<PAGE>
As filed with the Securities and Exchange Commission on April 9, 1999.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____________________
VINTAGE PETROLEUM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 1311 73-1182669
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
4200 One Williams Center
Tulsa, Oklahoma 74172
(918) 592-0101
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
CHARLES C. STEPHENSON, JR.
Chairman of the Board
4200 One Williams Center
Tulsa, Oklahoma 74172
(918) 592-0101
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
ROBERT J. MELGAARD, ESQ.
Conner & Winters,
A Professional Corporation
3700 First Place Tower
15 East 5th Street
Tulsa, Oklahoma 74103-4344
____________________
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after this Registration Statement becomes effective.
____________________
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
____________________
Calculation of Registration Fee
<TABLE>
<CAPTION>
====================================================================================================================================
Title of each class of securities Amount to Proposed maximum Proposed maximum aggregate Amount of
to be registered be registered offering price per unit offering price registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 3/4% Senior Subordinated Notes due 2009 $150,000,000 100% $150,000,000 $41,700
====================================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended.
____________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 9, 1999
PROSPECTUS
[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 , 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 , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
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............................. 71
Plan of Distribution....................................................... 71
Legal Matters.............................................................. 72
Experts.................................................................... 72
</TABLE>
_________________
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.
i
<PAGE>
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 ,
1999.
ii
<PAGE>
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.
iii
<PAGE>
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.
1
<PAGE>
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 1998 activity levels. Due
to the current low oil and gas prices, we anticipate reduced spending of
2
<PAGE>
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. We anticipate, that as a result of continued
low oil and gas prices, the borrowing base will be significantly reduced at
the banks' next borrowing base determination in April 1999. However, the
amount of any such reduction is unknown at this time.
3
<PAGE>
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.
<TABLE>
<S> <C>
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
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
. 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
, 1999, unless we decide to extend the expiration date.
Interest on the Exchange Notes..... The exchange notes will accrue interest at 9 1/4% 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.
</TABLE>
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.
5
<PAGE>
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.
6
<PAGE>
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.
7
<PAGE>
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.
8
<PAGE>
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>
Years Ended December 31,
---------------------------------------------------------------------
1994(a) 1995(a) 1996(a) 1997(a) 1998
-------- --------- --------- --------- ----------
(In thousands, except ratios and per share amounts)
<S> <C> <C> <C> <C> <C>
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 current 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.
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
13
<PAGE>
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 under our revolving credit facility because of lower oil and gas
reserve values, reducing our liquidity and even triggering mandatory loan
repayments. We anticipate that as a result of continued low oil and gas prices,
the borrowing base under our revolving credit facility will be significantly
reduced at the banks' next borrowing base determination in April 1999. The
amount of such reduction is unknown at this time. 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
. 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.
14
<PAGE>
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. 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 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. The
current low 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
15
<PAGE>
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. The current climate of low 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 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;
16
<PAGE>
. 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. 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.
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.
17
<PAGE>
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;
. 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.
18
<PAGE>
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, 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.
19
<PAGE>
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.
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.
20
<PAGE>
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
---------- -----------
(In thousands)
<S> <C> <C>
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 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;
. it has no arrangement or understanding with any person to participate
in the distribution of the exchange notes; and
22
<PAGE>
. 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.
Expiration Date; Extensions; Amendments; Termination
The term "expiration date" shall mean , 1999 (30
calendar days following the commencement of the exchange offer), unless the
exchange offer is extended if and as required by applicable law, 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 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 waived by the Company (if permitted to be
waived), by giving oral 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 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
23
<PAGE>
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.
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.
24
<PAGE>
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 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.
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 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
25
<PAGE>
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 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. 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, 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.
26
<PAGE>
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 properly completed and duly executed letter of
transmittal or facsimile thereof and 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, 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, 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
business day prior to the expiration date at the address set forth below under
the heading "-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.
27
<PAGE>
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;
. 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:
<TABLE>
<S> <C> <C>
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
</TABLE>
28
<PAGE>
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;
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;
29
<PAGE>
. 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
. 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
30
<PAGE>
. 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.
31
<PAGE>
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. The Company anticipates, that as a
result of continued low oil and gas prices, the borrowing base will be
significantly reduced at the banks' next borrowing base determination in April
1999. However, the amount of any such reduction is unknown at this time.
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;
. a breach of certain agreements and covenants, including all negative
covenants in the Bank Facility;
32
<PAGE>
. 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.
Events of default under the 9% Notes Indenture are:
. failure to pay any interest on the 9% Notes when due, continued for 30
days;
33
<PAGE>
. 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;
. asset sales;
. the issuance and sale of capital stock of restricted subsidiaries;
. transactions with affiliates;
34
<PAGE>
. 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.
35
<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 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
36
<PAGE>
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 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.
37
<PAGE>
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");
(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
38
<PAGE>
(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 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.
39
<PAGE>
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 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
40
<PAGE>
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 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.
41
<PAGE>
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;
(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;
42
<PAGE>
(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.
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;
43
<PAGE>
(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;
(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',
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)
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;
44
<PAGE>
(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 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.
45
<PAGE>
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;
(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),
46
<PAGE>
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
(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
47
<PAGE>
(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 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.
48
<PAGE>
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
(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),
49
<PAGE>
(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,
(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,
50
<PAGE>
(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
(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:
51
<PAGE>
(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
(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.
52
<PAGE>
"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);
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
53
<PAGE>
(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
(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;
54
<PAGE>
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.
"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
55
<PAGE>
Date and base interest rates in respect of floating interest rate
obligations equal to the base interest rates on such obligations in effect
as of the Transaction Date;
provided, that if the Company or any of its Restricted Subsidiaries is a party
to any Interest Rate Protection Agreement which would have the effect of
changing the interest rate on any Indebtedness of the Company or any of its
Restricted Subsidiaries for such four quarter period (or a portion thereof), the
resulting rate shall be used for such four quarter period or portion thereof;
provided further that any Consolidated Interest Expense with respect to
Indebtedness Incurred or retired by the Company or any of its Restricted
Subsidiaries during the fiscal quarter in which the Transaction Date occurs
shall be calculated as if such Indebtedness was so Incurred or retired on the
first day of the fiscal quarter in which the Transaction Date occurs. In
addition, if since the beginning of the four full fiscal quarter period
preceding the Transaction Date,
(a) the Company or any of its Restricted Subsidiaries shall have
engaged in any Asset Sale, EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive), or increased by an amount equal
to the EBITDA (if negative), directly attributable to the assets which are
the subject of such Asset Sale for such period calculated on a pro forma
basis as if such Asset Sale and any related retirement of Indebtedness had
occurred on the first day of such period; or
(b) the Company or any of its Restricted Subsidiaries shall have
acquired any material assets, EBITDA shall be calculated on a pro forma
basis as if such asset acquisitions had occurred on the first day of such
four fiscal quarter period.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication,
(i) the sum of
(a) the aggregate amount of cash and noncash interest expense
(including capitalized interest) of such Person and its Restricted
Subsidiaries for such period as determined on a consolidated basis in
accordance with 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;
56
<PAGE>
(d) the portion of any rental obligation of such Person or its
Restricted Subsidiaries in respect of any Sale and Leaseback
Transaction that is Indebtedness allocable to interest expense
(determined as if such obligation were treated as a Capital Lease
Obligation); and
(e) to the extent any Indebtedness of any other Person (other
than Restricted Subsidiaries) is Guaranteed by such Person or any of
its Restricted Subsidiaries, the aggregate amount of interest paid,
accrued or scheduled to be paid or accrued by such other Person during
such period attributable to any such Indebtedness;
less
(ii) to the extent included in (i) above, amortization or write-off of
deferred financing costs of such Person and its Restricted Subsidiaries
during such period;
in the case of both (i) and (ii) above, after elimination of 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.
57
<PAGE>
"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.
"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.
58
<PAGE>
"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
(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.
59
<PAGE>
"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
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.
60
<PAGE>
"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
(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.
61
<PAGE>
"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.
"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.
62
<PAGE>
"Oil and Gas Liens" means
(i) Liens on any specific property or any interest therein,
construction thereon or improvement thereto to secure all or any part of
the costs incurred for surveying, exploration, drilling, extraction,
development, operation, production, construction, alteration, repair or
improvement of, in, under or on such property and the plugging and
abandonment of wells located thereon (it being understood that, in the case
of oil and gas producing properties, or any interest therein, costs
incurred for "development" shall include costs incurred for all
facilities relating to such properties or to projects, ventures or other
arrangements of which such properties form a part or which relate to such
properties or interests);
(ii) Liens on an oil 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).
63
<PAGE>
"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.;
(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.
64
<PAGE>
"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 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.
65
<PAGE>
"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
(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).
66
<PAGE>
"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
(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
67
<PAGE>
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.
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.
68
<PAGE>
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 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.
69
<PAGE>
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,
(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.
70
<PAGE>
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, including the expenses of one counsel for the
holders of the outstanding notes, other than commissions or
71
<PAGE>
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.
72
<PAGE>
PROSPECTUS , 1999
$150,000,000
[LOGO]
Vintage Petroleum, Inc.
Exchange Offer for
9 3/4% Senior Subordinated
Notes due 2009
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
provides generally that a corporation may indemnify any person who was or is a
party to or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative in nature, by reason of the fact that he is or was a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees) and, in
a proceeding not by or in the right of the corporation, judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by him in
connection with such suit or proceeding, if he acted in good faith and in a
manner believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reason to believe his conduct was unlawful. Delaware law further provides that
a corporation may not indemnify any person against expenses incurred in
connection with an action by or in the right of the corporation if such person
shall have been adjudged to be liable in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine that, despite the adjudication of liability but
in the view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which such court shall deem
proper. The Restated By-laws of the Registrant provide that the Registrant
shall indemnify an officer or director against liability incurred by such person
as authorized under the General Corporation Law of the State of Delaware. In
addition, the Registrant has entered into specific agreements with the directors
and officers of the Registrant providing for indemnification of such persons
under certain circumstances. The Registrant's Restated Certificate of
Incorporation also eliminates the liability of the Registrant's directors for
monetary damages for breach of their fiduciary duty as directors. This
provision, however, does not eliminate a director's liability (a) for any breach
of the director's duty of loyalty to the Registrant or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) in respect of certain unlawful dividend payments
or stock redemptions or repurchases, or (d) for any transaction from which a
director derived an improper personal benefit.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following is a list of all exhibits filed as a part of
this Registration Statement on Form S-4, including those incorporated by
reference herein.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ---------------------------------------------------------------------------------------------------
<S> <C>
3.1** Restated Certificate of Incorporation, as amended, of the Registrant.
3.2*** Restated By-laws of the Registrant.
4.1**** Indenture dated as of January 26, 1999, between The Chase Manhattan Bank, as Trustee, and the
Registrant, relating to the 9 3/4% Senior Subordinated Notes due 2009 of the Registrant (the
"Indenture"), which includes the form of global note.
4.2* Registration Rights Agreement, dated January 20, 1999, between the Registrant and Warburg Dillon
Read LLC.
5.* Opinion of Conner & Winters, A Professional Corporation.
12.* Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of Conner & Winters, A Professional Corporation (included in Exhibit 5).
23.3* Consent of Netherland, Sewell & Associates, Inc.
</TABLE>
II-1
<PAGE>
Exhibit
Number Discription
- ------- --------------------------------------------------------------------
23.4* Consent of DeGolyer and MacNaughton.
24.* Power of Attorney (set forth on the signature page to this
Registration Statement).
25.* Form T-1 with respect to the eligibility of the Trustee with respect
to the Indenture.
____________________
* Filed herewith.
** Previously filed as an exhibit to the Registrant's Form 10-Q for the
quarter ended June 30, 1997, and incorporated by reference herein.
*** Previously filed as an exhibit to the Registrant's Registration Statement
on Form S-1 (No. 33-35289) and incorporated by reference herein.
**** Previously filed as an exhibit to the Registrant's Form 10-K for the year
ended December 31, 1998, and incorporated by reference herein.
(b) Financial Statement Schedules. All schedules are omitted as inapplicable
or because the required information is contained in the Registrant's
consolidated financial statements or included in the notes thereto.
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in this effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 20 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to such request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
this Registration Statement when it became effective.
* * *
II-3
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Tulsa,
State of Oklahoma, on the 9/th/ day of April, 1999.
VINTAGE PETROLEUM, INC.
By: /s/ C. C. Stephenson, Jr.
---------------------------
C. C. Stephenson, Jr.
Chairman of the Board
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints C. C. Stephenson, Jr., S. Craig George
and William C. Barnes, and each of them, his true and lawful attorneys-in-fact
and agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/ C. C. Stephenson, Jr. Director and Chairman of the Board April 9, 1999
- ---------------------------
C. C. Stephenson, Jr.
/s/ Jo Bob Hille Director and Vice Chairman of the April 9, 1999
- ----------------------------- Board
Jo Bob Hille
/s/ S. Craig George Director, President and Chief April 9, 1999
- ----------------------------- Executive Officer (Principal Executive
S. Craig George Officer)
/s/ William C. Barnes Director, Executive Vice President, April 9, 1999
- ----------------------------- Chief Financial Officer and Treasurer
William C. Barnes (Principal Financial Officer)
/s/ Bryan H. Lawrence Director April 9, 1999
- -----------------------------
Bryan H. Lawrence
/s/ John T. McNabb, II Director April 9, 1999
- -----------------------------
John T. McNabb, II
/s/ Michael F. Meimerstorf Vice President and Controller April 9, 1999
- ----------------------------- (Principal Accounting Officer)
Michael F. Meimerstorf
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ---------------------------------------------------------------------------------------------------
<S> <C>
3.1** Restated Certificate of Incorporation, as amended, of the Registrant.
3.2*** Restated By-laws of the Registrant.
4.1**** Indenture dated as of January 26, 1999, between The Chase Manhattan Bank, as Trustee, and the
Registrant, relating to the 9 3/4% Senior Subordinated Notes due 2009 of the Registrant (the
"Indenture").
4.2* Registration Rights Agreement, dated January 20, 1999, between the Registrant and Warburg Dillon
Read LLC.
5.* Opinion of Conner & Winters, A Professional Corporation.
12.* Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of Conner & Winters, A Professional Corporation (included in Exhibit 5).
23.3* Consent of Netherland, Sewell & Associates, Inc.
23.4* Consent of DeGolyer and MacNaughton.
24.* Power of Attorney (set forth on the signature page to this Registration Statement).
25.* Form T-1 with respect to the eligibility of the Trustee with respect to the Indenture.
</TABLE>
____________________
<TABLE>
<CAPTION>
<S> <C>
* Filed herewith.
** Previously filed as an exhibit to the Registrant's Form 10-Q for the quarter ended
June 30, 1997, and incorporated by reference herein.
*** Previously filed as an exhibit to the Registrant's Registration Statement on Form S-1 (No.
33-35289) and incorporated by reference herein.
**** Previously filed as an exhibit to the Registrant's Form 10-K for the year ended December
31, 1998, and incorporated by reference herein.
</TABLE>
<PAGE>
Exhibit 4.2
EXECUTION COPY
VINTAGE PETROLEUM, INC.
9 3/4% Senior Subordinated Notes Due 2009
REGISTRATION RIGHTS AGREEMENT
New York, New York
January 20, 1999
Warburg Dillon Read LLC
As Representatives of the Initial Purchasers
c/o Warburg Dillon Read LLC
299 Park Avenue
New York, New York 10101
Dear Sirs:
Vintage Petroleum, Inc., a corporation organized under the laws of
Delaware (the "Company"), proposes to issue and sell to certain purchasers (the
"Initial Purchasers"), upon the terms set forth in a purchase agreement of even
date herewith (the "Purchase Agreement"), its 9 3/4% Senior Subordinated
Notes Due 2009 (the "Securities") relating to the initial placement of the
Securities (the "Initial Placement"). To induce the Initial Purchasers to enter
into the Purchase Agreement, the Company agrees with you for your benefit and
the benefit of the holders from time to time of the Securities (including the
Initial Purchasers) (each a "Holder" and, together, the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition
shall have the respective meanings set forth in the Purchase Agreement. As used
in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" shall mean the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person shall mean any other person that,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control
of a person shall mean the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
"Broker-Dealer" shall mean any broker or dealer registered as such
under the Exchange Act.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City.
"Commission" shall mean the Securities and Exchange Commission.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Prospectus" shall mean the prospectus included in the
Exchange Offer Registration Statement, as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the New Securities covered by such Exchange Offer Registration Statement, and
all amendments and supplements thereto and all material incorporated by
reference therein.
"Exchange Offer Registration Period" shall mean the 180-day period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" shall mean a registration
statement of the Company on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments thereto, in each
case including the Exchange Offer Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Exchanging Dealer" shall mean any Holder (which may include any
Initial Purchaser) that is a Broker-Dealer and elects to exchange for New
Securities any Securities that it acquired for its own account as a result of
market-making activities or other trading activities (but not directly from the
Company or any Affiliate of the Company).
"Holder" shall have the meaning set forth in the preamble hereto.
"Indenture" shall mean the Indenture relating to the Securities, dated
as of January 26, 1999 between the Company and The Chase Manhattan Bank, as
trustee, as the same may be amended from time to time in accordance with the
terms thereof.
"Initial Placement" shall have the meaning set forth in the preamble
hereto.
"Initial Purchaser" shall have the meaning set forth in the preamble
hereto.
"Losses" shall have the meaning set forth in Section 6(d) hereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of Securities registered under a Registration
Statement.
"Managing Underwriters" shall mean the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
"New Securities" shall mean debt securities of the Company identical
in all material respects to the Securities (except that the interest rate step-
up provisions and the transfer restrictions shall be modified or eliminated, as
appropriate) and to be issued under the Indenture or the New Securities
Indenture.
"New Securities Indenture" shall mean an indenture between the Company
and the New Securities Trustee, identical in all material respects to the
Indenture (except that the interest rate step-up provisions will be modified or
eliminated, as appropriate).
2
<PAGE>
"New Securities Trustee" shall mean a bank or trust company reasonably
satisfactory to the Initial Purchasers, as trustee with respect to the New
Securities under the New Securities Indenture.
"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities covered by such
Registration Statement, and all amendments and supplements thereto and all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble
hereto.
"Registered Exchange Offer" shall mean the proposed offer of the
Company to issue and deliver to the Holders of the Securities that are not
prohibited by any law or policy of the Commission from participating in such
offer, in exchange for the Securities, a like aggregate principal amount of the
New Securities.
"Registration Statement" shall mean any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, any amendments
and supplements to such registration statement, including post-effective
amendments (in each case including the Prospectus contained therein), all
exhibits thereto and all material incorporated by reference therein.
"Securities" shall have the meaning set forth in the preamble hereto.
"Shelf Registration" shall mean a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof which
covers some or all of the Securities or New Securities, as applicable, on an
appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Trustee" shall mean the trustee with respect to the Securities under
the Indenture.
"underwriter" shall mean any underwriter of Securities in connection
with an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer. (a) The Company shall prepare and,
not later than 75 days following the date of the original issuance of the
Securities, shall file with the Commission the Exchange Offer Registration
Statement with respect to the Registered Exchange Offer. The Company shall
cause the Exchange Offer Registration Statement to become effective under the
Act within 150 days of the date of the original issuance of the Securities.
3
<PAGE>
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for New Securities (assuming that such Holder is
not an Affiliate of the Company, acquires the New Securities in the ordinary
course of such Holder's business, has no arrangements with any person to
participate in the distribution of the New Securities and is not prohibited by
any law or policy of the Commission from participating in the Registered
Exchange Offer) to trade such New Securities from and after their receipt
without any limitations or restrictions under the Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
(c) In connection with the Registered Exchange Offer, the Company
shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than 20
Business Days and not more than 30 Business Days after the date notice
thereof is mailed to the Holders (or, in each case, longer if required by
applicable law);
(iii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented and amended as required,
under the Act to ensure that it is available for sales of New Securities by
Exchanging Dealers during the Exchange Offer Registration Period;
(iv) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan in New York City, which
may be the Trustee, the New Securities Trustee or an Affiliate of either of
them;
(v) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last Business Day on which
the Registered Exchange Offer is open;
(vi) prior to effectiveness of the Exchange Offer Registration
Statement, if requested or required by the Commission, provide a
supplemental letter to the Commission (A) stating that the Company is
conducting the Registered Exchange Offer in reliance on the position of the
Commission in Exxon Capital Holdings Corporation (pub. avail. May 13, 1988)
and Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991); and (B)
including a representation that the Company has not entered into any
arrangement or understanding with any person to distribute the New
Securities to be received in the Registered Exchange Offer and that, to the
best of the Company's information and belief, each Holder participating in
the Registered Exchange Offer is acquiring the New Securities in the
ordinary course of business and has no arrangement or understanding with
any person to participate in the distribution of the New Securities; and
(vii) comply in all material respects with all applicable laws.
4
<PAGE>
(d) As soon as practicable after the close of the Registered Exchange
Offer, the Company shall:
(i) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation in accordance with
Section 4(s) all Securities so accepted for exchange; and
(iii) cause the New Securities Trustee promptly to authenticate and
deliver to each Holder of Securities a principal amount of New Securities
equal to the principal amount of the Securities of such Holder so accepted
for exchange.
(e) Each Holder hereby acknowledges and agrees that any such Holder
using the Registered Exchange Offer to participate in a distribution of the New
Securities (x) could not under Commission policy as in effect on the date of
this Agreement rely on the position of the Commission in Morgan Stanley and Co.,
Inc. (pub. avail. June 5, 1991) and Exxon Capital Holdings Corporation (pub.
avail. May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993 and similar no-action letters; and (y) must comply
with the registration and prospectus delivery requirements of the Act in
connection with any secondary resale transaction which must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K under
the Act if the resales are of New Securities obtained by such Holder in exchange
for Securities acquired by such Holder directly from the Company or one of its
Affiliates. Accordingly, each Holder participating in the Registered Exchange
Offer shall be required to represent to the Company that, at the time of the
consummation of the Registered Exchange Offer:
(i) any New Securities received by such Holder will be acquired in
the ordinary course of business;
(ii) such Holder will have no arrangement or understanding with any
person to participate in the distribution of the Securities or the New
Securities within the meaning of the Act; and
(iii) such Holder is not an Affiliate of the Company.
(f) If any Initial Purchaser determines that it is not eligible to
participate in the Registered Exchange Offer with respect to the exchange of
Securities constituting any portion of an unsold allotment, at the request of
such Initial Purchaser, the Company shall issue and deliver to such Initial
Purchaser or the person purchasing New Securities registered under a Shelf
Registration Statement as contemplated by Section 3 hereof from such Initial
Purchaser, in exchange for such Securities, a like principal amount of New
Securities. The Company shall use its best efforts to cause the CUSIP Service
Bureau to issue the same CUSIP number for such New Securities as for New
Securities issued pursuant to the Registered Exchange Offer.
3. Shelf Registration. (a) If (i) due to any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Registered Exchange Offer as contemplated by Section 2 hereof; (ii) for any
other reason the Exchange Offer Registration Statement is not declared effective
within 150 days of the date of original issuance of the Securities or the
Registered Exchange Offer is not consummated within 45 days after the date the
Exchange Offer Registration Statement is declared effective under the Act; (iii)
any Initial Purchaser so requests
5
<PAGE>
with respect to Securities that are not eligible to be exchanged for New
Securities in the Registered Exchange Offer and that are held by it following
consummation of the Registered Exchange Offer; (iv) any Holder (other than an
Initial Purchaser) is not eligible to participate in the Registered Exchange
Offer or does not receive freely tradeable New Securities in the Registered
Exchange Offer other than by reason of such Holder being an Affiliate of the
Company; or (v) in the case of any Initial Purchaser that participates in the
Registered Exchange Offer or acquires New Securities pursuant to Section 2(f)
hereof, such Initial Purchaser does not receive freely tradeable New Securities
in exchange for Securities constituting any portion of an unsold allotment (it
being understood that (x) the requirement that an Initial Purchaser deliver a
Prospectus containing the information required by Item 507 or 508 of Regulation
S-K under the Act in connection with sales of New Securities acquired in
exchange for such Securities shall result in such New Securities being not
"freely tradeable"; and (y) the requirement that an Exchanging Dealer deliver an
Exchange Offer Prospectus in connection with sales of New Securities acquired in
the Registered Exchange Offer in exchange for Securities acquired as a result of
market-making activities or other trading activities shall not result in such
New Securities being not "freely tradeable"), the Company shall effect a Shelf
Registration Statement in accordance with subsection (b) below.
(b) (i) The Company shall as promptly as practicable (but in no event
more than 30 days after so required or requested pursuant to this Section 3),
file with the Commission and thereafter shall cause to be declared effective
under the Act a Shelf Registration Statement relating to the offer and sale of
the Securities or the New Securities, as applicable, by the Holders thereof from
time to time in accordance with the methods of distribution elected by such
Holders and set forth in such Shelf Registration Statement; provided, however,
that no Holder (other than an Initial Purchaser) shall be entitled to have the
Securities held by it covered by such Shelf Registration Statement unless such
Holder agrees in writing to be bound by all of the provisions of this Agreement
applicable to such Holder; and provided further, that with respect to New
Securities received by an Initial Purchaser in exchange for Securities
constituting any portion of an unsold allotment, the Company may, if permitted
by current interpretations by the Commission's staff, file a post-effective
amendment to the Exchange Offer Registration Statement containing the
information required by Item 507 or 508 of Regulation S-K, as applicable, in
satisfaction of its obligations under this subsection with respect thereto, and
any such Exchange Offer Registration Statement, as so amended, shall be referred
to herein as, and governed by the provisions herein applicable to, a Shelf
Registration Statement.
(ii) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended as
required by the Act, in order to permit the Prospectus forming part thereof to
be usable by Holders for a period of two years from the date the Shelf
Registration Statement is declared effective by the Commission or such shorter
period that will terminate when all the Securities or New Securities, as
applicable, covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement (in any such case, such period being called
the "Shelf Registration Period"). The Company shall be deemed not to have used
its best efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in Holders
of Securities covered thereby not being able to offer and sell such Securities
during that period, unless (A) such action is required by applicable law; or (B)
such action is taken by the Company in good faith and for valid business reasons
(not including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of Section 4(k) hereof, if applicable.
6
<PAGE>
4. Additional Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply.
(a) The Company shall:
(i) furnish to you, not less than five Business Days prior to the
filing thereof with the Commission, a copy of any Exchange Offer
Registration Statement and any Shelf Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein (including all documents incorporated by
reference therein after the initial filing) and shall use its best efforts
to reflect in each such document, when so filed with the Commission, such
comments as you reasonably propose;
(ii) include the information set forth in Annex A hereto on the
facing page of the Exchange Offer Registration Statement, in Annex B hereto
in the forepart of the Exchange Offer Registration Statement in a section
setting forth details of the Exchange Offer, in Annex C hereto in the
underwriting or plan of distribution section of the Prospectus contained in
the Exchange Offer Registration Statement, and in Annex D hereto in the
letter of transmittal delivered pursuant to the Registered Exchange Offer;
(iii) if requested by an Initial Purchaser, include the information
required by Item 507 or 508 of Regulation S-K, as applicable, in the
Prospectus contained in the Exchange Offer Registration Statement; and
(iv) in the case of a Shelf Registration Statement, include the names
of the Holders that propose to sell Securities pursuant to the Shelf
Registration Statement as selling security holders.
(b) The Company shall ensure that:
(i) any Registration Statement and any amendment thereto and any
Prospectus forming part thereof and any amendment or supplement thereto
complies in all material respects with the Act and the rules and
regulations thereunder;
(ii) any Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and
(iii) any Prospectus forming part of any Registration Statement, and
any amendment or supplement to such Prospectus, does not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(c) The Company shall advise you, the Holders of Securities covered
by any Shelf Registration Statement and any Exchanging Dealer under any Exchange
Offer Registration Statement that has provided in writing to the Company a
telephone or facsimile number and address for notices, and, if requested by you
or any such Holder or Exchanging Dealer, shall confirm such advice in writing
(which notice pursuant to clauses (ii) through (v) hereof shall be
7
<PAGE>
accompanied by an instruction to suspend the use of the Prospectus until the
Company shall have remedied the basis for such suspension):
(i) when a Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any post-
effective amendment thereto has become effective;
(ii) of any request by the Commission for any amendment or supplement
to the Registration Statement or the Prospectus or for additional
information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the securities included therein
for sale in any jurisdiction or the initiation of any proceeding for such
purpose; and
(v) of the happening of any event that requires any change in the
Registration Statement or the Prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in the light of the circumstances
under which they were made) not misleading.
(d) The Company shall use its best efforts to obtain the withdrawal
of any order suspending the effectiveness of any Registration Statement or the
qualification of the securities therein for sale in any jurisdiction at the
earliest possible time.
(e) The Company shall furnish to each Holder of Securities covered by
any Shelf Registration Statement, without charge, at least one copy of such
Shelf Registration Statement and any post-effective amendment thereto, including
all material incorporated therein by reference, and, if the Holder so requests
in writing, all exhibits thereto (including exhibits incorporated by reference
therein).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Securities covered by any Shelf Registration Statement,
without charge, as many copies of the Prospectus (including each preliminary
Prospectus) included in such Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request. The Company consents
to the use of the Prospectus or any amendment or supplement thereto by each of
the selling Holders of Securities in connection with the offering and sale of
the Securities covered by the Prospectus, or any amendment or supplement
thereto, included in the Shelf Registration Statement.
(g) The Company shall furnish to each Exchanging Dealer which so
requests, without charge, at least one copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including all material
incorporated by reference therein, and, if the Exchanging Dealer so requests in
writing, all exhibits thereto (including exhibits incorporated by reference
therein).
(h) The Company shall promptly deliver to each Initial Purchaser,
each Exchanging Dealer and each other person required to deliver a Prospectus
during the Exchange Offer Registration Period, without charge, as many copies of
the Prospectus included in such Exchange Offer Registration Statement and any
amendment or supplement thereto as any such
8
<PAGE>
person may reasonably request. The Company consents to the use of the Prospectus
or any amendment or supplement thereto by any Initial Purchaser, any Exchanging
Dealer and any such other person that may be required to deliver a Prospectus
following the Registered Exchange Offer in connection with the offering and sale
of the New Securities covered by the Prospectus, or any amendment or supplement
thereto, included in the Exchange Offer Registration Statement.
(i) Prior to the Registered Exchange Offer or any other offering of
Securities pursuant to any Registration Statement, the Company shall arrange, if
necessary, for the qualification of the Securities or the New Securities for
sale under the laws of such jurisdictions as any Holder shall reasonably request
and will maintain such qualification in effect so long as required; provided
that in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to service of process in suits, other than those arising out of the
Initial Placement, the Registered Exchange Offer or any offering pursuant to a
Shelf Registration Statement, in any such jurisdiction where it is not then so
subject.
(j) The Company shall cooperate with the Holders of Securities to
facilitate the timely preparation and delivery of certificates representing New
Securities or Securities to be issued or sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as Holders may request.
(k) Upon the occurrence of any event contemplated by subsections
(c)(ii) through (v) above, the Company shall promptly prepare a post-effective
amendment to the applicable Registration Statement or an amendment or supplement
to the related Prospectus or file any other required document so that, as
thereafter delivered to Initial Purchasers of the securities included therein,
the Prospectus will not include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading. In such
circumstances, the period of effectiveness of the Exchange Offer Registration
Statement provided for in Section 2 and the Shelf Registration Statement
provided for in Section 3(b) shall each be extended by the number of days from
and including the date of the giving of a notice of suspension pursuant to
Section 4(c) to and including the date when the Initial Purchasers, the Holders
of the Securities and any known Exchanging Dealer shall have received such
amended or supplemented Prospectus pursuant to this Section.
(l) Not later than the effective date of any Registration Statement,
the Company shall provide a CUSIP number for the Securities or the New
Securities, as the case may be, registered under such Registration Statement and
provide the Trustee with printed certificates for such Securities or New
Securities, in a form eligible for deposit with The Depository Trust Company.
(m) The Company shall comply with all applicable rules and
regulations of the Commission and shall make generally available to its security
holders as soon as practicable after the effective date of the applicable
Registration Statement an earnings statement satisfying the provisions of
Section 11(a) of the Act.
(n) The Company shall cause the Indenture or the New Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act in
a timely manner.
(o) The Company may require each Holder of Securities to be sold
pursuant to any Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of such Securities as the
Company may from time to time reasonably
9
<PAGE>
require for inclusion in such Registration Statement. The Company may exclude
from such Shelf Registration Statement the Securities of any Holder that
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
(p) In the case of any Shelf Registration Statement, the Company
shall enter into such agreements (including if requested an underwriting
agreement in customary form) and take all other appropriate actions in order to
expedite or facilitate the registration or the disposition of the Securities,
and in connection therewith, if an underwriting agreement is entered into, cause
the same to contain indemnification provisions and procedures no less favorable
than those set forth in Section 6 (or such other provisions and procedures
acceptable to the Majority Holders and the Managing Underwriters, if any) with
respect to all parties to be indemnified pursuant to Section 6.
(q) In the case of any Shelf Registration Statement, the Company
shall:
(i) make reasonably available for inspection by the Holders of
Securities to be registered thereunder, any underwriter participating in
any disposition pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by the Holders or any such underwriter
all relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries;
(ii) cause the Company's officers, directors and employees to supply
all relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is designated in
writing by the Company, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by the Holders or
any such underwriter, attorney, accountant or agent, unless such disclosure
is made in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a third
party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to the Holders of
Securities registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings and covering matters including, but not
limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the underwriters, if any, covering such matters as
are customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such Holders and
underwriters;
(v) to the extent permitted by the professional standards governing
the accounting profession at the time, obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each
selling Holder of Securities registered thereunder and the underwriters, if
any, in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with primary underwritten
offerings; and
10
<PAGE>
(vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 4(k) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
The actions set forth in clauses (iii), (iv), (v) and (vi) of this Section shall
be performed at (A) the effectiveness of such Registration Statement and each
post-effective amendment thereto; and (B) each closing under any underwriting or
similar agreement as and to the extent required thereunder.
(r) In the case of any Exchange Offer Registration Statement, the
Company shall:
(i) make reasonably available for inspection by such Initial
Purchaser, and any attorney, accountant or other agent retained by such
Initial Purchaser, all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries;
(ii) cause the Company's officers, directors and employees to supply
all relevant information reasonably requested by such Initial Purchaser or
any such attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is designated in
writing by the Company, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by such Initial
Purchaser or any such attorney, accountant or agent, unless such disclosure
is made in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a third
party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to such Initial
Purchaser, in form, substance and scope as are customarily made by issuers
to underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to such Initial Purchaser and its counsel)
addressed to such Initial Purchaser, covering such matters as are
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such Initial Purchaser
or its counsel;
(v) to the extent permitted by the professional standards governing
the accounting profession at the time, obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to such
Initial Purchaser, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with primary
underwritten offerings, or if requested by such Initial Purchaser or its
counsel in lieu of a "cold comfort" letter, an agreed-upon procedures
letter under Statement on Auditing Standards No. 35, covering matters
requested by such Initial Purchaser or its counsel; and
11
<PAGE>
(vi) deliver such documents and certificates as may be reasonably
requested by such Initial Purchaser or its counsel, including those to
evidence compliance with Section 4(k) and with conditions customarily
contained in underwriting agreements.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this
Section shall be performed at the close of the Registered Exchange Offer and the
effective date of any post-effective amendment to the Exchange Offer
Registration Statement.
(s) If a Registered Exchange Offer is to be consummated, upon
delivery of the Securities by Holders to the Company (or to such other person as
directed by the Company) in exchange for the New Securities, the Company shall
mark, or cause to be marked, on the Securities so exchanged that such Securities
are being canceled in exchange for the New Securities. In no event shall the
Securities be marked as paid or otherwise satisfied.
(t) The Company will use its best efforts (i) if the Securities have
been rated prior to the initial sale of such Securities, to confirm such ratings
will apply to the Securities or the New Securities, as the case may be, covered
by a Registration Statement; or (ii) if the Securities were not previously
rated, to cause the Securities covered by a Registration Statement to be rated
with at least one nationally recognized statistical rating agency, if so
requested by Majority Holders with respect to the related Registration Statement
or by any Managing Underwriters.
(u) In the event that any Broker-Dealer shall underwrite any
Securities or participate as a member of an underwriting syndicate or selling
group or "assist in the distribution" (within the meaning of the Rules of Fair
Practice and the By-Laws of the National Association of Securities Dealers,
Inc.) thereof, whether as a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof, or otherwise,
assist such Broker-Dealer in complying with the requirements of such Rules and
By-Laws, including, without limitation, by:
(i) if such Rules or By-Laws shall so require, engaging a "qualified
independent underwriter" (as defined in such Rules) to participate in the
preparation of the Registration Statement, to exercise usual standards of
due diligence with respect thereto and, if any portion of the offering
contemplated by such Registration Statement is an underwritten offering or
is made through a placement or sales agent, to recommend the yield of such
Securities;
(ii) indemnifying any such qualified independent underwriter to the
extent of the indemnification of underwriters provided in Section 6 hereof;
and
(iii) providing such information to such Broker-Dealer as may be
required in order for such Broker-Dealer to comply with the requirements of
such Rules.
(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities or the New Securities, as
the case may be, covered by a Registration Statement.
5. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections 2,
3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel designated by the Majority Holders to act as counsel for the Holders in
connection therewith, and, in the case of any Exchange Offer Registration
Statement, will reimburse the Initial Purchasers for the reasonable fees and
disbursements of counsel acting in connection therewith.
12
<PAGE>
6. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Holder of Securities or New Securities, as the
case may be, covered by any Registration Statement (including each Initial
Purchaser and, with respect to any Prospectus delivery as contemplated in
Section 4(h) hereof, each Exchanging Dealer), the directors, officers, employees
and agents of each such Holder and each person who controls any such Holder
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement as originally filed or in
any amendment thereof, or in any preliminary Prospectus or the Prospectus, or in
any amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any such Holder specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
The Company also agrees to indemnify or contribute as provided in
Section 6(d) to Losses of each underwriter, if any, of Securities or New
Securities, as the case may be, registered under a Shelf Registration Statement,
their directors, officers, employees or agents and each person who controls such
underwriter on substantially the same basis as that of the indemnification of
the Initial Purchasers and the selling Holders provided in this Section 6(a) and
shall, if requested by any Holder, enter into an underwriting agreement
reflecting such agreement, as provided in Section 4(p) hereof.
(b) Each Holder of securities covered by a Registration Statement
(including each Initial Purchaser and, with respect to any Prospectus delivery
as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally and
not jointly agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who signs such Registration Statement and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
each such Holder, but only with reference to written information relating to
such Holder furnished to the Company by or on behalf of such Holder specifically
for inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any such Holder
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses; and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party
13
<PAGE>
shall not thereafter be responsible for the fees and expenses of any separate
counsel retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest; (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party; (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action; or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party shall
have a joint and several obligation to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
"Losses") to which such indemnified party may be subject in such proportion as
is appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from the
Initial Placement and the Registration Statement which resulted in such Losses;
provided, however, that in no case shall any Initial Purchaser or any subsequent
Holder of any Security or New Security be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to such
Security, or in the case of a New Security, applicable to the Security that was
exchangeable into such New Security, as set forth on the cover page of the Final
Memorandum, nor shall any underwriter be responsible for any amount in excess of
the underwriting discount or commission applicable to the securities purchased
by such underwriter under the Registration Statement which resulted in such
Losses. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified party
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of such indemnifying party, on the
one hand, and such indemnified party, on the other hand, in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the sum of (x) the total net proceeds from the Initial
Placement (before deducting expenses) as set forth on the cover page of the
Final Memorandum and (y) the total amount of additional interest which the
Company was not required to pay as a result of registering the securities
covered by the Registration Statement which resulted in such Losses. Benefits
received by the Initial Purchasers shall be deemed to be equal to the total
purchase discounts and commissions as set forth on the cover page of the Final
Memorandum, and benefits received by any other Holders shall be deemed to be
equal to the value of receiving Securities or New Securities, as applicable,
registered under the Act. Benefits received by any underwriter shall be deemed
to be equal to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration Statement
which resulted in such Losses. Relative fault shall be determined by reference
to,
14
<PAGE>
among other things, whether any alleged untrue statement or omission relates
to information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The parties agree that it would not be just
and equitable if contribution were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person
who controls a Holder within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of such Holder shall have the
same rights to contribution as such Holder, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, each officer
of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The provisions of this Section will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any of the directors, officers, employees, agents or controlling
persons referred to in this Section hereof, and will survive the sale by a
Holder of securities covered by a Registration Statement.
7. Underwritten Registrations. (a) If any of the Securities or New
Securities, as the case may be, covered by any Shelf Registration Statement are
to be sold in an underwritten offering, the Managing Underwriters shall be
selected by the Majority Holders; provided that the Majority Holders shall
consult with the Company about the selection of the Managing Underwriters in
advance of making such selection.
(b) No person may participate in any underwritten offering pursuant
to any Shelf Registration Statement, unless such Person (i) agrees to sell such
person's Securities or New Securities, as the case may be, on the basis
reasonably provided in any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements; and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
8. No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
9. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding aggregate
principal amount of Securities (or, after the consummation of any Registered
Exchange Offer in accordance with Section 2 hereof, of New Securities); provided
that, with respect to any matter that directly or indirectly affects the rights
of any Initial Purchaser hereunder, the Company shall obtain the written consent
of each such Initial Purchaser against which such amendment, qualification,
supplement, waiver or consent is to be effective. Notwithstanding the foregoing
(except the foregoing proviso), a waiver or consent to departure from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose Securities or New Securities, as the case may be, are
being sold pursuant to a
15
<PAGE>
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by the Majority Holders, determined on the
basis of Securities or New Securities, as the case may be, being sold rather
than registered under such Registration Statement.
10. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier or air courier guaranteeing overnight delivery:
(a) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section, which address
initially is, with respect to each Holder, the address of such Holder maintained
by the Registrar under the Indenture, with a copy in like manner to Warburg
Dillon Read LLC;
(b) if to you, initially at the respective addresses set forth in the
Purchase Agreement; and
(c) if to the Company, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
The Initial Purchasers or the Company by notice to the other parties
may designate additional or different addresses for subsequent notices or
communications.
11. Successors. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including,
without the need for an express assignment or any consent by the Company
thereto, subsequent Holders of Securities and the New Securities. The Company
hereby agrees to extend the benefits of this Agreement to any Holder of
Securities and the New Securities, and any such Holder may specifically enforce
the provisions of this Agreement as if an original party hereto.
12. Counterparts. This Agreement may be in signed counterparts, each
of which shall an original and all of which together shall constitute one and
the same agreement.
13. Headings. The headings used herein are for convenience only and
shall not affect the construction hereof.
14. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York.
15. Severability. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
16
<PAGE>
16. Securities Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
or New Securities is required hereunder, Securities or New Securities, as
applicable, held by the Company or its Affiliates shall be disregarded and
deemed not to be outstanding in determining whether such consent or approval was
given by the Holders of such required percentage.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Initial Purchasers.
Very truly yours,
VINTAGE PETROLEUM, INC.
By: /s/ William C. Barnes
----------------------------------
Name: William C. Barnes
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby confirmed and
accepted as of the date first above written.
WARBURG DILLON READ LLC
By: WARBURG DILLON READ LLC
By: /s/ Vincent Lu By: /s/ Whit Williams
----------------------------- ------------------------
Name: Vincent Lu Name: Whit Williams
Title: Executive Director Title: Executive Director
17
<PAGE>
ANNEX A
Each Broker-Dealer that receives New Securities for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a Broker-Dealer in connection with resales of New
Securities received in exchange for Securities where such Securities were
acquired by such Broker-Dealer as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration
Date (as defined herein) and ending on the close of business 180 days after the
Expiration Date, it will make this Prospectus available to any Broker-Dealer for
use in connection with any such resale. See "Plan of Distribution".
18
<PAGE>
ANNEX B
Each Broker-Dealer that receives New Securities for its own account in exchange
for Securities, where such Securities were acquired by such Broker-Dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Securities. See "Plan of Distribution".
19
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each Broker-Dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. 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 New Securities received in
exchange for Securities where such Securities 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. In addition, until __________, 199__, all dealers effecting
transactions in the New Securities may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New
Securities by brokers-dealers. New Securities 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 New Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Broker-Dealer and/or the purchasers of any such New
Securities. Any Broker-Dealer that resells New Securities 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 New Securities may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit
resulting from any such resale of New Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a Broker-
Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus 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 (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the holders of the Securities (including any
Broker-Dealers) against certain liabilities, including liabilities under the
Securities Act.
[If applicable, add information required by Regulation S-K Items 507
and/or 508. S-K 502(b) legend must appear on the back cover.]
20
<PAGE>
ANNEX D
Rider A
- -------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
------------------------------
Address:
------------------------------
------------------------------
Rider B
- -------
If the undersigned is not a Broker-Dealer, the undersigned represents that it
acquired the New Securities in the ordinary course of its business, it is not
engaged in, and does not intend to engage in, a distribution of New Securities
and it has no arrangements or understandings with any person to participate in a
distribution of the New Securities. If the undersigned is a Broker-Dealer that
will receive New Securities for its own account in exchange for Securities, it
represents that the Securities to be exchanged for New Securities were acquired
by it as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale of
such New Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
21
<PAGE>
Exhibit 5
[LETTERHEAD OF CONNER & WINTERS]
April 9, 1999
Vintage Petroleum, Inc.
4200 One Williams Center
Tulsa, Oklahoma 74172
Re: Vintage Petroleum, Inc.
Registration Statement on Form S-4 (the "Registration Statement")
-----------------------------------------------------------------
Gentlemen:
We have acted as counsel for Vintage Petroleum, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of the proposed
offering by the Company of up to $150,000,000 in aggregate principal amount of
its 9 3/4% Senior Subordinated Notes due 2009 (the "Exchange Notes") in exchange
for up to $150,000,000 in aggregate principal amount of its outstanding 9 3/4%
Senior Subordinated Notes due 2009 (the "Outstanding Notes"). The Exchange
Notes are to be issued under an Indenture dated as of January 26, 1999, between
the Company and The Chase Manhattan Bank, as Trustee (the "Indenture").
In reaching the conclusions expressed in this opinion, we have (a) examined
the Registration Statement, the Prospectus contained therein, the Indenture, and
such certificates of public officials and of corporate officers and directors
and such other documents and matters as we have deemed necessary or appropriate,
(b) relied upon the accuracy of facts and information set forth in all such
documents, and (c) assumed the genuineness of all signatures, the legal capacity
of all natural persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as copies, and the authenticity of the originals from which all such copies were
made.
Based on the foregoing, we are of the opinion that the Exchange Notes have
been duly authorized by the Company and that, when the Registration Statement
has become effective under
<PAGE>
April 9, 1999
Page 2
the Securities Act and the Exchange Notes have been duly executed and
authenticated in accordance with the Indenture and issued and delivered in
exchange for the Outstanding Notes as described in the Registration Statement,
the Exchange Notes will be validly issued and binding obligations of the Company
entitled to the benefits of the Indenture and enforceable in accordance with
their terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent transfer or conveyance, moratorium or
other laws affecting the enforcement of creditors' rights generally from time to
time in effect and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
We are members of the bar of the State of Oklahoma. Our opinion expressed
above is limited to the laws of the State of Oklahoma, the corporate laws of the
State of Delaware, and the federal laws of the United States of America, and we
do not express any opinion herein concerning the laws of any other jurisdiction.
To the extent that the opinion expressed herein relates to matters governed by
the laws of the State of New York, we have assumed that the applicable law of
the State of New York is the same as the applicable law of the State of Oklahoma
in all relevant respects.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm in the Registration Statement and the
Prospectus constituting a part thereof under the caption "Legal Matters." In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act.
Yours very truly,
CONNER & WINTERS,
A Professional Corporation
<PAGE>
EXHIBIT 12
Vintage Petroleum, Inc. & Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------
1994 1995 1996 1997 1998
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes $23,190 $12,241 $43,645 $62,032 ($131,229)
Add fixed charges:
Interest expense 12,002 20,178 30,109 36,762 43,680
Debt cost amortization 97 122 0 0 0
Capitalized interest 0 0 0 0 0
-------------------------------------------------------------------------
Total fixed charges 12,099 20,300 30,109 36,762 43,680
-------------------------------------------------------------------------
Adjusted earnings $35,192 $32,419 $73,754 $98,794 ($87,549)
=========================================================================
Fixed charge coverage 2.9x 1.6x 2.4x 2.7x --
</TABLE>
Note: Adjusted earnings for the year ended December 31, 1998 were insufficient
to cover fixed charges by $131.2 million.
<PAGE>
Exhibit 23.1
[Letterhead of Arthur Andersen LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-4 Registration Statement of our report dated February
24, 1999, included in Vintage Petroleum, Inc.'s Annual Report on Form 10-K dated
March 12, 1999, and to all references to our Firm included in this Form S-4
Registration Statement.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
April 9, 1999
<PAGE>
Exhibit 23.3
[LETTERHEAD OF NETHERLAND, SEWELL & ASSOCIATES, INC.]
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
---------------------------------------------------------
As Petroleum Engineers, we hereby consent to the inclusion of the
information included or incorporated by reference in this Form S-4 Registration
Statement with respect to the oil and gas reserves of Vintage Petroleum, Inc.,
for the United States, Argentina, and Ecuador, the future net revenue from such
reserves, and the present value thereof, which information has been included or
incorporated by reference in this Form S-4 Registration Statement in reliance
upon the report of this firm and upon the authority of this firm as experts in
petroleum engineering. We hereby further consent to all references to our
firm included in this Form S-4 Registration Statement.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ Frederic D. Sewell
----------------------------
Frederic D. Sewell
President
Dallas, Texas
April 9, 1999
<PAGE>
Exhibit 23.4
[Letterhead of DeGolyer and MacNaughton]
April 8, 1999
Vintage Petroleum, Inc.
4200 One Williams Center
Tulsa, Oklahoma 74172
Gentlemen:
We hereby consent to the inclusion of the information included or
incorporated by reference in this Form S-4 Registration Statement with respect
to the Bolivian oil and gas reserves, as of December 31, 1998, of Vintage
Petroleum, Inc., the future net revenues from such reserves, and the present
value thereof, which information has been included or incorporated by reference
in this Form S-4 Registration Statement in reliance upon our "Appraisal Report
as of December 31, 1998, on Reserves of Certain Properties in Bolivia Operated
by Vintage Petroleum, Inc.-SEC Case," and upon the authority of this firm as
experts in petroleum engineering. However, we are necessarily unable to verify
(i) the accuracy of future net revenues and discounted present value of future
net revenues contained in these filings because our estimates of future net
revenues and discounted present worth of future net revenues have been combined
with estimates prepared by other petroleum consultants and (ii) the accuracy of
reserves estimates and the basis for changes to reserves estimates prior to
December 31, 1998. We hereby further consent to the references to our firm in
the "Summary Oil and Gas Reserve Data" and "Experts" sections of the Form S-4
Registration Statement.
Very truly yours,
/s/ DeGolyer and MacNaughton
DeGOLYER and MacNAUGHTON
<PAGE>
Exhibit 25
___________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
____________________________________________
Vintage Petroleum, Inc.
(Exact name of obligor as specified in its charter)
Delaware 73-1182669
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4200 One Williams Center
Tulsa, Oklahoma 74172
(Address of principal executive offices) (Zip Code)
-----------
9 3/4% Senior Subordinated Notes due 2009
(Title of the indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 5/th/ day of April, 1999.
THE CHASE MANHATTAN BANK
By /s/ L. O'Brien
----------------------------------------
L. O'Brien
Vice President
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1998, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
<TABLE>
<CAPTION>
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin................................. $ 13,915
Interest-bearing balances......................... 7,805
Securities:........................................
Held to maturity securities........................ 1,429
Available for sale securities...................... 56,327
Federal funds sold and securities purchased under
agreements to resell.............................. 21,733
Loans and lease financing receivables:
Loans and leases, net of unearned income $131,095
Less: Allowance for loan and lease losses 2,711
Less: Allocated transfer risk reserve............. 0
--------
Loans and leases, net of unearned income,
allowance, and reserve............................ 128,384
Trading Assets..................................... 48,949
Premises and fixed assets (including capitalized
leases)........................................... 3,095
Other real estate owned............................ 239
Investments in unconsolidated subsidiaries and
associated companies.............................. 199
Customers' liability to this bank on acceptances
outstanding....................................... 1,209
Intangible assets.................................. 2,081
Other assets....................................... 11,352
--------
TOTAL ASSETS....................................... $296,717
========
</TABLE>
-4-
<PAGE>
LIABILITIES
<TABLE>
<CAPTION>
Deposits
<S> <C>
In domestic offices................................ $105,879
Noninterest-bearing.......................$39,175
Interest-bearing.......................... 66,704
-------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's............................. 79,294
Noninterest-bearing ............................... $ 4,082
Interest-bearing................................... 75,212
Federal funds purchased and securities sold under
agreements to repurchase............................ 32,546
Demand notes issued to the U.S. Treasury........ 629
Trading liabilities.................................. 36,807
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less...... 4,478
With a remaining maturity of more than one year
through three years................................ 213
With a remaining maturity of more than three
years........................................ 115
Bank's liability on acceptances executed and
outstanding 1,209
Subordinated notes and debentures.................... 5,408
Other liabilities.................................... 10,855
TOTAL LIABILITIES.................................... 277,433
--------
</TABLE>
EQUITY CAPITAL
<TABLE>
<CAPTION>
<S> <C>
Perpetual preferred stock and related surplus 0
Common stock............................................... 1,211
Surplus (exclude all surplus related to preferred stock).. 11,016
Undivided profits and capital reserves..................... 6,762
Net unrealized holding gains (losses)
on available-for-sale securities........................... 279
Cumulative foreign currency translation adjustments........ 16
TOTAL EQUITY CAPITAL....................................... 19,284
--------
TOTAL LIABILITIES AND EQUITY CAPITAL....................... $296,717
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the in-structions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
