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Filed pursuant to Rule 424(B)(3)
PROSPECTUS SEC File No. 333-76017
[Logo] VINTAGE PETROLEUM, INC.
$150,000,000
Offer to Exchange all Outstanding
9 3/4% Senior Subordinated Notes due 2009
for 9 3/4% Senior Subordinated Notes due 2009
of Vintage Petroleum, Inc.
____________________
Terms of the Exchange Offer
. We are offering to exchange the notes that we sold in a private offering for
new registered exchange notes.
. THE EXCHANGE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 3, 1999,
UNLESS EXTENDED.
. Tenders of outstanding notes may be withdrawn at any time prior to the
expiration of the exchange offer.
. All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged.
. We believe that the exchange of notes will not be a taxable exchange for U.S.
federal income tax purposes.
. We will not receive any proceeds from the exchange offer.
. The terms of the notes to be issued are substantially identical to the
outstanding notes, except for the transfer restrictions and registration
rights relating to the outstanding notes.
. The notes to be exchanged for the outstanding notes will not be listed on any
securities exchange or stock market.
____________________
You should consider carefully the"Risk Factors" beginning on page 13 before
participating in the exchange offer.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This Prospectus is dated April 30, 1999.
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TABLE OF CONTENTS
Page
----
Certain Definitions......................................................... i
Where You Can Find More Information......................................... ii
Forward-Looking Statements..................................................iii
Summary..................................................................... 1
Risk Factors................................................................ 13
Use of Proceeds............................................................. 21
Capitalization.............................................................. 21
The Exchange Offer.......................................................... 22
Description of Certain Indebtedness......................................... 32
Description of Notes........................................................ 36
Certain U.S. Federal Income Tax Considerations.............................. 72
Plan of Distribution........................................................ 72
Legal Matters............................................................... 73
Experts..................................................................... 73
_________________
You should rely only on the information incorporated by reference or contained
in this prospectus. We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information contained
in this prospectus is accurate as of any date other than the date on the front
of this prospectus.
CERTAIN DEFINITIONS
As used in this prospectus, "Mcf" means thousand cubic feet, "MMcf" means
million cubic feet, "Bcf" means billion cubic feet, "Bbl" means barrel, "MBbls"
means thousand barrels, "MMBbls" means million barrels, "BOE" means equivalent
barrels of oil, "MBOE" means thousand equivalent barrels of oil and "MMBOE"
means million equivalent barrels of oil.
Unless otherwise indicated in this prospectus, gas volumes are stated at the
legal pressure base of the state or area in which the reserves are located and
60 Fahrenheit. Equivalent barrels of oil are determined using the ratio of six
Mcf of gas to one Bbl of oil.
The term "gross" refers to the total acres or wells in which we have a working
interest, and "net" refers to gross acres or wells multiplied by the percentage
working interest owned by us. "Net production" means production that is owned
by us less royalties and production due others. The terms "net" and "net
production" include 100 percent of our subsidiary Cadipsa S.A. and do not
reflect reductions for minority interest ownership.
The term "oil" includes crude oil, condensate and natural gas liquids.
"Finding cost" means an amount per BOE equal to the sum of all costs incurred
relating to oil and gas property acquisition, exploration and development
activities divided by the sum of all additions and revisions to estimated proved
reserves, including reserve purchases.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the public reference room. Our common stock is
listed and traded on the New York Stock Exchange under the trading symbol "VPI."
Such reports, proxy statements and other information can also be inspected and
copied at the New York Stock Exchange, 20 Broad Street, New York, New York.
This prospectus, which constitutes a part of a registration statement on Form
S-4 filed by us with the SEC under the Securities Act of 1933, omits certain of
the information set forth in the registration statement. Accordingly, you
should refer to the registration statement and its exhibits for further
information with respect to us and the exchange notes. Copies of the
registration statement and its exhibits are on file at the offices of the SEC.
Furthermore, statements contained in this prospectus concerning any document
filed as an exhibit are not necessarily complete and, in each instance, we refer
you to the copy of such document filed as an exhibit to the registration
statement.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important business and financial
information about us to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede the information in this prospectus. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until the termination of the offering made under this prospectus:
. Our Annual Report on Form 10-K for the year ended December 31, 1998; and
. Our Current Reports on Form 8-K dated February 24, 1999, and March 16,
1999.
These filings have not been included in or delivered with this prospectus.
You may request a copy of these filings at no cost, by writing or telephoning us
at the following address:
William C. Barnes, Secretary
Vintage Petroleum, Inc.
4200 One Williams Center
Tulsa, Oklahoma 74172
(918) 592-0101
To ensure timely delivery, you should request these filings no later than May
26, 1999.
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FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All
statements, other than statements of historical facts, included or incorporated
by reference in this prospectus, which address activities, events or
developments which we expect or anticipate will or may occur in the future are
forward-looking statements. The words "believes," "intends," "expects,"
"anticipates," "projects," "estimates," "predicts" and similar expressions are
also intended to identify forward-looking statements.
These forward-looking statements include, among others, such things as:
. our Year 2000 plans;
. the amount and nature of future capital expenditures;
. wells to be drilled or reworked;
. oil and gas prices and demand;
. exploitation and exploration prospects;
. estimates of proved oil and gas reserves;
. reserve potential;
. development and infill drilling potential;
. drilling prospects;
. expansion and other development trends of the oil and gas industry;
. business strategy;
. production of oil and gas reserves; and
. expansion and growth of our business and operations.
These statements are based on certain assumptions and analyses made by us in
light of our experience and our perception of historical trends, current
conditions and expected future developments as well as other factors we believe
are appropriate in the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is subject to a
number of risks and uncertainties which could cause actual results to differ
materially from our expectations, including
. the risk factors discussed in this prospectus and in the documents we
incorporate by reference;
. oil and gas prices;
. exploitation and exploration successes;
. continued availability of capital and financing;
. general economic, market or business conditions;
. the acquisition and other business opportunities (or lack thereof) that may
be presented to and pursued by us;
. changes in laws or regulations; and
. other factors, most of which are beyond our control.
Consequently, all of the forward-looking statements made in this prospectus
and in the documents we incorporate by reference are qualified by these
cautionary statements and there can be no assurance that the actual results or
developments anticipated by us will be realized or, even if substantially
realized, that they will have the expected consequences to or effects on us or
our business or operations. We assume no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events or otherwise.
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SUMMARY
The following summary highlights selected information from this prospectus and
may not contain all of the information that is important to you. For a more
complete understanding of this exchange offer, we encourage you to read this
entire prospectus and the documents to which we have referred you. Unless
otherwise indicated, all information in this prospectus relating to our capital
stock has been adjusted to reflect a two-for-one common stock split effected on
October 7, 1997. The term "outstanding notes" refers to the 9 3/4% Senior
Subordinated Notes due 2009 that were issued on January 26, 1999. The term
"exchange notes" refers to the 9 3/4% Senior Subordinated Notes due 2009
issuable in the exchange offer. The term "notes" collectively refers to the
outstanding notes, the exchange notes and any additional notes or additional
series of notes issued under the indenture. Certain other terms used in this
prospectus are defined under the section "Certain Definitions."
The Company
We are an independent oil and gas company engaged in the development,
exploitation, exploration, acquisition and production of oil and natural gas.
We are focused on the acquisition of producing oil and gas properties which
contain the potential for increased value through exploitation and development.
Through our experienced management and engineering staff, we have been
successful in increasing the values of prior acquisitions by restoring or
increasing production of producing wells, adding production from new formations
in existing wells, instituting enhanced recovery operations, reducing operating
costs and drilling development wells. We believe that our primary strengths are
our ability to add reserves at attractive prices and our low cost operating
structure.
At December 31, 1998, we owned and operated producing properties in 13 states,
with our domestic proved reserves located primarily in four core areas: the West
Coast, Gulf Coast, East Texas and Mid-Continent areas of the United States.
During 1998, we acquired additional producing properties in California and
Texas. Internationally, we established a new core area in 1995 by acquiring 12
oil concessions, 11 of which are producing and operated by us, in the south
flank of the San Jorge Basin of southern Argentina. In 1996, we expanded our
South American operations into Bolivia through the acquisition of Vintage
Petroleum Boliviana, Ltd. (formerly Shamrock Ventures (Boliviana) Ltd.) which
owns and operates three blocks covering approximately 570,000 acres in the Chaco
Plains area of southern Bolivia. During 1997, we enhanced our operations in
Bolivia by obtaining the concession rights to the Naranjillos concession located
in the Santa Cruz Province. In November 1998, we purchased, through a wholly-
owned subsidiary, a subsidiary of Elf Aquitaine which operates through a branch
in Ecuador. This subsidiary currently has producing properties in the Oriente
Basin which it operates and provides us with substantial undeveloped acreage
which we believe has significant exploration potential. While we have commenced
operating the subsidiary, the legal transfer of the subsidiary's stock to us is
subject to the prior approval by the Ecuadorian government.
As of December 31, 1998, we owned interests in 4,495 gross (2,398 net)
producing wells in the United States, of which approximately 80 percent are
operated by us, 712 gross (696 net) producing wells in Argentina, of which
approximately 97 percent are operated by us, 4 gross (3 net) producing wells in
Bolivia, 100 percent of which are operated by us and 5 gross (2 net) producing
wells in Ecuador, 100 percent of which are operated by us. As of December 31,
1998, our properties had proved reserves of 298.9 MMBOE, comprised of 164.5
MMBbls of oil and 806.8 Bcf of gas, with a present value of estimated future net
revenues before income taxes (utilizing a 10 percent discount rate) of $703
million and a standardized measure of discounted future net cash flows of $648
million. The significant decrease in oil prices realized during 1998 for our
oil production, which accounted for approximately 68 percent of our total
production for 1998, has resulted in a significant reduction in our earnings and
cash flows compared to 1997. To the extent low oil prices continue, our
earnings and cash flows from operations will be adversely impacted. The lower
prices are likely to also result in decreased future earnings resulting from
higher depreciation, depletion and amortization expense due to lower reserves.
From the first quarter of 1996 through the fourth quarter of 1998, we
increased our average net daily production from 30,200 Bbls of oil to 45,500
Bbls of oil and from 92,350 Mcf of gas to 126,850 Mcf of gas. For the year ended
December 31, 1998, we generated revenues of $329 million and EBITDA (as defined
in this summary under the section "Summary Financial Data") of $116 million.
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Our principal office is located at 4200 One Williams Center, Tulsa, Oklahoma
74172, and our telephone number is (918) 592-0101.
Business Strategy
Our overall goal is to maximize our value through profitable growth in our oil
and gas reserves and production. We have been successful at achieving this goal
through our ongoing strategy of:
. acquiring producing oil and gas properties, at favorable prices, with
significant upside potential;
. focusing on exploitation, development and exploration activities to
maximize production and ultimate reserve recovery;
. exploring non-producing properties;
. maintaining a low cost operating structure; and
. maintaining financial flexibility.
Key elements of our strategy include:
. Acquisitions of Producing Properties. We have an experienced management and
engineering team which focuses on acquisitions of operated producing
properties that meet our selection criteria which include:
. significant potential for increasing reserves and production through
exploitation, development and exploration;
. attractive purchase price; and
. opportunities for improved operating efficiency.
Our emphasis on property acquisitions reflects our belief that continuing
consolidation and restructuring activities on the part of major integrated
and large independent oil companies has afforded in recent years, and should
afford in the future, attractive opportunities to purchase domestic and
international properties. This acquisition strategy has allowed us to
rapidly grow our reserves at favorable acquisition prices. From January 1,
1996, through December 31, 1998, we acquired 119.2 MMBOE of proved oil and
gas reserves at an average acquisition cost of $2.82 per BOE. We replaced
through acquisitions approximately 1.9 times our production of 64.2 MMBOE
during the same period. We are continually identifying and evaluating
acquisition opportunities, including acquisitions that would be
significantly larger than those consummated to date by us. We cannot assure
you that any such acquisitions will be successfully consummated.
. Exploitation and Development. We pursue workovers, recompletions, secondary
recovery operations and other production optimization techniques on our
properties, as well as development and infill drilling, to offset normal
production declines and replace our annual production. From January 1, 1996,
through December 31, 1998, we spent approximately $277.5 million on
exploitation and development activities. During this period, our
recompletion and workover activities resulted in improved production or
operating efficiencies in approximately 75 percent of these operations. As a
result of all of our exploitation activities, including development and
infill drilling, during the three-year period ended December 31, 1998, we
succeeded in adding 54.1 MMBOE to proved reserves, replacing approximately
84 percent of production during this period. However, year-end 1998 oil and
gas prices, which were much lower than year-end 1997 prices, reduced
reserves 49.0 MMBOE, resulting in net upward revisions for the three years
ended December 31, 1998, of 5.1 MMBOE. We have an extensive inventory of
exploitation and development opportunities including identified projects
which represent an inventory of over 10 years at
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1998 activity levels. Due to the current low oil and gas prices, we
anticipate reduced spending of approximately $17 million in 1999 on
exploitation and development projects, primarily in the United States.
. Exploration. Our overall exploration strategy balances high potential
international prospects with lower risk drilling in known formations in the
United States and Argentina. This prospect mix and our practice of risk-
sharing with industry partners is intended to lower the incidence and costs
of dry holes. We make extensive use of geophysical studies, including 3-D
seismic, which further reduces the cost by increasing the success of our
exploration program. From January 1, 1996, through December 31, 1998, we
spent approximately $128.2 million on exploration activities, including the
drilling of 70 gross (39.37 net) exploration wells, of which approximately
57 percent gross (66 percent net) were productive. Our exploration
activities in 1998 were focused on our core areas in the United States and
Argentina as well as in Bolivia. We anticipate spending approximately $39
million during 1999 on exploration projects, primarily in the United States
and Bolivia.
. Low Cost Structure. We are an efficient operator and capitalize on our low
cost structure in evaluating acquisition opportunities. We generally achieve
substantial reductions in labor and other field level costs from those
experienced by the previous operators. In addition, we target acquisition
candidates which are located in our core areas and provide opportunities for
cost efficiencies through consolidation with our other operations. The lower
cost structure has generally allowed us to substantially improve the cash
flow of newly acquired properties.
. Financial Flexibility. We are committed to maintaining financial
flexibility, which management believes is important for the successful
execution of its acquisition, exploitation and exploration strategy. In
conjunction with the purchase of substantial oil and gas assets in 1990,
1992 and 1995, we completed three public equity offerings, as well as a
public debt offering in 1995. We also successfully completed simultaneous
public debt and equity offerings in February 1997 and the offering of the
outstanding notes in January 1999 under Rule 144A. These seven offerings
provided us with aggregate net proceeds of approximately $561 million. The
unused portion of our revolving credit facility as of March 31, 1999, was
approximately $182 million. As a result of the banks' semi-annual borrowing
base review under our revolving credit facility, our agent bank has
recommended that the remaining lenders approve a new borrowing base of $400
million to be effective May 14, 1999; however, no assurance can be given
that the banks will approve this new borrowing base. If the $400 million
borrowing base is approved, we anticipate that the unused portion of our
revolving credit facility would be approximately $100 million.
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The Exchange Offer
On January 26, 1999, we issued the outstanding notes, consisting of $150
million in aggregate principal amount of 9 3/4% Senior Subordinated Notes due
2009, to Warburg Dillon Read LLC in a private offering. This initial purchaser
sold these outstanding notes to institutional investors in transactions exempt
from the registration requirements of the Securities Act of 1933.
When we issued the outstanding notes, we entered into a registration rights
agreement in which we agreed to use our best efforts to complete the exchange
offer.
The Exchange Offer............Under the terms of the exchange offer, you are
entitled to exchange the outstanding notes in the
exchange offer for registered exchange notes with
substantially identical terms. You should read the
discussion under the section "Description of
Notes" for further information regarding the
exchange notes. The outstanding notes may be
tendered only in integral multiples of $1,000.
Resale of Exchange Notes......We believe that the exchange notes issued in the
exchange offer may be offered for resale, resold
or otherwise transferred by you without compliance
with the registration and prospectus delivery
provisions of the Securities Act of 1933, provided
that:
. you are acquiring the exchange notes in the
ordinary course of your business;
. you have no arrangement or understanding with
any person to participate in the distribution
of the exchange notes; and
. you are not an "affiliate" of ours.
If any of the foregoing are not true and you
transfer any exchange note without delivering a
prospectus meeting the requirements of the
Securities Act or without an exemption from the
registration requirements of the Securities Act,
you may incur liability under the Securities Act.
We do not assume or indemnify you against such
liability.
If you are a broker-dealer and receive exchange
notes for your own account in exchange for
outstanding notes that you acquired as a result of
market making or other trading activities, you
must acknowledge that you will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale of
the exchange notes. A broker-dealer may use this
prospectus for an offer to resell, resale or other
transfer of the exchange notes.
Failure to Exchange
Outstanding Notes May
Affect You Adversely..........If you do not exchange your outstanding notes for
exchange notes, you will no longer be able to
require us to register the outstanding notes under
the Securities Act. In addition, you will not be
able to offer or sell the outstanding notes
unless:
. they are registered under the Securities Act;
or
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. you offer or sell them under an exemption
from the requirements of, or in a transaction
not subject to, the Securities Act.
Expiration Date...............The exchange offer will expire at 5:00 p.m., New
York City time, on June 3, 1999, unless we decide
to extend the expiration date.
Interest on the Exchange
Notes.........................The exchange notes will accrue interest at 9 3/4%
per year, beginning on the last date we paid
interest on the outstanding notes you exchanged
or, if no interest has been paid on such
outstanding notes, from January 26, 1999. We will
pay interest on the exchange notes on June 30 and
December 30 of each year.
Conditions to the Exchange
Offer.........................We will proceed with the exchange offer, so long
as:
. the exchange offer does not violate any
applicable law or applicable interpretation
of law of the staff of the SEC;
. no litigation materially impairs our ability
to proceed with the exchange offer; and
. we obtain all the governmental approvals we
deem necessary for the exchange offer.
Procedures for Tendering
Notes........................If you wish to accept the exchange offer, you
must:
. complete, sign and date the letter of
transmittal, or a facsimile of it; and
. send the letter of transmittal and all other
documents required by it, including the
outstanding notes to be exchanged, to The
Chase Manhattan Bank, as exchange agent at
the address set forth on the cover page of
the letter of transmittal. Alternatively, you
can tender your outstanding notes by
following the procedures for book-entry
transfer, as described in this prospectus.
Guaranteed Delivery
Procedure....................If you wish to tender your outstanding notes and
you cannot get your required documents to the
exchange agent by the expiration date, you may
tender your outstanding notes according to the
guaranteed delivery procedure described under the
section "The Exchange Offer" under the heading
"Guaranteed Delivery Procedure."
Withdrawal Rights.............You may withdraw the tender of your outstanding
notes at any time prior to 5:00 p.m., New York
City time, on the expiration date. To withdraw,
you must send a written or facsimile transmission
notice of withdrawal to the exchange agent at its
address set forth in this prospectus under the
section "The Exchange Offer" under the heading
"Exchange Agent" by 5:00 p.m., New York City time,
on the expiration date.
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Acceptance of Outstanding
Notes and Delivery of
Exchange Notes...............If all of the conditions to the exchange offer are
satisfied or waived, we will accept any and all
outstanding notes that are properly tendered in
the exchange offer prior to 5:00 p.m., New York
City time, on the expiration date. We will deliver
the exchange notes promptly after the expiration
date.
Use of Proceeds...............We will not receive any cash proceeds from the
issuance of the exchange notes.
Tax Considerations............We believe that the exchange of outstanding notes
for exchange notes will not be a taxable exchange
for federal income tax purposes. However, you
should consult your tax adviser about the tax
consequences of this exchange as they apply to
your individual circumstances.
Exchange Agent................The Chase Manhattan Bank is serving as exchange
agent for the exchange offer.
Fees and Expenses.............We will bear all expenses related to consummating
the exchange offer and complying with the
registration rights agreement.
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Description of Exchange Notes
The exchange notes will be freely tradeable and otherwise substantially
identical to the outstanding notes. The exchange notes will not have
registration rights or provisions for additional interest. The exchange notes
will evidence the same debt as the outstanding notes, and the outstanding notes
are, and the exchange notes will be, governed by the same indenture.
Total Amount of Notes
Offered..............$150 million in aggregate principal amount of 9 3/4%
Senior Subordinated Notes due 2009. The exchange notes
offered by this prospectus are being issued under an
indenture that provides for the issuance of additional
notes or additional series of notes in an aggregate
principal amount not to exceed $50 million. Any such
additional notes will be identical in all respects to the
exchange notes, except for issue price and issuance date.
Maturity Date.........June 30, 2009.
Interest..............Fixed annual rate of 9 3/4%.
Interest Payment
Dates................June 30 and December 30 of each year, commencing June 30,
1999.
Optional Redemption...On or after February 1, 2004, we may redeem some or all of
the exchange notes at any time. In addition, prior to
February 1, 2002, we may redeem up to 33 1/3 percent of
the exchange notes with the proceeds of certain
underwritten public offerings of our common stock. The
redemption prices are listed in the section "Description
of Notes" under the heading "Optional Redemption."
Ranking...............The exchange notes will be unsecured senior subordinated
obligations. The exchange notes will rank:
. subordinate in right of payment to all existing and
future senior indebtedness;
. equal with existing and any future senior
subordinated indebtedness; and
. senior to any future junior subordinated
indebtedness.
Assuming we had completed the offering of the outstanding
notes on December 31, 1998, and applied the net proceeds
as intended, and completed the exchange offer on December
31, 1998, the exchange notes:
. would have been subordinated to approximately $389
million of senior indebtedness; and
. would have ranked equally with $250 million of other
senior subordinated indebtedness.
The exchange notes will also be effectively subordinated
to the indebtedness and other liabilities of our
subsidiaries. The total balance sheet liabilities of our
subsidiaries were $26.9 million at December 31, 1998.
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Mandatory Offer to
Repurchase...........If we experience specific kinds of changes of control, we
must offer to repurchase the exchange notes at 101 percent
of the principal amount of the exchange notes, plus
accrued and unpaid interest, if any, to the date of
repurchase. For more details, see the section "Description
of Notes" under the heading "Repurchase at the Option of
Holders Upon a Change of Control."
Basic Covenants of
Indenture............We will issue the exchange notes under an indenture with
The Chase Manhattan Bank. The indenture contains
limitations on, among other things:
. our ability to incur additional indebtedness;
. the payment of dividends and other distributions
with respect to our capital stock and the purchase,
redemption or retirement of our capital stock;
. the making of certain investments;
. the incurrence of certain liens;
. asset sales;
. the issuance and sale of capital stock of our
restricted subsidiaries; transactions with
affiliates;
. payment restrictions affecting our restricted
subsidiaries; and
. certain consolidations, mergers and transfers of
assets.
All of these limitations are subject to a number of
important qualifications. For more details, see the
section "Description of Notes" under the heading "Certain
Covenants."
Risk Factors
You should consider carefully the "Risk Factors" beginning on page 13 before
participating in the exchange offer.
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Summary Financial Data
The following table presents a summary of our financial information for the
periods indicated. It should be read in conjunction with our consolidated
financial statements and related notes and the section "Management's Discussion
and Analysis of Financial Condition and Results of Operations," incorporated by
reference in this prospectus. Significant acquisitions of producing oil and gas
properties during 1995 and 1997 affect the comparability of the financial data
for the periods presented below.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------
1994(a) 1995(a) 1996(a) 1997(a) 1998
----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
(In thousands, except ratios and per share amounts)
Income Statement Data:
Revenues:
Oil and gas sales.........................$141,357 $ 160,254 $ 258,368 $ 355,113 $ 266,661
Oil and gas gathering..................... 14,635 12,380 20,508 18,063 7,741
Gas marketing............................. 27,285 20,912 31,920 45,981 54,108
Other income (expense).................... 2,474 1,669 1,351 (2,567) 425
-------- --------- --------- --------- ----------
185,751 195,215 312,147 416,590 328,935
-------- --------- --------- --------- ----------
Costs and expenses:
Lease operating, including production
taxes.................................... 59,292 66,771 91,916 114,346 122,726
Exploration costs......................... 3,012 3,834 10,192 12,667 24,056
Impairment of oil and gas properties...... -- -- -- 8,785 70,913
Oil and gas gathering..................... 12,294 9,511 16,985 14,932 6,258
Gas marketing............................. 24,963 18,839 29,537 43,398 51,560
General and administrative................ 11,657 15,505 22,902 27,361 31,996
Depreciation, depletion and
amortization............................. 39,341 48,336 66,861 96,307 108,975
Interest.................................. 12,002 20,178 30,109 36,762 43,680
-------- --------- --------- --------- ----------
162,561 182,974 268,502 354,558 460,164
-------- --------- --------- --------- ----------
Income (loss) before income taxes and
minority interest.......................... 23,190 12,241 43,645 62,032 (131,229)
Provision (benefit) for income taxes:
Current................................... 1,576 (955) 2,610 5,235 (4,068)
Deferred.................................. 7,225 4,566 7,365 1,640 (39,496)
Minority interest in (income) loss of
subsidiary(b)............................... -- 819 (482) (203) --
-------- --------- --------- --------- ----------
Net income (loss)...........................$ 14,389 $ 9,449 $ 33,188 $ 54,954 $ (87,665)
======== ========= ========= ========= ==========
Earnings (loss) per share(c)(d)............. $.34 $.22 $.68 $1.05 $(1.69)
Weighted average common shares
outstanding(c)(d)........................... 42,348 42,081 48,654 52,026 51,900
Cash Flow Data:
Cash provided (used) by:
Operating activities......................$ 56,001 $ 50,713 $ 110,586 $ 186,602 $ 66,250
Investing activities...................... (67,999) (183,765) (168,665) (300,648) (275,319)
Financing activities...................... 11,867 135,166 58,308 117,069 208,517
Balance Sheet Data (end of year):
Property, plant and equipment, net..........$335,922 $ 543,603 $ 664,025 $ 806,887 $ 898,242
Total assets................................ 377,010 613,397 766,816 915,394 1,014,175
Total debt.................................. 193,864 323,776 379,019 451,096 672,507
Stockholders' equity........................ 137,209 203,265 236,406 337,578 273,958
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1994(a) 1995(a) 1996(a) 1997(a) 1998
-------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
(In thousands, except ratios and per share amounts)
Other Financial Data:
Dividends declared per share(c)(e).......... $.035 $.045 $.055 $.07 $.09
EBITDA(f)...................................$ 77,545 $ 84,589 $ 150,807 $ 216,553 $ 116,395
Ratio of EBITDA to interest expense......... 6.5x 4.2x 5.0x 5.9x 2.7x
Ratio of earnings to fixed charges(g)(h).... 2.9x 1.6x 2.4x 2.7x -
</TABLE>
- --------
(a) Restated for change in accounting method. Effective January 1, 1998, we
elected to change our accounting method for oil and gas properties from the
full cost method to the successful efforts method.
(b) Reflects the minority interest in our subsidiary Cadipsa S.A.
(c) Amounts have been adjusted to give effect to our two-for-one common stock
split effected on October 7, 1997.
(d) Amounts have been restated to give effect to the adoption of Statement of
Financial Accounting Standards No. 128, Earnings Per Share, as of December
31, 1997. Amounts shown represent diluted earnings (loss) per share and
diluted weighted average common shares outstanding as calculated under the
provisions of SFAS No. 128.
(e) Due to the recent historically low oil and gas price environment, we have
temporarily suspended our regular quarterly cash dividend. Subject to
restrictions under credit arrangements, the determination of the amount of
future cash dividends, if any, to be declared and paid, will depend upon,
among other things, our financial condition, funds from operations, the
level of our capital expenditures and our future business prospects.
(f) EBITDA represents earnings before interest, income taxes, depreciation,
depletion and amortization, exploration costs and impairment of oil and gas
properties. EBITDA is included as a supplemental disclosure because it is
commonly accepted as providing useful information regarding a company's
ability to service and incur debt. EBITDA, however, should not be
considered in isolation or as a substitute for net income, cash flow
provided by operating activities or other income or cash flow data prepared
in accordance with generally accepted accounting principles or as a measure
of a company's profitability or liquidity.
(g) For purposes of calculating the ratio of earnings to fixed charges,
earnings are defined as income of us and our subsidiaries before income
taxes and fixed charges. Fixed charges consist of interest expense,
including amortization of financing costs and any discount or premium
related to any indebtedness.
(h) Earnings were insufficient to cover fixed charges by $131 million for the
year ended December 31, 1998.
10
<PAGE>
Summary Operating and Reserve Data (a)
(Unaudited)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------------
1994(b) 1995(b) 1996(b) 1997(b) 1998
----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Production:
Oil (MBbls).............................. 6,657 7,608 11,939 15,457 16,434
Gas (MMcf)............................. 28,884 30,610 32,366 42,691 47,238
Oil equivalent (MBOE).................. 11,471 12,710 17,333 22,573 24,307
Average sales prices:
Oil (per Bbl)..........................$ 13.53 $ 15.26 $ 16.73 (c) $ 17.02 (c) $ 10.87
Gas (per Mcf).......................... 1.78 1.46 1.81 2.16 1.86
Production costs (per BOE)(d)............ 5.17 5.25 5.30 5.07 5.05
Three-year average finding cost
(per BOE)(e)............................. 3.15 2.93 2.94 3.30 4.50
Proved reserves (end of year):
Oil (MBbls)............................ 70,789 147,871 178,296 187,768 164,457
Gas (MMcf)............................. 281,638 310,762 382,846 552,163 806,833
Total proved reserves (MBOE)........... 117,729 199,665 242,104 279,795 298,929
Proved developed reserves
(MBOE).............................. 91,722 145,790 183,629 204,874 207,745
Annual reserve replacement ratio(f)...... 179% 747% 347% 268% 181%
Estimated reserve life (in years)(g)..... 10.3 15.7 14.0 12.4 12.3
Present value of estimated future net
revenues before income taxes
(discounted at 10%) (in thousands).......$446,987 $894,249 $1,807,137 $1,222,560 $703,211
Standardized measure of discounted
future net cash flows (in thousands).....$385,721 $736,546 $1,392,841 $1,016,645 $648,222
</TABLE>
__________
(a) Significant acquisitions of producing oil and gas properties during 1995
and 1997 affect the comparability of the operating data for the periods
presented.
(b) Restated for change in accounting method. Effective January 1, 1998, we
elected to change our accounting method for oil and gas properties from the
full cost method to the successful efforts method.
(c) During the calendar year 1996, the impact of oil hedges reduced our overall
average oil price per Bbl $2.00 to $16.73. During the calendar year 1997,
the impact of oil hedges reduced our overall average oil price per Bbl 24
cents to $17.02.
(d) Includes lease operating costs and production and ad valorem taxes.
(e) Represents the average finding cost per BOE during the three years ended
December 31 of the year shown in the column. See the section "Certain
Definitions."
(f) The annual reserve replacement ratio is a percentage determined on a BOE
basis by dividing the estimated reserves added during a year from
exploitation, development and exploration activities, acquisitions of
proved reserves and revisions of previous estimates, excluding property
sales, by the oil and gas volumes produced during that year.
(g) Estimated reserve life is calculated on a BOE basis by dividing the total
estimated proved reserves at year-end by the total production during the
year. This calculation can be affected by the timing of major acquisitions.
For example, major acquisitions were made during the second half of 1995
which resulted in an estimated reserve life of 15.7 years for 1995. This
compares to an estimated reserve life of 12.0 years for 1995 based on
annualized first quarter 1996 production.
11
<PAGE>
Summary Oil and Gas Reserve Data
The following table sets forth summary information with respect to the
estimates of our proved oil and gas reserves at December 31, 1998, as estimated
by the independent petroleum engineers of Netherland, Sewell & Associates, Inc.,
for the United States, Argentina and Ecuador and as estimated by the independent
petroleum engineers of DeGolyer and MacNaughton for Bolivia. For additional
information relating to our oil and gas reserves, see Note 11 "Supplementary
Financial Information for Oil and Gas Producing Activities" to our consolidated
financial statements incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
Proved Reserves at
December 31, 1998
-------------------------------
Developed Undeveloped Total
--------- ----------- -------
<S> <C> <C> <C>
United States:
Oil (MBbls)...... 51,481 5,726 57,207
Gas (MMcf).......330,371 55,141 385,512
MBOE.............106,543 14,916 121,459
Argentina:
Oil (MBbls)...... 47,167 27,674 74,841
Gas (MMcf)....... 12,024 -- 12,024
MBOE............. 49,171 27,674 76,845
Bolivia:
Oil (MBbls)...... 4,390 3,974 8,364
Gas (MMcf).......278,317 130,980 409,297
MBOE............. 50,776 25,804 76,580
Ecuador:
Oil (MBbls)...... 1,255 22,790 24,045
Gas (MMcf)....... -- -- --
MBOE............. 1,255 22,790 24,045
Total:
Oil (MBbls)......104,293 60,164 164,457
Gas (MMcf).......620,712 186,121 806,833
MBOE.............207,745 91,184 298,929
</TABLE>
12
<PAGE>
RISK FACTORS
You should consider carefully the following risk factors, together with all
of the other information in this prospectus and the documents that are
incorporated by reference, before you decide to exchange your outstanding notes
for exchange notes in the exchange offer.
Low Oil and Gas Prices Have Caused Our Earnings and Cash Flow to Decline
Our revenues, operating results, cash flow and future rate of growth depend
substantially upon prevailing prices for oil and gas. Historically, oil and gas
prices and markets have been volatile, and they are likely to continue to be
volatile in the future. For the year ended December 31, 1998, approximately 68
percent of our production was oil. The prices we received for our oil for the
period decreased by 36 percent as compared to the same period in 1997. As a
result, although total production on an equivalent barrels of oil basis
increased by eight percent for 1998, our earnings and cash flows have been
materially reduced compared to the same period in 1997. While oil prices have
recovered modestly since year-end, they still remain well below the average
price historically seen by the industry. To the extent low oil prices continue,
our earnings and cash flow from operations will be adversely impacted.
Prices for oil and gas are subject to wide fluctuations in response to
relatively minor changes in the supply of and demand for oil and gas, market
uncertainty and a variety of additional factors that are beyond our control,
including:
. political conditions in oil producing regions, including the Middle East;
. the domestic and foreign supply of oil and gas;
. the level of consumer demand;
. weather conditions;
. domestic and foreign government regulations;
. the price and availability of alternative fuels; and
. overall economic conditions.
In addition, various factors may adversely affect our ability to market our
oil and gas production, including:
. the capacity and availability of oil and gas gathering systems and
pipelines;
. the effect of federal and state regulation of production and
transportation;
. general economic conditions;
. changes in supply due to drilling by other producers;
. the availability of drilling rigs; and
. changes in demand.
13
<PAGE>
Lower Oil and Gas Prices Have Reduced Our Capital Expenditures and Adversely
Affect Our Reserve Estimates
Lower oil and gas prices have various adverse effects on us, including
reducing cash flows which, among other things, have caused us, and may in the
future cause us, to decrease our capital expenditures. Our preliminary planned
capital expenditure program, before acquisitions, in 1999 is set at $56 million,
compared to $185 million in 1998 and $119 million in 1997. Because the timing of
most of our capital expenditures is discretionary, should oil and gas prices
improve during 1999, our 1999 capital expenditure program may be adjusted
upwards. A smaller capital expenditure program may adversely affect our ability
to increase or maintain our reserve and production levels. Lower prices may also
result in reduced reserve estimates, the one-time write-off of impaired assets
and decreased earnings due to lower reserves and higher depreciation, depletion
and amortization expense. For example, we recorded in the fourth quarter of
1998 a significant non-cash charge for the impairment of our oil and gas
properties due to lower oil and gas prices.
The Amount We Can Borrow Under Our Credit Arrangements May be Significantly
Reduced
Lower oil and gas prices could also result in future reductions in the
borrowing base (currently $482.5 million) under our revolving credit facility
because of lower oil and gas reserve values, reducing our liquidity and even
triggering mandatory loan repayments. As a result of the banks' semi-annual
borrowing base review under our revolving credit facility, our agent bank has
recommended that the remaining lenders approve a new borrowing base of $400
million to be effective May 14, 1999; however, no assurance can be given that
the banks will approve this new borrowing base. Any reduction in our liquidity
could impede our ability to fund future acquisitions. Lower prices may also
cause us to not be in compliance with maintenance covenants under our revolving
credit facility and may negatively affect our credit statistics and coverage
ratios.
Our Significant Indebtedness Could Have Important Consequences to You
We currently have, and after the exchange offer will continue to have, a
substantial amount of indebtedness. At December 31, 1998, after giving effect to
the offering of the outstanding notes and the application of the net proceeds as
intended, our total long-term debt outstanding would have been approximately
$677 million. At December 31, 1998, after giving effect to the offering of the
outstanding notes and the application of the net proceeds as intended, we would
have had a long-term debt to total capitalization ratio of 71 percent. Our
significant indebtedness could have important consequences to you. For example:
. our ability to obtain any necessary financing in the future for
working capital, capital expenditures, acquisitions, debt service
requirements or other purposes may be limited;
. a portion of our cash flow from operations must be utilized for the
payment of interest on our indebtedness and will not be available for
financing capital expenditures or other purposes; for example, interest
payments for 1998 represented approximately 35 percent of our cash
flows from operations before interest expense and will likely represent
a significantly higher percentage in 1999 due to the adverse effect of
low oil and gas prices on our cash flow from operations;
. our level of indebtedness and the covenants governing our current
indebtedness could limit our flexibility in planning for, or reacting
to, changes in our business because certain financing options may be
limited or prohibited;
. we are more highly leveraged than some of our competitors, which may
place us at a competitive disadvantage;
. our level of indebtedness may make us more vulnerable during periods of
low oil and gas prices (such as exist today) or in the event of a
downturn in our business because of our fixed debt service obligations;
and
14
<PAGE>
. the terms of our revolving credit facility require us to make interest
and principal payments and to maintain stated financial covenants. If
the requirements of this facility are not satisfied, the lenders under
this facility would be entitled to accelerate the payment of all
outstanding indebtedness under this facility, and a default would be
deemed to occur under the terms of the notes as well as under our other
senior subordinated notes. In such event, we cannot assure you that we
would have sufficient funds available or could obtain the financing
required to meet our obligations.
We May Take On More Debt Which Would Increase These Risks
We may be able to incur substantial additional indebtedness in the future.
As of March 31, 1999, our revolving credit facility, which has a current
borrowing base of $482.5 million, would permit additional borrowings of up to
approximately $182 million. Had the banks' proposed borrowing base of $400
million been in effect on March 31, 1999, our unused availability under our
revolving credit facility would have been approximately $100 million. All of
such borrowings would be senior to the notes. In addition, the terms of the
indentures governing the notes and our other senior subordinated notes permit us
to incur additional indebtedness. If we were to add additional indebtedness to
our current debt levels, the related risks discussed above that we now face
could intensify.
Subordination of Notes As to Right of Payment and Holding Company Structure May
Limit Payments on the Notes
The indenture governing the notes limits, but does not prohibit, us from
incurring additional indebtedness that is senior in right of payment to the
notes. Senior indebtedness includes the indebtedness and other liabilities of
our subsidiaries by reason of structural subordination. In the event of our
bankruptcy, liquidation, reorganization or other winding up, our assets will be
available to pay our obligations on the notes only after all senior indebtedness
has been paid in full. Accordingly, 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.
Obligations of our subsidiaries will represent prior claims with respect to
the assets and earnings of such subsidiaries. The notes, therefore, are
effectively subordinated to all current and future liabilities (including trade
payables and accrued liabilities) of our subsidiaries. Our subsidiaries also
may have contingent liabilities, which could be substantial. The rights of our
creditors, including the holders of the notes, to realize upon the assets of any
subsidiary upon such subsidiary's liquidation or reorganization will be subject
to the prior claims of such subsidiary's creditors.
If we are required to apply any portion of the proceeds from an asset sale
to redeem the notes or to make an offer to repurchase the notes, we would be
required to first redeem or repurchase our 9% Senior Subordinated Notes Due
2005. In addition, we would be required to make any such redemption of, or
offer to repurchase, the notes on a pro rata basis with all then outstanding
indebtedness that is equal in rank with the notes (other than such 9% Notes),
including our 8 5/8% Senior Subordinated Notes Due 2009.
In addition, the indenture governing the notes permits our foreign
subsidiaries to enter into agreements restricting their ability to pay dividends
to us. There are no such agreements currently in place.
Our Future Performance Depends Upon Our Ability to Find or Acquire Additional
Oil and Gas Reserves that are Economically Recoverable
Unless we successfully replace the reserves that we produce, our reserves
will decline, resulting eventually in a decrease in oil and gas production and
lower revenues and cash flow from operations. We historically have succeeded in
substantially replacing reserves through exploitation, development and
exploration. We have
15
<PAGE>
conducted such activities on our existing oil and gas properties as well as on
newly acquired properties. We may not be able to continue to replace reserves
from such activities at acceptable costs. Lower prices of oil and gas may
further limit the kinds of reserves that can be developed at an acceptable cost.
Lower prices also decrease our cash flow and may cause us to decrease capital
expenditures. The business of exploring for, developing or acquiring reserves is
capital intensive. We may not be able to make the necessary capital investment
to maintain or expand our oil and gas reserves if cash flow from operations is
reduced and external sources of capital become limited or unavailable. In
addition, exploitation, development and exploration involve numerous risks that
may result in dry holes, the failure to produce oil and gas in commercial
quantities and the inability to fully produce discovered reserves.
We are continually identifying and evaluating acquisition opportunities,
including acquisitions that would be significantly larger than those consummated
to date by us. We cannot assure you that we will successfully consummate any
acquisition, that we will be able to acquire producing oil and gas properties
that contain economically recoverable reserves or that any acquisition will be
profitably integrated into our operations.
Acquisitions Carry Unknown Risks Including Potential for Environmental Problems
We expect to continue to focus, as we have done in the past, on acquiring
producing oil and gas properties to replace reserves. Our focus on acquiring
producing oil and gas properties may increase our potential exposure to
liabilities and costs for environmental and other problems existing on such
properties. Although we perform a review of the acquired properties that we
believe is consistent with industry practice, such reviews are inherently
incomplete. In general, it is not feasible to review in-depth each individual
property being acquired. Ordinarily, we focus our review efforts on the higher-
valued properties and sample the remainder. However, even an in-depth review of
all properties and records may not necessarily reveal existing or potential
problems nor will it permit us to become sufficiently familiar with the
properties to fully assess their deficiencies and capabilities. Inspections may
not always be performed on each well included in an acquisition, and
environmental problems, such as ground water contamination and surface and
subsurface damages from the leakage, spills, disposal or other releases of
hazardous substances on such properties or from adjoining properties that have
migrated to such properties, are not necessarily observable even when an
inspection is performed.
Estimating Reserves and Future Net Revenues Involves Uncertainties and Oil and
Gas Price Declines May Lead to Impairment of Oil and Gas Assets
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting future rates of production and timing of
developmental expenditures, including many factors beyond the control of the
producer. The reserve data included or incorporated by reference in this
prospectus represent only estimates. In addition, the estimates of future net
revenues from our proved reserves and the present value of such estimates are
based upon certain assumptions about future production levels, prices and costs
that may not prove to be correct over time.
Quantities of proved reserves are estimated based on economic conditions in
existence in the period of assessment. Lower oil and gas prices may have the
impact of shortening the economic lives on certain fields because it becomes
uneconomic to produce all recoverable reserves on such fields, thus reducing
proved property reserve estimates. If such revisions in the estimated quantities
of proved reserves occur, it will have the effect of increasing the rates of
depreciation, depletion and amortization on the affected properties, which would
decrease earnings through higher depreciation, depletion and amortization
expense. The revisions may also be sufficient to trigger impairment losses on
certain properties which would result in a further non-cash charge to earnings.
Our International Operations May Be Adversely Affected By a Number of Factors
International investments represent, and are expected to continue to
represent, a significant portion of our total assets. We have international
operations in Argentina, Bolivia, Ecuador and Yemen. For 1998, our operations
16
<PAGE>
in Argentina accounted for approximately 20 percent of our revenues, 80 percent
of our operating income (before impairments of oil and gas properties) and 27
percent of our long-lived assets. During such period, our operations in
Argentina represented our only foreign operations accounting for more than 10
percent of our revenues, operating income (before impairments of oil and gas
properties) or long-lived assets. We continue to identify and evaluate
international investment opportunities but currently have no binding agreements
or commitments to make any material international investment.
Our foreign properties, operations or investments in Argentina, Bolivia,
Ecuador and Yemen may be adversely affected by a number of factors, including:
. local political and economic developments could restrict or increase
the cost of our foreign operations;
. exchange controls and currency fluctuations;
. royalty and tax increases and retroactive tax claims could increase
costs of our foreign operations;
. expropriation of our property could result in loss of revenue, property
and equipment;
. import and export regulations and other foreign laws or policies could
result in loss of revenues; and
. laws and policies of the United States affecting foreign trade,
taxation and investment could restrict ability to fund foreign
operations or make foreign operations more costly.
In particular, our Bolivian projects are dependent, at least in part, on the
development of the Bolivia-to-Brazil gas pipeline. The completion of this
pipeline is subject to various factors outside our control. In addition, in the
event of a dispute arising from foreign operations, we may be subject to the
exclusive jurisdiction of foreign courts or may not be successful in subjecting
foreign persons to the jurisdiction of the courts in the United States. We may
also be hindered or prevented from enforcing our rights with respect to actions
taken by a foreign government or its agencies.
Our Hedging Activities May Reduce the Effect of Volatility of Oil and Gas Prices
on Us But May Expose Us to the Risk of Financial Loss in Certain Circumstances
We have previously engaged in oil and gas hedging activities and intend to
continue to consider various hedging arrangements to realize commodity prices
which we consider favorable. We currently have in place natural gas basis swaps
covering 82,000 million british thermal units of gas per day for calendar year
1999 and covering an additional 3,000 million british thermal units of gas per
day for the period of January through October 1999. We have also recently
entered into a contract hedging 15,000 barrels of oil per day for the months of
May, June and July 1999 at a NYMEX reference price of $18.00 per barrel. The
impact of changes in the market prices for oil and gas on the average oil and
gas prices received by us may be reduced from time to time based on the level of
our hedging activities. These hedging arrangements may limit our potential gains
if the market prices for oil and gas were to rise substantially over the price
established by the hedge. In addition, our hedging arrangements expose us to the
risk of financial loss in certain circumstances, including instances in which:
. production is less than expected;
. a change in the difference between published price indexes established
by pipelines in which our hedged production is delivered and the
reference price established in the hedging arrangements is such that we
are required to make payments to the counterparties to our
arrangements; or
. the counterparties to our hedging arrangements fail to honor their
financial commitments.
17
<PAGE>
Possible Inability to Repay or Repurchase Indebtedness, Including the Notes,
upon a Change of Control
Upon the occurrence of certain specific change of control events:
. the lenders under our revolving credit facility could demand repayment
of all outstanding indebtedness under the facility; and
. holders of the notes and our other outstanding senior subordinated
indebtedness, in the aggregate principal amount of $400 million, will
have the right to require us, subject to certain conditions, to
repurchase all or any part of such holders' indebtedness at a price
equal to 101 percent of the principal amount, plus accrued and unpaid
interest, if any, to the date of repurchase.
Upon such an occurrence, we would be required to redeem or repay the lenders
under our revolving credit facility before repurchasing the notes and such other
outstanding senior subordinated indebtedness. In addition, future indebtedness
of ours may include similar change of control provisions.
A change of control under our revolving credit facility and senior
subordinated indentures, including the indenture for the notes, includes:
. the acquisition of 50 percent or more of our voting stock by any
individual or group;
. the sale, lease, transfer or conveyance of substantially all our
assets;
. the reconstitution of our Board of Directors under certain
circumstances; and
. our merger or consolidation with another entity in a transaction in
which our outstanding voting stock is exchanged for cash, securities or
property other than voting capital stock of the surviving corporation
where holders of our voting stock immediately prior to the transaction
own not less than a majority of the voting stock of the surviving
corporation after the transaction in substantially the same proportion
as before the transaction.
The term "Change of Control" with respect to the notes is defined in
"Description of Notes--Repurchase at the Option of Holders Upon a Change of
Control." Except as described above, the indenture for the notes does not
contain any other provisions that permit the holders of the notes to require us
to repurchase or redeem the notes in the event of a takeover, recapitalization
or similar restructuring.
We cannot assure you that we would have sufficient funds available or could
obtain the financing required to repay or repurchase such outstanding
indebtedness, including the notes, following such a change of control. If a
change of control occurred and we had inadequate funds or financing available to
pay for such indebtedness, an event of default would be triggered under the
terms of such indebtedness, which could have adverse consequences for us and the
holders of the indebtedness. In such event, we cannot assure you that we would
have sufficient funds available or could obtain the financing required to meet
our obligations.
Possible Financial Loss Due to Uninsured Risks Associated with Our Operations
Our operations are subject to all of the risks and hazards typically
associated with the exploitation, development and exploration for, the
production of, and the transportation of oil and gas. Operating risks include
but are not limited to:
. blowouts, cratering and explosions;
. uncontrollable flows of oil, natural gas or well fluids;
. fires;
18
<PAGE>
. formations with abnormal pressures;
. pollution and other environmental risks; and
. natural disasters.
Any of such events could result in loss of human life, significant damage to
property, environmental pollution, impairment of our operations and substantial
losses to us. In accordance with customary industry practice, we maintain
insurance against some, but not all, of such risks and losses. The occurrence of
such an event not fully covered by insurance could have a material adverse
effect on our financial position and results of operations.
Governmental and Environmental Regulations Could Adversely Affect Our Business
Our business is subject to certain foreign, federal, state and local laws
and regulations on taxation, the exploration for and development, production and
marketing of oil and gas, and environmental and safety matters. Many laws and
regulations require drilling permits and govern the spacing of wells, rates of
production, prevention of waste and other matters. Such laws and regulations
have increased the costs of planning, designing, drilling, installing, operating
and abandoning our oil and gas wells and other facilities. In addition, these
laws and regulations, and any others that are passed by the jurisdictions where
we have production, could limit the total number of wells drilled or the
allowable production from successful wells which could limit our revenues.
Our operations are subject to complex environmental laws and regulations
adopted by the various jurisdictions where we operate. We could incur liability
to governments or third parties for any unlawful discharge of oil, gas or other
pollutants into the air, soil or water, including responsibility for remedial
costs. We could potentially discharge such materials into the environment in any
of the following ways:
. from a well or drilling equipment at a drill site;
. leakage from gathering systems, pipelines, transportation facilities
and storage tanks;
. damage to oil and natural gas wells resulting from accidents during
normal operations; and
. blowouts, cratering and explosions.
Because the requirements imposed by such laws and regulations are frequently
changed, we cannot assure you that laws and regulations enacted in the future,
including changes to existing laws and regulations, will not adversely affect
our business. In addition, because we acquire interests in properties that have
been operated in the past by others, we may be liable for environmental damage
caused by such former operators.
Highly Competitive Industry May Impede Our Growth
The oil and gas industry is highly competitive. We compete in the areas of
property acquisitions and the development, production and marketing of, and
exploration for, oil and natural gas with major oil companies, other independent
oil and natural gas concerns and individual producers and operators. We also
compete with major and independent oil and natural gas concerns in recruiting
and retaining qualified employees. Many of these competitors have substantially
greater financial and other resources than we do.
Pending Litigation
We are currently involved in pending litigation in Argentina with respect to
the amount of royalties due the Province of Santa Cruz, Argentina, on production
from four of our Argentine concessions. At December 31, 1998,
19
<PAGE>
the disputed claim totaled approximately $18.0 million (which amount includes
interest). The amount of this claim will increase, until resolved, as a result
of the continued payment of a lower royalty rate than that claimed to be
applicable by the Province of Santa Cruz. We believe that, with respect to our
50 percent interest in two concessions acquired from British Gas, plc, we will
be entitled to indemnification by British Gas, plc for any loss sustained by us
as a result of this claim. Such indemnification is estimated at approximately
$4.7 million at December 31, 1998.
Control by Certain Stockholders May Have the Effect of Delaying or Preventing a
Change in Control of Us
Our current officers and directors as a group own approximately 31 percent
of our outstanding common stock. Consequently, these stockholders may be in a
position to effectively control our affairs, including the election of all of
our directors and the approval or prevention of certain corporate transactions
which require majority stockholder approval. Such a concentration of ownership
may have the effect of delaying or preventing a change in control of us,
including transactions in which our stockholders might otherwise receive a
premium for their shares over then current market prices.
Year 2000 Risks Could Have a Material Adverse Impact on Our Operations and
Financial Condition Despite Our Own Efforts to Ensure Year 2000 Compliance
We have undertaken various initiatives to assess and ensure that our
information systems and our production and field equipment, gathering systems,
security systems and other systems and equipment will function properly before
and after January 1, 2000. We have formed a Year 2000 Project team, which is
chaired by our Manager of Information Services, and have developed a Year 2000
compliance time line that covers the phases of identification, assessment,
remediation and testing. We are currently developing contingency plans in the
event that Year 2000 problems arise due to any failures of our systems or any
failures on the part of our business partners to become Year 2000 compliant. We
presently believe that the Year 2000 issue will not cause significant internal
operational problems. However, in the event we have not properly identified all
Year 2000 issues, or we have not effected assessment, remediation and testing on
a timely basis, we cannot assure you that Year 2000 issues will not have a
material adverse impact on our results of operations or financial condition.
The Year 2000 issues also affect numerous other companies with whom we do
business, including oil and gas purchasers, pipeline companies, vendors, service
companies, utility providers and financial institutions. We have submitted over
14,000 Year 2000 compliance questionnaires to our various business partners. To
date, we have received over 5,600 responses to these questionnaires. Responses
to these questionnaires are being evaluated to determine the preparation and
readiness of our key business partners with respect to Year 2000 issues. There
can be no assurance, however, that the failure of our key business partners to
adequately prepare for Year 2000 issues will not have a material adverse impact
on our operations and financial condition notwithstanding our own efforts to
ensure Year 2000 compliance.
If You Do Not Participate in the Exchange Offer, Your Outstanding Notes Will
Continue to be Subject to Transfer Restrictions
If you do not exchange your outstanding notes for exchange notes pursuant to
the exchange offer, your outstanding notes will continue to be subject to the
restrictions on transfer of your outstanding notes. We do not intend to
register the outstanding notes under the Securities Act of 1933. To the extent
outstanding notes are tendered and accepted in the exchange offer, the trading
market, if any, for the outstanding notes would be adversely affected.
20
<PAGE>
Lack of Public Market for the Exchange Notes
There is no existing trading market for the exchange notes, and there can be
no assurance regarding the future development of a market for the exchange
notes, or the ability of holders of the exchange notes to sell the exchange
notes or the price at which such holders may be able to sell the exchange notes.
If such a market were to develop, future trading prices of the exchange notes
will depend on many factors, including prevailing interest rates, our financial
condition and results of operations and the market for similar notes. The
initial purchaser of the outstanding notes has advised us that it currently
intends to make a market in the exchange notes. The initial purchaser is not
obligated to do so, however, and any such market-making may be discontinued at
any time without notice. Therefore, there can be no assurance as to the
liquidity of any trading market for the exchange notes or that an active public
market for the exchange notes will develop. If an active market does not
develop, the market price and liquidity of the exchange notes may be adversely
affected. In addition, we do not intend to apply (and are not obligated to
apply) for listing or quotation of the exchange notes on any securities exchange
or stock market.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
exchange notes. In consideration for issuing the exchange notes, the Company
will receive in exchange a like principal amount of outstanding notes. The
outstanding notes surrendered in exchange for the exchange notes will be retired
and canceled and cannot be reissued. Accordingly, the issuance of the exchange
notes will not result in any change in the Company's capitalization. The
proceeds received from the sale of the outstanding notes were used to reduce a
portion of existing indebtedness under the Company's revolving credit facility.
CAPITALIZATION
The following table sets forth at December 31, 1998: (a) the historical
capitalization of the Company, and (b) the as adjusted capitalization of the
Company after giving effect to the sale of the outstanding notes and the
application of the approximately $146 million in net proceeds from such sale to
reduce borrowings under the Company's revolving credit facility. This table
should be read in conjunction with the Company's consolidated financial
statements and the notes thereto incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
December 31, 1998
-----------------------
Historical As Adjusted
---------- -----------
<S> <C> <C>
(In thousands)
Current portion of long-term debt............................ $ - $ -
---------- -----------
Long-term debt:
Bank Revolving Loan Facility.............................. $423,500 $277,500
9% Senior Subordinated Notes Due 2005, net of discount.... 149,714 149,714
8 5/8% Senior Subordinated Notes Due 2009, net of discount 99,293 99,293
9 3/4% Senior Subordinated Notes Due 2009................. - 150,000
-------- --------
Total long-term debt.................................. 672,507 676,507
-------- --------
Stockholders' equity:
Common stock.............................................. 266 266
Capital in excess of par value............................ 230,736 230,736
Retained earnings......................................... 42,956 42,956
-------- --------
Total stockholders' equity............................ 273,958 273,958
-------- --------
Total capitalization......................................... $946,465 $950,465
======== ========
</TABLE>
21
<PAGE>
THE EXCHANGE OFFER
Terms of the Exchange Offer
General
In connection with the issuance of the outstanding notes, the Company
entered into a Registration Rights Agreement dated January 20, 1999, with the
initial purchaser of the outstanding notes. Pursuant to the Registration Rights
Agreement, the Company has agreed to file a registration statement (the
"Exchange Offer Registration Statement"), of which this prospectus is a part,
with the SEC with respect to a registered offer to exchange the outstanding
notes for exchange notes having terms substantially identical in all material
respects to the outstanding notes, except that the exchange notes will not
contain terms with respect to transfer restrictions and additional interest.
Under the Registration Rights Agreement, the Company will, at its cost:
. file the Exchange Offer Registration Statement not later than 75 days
of the date of original issuance of the outstanding notes;
. use its best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act not later
than 150 days of the date of original issuance of the outstanding
notes; and
. keep the exchange offer open for not less than 20 business days nor
more than 30 business days (or longer if required by applicable law)
after the date notice of the exchange offer is mailed to the holders
of the outstanding notes.
The exchange offer being made by this prospectus, if commenced and consummated
within the time periods described in this paragraph, will satisfy those
requirements under the Registration Rights Agreement.
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, all outstanding notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the expiration date will be
accepted for exchange. Exchange notes of the same class will be issued in
exchange for an equal principal amount of outstanding notes accepted in the
exchange offer. Outstanding notes may be tendered only in integral multiples of
$1,000. This prospectus, together with the letter of transmittal, is being sent
to all registered holders of outstanding notes. The exchange offer is not
conditioned upon any minimum principal amount of outstanding notes being
tendered in exchange. However, our obligation to accept outstanding notes for
exchange is subject to certain conditions as set forth in this section under the
heading "-Conditions."
Outstanding notes will be deemed accepted when, as and if the Company has
given oral (promptly confirmed in writing) or written notice to the exchange
agent. The exchange agent will act as agent for the tendering holders of
outstanding notes for the purposes of receiving the exchange notes and
delivering them to the holders.
Resale of Exchange Notes
Based on interpretations of the SEC staff in no-action letters issued to
third parties, the Company believes that the exchange notes will be freely
transferable by holders of the outstanding notes other than affiliates of the
Company after the 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;
22
<PAGE>
. it has no arrangement or understanding with any person to participate
in the distribution of the exchange notes; and
. it is not an "affiliate" of the Company, as that term is defined in
Rule 405 under the Securities Act;
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 SEC 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
outstanding notes) with the prospectus contained in the Exchange Offer
Registration Statement. Under the Registration Rights Agreement, the Company is
required to allow Participating Broker-Dealers to use the prospectus contained
in the Exchange Offer Registration Statement in connection with the resale of
such exchange notes.
A holder of outstanding notes who wishes to exchange such notes for
exchange notes in the 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;
. 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
. it is not an "affiliate" of the Company, as defined in Rule 405 under
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.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
exchange notes. If the holder is a broker-dealer that will receive exchange
notes for its own account in exchange for outstanding notes that were acquired
as a result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such exchange notes.
If a holder of outstanding notes is engaged in or intends to engage in a
distribution of the exchange notes or has any arrangement or understanding with
respect to the distribution of the exchange notes to be acquired pursuant to the
exchange offer, the holder may not rely on the applicable interpretations of the
staff of the SEC and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction.
Expiration Date; Extensions; Amendments; Termination
The term "expiration date" shall mean June 3, 1999 (30 calendar days
following the commencement of the exchange offer), unless the exchange offer is
extended by the Company, 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 Company will notify the
exchange agent of any extension by oral (promptly confirmed in writing) or
written notice and may notify the holders of the outstanding notes by mailing an
announcement or by means of a press release or other public announcement prior
to 9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date.
The Company reserves the right to delay acceptance of any outstanding
notes, to extend the exchange offer or to terminate the exchange offer and not
permit acceptance of outstanding notes not previously accepted if any of the
conditions set forth in this section under the heading "-Conditions" shall have
occurred and shall not have been
23
<PAGE>
waived by the Company (if permitted to be waived), by giving oral (promptly
confirmed in writing) or written notice of such delay, extension or termination
to the exchange agent. The Company also reserves the right to amend the terms of
the exchange offer in any manner deemed by it to be advantageous to the holders
of the outstanding notes. If any material change is made to terms of the
exchange offer, the exchange offer shall remain open for a minimum of an
additional five business days, if the exchange offer would otherwise expire
during such period. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral (promptly
confirmed in writing) or written notice of the delay to the exchange agent. If
the exchange offer is amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose the amendment
in a manner reasonably calculated to inform the holders of the outstanding notes
of the amendment including providing public announcement, or giving oral or
written notice to the holders of the outstanding notes. A material change in the
terms of the exchange offer could include, among other things, a change in the
timing of the exchange offer, a change in the exchange agent, and other similar
changes in the terms of the exchange offer.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
exchange offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement.
Interest on the Exchange Notes
Interest on each exchange note will accrue from the last interest payment
date on which interest was paid on the outstanding note surrendered in exchange
thereof or, if no interest has been paid on such outstanding note, from the date
of its original issue.
Single Class of Notes
The outstanding notes and the exchange notes will be treated as a single
class for all purposes under the Indenture (except for provisions dealing
specifically with registration and exchange offer issues).
Procedures for Tendering
To tender in the exchange offer, a holder of outstanding notes must
complete, sign and date the letter of transmittal or a facsimile of it, have the
signatures guaranteed if required by the letter of transmittal, and mail or
otherwise deliver the letter of transmittal or facsimile, or an agent's message
together with the outstanding 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:
. certificates for the outstanding notes must be received by the
exchange agent along with the letter of transmittal;
. a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of the outstanding notes, if such procedure is
available, into the exchange agent's account at The Depository Trust
Company (the "Book-Entry Transfer Facility" or "DTC") pursuant to the
procedure for book-entry transfer described below, must be received by
the exchange agent prior to the expiration date; or
. the holder must comply with the guaranteed delivery procedures
described below.
The method of delivery of outstanding notes, letters of transmittal and all
other required documents 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. If such delivery is by mail, it is recommended that
registered mail, properly insured, with return receipt requested, be used. In
all cases, sufficient time should be allowed to assure timely delivery. No
letters of transmittal or outstanding notes should be sent to the Company.
24
<PAGE>
Delivery of all documents must be made to the exchange agent at its address
set forth below. Holders of outstanding notes may also request their respective
brokers, dealers, commercial banks, trust companies or nominees to tender
outstanding notes for them.
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 the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering outstanding notes that are the subject of the Book-
Entry Confirmation that the participant has received and agrees to be bound by
the terms of the letter of transmittal, and that the Company may enforce this
agreement against the participant.
The tender by a holder of outstanding notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth here and in the letter of transmittal.
Only a holder of outstanding notes may tender the outstanding notes in the
exchange offer. The term "holder" for this purpose means any person in whose
name outstanding notes are registered on the books of the Company or a person
whose name appears on a security position listing provided by the Book-Entry
Transfer Facility or any other person who has obtained a properly completed bond
power from the registered holder.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on his or her behalf. If the beneficial owner
wishes to tender on his or her own behalf, such beneficial owner must, prior to
completing and executing the letter of transmittal and delivering his or her
outstanding notes, either make appropriate arrangements to register ownership of
the outstanding notes in such owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may take
considerable time.
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 Securities Exchange Act of 1934 (each, an "Eligible
Institution"), unless the outstanding notes are tendered:
. 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
. for the account of an Eligible Institution.
If the letter of transmittal is signed by the recordholder(s) of the
outstanding notes tendered, the signature must correspond with the name(s)
written on the face of the outstanding notes without alteration, enlargement or
any change whatsoever. If the letter of transmittal is signed by a participant
in DTC, the signature must correspond with the name as it appears on the
security position listing as the holder of the outstanding notes.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes listed therein, those outstanding
notes must be endorsed or accompanied by bond powers and a proxy that authorize
such person to tender the outstanding notes on behalf of the registered holder,
in each case as the name of the registered holder or holders appears on the
outstanding notes.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or 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.
25
<PAGE>
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 outstanding
notes, or a timely confirmation received of a book-entry transfer of outstanding
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 outstanding 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 outstanding notes or a timely confirmation
received of a book-entry transfer of outstanding notes with an agent's message
into the exchange agent's account at DTC with the exchange agent.
All questions as to the validity, form, eligibility, time of receipt,
acceptance and withdrawal of the tendered outstanding notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all
outstanding notes not properly tendered or any outstanding notes which, if
accepted, would, in the opinion of the Company or its counsel, be unlawful. The
Company also reserves the absolute right to waive any conditions of the exchange
offer or irregularities or defects in tender as to particular outstanding notes.
The Company's interpretation of the terms and conditions of the exchange offer
(including the instructions in the letter of transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding notes must be cured within such time as
the Company shall determine. Neither the Company, the exchange agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of outstanding notes, nor shall any of
them incur any liability for failure to give such notification. Tenders of
outstanding notes will not be deemed to have been made until such irregularities
have been cured or waived. Any outstanding notes received by the exchange agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned without cost by the exchange
agent to the tendering holders of such outstanding 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 discretion, subject
to the provisions of the Indenture, to:
. purchase or make offers for any outstanding notes that remain
outstanding subsequent to the expiration date or, as set forth in this
section under the heading "-Expiration Date; Extensions; Amendments;
Termination," to terminate the exchange offer in accordance with the
terms of the Registration Rights Agreement; and
. to the extent permitted by applicable law, purchase outstanding notes
in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of
the exchange offer.
Acceptance of Outstanding Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
all outstanding notes properly tendered will be accepted, promptly after the
expiration date, and the exchange notes will be issued promptly after acceptance
of the outstanding notes. See the heading "-Conditions" below. For purposes of
the exchange offer, outstanding notes shall be deemed to have been accepted as
validly tendered for exchange when, as and if the Company has given oral
(promptly confirmed in writing) or written notice thereof to the exchange agent.
In all cases, issuance of exchange notes for outstanding notes that are
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of certificates for such outstanding notes
or a timely Book-Entry Confirmation of such outstanding notes into the exchange
agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed letter of transmittal and all other required documents or an
agent's message in lieu thereof. If any tendered outstanding notes are not
accepted for any reason set forth in the terms and conditions of the exchange
offer or if outstanding notes are submitted for a greater principal amount than
the holder desires to exchange, such unaccepted or non-exchanged outstanding
notes will be returned without expense to the tendering holder as promptly as
practicable after the expiration or termination of the exchange offer. In the
case of outstanding notes tendered by the book-entry transfer procedures
described below,
26
<PAGE>
the non-exchanged outstanding notes will be credited to an account maintained
with the Book-Entry Transfer Facility.
Book-Entry Transfer
The exchange agent will make a request to establish an account with respect
to the outstanding notes at the Book-Entry Transfer Facility for purposes of the
exchange offer within two business days after the date of this prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of outstanding notes by causing
the Book-Entry Transfer Facility to transfer such outstanding notes into the
exchange agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of outstanding notes may be effected through book-entry transfer into
the exchange agent's account at the Book-Entry Transfer Facility, an agent's
message or the letter of transmittal or facsimile thereof with any required
signature guarantees and any other required documents must, in any case, be
transmitted to and received by the exchange agent at one of the addresses set
forth below under the heading "-Exchange Agent" on or prior to the expiration
date or the guaranteed delivery procedures 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 of outstanding notes shall
be deemed to include the Book-Entry Transfer Facility's book-entry delivery
method.
Guaranteed Delivery Procedure
If a registered holder of the outstanding notes desires to tender the
outstanding notes, and the outstanding notes are not immediately available, or
time will not permit the holder's outstanding notes or other required documents
to reach the exchange agent before the expiration date, or the procedures for
book-entry transfer cannot be completed on a timely basis and an agent's message
delivered, a tender may be effected if:
. the tender is made through an Eligible Institution;
. prior to the expiration date, the exchange agent receives from such
Eligible Institution a notice of guaranteed delivery, substantially in
the form provided by the Company, by facsimile transmission, mail or
hand delivery:
. setting forth the name and address of the holder of the outstanding
notes and the amount of outstanding notes tendered;
. stating that the tender is being made thereby; and
. guaranteeing that within five business days after the expiration
date, the certificates for all physically tendered outstanding notes,
in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, the letter of transmittal or an agent's message in lieu
thereof and any other documents required by the letter of transmittal
will be deposited by the Eligible Institution with the exchange
agent; and
. the certificates for all physically tendered outstanding notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may
be, the letter of transmittal or an agent's message in lieu thereof and
all other documents required by the letter of transmittal are received
by the exchange agent within five business days after the expiration
date.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, tenders of outstanding
notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the expiration date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent prior to 5:00 p.m., New York City time on the
expiration date at the address set forth below under the heading
27
<PAGE>
"-Exchange Agent" and prior to acceptance for exchange thereof by the Company.
Any such notice of withdrawal must:
. specify the name of the person having tendered the outstanding notes
to be withdrawn (the "Depositor");
. identify the outstanding notes to be withdrawn, including, if
applicable, the registration number or numbers and total principal
amount of such outstanding notes;
. be signed by the Depositor in the same manner as the original
signature on the letter of transmittal by which such outstanding notes
were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to permit the Trustee
with respect to the outstanding notes to register the transfer of such
outstanding notes into the name of the Depositor withdrawing the
tender;
. specify the name in which any such outstanding notes are to be
registered, if different from that of the Depositor; and
. if the outstanding 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, time of receipt of
such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any outstanding notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
exchange offer. Any outstanding notes that have been tendered for exchange and
that are not exchanged for any reason will be returned to the holder thereof
without cost to such holder (or, in the case of outstanding notes tendered by
book-entry transfer, such outstanding notes will be credited to an account
maintained with the Book-Entry Transfer Facility for the outstanding notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn outstanding notes may be re-tendered by
following one of the procedures described above under the headings "-Procedures
for Tendering" and "-Book-Entry Transfer" at any time on or prior to the
expiration date.
Conditions
Notwithstanding any other term of the exchange offer, outstanding notes
will not be required to be accepted for exchange, nor will exchange notes be
issued in exchange for any outstanding notes, and the Company may terminate or
amend the exchange offer as provided in this prospectus before the acceptance of
such outstanding notes, if:
. because of any change in law, or applicable interpretations of law by
the SEC, the Company determines that it is not permitted to effect the
exchange offer;
. an action is proceeding or threatened that would materially impair
the Company's ability to proceed with the exchange offer; or
. not all government approvals that the Company deems necessary for the
consummation of the exchange offer have been received.
The Company has no obligation to, and will not knowingly, permit acceptance
of tenders of outstanding notes:
. from affiliates of the Company within the meaning of Rule 405 under
the Securities Act;
28
<PAGE>
. from any other holder or holders who are not eligible to participate
in the exchange offer under applicable law or interpretations by the
SEC; or
. if the exchange notes to be received by such holder or holders of
outstanding notes in the exchange offer, upon receipt, will not be
tradeable by such holder without restriction under the Securities Act
and the Securities Exchange Act of 1934 and without material
restrictions under the "blue sky" or securities laws of substantially
all of the states of the United States.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the
outstanding notes, as reflected in the Company's accounting records on the date
of the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The costs of the exchange offer and the unamortized
expenses related to the issuance of the outstanding notes will be amortized over
the term of the exchange notes.
Exchange Agent
The Chase Manhattan 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:
By Mail, Overnight Mail The Chase Manhattan Bank Phone: 212/638-0826
or Courier: 55 Water Street Facsimile: 212/638-7380
New York, New York 10041
ATTN: Carlos Esteves
Fees and Expenses
The Company will pay the expenses of soliciting tenders under the exchange
offer. The principal solicitation for tenders pursuant to the exchange offer is
being made by mail; however, additional solicitations may be made by telegraph,
telephone, telecopy or in person by officers and regular employees of the
Company.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. 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. 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 the prospectus, letters of transmittal and related documents to the
beneficial owners of the outstanding notes, and in handling or forwarding
tenders for exchange.
The expenses to be incurred in connection with the exchange offer will be
paid by the Company, including fees and expenses of the exchange agent and
Trustee and accounting, legal, printing and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of outstanding notes pursuant to the exchange offer. If, however:
. certificates representing exchange notes or outstanding notes for
principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the outstanding notes
tendered; or
. if tendered outstanding 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
outstanding notes pursuant to the exchange offer;
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<PAGE>
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 from such taxes is
not submitted with the letter of transmittal, the amount of the transfer taxes
will be billed directly to the tendering holder.
Shelf Registration Statement
In the event that:
. any change in law or applicable interpretations of the staff of the SEC
do not permit the Company to effect the exchange offer;
. for any other reason the Exchange Offer Registration Statement is not
declared effective within 150 days of the date of original issuance of
the outstanding notes or the exchange offer is not consummated within
45 days after the date the Exchange Offer Registration Statement is
declared effective under the Securities Act;
. under certain circumstances if the initial purchaser so requests with
respect to outstanding notes not eligible to be exchanged for exchange
notes in the exchange offer;
. under certain circumstances any holder of outstanding notes (other than
the initial purchaser) is not eligible to participate in the exchange
offer or does not receive freely tradeable exchange notes in the
exchange offer other than by reason of such holder being an affiliate
of the Company; or
. in the case that the initial purchaser participates in the exchange
offer or otherwise acquires exchange notes pursuant to the Registration
Rights Agreement, such initial purchaser does not receive freely
tradeable exchange notes in exchange for outstanding notes constituting
any portion of an unsold allotment (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 will, at its cost,
. as promptly as practicable (but in no event more than 30 days after so
required or requested pursuant to the Registration Rights Agreement),
file a shelf registration statement ("Shelf Registration Statement")
covering resales of the outstanding notes or the exchange notes, as the
case may be;
. use its best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act; and
. use its best efforts to keep the Shelf Registration Statement effective
until two years after its effective date.
The Company 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
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<PAGE>
. take certain other actions as are required to permit unrestricted
resales of the outstanding notes or the exchange notes, as the case may
be.
A holder selling outstanding 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 Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
Additional Interest
In the event that:
. on or prior to the 75th day of the date of original issuance of the
outstanding notes, neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been filed with the
Commission;
. on or prior to the 150th day of the date of original issuance of the
outstanding notes, neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been declared effective;
. on or prior to the 45th day after the date the Exchange Offer
Registration Statement is declared effective under the Securities Act,
neither the exchange offer has been consummated nor the Shelf
Registration Statement has been declared effective; or
. 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 outstanding notes or
exchange notes in accordance with and during the periods specified in
the Registration Rights Agreement
(each such event referred to above in this paragraph, a "Registration Default");
then, as liquidated damages for such Registration Default, additional interest
("Special Interest") will accrue on the principal amount of the outstanding
notes and the exchange notes (in addition to the stated interest on the
outstanding 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.
Special Interest will accrue in an amount equal to $.05 per calendar week
per $1,000 principal amount of the outstanding notes and exchange notes during
the 90-day period immediately following the occurrence of such Registration
Default and shall increase by an amount equal to $.05 per calendar week per
$1,000 principal amount of the outstanding notes and exchange notes at the end
of each subsequent 90-day period, but in no event shall such amount exceed $.30
per calendar week per $1,000 principal amount of the outstanding notes and
exchange notes.
Failure to Exchange Outstanding Notes May Affect You Adversely
Upon consummation of the exchange offer, subject to certain exceptions,
holders of outstanding notes who do not exchange their outstanding notes for
exchange notes in the exchange offer will no longer be entitled to registration
rights and will not be able to offer or sell their outstanding notes, unless the
outstanding notes are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, the Company will have no obligation to
do), except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Bank Facility
Under the Company's revolving credit facility (the "Bank Facility"),
certain banks have provided to the Company an unsecured revolving credit
facility. The Bank Facility establishes a borrowing base determined by the
banks' evaluation of the Company's oil and gas reserves.
Outstanding advances under the Bank Facility bear interest payable
quarterly at a floating rate based on Bank of Montreal's alternate base rate (as
defined) or, at the Company's option, at a fixed rate for up to six months based
on LIBOR. The Company's interest rate increments above the alternate base rate
and LIBOR vary based on the level of outstanding senior debt to the borrowing
base. As of March 31, 1999, the Company had elected a fixed rate based on LIBOR
for a substantial portion of its outstanding advances, which resulted in an
average interest rate of approximately 6.0 percent. In addition, the Company
must pay a commitment fee ranging from 0.25 to 0.375 percent per annum on the
unused portion of the banks' commitment.
On a semiannual basis, the Company's borrowing base is redetermined by the
banks based upon their review of the Company's oil and gas reserves. If the sum
of outstanding senior debt exceeds the borrowing base, as redetermined, the
Company must repay such excess. Any principal advances outstanding under the
Bank Facility at September 11, 2001, will be payable in eight equal consecutive
quarterly installments commencing December 1, 2001, with maturity at September
11, 2003.
The unused portion of the Bank Facility was approximately $182 million at
March 31, 1999, based on the current borrowing base of $482.5 million. The
Company entered into an amendment to its Bank Facility in connection with the
offering of the outstanding notes which resulted in the borrowing base being
reduced from $550 million to $482.5 million. As a result of the banks' semi-
annual borrowing base review under the Bank Facility, the agent bank has
recommended that the remaining lenders approve a new borrowing base of $400
million to be effective May 14, 1999; however, no assurance can be given that
the banks will approve this new borrowing base. If the $400 million borrowing
base is approved, the Company anticipates that the unused portion of the Bank
Facility would be approximately $100 million.
The Bank Facility includes customary covenants, including, among other
things:
. maintenance of consolidated tangible net worth;
. limitations on indebtedness;
. limitations on creation of liens;
. limitations on guarantees, loans or advances;
. limitations on certain consolidations, mergers and transfers of assets;
. limitations on investments; and
. limitations on transactions with affiliates.
The Bank Facility includes customary events of default, including among
other things, and subject to applicable grace periods, if any:
. failure of the Company to make any payment of principal of or interest on
any loan under the Bank Facility when due and payable;
. breaches of any representations or warranties in any material respect
when made;
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<PAGE>
. a breach of certain agreements and covenants, including all negative
covenants in the Bank Facility;
. a default in payment under any other indebtedness for borrowed money or
contingent liability of the Company or any of its subsidiaries or any
other default if the effect of such is to permit acceleration of such
indebtedness;
. any judgment or order for the payment of money in excess of $20 million
is rendered against the Company or any of its subsidiaries;
. certain acts of bankruptcy, insolvency or dissolution; and
. any change in control.
9% Senior Subordinated Notes Due 2005
In December 1995, the Company publicly offered and sold $150,000,000
aggregate principal amount at maturity of 9% Senior Subordinated Notes Due 2005
(the "9% Notes") pursuant to an Indenture between the Company and The Chase
Manhattan Bank (formerly Chemical Bank) (the "9% Notes Indenture"). Interest
on the 9% Notes is payable on June 15 and December 15 of each year, and such
payments commenced on June 15, 1996. The 9% Notes are redeemable at the option
of the Company, in whole or in part, at any time on or after December 15, 2000,
at the redemption prices set forth in the 9% Notes Indenture plus accrued and
unpaid interest, if any, to the date of redemption. The 9% Notes are not subject
to any mandatory sinking fund.
Upon the occurrence of a Change of Control (as defined in the 9% Notes
Indenture), the Company will be required to make an offer to repurchase the 9%
Notes at 101 percent of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase.
The 9% Notes are unsecured senior subordinated obligations of the Company.
The 9% Notes rank subordinate in right of payment to all existing and future
senior indebtedness, pari passu with any existing and future senior subordinated
indebtedness (including the 8 5/8% Notes and the notes) and senior to any future
junior subordinated indebtedness of the Company. The 9% Notes are structurally
subordinated to the indebtedness and other liabilities of the Company's
subsidiaries.
The 9% Notes Indenture contains limitations on, among other things:
. the ability of the Company to incur additional indebtedness;
. the payment of dividends and other distributions with respect to the
capital stock of the Company and the purchase, redemption or retirement
of capital stock of the Company;
. the making of certain investments;
. the incurrence of certain liens;
. asset sales;
. the issuance and sale of capital stock of restricted subsidiaries;
. transactions with affiliates;
. payment restrictions affecting restricted subsidiaries; and
. certain consolidations, mergers and transfers of assets.
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<PAGE>
Events of default under the 9% Notes Indenture are:
. failure to pay any interest on the 9% Notes when due, continued for 30
days;
. failure to pay principal of (or premium, if any, on) the 9% Notes when
due;
. failure to perform any other covenant of the Company in the 9% Notes
Indenture, continued for 60 days after written notice as provided in the
9% Notes Indenture;
. a default under any indebtedness for borrowed money by the Company or any
restricted subsidiary which results in acceleration of the maturity of
such indebtedness, or failure to pay any such indebtedness at maturity,
in an amount greater than $10 million ($40 million in the case of
indebtedness of a foreign subsidiary the recourse for which is limited to
solely foreign subsidiaries) if such indebtedness is not discharged or
such acceleration is not rescinded or annulled within 10 days after
written notice as provided in the 9% Notes Indenture;
. 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 in excess of $10
million and such judgments or orders are not discharged, waived, stayed,
satisfied or bonded for a period of 60 consecutive days; and
. certain events of bankruptcy, insolvency or reorganization.
8 5/8% Senior Subordinated Notes Due 2009
In February 1997, the Company publicly offered and sold $100,000,000
aggregate principal amount at maturity of 8 5/8% Senior Subordinated Notes Due
2009 (the "8 5/8% Notes") pursuant to an Indenture between the Company and The
Chase Manhattan Bank (the "8 5/8% Notes Indenture"). Interest on the 8 5/8%
Notes is payable on February 1 and August 1 of each year, and such payments
commenced on August 1, 1997. The 8 5/8% Notes are redeemable at the option of
the Company, in whole or in part, at any time on or after February 1, 2002, at
the redemption prices set forth in the 8 5/8% Notes Indenture plus accrued and
unpaid interest, if any, to the date of redemption. The 8 5/8% Notes are not
subject to any mandatory sinking fund.
Upon the occurrence of a Change of Control (as defined in the 8 5/8% Notes
Indenture), the Company will be required to make an offer to repurchase the 8
5/8% Notes at 101 percent of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase.
The 8 5/8% Notes are unsecured senior subordinated obligations of the
Company. The 8 5/8% Notes rank subordinate in right of payment to all existing
and future senior indebtedness, pari passu with any existing and future senior
subordinated indebtedness (including the 9% Notes and the notes) and senior to
any future junior subordinated indebtedness of the Company. The 8 5/8% Notes are
structurally subordinated to the indebtedness and other liabilities of the
Company's subsidiaries.
The 8 5/8% Notes Indenture contains limitations on, among other things:
. the ability of the Company to incur additional indebtedness;
. the payment of dividends and other distributions with respect to the
capital stock of the Company and the purchase, redemption or retirement
of capital stock of the Company;
. the making of certain investments;
. the incurrence of certain liens;
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<PAGE>
. asset sales;
. the issuance and sale of capital stock of restricted subsidiaries;
. transactions with affiliates;
. payment restrictions affecting restricted subsidiaries; and
. certain consolidations, mergers and transfers of assets.
Events of default under the 8 5/8% Notes Indenture are:
. failure to pay any interest on the 8 5/8% Notes when due, continued for
30 days;
. failure to pay principal of (or premium, if any, on) the 8 5/8% Notes
when due;
. failure to perform any other covenant of the Company in the 8 5/8% Notes
Indenture, continued for 60 days after written notice as provided in the
8 5/8% Notes Indenture;
. a default under any indebtedness for borrowed money by the Company or any
restricted subsidiary which results in acceleration of the maturity of
such indebtedness, or failure to pay any such indebtedness at maturity,
in an amount greater than $10 million ($40 million in the case of
indebtedness of a foreign subsidiary the recourse for which is limited to
solely foreign subsidiaries) if such indebtedness is not discharged or
such acceleration is not rescinded or annulled within 10 days after
written notice as provided in the 8 5/8% Notes Indenture;
. 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 in excess of $10
million and such judgments or orders are not discharged, waived, stayed,
satisfied or bonded for a period of 60 consecutive days; and
. certain events of bankruptcy, insolvency or reorganization.
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<PAGE>
DESCRIPTION OF NOTES
The outstanding notes were, and the exchange notes will be, issued under an
Indenture dated as of January 26, 1999 (the "Indenture"), between the Company
and The Chase Manhattan Bank, as Trustee (the "Trustee"). The Indenture provides
for the issuance of up to an aggregate principal amount of $150 million of
outstanding notes and exchange notes and of up to $50 million of additional
notes (as part of the same or an additional series) from time to time in
aggregate principal amounts of not less than $25 million. The additional notes
will be identical in all respects other than issue price and issuance date. A
copy of the Indenture has been filed as an exhibit to the registration statement
of which this prospectus is a part and is available from the Company upon
request. The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject, and are qualified in their entirety by
reference, to the Trust Indenture Act of 1939, as amended (the "1939 Act") and
to all the provisions of the Notes and the Indenture, including the definitions
therein of certain terms. Wherever particular Sections or defined terms of the
Indenture are referred to herein, such Sections or defined terms are
incorporated by reference herein. For purposes of this Section, references to
the "Company" shall mean Vintage Petroleum, Inc. excluding its subsidiaries. The
term "Notes" collectively refers to the outstanding notes, the exchange notes
and any additional notes or additional series of notes issued under the
Indenture. Certain terms used in this Section are defined under "--Certain
Definitions."
General
The exchange notes are to be issued in exchange for outstanding notes
pursuant to the Registration Rights Agreement, as further described in "The
Exchange Offer." The terms of the exchange notes are substantially identical to
the outstanding notes except that the exchange notes will have been registered
under the Securities Act and, therefore, will not bear legends restricting their
transfer and will not contain certain provisions providing for an increase in
interest thereon under certain circumstances described under "The Exchange Offer
- - Additional Interest," the provisions of which will terminate upon consummation
of the exchange offer.
The Notes will mature on June 30, 2009, and will be limited to an aggregate
principal amount of $200,000,000. The outstanding notes and exchange notes will
be issued in an aggregate principal amount not to exceed $150,000,000. The Notes
will bear interest at the rate set forth on the cover page of this prospectus
from January 26, 1999 (the "Issue Date"), or from the most recent interest
payment date to which interest has been paid, payable semiannually on June 30
and December 30 of each year, beginning, in the case of the outstanding notes
and the exchange notes, as the case may be, on June 30, 1999, to the person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the preceding June 15 or December 15, as the case may be. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
Principal of, premium, if any, and interest on, the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Company in The City of New York maintained for such purposes (which
initially will be the Corporate Trust Office of the Trustee) or such other
office or agency permitted under the Indenture; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
person entitled thereto as shown on the Security Register. The Notes will be
issued only in fully registered form without coupons, in denominations of $1,000
and any integral multiple thereof. No service charge will be made for any
registration of transfer, exchange or redemption of Notes, except in certain
circumstances for any tax or other governmental charge that may be imposed in
connection therewith.
Subordination
The Notes will be unsecured senior subordinated obligations of the Company.
The payment of the principal of, premium, if any, 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 (as defined) of the Company.
However, payment from the money or the proceeds of U.S. Government Obligations
held in any defeasance trust will not be subordinate to any Senior Indebtedness
or subject to the restrictions described herein. The Notes will rank subordinate
in right of
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payment to all existing and future Senior Indebtedness, pari passu with the 9%
Notes and the 8 5/8% Notes and all other existing and any future senior
subordinated indebtedness and senior to any future junior subordinated
indebtedness of the Company. As adjusted for the consummation of the offering of
the outstanding notes and the application of the estimated net proceeds
therefrom, at December 31, 1998, the Company's outstanding Senior Indebtedness
would have been approximately $389 million. The Company also has outstanding the
9% Notes ($150 million) and the 8 5/8% Notes ($100 million) which will rank pari
passu with the Notes. The Notes will be structurally subordinated to
indebtedness and other liabilities of the Company's subsidiaries. The balance
sheet liabilities of the Company's subsidiaries totaled $26.9 million at
December 31, 1998. The Company and its subsidiaries have other liabilities,
including contingent liabilities, which may be significant. Although the
Indenture contains limitations on the amount of additional Indebtedness which
the Company and its Restricted Subsidiaries may incur, the amounts of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness or Indebtedness of subsidiaries (to which the Notes will be
structurally subordinated). See "--Certain Covenants--Limitation on
Indebtedness."
The Company may not pay principal of, premium, if any, or interest on, the
Notes or make any deposit pursuant to the provisions described under "--
Defeasance and Covenant Defeasance" and may not repurchase, redeem or otherwise
retire any Notes (collectively, "pay the Notes") if (a) any principal, premium
or interest in respect of any Senior Indebtedness is not paid within any
applicable grace period (including at maturity) or (b) any other default on
Senior Indebtedness 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 Company may pay
the Notes without regard to the foregoing if the Company and the Trustee receive
written notice approving such payment from the Representative of each issue of
Designated Senior Indebtedness. During the continuance of any default (other
than a default described in clause (a) or (b) of the preceding sentence) with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration), the Company may not pay
the Notes for a period (a "Payment Blockage Period") commencing upon the
receipt by the Company and the Trustee of written notice of such default from
the Representative of the holders of any Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period (a "Payment Blockage
Notice") and ending 179 days thereafter (unless earlier terminated (i) by
written notice to the Trustee and the Company from the Representative which gave
such Payment Blockage Notice, (ii) because such default is no longer continuing,
or (iii) because such Designated Senior Indebtedness has been repaid in full).
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 Company 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. Not
more than one Payment Blockage Notice may be given in any consecutive 360-day
period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation, dissolution or winding up of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness 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. In addition, until the Senior Indebtedness is paid in
full in cash, any distribution 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, except that holders of Notes may receive and retain shares
of stock and any debt securities that are subordinated to Senior Indebtedness to
at least the same extent as the Notes.
By reason of such subordination provisions contained in the Indenture, in
the event of bankruptcy, insolvency or winding up, creditors of the Company who
are holders of Senior Indebtedness may recover more, ratably, than the holders
of the Notes, and creditors of the Company who are not holders of Senior
Indebtedness or the Notes may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the holders of the Notes.
Claims of creditors of the Company's subsidiaries, including trade
creditors, and holders of Preferred Stock of the Company's subsidiaries (if
any), will generally have a priority as to the assets of such subsidiaries over
the
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claims of the Company and the holders of the Company's Indebtedness, including
the Notes. Under the Indenture, and subject to certain limitations, Indebtedness
may be incurred by subsidiaries of the Company.
Optional Redemption
At any time on or after February 1, 2004, the Notes are redeemable at the
option of the Company, in whole or in part, on not less than 30 nor more than 60
days' prior notice, in amounts of $1,000 or an integral multiple thereof 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 relevant interest payment date), if redeemed during the 12-month period
commencing February 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
------ -----------------
<S> <C>
2004.......... 104.875%
2005.......... 103.250%
2006.......... 101.625%
</TABLE>
and thereafter, beginning February 1, 2007, at 100 percent of the principal
amount of the Notes.
At any time and from time to time, prior to February 1, 2002, the Company
may redeem up to a maximum of 33 1/3 percent of the original aggregate principal
amount of the Notes actually issued with the proceeds of one or more Public
Equity Offerings, at a redemption price equal to 109.75 percent of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that after giving effect to any such redemption, at least
66 2/3 percent of the original aggregate principal amount of the Notes actually
issued remains outstanding. Any such redemption shall be made within 75 days of
such Public Equity Offering upon not less than 30 nor more than 60 days' prior
notice.
Sinking Fund
There will be no mandatory sinking fund payments for the Notes.
Repurchase at the Option of Holders Upon a Change of Control
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase such holder's Notes in whole or
in part in integral multiples of $1,000 pursuant to the offer described below
(the "Change of Control Offer") at a purchase price equal to 101 percent of
the principal amount thereof, plus accrued and unpaid interest, if any, thereon
to the repurchase date (the "Change of Control Payment").
Within 30 days following any Change of Control, the Company shall mail a
notice to each holder stating, among other things:
(1) that a Change of Control has occurred and a Change of Control
Offer is being made pursuant to the covenant entitled "Mandatory
Repurchase Upon a Change of Control" and that all Notes (or portions
thereof) timely tendered will be accepted for payment;
(2) the purchase price and the repurchase date, which shall be,
subject to any contrary requirements of applicable law, no earlier than 30
days nor later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date");
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<PAGE>
(3) 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 after the Change of Control
Payment Date;
(4) that any Notes (or portions thereof) not tendered will continue to
accrue interest;
(5) a description of the transaction or transactions constituting the
Change of Control; and
(6) 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.
The Company will comply, to the extent applicable, with the requirements of
Rules 13e-4 and 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 repurchase 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 will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations described above by virtue thereof.
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 Company repurchase or redeem the Notes in the event of
a takeover, recapitalization or similar restructuring.
There can be no assurance that the Company will be able to fund any such
repurchase of the Notes and all other existing and future Pari Passu
Indebtedness. The Company's existing credit agreement contains and any future
credit agreements or other agreements relating to indebtedness of the Company
may contain prohibitions or restrictions on the Company's ability to effect a
Change of Control Payment. In the event a Change of Control occurs at a time
when such prohibitions or restrictions are in effect, the Company could seek the
consent of its lenders to the repurchase of Notes or could attempt to refinance
the borrowings that contain such prohibition. If the Company does not obtain
such a consent or repay such borrowings, the Company will be effectively
prohibited from repurchasing Notes. In such case, the Company's failure to
repurchase tendered Notes would constitute an Event of Default under the
Indenture.
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), other than any one or more of the
Permitted Holders, becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) of 50 percent or more of the total
voting power of all classes of the Voting Stock of the Company and/or
warrants or options to acquire such Voting Stock, calculated on a fully
diluted basis;
(ii) the sale, lease, conveyance or transfer of all or
substantially all of the assets of the Company (other than to any Wholly
Owned Subsidiary) shall have occurred;
(iii) the stockholders of the Company shall have approved any
plan of liquidation or dissolution of the Company;
(iv) the Company consolidates with or merges into another
Person or any Person consolidates with or merges into the Company in any
such event pursuant to a transaction in which the outstanding Voting Stock
of the Company is reclassified into or exchanged for cash, securities or
other property, other than any such transaction where (a) the outstanding
Voting Stock of the Company is reclassified into or exchanged for Voting
Stock of the surviving corporation that is Capital Stock and (b) the
holders of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, not less
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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 Board of
Directors (together with any new directors whose election or appointment by
such board or whose nomination for election by the stockholders of the
Company 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 Board of Directors
then in office.
The definition of Change of Control includes a phrase relating to the sale,
lease, conveyance or transfer of "all or substantially all" of the Company's
assets. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, conveyance or
transfer of less than all of the assets of the Company to another person may be
uncertain. In such a case, holders of the Notes may not be able to resolve this
uncertainty without resorting to legal action.
"Permitted Holders" means Charles C. Stephenson, Jr., Jo Bob Hille, S.
Craig George, William C. Barnes and their Permitted Designees.
"Permitted Designee" means (i) a spouse or a child of a Permitted Holder,
(ii) trusts for the benefit of a Permitted Holder or a spouse or child of a
Permitted Holder, (iii) in the event of the death or incompetence of a Permitted
Holder, his estate, heirs, executor, administrator, committee or other personal
representative, or (iv) any Person so long as a Permitted Holder owns at least
51 percent of the voting power of all classes of the Voting Stock of such
Person.
Book-Entry System
The Notes will initially be issued in the form of one or more Global
Securities (as defined in the Indenture) held in book-entry form. Accordingly,
The Depository Trust Company ("DTC") or its nominee will initially be the sole
registered holder of the Notes for all purposes under the Indenture.
Upon the issuance of a Global Security, DTC or its nominee will credit the
accounts of persons holding through it with the respective principal amounts of
the Notes represented by such Global Security purchased by such persons in this
Offering. Such accounts shall be designated by the Underwriters with respect to
Notes placed by the Initial Purchaser for the Company. Ownership of beneficial
interests in a Global Security will be limited to persons that have accounts
with DTC ("participants") or persons that may hold interests through
participants. 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 DTC 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 and interest on Notes represented by any such Global
Security will be made to DTC 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 Company, the Trustee, any agent of the
Company, or the Initial Purchaser will have any responsibility or liability for
any aspect of DTC's records 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 DTC's records relating to such
beneficial ownership interests.
The Company has been advised by DTC that upon receipt of any payment of
principal of, or interest on, any Global Security, DTC will immediately credit,
on its book-entry registration and transfer system, the accounts
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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 DTC. Payments by participants to owners of beneficial
interests in a Global Security held through such participants will be governed
by standing 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.
A Global Security may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC. A Global Security is exchangeable
for certificated Notes only if (i) DTC notifies the Company that it is unwilling
or unable to continue as a Depositary for such Global Security or if at any time
DTC ceases to be a clearing agency registered under the Exchange Act, (ii) the
Company executes and delivers to the Trustee a notice that such Global Security
shall be so transferable, registrable, and exchangeable, and such transfers
shall be registrable, or (iii) there shall have occurred and be continuing an
Event of Default or an event which, with the giving of notice or lapse of time
or both, would constitute an 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 Depositary holding such Global
Security may direct. Subject to the foregoing, a Global Security is not
exchangeable, except for a Global Security of like denomination to be registered
in the name of the Depositary or its nominee. In the event that 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
integral multiples thereof, (ii) payment of principal, 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 Company
maintained for such purposes, and (iii) no service charge will be made for any
registration of transfer or exchange of the certificated Notes, although the
Company may require payment of a sum sufficient to cover any tax or governmental
charge imposed in connection therewith.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary 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 Depositary and
its participants. Cede & Co. has been appointed as the nominee of DTC. Except as
provided above, owners of beneficial interests in a Global Security will not be
entitled to and will not be considered the holders thereof for any purposes
under the Indenture. Accordingly, each person owning a beneficial interest in a
Global Security must rely on the procedures of the Depositary, 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 Company understands that under existing industry practices, in
the event that the Company requests any action of holders or that an owner of a
beneficial interest in a Global Security desires to give or take any action
which a holder is entitled to give or take under the Indenture, the Depositary
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.
DTC has advised the Company that DTC is a limited-purpose trust company
organized under the Banking Law of the State of New York, 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. DTC 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. DTC's participants include securities brokers and
dealers (which may include the Initial Purchaser), banks, trust companies,
clearing corporations, and certain other organizations some of whom (and/or
their representatives) own DTC. Access to DTC'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.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in Global Securities among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Trustee or
the Initial Purchaser
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will have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Certain Covenants
Limitation on Indebtedness. The Indenture provides that the Company will
not, and it will not permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness unless, after giving pro forma effect to the
application of the proceeds thereof, no Default or Event of Default would occur
as a consequence of such Incurrence or be continuing following such Incurrence
and either (a) after giving pro forma effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the
Consolidated Interest Coverage Ratio exceeds 2.5 to 1.0 or (b) such Indebtedness
is Permitted Indebtedness.
Permitted Indebtedness means any and all of the following:
(a) Indebtedness evidenced by the outstanding notes;
(b) Indebtedness under Bank Credit Facilities, provided that the
aggregate principal amount of all such Indebtedness under Bank Credit
Facilities, together with all Indebtedness Incurred pursuant to clause (l)
of this paragraph in respect of Indebtedness previously Incurred pursuant
to this clause (b), at any one time outstanding does not exceed the greater
of
(i) $265 million and
(ii) an amount equal to the sum of (A) $100 million and (B) 15
percent of Adjusted Consolidated Net Tangible Assets determined as of
the date of the Incurrence of such Indebtedness;
provided, however, that the maximum amount available to be outstanding
under Bank Credit Facilities shall be permanently reduced by the amount of
Net Available Cash from Assets 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 "Limitation on Asset Sales" covenant;
(c) Indebtedness to the Company or any of its Wholly Owned Subsidiaries 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);
(d) Indebtedness in connection with one or more standby letters of credit,
Guarantees, performance bonds or other reimbursement obligations issued in the
ordinary course of business and not in connection with the borrowing of money or
the obtaining of advances or credit (other than advances or credit on open
account, includable in current liabilities, for goods and services in the
ordinary course of business and on terms and conditions which are customary in
the Oil and Gas Business and other than the extension of credit represented by
such letter of credit, Guarantee or performance bond itself);
(e) Indebtedness of any Person which shall merge or consolidate with or
into the Company in accordance with the covenant described under "--Merger,
Consolidation and Sale of Assets," which was outstanding prior to such merger
or consolidation;
(f) Indebtedness under Interest Rate Protection Agreements entered into
for the purpose of limiting interest rate risks, provided that the obligations
under such agreements are related to payment obligations on Indebtedness
otherwise permitted by the terms of the "Limitation on Indebtedness" covenant;
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(g) Indebtedness under Exchange Rate Contracts, provided that such
Exchange Rate Contracts were entered into for the purpose of limiting exchange
rate risks in connection with transactions entered into in the ordinary course
of business;
(h) Indebtedness under Oil and Gas Purchase and Sale Contracts, provided
that such contracts were entered into in the ordinary course of business for the
purpose of limiting risks that arise in the ordinary course of business of the
Company and its Subsidiaries;
(i) in-kind obligations relating to net oil or gas balancing positions
arising in the ordinary course of business that are customary in the Oil and Gas
Business;
(j) Indebtedness outstanding on the Issue Date not otherwise permitted in
clauses (a) through (i) above;
(k) Indebtedness not otherwise permitted to be Incurred pursuant to this
paragraph, provided that the aggregate principal amount of all Indebtedness
Incurred pursuant to this clause (k), together with all Indebtedness Incurred
pursuant to clause (l) of this paragraph in respect of Indebtedness previously
Incurred pursuant to this clause (k), at any one time outstanding does not
exceed $25 million;
(l) Indebtedness Incurred in exchange for, or the proceeds of which are
used to refinance,
(i) Indebtedness referred to in clauses (a) through (k) of this
paragraph (including Indebtedness previously Incurred pursuant to this
clause (l)); and
(ii) Indebtedness Incurred pursuant to clause (a) of the first
paragraph of the "Limitation on Indebtedness" covenant;
provided, however, that
(i) such Indebtedness is in an aggregate principal amount not in
excess of the sum of (A) the aggregate principal amount then outstanding of
the Indebtedness being exchanged or refinanced and (B) an amount necessary
to pay any fees and expenses, including premiums, related to such exchange
or refinancing,
(ii) such Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being exchanged or refinanced,
(iii) such Indebtedness has an Average Life to Stated Maturity at the
time such Indebtedness is Incurred that is equal to or greater than the
Average Life to Stated Maturity of the Indebtedness being exchanged or
refinanced, and
(iv) such Indebtedness is subordinated in right of payment to Senior
Indebtedness or the Notes to at least the same extent, if any, as the
Indebtedness being exchanged or refinanced;
(m) 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 assets; and
(n) 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.
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Limitation on Liens. The Indenture provides that the Company will not,
directly or indirectly, Incur any Lien on or with respect to any Property of the
Company, 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 are
secured equally and ratably with (or prior to) any and all other obligations
secured by such Lien, except that the Company may without restriction Incur
Liens securing Senior Indebtedness and the following (each a "Permitted
Lien"):
(a) Liens existing as of the Issue Date;
(b) any Lien existing on any Property of a Person at the time such
Person is merged or consolidated with or into the Company (and not Incurred
in anticipation of such transaction), provided that such Liens are not
extended to other Property of the Company;
(c) any Lien existing on any Property at the time of the acquisition
thereof (and not Incurred in anticipation of such transaction), provided
that such Liens are not extended to other Property of the Company;
(d) Liens securing the exchange notes and other obligations arising
under the Indenture;
(e) 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 (a) through (d) of this paragraph;
provided, however, that
(i) such new Lien shall be limited to all or part of the same
Property that secured the original Lien, plus improvements on such
Property and
(ii) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (A) the outstanding
principal amount or, if greater, committed amount of the Indebtedness
secured by Liens described under clauses (a) through (d) of this
paragraph at the time the original Lien became a Lien permitted in
accordance with the Indenture and (B) an amount necessary to pay any
fees and expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement;
(f) any Lien incidental to the normal conduct of the business of the
Company, the ownership of its property or the conduct in the ordinary
course of its business (including, without limitation,
(i) easements, rights of way and similar encumbrances,
(ii) rights of lessees under leases,
(iii) rights of collecting banks having rights of setoff,
revocation, refund or chargeback with respect to money or instruments of
the Company or on deposit with or in the possession of such banks,
(iv) Liens imposed by law, including without limitation Liens
under workers' compensation or similar legislation and mechanics',
carriers', warehousemen's, materialmen's, suppliers' and vendors' Liens,
(v) Oil and Gas Liens, and
(vi) 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)
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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 and which do not in the aggregate
impair in any material respect the use of Property in the operation of
the business of the Company and its Restricted Subsidiaries taken as a
whole;
(g) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, so long as reserves have been
established to the extent required by U.S. GAAP as in effect at such
time;
(h) 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 U.S. GAAP as in effect at such time and so long as such
Liens do not encumber assets by an amount in excess of $20 million;
(i) Liens securing Hedging Agreements so long as such Hedging
Agreements are permitted under the "Limitation on Indebtedness"
covenant;
(j) Liens in connection with Sale and Leaseback Transactions
permitted pursuant to the "Limitation on Indebtedness" covenant;
(k) 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; and
(l) Liens resulting from the deposit of funds or evidences of
Indebtedness in trust for the purpose of decreasing Indebtedness of the
Company or any of its Subsidiaries so long as such deposit of funds is
permitted under the "Limitation on Restricted Payments" covenant.
Limitation on Restricted Payments. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, make any Restricted Payment if, at the time of and after
giving effect to the proposed Restricted Payment
(a) any Default or Event of Default would have occurred and be
continuing,
(b) the Company could not Incur at least $1.00 of additional
Indebtedness pursuant to clause (a) of the first paragraph of the
"Limitation on Indebtedness" covenant, or
(c) the aggregate amount expended or declared for all
Restricted Payments from December 20, 1995 (the date of issue of the 9%
Notes), would exceed the sum of
(i) $25 million,
(ii) 100 percent of the aggregate net cash proceeds or the
Fair Market Value of Property other than cash received by the
Company on or subsequent to December 20, 1995, from capital
contributions to the Company (other than from a Subsidiary of
the Company) and from the issuance or sale (other than to a
Subsidiary of the Company) of Capital Stock of the Company,
including Capital Stock of the Company issued upon conversion of
convertible debt or convertible Redeemable Stock and upon the
exercise of options, warrants or rights to purchase Capital
Stock of the Company,
(iii) 50 percent of the aggregate Consolidated Net Income
of the Company (or, if Consolidated Net Income shall be a
deficit, less 100 percent of such deficit) subsequent to
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September 30, 1995, and ending on the last day of the fiscal
quarter ending on or immediately preceding the date of such
Restricted Payment, and
(iv) an amount equal to the net reduction in
Investments made by the Company and its Restricted Subsidiaries
subsequent to December 20, 1995, in any Person resulting from
(A) payments of interest on debt, dividends,
repayment of loans or advances, or other transfers or
distributions of Property (but only to the extent the
Company excludes such transfers or distributions from
the calculation of Consolidated Net Income for purposes
of clause (iii) above), in each case to the Company or
any Restricted Subsidiary from any Person, or
(B) the redesignation of any Unrestricted
Subsidiary as a Restricted Subsidiary, not to exceed, in
the case of (A) or (B), the amount of such Investments
previously made in such Person or such Unrestricted
Subsidiary, as the case may be, which were treated as
Restricted Payments.
Any payments made pursuant to clauses (a) through (i) of the definition of
Permitted Investments shall be excluded for purposes of any calculation of the
aggregate amount of Restricted Payments. Any payments made pursuant to clause
(j) of the definition of Permitted Investments shall be included for purposes of
any calculation of the aggregate amount of Restricted Payments.
The foregoing limitations do not prevent the Company or any Restricted
Subsidiary from (a) paying a dividend on its Capital Stock within 60 days after
declaration thereof if, on the declaration date, such dividend could have been
paid in compliance with the Indenture, or (b) making Permitted Investments so
long as no Default or Event of Default shall have occurred and be continuing.
Permitted Investments is defined to mean any and all of the following:
(a) Permitted Short-Term Investments;
(b) Investments in property, plant and equipment used in the ordinary
course of business and Permitted Business Investments;
(c) Investments by the Company or any Restricted Subsidiary in a
Restricted Subsidiary and Investments by a Restricted Subsidiary in the
Company;
(d) Investments in any other Person, including the acquisition from
third parties of Capital Stock of a Restricted Subsidiary or any other
Person, as a result of which such other Person becomes a Restricted
Subsidiary in compliance with the "Restricted and Unrestricted
Subsidiaries" covenant or is merged into or consolidated with or transfers
or conveys all or substantially all of its assets to the Company or a
Restricted Subsidiary;
(e) negotiable instruments held for collection; lease, utility and
other similar deposits; or stock, obligations or securities received in
settlement of debts owing to the Company or any of its Restricted
Subsidiaries as a result of foreclosure, perfection or enforcement of any
Lien or Indebtedness, in each of the foregoing cases in the ordinary course
of business of the Company or such Restricted Subsidiary;
(f) Investments in Persons in the Oil and Gas Business (other than
Restricted Subsidiaries) intended to promote the Company's strategic
business objectives in an amount not to exceed $20 million at any one time
outstanding;
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(g) loans made (i) to officers, directors and employees of the Company
or any Subsidiary approved by the Board of Directors (or by a duly
authorized officer), the proceeds of which are used solely to exercise
stock options received pursuant to an employee stock option plan or other
incentive plan, in a principal amount not to exceed the exercise price of
such stock options and (ii) to refinance loans, together with accrued
interest thereon, made pursuant to this clause (g);
(h) advances and loans to officers, directors and employees of the
Company or any Subsidiary in the ordinary course of business, provided such
loans and advances do not exceed $3.0 million at any one time outstanding;
(i) Investments in the form of securities received from Asset Sales,
provided that such Asset Sales are made in compliance with the "Limitation
on Asset Sales" covenant; and
(j) 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 (a) through (i) above).
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 other
than to the Company or one of its Wholly Owned Subsidiaries or
(b) permit any Person other than the Company or a Restricted
Subsidiary to own any Capital Stock of any other Restricted Subsidiary
(other than directors' qualifying shares),
except, in each case, for
(i) a sale of the Capital Stock of a Restricted Subsidiary owned by
the Company or its Restricted Subsidiaries effected in accordance with the
"Limitation on Asset Sales" covenant,
(ii) the issuance of Capital Stock by a Restricted Subsidiary to a
Person other than the Company or a Restricted Subsidiary and
(iii) the Capital 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 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 "Limitation on Restricted
Payments" covenant.
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 shares and assets subject to such Asset Sale and
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(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, or the assumption by the purchaser of
liabilities of the Company (other than liabilities of the Company that are by
their terms subordinated to the Notes) or any Restricted Subsidiary as a result
of which the Company and its remaining Restricted Subsidiaries are no longer
liable;
provided, however, that
(x) the Fair Market Value of Exchanged Properties shall be treated as cash
for purposes of this clause (ii) and
(y) the Company and its Restricted Subsidiaries shall be permitted to
receive property and securities other than cash, cash equivalents, Exchanged
Properties or Liquid Securities, so long as the aggregate Fair Market Value of
all such property and securities received in Asset Sales held by the Company or
any Restricted Subsidiary at any one time shall not exceed 10 percent of
Adjusted Consolidated Net Tangible Assets.
The Net Available Cash from Asset Sales may be applied by the Company or a
Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary
elects (or is required by the terms of any Senior Indebtedness),
(A) to prepay, repay or purchase Senior Indebtedness or Indebtedness of a
Restricted Subsidiary (in each case excluding Indebtedness owed to the Company
or an Affiliate of the Company);
(B) 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
(C) if there are no 9% Notes or 8 5/8% Notes outstanding, to purchase Notes
(excluding Notes 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 million, the Company will be required to comply with the applicable
provisions of the indenture relating to the 9% Notes, to make a prepayment offer
to purchase on a pro rata basis, from all holders of the 9% Notes, an aggregate
principal amount of 9% Notes equal to the Excess Proceeds, at a price in cash
not in excess of 100 percent of the outstanding principal amount thereof plus
accrued interest, if any. To the extent that any portion of the amount of such
Excess Proceeds remains after compliance with the preceding sentence such amount
shall constitute "Remaining Excess Proceeds" held for the benefit of the
holders of the Notes and any then outstanding Pari Passu Indebtedness (other
than the 9% Notes) and the amount of Excess Proceeds will be reset to zero. When
the aggregate amount of Remaining Excess Proceeds exceeds $10 million, the
Company will be required to make an offer to purchase (a "Prepayment Offer")
on a pro rata basis, from all holders of the Notes and any then outstanding Pari
Passu Indebtedness (other than the 9% Notes), an aggregate principal amount of
Notes and any then outstanding Pari Passu Indebtedness (other than the 9% Notes)
equal to the Remaining Excess Proceeds, at a price in cash at least equal to 100
percent of the outstanding principal amount thereof plus accrued interest, if
any, to the Purchase Date (as defined herein). To the extent that any portion of
the amount of Remaining Excess Proceeds remains after compliance with the
preceding sentence 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 or such Restricted
Subsidiary may use such remaining amount for general corporate purposes and the
amount of Remaining Excess Proceeds will be reset to zero.
Within five Business Days after the later of (i) 365 days from the date of
an Asset Sale and (ii) the completion of any offer for the 9% Notes required by
the indenture relating to the 9% Notes, the Company shall, if it is obligated to
make an offer to purchase the Notes pursuant to the preceding paragraph, send a
written
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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 in good faith 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,
(a) that the Company is offering to purchase Notes pursuant to the
provisions of the Indenture described herein under "--Limitation on Asset
Sales,"
(b) 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 after the Purchase Date,
(c) 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"),
(d) the aggregate principal amount of Notes to be purchased, and
(e) 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.
The Company will comply, to the extent applicable, with the requirements of
Rules 13e-4 and 14e-1 under the Exchange Act and any other securities laws or
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase 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 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 the
Company will not Incur any Indebtedness which is subordinate or junior in right
of payment to any Senior Indebtedness unless such Indebtedness constitutes
Indebtedness which is junior to, or pari passu with, the Notes in right of
payment.
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, but not limited to, 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, unless
(a) such transaction or series of transactions is in the best interest of
the Company or such Restricted Subsidiary,
(b) 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
(c) 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
(i) $5.0 million but less than $20.0 million, the Board of Directors
of the Company (including a majority of the disinterested members of the
Board of Directors of the Company) approves such transaction or series
of transactions and, in its good faith judgment, believes that such
transaction or series of transactions complies with clauses (a) and (b)
of this paragraph as evidenced by a certified resolution delivered to
the Trustee or
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(ii) $20.0 million, (A) the Company 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 (B) the Board of Directors of the Company (including a
majority of the disinterested members of the Board of Directors of the
Company) approves such transaction or series of transactions and, in its
good faith judgment, believes that such transaction or series of
transactions complies with clauses (a) and (b) of this paragraph, as
evidenced by a certified resolution delivered to the Trustee.
The limitations of the preceding paragraph do not apply to
(a) 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,
(b) indemnities of officers and directors of the Company or any Subsidiary
consistent with such Person's bylaws and applicable statutory provisions,
(c) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
the past practice of the Company or such Restricted Subsidiary,
(d) loans made (i) to officers and directors of the Company or any
Subsidiary approved by the Board of Directors (or by a duly authorized officer),
the proceeds of which are used solely to exercise stock options received
pursuant to an employee stock option plan or other incentive plan, in a
principal amount not to exceed the exercise price of such stock options, or (ii)
to refinance loans, together with accrued interest thereon, made pursuant to
this clause (d),
(e) advances and loans to officers and directors of the Company or any
Subsidiary in the ordinary course of business, provided such loans and advances
do not exceed $3.0 million at any one time outstanding, or
(f) transactions with Restricted Subsidiaries.
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, assume or otherwise
cause or suffer to exist or become effective, or enter into any agreement with
any Person that would cause to become effective, any consensual encumbrance or
restriction on the legal right of any Restricted Subsidiary (other than a
Foreign Subsidiary) to
(a) pay dividends, in cash or otherwise, or make any other distributions
on or in respect of its Capital Stock or Redeemable Stock held by the Company or
a Restricted Subsidiary,
(b) pay any Indebtedness or other obligation owed to the Company or any
other Restricted Subsidiary,
(c) make any loans or advances to the Company or any other Restricted
Subsidiary, or
(d) transfer any of its property or assets to the Company or any other
Restricted Subsidiary.
Such limitation will not apply
(1) with respect to clauses (c) and (d) only, to encumbrances and
restrictions
(i) in existence under or by reason of any agreements in effect on
the Issue Date,
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(ii) required by Bank Credit Facilities that are not more restrictive
than those in effect under the Bank Credit Facility on the Issue Date,
(iii) existing at such Restricted Subsidiary at the time it became a
Restricted Subsidiary if (A) such encumbrance or restriction was not
created in anticipation of such acquisition and (B) immediately
following such acquisition, on a pro forma basis, the Company could
incur at least $1.00 of additional Indebtedness pursuant to clause (a)
of the first paragraph of the "Limitation on Indebtedness" covenant,
or
(iv) which result from the renewal, refinancing, extension or
amendment of an agreement referred to in the immediately preceding
clauses (i), (ii) and (iii),
provided, such replacement or encumbrance or restriction is no more restrictive
to the Company or Restricted Subsidiary and is not materially less favorable to
the holders of Notes than those under or pursuant to the agreement evidencing
the Indebtedness so extended, renewed, refinanced or replaced, and
(2) with respect to clause (d) only, to
(i) any restriction on the sale, transfer or other disposition of
assets or Property securing Indebtedness as a result of a Lien permitted
under the "Limitation on Liens" covenant,
(ii) any encumbrance or restriction in connection with an acquisition
of Property, so long as such encumbrance or restriction relates solely to
the Property so acquired and was not created in connection with or in
anticipation of such acquisition,
(iii) customary provisions restricting subletting or assignment of
leases and customary provisions in other agreements that restrict
assignment of such agreements or rights thereunder,
(iv) any encumbrance or restriction due to applicable law,
(v) customary restrictions contained in asset sale agreements
limiting the transfer of such assets pending the closing of such sale and
(vi) restrictions contained in purchase money obligations for
Property acquired in the ordinary course of business with respect to
transfers of such Property.
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 (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 own any Capital Stock, Redeemable
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 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
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(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
"Limitation on Restricted Payments" covenant. Except as provided in clauses
(iii)(B) and (C) 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 of the
"Limitation on Indebtedness" covenant and
(ii) no Default or Event of Default would occur or be
continuing.
Merger, Consolidation and Sale of Assets
The Indenture provides that the Company will not merge or consolidate with
or into any other entity (other than a merger of a Restricted Subsidiary into
the Company) or sell, transfer, assign, lease, convey or otherwise dispose of
all or substantially all of its Property or assets in any one transaction or
series of transactions unless:
(a) the entity formed by or surviving any such consolidation or merger
(if the Company is not the surviving entity) or the Person to which such
sale, assignment, transfer, lease or conveyance is made (the "Surviving
Entity") shall be a corporation organized and existing under the laws of
the United States of America or a State thereof or the District of Columbia
and such corporation expressly assumes, by supplemental indenture
satisfactory to the Trustee, executed and delivered to the Trustee by such
corporation, the due and punctual payment of the principal of, premium, if
any, and interest on all the Notes, according to their tenor, and the due
and punctual performance and observance of all of the covenants and
conditions of the Indenture to be performed by the Company;
(b) in the case of a sale, transfer, assignment, lease, conveyance or
other disposition of all or substantially all of the Company's Property or
assets, such Property or assets shall have been transferred as an entirety
or virtually as an entirety to one Person;
(c) immediately before and after giving effect to such transaction or
series of transactions, no Default or Event of Default shall have occurred
and be continuing;
(d) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), the Company or the Surviving
Entity, as the case may be, would be able to Incur at least $1.00 of
additional Indebtedness under clause (a) of the first paragraph of the
"Limitation on Indebtedness" covenant; and
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(e) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), the Company or the Surviving Entity
shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to the transaction
or series of transactions.
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, cash equivalents or securities)
used in any business in which the Company or any Restricted Subsidiary is
engaged as of the date of the Indenture 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
"Restricted and Unrestricted Subsidiaries" covenant,
(iii) the acquisition from third parties of Capital Stock of a
Restricted Subsidiary,
(iv) the costs of acquiring, exploiting, developing and exploring in
respect of oil and gas properties, or
(v) Permitted Business Investments.
"Adjusted Consolidated Net Tangible Assets" means (without duplication),
as of the date of determination,
(a) the sum of
(i) discounted future net revenues from proved oil and gas
reserves of the Company and its Restricted Subsidiaries calculated in
accordance with Commission guidelines before any state, federal or
foreign income taxes, as estimated by a nationally recognized firm of
independent petroleum engineers in a reserve report prepared as of the
end of the Company's most recently completed fiscal year for which
financial statements are available, as increased by, as of the date of
determination, the estimated discounted future net revenues from
(A) estimated proved oil and gas reserves acquired since the
date of such year-end reserve report, and
(B) estimated oil and gas reserves attributable to upward
revisions of estimates of proved oil and gas reserves since the
date of such year-end reserve report due to exploration,
development or exploitation activities, in each case calculated
in accordance with Commission guidelines (utilizing the prices
utilized in such year-end reserve report),
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and decreased by, as of the date of determination, the estimated
discounted future net revenues, from
(C) estimated proved oil and gas reserves produced or
disposed of since the date of such year-end reserve report and
(D) estimated oil and gas reserves attributable to downward
revisions of estimates of proved oil and gas reserves since the
date of such year-end reserve report due to changes in
geological conditions or other factors which would, in
accordance with standard industry practice, cause such
revisions, in each case calculated in accordance with 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 (A) through (D), 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 (a)(i) shall be confirmed in writing by a
nationally recognized firm of independent petroleum engineers,
(ii) the capitalized costs that are attributable to oil and gas
properties of the Company and its Restricted Subsidiaries to which no
proved oil and gas reserves are attributable, based on the Company's
books and records as of a date no earlier than the date of the Company's
latest annual or quarterly financial statements,
(iii) the Net Working Capital on a date no earlier than the date
of the Company's latest annual or quarterly financial statements, and
(iv) the greater of
(A) the net book value on a date no earlier than the date
of the Company's latest annual or quarterly financial
statements; or
(B) the appraised value, as estimated by independent
appraisers, of other tangible assets (including, without
duplication, Investments in unconsolidated Restricted
Subsidiaries) of the Company and its Restricted Subsidiaries, as
of the date no earlier than the date of the Company's latest
audited financial statements,
minus
(b) the sum of
(i) minority interests,
(ii) any gas balancing liabilities of the Company and its
Restricted Subsidiaries reflected in the Company's latest audited
financial statements,
(iii) to the extent included in (a)(i) above, the discounted
future net revenues, calculated in accordance with 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 on the schedules specified with respect thereto
and
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(iv) 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 (a)(i) above, would be
necessary to fully satisfy the payment obligations of the Company and
its Restricted Subsidiaries with respect to Dollar-Denominated
Production Payments on the schedules specified with respect thereto.
If the Company changes its method of accounting from the 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
percent 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 (including, without limitation, dispositions
pursuant to any consolidation or merger) by such Person or any of its Restricted
Subsidiaries in any single transaction or series of transactions of
(a) shares of Capital Stock or other ownership interests of another Person
(including Capital Stock of Unrestricted Subsidiaries) or
(b) any other Property of such Person or any of its Restricted
Subsidiaries;
provided, however, that the term "Asset Sale" shall not include:
(i) the sale or transfer of Permitted Short-Term Investments, inventory,
accounts receivable or other Property in the ordinary course of business;
(ii) the liquidation of Property received in settlement of debts owing to
the Company or any Restricted Subsidiary as a result of foreclosure, perfection
or enforcement of any Lien or debt, which debts were owing to the Company or any
Restricted Subsidiary in the ordinary course of business of the Company or such
Restricted Subsidiary;
(iii) when used with respect to the Company, any asset disposition
permitted pursuant to the covenant described under "--Merger, Consolidation and
Sale of Assets" which constitutes a disposition of all or substantially all of
the Company's assets;
(iv) the sale or transfer of any Property by the Company or a Restricted
Subsidiary to the Company or a Restricted Subsidiary; or
(v) the sale or transfer of any asset with a Fair Market Value of less
than $1 million.
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"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, without limitation, the credit facility pursuant to the
Credit Agreement, dated September 11, 1998, as amended, among the Company and
certain banks) 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. Notwithstanding the foregoing, for
purposes of determining whether Indebtedness under Bank Credit Facilities
constitutes Permitted Indebtedness and only for such purposes, Indebtedness
Incurred in reliance on clause (a) of the first paragraph of the "Limitation on
Indebtedness" covenant shall not be deemed to constitute Indebtedness Incurred
in reliance on the exception provided by clause (b) or clause (l) of the
definition of Permitted Indebtedness. Notwithstanding anything to the contrary
in the Indenture, the principal amount outstanding on the Issue Date under Bank
Credit Facilities, together with accrued and unpaid interest thereon (if any) on
the Issue Date, shall be Senior Indebtedness for purposes of the Indenture.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other arrangement conveying the
right to use) real or personal property of such Person which is required to be
classified and accounted for as a capital lease or a liability on the face of a
balance sheet of such Person in accordance with U.S. GAAP. For purposes of the
"Limitation on Liens" covenant, a Capital Lease Obligation shall be deemed to
be secured by a Lien on the property being leased.
"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.
"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,
(x) 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
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(y) 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 U.S.
GAAP in respect of Indebtedness (including, without limitation,
(A) any amortization of debt discount,
(B) net costs associated with Interest Rate Protection
Agreements (including any amortization of discounts),
(C) the interest portion of any deferred payment obligation,
(D) all accrued interest, and
(E) all commissions, discounts, commitment fees, origination fees
and other fees and charges owed with respect to 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 Wholly Owned
Subsidiaries) declared and payable other than in kind;
(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 U.S. 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;
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in the case of both (i) and (ii) above, after elimination of intercompany
accounts among such Person and its Restricted Subsidiaries and as determined in
accordance with U.S. 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 U.S. GAAP; provided that there shall be excluded therefrom,
without duplication,
(i) items classified as extraordinary (other than the tax benefit
of the utilization of net operating loss carry-forwards and alternative
minimum tax credits);
(ii) any gain or loss, net of taxes, on the sale or other
disposition of assets (including the Capital Stock of any other Person) in
excess of $5.0 million, from any sale or disposition, or series of related
sales or dispositions (but in no event shall this clause (ii) apply to the
sale of oil and gas inventories in the ordinary course of business);
(iii) the net income of any 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 Subsidiary to such Person during such period;
(iv) the net income (or loss) of any other Person in which such
specified 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 specified Person in accordance
with U.S. 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 Restricted
Subsidiaries by such other Person during such period;
(v) the net income of any Person acquired by such specified 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;
and
(ix) impairment losses on oil and gas properties.
"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 U.S. 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 any Senior Indebtedness which has,
at the time of determination, an aggregate principal amount outstanding of at
least $10 million (including the amount of all undrawn commitments and matured
and contingent reimbursement obligations pursuant to letters of credit
thereunder) that is specifically designated in the instrument evidencing such
Senior Indebtedness and is designated in a notice delivered by the Company to
the holders or a Representative of the holders of such Senior Indebtedness and
the Trustee as "Designated Senior Indebtedness" of the Company.
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"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with U.S. GAAP, together with
all undertakings and obligations in connection therewith.
"EBITDA" means with respect to any Person for any period, the
Consolidated Net Income of such Person and its consolidated Restricted
Subsidiaries for such period, plus
(a) 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 deducted in the determination of
such Consolidated Net Income, without duplication,
(i) income tax expense (but excluding income tax expense relating
to sales or other disposition of assets (including the Capital Stock of
any other Person) the gains and losses from which are included in the
determination of such Consolidated Net Income),
(ii) Consolidated Interest Expense,
(iii) depreciation and depletion expense,
(iv) amortization expense,
(v) exploration expense, and
(vi) any other noncash charges including, without limitation,
unrealized foreign exchange losses (but excluding losses on sales or
other dispositions of assets which are included in the determination of
such Consolidated Net Income);
less
(b) 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
(i) income tax recovery (but excluding income tax recovery relating
to sales or other dispositions of assets (including the Capital Stock of
any other Person) the gains and losses from which are included in the
determination of such Consolidated Net Income) and
(ii) unrealized foreign exchange gains.
"Event of Default" has the meaning set forth under the caption "--Events
of Default and Notice."
"Exchanged Properties" means oil and gas properties received by the
Company or a Restricted Subsidiary in trade or as a portion of the total
consideration for other such properties.
"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, designed to provide
protection against fluctuations in currency exchange rates.
"Fair Market Value" means, with respect to any assets to be transferred
pursuant to any Asset Sale or Sale and Leaseback Transaction or any non-cash
consideration or property transferred or received by any Person, the fair market
value of such consideration or property as determined in good faith by
(i) any officer of the Company if such fair market value is less than $10
million and
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(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 $10 million;
provided that if such resolution indicates that such fair market value is equal
to or in excess of $20 million and such transaction involves any Affiliate of
the Company (other than a Restricted Subsidiary), such resolution shall be
accompanied by the written opinion of 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, to the effect that such consideration or property is
fair, from a financial point of view, to such Person.
"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated
in a jurisdiction other than the United States or a State thereof or the
District of Columbia and engages in the Oil and Gas Business exclusively outside
the United States of America.
"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, without limitation, any Lien on
the assets of such Person securing obligations 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 (b) of the definition of Permitted Investments.
"Hedging Agreements" means Interest Rate Protection Agreements, Exchange
Rate Contracts and Oil and Gas Purchase and Sale Contracts.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
extend, assume, Guarantee or become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to U.S. 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
U.S. 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
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Wholly Owned Subsidiary or in the event such Indebtedness is transferred to a
Person other than the Company or a Wholly Owned Subsidiary.
"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, without limitation, 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,
(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 Hedging Agreements at
the time of determination,
(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 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 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 designed to protect
such Person or its Restricted Subsidiaries against fluctuations in interest
rates, as in effect from time to time.
"Investment" means, with respect to any Person
(i) any amount paid by such Person, directly or indirectly (such amount to
be the fair market value of such Capital Stock, securities or Property at the
time of transfer), to any other Person for Capital Stock or other Property of,
or as a capital contribution to, any other Person, or
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(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 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 upon which the outstanding notes first were
issued and authenticated 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,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing). For
purposes of the "Limitation on Liens" covenant, 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 or the Nasdaq National Market, and
(iii) as to which the Company 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
cash equivalents, and
(y) 180 days following the date of receipt of such securities. In the event
such securities are not sold or exchanged for cash or cash equivalents 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 "Limitation on Asset Sales" covenant, such
securities shall be deemed not to have been Liquid Securities at any time.
"Material Change" means an increase or decrease (except to the extent
resulting from changes in prices) of more than 30 percent 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 (a)(i) of the definition of Adjusted Consolidated Net
Tangible Assets; provided, however, that the following will be excluded from the
calculation of Material Change:
(i) any acquisitions during the quarter of oil and gas reserves 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 "Limitation on Asset Sales" covenant.
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"Net Available Cash" from an Asset Sale means cash proceeds received
(including any cash proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, and excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to such properties or assets) therefrom, in each case net of
(i) 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 U.S. GAAP as a consequence of such
Asset Sale,
(ii) all payments made on any Indebtedness 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,
(iii) 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
(iv) the deduction of appropriate amounts to be provided by the seller as
a reserve, in accordance with U.S. 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 in the event that 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 such Person or its Restricted
Subsidiaries from escrow; and provided, further, however, that any non-cash
consideration received in connection with an Asset Sale which is subsequently
converted to cash shall be deemed to be Net Available Cash at such time and
shall thereafter be applied in accordance with the "Limitation on Asset Sales"
covenant.
"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 financial statements of the Company prepared in accordance with
U.S. GAAP.
"Oil and Gas Business" means the business of exploiting, exploring for,
developing, acquiring, producing, processing, gathering, marketing, storing and
transporting hydrocarbons and other related energy businesses.
"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);
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(ii) Liens on an oil and/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, master limited partnership agreements,
farm-out 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 in all instances that such Liens are limited to the assets
that are the subject of the relevant agreement;
(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.
"Oil and Gas Purchase and Sale Contract" means, with respect to any
Person, any oil and gas agreements, and other agreements or arrangements, or any
combination thereof, designed to provide protection against oil and gas price
fluctuations.
"Pari Passu Indebtedness" means any Indebtedness of the Company
(including, without limitation, the 9% Notes and the 8 5/8% Notes) that is pari
passu in right of payment to the Notes.
"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 means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, marketing or
transporting oil and gas 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, without limitation,
(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, farm-in agreements, farm-out 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),
subscription agreements, stock purchase agreements and other similar agreements
with third parties (including Unrestricted Subsidiaries).
"Permitted Short-Term Investments" means
(a) Investments in U.S. Government Obligations maturing within one year of
the date of acquisition thereof,
(b) 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
that is a member of the Federal Reserve System having capital, surplus and
undivided profits aggregating in excess of $500 million and whose long-term
indebtedness is rated "A" (or higher) according to Moody's Investors Service
Inc.,
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(c) 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 Canadian bank to which the Bank
Act (Canada) applies having capital, surplus and undivided profits aggregating
in excess of U.S. $500 million,
(d) Investments in deposits available for withdrawal on demand with any
commercial bank which 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 (i) all such deposits have been made in such
accounts in the ordinary course of business and (ii) such deposits do not at any
one time exceed $20 million in the aggregate,
(e) repurchase and reverse repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (a)
entered into with a bank meeting the qualifications described in either clause
(b) or (c),
(f) Investments in commercial paper, 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 with a rating at the time as of which any
Investment therein is made of "P-1" (or higher) according to Moody's Investors
Service Inc. or "A-1" (or higher) according to Standard & Poor's Ratings
Group, and
(g) Investments in any money market mutual fund having assets in excess of
$250 million substantially all of which consist of other obligations of the
types described in clauses (a), (b), (e) and (f) hereof.
"Person" means any individual, corporation, partnership, joint venture,
trust, 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 and/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.
"Production Payments and Reserve Sales" means the grant or transfer to
any Person of a royalty, overriding royalty, net profits interest, production
payment (whether volumetric or dollar denominated), master limited partnership
interest 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 matters.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock in any other Person
(but excluding Capital Stock or other securities issued by such first mentioned
Person).
"Public Equity Offering" means an underwritten public offering of common
stock of the Company pursuant to an effective registration statement under the
Securities Act.
"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
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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.
"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 stockholders
(other than dividends, distributions or payments made solely in Capital
Stock of the Company), or declared and paid to any Person other than the
Company or any of its Restricted Subsidiaries 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
of the Company or of a Restricted Subsidiary,
(iii) a payment made by the Company or any of its Restricted
Subsidiaries to redeem, repurchase, 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, Indebtedness of the Company which is subordinate (whether
pursuant to its terms or by operation of law) in right of payment to the
Notes,
(iv) an Investment by the Company or a Restricted Subsidiary in any
Person other than the Company or a Restricted Subsidiary or
(v) the sale or issuance of Capital Stock of a Restricted Subsidiary
to a Person other than the Company or another Restricted Subsidiary if the
result thereof is that such Restricted Subsidiary shall cease to be a
Restricted Subsidiary, in which event the amount of such "Restricted
Payment" shall be the Fair Market Value of the remaining interest in such
former Restricted Subsidiary held by the Company and its other Restricted
Subsidiaries.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated an Unrestricted Subsidiary in the manner provided in the
covenant described under "--Certain Covenants--Restricted and Unrestricted
Subsidiaries."
"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" means
(i) all obligations consisting of the principal of and premium, if any,
and accrued and unpaid interest in respect of
(A) Indebtedness of the Company for borrowed money, and
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(B) Indebtedness evidenced by notes, debentures, bonds or other
similar instruments permitted under the Indenture for the payment of which
the Company is responsible or liable;
(ii) all Capital Lease Obligations of the Company;
(iii) all obligations of the Company
(A) for the reimbursement of any obligor on any letter of credit,
bankers' acceptance or similar credit transaction;
(B) under Hedging Agreements; or
(C) issued or assumed as the deferred purchase price of property
and all conditional sale obligations of the Company and all obligations
under any title retention agreement permitted under the Indenture; and
(iv) all obligations of other persons of the type referred to in clauses
(i) and (ii) for the payment of which the Company is responsible or liable as
Guarantor;
provided that Senior Indebtedness does not include
(i) Pari Passu Indebtedness or Indebtedness of the Company that is by its
terms subordinate in right of payment to the Notes;
(ii) any Indebtedness Incurred in violation of the provisions of the
Indenture;
(iii) accounts payable or any other obligations of the Company to trade
creditors created or assumed by the Company in the ordinary course of business
in connection with the obtaining of materials or services;
(iv) in-kind obligations relating to net oil and gas balancing positions;
or
(v) any liability for federal, state, local or other taxes owed or owing
by the Company.
"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).
"Subsidiary" of a Person means
(a) another Person which is a corporation a majority of whose Voting Stock
is at the time, directly or indirectly, owned or controlled by
(i) the first Person;
(ii) the first Person and one or more of its Subsidiaries; or
(iii) one or more of the first Person's Subsidiaries; or
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(b) another Person which is not a corporation
(x) at least 50 percent 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 (i), (ii) or (iii) above.
"Unrestricted Subsidiary" means
(i) each Subsidiary of the Company that the Company has designated
pursuant to the covenant described under "--Certain Covenants--Restricted
and Unrestricted Subsidiaries" as an Unrestricted Subsidiary; and
(ii) any Subsidiary of an Unrestricted Subsidiary.
"U.S. GAAP" means United States generally accepted accounting principles
as in effect on the date of the Indenture, unless stated otherwise.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with U.S. GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Redeemable Stock" of any Person means Redeemable 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.
"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 all
of the Voting Stock of which (except directors' qualifying shares) is at the
time owned, directly or indirectly, by the Company and its other Wholly Owned
Subsidiaries.
Defeasance and Covenant Defeasance
The Indenture provides that the Company will be discharged from all its
obligations, and the provisions of the Indenture relating to subordination will
cease to be effective, 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) 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 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 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 Company has
delivered to the Trustee an Opinion of Counsel to the effect that (a) the
Company has received from, or there has been published by, the United States
Internal Revenue Service a ruling or (b) 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 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; and 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.
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The Indenture provides that the Company may omit to comply with certain
covenants, including those described under "--Certain Covenants" and in
clauses (d) and (e) under the first paragraph of "--Merger, Consolidation and
Sale of Assets," that the occurrence of certain Events of Default, which are
described below in clause (c) (with respect to such covenants) and clauses (d)
and (e) under "--Events of Default and Notice" will be deemed not to be or
result in an Event of Default and that the provisions of the Indenture relating
to subordination will cease to be effective. The Company, in order to exercise
such option, 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 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 or on earlier redemption in accordance with the terms of the Indenture
and the Notes. The Company will also be required, among other things, to deliver
to the Trustee an Opinion of Counsel to the effect that holders of the Notes
will not recognize 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;
and 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. In the event the Company 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 Company would remain liable for such payments.
Events of Default and Notice
The following are summaries of Events of Default under the Indenture with
respect to the Notes:
(a) failure to pay any interest on the Notes when due, continued
for 30 days;
(b) failure to pay principal of (or premium, if any, on) the
Notes when due;
(c) failure to perform any other covenant of the Company in the
Indenture, continued for 60 days after written notice as provided in the
Indenture;
(d) a default under any Indebtedness for borrowed money by the
Company or any Restricted Subsidiary which results in acceleration of
the maturity of such Indebtedness, or failure to pay any such
Indebtedness at maturity, in an amount greater than $10 million ($40
million in the case of Indebtedness of a Foreign Subsidiary the recourse
for which is limited to solely Foreign Subsidiaries) 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;
(e) 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 in excess
of $10 million and such judgments or orders are not discharged, waived,
stayed, satisfied or bonded for a period of 60 consecutive days; and
(f) certain events of bankruptcy, insolvency or reorganization.
The Indenture provides that if an Event of Default (other than an Event
of Default described in clause (f) 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 percent 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 (f) 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 a majority in aggregate principal amount of the Outstanding Notes may, under
certain circumstances, rescind and
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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 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 percent 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 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 Company and the Trustee without the consent of any holders of
Notes in certain limited circumstances, including
(a) to cure any ambiguity, omission, defect or inconsistency,
(b) 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 of the assets of the Company,
(c) to provide for uncertificated Notes in addition to or in place
of certificated Notes,
(d) to comply with any requirement of the Commission in order to
effect or maintain the qualification of the Indenture under the 1939
Act, or
(e) to make any change that does not adversely affect the rights of
any holder of Notes in any material respect.
The Indenture contains provisions permitting the Company 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 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,
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(a) reduce the principal amount of Notes whose holders must consent
to an amendment or waiver;
(b) reduce the rate of or change the time for payment of interest on
any Notes;
(c) change the currency in which any amount due in respect of the
Notes is payable;
(d) 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;
(e) reduce the relative ranking of any Notes; or
(f) release any security that may have been granted in respect of the
Notes.
The holders of 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 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 holder of
each Outstanding Note.
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 Trustee and 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.
Notices
Notices to holders of 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.
The Trustee
The Chase Manhattan Bank 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. The
Trustee is also the trustee under the 9% Notes Indenture and the 8 5/8% Notes
Indenture.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material United States federal income
tax consequences of the exchange of the outstanding notes for exchange notes
that may be relevant to a beneficial owner of notes that is a citizen or
resident of the United States or a U.S. domestic corporation or that otherwise
is subject to United States federal income taxation on a net income basis in
respect of such notes (a "U.S. holder"). This summary is based on laws,
regulations, rulings and decisions now in effect, all of which are subject to
change. This summary deals only with U.S. holders that hold the outstanding
notes as capital assets, and does not address tax considerations applicable to
holders that may be subject to special tax rules, such as, but not limited to,
banks, tax-exempt entities, insurance companies or dealers in securities or
currencies, traders in securities electing to mark to market, persons that hold
the outstanding notes as a position in a "straddle" or conversion transaction,
or as part of a "synthetic security" or other integrated financial transaction
or persons that have a "functional currency" other than the U.S. dollar.
The Company believes that the exchange of outstanding notes for exchange
notes pursuant to the exchange offer will not be treated as an "exchange" for
federal income tax purposes because the exchange notes will not be considered to
differ materially in kind or extent from the outstanding notes. Rather, the
exchange notes received by a holder will be treated as a continuation of the
outstanding notes in the hands of such holder. As a result, there will be no
federal income tax consequences to holders exchanging outstanding notes for
exchange notes pursuant to the exchange offer.
Holders should consult their own tax advisors in determining the tax
consequences to them, as a result of their individual circumstances, of the
exchange of the outstanding notes for the exchange notes and of the ownership
and disposition of exchange notes received in the exchange offer, including the
application of state, local, foreign or other tax laws.
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 outstanding notes where such outstanding notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, starting on the expiration date and ending on the close of business
180 days after the expiration date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale.
The Company will not 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 at 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 resulting
from any such resale of exchange notes and any commission 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 and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. The Company has agreed to pay all expenses
incident to the exchange offer,
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including the expenses of one counsel for the holders of the outstanding notes,
other than commissions or concessions of any brokers or dealers. The Company
will indemnify the holders of the outstanding notes, including any broker-
dealers, against certain liabilities, including liabilities under the Securities
Act.
LEGAL MATTERS
The validity of the exchange notes will be passed upon for the Company by
Conner & Winters, A Professional Corporation, Tulsa, Oklahoma.
EXPERTS
The audited financial statements of the Company incorporated by reference
in this prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect to such audited financial
statements, and are incorporated by reference in reliance upon the authority of
such firm as experts in giving such report.
The estimated reserve evaluations and related calculations of Netherland,
Sewell & Associates, Inc. for the United States, Argentina and Ecuador set forth
or incorporated by reference in this prospectus have been included or
incorporated by reference in reliance upon the authority of such firm as experts
in petroleum engineering.
The estimated reserve evaluations and related calculations of DeGolyer and
MacNaughton for Bolivia set forth or incorporated by reference in this
prospectus have been included or incorporated by reference in reliance upon the
authority of such firm as experts in petroleum engineering.
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PROSPECTUS APRIL 30, 1999
$150,000,000
[LOGO]
Vintage Petroleum, Inc.
Exchange Offer for
9 3/4% Senior Subordinated
Notes due 2009
