recourse Purchase Money Indebtedness, such new Indebtedness
satisfies clauses (i) and (ii) of the definition of "Non-recourse Purchase Money
Indebtedness."
"PERMITTED SHORT-TERM INVESTMENTS" means (i) Investments in Government
Obligations maturing within one year of the date of acquisition thereof, (ii)
Investments in demand accounts, time deposit accounts, certificates of deposit,
bankers' acceptances and money market deposits maturing within one year of the
date of acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America or any State thereof or the
District of Columbia or Canada or any province thereof that is a member of the
Federal Reserve System or comparable Canadian system and has capital, surplus
and undivided profits aggregating in excess of $500.0 million and whose
long-term Indebtedness is rated "A" (or such similar equivalent rating), or
higher, according to Moody's or Dominion Bond Rating Service Limited or Canadian
Bond Rating Service, Inc., (iii) Investments in deposits available for
withdrawal on demand with any commercial bank that is organized under the laws
of any country in which the Company or any Restricted Subsidiary maintains an
office or is engaged in the Oil and Gas Business, PROVIDED that (a) all such
deposits have been made in such accounts in the ordinary course of business and
(b) such deposits do not at any one time exceed $20.0 million in the aggregate,
(iv) repurchase and reverse repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i)
entered into with a bank meeting the qualifications described in clause (ii),
(v) Investments in commercial paper or notes, maturing not more than one year
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
of America or any State thereof or the District of Columbia, or Canada or any
Province thereof, with a short-term rating at the time as of which any
Investment therein is made of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P or "R-1" (or higher) by Dominion Bond Rating
Service Limited or Canadian Bond Rating Service, Inc. (in the case of a Canadian
issuer) or a long-term rating at the time as of which
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any Investment therein is made of "A3" (or higher) according to Moody's or "A-"
(or higher) according to S&P or such similar equivalent rating (or higher) by
Dominion Bond Rating Service Limited or Canadian Bond Rating Service, Inc. (in
the case of a Canadian issuer), (vi) Investments in any money market mutual fund
having assets in excess of $250.0 million all of which consist of other
obligations of the types described in clauses (i), (ii), (iv) and (v) hereof and
(vii) Investments in asset-backed securities maturing within one year of the
date of acquisition thereof with a long-term rating at the time as of which any
Investment therein is made of "A3" (or higher) according to Moody's or "A-1" (or
higher) according to S&P or such similar equivalent rating (or higher) by
Dominion Bond Rating Service Limited or Canadian Bond Rating Service, Inc. (in
the case of a Canadian issuer).
"PERSON" means any individual, corporation, partnership, joint venture,
limited liability company, unlimited liability company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
"PREFERRED STOCK" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person; PROVIDED, HOWEVER, that "Preferred
Stock" shall not include Redeemable Stock.
"PRINCIPAL" of any Indebtedness (including the Notes) means the principal
amount of such Indebtedness plus the premium, if any, on such Indebtedness.
"PRODUCTION PAYMENTS AND RESERVE SALES" means the grant or transfer by the
Company or a Restricted Subsidiary to any Person of a royalty, overriding
royalty, net profits interest, production payment (whether volumetric or dollar
denominated), partnership or other interest in oil and gas properties, reserves
or the right to receive all or a portion of the production or the proceeds from
the sale of production attributable to such properties where the holder of such
interest has recourse solely to such production or proceeds of production,
subject to the obligation of the grantor or transferor to operate and maintain,
or cause the subject interests to be operated and maintained, in a reasonably
prudent manner or other customary standard or subject to the obligation of the
grantor or transferor to indemnify for environmental, title or other matters
customary in the Oil and Gas Business, including any such grants or transfers
pursuant to incentive compensation programs on terms that are reasonably
customary in the Oil and Gas Business for geologists, geophysicists and other
providers of technical services to the Company or a Restricted Subsidiary.
"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 Capital Stock and other securities issued by any other
Person (but excluding Capital Stock or other securities issued by such first
mentioned Person).
"REDEEMABLE STOCK" of any Person means any equity security of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or otherwise (including on the happening of an
event), is or could become required to be redeemed for cash or other Property or
is or could become redeemable for cash or other Property at the option of the
holder thereof, in whole or in part, on or prior to the first anniversary of the
Stated Maturity of the Notes; or is or could become exchangeable at the option
of the holder thereof for Indebtedness at any time in whole or in part, on or
prior to the first anniversary of the Stated Maturity of the Notes; PROVIDED,
HOWEVER, that Redeemable Stock shall not include any security by virtue of the
fact that it may be exchanged or converted at the option of the holder for
Capital Stock of the Company having no preference as to dividends or liquidation
over any other Capital Stock of the Company.
"REPRESENTATIVE" means the trustee, agent or representative expressly
authorized to act in such capacity, if any, for an issue of Senior Indebtedness
of the Issuer or the Company.
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"RESTRICTED PAYMENT" means (i) a dividend or other distribution declared or
paid on the Capital Stock or Redeemable Stock of the Company or to the Company's
shareholders (other than dividends, distributions or payments made solely in
Capital Stock of the Company or in options, warrants or other rights to purchase
or acquire Capital Stock), or declared and paid to any Person other than the
Company or any of its Restricted Subsidiaries (and, if such Restricted
Subsidiary is not a Wholly Owned Subsidiary, to the other shareholders of such
Restricted Subsidiary on a pro rata basis) on the Capital Stock or Redeemable
Stock of any Restricted Subsidiary, (ii) a payment made by the Company or any of
its Restricted Subsidiaries (other than to the Company or any Restricted
Subsidiary) to purchase, redeem, acquire or retire any Capital Stock or
Redeemable Stock, or any options, warrants or other rights to acquire Capital
Stock or Redeemable Stock, of the Company or of a Restricted Subsidiary, (iii) a
payment made by the Company or any of its Restricted Subsidiaries to redeem,
repurchase, legally defease or otherwise acquire or retire for value (including
pursuant to mandatory repurchase covenants), prior to any scheduled maturity,
scheduled sinking fund or scheduled mandatory redemption, any Indebtedness of
the Company or a Restricted Subsidiary which is subordinate (whether pursuant to
its terms or by operation of law) in right of payment to the Notes, the Company
Guarantee or the relevant Subsidiary Guarantee, as the case may be, PROVIDED
that this clause (iii) shall not include any such payment with respect to (a)
any such subordinated Indebtedness to the extent of Excess Proceeds remaining
after compliance with the provisions of the Indenture described under "--
Certain Covenants -- Limitation on Asset Sales" and to the extent required by
the indenture or other agreement or instrument pursuant to which such
subordinated Indebtedness was issued or (b) the purchase, repurchase or other
acquisition of any such subordinated Indebtedness purchased in anticipation of
satisfying a scheduled maturity, scheduled sinking fund or scheduled mandatory
redemption, in each case due within one year of the date of acquisition, or (iv)
an Investment (other than a Permitted Investment) by the Company or a Restricted
Subsidiary in any Person.
"RESTRICTED SUBSIDIARY" means (i) Canadian Forest Oil Ltd. and (ii) any
other Subsidiary of the Company that has not been designated an Unrestricted
Subsidiary pursuant to the provision of the Indenture described under "--
Certain Covenants -- Restricted and Unrestricted Subsidiaries."
"S&P" means Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc., and its successors.
"SALE AND LEASEBACK TRANSACTION" means, with respect to any Person, any
direct or indirect arrangement (excluding, however, any such arrangement between
such Person and a Wholly Owned Subsidiary of such Person or between one or more
Wholly Owned Subsidiaries of such Person) pursuant to which Property is sold or
transferred by such Person or a Restricted Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such Person
or one of its Restricted Subsidiaries.
"SENIOR INDEBTEDNESS OF THE COMPANY" means the obligations of the Company
with respect to Indebtedness of the Company, whether outstanding on the date of
the Indenture or thereafter created, Incurred or assumed, and any renewal,
refunding, refinancing, replacement or extension thereof, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Company Guarantee;
provided, however, that Senior Indebtedness of the Company shall not include (i)
Indebtedness of the Company to a Subsidiary of the Company (but only so long as
such Indebtedness is held by such Subsidiary), (ii) amounts owed for goods,
materials or services purchased in the ordinary course of business, (iii)
Indebtedness Incurred in violation of the Indenture, (iv) amounts payable or any
other Indebtedness to employees of the Company or any Subsidiary of the Company,
(v) any liability for federal, state, local or other taxes owed or owing by the
Company, (vi) any Indebtedness of the Company that, when Incurred and without
regard to any election under Section 1111(b) of the United States Bankruptcy
Code, was without recourse to the Company, (vii) Pari Passu or Subordinated
Indebtedness of the Company, (viii) Indebtedness of the Company that is
represented by
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Redeemable Stock, (ix) Indebtedness evidenced by the Company Guarantee and (x)
in-kind obligations relating to net oil and gas balancing positions. "SENIOR
INDEBTEDNESS OF ANY SUBSIDIARY GUARANTOR" has a correlative meaning; provided
that clause (i) above shall be deemed to refer to Indebtedness of any Subsidiary
Guarantor to the Company or any Subsidiary of the Company (other than as
described in the proviso to clause (i) of the definition of "Senior Indebtedness
of the Issuer").
"SENIOR INDEBTEDNESS OF THE ISSUER" means the obligations of the Issuer with
respect to Indebtedness of the Issuer, whether outstanding on the date of the
Indenture or thereafter created, Incurred or assumed, and any renewal,
refunding, refinancing, replacement or extension thereof, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes; PROVIDED,
HOWEVER, that Senior Indebtedness of the Issuer shall not include (i)
Indebtedness of the Issuer to the Company or any Subsidiary of the Company or
the Issuer; provided, that Indebtedness of the Issuer to 611852 Saskatchewan
Ltd. in an amount equal to the amount of Indebtedness outstanding at any time
under the Canadian Credit Facility shall constitute Senior Indebtedness of the
Issuer to the extent that such outstanding Indebtedness under the Canadian
Credit Facility is not guaranteed by the Issuer, (ii) amounts owed for goods,
materials or services purchased in the ordinary course of business, (iii)
Indebtedness Incurred in violation of the Indenture, (iv) amounts payable or any
other Indebtedness to employees of the Issuer or any Subsidiary of the Issuer,
(v) any liability for United States federal, state, local, or Canadian federal
or provincial, or other taxes owed or owing by the Issuer, (vi) any Indebtedness
of the Issuer that, when Incurred and without regard to any election under
Section 1111(b) of the United States Bankruptcy Code or corresponding provisions
of the Bankruptcy and Insolvency Act (Canada) and the Companies' Creditors
Arrangements Act (Canada), was without recourse to the Issuer, (vii) Pari Passu
or Subordinated Indebtedness of the Issuer, (viii) Indebtedness of the Issuer
that is represented by Redeemable Stock, (ix) Indebtedness evidenced by the
Notes and (x) in-kind obligations relating to net oil and gas balancing
positions.
"SIGNIFICANT SUBSIDIARY," means, at any date of determination, (a) the
Issuer and (b) any other Restricted Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the Commission.
"STATED MATURITY," when used with respect to any security or any installment
of principal thereof or interest thereon, means the date specified in such
security as the fixed date on which the principal of such security or such
installment of principal or interest is due and payable, including pursuant to
any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Issuer, the Company or
a Subsidiary Guarantor that is subordinated or junior in right of payment to the
Notes, the Company Guarantee or the relevant Subsidiary Guarantee, as
applicable, pursuant to a written agreement to that effect.
"SUBSIDIARY" of a Person means (i) another Person which is a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned or
controlled by (a) the first Person, (b) the first Person and one or more of its
Subsidiaries or (c) one or more of the first Person's Subsidiaries or (ii)
another Person which is not a corporation (x) at least 50% of the ownership
interest of which and (y) the power to elect or direct the election of a
majority of the directors or other governing body of which are controlled by
Persons referred to in clause (a), (b) or (c) above.
"SUBSIDIARY GUARANTOR" means, unless released from its Subsidiary Guarantee
as permitted by the Indenture, any Restricted Subsidiary that becomes a
Guarantor of the Notes in compliance with the provisions of the Indenture and
executes a supplemental indenture agreeing to be bound by the terms of the
Indenture, until a successor replaces such Restricted Subsidiary pursuant to the
applicable provisions of the Indenture and, thereafter, means the successor.
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"SUBSIDIARY GUARANTEE" means an unconditional, unsecured senior subordinated
Guarantee of the Notes given by any Restricted Subsidiary pursuant to the terms
of the Indenture.
"TRADE ACCOUNTS PAYABLE" means accounts payable or other obligations of the
Company or any Restricted Subsidiary to trade creditors created or assumed by
the Company or such Restricted Subsidiary in the ordinary course of business in
connection with the obtaining of goods or services.
"UNRESTRICTED SUBSIDIARY" means (i) each Subsidiary of the Company that the
Company has designated pursuant to the provision of the Indenture described
under "-- Certain Covenants -- Restricted and Unrestricted Subsidiaries" as an
Unrestricted Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary.
"VOLUMETRIC PRODUCTION PAYMENTS" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"VOTING STOCK" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"WHOLLY OWNED SUBSIDIARY" means, at any time, a Restricted Subsidiary of the
Company all the Voting Stock of which (other than directors' qualifying shares)
is at such time owned, directly or indirectly, by the Company and its other
Wholly Owned Subsidiaries.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Issuer, the Company and the Subsidiary
Guarantors will be discharged from all their obligations with respect to the
Notes (except for certain obligations to exchange or register the transfer of
Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies
and to hold moneys for payment in trust and its obligations described under
"Additional Amounts") upon the deposit in trust for the benefit of the Holders
of the Notes of money or U.S. Government Obligations, or a combination thereof,
which, through the payment of principal, premium, if any, and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on the Notes at
Stated Maturity thereof or on earlier redemption in accordance with the terms of
the Indenture and the Notes. Such defeasance or discharge may occur only if,
among other things, the Issuer or the Company has delivered to the Trustee an
Opinion of United States or Canadian Counsel, as appropriate, to the effect that
(i) the Company or the Issuer has received from, or there has been published by,
the United States Internal Revenue Service a ruling or since the date of the
Indenture there has been a change in the applicable federal income tax law, in
either case to the effect that Holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge were not to occur; (ii) Holders of the
Notes will not recognize income, gain or loss for Canadian federal, provincial
or territorial income or other tax purposes and will be subject to Canadian
federal, provincial or territorial income or other tax on the same amounts, in
the same manner and at the same times as would have been the case had such
deposit, defeasance and discharge not occurred; and (iii) the resulting trust
will not be an "Investment Company" within the meaning of the Investment Company
Act of 1940 unless such trust is qualified thereunder or exempt from regulation
thereunder.
The Indenture provides that if the Issuer takes the actions described below,
it and the Company may omit to comply with certain covenants, including those
described under "-- Repurchase at the Option of Holders Upon a Change of
Control," "-- Certain Covenants" and in clauses (vi) and (vii) under the first
paragraph and clauses (vii) and (viii) under the third paragraph of "-- Merger,
Consolidation and Sale of
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Substantially All Assets," and the occurrence of the Events of Default described
below in clauses (iii) and (iv) (with respect to such covenants) and clauses
(v), (vi), (vii) (with respect to Significant Subsidiaries) and (viii)), under
"-- Events of Default and Notice" will be deemed not to be or result in an Event
of Default. In order to exercise such option, the Issuer or the Company will be
required to deposit, in trust for the benefit of the Holders of the Notes, money
or U.S. Government Obligations, or a combination thereof, which, through the
payment of principal, premium, if any, and interest in respect thereof in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of and any premium and interest on the Notes at Stated Maturity
thereof or on earlier redemption in accordance with the terms of the Indenture
and the Notes. The Issuer will also be required, among other things, to deliver
to the Trustee an Opinion of United States or Canadian Counsel, as appropriate,
to the effect that (i) Holders of the Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit and defeasance
of certain obligations and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit and defeasance were not to occur; (ii) Holders of the Notes will
not recognize income, gain or loss for Canadian federal, provincial or
territorial income or other tax purposes and will be subject to Canadian
federal, provincial or territorial income or other tax on the same amounts, in
the same manner and at the same times as would have been the case had such
deposit and defeasance not occurred; and (iii) that the resulting trust will not
be an "Investment Company" within the meaning of the Investment Company Act of
1940 unless such trust is qualified thereunder or exempt from regulation
thereunder. If the Issuer were to exercise this option and the Notes were
declared due and payable because of the occurrence of any Event of Default, the
amount of money and U.S. Government Obligations so deposited in trust would be
sufficient to pay amounts due on the Notes at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Notes upon any acceleration
resulting from such Event of Default. In such case, the Issuer would remain
liable for such payments.
If the Issuer exercises either of the options described above, each
Subsidiary Guarantor will be released from all its obligations under its
Subsidiary Guarantee.
EVENTS OF DEFAULT AND NOTICE
The following are summaries of Events of Default under the Indenture with
respect to the Notes: (i) failure to pay any interest on the Notes when due,
continued for 30 days; (ii) failure to pay principal of (or premium, if any, on)
the Notes when due; (iii) failure to comply with the provisions of the Indenture
described under "Merger, Consolidation and Sale of Substantially All Assets;"
(iv) failure to perform any other covenant of the Issuer, the Company or any
Subsidiary Guarantor in the Indenture, continued for 60 days after written
notice to the Issuer from the Trustee or the Holders of at least 25% in
aggregate principal amount of the outstanding Notes; (v) a default by the
Company or any Restricted Subsidiary under any Indebtedness for borrowed money
(other than Non-recourse Purchase Money Indebtedness) which results in
acceleration of the maturity of such Indebtedness, or failure to pay any such
Indebtedness at maturity, in an amount greater than $5.0 million if such
Indebtedness is not discharged or such acceleration is not rescinded or annulled
within 10 days after written notice as provided in the Indenture; (vi) one or
more final judgments or orders by a court of competent jurisdiction are entered
against the Company or any Restricted Subsidiary in an uninsured or
unindemnified aggregate amount outstanding at any time in excess of $5.0 million
and such judgments or orders are not discharged, waived, stayed, satisfied or
bonded for a period of 60 consecutive days; (vii) certain events of bankruptcy,
insolvency or reorganization with respect to the Company or any Significant
Subsidiary; (viii) the Company Guarantee ceases to be in full force and effect
(other than in accordance with the terms of the Indenture and the Company
Guarantee) or the Company denies or disaffirms its obligations under the Company
Guarantee; or (ix) a Subsidiary Guarantee ceases to be in full force and effect
(other than in accordance with the terms of the Indenture and such Subsidiary
Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations under
its Subsidiary Guarantee.
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The Indenture provides that if an Event of Default (other than an Event of
Default described in clause (vii) above) with respect to the Notes at the time
outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the outstanding Notes by notice as
provided in the Indenture may declare the principal amount of the Notes to be
due and payable immediately. If an Event of Default described in clause (vii)
above with respect to the Notes at the time outstanding shall occur, the
principal amount of all the Notes will automatically, and without any action by
the Trustee or any Holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree based on acceleration, the Holders
of at least a majority in aggregate principal amount of the outstanding Notes
may, under certain circumstances, rescind and annul such acceleration if all
Events of Default, other than the nonpayment of accelerated principal (or other
specified amount), have been cured or waived as provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of at least
a majority in aggregate principal amount of the outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Notes.
No Holder of Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless (i) such Holder has previously given to
the Trustee written notice of a continuing Event of Default with respect to the
Notes, (ii) the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and such Holder or Holders have
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee and (iii) the Trustee has failed to institute such proceeding and has
not received from the Holders of at least a majority in aggregate principal
amount of the outstanding Notes a direction inconsistent with such request,
within 60 days after such notice, request and offer. However, such limitations
do not apply to a suit instituted by a Holder of Notes for the enforcement of
payment of the principal of or any premium or interest on such Notes on or after
the applicable due date specified in such Notes.
MODIFICATION OF THE INDENTURE; WAIVER
The Indenture provides that modifications and amendments of the Indenture
may be made by the Issuer, the Company, the Subsidiary Guarantors, if any, and
the Trustee without the consent of any Holders of Notes in certain limited
circumstances, including (i) to cure any ambiguity, omission, defect or
inconsistency, (ii) to provide for the assumption of the obligations of the
Company under the Indenture upon the merger, consolidation or sale or other
disposition of all or substantially all the assets of the Company and the
Restricted Subsidiaries taken as a whole and certain other events specified in
the provisions of the Indenture described under "-- Merger, Consolidation and
Sale of Substantially All Assets," (iii) to provide for uncertificated Notes in
addition to or in place of certificated Notes, (iv) to comply with any
requirement of the Commission in order to effect or maintain the qualification
of the Indenture under the 1939 Act, (v) to make any change that does not
adversely affect the rights of any Holder of Notes in any material respect, (vi)
to add or remove Subsidiary Guarantors pursuant to the procedure set forth in
the Indenture and (vii) certain other modifications and amendments as set forth
in the Indenture.
The Indenture contains provisions permitting the Issuer, Company, the
Subsidiary Guarantors and the Trustee, with the written consent of the Holders
of not less than a majority in aggregate principal amount of the outstanding
Notes, to execute supplemental indentures or amendments adding any provisions to
or changing or eliminating any of the provisions of the Indenture or modifying
the rights of
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the Holders of the Notes, except that no such supplemental indenture, amendment
or waiver may, without the consent of all the Holders of outstanding Notes,
among other things, (i) reduce the principal amount of Notes whose Holders must
consent to an amendment or waiver, (ii) reduce the rate of or change the time
for payment of interest on any Notes, (iii) change the currency in which any
amount due in respect of the Notes is payable, (iv) reduce the principal of or
any premium on or change the Stated Maturity of any Notes or alter the
redemption or repurchase provisions with respect thereto, (v) reduce the
relative ranking of any Notes, (vi) release any security that may have been
granted to the Trustee in respect of the Notes, (vii) at any time after a Change
of Control or an Asset Sale has occurred, change the time at which the Change of
Control Offer or Prepayment Offer relating thereto must be made or at which the
Notes must be repurchased pursuant to such Change of Control Offer or Prepayment
Offer, (viii) cause the Company, the Issuer or any Subsidiary Guarantor to be
required to make any deduction or withholding from payments made under or with
respect to the Notes, (ix) make any modification to the provisions of the
Indenture described under "-- Additional Amounts" that would adversely affect
the rights of the Holders to receive Additional Amounts as described thereunder,
or (x) make certain other significant amendments or modifications as specified
in the Indenture.
The Holders of at least a majority in principal amount of the outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. The Holders of at least a majority in principal amount of the
outstanding Notes may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest and certain covenants
and provisions of the Indenture which cannot be amended without the consent of
the Holders of each outstanding Note.
NOTICES
Notices to Holders of the Notes will be given by mail to the addresses of
such Holders as they may appear in the Security Register.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in accordance with
the internal laws of the State of New York without reference to principles of
conflicts of law.
CONSENT TO JURISDICTION AND SERVICE
The Indenture provides that each of the Issuer, the Company and each
Subsidiary Guarantor will irrevocably appoint CT Corporation System, 1633
Broadway, New York, New York 10019 as its agent for service of process in any
suit, action or proceeding with respect to the Indenture or the Notes and for
actions brought under federal or state securities laws brought in any federal or
state court located in the Borough of Manhattan in The City of New York and
submits to such jurisdiction.
TRUSTEE
State Street Bank & Trust Company is the Trustee under the Indenture. The
Trustee maintains normal banking relationships with the Company and its
Subsidiaries and may perform certain services for and transact other business
with the Company and its Subsidiaries from time to time in the ordinary course
of business.
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CERTAIN UNITED STATES AND CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The information included in this Prospectus with respect to United States
Federal income tax considerations has been passed on for the Company by Ernst &
Young LLP, independent certified public accountants and with respect to Canadian
Federal income tax considerations has been passed on for the Company by Ernst &
Young Chartered Accountants.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the principal United States Federal
income tax consequences of the receipt, ownership and disposition of the
Exchange Notes to original purchasers thereof that, except as noted below, are
United States Holders (as defined below) and that receive the Exchange Notes by
tendering Old Notes and receiving Exchange Notes pursuant to the Exchange Offer.
This discussion is based on currently existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing, temporary and proposed
Treasury regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or proposed on the date hereof and all
of which are subject to change, possibly with retroactive effect, or different
interpretations. This discussion does not address the tax consequences to
subsequent purchasers of Exchange Notes and is limited to initial purchasers who
hold the Exchange Notes as capital assets, within the meaning of section 1221 of
the Code. Moreover, this discussion is for general information only and does not
address all of the tax consequences that may be relevant to particular initial
purchasers in light of their personal circumstances or to certain types of
initial purchasers (such as certain financial institutions, insurance companies,
tax-exempt entities or dealers in securities) and also does not discuss Exchange
Notes held as a hedge against currency risks or as part of a straddle, as part
of a "synthetic security" or other integrated investment (including a
"conversion transaction") comprised of an Exchange Note and one or more other
investments, or held by a holder whose functional currency is not the US dollar.
INITIAL PURCHASERS OF OLD NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF THE OLD NOTES
AND THE RECEIPT, OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES, INCLUDING THE
APPLICABILITY OF ANY UNITED STATES FEDERAL TAX LAWS OR ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE TAX LAWS
OR INTERPRETATIONS THEREOF.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of an
Exchange Note who is an initial purchaser that is, for United States Federal
income tax purposes, (i) an individual who is a citizen or resident of the
United States, (ii) a corporation or other entity taxable as a corporation
created or organized in the United States or under the laws of the United States
or of any state thereof (including the District of Columbia), (iii) an estate
the income of which is includable in gross income for United States Federal
income tax purposes regardless of its source, or (iv) a trust if a United States
court is able to exercise primary supervision over the trust's administration
and one or more United States persons have authority to control all substantial
decisions of such trust.
TAXATION OF INTEREST. Interest paid or accrued on an Exchange Note,
including any Additional Amounts paid as a result of the imposition of Canadian
withholding taxes (see "Description of the Notes--Canadian Withholding Taxes"),
will be taxable to a United States Holder as ordinary interest income, generally
at the time it is received or accrued, in accordance with such United States
Holder's regular method of accounting for United States Federal income tax
purposes.
EXCHANGE OFFER. The exchange of Old Notes for Exchange Notes pursuant to
the Exchange Offer should not be a taxable exchange. Consequently, a United
States Holder should not recognize taxable income or loss as a result of
exchanging an Old Note for an Exchange Note pursuant to the Exchange
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Offer. The holding period of an Exchange Note will include the holding period of
the Old Note and the basis of the Exchange Note will be the same as the basis of
the Old Note immediately before the exchange.
The Issuer will be required to pay additional cash interest on the Old Notes
and the Exchange Notes if it fails to comply with certain of its Obligations
under the Registration Agreement (see "Exchange Offer; Registration Rights").
Such additional interest should be taxable to a United States Holder as ordinary
income at the time it accrues or is received, in accordance with each such
United States Holder's method of tax accounting. It is possible, however, that
the Internal Revenue Service (the "IRS") may take a different position, in which
case United States Holders might be required to include such additional interest
in income prior to its receipt (regardless of their usual method of tax
accounting).
SALE, EXCHANGE OR RETIREMENT OF THE EXCHANGE NOTES. Upon the sale,
exchange, redemption, retirement at maturity or other taxable disposition of an
Exchange Note, a United States Holder generally will recognize gain or loss
equal to the difference between the sum of cash plus the fair market value of
all other property received on such disposition (except to the extent such cash
or property is attributable to accrued but unpaid interest, which will be
taxable as ordinary income) and such United States Holder's tax basis in the
Exchange Note.
Gain or loss recognized on the disposition of an Exchange Note generally
will be capital gain or loss. In the case of a United States Holder who is an
individual, such capital gain generally will be subject to tax at a 28% rate if
the Exchange Note (including the time period the Old Note was held) has been
held for more than 12 months but not more than 18 months, and a maximum capital
gains rate of 20% will apply if the Exchange Note (including the time period the
Old Note was held) has been held for more than 18 months.
FOREIGN TAX CREDIT CONSIDERATIONS. Interest (including Additional Amounts)
will constitute income from sources without the United States for United States
foreign tax credit purposes. Payment of interest on the Exchange Notes to a
United States Holder with whom the Issuer deals at arm's length will not be
subject to Canadian withholding taxes (see "Certain Canadian Income Tax
Considerations"). If, however, the cash interest payments on the Exchange Notes
become subject to Canadian withholding taxes, United States Holders will be
treated as having actually received the amount of such taxes withheld and as
having paid such amount to the Canadian taxing authorities. As a result, the
amount of interest income included in gross income by a United States Holder
will generally be greater than the amount of cash actually received by the
United States Holder from the Issuer with respect to such interest income. A
United States Holder may be able, subject to generally applicable limitations,
to claim a foreign tax credit or take a deduction for Canadian withholding taxes
imposed on interest payments (including Additional Amounts). Interest income
(including Additional Amounts) generally will constitute "passive income" or
"financial services income" for foreign tax credit purposes. If, however,
Canadian withholding tax is imposed at a rate of 5% or more, such income will
constitute "high withholding tax interest."
Gain on the sale, redemption or other taxable disposition of an Exchange
Note will generally constitute United States source income for United States
foreign tax credit purposes. Present law is unclear regarding the allocation of
a loss recognized by a United States Holder on such a sale, redemption or other
taxable disposition. Under proposed Treasury regulations, any capital loss
recognized by a United States Holder would be allocated against foreign source
income and may thus reduce the United States Holder's ability to claim foreign
tax credits.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Backup withholding and
information reporting requirements may apply to certain payments of principal,
premium, if any, and interest on an Exchange Note and to proceeds from the sale
or other disposition of an Exchange Note before maturity. The Issuer, its agent
or a broker, as the case may be, will be required to withhold from any payment
that is subject to backup withholding a tax equal to 31% of such payment if a
United States Holder fails to furnish its
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taxpayer identification number (social security or employer identification
number), certify that such number is correct, certify that such United States
Holder is not subject to backup withholding or otherwise comply with the
applicable requirements of the backup withholding rules. Certain United States
Holders, including all corporations, are not subject to backup withholding and
information reporting requirements. Any amounts withheld under the backup
withholding rules from a payment to a United States Holder will be allowed as a
credit against such United States Holder's United States Federal income tax and
may entitle the United States Holder to a refund, provided that the required
information is furnished to the IRS.
UNITED STATES FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
The following discussion is limited to the United States Federal income tax
consequences relevant to a holder of an Exchange Note that is not a United
States Holder (a "Non-U.S. Holder").
PAYMENT OF INTEREST ON EXCHANGE NOTES. Payment of interest (including
Additional Amounts) by the Issuer on the Exchange Notes will be exempt from
United States Federal income and withholding tax if paid to a Non-U.S. Holder
unless such Non-U.S. Holder has an office or other fixed place of business in
the United States to which the interest income is attributable and such income
is either derived in the active conduct of a banking, financing or similar
business within the United States or received by a corporation, the principal
business of which is the trading in stock or securities for its own account.
SALE, EXCHANGE OR RETIREMENT OF EXCHANGE NOTES. A Non-U.S. Holder generally
will not be subject to United States Federal income tax (and generally no tax
will be withheld) with respect to gain realized on the sale, exchange,
redemption, retirement at maturity or other disposition of an Exchange Note
unless (i) the gain is treated as effectively connected with a U.S. trade or
business conducted by the Non-U.S. Holder or (ii) the Non-U.S. Holder is an
individual who is present in the United States for 183 or more days in the
taxable year of the sale, redemption, retirement at maturity or other
disposition of the Exchange Note and certain other conditions are met.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following is, as of the date hereof, a summary of the principal Canadian
federal income tax consequences to a holder (other than an Initial Purchaser) of
Exchange Notes who acquires such Exchange Notes pursuant to the Exchange Offer
and who, for purposes of the INCOME TAX ACT (Canada)(the "ITA") and at all
relevant times, is not resident in Canada. This summary is based on the current
provisions of the ITA and the regulations thereunder, the current published
administrative practices of Revenue Canada, and all specific proposals to amend
the ITA and the regulations announced by or on behalf of the Minister of Finance
prior to the date hereof. This summary does not otherwise take into account or
anticipate changes in the law, whether by judicial, governmental or legislative
decision or action, nor does it take into account tax legislation or
considerations of any province or territory of Canada or any jurisdiction other
than Canada. The provisions of provincial income tax legislation vary from
province to province in Canada and in some cases differ from federal income tax
legislation.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND
SHOULD NOT BE INTERPRETED AS, LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER OF
EXCHANGE NOTES. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS
TO THE TAX CONSEQUENCES TO THEM OF THE ACQUISITION, HOLDING AND DISPOSITION OF
THE EXCHANGE NOTES, INCLUDING THE APPLICATION AND EFFECT OF CANADIAN FEDERAL,
PROVINCIAL, TERRITORIAL, AND LOCAL TAX LAWS.
The payment by the Issuer of interest, principal or premium, if any, on the
Exchange Notes to a holder who is not resident in Canada and with whom the
Issuer deals at arm's length within the meaning of the ITA will be exempt from
Canadian withholding tax. For the purposes of the ITA, related persons (as
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therein defined) are deemed not to deal at arm's length, and it is a question of
fact whether persons not related to each other deal at arm's length.
No other taxes on income (including taxable capital gains) will be payable
under the ITA in respect of the holding, redemption or disposition of the
Exchange Notes by holders who are neither residents nor deemed to be residents
of Canada for the purposes of ITA and who do not use or hold and are not deemed
by such laws to use or hold the Exchange Notes in carrying on business in Canada
for the purposes of the ITA, except that in certain circumstances holders who
are non-resident insurers carrying on an insurance business in Canada and
elsewhere may be subject to such taxes.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company and the Issuer have agreed pursuant to a Registration Agreement
(the "Registration Agreement") with the Initial Purchaser, for the benefit of
the Holders of the Old Notes, that the Company and the Issuer will, at the
Company's cost, use their reasonable best efforts to (i) file a registration
statement (the "Exchange Offer Registration Statement") within 75 days after the
date of the original issuance of the Old Notes with the Commission with respect
to a registered offer to exchange the Old Notes for the Exchange Notes having
terms substantially identical in all material respects to the Old Notes (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions) and (ii) cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act within 135 days after the date of
the original issuance of the Old Notes. Upon the effectiveness of the Exchange
Offer Registration Statement, the Issuer will offer the Exchange Notes in the
Exchange Offer. The Company and the Issuer will use their reasonable best
efforts to keep the Registered Exchange Offer open for not less than 30 days (or
longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to the Holders of the Old Notes. For each Old Note surrendered
to the Issuer pursuant to the Registered Exchange Offer, the Holder of such Old
Note will receive an Exchange Note having a principal amount equal to that of
the surrendered Old Note. Interest on each Exchange Note will accrue from the
last interest payment date on which interest was paid on the Old Note
surrendered in exchange thereof or, if no interest has been paid on such Old
Note, from the date of its original issue. Under existing Commission
interpretations, the Exchange Notes would be freely transferable by Holders
other than affiliates of the Issuer after the Registered Exchange Offer without
further registration under the Securities Act if the Holder of the Exchange
Notes represents that it is acquiring the Exchange Notes in the ordinary course
of its business, that it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes and that it is not an
affiliate of the Issuer, as such terms are interpreted by the Commission;
PROVIDED that broker-dealers ("Participating Broker-Dealers") receiving Exchange
Notes in the Exchange Offer will have a prospectus delivery requirement with
respect to resales of such Exchange Notes. The Commission has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to Exchange Notes (other than a resale of an unsold
allotment from the original sale of the Old Notes) with the prospectus contained
in the Exchange Offer Registration Statement. Under the Registration Agreement,
the Company and the Issuer are required to allow Participating Broker-Dealers
and other persons, if any, with similar prospectus delivery requirements to use
the prospectus contained in the Exchange Offer Registration Statement in
connection with the resale of such Exchange Notes.
A Holder of Old Notes (other than certain specified Holders) who wishes to
exchange such Notes for Exchange Notes in the Registered Exchange Offer will be
required to represent that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business and that at the time of the
commencement of the Registered Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
"affiliate" of the Issuer, as defined in Rule 405 of the Securities Act, or if
it is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
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In the event that (i) applicable interpretations of the staff of the
Commission do not permit the Company and the Issuer to effect such a Registered
Exchange Offer, (ii) for any other reason the Exchange Offer Registration
Statement is not declared effective within 120 days after the date of the
original issuance of the Old Notes or the Registered Exchange Offer is not
consummated within 150 days after the date of the original issuance of the Old
Notes, (iii) the Initial Purchaser so requests with respect to Old Notes not
eligible to be exchanged for Exchange Notes in the Registered Exchange Offer or
the Initial Purchaser does not receive freely tradeable Exchange Notes in the
Registered Exchange Offer or (iv) any Holder (other than the Initial Purchaser)
is not eligible to participate in the Registered Exchange Offer or such Holder
does not receive freely tradeable Exchange Notes in the Registered Exchange
Offer other than by reason of such Holder being an affiliate of the Issuer (it
being understood that the requirement that a Participating Broker-Dealer deliver
the prospectus contained in the Exchange Offer Registration Statement in
connection with sales of Exchange Notes shall not result in such Exchange Notes
being not "freely tradeable"), the Company and the Issuer will, at the Company's
cost, use their reasonable best efforts to (a) as promptly as practicable, file
a Shelf Registration Statement covering resales of the Old Notes or the Exchange
Notes, as the case may be, (b) cause the Shelf Registration Statement to be
declared effective under the Securities Act and (c) keep the Shelf Registration
Statement effective until two years after its effective date (or until one year
after such effective date if such Shelf Registration Statement is filed at the
request of an Initial Purchaser). The Company and the Issuer will, in the event
a Shelf Registration Statement is filed, among other things, provide to each
Holder for whom such Shelf Registration Statement was filed copies of the
prospectus which is a part of the Shelf Registration Statement, notify each such
Holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of the Old
Notes or the Exchange Notes, as the case may be. A Holder selling such Old Notes
or Exchange Notes pursuant to the Shelf Registration Statement generally would
be required to be named as a selling security Holder in the related prospectus
and to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Agreement which
are applicable to such Holder (including certain indemnification obligations).
In the event that (a) neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement has been filed with the Commission on or prior
to the 75th day following the date of the original issuance of the Old Notes,
(b) neither the Exchange Offer Registration Statement nor the Shelf Registration
Statement has been declared effective on or prior to the 135th day following the
date of the original issuance of the Old Notes, (c) either the Exchange Offer
has not been consummated or a Shelf Registration Statement has not been declared
effective on or prior to the 165th day following the date of the original
issuance of the Old Notes or (d) after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective, such
Registration Statement thereafter ceases to be effective or usable (subject to
certain exceptions) in connection with resales of Old Notes or Exchange Notes in
accordance with and during the periods specified in the Registration Agreement
(each such event referred to in clauses (a) through (d) a "Registration
Default"), interest ("Special Interest") will accrue on the Old Notes and the
Exchange Notes (in addition to the stated interest on the Old Notes and the
Exchange Notes) from and including the date on which any such Registration
Default shall occur to but excluding the date on which all Registration Defaults
have been cured. The Special Interest will accrue at a rate of 0.5% per annum
during the 90-day period immediately following the occurrence of any
Registration Default and shall increase by 0.25% per annum at the end of each
subsequent 90-day period, but in no event shall such rate exceed 1.5% per annum.
All accrued Special Interest shall be paid to Holders of the Old Notes in
the same manner in which payments of other interest are made pursuant to the
Indenture. See "Description of the Notes -- General."
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The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which is available upon request to the Company.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. The Issuer and the Company have agreed that, starting
on the Expiration Date and ending on the close of business 180 days after the
Expiration Date, they will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. A
broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Agreement (including certain indemnification rights and obligations).
Neither the Issuer nor the Company will receive any proceeds from any sale
of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal. The Company has agreed in
the Registration Agreement to pay all expenses incident to the Exchange Offer
other than commissions or concessions of any brokers or dealers and to indemnify
the holders of the Old Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
TRANSFER RESTRICTIONS ON OLD NOTES
OFFERS AND SALES BY THE INITIAL PURCHASERS
The Old Notes have not been registered under the Securities Act and may not
be offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act. Accordingly,
the Old Notes were offered and sold only (i) to "qualified institutional buyers"
(as defined in Rule 144A) ("QIBs") in compliance with Rule 144A, (ii) to a
limited number of other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
("Institutional Accredited Investors") that, prior to their purchase of the Old
Notes, delivered to the Initial Purchaser a letter containing certain
representations and agreements and (iii) outside the United States to persons
other than U.S. persons ("foreign purchasers"), which term shall include dealers
or other
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professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust), in reliance upon
Regulation S. Each foreign purchaser that was a purchaser of Offered Notes from
the Initial Purchaser (an "Initial Foreign Purchaser") was required to sign a
certificate in the form provided by the Initial Purchaser.
By its purchase of Old Notes, each purchaser of Old Notes was deemed to:
1. represent that it was purchasing such Old Notes for its own account
or an account with respect to which it exercised sole investment discretion
and that it and any such account is (i) a QIB, and was aware that the sale
to it was being made in reliance on Rule 144A, (ii) an Institutional
Accredited Investor or (iii) a foreign purchaser that is outside the United
States (or a foreign purchaser that is a dealer or other fiduciary as
referred to above);
2. acknowledge that the Old Notes had not been registered under the
Securities Act and 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
below;
3. if it is a person other than a foreign purchaser outside the United
States, agree that if it should resell or otherwise transfer the Old Notes
within two years after the Closing Date or within three months after it
ceases to be an affiliate (within the meaning of Rule 144 under the
Securities Act) of the Issuer, it would do so only (i) to the Issuer or the
Company or any subsidiary thereof, (ii) to a QIB in compliance with Rule
144A, (iii) to an Institutional Accredited Investor that, prior to such
transfer, furnishes to the Trustee a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Old Notes (the form of which letter can be obtained from the Trustee)
and, if such transfer is in respect of an aggregate principal amount of Old
Notes at the time of transfer of less than $100,000, an opinion of counsel
acceptable to the Issuer that such transfer is in compliance with the
Securities Act (provided that holders of interests in the Temporary
Regulation S Note shall not be permitted to transfer any interest therein to
an Institutional Accredited Investor pursuant to this clause (iii) prior to
the expiration of the "40-day restricted period" (within the meaning of Rule
903(c)(3) of Regulation S under the Securities Act)), (iv) outside the
United States in compliance with Rule 904 under the Securities Act, other
than in Canada or to or for the benefit of a resident of Canada prior to 40
days following the original issue of the Old Notes except pursuant to a
prospectus qualifying the Offered Notes for sale under the securities law in
any province or territory of Canada in which such purchaser resides or an
exemption from the prospectus requirements of such laws, (v) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act
(if available) or (vi) pursuant to an effective registration statement under
the Securities Act. Each Institutional Accredited Investor that was not a
QIB and that was an original purchaser of the Old Notes was required to sign
an agreement to the foregoing effect. Subject to the procedures set forth
under "Description of the Notes -- Book-Entry System," prior to any proposed
transfer of the Old Notes (otherwise than pursuant to an effective
registration statement) within two years after the issuance of the Old Notes
or within three months after it ceases to be an affiliate (within the
meaning of Rule 144 under the Securities Act) of the Issuer, the Holder
thereof must check the appropriate box set forth on the reverse of its Old
Note relating to the manner of such transfer and submit the Old Notes to the
Trustee;
4. agreed that it would deliver to each person to whom it transfers Old
Notes notice of any restrictions on transfer of such Old Notes;
5. if it was a foreign purchaser outside the United States, (i)
understood that the Old Notes will be represented by the Temporary
Regulation S Global Note and the Regulation S Global Note and that transfers
are restricted as described under "Description of the Notes -- Book-Entry
System" and (ii) represented and agreed that it will not sell short or
otherwise sell, transfer or dispose of the economic risk of the Old Notes
into the United States or to a U.S. person. If it is a QIB, it understands
that the Old Notes offered in reliance on Rule 144A will be represented by
the Rule 144A Global Notes. Before any interest in the Rule 144A Global
Notes may be offered, sold, pledged or otherwise
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transferred to a person who is not a QIB, the transferee will be required to
provide the Trustee with a written certification (the form of which
certification can be obtained from the Trustee) as to compliance with the
transfer restriction referred to above;
6. understood that until registered under the Securities Act, the Old
Notes (other than those issued to foreign purchasers after the expiration of
the 40-day period referred to above or in substitution or exchange therefor)
will bear a legend to the following effect unless otherwise agreed by the
Issuer and the Holder thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), 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) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE OR WITHIN THREE MONTHS AFTER IT CEASES TO BE
AN AFFILIATE (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF
THE ISSUER, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER
OR THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) 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 THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF
SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES AT THE
TIME OF TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT
(PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY NOT TRANSFER
THIS NOTE PURSUANT TO THIS CLAUSE (C) PRIOR TO THE EXPIRATION OF THE "40-DAY
RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF REGULATION S
UNDER THE SECURITIES ACT), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, OTHER THAN
IN CANADA OR TO OR FOR THE BENEFIT OF A RESIDENT OF CANADA PRIOR TO 40 DAYS
FOLLOWING THE ORIGINAL ISSUE OF THIS NOTE EXCEPT PURSUANT TO A PROSPECTUS
QUALIFYING THE NOTES FOR SALE UNDER THE SECURITIES LAW IN ANY PROVINCE OR
TERRITORY OF CANADA IN WHICH SUCH PURCHASER RESIDES OR AN EXEMPTION FROM THE
PROSPECTUS REQUIREMENTS OF SUCH LAWS, (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 THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE OR WITHIN THREE MONTHS AFTER IT CEASES TO BE
AN AFFILIATE (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF
THE ISSUER, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
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SUBMIT THIS NOTE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM 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. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
7. represented that it (i) was able to fend for itself in the
transactions contemplated by this Offering Memorandum; (ii) had such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of its prospective investment in the Old
Notes and (iii) had the ability to bear the economic risks of its
prospective investment and could afford the complete loss of such
investment.
8. acknowledged that the Issuer, the Company and the Initial Purchaser
and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements, and agrees that if any of
the acknowledgments, representations or warranties deemed to have been made
by it by its purchase of Offered Notes is no longer accurate, it shall
promptly notify the Issuer, the Company and the Placement Agent. If it was
acquiring Old Notes as a fiduciary or agent for one or more investor
accounts, represent that it has sole investment discretion with respect to
each such account and that it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of each such
account.
Any Old Notes not exchanged in the Exchange Offer for Exchange Notes will
continue to be subject to the transfer restrictions described above.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby will be
passed on for the Company by Vinson & Elkins L.L.P., Houston, Texas and for the
Issuer by Bennett Jones Vechere, Calgary, Alberta.
EXPERTS
The consolidated financial statements of Forest Oil Corporation as of
December 31, 1997 and 1996, and for each of the years in the three-year period
ended December 31, 1997, have been incorporated by reference herein in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of ATCOR Resources Ltd., which appear
in the Current Report of Form 8-K/A of Forest Oil Corporation dated January 28,
1997, have been incorporated by reference herein in reliance upon the report
dated February 1, 1996 of Price Waterhouse, independent auditors, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. Price Waterhouse is a Canadian partnership, resident in
Canada.
The audited statement of oil and gas revenue and direct operating and
production expenses of Forest Oil Corporation's interest in certain oil and gas
producing properties for the year ended December 31, 1997, which appears in Form
8-K/A of Forest Oil Corporation dated February 3, 1998, incorporated by
reference in this Prospectus, has been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and is incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said reports.
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Forest's U.S. reserve estimates, which appear in the 1997 Form 10-K, have
been reviewed by Ryder Scott Company and are incorporated herein by reference in
reliance upon the authority of said firm as experts in petroleum engineering.
The reserve estimates of Canadian Forest Oil Ltd., which appear in the 1997
Form 10-K, have been prepared by McDaniel & Associates Ltd. and are incorporated
herein by reference in reliance upon the authority of said firm as experts in
petroleum engineering.
The reserve estimates of Saxon, which appear in the 1997 Form 10-K, have
been prepared by Fekete & Associates, Inc. and are incorporated herein by
reference in reliance upon the authority of said firm as experts in petroleum
engineering.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
CANADIAN FOREST OIL LTD. The Board of Directors of Canadian Forest Oil Ltd.
("Canadian Forest") has enacted By-law No. 1 as confirmed by the shareholder of
Canadian Forest, which includes provision for the protection of directors and
officers subject to the provisions of the Business Corporations Act (Alberta).
The provisions of By-law No. 1 as affected by the Business Corporations Act
(Alberta) may be summarized as follows:
(a) except in respect of an action by or on behalf of Canadian Forest or of
a body corporate of which Canadian Forest is or was a shareholder to
procure a judgment in its favour, Canadian Forest may indemnify a
director or officer of Canadian Forest, a former director of officer of
Canadian Forest or a person who acts or acted at Canadian Forest's
request as a director or officer of a body corporate of which Canadian
Forest is or was a shareholder or creditor, from and against any
liability in respect of any civil, criminal or administrative action or
proceeding to which he is made a party by reason of being or having been
a director of officer, provided such director or officer acted honestly
and in good faith with a view to the best interests of Canadian Forest
and in the case of criminal or administrative action or proceedings that
is enforced by a monetary penalty he had reasonable grounds for believing
that his conduct was lawful;
(b) a director or officer or other person referred to in (a) above is
entitled to indemnity from Canadian Forest, (in certain circumstances,
only with the approval of the Court of Queen's Bench of Alberta) in
respect of all costs, charges and expenses reasonably incurred by him in
connection with the defense of any proceeding to which he is made a party
provided such person seeking indemnification is substantially successful
on the merits in his defense of such proceedings, he fulfills the
conditions set forth in (a) above and is fairly and reasonably entitled
to indemnity; and
(c) Canadian Forest may purchase and maintain insurance for the benefit of
each director and officer against any liability incurred by him in his
capacity as a director or officer of Canadian Forest or another body
corporate except when the liability relates to his failure to act
honestly and in good faith with a view to the best interests of Canadian
Forest or such other body corporate, as the case may be.
As permitted and for the purposes described in paragraph (c) above, Canadian
Forest has purchased and maintains insurance with such authorization. Directors
and officers of Canadian Forest are insured, subject to all the terms,
conditions and exclusions of the policy, against certain liabilities incurred by
them in their capacity as directors and officers of Canadian Forest and its
subsidiaries. This insurance provides for an annual limit for liability and
reimbursement of payments of US $25,000,000. The deductible applicable to
reimbursement of Canadian Forest is US $100,000, ($200,000 per occurrence in
respect of securities claims) and there is no deductible applicable to
individual directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
FOREST OIL CORPORATION. Sections 721 through 724 of the Business
Corporation Law of the State of New York (the "BCL"), in which Forest Oil
Corporation is incorporated, permit New York corporations, acting through their
boards of directors, to extend broad protection to their directors, officers and
other
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employees by way of indemnity and advancement of expenses. These sections (1)
provide that the statutory indemnification provisions of the BCL are not
exclusive, provided that no indemnification may be made to or on behalf of any
director or officer if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not entitled, (2) establish procedures
for indemnification and advancement of expenses that may be contained in the
certificate of incorporation or by-laws, or, when authorized by either of the
foregoing, set forth in a resolution of the shareholders or directors or an
agreement providing for indemnification and advancement of expenses, (3) apply a
single standard for statutory indemnification for third-party and derivative
suits by providing that indemnification is available if the director or officer
acted in good faith, for a purpose which he reasonably believed to be in the
best interests of the corporation, and, in criminal actions, had no reasonable
cause to believe that his conduct was unlawful, (4) eliminate the requirement
for mandatory statutory indemnification that the indemnified party be "wholly"
successful and (5) provide for the advancement of litigation expenses upon
receipt of an undertaking to repay such advance if the director or officer is
ultimately determined not to be entitled an undertaking to repay such advance if
the director or officer is ultimately determined not to be entitled to
indemnification. Section 726 of the BCL permits the purchase of insurance to
indemnify a corporation or its officers and directors to the extent permitted.
Essentially, the amended BCL allows corporations to provide for indemnification
of directors, officers and employees except in those cases where a judgment or
other final adjudication adverse to the indemnified party establishes that the
acts were committed in bad faith or were the result of active and deliberate
dishonesty or that the indemnified party personally gained a financial profit or
other advantage to which he was not legally entitled.
Article IX of the By-laws of Forest Oil Corporation contains very broad
indemnification provisions which permit the corporation to avail itself of the
amended BCL to extend broad protection to its directors, officers and employees
by way of indemnity and advancement of expenses. It sets out the standard under
which the Company will indemnify directors and officers, provides for
reimbursement in such instances, for the advancement or reimbursement for
expenses reasonably incurred in defending an action, and for the extension of
indemnity to persons other than directors and officers. It also establishes the
manner of handling indemnification when a lawsuit is settled. It is not intended
that this By-law is an exclusive method of indemnification.
Article IX of the By-laws may only be amended prospectively. In addition,
the Company cannot, except by elimination or amendment of such section of the
By-laws, limit the rights of any indemnified person to indemnity or advancement
of expenses provided in accordance with this By-law. It also permits the
indemnified person to sue the Company for indemnification, shifting the burden
of proof to the Company to prove that the indemnified person has not met the
standards of conduct required for indemnification and requires the Company to
pay the costs of such suit if the indemnified person is successful.
The Restated Certificate of Incorporation of the Company limits the personal
liability of the Company's directors to the fullest extent permitted under the
BCL.
Additionally, the BCL was amended in 1987 to allow New York corporations to
limit or eliminate director's liability for certain breaches of duty. The
Restated Certificate of Incorporation provides that a director of the Company
shall not be liable to the Company or its shareholders for damages for any
breach of duty in such a capacity unless a judgment or other final adjudication
adverse to the director establishes that:
(a) the director's acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law; or
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(b) the director personally gained in fact a financial profit or other
advantage to which the director was not legally entitled; or
(c) the director's act violated Section 719 of the BCL.
A director's liability for any act or omission prior to the adoption of the
amendment to the BCL to eliminate director's liability for certain breaches of
duty shall not be eliminated or limited by virtue thereof and any repeal or
modification of the foregoing provisions of, or the adoption of any provision
of, the Restated Certificate of Incorporation inconsistent with the BCL shall
not adversely affect any right, immunity or protection of director existing
thereunder with respect to any act or omission occurring prior to or at the time
of such repeal or modification or the adoption of such inconsistent provision.
If the BCL is subsequently amended to permit the further elimination or
limitation of the personal liability of a director, then the liability of the
director shall be eliminated or limited to the fullest extent permitted by the
BCL as so amended.
The Company has insurance coverage which protects directors and officers of
Forest Oil Corporation and its subsidiaries against judgments, settlements and
legal costs incurred because of actual or alleged errors or omissions in
connection with their activities as directors or officers of Forest Oil
Corporation and its subsidiaries. One of the policies is a Directors and
Officers Liability and Corporation Reimbursement Policy, which covers the period
July 25, 1997 to July 25, 1998. Where Forest Oil Corporation or its subsidiaries
indemnifies covered directors and officers, Forest Oil Corporation is
responsible for a $100,000 ($200,000 for securities claims) deductible per loss.
The maximum annual cumulative policy limit is $25 million.
The Company also has Pension Trust Liability coverage as respects Forest Oil
Corporation Pension Trust and the Retirement Savings Plan. It covers legal
liability and defense of Plan sponsors and fiduciaries for certain claims based
upon actual or alleged Breach of Fiduciary Duty (as defined in the policy) as
respects the covered benefit plans. The coverage limit is $10 million (annual
cumulative policy limit) and is subject to a deductible of $100,000 for each
loss when indemnifiable by Forest Oil Corporation and its subsidiaries.
These policies contain exclusions commonly found in such insurance policies
including, but not limited to, exclusions for claims based on fines and
penalties imposed by law or other matters deemed uninsurable by law, claims
brought by one insured against another insured, claims based upon or
attributable to an officer or director gaining any personal profit or advantage
to which he or she is not legally entitled, adjudicated acts of active or
deliberate dishonesty, and claims based upon attempts (whether alleged or
actual, successful or unsuccessful) by persons to acquire securities of the
Company against the opposition of the Company's Board of Directors and in
connection with which the Company acquires its securities from such persons at a
price not available to all other shareholders or gives consideration to such
persons to terminate such attempts. Also excluded are those attempts (whether
alleged or actual, successful or unsuccessful) by the Company to acquire its
securities at a premium over the then existing market price other than pursuant
to an offer to all of the holders of that class.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person thereof in connection with the
securities being registered (and the Securities and Exchange Commission is still
of the same opinion), the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of
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whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following instruments and documents are included or incorporated by
reference as Exhibits to this Registration Statement.
<TABLE>
<CAPTION>
Exhibit 3(i) Restated Certificate of Incorporation of Forest Oil Corporation dated
October 14, 1993, incorporated herein by reference to Exhibit 3(i) to
Form 10-Q for Forest Oil Corporation for the quarter ended September 30,
1993 (File No. 0-4597).
<S> <C>
Exhibit 3(i)(a) Certificate of Amendment of the Restated Certificate of Incorporation
dated as of July 20, 1995, incorporated herein by reference to Exhibit
3(i)(a) to Form 10-Q for Forest Oil Corporation for the quarter ended
June 30, 1995 (File No. 0-4597).
Exhibit 3(i)(b) Certificate of Amendment of Restated Certificate of Incorporation dated
as of July 26, 1995, incorporated herein by reference to Exhibit 3(i)(b)
to Form 10-Q for Forest Oil Corporation for the quarter ended June 30,
1995 (File No. 0-4597).
Exhibit 3(i)(c) Certificate of Amendment of the Restated Certificate of Incorporation
dated as of January 5, 1996, incorporated herein by reference to Exhibit
3(i)(c) to Forest Oil Corporation's Registration Statement on Form S-2
(File No. 33-64949).
Exhibit 3(ii) Restated By-Laws of Forest Oil Corporation as of May 9, 1990, Amendment
No. 1 to By-Laws dated as of April 2, 1991, Amendment No. 2 to By-Laws
dated as of May 8, 1991, Amendment No. 3 to By-Laws dated as of July 30,
1991, Amendment No. 4 to By-Laws dated as of January 17, 1992, Amendment
No. 5 to By-Laws dated as of March 18, 1993 and Amendment No. 6 to
By-Laws dated as of September 14, 1993, incorporated herein by reference
to Exhibit 3(ii) to Form 10-Q for Forest Oil Corporation for the quarter
ended September 30, 1993 (File No. 0-4597).
Exhibit 3(ii)(a) Amendment No. 7 to By-Laws dated as of December 3, 1993, incorporated
herein by reference to Exhibit 3(ii)(a) to Form 10-K for Forest Oil
Corporation for the year ended December 31, 1993 (File No. 0-4597).
Exhibit 3(ii)(b) Amendment No. 8 to By-Laws dated as of February 24, 1994, incorporated
herein by reference to Exhibit 3(ii)(b) to Form 10-K for Forest Oil
Corporation for the year ended December 31, 1993 (File No. 0-4597).
Exhibit 3(ii)(c) Amendment No. 9 to By-Laws dated as of May 15, 1995, incorporated herein
by reference to Exhibit 3(ii)(c) to Form 10-Q for Forest Oil Corporation
for the quarter ended June 30, 1995 (File No. 0-4597).
Exhibit 3(ii)(d) Amendment No. 10 to By-Laws dated as of July 27, 1995, incorporated
herein by reference to Exhibit 3(ii)(d) to Form 10-Q for Forest Oil
Corporation for the quarter ended June 30, 1995 (File No. 0-4597).
Exhibit 3(iii) Articles of Amalgamation of Canadian Forest Oil Ltd., incorporated
herein by reference to Exhibit 3(iii) to Forest Oil Corporation's
Registration Statement on Form S-4 (File No. 333-39255).
Exhibit 3(iv) Bylaws of Canadian Forest Oil Ltd., incorporated herein by reference to
Exhibit 3(iv) to Forest Oil Corporation's Registration Statement on Form
S-4 (File No. 333-39255).
</TABLE>
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<TABLE>
<S> <C>
Exhibit 4.1 Indenture dated as of September 29, 1997 among Canadian Forest Oil Ltd.,
as Issuer, Forest Oil Corporation, as Guarantor, and State Street Bank
and Trust, as Trustee, incorporated herein by reference to Exhibit 4.1
to Forest Oil Corporation's Registration Statement on Form S-4 (File No.
333-39255).
Exhibit 4.2 Registration Agreement dated February 2, 1998 by and among Canadian
Forest Oil Ltd., Forest Oil Corporation and Morgan Stanley & Co.
Incorporated.
Exhibit 4.3 Third Amended and Restated Credit Agreement dated as of January 31, 1997
between Forest Oil Corporation and Subsidiary Guarantors and The Chase
Manhattan Bank, as agent, incorporated herein by reference to Exhibit
4.7 to Form 10-K for Forest Oil Corporation for the year ended December
31, 1997 (File No. 0-4597).
Exhibit 4.5 Deed of Trust, Mortgage, Security Agreement, Assignment of Production,
Financing Statement (Personal Property including Hydrocarbons), and
Fixture Filing dated as of December 1, 1993, incorporated herein by
reference to Exhibit 4.6 to Form 10-K for Forest Oil Corporation for the
year ended December 31, 1993 (File No. 0-4597).
Exhibit 4.6 Amendment No. 1 dated as of June 3, 1994 to the Deed of Trust, Mortgage,
Security Agreement, Assignment of Production, Financing Statement
(Personal Property including Hydrocarbons) and Fixture Filing dated as
of December 1, 1993 between Forest Oil Corporation and The Chase
Manhattan Bank (National Association), as agent, incorporated herein by
reference to Exhibit 4.9 of Form 10-K for Forest Oil Corporation for the
year ended December 31, 1994 (File No. 0-4597).
Exhibit 4.7 Amendment No. 2 dated as of August 31, 1995 to the Deed of Trust,
Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property including Hydrocarbons) and Fixture Filing
dated as of December 1, 1993 between Forest Oil Corporation and The
Chase Manhattan Bank (National Association), as agent, incorporated
herein by reference to Exhibit 4.14 to Form 10-K for Forest Oil
Corporation for the year ended December 31, 1995 (File No. 0-4597).
Exhibit 4.8 Amendment No. 2 dated as of January 31, 1997 to the Deed of Trust,
Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property including Hydrocarbons) and Fixture Filing
dated as of June 3, 1994 between Forest Oil Corporation and The Chase
Manhattan Bank, as agent, incorporated herein by reference to Exhibit
4.8 to Form 10-K for Forest Oil Corporation for the year ended December
31, 1996 (File No. 0-4597).
Exhibit 4.9 Amendment No. 3 dated as of January 31, 1997 to the Deed of Trust,
Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property including Hydrocarbons) and Fixture Filing
dated as of December 1, 1993 between Forest Oil Corporation and The
Chase Manhattan Bank, as agent, incorporated herein by reference to
Exhibit 4.9 to Form 10-K for Forest Oil Corporation for the year ended
December 31, 1996 (File No. 0-4597).
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
Exhibit 4.9.1 Amendment No. 4 dated as of February 3, 1998 to Deed of Trust, Mortgage,
Security Agreement, Assignment of Production, Financing Statement
(Personal Property including Hydrocarbons and Fixture Filing dated as of
December 1, 1993 between Forest Oil Corporation and The Chase Manhattan
Bank, as agent, incorporated herein by reference to Exhibit 4.13 to Form
10-K for Forest Oil Corporation for the year ended December 31, 1997
(File No. 0-4597).
Exhibit 4.9.2 Amendment No. 5 dated as of February 3, 1998 to Deed of Trust, Mortgage,
Security Agreement, Assignment of Production, Financing Statement
(Personal Property including Hydrocarbons and Fixture Filing dated as of
December 1, 1993 between Forest Oil Corporation and The Chase Manhattan
Bank, as agent), incorporated herein by reference to Exhibit 4.14 to
Form 10-K for Forest Oil Corporation for the year ended December 31,
1997 (File No. 0-4597).
Exhibit 4.10 Deed of Trust, Mortgage, Security Agreement, Assignment of Production,
Financing Statement (Personal Property including Hydrocarbons) and
Fixture Filing dated as of June 3, 1994 between Forest Oil Corporation
and The Chase Manhattan Bank (National Association), as agent,
incorporated herein by reference to Exhibit 4.9 of Form 10-K for Forest
Oil Corporation for the year ended December 31, 1994 (File No. 0-4597).
Exhibit 4.11 Amendment No. 1 dated as of August 31, 1995 to Deed of Trust, Mortgage,
Security Agreement, Assignment of Production, Financing Statement
(Personal Property including Hydrocarbons), and Fixture Filing dated
June 3, 1994, incorporated herein by reference to Exhibit 4.16 on Form
10-K for Forest Oil Corporation for the year ended December 31, 1995
(File No. 0-4597).
Exhibit 4.12 Second Amended and Restated Credit Agreement dated as of April 1, 1997
among 611852 Saskatchewan Ltd. and The Chase Manhattan Bank of Canada,
as Administrative Agent, incorporated herein by reference to Exhibit
4.14 to Forest Oil Corporation's Registration Statement on Form S-4
(File No. 333-39255).
Exhibit 4.12.1 Amendment No. 1 to Second Amended and Restated Credit Agreement dated as
of August 19, 1997, incorporated herein by reference to Exhibit 4.14.1
to Forest Oil Corporation's Registration Statement on Form S-4 (File No.
333-39255).
Exhibit 4.12.2 Amendment No. 2 to Second Amended and Restated Credit Agreement dated as
of September 26, 1997, incorporated herein by reference to Exhibit
4.14.2 to Forest Oil Corporation's Registration Statement on Form S-4
(File No. 333-39255).
Exhibit 4.13 Second Amended and Restated Credit Agreement dated as of April 1, 1997
among Canadian Forest Oil Ltd. and Subsidiary Borrowers and 611852
Saskatchewan Ltd., incorporated herein by reference to Exhibit 4.15 to
Forest Oil Corporation's Registration Statement on Form S-4 (File No.
333-39255).
Exhibit 4.13.1 Amendment No. 1 to Second Amended and Restated Credit Agreement dated as
of August 19, 1997, incorporated herein by reference to Exhibit 4.15.1
to Forest Oil Corporation's Registration Statement on Form S-4 (File No.
333-39255).
Exhibit 4.13.2 Amendment No. 2 to Second Amended and Restated Credit Agreement dated as
of September 26, 1997, incorporated herein by reference to Exhibit
4.15.2 to Forest Oil Corporation's Registration Statement on Form S-4
(File No. 333-39255).
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C>
Exhibit 4.14 Second Amended and Restated Security Agreement dated as of January 31,
1997 between Forest Oil Corporation, the Subsidiary Guarantors named
therein and The Chase Manhattan Bank, as agent, incorporated herein by
reference to Exhibit 4.16 to Forest Oil Corporation's Registration
Statement on Form S-4 (File No. 333-39255).
Exhibit 4.15 Pledge Agreement dated as of August 19, 1997 between 3189503 Canada Ltd.
and The Chase Manhattan Bank, incorporated herein by reference to
Exhibit 4.17 to Forest Oil Corporation's Registration Statement on Form
S-4 (File No. 333-39255).
Exhibit 4.16 Guarantee dated as of August 19, 1997 by Forest Oil Corporation and The
Chase Manhattan Bank, incorporated herein by reference to Exhibit 4.18
to Forest Oil Corporation's Registration Statement on Form S-4 (File No.
333-39255).
Exhibit 4.17 Third Security Confirmation, Amendment and Supplemental Debenture
Agreement made as of August 19, 1997 among Canadian Forest Oil Ltd.,
Producers Marketing Ltd., 3189503 Canada Ltd., 611852 Saskatchewan Ltd.,
Forest Oil Corporation and The Chase Manhattan Bank, incorporated herein
by reference to Exhibit 4.19 to Forest Oil Corporation's Registration
Statement on Form S-4 (File No. 333-39255).
Exhibit 4.18 Second Security Confirmation, Amendment and Supplemental Debenture
Agreement made as of April 1, 1997 among Canadian Forest Oil Ltd.,
Producers Marketing Ltd., 3189503 Canada Ltd., 611852 Saskatchewan Ltd.,
Forest Oil Corporation and The Chase Manhattan Bank, incorporated herein
by reference to Exhibit 4.20 to Forest Oil Corporation's Registration
Statement on Form S-4 (File No. 333-39255).
Exhibit 4.19 Guarantee and Pledge Agreement dated as of April 1, 1997 between 3189503
Canada Ltd. and 611852 Saskatchewan Ltd., incorporated herein by
reference to Exhibit 4.21 to Forest Oil Corporation's Registration
Statement on Form S-4 (File No. 333-39255).
Exhibit 4.20 Limited Recourse Secured Guarantee dated as of April 1, 1997 between
Forest Oil Corporation and 611852 Saskatchewan Ltd., incorporated herein
by reference to Exhibit 4.22 to Forest Oil Corporation's Registration
Statement on Form S-4 (File No. 333-39255).
Exhibit 4.21 Limited Recourse Demand Debenture and Negative Pledge issued as of April
1, 1997 by Forest Oil Corporation to 611852 Saskatchewan Ltd.,
incorporated herein by reference to Exhibit 4.23 to Forest Oil
Corporation's Registration Statement on Form S-4 (File No. 333-39255).
Exhibit 4.22 Deposit Agreement made as of April 1, 1997 by Forest Oil Corporation in
favor of 611852 Saskatchewan Ltd., incorporated herein by reference to
Exhibit 4.24 to Forest Oil Corporation's Registration Statement on Form
S-4 (File No. 333-39255).
Exhibit 5.1 Opinion of Bennett Jones Verchere
Exhibit 5.2 Opinion of Vinson & Elkins L.L.P.
Exhibit 5.3 Opinion of Ernst & Young as to tax matters
Exhibit 5.4 Opinion of Ernst & Young, Chartered Accountants
Exhibit 23.1 Consent of KPMG Peat Marwick LLP.
</TABLE>
II-7
<PAGE>
<TABLE>
<S> <C>
Exhibit 23.2 Consent of Ryder Scott Company.
Exhibit 23.3 Consent of McDaniel & Associates Ltd.
Exhibit 23.4 Consent of Fekete & Associates, Inc.
Exhibit 23.5 Consent of Bennett Jones Verchere (included in Exhibit 5.1 hereto).
Exhibit 23.6 Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.2 hereto).
Exhibit 23.7 Consent of Ernst & Young (included in Exhibit 5.3 hereto).
Exhibit 23.8 Consent of Ernst & Young, Chartered Accountants (included in Exhibit 5.4
hereto).
Exhibit 23.9 Consent of Price Waterhouse.
Exhibit 23.10 Consent of Arthur Andersen LLP.
Exhibit 24.1 Powers of Attorney (included on the signature page hereto).
Exhibit 25.1 Statement of Eligibility of State Street Bank and Trust Company.
Exhibit 99.1 Form of Letter of Transmittal, incorporated herein by reference to
Exhibit 99.1 to Forest Oil Corporation's Registration Statement on Form
S-4 (File No. 333-39255).
</TABLE>
- ------------------------
All exhibits have been previously filed.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described under Item 15 above,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final jurisdiction of such
issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Canadian Forest Oil Ltd. has duly caused this Amendment No. 1 to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Calgary, Alberta, on June 5, 1998.
<TABLE>
<S> <C> <C>
CANADIAN FOREST OIL LTD.
By: /s/ DANIEL L. MCNAMARA
------------------------------------------
Daniel L. McNamara
VICE PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ President and Chief June 5, 1998
Arthur C. Eastly Executive Officer
* Vice President, Finance
- ------------------------------ (Principal Financial and June 5, 1998
Ronald E. Pratt Accounting Officer)
*
- ------------------------------ Director June 5, 1998
Daniel L. Baxter
*
- ------------------------------ Director June 5, 1998
Robert S. Boswell
*
- ------------------------------ Director June 5, 1998
William L. Dorn
*
- ------------------------------ Director June 5, 1998
Arthur C. Eastly
</TABLE>
*By:
/s/ DANIEL L. MCNAMARA
- ----------------------------
Daniel L. McNamara,
as attorney-in-fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Forest Oil Corporation has duly caused this Amendment No. 1 to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on June 5, 1998.
<TABLE>
<S> <C> <C>
FOREST OIL CORPORATION
By: /s/ DANIEL L. MCNAMARA
------------------------------------------
Daniel L. McNamara
CORPORATE COUNSEL AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ President and Chief June 5, 1998
Robert S. Boswell Executive Officer
Vice President and Chief
* Financial Officer
- ------------------------------ (Principal Financial June 5, 1998
David H. Keyte Officer)
*
- ------------------------------ Controller (Principal June 5, 1998
Joan C. Sonnen Accounting Officer)
*
- ------------------------------ Director June 5, 1998
Philip F. Anschutz
*
- ------------------------------ Director June 5, 1998
Robert S. Boswell
*
- ------------------------------ Director June 5, 1998
William L. Britton
*
- ------------------------------ Director June 5, 1998
Cortlandt S. Dietler
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Director June 5, 1998
William L. Dorn
*
- ------------------------------ Director June 5, 1998
Jordan L. Haines
*
- ------------------------------ Director June 5, 1998
James H. Lee
*
- ------------------------------ Director June 5, 1998
J. J. Simmons, III
*
- ------------------------------ Director June 5, 1998
Craig D. Slater
*
- ------------------------------ Director June 5, 1998
Drake S. Tempest
*
- ------------------------------ Director June 5, 1998
Michael B. Yanney
</TABLE>
*By:
/s/ DANIEL L. MCNAMARA
- ----------------------------
Daniel L. McNamara,
as attorney-in-fact
II-11
