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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10578
VINTAGE PETROLEUM, INC.
(Exact name of registrant 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)
Registrant's telephone number, including area code: (918) 592-0101
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $.005 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 3, 1999, 53,107,066 shares of the Registrant's Common Stock
were outstanding, and the aggregate market value of the Common Stock held by
non-affiliates was approximately $179,878,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held May 11, 1999, are incorporated by reference into Part
III of this Form 10-K.
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VINTAGE PETROLEUM, INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
PART I
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Page
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Items 1 and 2 Business and Properties................................................................... 1
Item 3. Legal Proceedings......................................................................... 19
Item 4. Submission of Matters to a Vote of Security-Holders....................................... 19
Item 4A. Executive Officers of the Registrant...................................................... 20
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..................... 23
Item 6. Selected Financial Data................................................................... 24
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk................................ 34
Item 8. Financial Statements and Supplementary Data............................................... 36
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...... 36
PART III
Item 10. Directors and Executive Officers of the Registrant........................................ 36
Item 11. Executive Compensation.................................................................... 36
Item 12. Security Ownership of Certain Beneficial Owners and Management............................ 36
Item 13. Certain Relationships and Related Transactions............................................ 37
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................... 37
Signatures................................................................................................. 40
</TABLE>
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Certain Definitions
As used in this Form 10-K:
Unless the context requires otherwise, all references to the "Company"
include Vintage Petroleum, Inc., its consolidated subsidiaries and its
proportionately consolidated general partner interests in various limited
partnerships and joint ventures.
"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 Form 10-K, gas volumes are
stated at the legal pressure base of the state or area in which the reserves are
located and at 60/o/ 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 the Company has a working interest, and "net"
refers to gross acres or wells multiplied by the percentage working interest
owned by the Company. "Net production" means production that is owned by the
Company less royalties and production due others. The terms "net" and "net
production" include 100 percent of the Company's subsidiary Cadipsa S.A. and do
not reflect reductions for minority interest ownership. The term "oil" includes
crude oil, condensate and natural gas liquids.
"Proved oil and gas reserves" are the estimated quantities of crude oil,
natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. "Proved
developed oil and gas reserves" are reserves that can be expected to be
recovered through existing wells with existing equipment and operating methods.
"Proved undeveloped oil and gas reserves" are reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion.
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Forward-Looking Statements
This Form 10-K includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included in this Form 10-K which address
activities, events or developments which the Company expects or anticipates 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;
. 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 the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
and developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties which could cause actual results
to differ materially from the Company's expectations, including:
. the risk factors discussed in this Form 10-K and listed from time to
time in the Company's filings with the Securities and Exchange
Commission;
. 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 the Company ;
. changes in laws or regulations; and
. other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-K
are qualified by these cautionary statements and there can be no assurance that
the actual results or developments anticipated by the Company will be realized
or, even if substantially realized, that they will have the expected
consequences to or effects on the Company or its business or operations. The
Company assumes no obligation to update publicly any such forward-looking
statements, whether as a result of new information, future events or otherwise.
iii
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PART I
Items 1 and 2. Business and Properties.
General
The Company is an independent oil and gas company focused on the
acquisition of oil and gas properties which contain the potential for increased
value through exploitation and exploration. The Company, through its
experienced management and engineering staff, has been successful in realizing
such potential on prior acquisitions through workovers, recompletions, secondary
recovery operations, operating cost reductions, and the drilling of development
or exploratory wells. The Company believes that its primary strengths are its
ability to add reserves at attractive prices, and its low cost operating
structure.
At December 31, 1998, the Company owned and operated producing properties
in 13 states, with its 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, the Company acquired additional producing
properties in California and Texas. See "Acquisition Activities." In addition,
the Company established a new core area in 1995 by acquiring 12 oil concessions,
11 of which are producing and operated by the Company, in the south flank of the
San Jorge Basin in southern Argentina. In 1996, the Company expanded its South
American operations into Bolivia through the acquisition of Vintage Petroleum
Boliviana Ltd. (formerly Shamrock Ventures (Boliviana) Ltd.) ("Vintage
Boliviana") which owns and operates three blocks covering approximately 570,000
acres in the Chaco Plains area of southern Bolivia. During 1997, the Company
enhanced its operations in Bolivia by obtaining the concession rights to the
Naranjillos concession located in the Santa Cruz Province. In November 1998,
the Company 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 the
Company with substantial undeveloped acreage which the Company believes has
significant exploration potential. While the Company has commenced operating
the subsidiary, the legal transfer of the subsidiary's stock to the Company is
subject to the prior approval by the Ecuadorian government. See "Acquisition
Activities."
As of December 31, 1998, the Company owned interests in 4,495 gross (2,398
net) producing wells in the United States, of which approximately 80 percent are
operated by the Company, 712 gross (696 net) producing wells in Argentina, of
which approximately 97 percent are operated by the Company, 4 gross (3 net)
producing wells in Bolivia, 100 percent of which are operated by the Company and
5 gross (2 net) producing wells in Ecuador, 100 percent of which are operated by
the Company. As of December 31, 1998, the Company's 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. From the first
quarter of 1996 through the fourth quarter of 1998, the Company increased its
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.
Financial information relating to the Company's industry segments is set
forth in Note 8 "Segment Information" to the Company's consolidated financial
statements included elsewhere in this Form 10-K.
The Company was incorporated in Delaware on May 31, 1983. The Company's
principal office is located at 4200 One Williams Center, Tulsa, Oklahoma 74172,
and its telephone number is (918) 592-0101.
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Business Strategy
The Company's overall goal is to maximize its value through profitable
growth in its oil and gas reserves and production. The Company has been
successful at achieving this goal through its ongoing strategy of (a) acquiring
producing oil and gas properties, at favorable prices, with significant upside
potential, (b) focusing on exploitation, development and exploration activities
to maximize production and ultimate reserve recovery, (c) exploring non-
producing properties, (d) maintaining a low cost operating structure, and (e)
maintaining financial flexibility. Key elements of the Company's strategy
include:
. Acquisitions of Producing Properties. The Company has an experienced
management and engineering team which focuses on acquisitions of operated
producing properties that meet its selection criteria which include (a)
significant potential for increasing reserves and production through
exploitation, development and exploration, (b) attractive purchase price, and
(c) opportunities for improved operating efficiency. The Company's emphasis
on property acquisitions reflects its 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 the Company to rapidly
grow its reserves at favorable acquisition prices. From January 1, 1996,
through December 31, 1998, the Company acquired 119.2 MMBOE of proved oil and
gas reserves at an average acquisition cost of $2.82 per BOE. The Company
replaced through acquisitions approximately 1.9 times its production of 64.2
MMBOE during the same period. The Company is continually identifying and
evaluating acquisition opportunities, including acquisitions that would be
significantly larger than those consummated to date by the Company. No
assurance can be given that any such acquisitions will be successfully
consummated.
. Exploitation and Development. The Company pursues workovers, recompletions,
secondary recovery operations and other production optimization techniques on
its properties, as well as development and infill drilling, to offset normal
production declines and replace the Company's annual production. From
January 1, 1996, through December 31, 1998, the Company spent approximately
$277.5 million on exploitation and development activities. During this
period, the Company's recompletion and workover activities resulted in
improved production or operating efficiencies in approximately 75 percent of
these operations. As a result of all of its exploitation activities,
including development and infill drilling, during the three-year period ended
December 31, 1998, the Company 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.
The Company has an extensive inventory of exploitation and development
opportunities including identified projects which represent an inventory of
over 10 years at 1998 levels. Due to the current low oil and gas prices, the
Company anticipates reduced spending of approximately $17 million in 1999 on
exploitation and development projects, primarily in the United States.
. Exploration. The Company's 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 the
Company's practice of risk-sharing with industry partners is intended to
lower the incidence and costs of dry holes. The Company makes extensive use
of geophysical studies, including 3-D seismic, which further reduces the cost
by increasing the success of its exploration program. From January 1, 1996,
through December 31, 1998, the Company 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. The Company's exploration activities in 1998 were focused on
its core areas in the United States and Argentina as well as Bolivia. The
Company anticipates spending approximately $39 million during 1999 on
exploration projects, primarily in the United States and Bolivia.
2
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. Low Cost Structure. The Company is an efficient operator and capitalizes on
its low cost structure in evaluating acquisition opportunities. The Company
generally achieves substantial reductions in labor and other field level
costs from those experienced by the previous operators. In addition, the
Company targets acquisition candidates which are located in its core areas
and provide opportunities for cost efficiencies through consolidation with
other Company operations. The lower cost structure has generally allowed the
Company to substantially improve the cash flow of newly acquired properties.
. Financial Flexibility. The Company is 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, the Company completed three public equity offerings, as well as a
public debt offering in 1995. The Company also successfully completed
simultaneous public debt and equity offerings in February 1997 and a private
debt offering in January 1999 under Rule 144A. These seven offerings provided
the Company with aggregate net proceeds of approximately $561 million. The
unused portion of the Company's revolving credit facility as of February 28,
1999, was approximately $187 million. The Company anticipates, that as a
result of continued low oil and gas prices, the borrowing base will be
significantly reduced at the bank's next borrowing base redetermination in
April 1999. However, the amount of any such reduction is unknown at this
time.
Acquisition Activities
Historically, the Company has allocated a substantial portion of its
capital expenditures to the acquisition of producing oil and gas properties.
The Company's continuing emphasis on reserve additions through property
acquisitions reflects its belief that 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 producing properties.
Since the Company's incorporation in May 1983, it has been actively engaged
in the acquisition of producing oil and gas properties primarily in the Gulf
Coast, East Texas and Mid-Continent areas of the United States, and in
California since April 1992. In 1995, a series of acquisitions made by the
Company established a new core area in the San Jorge Basin in southern
Argentina. In late 1996, the Company expanded its South American operations
into Bolivia and in 1998 into Ecuador. The Company is constantly identifying
and evaluating additional acquisition opportunities which may lead to expansion
into new domestic core areas or other countries which the Company believes are
politically stable.
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From January 1, 1996, through December 31, 1998, the Company made oil and
gas property acquisitions involving total costs of approximately $336.1 million.
As a result of these acquisitions, the Company acquired approximately 119.2
MMBOE of proved oil and gas reserves. The following table summarizes the
Company's acquisition experience during the periods indicated:
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Proved Reserves When Acquired Cost
---------------------------- Per BOE
Acquisition Oil Gas When
Costs (MBbls) (MMcf) MBOE Acquired
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(In thousands)
U.S. Acquisitions:
1996.......................................... $ 50,480 8,095 20,787 11,560 $4.37
1997.......................................... 133,548 24,653 62,253 35,029 3.81
1998.......................................... 70,805 5,452 53,027 14,290 4.96
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Total U.S. Acquisitions................... 254,833 38,200 136,067 60,879 4.19
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International Acquisitions:
1996.......................................... 40,802 7,802 57,758 17,428 2.34
1997.......................................... 6,201 758 111,212 19,293 0.32
1998.......................................... 34,218 21,577 - 21,577 1.59
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Total International Acquisitions.......... 81,221 30,137 168,970 58,298 1.39
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Total U.S. and International Acquisitions........ $336,054 68,337 305,037 119,177 $2.82
======= ====== ======= =======
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The following is a brief discussion of the significant acquisitions in
1998:
Western Gas Resources Properties (East Texas). On October 29, 1998, the
Company purchased certain producing oil and gas properties located in East Texas
from Western Gas Resources, Inc. for $42.1 million in cash (the "Western
Properties"). The Western Properties consist of five key onshore fields and a
number of smaller fields. The Company now operates a substantial portion of the
properties, which had net daily production at the time of acquisition averaging
1,100 Bbls of condensate and natural gas liquids and 3,800 Mcf of gas or a total
of 1,733 BOE. Activities aimed at exploitation through development drilling,
workovers, recompletions and other projects as well as improving operational
efficiency are planned. Funds for this acquisition were provided through
advances on the Company's revolving credit facility.
Texaco Properties (West Coast). On November 10, 1998, the Company
purchased certain producing oil and gas properties located in northern
California from Texaco Exploration and Production, Inc. and an affiliate for
$28.7 million in cash (the "Texaco Properties"). The Texaco Properties consist
of 10 onshore fields in the Gas Country area of northern California covering
22,600 net acres. Net daily production at the time of acquisition was
approximately 9,700 Mcf of gas. The Company now operates fields representing
approximately 50 percent of the production. The Company plans activities aimed
at increasing gas production and reserves through focusing on improving
operational efficiency, exploitation activities and exploration drilling. Funds
for this acquisition were provided through advances on the Company's revolving
credit facility.
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Elf Hydrocarbures Equateur (Ecuador). On November 4, 1998, the Company,
through a wholly-owned subsidiary, purchased from Elf Aquitaine 100 percent of
the outstanding shares of its French subsidiary, Elf Hydrocarbures Equateur,
S.A. ("EHE"). EHE has producing oil properties, along with substantial
undeveloped acreage, in Ecuador. The principal assets acquired include a 40
percent working interest in Block 14 and a 30 percent working interest in Block
17 in Ecuador's prolific Oriente Basin and estimated working capital of
approximately $7.2 million. Gross daily production is currently 3,300 Bbls of
oil (1,100 Bbls net). The Company believes that these properties have
significant upside potential which can be realized as additional pipeline
infrastructure is constructed. The acquisition cost for EHE of $41.4 million
(including the $7.2 million of working capital) was funded through $14.9 million
of advances on the Company's revolving credit facility and the issuance of
1,325,000 shares of common stock of the Company valued at a guaranteed amount of
$20 per share, or $26.5 million. If the prevailing share price is not equal to
at least $20 per share after two years, then the Company will be required to
deliver additional consideration under the price guarantee provisions of the
agreement. Such additional consideration, if any, is payable, at the Company's
option, in cash or additional shares of the Company's common stock. Had the
Company been required to fulfill its commitment under the price guarantee at
December 31, 1998 (based on the average price for the preceding 60 trading days
of $10.57), it would have had to pay an additional $12.5 million in cash or
issue an additional 1.2 million shares of its common stock. While the Company
has commenced operating this subsidiary, the legal transfer of the stock of EHE
to the Company is subject to the prior approval by the Ecuadorian government.
The Company estimates that 35.9 MMBOE of proved reserves, as of the various
acquisition dates, were acquired in these three transactions for an aggregate
cost attributable to oil and gas assets of $105.0 million, resulting in an
average cost of $2.93 per BOE. This average cost per BOE is comparable to the
Company's average acquisition cost over the three-year period ended December 31,
1998, of $2.82 per BOE and the average acquisition cost since the Company's
inception of $2.87 per BOE.
Exploitation and Development Activities
The Company concentrates its acquisition efforts on proved producing
properties which demonstrate a potential for significant additional development
through workovers, recompletions, secondary recovery operations, the drilling of
development, infill or exploratory wells, and other exploitation techniques.
The Company has pursued an active workover, recompletion and development
drilling program on the properties it has acquired and intends to continue these
activities in the future.
The Company's exploitation staff focuses on maximizing the value of the
properties within its reserve base striving to offset normal production declines
and to replace the Company's annual production. The results of their efforts
are reflected in revisions to reserves. Net revisions to reserves for 1998
(before the impact of lower oil and gas prices) totaled 24.8 MMBOE, or 102
percent of the Company's production of 24.3 MMBOE. However, the replacement of
these reserves was entirely offset by a 49.0 MMBOE downward revision of reserves
resulting from sharply lower oil and gas prices at year-end 1998 used in the
calculation of proved reserves.
The Company spent approximately $29.9 million on workover and recompletion
operations during 1998. A measure of the overall success of the Company's
recompletion and workover operations during 1998 (excluding minor equipment
repair and replacement) was that improved production or operating efficiencies
were achieved from approximately 81 percent of such operations.
Development drilling activity is generated both through the Company's
exploration efforts and as a result of obtaining undeveloped acreage in
connection with producing property acquisitions. In addition, there are many
opportunities for infill drilling on Company leases currently producing oil and
gas. The Company intends to continue to pursue development drilling
opportunities which offer potentially significant returns to the Company.
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During 1998, the Company participated in the drilling of 94 gross (82.72
net) development wells of which approximately 94 percent gross (95 percent net)
were productive. At December 31, 1998, the Company's proved reserves included
approximately 82 development or infill drilling locations on its U.S. acreage
and 126 locations on its Argentine acreage. In addition, the Company has an
extensive inventory of development and infill drilling locations on its existing
properties which are not included in proved reserves. The Company spent
approximately $30 million in the U.S. and $38 million in South America on
development/infill drilling during 1998. The Company also spent approximately
$9.5 million on the acquisition of development seismic data and other
development costs in 1998.
In connection with its exploitation focus, the Company actively pursues
operating cost reductions on the properties it acquires. The Company believes
that its cost structure and operating practices generally result in improved
operating economics. Although each situation is unique, the Company generally
has achieved reductions in labor and other field level costs from those
experienced by the previous operators, particularly in its acquisitions from
major oil companies.
The following is a brief discussion of significant developments in the
Company's recent exploitation and development activities:
United States. The San Miguelito/Rincon field area, acquired from Conoco,
Santa Fe Energy and Mobil, continues to be a focus area of the Company's West
Coast exploitation efforts. Consolidation of the three acquisition areas into a
single operating unit has significantly reduced operating costs. Exploitation
efforts including artificial lift enhancements, waterflood optimization,
recompletions and sidetracking junked producers have resulted in sustaining the
average field production at levels comparable to that of the three prior years.
The Company believes ongoing reservoir studies will continue to identify
additional exploitation projects in addition to the 50 projects currently
identified.
Exploitation of the properties acquired from Burlington Resources, Inc. in
April 1997 (the "Burlington Properties") in the Company's Gulf Coast area
proceeded on schedule for the first half of 1998. Due to low oil prices, the
activity planned for the second half of 1998 was postponed. First half 1998
drilling and workovers produced the volumes the Company anticipated and it sees
no barrier to continued work other than product prices. A total of 14
horizontal wells were drilled in the Luling field and three in the West Ranch
field. The total of the gross initial rate for these 17 wells was 3,518 Bbls of
oil per day. In addition, a total of 24 workovers were completed on the
Burlington Properties in the Luling, Darst Creek, West Ranch, Main Pass and East
Picoso fields resulting in a gross production build-up of 546 Bbls of oil per
day and 2,862 Mcf of gas per day. A large inventory of similar jobs remains for
these fields. Other Gulf Coast activity occurred in seven fields where two
recompletions, five workovers and a new well resulted in total net production
increases of 290 Bbls of oil per day and 4,420 Mcf of gas per day.
South America. Development and extensional drilling along with the
implementation and optimization of secondary recovery projects have been the
focus of the Company's exploitation efforts in its Argentina properties. The
Company's successful exploitation program has resulted in a gross daily
production increase from 10,200 Bbls of oil in January 1996 to over 19,450 Bbls
of oil currently. Drilling activity commenced during February 1996 and continued
through 1998, with 157 wells having been completed. The three focus areas for
drilling activity to date have been Canadon Minerales with 56 wells, Canadon
Seco with 43 wells, and Meseta Espinosa with 45 wells. Largely due to the
results of this drilling activity, average gross daily oil production on these
three concessions has increased from a total of 6,800 Bbls to 15,750 Bbls.
Currently, the Company has suspended its drilling program in Argentina pending
the return of higher oil prices.
During 1998, the Company acquired 57 square miles (147 square kilometers)
of 3-D seismic data for a total of 204 square miles (527 square kilometers)
acquired since 1996 to aid in the optimum placement of drilling locations in
Argentina. The Company believes that substantial upside potential can continue
to be economically exploited with the aid of this 3-D seismic. Acquisition of
additional 3-D seismic is planned when oil prices recover to a level that
supports additional drilling activities.
6
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The Company has also continued its endeavor to optimize existing secondary
recovery projects and to initiate new waterfloods in Argentina. The waterflood
work in 1996 and 1997 on Canadon Minerales Block 123A, Canadon Minerales Block
123E, Cerro Wenceslao Flanco Oriental and Piedra Clavada Block 24 has resulted
in incremental gross daily production responses of 1,050 Bbls of oil. Only a
small portion of the producing areas of the concessions controlled by the
Company have been subject to secondary recovery operations. The Company
believes that numerous other areas presently under primary recovery are amenable
to waterflooding. The Company also believes that the utilization of 3-D seismic
will enhance the ultimate recovery derived from these new waterflood projects
and be a valuable tool in identifying new secondary recovery project areas that
previously would have gone undeveloped.
The Company initiated its exploitation program in Bolivia during 1997 with
the rework of two wells. Incremental gross daily production from this work was
approximately 7,500 Mcf of gas and 200 Bbls of condensate. During the second
quarter of 1998, the Company drilled the Supuati X-1-ST located in the southern
Chaco block. The well was drilled to a depth of 12,515 feet encountering 20
feet of net oil pay in the Devonian Iquiri sand. Exploitation and production of
the Devonian Iquiri reservoir in the southern Chaco block will be deferred until
the return of higher oil prices.
Activity in early 1999 will continue to increase as the Bolivia-to-Brazil
pipeline is completed and gas deliveries to the Brazilian market are initiated
in mid-1999. In preparation for the opening of the Brazilian market, the Company
has completed work to upgrade the existing facilities and compression in Nupuco
and Naranjillos. These facility improvements along with planned additional
development drilling and exploration activities should position the Company to
take advantage of this increased gas market opportunity.
Exploration
The Company's exploration program is designed to contribute significantly
to its growth. Management divides the strategic objectives of its exploration
program into two parts. First, in the U.S. and in Argentina, the Company's
exploration focus is in its core areas where its geological and engineering
expertise and experience are greatest. State-of-the-art technology, including
3-D seismic, is employed to identify prospects. Exploration in the U.S. and
Argentina is designed to generate reserve growth in the Company's core areas in
combination with its exploitation activities. The Company's longer-term plans
are to increase the magnitude of this program with a goal of achieving
production replacement through core area exploration. Such exploration is
characterized by numerous individual projects with medium to low risk.
Secondly, international exploration targets significant long-term reserve growth
and value creation. International exploration projects in Ecuador, Bolivia and
Yemen are characterized by higher potential and higher risk. The Company spent
approximately $73 million on exploration activities during 1998, approximately
$58 million in the U.S. and Argentina and approximately $15 million in other
international areas.
The following is a brief discussion of the primary areas of exploration
activity for the Company:
United States. Since the initial discovery in 1996, the Company has made
successful completions on eight of 10 wells drilled in its Galveston Bay-
Umbrella Point exploration program in its Gulf Coast area. Gross oil and gas
production from these wells reached a peak of approximately 76 MMcf of gas per
day and 1,600 Bbls of oil per day and are currently producing at gross daily
rates of 38 MMcf of gas and 1,600 Bbls of oil. The recently completed ST 2-3A
was the most significant well drilled in 1998. This Text II discovery is
currently producing at gross rates of 1,500 Bbls of oil per day and 2.5 MMcf of
gas per day. This test was the first of four anomalies that are in close
proximity to the Company's Fisher's Reef field. The three remaining untested
features are planned to be drilled in the future.
7
<PAGE>
Currently, an onshore 40-square-mile 3-D survey in the nearby Cedar Point
area is being interpreted. Preliminary interpretations look promising and
drilling of the initial test wells should take place in 1999. This project is
immediately northwest of the Company's Galveston Bay area and will have the same
targets with similar reserve potential. The Company also recently finished
processing a 180-square-mile 3-D survey in its South Texas E1 Sauz project.
Several gas prospects were identified and a minimum of two wells are planned for
drilling in 1999.
The Company is participating in a regional Western Anadarko 3-D Seismic
Alliance in its Mid-Continent area in which over 640 square miles of non-
contiguous, high-quality 3-D seismic has been shot. Several different play
concepts are being pursued and two significant discoveries were made in 1998.
The Thomas #2 was completed in the Gold prospect in Dewey County, Oklahoma. The
well was completed from the Hunton formation and is currently producing at a
gross rate exceeding 2.6 MMcf of gas per day. The Elise #1 was drilled in the
Sundevil prospect of Lipscomb County, Texas. The well is currently producing at
a gross rate of 1.5 MMcf of gas per day from the Morrow formation with
additional uphole potential yet to be tested. The first offset, the Katy, was
also found productive from the same Morrow sand.
South America. The Company believes that its existing projects in Bolivia
have the potential to significantly increase reserves. Activity in Bolivia
during 1997 and 1998 was relatively modest due to restriction of the current gas
market to Argentina. However, the activity increased beginning in late 1998 and
will continue to significantly increase in early 1999 as the Bolivia-to-Brazil
pipeline is completed and gas begins to flow into the Brazilian market by mid-
1999. This third-party pipeline is designed to deliver approximately one Bcf of
gas per day to Brazilian markets, as compared to the current export market to
Argentina of approximately 200 MMcf of gas per day.
During the first quarter of 1998, the Company completed acquisition of a
64-square-mile (165 square kilometer) 3-D seismic survey on the southern Chaco
and Nupuco concessions in Bolivia. Based on the seismic survey, the Company
drilled the Chaco Sur X-101 on the southern Chaco block to a depth of 6,500
feet. The well encountered approximately 115 feet of net gas pay based on log
analysis in the Carboniferous sands. This well tested at a gross daily rate of
13.5 MMcf of gas and will commence production early in the second quarter of
1999. Additional potential drilling locations targeting the shallow
Carboniferous and deep Devonian Huamampampa reservoirs have been identified.
The Company significantly expanded its operations in Bolivia by acquiring
the Naranjillos concession in December 1997. The Company believes this 15,444
acre concession contains significant upside exploration and development
potential. Multiple exploration well targets have been located and more are
expected to follow based upon the interpretation of a 3-D seismic survey
covering the entire concession. This 3-D survey was acquired in early 1998. The
first exploration well drilled in this concession, the Naranjillos X-104, was a
new field discovery in the Devonian Iquiri. This well tested at a gross daily
rate of 5 MMcf of gas. The well is currently shut in pending the assignment of
market allocation volumes into the Bolivia-to-Brazil pipeline. Estimated initial
production is expected to occur early in the year 2000. Drilling is expected to
continue throughout 1999 and 2000 to develop reserves for the new Brazilian
market.
Yemen. The Company has entered into a farm-in agreement with TransGlobe
Energy to explore on the S-1 Damis Block in central Yemen. The block covers
approximately one million acres (4,484 square kilometers). The Company earned a
75 percent interest in the S-1 Damis Block for its commitment to fulfill 100
percent of the initial phase exploration work program of $11 million over two
and one-half years. The $11 million of expenditures will include a 3-D seismic
survey of 58 square miles (150 square kilometers) and the drilling of three
exploration wells. The 3-D seismic program commenced late in the fourth quarter
of 1998 and will conclude during the first quarter of 1999.
8
<PAGE>
Oil and Gas Properties
At December 31, 1998, the Company owned and operated producing properties
in 13 states, with its U.S. proved reserves located primarily in four core
areas: the West Coast, Gulf Coast, East Texas and Mid-Continent areas. In
addition, the Company established new core areas in the San Jorge Basin of
Argentina during 1995, Bolivia during 1996 and Ecuador in 1998. As of December
31, 1998, the Company operated approximately 4,311 productive wells and also
owned non-operating interests in 905 productive wells. The Company continuously
evaluates the profitability of its oil, gas and related activities and has a
policy of divesting itself of unprofitable leases or areas of operations that
are not consistent with its operating philosophy.
The following table sets forth estimates of the proved oil and gas reserves
of the Company at December 31, 1998, as estimated by the independent petroleum
consultants of Netherland, Sewell & Associates ("Netherland, Sewell") for the
United States, Argentina and Ecuador and as estimated by the independent
petroleum consultants of DeGolyer and MacNaughton for Bolivia:
<TABLE>
<CAPTION>
Oil (MBbls) Gas (MMcf)
------------------------------------ ------------------------------------- MBOE
Developed Undeveloped Total Developed Undeveloped Total Total
--------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
West Coast......... 26,112 2,549 28,661 111,504 7,126 118,630 48,433
Gulf Coast......... 14,246 1,451 15,697 86,002 17,397 103,399 32,930
East Texas......... 8,125 467 8,592 82,426 13,977 96,403 24,659
Mid-Continent...... 2,998 1,259 4,257 50,439 16,641 67,080 15,437
-------- --------- -------- --------- --------- --------- ---------
Total U.S. ..... 51,481 5,726 57,207 330,371 55,141 385,512 121,459
-------- --------- -------- --------- --------- --------- ---------
Argentina.......... 47,167 27,674 74,841 12,024 - 12,024 76,845
Bolivia............ 4,390 3,974 8,364 278,317 130,980 409,297 76,580
Ecuador............ 1,255 22,790 24,045 - - - 24,045
-------- --------- -------- --------- --------- --------- ---------
Total Company... 104,293 60,164 164,457 620,712 186,121 806,833 298,929
======== ========= ======== ========= ========= ========= =========
</TABLE>
Estimates of the Company's 1998 proved reserves set forth above have not
been filed with, or included in reports to, any Federal authority or agency,
other than the Securities and Exchange Commission.
The Company's non-producing proved reserves are largely behind-pipe in
fields which it operates. Undeveloped proved reserves are predominantly infill
drilling locations and secondary recovery projects.
The following is a brief discussion of the Company's oil and gas operations
in its core areas:
West Coast Area. The West Coast area includes oil and gas properties
located primarily in Kern, Ventura, Santa Barbara and Sacramento counties of
California. The Stevens, Forbes, Grubb and Sisquoc formations are the dominant
producing reservoirs on the Company's acreage in California with well depths
ranging from 800 feet to 14,300 feet. As of December 31, 1998, the area
comprised 16 percent of the Company's total proved reserves and 40 percent of
the Company's U.S. proved reserves. The Company currently operates 1,253 active
wells and owns an interest in 220 productive wells operated by others. During
1998, total net daily production averaged approximately 16,000 BOE, or 35
percent of the total U.S. production. Numerous workovers and recompletion
opportunities exist in the San Miguelito, Rio Vista, Buena Vista and Rincon
fields. Additional infill drilling locations are available in the San Miguelito
and Buena Vista fields. The San Miguelito field also has significant waterflood
potential that may add significant reserves.
9
<PAGE>
Gulf Coast Area. The Gulf Coast area includes properties located in south
Texas, the south half of Louisiana, Alabama, Mississippi and wells located in
state and federal waters in the Gulf of Mexico. Production in this area is
predominantly from structural accumulations in reservoirs of Miocene age. The
depths of the producing reservoirs range from 1,200 feet to 14,500 feet. At
December 31, 1998, the Gulf Coast area comprised approximately 11 percent of the
Company's total proved reserves and 27 percent of its U.S. reserves. The
Company currently operates 1,531 productive wells in this area and owns an
additional interest in 178 productive wells. Total net daily production from
this area during 1998 averaged approximately 20,700 BOE, or 45 percent of total
U.S. production. A significant inventory of workovers and recompletions exist
in eight major Gulf Coast fields from Alabama to South Texas. Development
drilling potential is also available in six fields in Texas and Louisiana.
East Texas Area. The East Texas area includes properties located in the
northeastern portion of Texas and the north half of Louisiana. The Cotton
Valley, Smackover, Travis Peak and Wilcox formations are the dominant producing
reservoirs on the Company's acreage in this area from wells ranging in depth
from 1,300 feet to 14,800 feet. The East Texas area comprised approximately
eight percent of the Company's December 31, 1998, total proved reserves. The
Company currently operates 427 productive wells in this area and owns an
interest in an additional 206 productive wells. During 1998, net daily
production averaged approximately 5,500 BOE, or 12 percent of total U.S.
production. Significant infill drilling potential exists on the Company's
acreage in the South Gilmer, Southern Pine, Rosewood, Bethany Longstreet and
Bear Grass fields. The Company plans to continue infill drilling programs in
Southern Pine and South Gilmer fields.
Mid-Continent Area. The Mid-Continent area extends from the Arkoma Basin
of eastern Oklahoma to the Texas Panhandle and north to include Kansas. The Red
Fork, Morrow, Skinner and Hoxbar formations are the dominant producing
reservoirs on the Company's acreage in this area with well depths ranging from
1,560 feet to 17,260 feet. This area comprised five percent of the Company's
total proved reserves as of December 31, 1998. The Company currently operates
400 productive wells in this area and owns an interest in an additional 279
productive wells. During 1998, net daily production averaged approximately
4,100 BOE, or nine percent of total U.S. production. Significant development
drilling and recompletion opportunities exist in the Marlow/Velma field plus
additional projects to improve the ultimate reserve recovery in the Shawnee
Townsite waterflood.
Argentina Concessions. The Argentina properties consist primarily of 13
mature producing concessions located on the south flank of the San Jorge Basin.
These concessions comprised approximately 26 percent of the Company's December
31, 1998, total proved reserves. During 1998, net daily production averaged
approximately 17,300 Bbls of oil. The Company currently operates 690 productive
wells (100 percent working interest) with net daily production of 17,000 Bbls of
oil. In addition, the Company owns an interest in 22 productive wells operated
by others. At December 31, 1998, the Company's proved reserves included
approximately 126 development or infill drilling locations and 306 workovers on
its Argentina acreage. In addition, the Company has an extensive inventory of
workovers and development or infill drilling locations on its Argentina
properties which are not included in proved reserves. For additional
information, see "Exploitation and Development Activities - South America."
Bolivia Concessions. The Bolivia properties consist of two producing
concessions and two exploration concessions located in the Chaco Basin of
Bolivia. The Company has 100 percent working interests in the Chaco and
Naranjillos exploration concession as well as in the producing Porvenir
concession. In the other producing concession, Nupuco, the Company has a 50
percent working interest. The Company operates all four concessions. These
concessions comprise approximately 26 percent of the Company's December 31,
1998, total proved reserves and include 4 gross (3 net) active producing wells,
all of which are operated by the Company. The current net daily production is
approximately 10,000 Mcf of gas and 180 Bbls of condensate. For additional
information, see "Exploitation and Development Activities - South America."
10
<PAGE>
Ecuador Concessions. The Ecuador properties consist of two producing
concessions and one exploration concession. The Company has a 30 percent
working interest in the producing Block 17 concession and a 40 percent working
interest in the producing Block 14 concession. The Company also has a 53
percent interest in the Shiripuno exploration concession. The Company currently
operates 5 gross (2 net) productive wells with current gross daily production of
3,300 Bbls of oil (1,100 Bbls net). These concessions comprised eight percent
of the Company's December 31, 1998, total proved reserves. Development plans
for Block 14 and Block 17 were approved by the Ecuadorian Government during
December 1998. Under these plans, the existing production facilities will be
upgraded during the second half of 1999 to increase the oil handling capacity
from 3,500 Bbls of oil per day to approximately 10,000 Bbls of oil per day.
Development drilling on both concessions will be deferred until product prices
recover.
Marketing
The Company's U.S. gas production and gathered gas are sold on the spot
market or under market-sensitive, long-term agreements with a variety of
purchasers, including intrastate and interstate pipelines, their marketing
affiliates, independent marketing companies and other purchasers who have the
ability to move the gas under firm transportation agreements. Because none of
the Company's gas in the U.S. is committed to long-term fixed-price contracts,
the Company is positioned to take advantage of rising prices for gas but it is
also subject to gas price declines. The Company's Bolivia average gas price is
tied to a long-term contract under which the base price is adjusted for changes
in specified fuel oil indexes. During 1998, these fuel oil indexes have
decreased in conjunction with the current low oil price environment.
The Company's domestic gas marketing activities are handled by Vintage Gas,
Inc., its wholly-owned gas marketing affiliate. This marketing affiliate earns
fees through the marketing of Company produced gas as well as purchases of gas
on the spot market from third parties. Generally, the marketing affiliate
purchases this gas on a month-to-month basis at a percentage of resale prices.
Generally, the Company's domestic oil production is sold under short-term
contracts at posted prices plus a premium in some cases. The Company's Argentina
oil production is currently sold at port to Esso Sapa, ARCO and Shell at West
Texas Intermediate spot prices less a specified differential. No purchaser of
the Company's oil or gas during 1998 exceeded 10 percent of the Company's total
revenues.
The Company has previously engaged in oil and gas hedging activities and
intends to continue to consider various hedging arrangements to realize
commodity prices which it considers favorable. In 1998, the Company entered
into various natural gas basis swaps for the calender year 1999 covering a total
of 82,000 MMBtu of gas per day plus an additional 3,000 MMBtu per day for the
period of January through October 1999. These natural gas basis swaps were used
to reduce the Company's exposure to increases in the basis differential between
the NYMEX reference price and the Company's industry delivery point indexes
under which the gas is sold.
Gathering Systems
The Company owns 100 percent interests in two oil and gas gathering systems
located in Pottawatomie County, Oklahoma and Harris and Chambers Counties,
Texas. In addition, the Company owns 100 percent interests in 21 gas gathering
systems located in active producing areas of California, Kansas, Texas and
Oklahoma. All of these gathering systems are operated by the Company.
Together, these systems comprise approximately 350 miles of varying diameter
pipe with a combined capacity in excess of 240 MMcf of gas per day. At December
31, 1998, there were 353 wells (331 wells (94 percent) which are operated by the
Company) connected to these systems. Generally, the gathering systems buy gas at
the wellhead on the basis of a percentage of the resale price under contracts
containing terms of one to 10 years.
11
<PAGE>
Reserves
At December 31, 1998, the Company had proved reserves of 298.9 MMBOE,
comprised of 164.5 MMBbls of oil and 806.8 Bcf of gas as estimated by the
independent petroleum consultants of Netherland, Sewell for the United States,
Argentina and Ecuador and as estimated by the independent petroleum consultants
of DeGolyer and MacNaughton for Bolivia. For additional information on the
Company's oil and gas reserves, see "Oil and Gas Properties." The following
table sets forth, at December 31, 1998, the present value of future net revenues
(revenues less production and development costs) before income taxes
attributable to the Company's proved reserves at such date (in thousands):
<TABLE>
<CAPTION>
Proved Reserves:
<S> <C>
Future net revenues................................................................. $1,216,347
Present value of future net revenues before income taxes, discounted at 10 percent.. 703,211
Standardized measure of discounted future net cash flows............................ 648,222
Proved Developed Reserves:
Future net revenues................................................................. $ 895,500
Present value of future net revenues before income taxes, discounted at 10 percent.. 590,766
</TABLE>
In computing this data, assumptions and estimates have been utilized, and
the Company cautions against viewing this information as a forecast of future
economic conditions. The historical future net revenues are determined by using
estimated quantities of proved reserves and the periods in which they are
expected to be developed and produced based on December 31, 1998, economic
conditions. The estimated future production is priced at prices prevailing at
December 31, 1998. The resulting estimated future gross revenues are reduced by
estimated future costs to develop and produce the proved reserves, based on
December 31, 1998, cost levels, but such costs do not include debt service,
general and administrative expenses and income taxes. For additional
information concerning the historical discounted future net revenues to be
derived from these reserves and the disclosure of the Standardized Measure
information in accordance with the provisions of Statement of Financial
Accounting Standards No. 69, "Disclosures about Oil and Gas Producing
Activities," see Note 11 "Supplementary Financial Information for Oil and Gas
Producing Activities" to the Company's consolidated financial statements
included elsewhere in this Form 10-K.
The reserve data set forth in this Form 10-K represent only estimates.
Reserve engineering is a subjective process of estimating underground
accumulations of oil and gas that cannot be measured in an exact manner. The
accuracy of any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment. As a result,
estimates of different engineers often vary. In addition, results of drilling,
testing and production subsequent to the date of an estimate may justify
revision of such estimate. Accordingly, reserve estimates often differ from the
quantities of oil and gas that are ultimately recovered. The meaningfulness of
such estimates is highly dependent upon the accuracy of the assumptions upon
which they were based.
For further information on reserves, costs relating to oil and gas
activities and results of operations from producing activities, see Note 11
"Supplementary Financial Information for Oil and Gas Producing Activities" to
the Company's consolidated financial statements included elsewhere in this Form
10-K.
12
<PAGE>
Productive Wells; Developed Acreage
The following table sets forth the Company's productive wells and developed
acreage assignable to such wells at December 31, 1998:
<TABLE>
<CAPTION>
Productive Wells
--------------------------------------
Developed Acreage Oil Gas Total
-------------------- ------------ ---------- ------------
Gross Net Gross Net Gross Net Gross Net
--------- -------- ------ ----- ----- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. ....... 702,210 434,570 3,043 1,764 1,452 634 4,495 2,398
Argentina... 1,008,339 844,372 712 696 - - 712 696
Bolivia..... 99,458 88,339 - - 4 3 4 3
Ecuador..... 33,592 12,787 5 2 - - 5 2
--------- --------- ----- ----- ----- --- ----- -----
Total.... 1,843,599 1,380,068 3,760 2,462 1,456 637 5,216 3,099
========= ========= ===== ===== ===== === ===== =====
</TABLE>
Productive wells consist of producing wells and wells capable of
production, including gas wells awaiting pipeline connections to commence
deliveries and oil wells awaiting connection to production facilities. Wells
which are completed in more than one producing horizon are counted as one well.
Undeveloped Acreage
At December 31, 1998, the Company held the following undeveloped acres
located in the United States, Bolivia, Ecuador and Yemen. With respect to such
United States acreage held under leases, 22,769 gross (9,767 net) acres are held
under leases with primary terms that expire at varying dates through December
31, 2002, unless commercial production is commenced. The Bolivia, Ecuador and
Yemen acreage are held under concessions with primary terms that expire at
varying dates in 1999, 2000 and 2001. Although substantial undeveloped acreage
exists in the Company's concessions in Argentina, the concessions in their
entirety are held by production.
<TABLE>
<CAPTION>
Gross Net
State/Country Acres Acres
- ------------------------ -------- -------
<S> <C> <C>
California............. 9,922 9,540
Colorado............... 1,248 468
Kansas................. 1,940 1,799
Louisiana.............. 1,100 1,100
Montana................ 6,986 2,477
New Mexico............. 1,471 368
Oklahoma............... 45,047 20,248
Texas.................. 86,188 28,023
Wyoming................ 10,879 3,576
------------------
Total U.S. ..... 164,781 67,599
Bolivia............... 485,552 485,552
Ecuador............... 494,226 148,268
Yemen................. 1,108,019 831,014
--------------------
Total Company... 2,252,578 1,532,433
====================
</TABLE>
13
<PAGE>
Production; Unit Prices; Costs
The following table sets forth information with respect to production and
average unit prices and costs for the periods indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1998 1997 1996
--------- ------- ----------
Production:
<S> <C> <C> <C>
Oil (MBbls) -
U.S.......................... 9,912 9,692 7,694
Argentina.................... 6,322 5,630 4,245
Bolivia...................... 122 135 -
Ecuador...................... 78 - -
Total................ 16,434 15,457 11,939
Gas (MMcf) -
U.S.......................... 42,176 36,623 32,366
Bolivia...................... 5,062 6,068 -
Total........................ 47,238 42,691 32,366
Total MBOE........... 24,307 22,573 17,333
Average Sales Prices:
Oil (per Bbl) -
U.S.......................... $ 11.20 $ 17.23 $ 17.19 (b)
Argentina.................... 10.41 16.67 (a) 15.91 (b)
Bolivia...................... 11.31 16.52 -
Ecuador...................... 5.77 - -
Total................ 10.87 17.02 (a) 16.73 (b)
Gas (per Mcf) -
U.S.......................... 1.99 2.33 1.81
Bolivia...................... .78 1.10 -
Total................ 1.86 2.16 1.81
Production Costs (per BOE):
U.S.......................... $ 5.57 $ 5.64 $ 5.42
Argentina.................... 4.23 4.29 4.93
Bolivia...................... 1.47 1.00 -
Ecuador...................... 3.00 - -
Total................ 5.05 5.07 5.30
</TABLE>
(a) Reflects the impact of oil hedges which reduced the Company's 1997
Argentina and total average oil prices per Bbl by 66 cents and 24 cents,
respectively.
(b) Reflects the impact of oil hedges which reduced the Company's 1996
U.S., Argentina and total average oil prices per Bbl by $1.47, $2.96 and
$2.00, respectively.
The components of production costs may vary substantially among wells
depending on the methods of recovery employed and other factors, but generally
include production taxes, maintenance and repairs, labor and utilities.
14
<PAGE>
Drilling Activity
During the periods indicated, the Company drilled or participated in the
drilling of the following exploratory and development wells:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1998 1997 1996
----------- ------------- ------------
Gross Net Gross Net Gross Net
----- ----- ----- ---- ----- -----
Development:
United States -
<S> <C> <C> <C> <C> <C> <C>
Productive.......... 34 24.94 30 15.74 22 12.67
Non-Productive...... 4 1.78 3 0.80 5 2.94
Argentina -
Productive.......... 54 54.00 55 55.00 39 39.00
Non-Productive...... 2 2.00 2 2.00 2 2.00
----- ----- ---- ----- ----- -----
Total.......... 94 82.72 90 73.54 68 56.61
===== ===== ==== ===== ===== =====
Exploratory:
United States -
Productive.......... 22 15.17 7 3.01 6 3.00
Non-Productive...... 13 3.78 6 2.87 7 3.12
Argentina -
Productive.......... 2 2.00 - - 2 2.00
Non-Productive...... - - 1 1.00 1 1.00
Other International -
Productive.......... 1 1.00 - - - -
Non-Productive...... - - 1 0.42 1 1.00
----- ----- ---- ----- ----- -----
Total.......... 38 21.95 15 7.30 17 10.12
===== ===== ==== ===== ===== =====
Total:
Productive ............ 113 97.11 92 73.75 69 56.67
Non-Productive......... 19 7.56 13 7.09 16 10.06
----- ----- ---- ----- ----- -----
Total............. 132 104.67 105 80.84 85 66.73
===== ====== ==== ===== ===== =====
</TABLE>
The above well information excludes wells in which the Company has only a
royalty interest.
At December 31, 1998, the Company was a participant in the drilling or
completion of 11 gross (9.62 net) wells. All of the Company's drilling
activities are conducted with independent contractors. The Company owns no
drilling equipment.
Seasonality
The results of operations of the Company are somewhat seasonal due to
seasonal fluctuations in the price for gas. Gas prices have been generally
higher in the fourth and first quarters. Due to these seasonal fluctuations,
results of operations for individual quarterly periods may not be indicative of
results which may be realized on an annual basis.
15
<PAGE>
Competition
Competition in the oil and gas industry is intense. Both in seeking to
obtain and acquire desirable producing properties, new leases and exploration
prospects, and in marketing oil and gas, the Company faces competition from both
major and independent oil and gas companies, as well as from numerous
individuals and drilling programs. Many of these competitors have financial and
other resources substantially in excess of those available to the Company.
Increases in worldwide energy production capability have brought about
substantial surpluses in energy supplies in recent years. This, in turn, has
resulted in substantial competition for markets historically served by domestic
gas resources from alternative sources of energy, such as residual fuel oil, and
among domestic gas suppliers. Changes in government regulations relating to the
production, transportation and marketing of gas have also resulted in
significant changes in the historical marketing patterns of the industry.
Generally, these changes have resulted in the abandonment by many pipelines of
long-term contracts for the purchase of gas, the development by gas producers of
their own marketing programs to take advantage of new regulations requiring
pipelines to transport gas for regulated fees, and the emergence of various
types of marketing companies and other aggregators of gas supplies. As a
consequence, gas prices, which were once effectively determined by government
regulations, are now largely established by competition. Competitors of the
Company in this market include other producers, gas pipelines and their
affiliated marketing companies, independent marketers and providers of alternate
energy supplies, such as residual fuel oil.
Exploration for and production of oil and gas are affected by the
availability of pipe, casing and other tubular goods and certain other oil field
equipment, including drilling rigs and tools. The Company is dependent upon
independent drilling contractors to furnish rigs, equipment and tools to drill
the wells it operates. The Company has not experienced and does not anticipate
difficulty in obtaining supplies, materials, drilling rigs, equipment or tools.
Higher prices for oil and gas production, however, may cause competition for
these items to increase and may result in increased costs of operations.
Regulation
The domestic oil and gas industry is extensively regulated by federal,
state and local authorities. Legislation affecting the oil and gas industry is
under constant review for amendment or expansion. Numerous departments and
agencies, both federal and state, have issued rules and regulations affecting
the oil and gas industry and its individual members, some of which carry
substantial penalties for the failure to comply. The regulatory burden on the
oil and gas industry increases its cost of doing business and, consequently,
affects its profitability. Inasmuch as such laws and regulations are frequently
amended or reinterpreted, the Company is unable to predict the future cost or
impact of complying with such regulations.
Exploration and Production. Exploration and production operations of the
Company are subject to various types of regulation at the federal, state and
local levels. Such regulation includes requiring permits for the drilling of
wells, maintaining bonding requirements in order to drill or operate wells, and
regulating the location of wells, the method of drilling and casing wells, the
surface use and restoration of properties upon which wells are drilled and the
plugging and abandoning of wells. The Company's operations are also subject to
various conservation regulations, including regulation of the size of drilling
and spacing units or proration units, the density of wells which may be drilled
and the unitization or pooling of oil and gas properties. In this regard, some
states allow the forced pooling or integration of lands and leases to facilitate
exploration, while other states rely on voluntary pooling of lands and leases.
In addition, state conservation laws establish maximum, quarterly and/or daily
allowable rates of production from oil and gas wells, generally prohibit the
venting or flaring of gas and impose certain requirements regarding the
ratability of production. The effect of these regulations is to limit the
amounts of oil and gas the Company can produce from its wells and the number of
wells or the locations at which the Company can drill.
16
<PAGE>
Various federal, state and local laws and regulations covering the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, may affect exploration, development and
production operations of the Company. For example, the discharge or substantial
threat of a discharge of oil by the Company into United States waters or onto an
adjoining shoreline may subject the Company to liability under the Oil Pollution
Act of 1990 and similar state laws. While liability under the Oil Pollution Act
of 1990 is limited under certain circumstances, such limits are so high that the
maximum liability would likely have a significant adverse effect on the Company.
The Company's operations generally will be covered by insurance which the
Company believes is adequate for these purposes. However, there can be no
assurance that such insurance coverage will always be in force or that, if in
force, it will adequately cover any losses or liability the Company may incur.
The Company is also subject to laws and regulations concerning occupational
safety and health. It is not anticipated that the Company will be required in
the near future to expend any amounts that are material in the aggregate to the
Company's overall operations by reason of environmental or occupational safety
and health laws and regulations, but because such laws and regulations are
frequently changed, the Company is unable to predict the ultimate cost of
compliance.
Certain of the Company's oil and gas leases are granted by the federal
government and administered by various federal agencies. Such leases require
compliance with detailed federal regulations and orders which regulate, among
other matters, drilling and operations on these leases and calculation of
royalty payments to the federal government. The Mineral Lands Leasing Act of
1920 places limitations on the number of acres under federal leases that may be
owned in any one state. While subject to this law, the Company does not have a
substantial federal lease acreage position in any state or in the aggregate.
The Mineral Lands Leasing Act of 1920 and related regulations also may restrict
a corporation from the holding of a federal onshore oil and gas lease if stock
of such corporation is owned by citizens of foreign countries which are not
deemed reciprocal under such Act. Reciprocity depends, in large part, on
whether the laws of the foreign jurisdiction discriminate against a United
States person's ownership of rights to minerals in such jurisdiction. The
purchase of such shares in the Company by citizens of foreign countries who are
not deemed to be reciprocal under such Act could have an impact on the Company's
ownership of federal leases.
Marketing, Gathering and Transportation. Federal legislation and
regulatory controls have historically affected the price of the gas produced and
sold by the Company and the manner in which such production is marketed.
Historically, the transportation and sale for resale of gas in interstate
commerce have been regulated pursuant to the Natural Gas Act of 1938 (the
"NGA"), the Natural Gas Policy Act of 1978 (the "NGPA") and the regulations
promulgated thereunder by the Federal Energy Regulatory Commission ("FERC"). On
July 26, 1989, the Natural Gas Wellhead Decontrol Act of 1989 (the "Decontrol
Act") was enacted. The Decontrol Act amended the NGPA to remove as of January
1, 1993, the remaining natural gas wellhead pricing, sales, certificate and
abandonment regulation of first sales that had been regulated by the FERC.
Commencing in 1985, the FERC through Order Nos. 436, 500 and 636
promulgated changes that significantly affect the transportation and marketing
of gas. These changes have been intended to foster competition in the gas
industry by, among other things, inducing or mandating that interstate pipeline
companies provide nondiscriminatory transportation services to producers,
distributors, buyers and sellers of gas and other shippers (so-called "open
access" requirements). The FERC has also sought to expedite the certification
process for new services, facilities, and operations of those pipeline companies
providing "open access" services.
17
<PAGE>
In 1992, the FERC issued Order 636. Among other things, Order 636 required
each interstate pipeline company to "unbundle" its traditional wholesale
services and create and make available on an open and nondiscriminatory basis
numerous constituent services (such as gathering services, storage services,
firm and interruptible transportation services, and stand-by sales services) and
to adopt a new rate making methodology to determine appropriate rates for those
services. Each pipeline company had to develop the specific terms of service in
individual proceedings. The new rules and various pipeline compliance filings
are the subject of appeals and resulting remand proceedings concerning certain
issues. The Company cannot predict whether and to what extent further FERC
remand proceedings and judicial review will affect these matters. Although the
new regulations do not directly regulate gas producers such as the Company, the
availability of non-discriminatory transportation services and the ability of
pipeline customers to modify or terminate their existing purchase obligations
under these regulations have greatly enhanced the ability of producers to market
their gas directly to end users and local distribution companies. In this
regard, access to markets through interstate gas pipelines is critical to the
marketing activities of the Company.
The FERC has issued a new policy regarding the use of nontraditional
methods of setting rates for interstate gas pipelines in certain circumstances
as alternatives to cost-of-service based rates. A number of pipelines have
obtained FERC authorization to charge negotiated rates as one such alternative.
Under the NGA, gas gathering facilities are generally exempt from FERC
jurisdiction. Interstate transmission facilities are, on the other hand,
subject to FERC jurisdiction. The FERC has historically distinguished between
these types of activities on a very fact-specific basis which makes it difficult
to predict with certainty the status of the Company's gathering facilities.
While the FERC has not issued any order or opinion declaring the Company's
facilities as gathering rather than transmission facilities, the Company
believes that these systems meet the traditional tests that the FERC has used to
establish a pipeline's status as a gatherer. As a result of FERC's allowing a
number of interstate pipelines to spin-off gathering systems and thereby exempt
them from Federal regulation, states are now enacting or considering statutory
and/or regulatory provisions to regulate gathering systems. The Company's
gathering systems could be adversely affected should they be subjected in the
future to the application of such state regulation.
With respect to oil pipeline rates subject to the FERC's jurisdiction, in
October 1993 the FERC issued Order 561 to fulfill the requirements of Title
XVIII of the Energy Policy Act of 1992. Order 561 established an indexing
system, effective January 1, 1995, under which oil pipelines will be able to
readily change their rates to track changes in the Producer Price Index for
Finished Goods (PPI-FG), minus one percent. This index established ceiling
levels for rates. Order 561 also permits cost-of-service proceedings to
establish just and reasonable rates. The order does not alter the right of a
pipeline to seek FERC authorization to charge market-based rates. However,
until the FERC makes the finding that the pipeline does not exercise significant
market power, the pipeline's rates cannot exceed the applicable index ceiling
level or a level justified by the pipeline's cost of service.
The Company's operations in Argentina, Bolivia and Ecuador are subject to
various laws and regulations in those countries. These laws and regulations as
currently imposed are not anticipated to have a material adverse effect upon the
Company's operations. The Company's Bolivian projects are dependent, in part,
on the development of the Bolivia-to-Brazil gas pipeline.
Employees
The Company employs approximately 220 people in its Tulsa office whose
functions are associated with management, engineering, geology, land and legal,
accounting, financial planning, and administration. In addition, approximately
190 full time employees are responsible for the supervision and operation of its
U.S. field activities. The Company also has approximately 145 employees located
in South America for the management and operation of its properties in
Argentina, Bolivia and Ecuador, as well as 13 employees in Yemen. The Company
believes its relations with its employees are excellent.
18
<PAGE>
Item 3. Legal Proceedings.
On November 5, 1996, the Province of Santa Cruz, Argentina brought suit
against the Company's subsidiary Cadipsa S.A. in the Corte Suprema de Justicia
de la Nacion (the Supreme Court of Justice of the Argentine Republic, Buenos
Aires, Argentina), Dossier No. s-1451, seeking to recover approximately $10.6
million (which sum includes interest) allegedly due as additional royalties on
four concessions granted in 1990 in which the Company currently owns a 100
percent working interest. The Company and its predecessors in title have been
paying royalties at an eight percent rate; the Province of Santa Cruz claims the
rate should be 12 percent. The amount of such claim will increase at the
differential of these royalty rates until this claim is resolved. With respect
to the 50 percent interest in the two concessions that the Company acquired from
British Gas, plc, the Company believes that it is entitled to indemnification by
British Gas, plc for any loss sustained by the Company as a result of this
claim. Such indemnification equals approximately $4.7 million of the current
$18.0 million claim. The Company has no indemnification from its predecessors
in title with respect to the payment of royalties on the other two concessions.
Although the Company cannot predict the outcome of this litigation, based upon
the advice of counsel, the Company does not expect this claim to have a material
adverse impact on the Company's financial position or results of operations.
The Company is also a named defendant in other lawsuits and is a party in
governmental proceedings from time to time arising in the ordinary course of
business. While the outcome of such other lawsuits or proceedings against the
Company cannot be predicted with certainty, management does not expect these
matters to have a material adverse effect on the Company's financial position or
results of operations.
Item 4. Submission of Matters to a Vote of Security-Holders.
There were no matters submitted to the Company's stockholders during the
fourth quarter of the fiscal year ended December 31, 1998.
19
<PAGE>
Item 4A. Executive Officers of the Registrant.
The following table sets forth as of the date hereof certain information
regarding the executive officers of the Company. Officers are elected annually
by the Board of Directors and serve at its discretion.
<TABLE>
<CAPTION>
Name Age Position
- -------------------------- ----- ------------------------------------------------------------
<S> <C> <C>
Charles C. Stephenson, Jr. 62 Director and Chairman of the Board of Directors
Jo Bob Hille 57 Director and Vice Chairman of the Board of Directors
S. Craig George 46 Director, President and Chief Executive Officer
William L. Abernathy 47 Executive Vice President and Chief Operating Officer
William C. Barnes 44 Director, Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
William E. Dozier 46 Senior Vice President - Operations
Robert W. Cox 53 Vice President - General Counsel
Andy R. Lowe 47 Vice President - Marketing
Michael F. Meimerstorf 42 Vice President and Controller
Robert E. Phaneuf 52 Vice President - Corporate Development
Barry D. Quackenbush 57 Vice President - Engineering
Larry W. Sheppard 44 Vice President - International
Martin L. Thalken 38 Vice President - Acquisitions
</TABLE>
Mr. Stephenson, a co-founder of the Company, has been a Director since June
1983 and Chairman of the Board of Directors of the Company since April 1987. He
was also Chief Executive Officer of the Company from April 1987 to March 1994
and President of the Company from June 1983 to May 1990. From October 1974 to
March 1983, he was President of Santa Fe-Andover Oil Company (formerly Andover
Oil Company), an independent oil and gas company ("Andover"), and from January
1973 to October 1974, he was Vice President of Andover. Mr. Stephenson has a
B.S. Degree in Petroleum Engineering from the University of Oklahoma, and has
approximately 39 years of oil and gas experience.
Mr. Hille, the other co-founder of the Company, has been a Director of the
Company since June 1983 and Vice Chairman of the Company since September 1995.
He was also Chief Executive Officer of the Company from March 1994 to December
1997, President of the Company from May 1990 to September 1995, Chief Operating
Officer of the Company from April 1987 to March 1994, Executive Vice President
of the Company from June 1983 to May 1990 and Treasurer and Secretary of the
Company from June 1983 to April 1987. From August 1972 to March 1983, Mr. Hille
was employed by Andover where he served at various times primarily as Executive
Vice President and Vice President--Operations. Mr. Hille has a B.S. Degree in
Petroleum Engineering from the University of Tulsa, and has approximately 33
years of oil and gas experience.
Mr. George has been a Director since October 1991, President of the Company
since September 1995 and Chief Executive Officer of the Company since December
1997. He was also Chief Operating Officer of the Company from March 1994 to
December 1997, an Executive Vice President of the Company from March 1994 to
September 1995 and a Senior Vice President of the Company from October 1991 to
March 1994. From April 1991 to October 1991, Mr. George was Vice President of
Operations and International with Santa Fe Minerals, Inc., an independent oil
and gas company ("Santa Fe Minerals"). From May 1981 to March 1991, he served
in various other management and executive capacities with Santa Fe Minerals and
its subsidiary, Andover. From December 1974 to April 1981, Mr. George held
various management and engineering positions with Amoco Production Company. He
has a B.S. Degree in Mechanical Engineering from the University of Missouri-
Rolla.
20
<PAGE>
Mr. Abernathy has been an Executive Vice President and Chief Operating
Officer of the Company since December 1997. He was Senior Vice President--
Acquisitions of the Company from March 1994 to December 1997, Vice President--
Acquisitions of the Company from May 1990 to March 1994 and Manager--
Acquisitions of the Company from June 1987 to May 1990. From June 1976 to June
1987, Mr. Abernathy was employed by Exxon Company USA, where he served at
various times as Senior Staff Engineer, Senior Supervising Engineer and in other
engineering capacities, with assignments in drilling, production and reservoir
engineering in the Gulf Coast and offshore. He has B.S. and M.S. Degrees in
Mechanical Engineering from Auburn University.
Mr. Barnes, a certified public accountant, has been a Director, Treasurer
and Secretary of the Company since April 1987, an Executive Vice President of
the Company since March 1994 and Chief Financial Officer of the Company since
May 1990. He was also a Senior Vice President of the Company from May 1990 to
March 1994 and Vice President--Finance of the Company from January 1984 to May
1990. From November 1982 to December 1983, Mr. Barnes was an audit manager for
Arthur Andersen & Co., an independent public accounting firm, where he dealt
primarily with clients in the oil and gas industry. He was Assistant
Controller--Finance of Andover from December 1980 to November 1982. From June
1976 to December 1980, he was an auditor with Arthur Andersen & Co., where he
dealt primarily with clients in the oil and gas industry. Mr. Barnes has a B.S.
Degree in Business Administration from Oklahoma State University.
Mr. Dozier has been Senior Vice President--Operations of the Company since
December 1997. From May 1992 to December 1997, he was Vice President--
Operations of the Company. From June 1983 to April 1992, he was employed by
Santa Fe Minerals where he held various engineering and management positions
serving most recently as Manager of Operations Engineering. From January 1975
to May 1983, he was employed by Amoco Production Company serving in various
positions where he worked all phases of production, reservoir evaluations,
drilling and completions in the Mid-Continent and Gulf Coast areas. He has a
B.S. Degree in Petroleum Engineering from the University of Texas.
Mr. Cox has been Vice President--General Counsel of the Company since March
1988. From August 1982 to March 1988, he was employed by Santa Fe Minerals and
its subsidiary, Andover, where he served at various times as Vice President--Law
and Regional Attorney. From April 1982 to August 1982, he was employed as
Corporate Attorney by Andover. Prior to that time, Mr. Cox was employed by
Amerada Hess Corporation, a major oil company, served as General Counsel and
Secretary of Kissinger Petroleum Corporation, an independent oil and gas
company, and served on the legal staff of Champlin Petroleum Company, an
independent oil and gas company. He has a B.S. Degree in Business
Administration with a major in Petroleum Marketing from the University of Tulsa,
and a Juris Doctor from the University of Michigan Law School.
Mr. Lowe has been Vice President--Marketing of the Company since December
1997. He was General Manager--Marketing of the Company from July 1992 to
December 1997. From September 1983 to November 1990, he was employed by Maxus
Energy Corporation, formerly Diamond Shamrock Exploration Company, serving as
Manager--Marketing and in various other management and supervisory capacities.
From 1981 to October 1983, he was employed by American Quasar Exploration
Company as Manager--Oil and Gas Marketing. From 1978 to 1981, he was employed by
Texas Pacific Oil Company serving in various positions in production and
marketing. He has a B.S. Degree in Education from Texas Tech University.
Mr. Meimerstorf, a certified public accountant, has been Controller of the
Company since January 1988 and a Vice President of the Company since May 1990.
He was Accounting Manager of the Company from February 1984 to January 1988.
From April 1981 to February 1984, he was the Financial Reporting Supervisor for
Andover. From June 1979 to April 1981, he was an auditor with Arthur Andersen &
Co. He has a B.S. Degree in Accounting from Arkansas Tech University and an
M.B.A. Degree from the University of Arkansas.
21
<PAGE>
Mr. Phaneuf has been Vice President--Corporate Development of the Company
since October 1995. From June 1995 to October 1995, he was employed in the
Corporate Finance Group of Arthur Andersen LLP, specializing in energy industry
corporate finance activities. From April 1993 to August 1994, he was Senior Vice
President and head of the Energy Research Group at Kemper Securities, an
investment banking firm. From 1988 until April 1993, he was employed by
Rauscher, Pierce Refsnes, Inc., an investment banking firm, as a Senior Vice
President, serving as an energy analyst involved in equity research. From 1978
to 1988, Mr. Phaneuf was Vice President of Kidder, Peabody, & Co., an investment
banking firm, serving as an energy analyst in the Research Department. From
1976 to 1978, he was employed by Schneider, Bernet, and Hickman, serving as an
energy analyst in the Research Department. From 1972 to 1976, he held the
position of Investment Advisor for First International Investment Management, a
subsidiary of NationsBank. He holds a B.A. Degree in Psychology and an M.B.A
Degree from the University of Texas.
Mr. Quackenbush has been Vice President--Engineering of the Company since
May 1998. He was Vice President--Production of the Company from May 1990 to May
1998 and Manager--Production of the Company from November 1989 to May 1990.
From May 1970 to July 1989, Mr. Quackenbush was employed by Tenneco Oil Co., an
oil and gas company, where he served as Acquisition Manager and in various
engineering positions. He has a B.S. Degree in Petroleum Engineering from the
Colorado School of Mines.
Mr. Sheppard has been Vice President--International of the Company since
November 1994. From June 1984 to August 1994, he was employed by Santa Fe
Minerals serving as Manager--Acquisitions & Special Projects, Manager--
International Operations, and in various other management and supervisory
capacities. From August 1977 to June 1984, he was employed by Amoco Production
Company serving in various engineering and supervisory capacities. He has a
B.S. Degree in Petroleum Engineering from Texas Tech University.
Mr. Thalken has been Vice President--Acquisitions of the Company since
December 1997. He was Acquisitions Technical Manager of the Company from May
1995 to December 1997 and an acquisitions engineer with the Company from January
1992 to May 1996. From October 1990 to December 1991, he was employed by Enron
Oil and Gas Company, serving as a production engineer. From May 1983 to
September 1990, he was employed by Exxon Company, USA, in various engineering
and supervisory capacities. He has a B.S. Degree in Mechanical Engineering from
the University of Kansas.
22
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock commenced trading on the New York Stock Exchange
on August 3, 1990, under the symbol "VPI." The following table sets forth the
high and low sale prices per share of the Company's common stock, as reported in
the New York Stock Exchange composite transactions, and the cash dividends paid
per share of common stock, for the periods indicated:
<TABLE>
<CAPTION>
Dividends
High Low Paid
-------- -------- ---------
<S> <C> <C> <C>
1998
- ----
First Quarter 23 1/8 16 13/16 $ .02
Second Quarter 21 1/2 15 7/8 .02
Third Quarter 19 1/2 7 5/16 .02
Fourth Quarter 15 1/2 7 1/4 .025
1997
- ----
First Quarter 18 11/16 13 .015
Second Quarter 18 1/16 12 1/2 .015
Third Quarter 25 1/2 15 3/8 .015
Fourth Quarter 25 7/8 17 .02
</TABLE>
Substantially all of the Company's stockholders maintain their shares in
"street name" accounts and are not, individually, stockholders of record. As of
December 31, 1998, the common stock was held by 106 holders of record and
approximately 7,200 beneficial owners.
The Company began paying a quarterly cash dividend in the fourth quarter of
1992. On December 7, 1998, the Company declared a regular quarterly cash
dividend of $.025 per share payable on January 6, 1999, to stockholders of
record at December 22, 1998. Due to the current historically low oil and gas
price environment, the Company has temporarily suspended its 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, the Company's financial condition,
funds from operations, the level of its capital expenditures and its future
business prospects. The Company's credit arrangements (including the indentures
for its outstanding senior subordinated indebtedness) contain certain
restrictions on the payment of cash dividends, the most restrictive of which
prohibits the payment of cash dividends if the Company's Consolidated Interest
Coverage Ratio (as defined in indentures) does not exceed 2.5 to 1.0. The
Company is currently prohibited from paying cash dividends.
On November 4, 1998, a wholly-owned subsidiary of the Company acquired all
of the outstanding shares of capital stock of Elf Hydrocarbures Equateur, S.A.
from Elf Aquitaine. As part of the consideration for this acquisition, the
Company issued to Elf Aquitaine 1,325,000 shares of common stock of the Company
valued at a guaranteed amount of $20.00 per share on November 4, 2000, or $26.5
million. The Company effected such issuance of shares in accordance with Rule
506 of Regulation D under the Securities Act of 1933, as amended. Elf Aquitaine
was an "accredited investor" for purposes of such rule.
23
<PAGE>
Item 6. Selected Financial Data.
SELECTED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------
1998 1997 (a) 1996 (a) 1995 (a) 1994 (a)
----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share amounts and operating data)
Income Statement Data:
Oil and gas sales.............................. $ 266,661 $ 355,113 $ 258,368 $160,254 $141,357
Gathering revenues............................. 7,741 18,063 20,508 12,380 14,635
Gas marketing revenues......................... 54,108 45,981 31,920 20,912 27,285
Total revenues................................. 328,935 416,590 312,147 195,215 185,751
Operating expenses............................. 180,544 172,676 138,438 95,121 96,549
Exploration costs.............................. 24,056 12,667 10,192 3,834 3,012
Impairment of oil and gas properties........... 70,913 8,785 - - -
Depreciation, depletion and amortization....... 108,975 96,307 66,861 48,336 39,341
Interest....................................... 43,680 36,762 30,109 20,178 12,002
Net income (loss).............................. (87,665) 54,954 33,188 9,449 14,389
Earnings (loss) per share(b)(c):
Basic....................................... (1.69) 1.07 .69 .23 .36
Diluted..................................... (1.69) 1.05 .68 .22 .34
Dividends declared per share(c)................ .09 .07 .055 .045 .035
----------- ---------- ---------- --------- ---------
Balance Sheet Data (end of year):
Total assets................................... $1,014,175 $ 915,394 $ 766,816 $613,397 $377,010
Long-term debt, less current portion........... 672,507 451,096 372,390 315,846 186,548
Stockholders' equity........................... 273,958 337,578 236,406 203,265 137,210
----------- ---------- ---------- --------- ---------
Operating Data:
Production:
Oil (MBbls).................................... 16,434 15,457 11,939 7,608 6,657
Gas (MMcf)..................................... 47,238 42,691 32,366 30,610 28,884
----------- ---------- ---------- --------- ---------
Average Sales Prices:
Oil (per Bbl).................................. $ 10.87 $ 17.02 $ 16.73 $ 15.26 $ 13.53
Gas (per Mcf).................................. 1.86 2.16 1.81 1.46 1.78
----------- ---------- ---------- --------- ---------
Proved Reserves (end of year):
Oil (MBbls).................................... 164,457 187,768 178,296 147,871 70,789
Gas (MMcf)..................................... 806,833 552,163 382,846 310,762 281,638
Total proved reserves (MBOE)................... 298,929 279,795 242,104 199,665 117,729
----------- ---------- ---------- --------- ---------
Present value of estimated future net revenues
before income taxes discounted at 10 percent
(in thousands):
Oil and gas properties.................. $ 703,211 $1,222,560 $1,807,137 $894,249 $446,987
Gathering systems....................... 4,493 5,940 10,364 10,641 9,215
Standardized measure of discounted future
net cash flows (in thousands)............... 648,222 1,016,645 1,392,841 736,546 385,721
----------- ---------- ---------- --------- ---------
</TABLE>
Significant acquisitions of producing oil and gas properties during 1997
and 1995 affect the comparability between the Financial and Operating Data for
the years presented above.
(a) Restated for change in accounting method. See Note 1 to the Company's
consolidated financial statements included elsewhere in this Form 10-K.
(b) 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.
(c) Amounts have been adjusted to give effect to the two-for-one common stock
split effected on October 7, 1997.
24
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Change in Accounting Method
Effective January 1, 1998, the Company elected to convert from the full
cost method to the successful efforts method of accounting for its investments
in oil and gas properties. The Company believes that the successful efforts
method of accounting is preferable, as it more accurately presents the results
of the Company's exploration and development activities, minimizes asset write-
offs caused by temporary downward oil and gas price movements and reflects an
impairment in the carrying value of its oil and gas properties only when there
has been a permanent decline in their fair value. Accordingly, the consolidated
balance sheet as of December 31, 1997, and the consolidated statements of income
and cash flows for the years ended December 31, 1997 and 1996, included in this
Form 10-K have been restated to conform with successful efforts accounting. The
effect, net of income taxes, was to reduce December 31, 1997, retained earnings
by $46.0 million. For the statements of income for the years ended December 31,
1997 and 1996, the effect of the accounting change was to decrease net income by
$17.3 million ($.34 per diluted share), and $8.0 million ($.17 per diluted
share), respectively.
Results of Operations
The Company's results of operations have been significantly affected by its
success in acquiring oil and gas properties and its ability to maintain or
increase production through its exploitation and exploration activities.
Fluctuations in oil and gas prices have also significantly affected the
Company's results. The following table reflects the Company's oil and gas
production and its average oil and gas prices for the periods presented:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Production:
Oil (MBbls) -
U.S. ......... 9,912 9,692 7,694
Argentina..... 6,322 5,630 4,245
Bolivia....... 122 135 -
Ecuador....... 78 - -
Total....... 16,434 15,457 11,939
Gas (MMcf) -
U.S. ......... 42,176 36,623 32,366
Bolivia....... 5,062 6,068 -
Total....... 47,238 42,691 32,366
Total MBOE........ 24,307 22,573 17,333
Average Sales Prices:
Oil (per Bbl) -
U.S........... $ 11.20 $ 17.23 $ 17.19
Argentina..... 10.41 16.67 15.91
Bolivia....... 11.31 16.52 -
Ecuador....... 5.77 - -
Total....... 10.87 17.02 16.73
Gas (per Mcf) -
U.S. ......... $ 1.99 $ 2.33 $ 1.81
Bolivia....... .78 1.10 -
Total....... 1.86 2.16 1.81
</TABLE>
25
<PAGE>
Average U.S. oil prices received by the Company fluctuate generally with
changes in the West Texas Intermediate ("WTI") posted prices for oil. The
Company's Argentina oil production is sold at WTI spot prices less a specified
differential. The Company experienced a 36 percent decrease in its average oil
price in 1998 compared to 1997. The Company was not a party to any oil hedges
in 1998. During 1997, the impact of Argentina oil hedges reduced the Company's
overall average oil price 24 cents to $17.02 per Bbl and its average Argentina
oil price was reduced 66 cents to $16.67 per Bbl. Approximately 49 percent of
the 1997 Argentina oil production was covered by hedges. Oil hedges reduced the
Company's overall 1996 average oil price $2.00 to $16.73 per Bbl. The Company's
1996 average U.S. oil price was reduced $1.47 to $17.19 per Bbl while its
average Argentina oil price was reduced $2.96 to $15.91 per Bbl.
The Company realized an average oil price for 1998 which was approximately
91 percent of WTI posted prices compared to a realization of 93 percent (before
the impact of oil hedges) of WTI posted prices for the year earlier. However,
due to an increase in the differential between WTI posted prices and the NYMEX
reference price ("NYMEX"), the Company's average realized prices (before hedges)
declined to 75 percent of NYMEX in 1998 compared to 84 percent of NYMEX in 1997
and 85 percent of NYMEX in 1996.
Average U.S. gas prices received by the Company fluctuate generally with
changes in spot market prices, which may vary significantly by region. The
Company's Bolivia average gas price is tied to a long-term contract under which
the base price is adjusted for changes in specified fuel oil indexes. During
1998, these fuel oil indexes decreased in conjunction with the current low oil
price environment. The Company's average gas price for 1998 was 14 percent lower
than 1997's. The Company's average gas price for 1997 was 19 percent higher
than 1996's. Average realized gas prices for 1996 were negatively impacted by
five cents per Mcf as a result of certain gas hedges that were in place for
40,000 Mcf of gas per day for the period January through March 1996.
The Company has previously engaged in oil and gas hedging activities and
intends to continue to consider various hedging arrangements to realize
commodity prices which it considers favorable. During 1998, the Company entered
into various natural gas basis swaps for the calender year 1999 covering a total
of 82,000 MMBtu of gas per day plus an additional 3,000 MMBtu per day for the
period of January through October 1999. These natural gas basis swaps were used
to reduce the Company's exposure to increases in the basis differential between
the NYMEX reference price and the Company's industry delivery point indexes
under which the gas is sold.
Relatively modest changes in either oil or gas prices significantly impact
the Company's results of operations and cash flow. However, the impact of
changes in the market prices for oil and gas on the Company's average realized
prices may be reduced from time to time based on the level of the Company's
hedging activities. Based on 1998 oil production, a change in the average oil
price realized by the Company of $1.00 per Bbl would result in a change in net
income and cash flow before income taxes on an annual basis of approximately
$10.2 million and $16.0 million, respectively. A 10 cent per Mcf change in the
average price realized by the Company for gas would result in a change in net
income and cash flow before income taxes on an annual basis of approximately
$2.8 million and $4.6 million, respectively, based on 1998 gas production.
26
<PAGE>
Period to Period Comparison
Year Ended December 31, 1998, Compared to Year Ended December 31, 1997
The Company reported a net loss of $87.7 million for the year ended
December 31, 1998, compared to net income of $55.0 million for the same period
in 1997. An increase in the Company's oil and gas production of eight percent
on an equivalent barrel basis was more than offset by a 36 percent decrease in
average oil prices and a 14 percent decrease in average gas prices. The
production increases primarily relate to the exploration activities in the
United States, the exploitation activities in Argentina and the acquisition of
certain oil and gas properties from Burlington Resources Inc. (the "Burlington
Properties") in April 1997. However, a portion of the production increases were
reduced by the impact of severe weather in California during the first quarter
of 1998 and the Gulf of Mexico in the third quarter of 1998 forcing the Company
to temporarily shut in some of its oil and gas properties for portions of 1998
reducing production by approximately 167,000 Bbls of oil and 877,000 Mcf of gas.
Oil and gas sales decreased $88.4 million (25 percent), to $266.7 million
for 1998 from $355.1 million for 1997. A 36 percent decrease in average oil
prices, partially offset by a six percent increase in oil production, accounted
for a decrease of $84.4 million. A 14 percent decrease in average gas prices,
partially offset by an 11 percent increase in gas production, accounted for an
additional decrease of $4.0 million.
Oil and gas gathering net margins decreased $1.6 million (52 percent), to
$1.5 million for 1998 from $3.1 million for 1997, due primarily to the sale by
the Company of its two largest gathering systems in December 1997 and June 1998.
Lease operating expenses, including production taxes, increased $8.4
million (7 percent), to $122.7 million for 1998 from $114.3 million for 1997.
The increase in lease operating expenses is in line with the eight percent
increase in production and is due primarily to operating costs associated with
the Burlington Properties and costs in 1998 related to storm damage repair and
cleanup as a result of the severe weather in California and the Gulf of Mexico.
Lease operating expenses per equivalent barrel produced decreased to $5.05 in
1998 from $5.07 for the same period in 1997.
Exploration costs increased $11.4 million (90 percent), to $24.1 million
for 1998 from $12.7 million for 1997. During 1998, the Company's exploration
costs included $13.9 million for the acquisition of 3-D seismic data primarily
in the U.S. Gulf Coast area and Bolivia, $4.8 million for unsuccessful
exploratory drilling, $3.0 million for lease impairments and $2.4 million in
other geological and geophysical costs. The Company's 1997 exploration costs
consisted primarily of $6.6 million for unsuccessful exploratory drilling, $5.6
million in 3-D seismic acquisition costs, and $0.5 million in lease impairments.
Impairments of oil and gas properties of $70.9 million were recognized in
1998, compared to $8.8 million of impairments in 1997, due primarily to the
decline in oil prices which took place in the last quarter of 1998. The Company
reviews its proved properties for impairment on a field basis and recognizes an
impairment whenever events or circumstances (such as declining oil and gas
prices) indicate that the properties' carrying value may not be recoverable. If
an impairment is indicated based on the Company's estimated future net revenues
for total proved reserves on a field basis, then a provision is recognized to
the extent that the carrying value exceeds the present value of the estimated
future net revenues ("fair value"). In estimating the future net revenues, the
Company assumed future oil and gas prices and costs would escalate annually and
that the current low oil and gas price environment would return to more
historical levels over a period of time. Due to the volatility of oil and gas
prices, it is possible that the Company's assumptions regarding oil and gas
prices may change in the future. If future price expectations were to be
reduced, it is possible that additional significant impairment provisions for
oil and gas properties would be required.
27
<PAGE>
General and administrative expenses increased $4.6 million (17 percent), to
$32.0 million for 1998 from $27.4 million for 1997, due primarily to the
addition of personnel as a result of the acquisition of the Burlington
Properties and the Company's increased emphasis on exploration activities, and
additional costs associated with international acquisition and business
development activities and unsuccessful acquisition activities.
Depreciation, depletion and amortization increased $12.7 million (13
percent), to $109.0 million for 1998 from $96.3 million for 1997, due primarily
to the eight percent increase in production on an equivalent barrel basis and
the increase in the Company's DD&A rate. The Company's average DD&A rate per
equivalent barrel produced for 1998 was $4.32 compared to $4.14 for the year
earlier.
Interest expense increased $6.9 million (19 percent), to $43.7 million for
1998 from $36.8 million for 1997, due primarily to a 23 percent increase in the
Company's total average outstanding debt as a result of capital spending in the
Company's exploitation and exploration programs in excess of 1998's cash flow
and the acquisition of the Burlington Properties in April 1997. The increase in
interest expense was partially offset by a decrease in the Company's overall
average interest rate from 8.01% in 1997 to 7.72% in 1998.
Year Ended December 31, 1997, Compared to Year Ended December 31, 1996
Net income was $54.9 million for the year ended December 31, 1997, up 66
percent from $33.2 million in 1996. Increases in the Company's oil and gas
production of 30 percent on an equivalent barrel basis, an increase of 19
percent in natural gas prices, and an increase of two percent in oil prices are
primarily responsible for the increase in net income. The production increases
primarily relate to the acquisition of the Burlington Properties, exploitation
activities in Argentina, exploration activities in the Galveston Bay area, the
acquisitions of producing oil and gas properties from Conoco, Inc. and Exxon
Company, U.S.A. and the acquisition of 100 percent of the common stock of
Vintage Petroleum Boliviana, Inc. ("Vintage Boliviana") (formerly Shamrock
Ventures (Boliviana) Ltd.) (collectively, the "1996 Acquisitions").
Oil and gas sales increased $96.7 million (37 percent), to $355.1 million
for 1997 from $258.4 million for 1996. A 29 percent increase in oil production
and a two percent increase in average oil prices combined to account for $63.3
million of the increase. A 32 percent increase in gas production and a 19
percent increase in average gas prices contributed to an additional $33.4
million increase.
Other income (expense) decreased $3.9 million, to an expense of $2.5
million for 1997 from income of $1.4 million for 1996, due primarily to a $5.5
million charge in 1997 related to an adverse judgement in a lawsuit involving
the handling of proceeds received by the Company from a 1992 gas contract
termination. The charge was partially offset by a $1.6 million gain recognized
on the sale of a gas gathering system.
Lease operating expenses, including production taxes, increased $22.4
million (24 percent), to $114.3 million for 1997 from $91.9 million for 1996.
The increase in lease operating expenses is due primarily to costs associated
with the Burlington Properties, the 1996 Acquisitions, and an increase in
severance taxes due to higher oil and gas sales. Lease operating expenses per
equivalent barrel produced decreased to $5.07 in 1997 from $5.30 for 1996.
Exploration costs increased $2.5 million (24 percent) to $12.7 million for
1997 from $10.2 million for 1996. The Company's 1997 exploration costs included
$6.6 million for unsuccessful exploratory drilling, $5.6 million for the
acquisition of seismic data and $0.5 million in lease impairments. The
Company's 1996 exploration costs included $6.9 million for the acquisition of
seismic data, $3.2 million for unsuccessful exploratory drilling and $0.1
million in lease impairments.
28
<PAGE>
Impairments of oil and gas properties of $8.8 million were recognized in
1997, due primarily to the decline in oil prices which took place in the last
quarter of 1997. There was no similar impairment provision required in 1996.
The Company reviews its proved properties for impairment on a field basis and
recognizes an impairment whenever events or circumstances (such as declining oil
and gas prices) indicate that the properties' carrying value may not be
recoverable. If an impairment is indicated based on the Company's estimated
future net revenues for total proved reserves then a provision is recognized to
the extent that the carrying value exceeds the present value of the estimated
future net revenues ("fair value").
General and administrative expenses increased $4.5 million (19 percent), to
$27.4 million for 1997 from $22.9 million for 1996, due primarily to the
acquisition of Vintage Boliviana, the addition of personnel as a result of the
acquisition of the Burlington Properties and additional costs associated with
unsuccessful acquisition activities.
Depreciation, depletion and amortization increased $29.4 million (44
percent), to $96.3 million for 1997 from $66.9 million for 1996, due primarily
to the 30 percent increase in production on an equivalent barrel basis. The
Company's average DD&A rate per equivalent barrel produced for 1997 was $4.14
compared to $3.73 for 1996.
Interest expense increased $6.7 million (22 percent), to $36.8 million for
1997 from $30.1 million for 1996, due primarily to a 29 percent increase in the
Company's total average outstanding debt as a result of the acquisition of the
Burlington Properties in April 1997, and the acquisitions made late in 1996.
The increase was partially offset by a decrease in the Company's overall average
interest rate from 8.36% in 1996 to 8.01% in 1997.
Capital Expenditures
During 1998, the Company's domestic oil and gas capital expenditures
totaled $178.0 million. Exploration activities accounted for $56.4 million of
the domestic capital expenditures with exploitation activities contributing
$50.8 million. The Company also had domestic capital expenditures in 1998 of
$70.8 million for the acquisitions of producing oil and gas properties, the
largest of which was the $42.1 million acquisition from Western Gas Resources,
Inc. in late October. During 1998, the Company's international oil and gas
capital expenditures totaled $108.4 million, including $44.6 million in
Argentina, primarily on exploitation activities, $24.3 million in Bolivia, on
exploitation and exploration activities, and $34.2 million in Ecuador related to
the acquisition of EHE.
The Company committed to perform 17,728 work units related to its
concession rights in the Naranjillos field in Santa Cruz Province, Bolivia
awarded in late 1997. The total work unit commitment was guaranteed by the
Company through an $88.6 million letter of credit; however, the Company
anticipated that it would fulfill this three-year work unit commitment through
approximately $50 to $60 million of various seismic and drilling capital
expenditures. During 1998, the Company spent approximately $7.6 million in the
fulfillment of 1,218 work units through the acquisition of seismic data and the
drilling of one well. The Company has budgeted to spend approximately $24
million (7,500 work units) in 1999 related to the fulfillment of its Naranjillos
field commitment.
In addition, the Company's commitment to perform 1,400 work units related
to an exploration program within the Chaco Block in Bolivia was fulfilled during
1998 through acquisitions of 3-D seismic and the drilling of two wells. Under
the Company's exploration contract on Block 19 in Ecuador, the Company is
required to participate in the drilling of one additional well. The Company
expects to drill the well during 2000 at a cost of approximately $4 million.
29
<PAGE>
The Company is also committed to spend approximately $11 million in the
Republic of Yemen over a two and one-half year period which began in July 1998.
The expenditures will include the acquisition and interpretation of 150 square
kilometers of seismic and the drilling of three exploration wells. At the end
of the first two and one-half years, the Company has the option to extend the
work program for a second two and one-half year period with similar work and
capital commitments required. During 1998, approximately $0.6 million of the
$11 million commitment was spent. The Company has budgeted to spend
approximately $5 million in 1999 on the acquisition of 3-D seismic data in
Yemen.
Except for the commitments discussed above, the timing of most of the
Company's capital expenditures is discretionary with no material long-term
capital expenditure commitments. Consequently, the Company has a significant
degree of flexibility to adjust the level of such expenditures as circumstances
warrant. The Company uses internally generated cash flow, coupled with advances
under its revolving credit facility, to fund capital expenditures other than
significant acquisitions. Of the Company's 1998 non-acquisition capital
expenditures of $181 million, approximately 59 percent was spent on exploitation
activities, including development and infill drilling, and approximately 41
percent was spent on exploration activities. The Company's preliminary capital
expenditure budget for 1999 is currently set at $56 million, exclusive of
acquisitions. Because the timing of most of the Company's capital expenditures
is discretionary, should oil and gas prices improve during 1999, its 1999
capital expenditure program may be adjusted upward. The Company does not have a
specific acquisition budget since the timing and size of acquisitions are
difficult to forecast. The Company is actively pursuing additional acquisitions
of oil and gas properties. In addition to internally generated cash flow and
advances under its revolving credit facility, the Company may seek additional
sources of capital to fund any future significant acquisitions (see "--
Liquidity"), however, no assurance can be given that sufficient funds will be
available to fund the Company's desired acquisitions.
The Company's recent capital expenditure history is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
(In thousands) 1998 1997 1996
---------- --------- ---------
(Restated) (Restated)
<S> <C> <C> <C>
Acquisition of oil and gas reserves............................. $105,023 $139,749 $ 91,282
Drilling........................................................ 114,773 71,069 51,175
Acquisition of undeveloped acreage and seismic.................. 35,024 10,349 14,847
Workovers and recompletions..................................... 29,939 32,856 33,482
Acquisition and construction of gathering systems............... 1,831 1,209 724
Other........................................................... 1,601 4,638 5,945
---------- --------- ---------
Total $288,191 $259,870 $197,455
========== ========= =========
</TABLE>
Liquidity
Internally generated cash flow and the borrowing capacity under its
revolving credit facility are the Company's major sources of liquidity. In
addition, the Company may use other sources of capital, including the issuance
of additional debt securities or equity securities, to fund any major
acquisitions it might secure in the future and to maintain its financial
flexibility.
In the past, the Company has accessed the public markets to finance
significant acquisitions and provide liquidity for its future activities. In
conjunction with the purchase of substantial oil and gas assets in 1990, 1992
and 1995, the Company completed three public equity offerings, as well as a
public debt offering in 1995, which provided the Company with aggregate net
proceeds of approximately $272 million. In February 1997, the Company also
completed concurrent public debt and equity offerings. Net proceeds of
approximately $143 million were used to repay a portion of existing indebtedness
under the Company's revolving credit facility.
30
<PAGE>
On January 26, 1999, the Company issued $150 million of its 9 3/4% Senior
Subordinated Notes Due 2009 (the "9 3/4% Notes"). The 9 3/4% Notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after February 1, 2004. In addition, prior to February 1, 2002, the Company may
redeem up to 33 1/3% of the 9 3/4% Notes with the proceeds of certain
underwritten public offerings of the Company's common stock. The 9 3/4% Notes
mature on June 30, 2009, with interest payable semiannually on June 30 and
December 30 of each year. The net proceeds to the Company from the sale of the
9 3/4% Notes (approximately $146 million) were used to repay a portion of the
existing indebtedness under the Company's revolving credit facility.
Under the Amended and Restated Credit Agreement dated October 21, 1998, as
amended (the "Bank Facility"), certain banks have provided to the Company an
unsecured revolving credit facility. The Bank Facility establishes a borrowing
base (currently $482.5 million) 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 the Eurodollar market rate ("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 February 28, 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 6.2
percent per annum. 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 final maturity at
September 11, 2003.
At February 28, 1999, the unused portion of the Bank Facility was
approximately $187 million based on the current borrowing base of $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 redetermination in April 1999. However, the amount of any such
reduction is unknown at this time. The unused portion of the Bank Facility and
the Company's internally generated cash flow provide liquidity which may be used
to finance future capital expenditures, including acquisitions. As additional
acquisitions are made and such properties are added to the borrowing base, the
banks' determination of the borrowing base and their commitments may be
increased.
The Company's internally generated cash flow, results of operations and
financing for its operations are dependent on oil and gas prices. For 1998,
approximately 68 percent of the Company's production was oil. Realized oil
prices for the year decreased by 36 percent as compared to 1997. As a result,
although total production on a BOE basis increased by eight percent, the
Company's earnings and cash flows have been materially reduced compared to 1997.
To the extent low oil prices continue, the Company's earnings and cash flow from
operations will be adversely impacted. The Company believes that its cash flows
and unused availability under the Bank Facility are sufficient to fund its
planned capital expenditures for the foreseeable future. However, continued low
oil and gas prices may cause the Company to not be in compliance with
maintenance covenants under its Bank Facility and may negatively affect its
credit statistics and coverage ratios and thereby affect its liquidity.
Inflation
In recent years inflation has not had a significant impact on the Company's
operations or financial condition.
31
<PAGE>
Income Taxes
The Company realized a current benefit for income taxes of approximately
$4.1 million for 1998 and incurred a current provision of $5.2 million for 1997.
The total provision for U.S. income taxes is based on the Federal corporate
statutory income tax rate plus an estimated average rate for state income taxes.
Earnings of the Company's foreign subsidiaries are subject to foreign income
taxes. No U.S. deferred tax liability will be recognized related to the
unremitted earnings of these foreign subsidiaries as it is the Company's
intention, generally, to reinvest such earnings permanently.
As of December 31, 1998, the Company had estimated net operating loss
("NOL") carryforwards of $44.9 million for Argentina income tax reporting
purposes which can be used to offset future taxable income in Argentina. The
carryforward amount includes certain Argentina NOL carryforwards ($17.3 million)
which were acquired and are recorded at cost ($1.0 million), which is less than
the calculated value for the tax effect of these carryforwards ($6.0 million)
under the provisions of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109"). These unrecorded NOL carryforwards
($14.4 million) will reduce the Company's foreign income tax provision for
financial purposes in future years by approximately $5.0 million if their
benefit is realized.
At the time the Company acquired a controlling interest in Cadipsa, S.A.
("Cadipsa") and 100 percent of Vintage Oil Argentina, Inc. ("VOA") in 1995,
Cadipsa and VOA had combined tax NOL carryforwards of approximately $62 million.
As the acquisitions were accounted for as business combinations and Cadipsa and
VOA had suffered cumulative losses in recent years prior to the acquisition, the
Company was required by the provisions of SFAS 109 to place a valuation
allowance on the carryforwards until it could be shown that it reasonably
expected to utilize the carryforwards prior to their expiration. During 1997, a
substantial benefit ($11.4 million) was realized from the utilization of
Argentina NOL carryforwards for tax purposes. As of the end of 1997, Cadipsa
and VOA had shown cumulative profits for the prior three-year period, and based
on estimated cash flows based on industry existing conditions at December 31,
1997, the Company believed it would be able to fully utilize 100 percent of the
remaining tax NOL carryforwards. It therefore reversed the remaining $3.1
million of the valuation allowance against its Argentina deferred tax asset in
1997 relating to the remaining unutilized carryforwards as of December 31, 1997.
As a result of the significant decline in oil prices in 1998, primarily in
the fourth quarter, the Company currently believes that of the $27.6 million of
Argentina NOL carryforwards generated by Cadipsa and VOA, $16.2 million will
expire in 1999 unutilized and has therefore recorded a valuation allowance
against its Argentina deferred tax asset of approximately $5.7 million in 1998
related to these carryforwards.
The Company has a U.S. Federal alternative minimum tax ("AMT") credit
carryforward of approximately $4.8 million which does not expire and is
available to offset U.S. Federal regular income taxes in future years, but only
to the extent that U.S. Federal regular income taxes exceed the AMT in such
years. The Company incurred a tax NOL for U.S. purposes in 1998 and will be
able to carry back the NOL two years and/or forward 20 years to receive a refund
of prior income taxes paid or to offset future income taxes to be paid.
Foreign Operations
For information on the Company's foreign operations, see "Foreign Currency
and Operations Risk" under Item 7A of this Form 10-K.
32
<PAGE>
Year 2000 Compliance
Readers are cautioned that the forward-looking statements contained in the
following Year 2000 discussion should be read in conjunction with the Company's
disclosures under the heading "Forward-Looking Statements." The disclosures
also constitute a "Year 2000 Readiness Disclosure" and "Year 2000 Statement"
within the meaning of the Year 2000 Information and Readiness Disclosure Act of
1998. The Year 2000 Information and Readiness Disclosure Act of 1998 does not
insulate the Company from liability under the federal securities laws with
respect to disclosures relating to Year 2000 information.
Statement of Readiness. The Company has undertaken various initiatives to
ensure that its hardware, software and equipment will function properly with
respect to dates before and after January 1, 2000. For this purpose, the phrase
"hardware, software and equipment" includes systems that are commonly thought of
as Information Technology systems ("IT"), as well as those Non-Information
Technology systems ("Non-IT") and equipment which include embedded technology.
IT systems include computer hardware and software and other related systems.
Non-IT systems include certain oil and gas production and field equipment,
gathering systems, office equipment, telephone systems, security systems and
other miscellaneous systems. The Non-IT systems present the greatest compliance
challenge since identification of embedded technology is difficult and because
the Company is, to a great extent, reliant on third parties for Non-IT
compliance.
The Company has formed a Year 2000 ("Y2K") Project team, which is chaired
by its Manager of Information Services. The team includes corporate staff and
representatives from the Company's business units. The phases of
identification, assessment, remediation, and testing make up the Y2K directive.
The following is the Company's targeted Non-IT and IT compliance time line:
<TABLE>
<CAPTION>
Completion Date
-----------------
<S> <C>
Non-IT Systems and Equipment:
Identification Phase............ Completed
Compliance...................... August 1999
IT Systems and Equipment:
Identification Phase............ Completed
Compliance...................... August 1999
</TABLE>
Included in the Company's Y2K Project are procedures to determine the
readiness of its business partners, such as service companies, technology
providers, transportation and communication providers, pipeline systems,
materials suppliers and oil and gas product purchasers. By use of
questionnaires, 14,000 notices were distributed which will allow the Company to
determine the extent to which these business partners are addressing their Y2K
issues. Each returned document is examined for a response that may be
detrimental to the Company's operations. To date, approximately 5,600 of the
Company's business partners have responded and those business partners who do
not respond and who are considered key businesses in the support of the
Company's operations will be sent a second request, followed by direct
correspondence, to determine their readiness. Any material adverse responses
will be reviewed to determine an alternate business partner selection or the
need for alternative actions to mitigate the impact on the Company.
The Cost to Address Y2K Issues. The Company believes that the cost of the
Y2K Project will not exceed $3.5 million, excluding costs of Company employees
working on the Y2K Project. Costs incurred for the purchase of new software and
hardware are being capitalized and all other costs are being expensed as
incurred. To date, the Company has incurred Y2K Project costs of approximately
$700,000. The expenditures relate primarily to the upgrading and replacement of
existing software and hardware and the use of contract service consultants.
33
<PAGE>
Y2K Worst-Case Scenario. The Company's initial results from its
assessment phase of the Y2K Project is that its internal systems have fewer Y2K
compliance problems than initially anticipated. As the Company plans to have
all internal systems within its control compliant and tested before the year
2000, it believes its likely worst-case scenario is the possibility of
operational interruptions due to non-compliance by third parties. This non-
compliance could cause operational problems such as temporary disruptions of
certain production, delays in marketing and transportation of production and
delays of payments for oil and gas sales. This risk should be minimized by the
Company's efforts to communicate and evaluate third party compliance.
The Company is currently developing contingency plans in the event that
problems arise due to third party non-compliance or any failures of the
Company's systems. These plans should be completed by the third quarter of 1999
and will include, but are not limited to, backup and recovery procedures,
installations of new systems, replacement of current services with temporary
manual processes, finding non-technological alternatives or sources of
information, and finding alternative suppliers, service companies and
purchasers.
The Risks of Y2K Issues. The Company presently believes that the Y2K issue
will not pose significant operational problems. However, if all significant Y2K
issues are not properly identified, or assessment, remediation and testing are
not effected timely, the Y2K issues may materially and adversely impact the
Company's results of operations, liquidity and financial condition or materially
and adversely affect its relationships with its business partners.
Additionally, the lack of Y2K compliance by other entities may have a material
and adverse impact on the Company's operations or financial condition.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company's operations are exposed to market risks primarily as a result
of changes in commodity prices, interest rates and foreign currency exchange
rates. The Company does not use derivative financial instruments for
speculative or trading purposes.
Commodity Price Risk
The Company produces, purchases and sells crude oil, natural gas,
condensate, natural gas liquids and sulfur. As a result, the Company's
financial results can be significantly impacted as these commodity prices
fluctuate widely in response to changing market forces. The Company has
previously engaged in oil and gas hedging activities and intends to continue to
consider various hedging arrangements to realize commodity prices which it
considers favorable. During 1998, the Company entered into various natural gas
basis swaps for the calendar year 1999 covering a total of 82,000 MMBtu of gas
per day plus an additional 3,000 MMBtu per day for the period of January through
October 1999 for a total weighted average differential of approximately one
cent below NYMEX. These natural gas basis swaps were used to reduce the
Company's exposure to increases in the basis differential between the NYMEX
reference price and the Company's industry delivery point indexes under which
the gas is sold. During the first three months of 1999, the actual basis
differential for this same volume of gas was approximately seven and one-half
cents above NYMEX.
Interest Rate Risk
The Company's interest rate risk exposure results primarily from short-term
rates, mainly LIBOR based borrowings from its commercial banks. To reduce the
impact of fluctuations in interest rates the Company maintains a portion of its
total debt portfolio in fixed rate debt. At December 31, 1998, the amount of
the Company's fixed rate debt was approximately 37 percent of total debt,
however, the Company issued additional fixed rate debt in January 1999 bringing
the current fixed rate debt level to 59 percent of total debt. In the past, the
Company has not entered into financial instruments such as interest rate swaps
or interest rate lock agreements. However, it may consider these instruments to
manage the impact of changes in interest rates based on management's assessment
of future interest rates, volatility of the yield curve and the Company's
ability to access the capital markets in a timely manner.
34
<PAGE>
The following table provides information about the Company's long-term debt
cash flows and weighted average interest rates by expected maturity dates
(before the impact of the January 1999 fixed-rate debt issuance discussed
above):
<TABLE>
<CAPTION>
Fair
Value
There- at
1999 2000 2001 2002 2003 after Total 12/31/98
---- ---- ---- ---- ---- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt:
Fixed rate (in thousands) - - - - - $249,006 $249,006 $ 239,500
Average interest rate - - - - - 8.9% 8.9% -
Variable rate (in thousands) - - $52,938 $211,750 $158,812 - $423,500 $ 423,500
Average interest rate - - (a) (a) (a) - (a) (a)
</TABLE>
(a) LIBOR plus an increment, based on the level of outstanding senior debt to
the borrowing base, up to a maximum increment of 1.5 percent. Current
increment above LIBOR is 1 percent.
Foreign Currency and Operations Risk
International investments represent, and are expected to continue to
represent, a significant portion of the Company's total assets. The Company has
international operations in Argentina, Bolivia, Ecuador and Yemen. For 1998,
the Company's operations in Argentina accounted for approximately 20 percent of
the Company's revenues, 80 percent of the Company's operating income (before
impairments of oil and gas properties) and 25 percent of its total assets.
During such period, the Company's operations in Argentina represented its only
foreign operations accounting for more than 10 percent of its revenues,
operating income (before impairments of oil and gas properties) or total assets.
The Company continues to identify and evaluate international opportunities but
currently has no binding agreements or commitments to make any material
international investment. As a result of such significant foreign operations,
the Company's financial results could be affected by factors such as changes in
foreign currency exchange rates, weak economic conditions or changes in the
political climate in these foreign countries.
The Company believes Argentina offers a relatively stable political
environment and does not anticipate any significant change in the near future.
The current democratic form of government has been in place since 1983 and,
since 1989, has pursued a steady process of privatization, deregulation and
economic stabilization and reforms involving the reduction of inflation and
public spending. Argentina's 12-month trailing inflation rate measure by the
Argentine Consumer Price Index declined from 200.7 percent as of June 1991 to a
negative 6.29 percent (-6.29%) as of December 1998.
All of the Company's Argentine revenues are U.S. dollar based, while a
large portion of its costs are denominated in Argentine pesos. The Argentina
Central Bank is obligated by law to sell dollars at a rate of one Argentine peso
to one U.S. dollar and has sought to prevent appreciation of the peso by buying
dollars at rates of not less than 0.998 peso to one U.S. dollar. As a result,
the Company believes that should any devaluation of the Argentine peso occur,
its revenues would be unaffected and its operating costs would not be
significantly increased. At the present time, there are no foreign exchange
controls preventing or restricting the conversion of Argentine pesos into
dollars.
Since the mid-1980's, Bolivia has been undergoing major economic reform,
including the establishment of a free-market economy and the encouragement of
foreign private investment. Economic activities that had been reserved for
government corporations were opened to foreign and domestic private investments.
Barriers to international trade have been reduced and tariffs lowered. A new
investment law and revised codes for mining and the petroleum industry, intended
to attract foreign investment, have been introduced.
On February 1, 1987, a new currency, the Boliviano ("Bs"), replaced the
peso at the rate of one million pesos to one Boliviano. The exchange rate is set
daily by the Government's exchange house, the Bolsin, which is under the
supervision of the Bolivian Central Bank. Foreign exchange transactions are not
subject to any controls. The US$:Bs exchange rate at December 31, 1998, was
US$1:Bs 5.65. The Company believes that any currency risk associated with its
Bolivian operations would not have a material impact on the Company's financial
position or results of operations.
35
<PAGE>
Prior to the Company's acquisition of EHE in November 1998, its previous
operations in Ecuador were through a farm-in exploration joint venture with two
other companies in Block 19. The economy of Ecuador has been uneven in recent
years and has recently reached a crisis level, due in large part to decreases in
oil prices and damage from El Nino floods. Since 1992, the Government has
generally sought to reduce its participation in the economy and has implemented
certain macroeconomic reforms which were designed to reduce inflation. The
Company believes the current Government has a favorable attitude toward foreign
investment and has strong international relationships with the U.S.
Due to the current economic crisis, the sucre (Ecuador's monetary unit) has
lost approximately 45 percent of its value so far this year and inflation has
reached nearly 50 percent. President Jamil Mahaud announced March 11, 1999, a
comprehensive economic plan that calls for an increase in the Value Added Tax
from 10 percent to 15 percent and the freezing of Ecuadorian bank accounts for
one year. Furthermore, the Ecuadorian Government is likely to implement a
convertibility plan similar to that adopted by Argentina in 1991, whereby the
sucre will be tied to the U.S. dollar. Earlier this year the income tax was
replaced by a one percent tax on all financial transactions. The purpose of the
reform is to reduce tax evasion and increase tax collection by the Government,
without increasing the tax burden on taxpayers. Although the Company believes
any currency risk associated with its operations in Ecuador would not have a
material impact on its financial position or results of operations, it has
policies in place that will reduce its exposure to currency risk in Ecuador.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements and notes thereto, the report of
independent public accountants and the supplementary financial and operating
information are included elsewhere in this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this Item with respect to the Company's
directors is incorporated by reference from the sections of the Company's
definitive Proxy Statement for its 1999 Annual Meeting of Stockholders (the
"Proxy Statement") entitled "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance." The information required by this
Item with respect to the Company's executive officers appears at Item 4A of Part
I of this Form 10-K.
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference from the
section of the Proxy Statement entitled "Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this Item is incorporated by reference from the
section of the Proxy Statement entitled "Principal Stockholders and Security
Ownership of Management."
36
<PAGE>
Item 13. Certain Relationships and Related Transactions.
The information required by this Item is incorporated by reference from the
section of the Proxy Statement entitled "Certain Transactions."
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) (1) Financial Statements:
The financial statements of the Company and its subsidiaries and report of
independent public accountants listed in the accompanying Index to Financial
Statements are filed as a part of this Form 10-K.
(2) Financial Statements Schedules:
All schedules are omitted as inapplicable or because the required
information is contained in the financial statements or included in the notes
thereto.
(3) Exhibits:
The following documents are included as exhibits to this Form 10-K. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.
3.1 Restated Certificate of Incorporation, as amended, of the Company
(Filed as Exhibit 3.2 to the Company's report on Form 10-Q for the
quarter ended June 30, 1997, filed August 13, 1997).
3.2 Restated By-laws of the Company (Filed as Exhibit 3.2 to the
Company's Registration Statement on Form S-1, Registration No. 33-
35289 (the "S-1 Registration Statement")).
4.1 Form of stock certificate for Common Stock, par value $.005 per
share (Filed as Exhibit 4.1 to the S-1 Registration Statement).
4.2 Indenture dated as of December 20, 1995, between The Chase Manhattan
Bank (formerly Chemical Bank), as Trustee, and the Company (Filed as
Exhibit 99.1 to the Company's report on Form 8-K filed January 16,
1996).
4.3 Indenture dated as of February 5, 1997, between The Chase Manhattan
Bank, as Trustee, and the Company (Filed as Exhibit 4.3 to the
Company's report on Form 10-K for the year ended December 31, 1996,
filed March 27, 1997).
4.4 Indenture dated as of January 26, 1999, between The Chase Manhattan
Bank, as Trustee, and the Company.
10.1* Employment and Noncompetition Agreement dated January 7, 1987,
between the Company and Charles C. Stephenson, Jr. (Filed as Exhibit
10.19 to the S-1 Registration Statement).
10.2* Employment and Noncompetition Agreement dated January 7, 1987,
between the Company and Jo Bob Hille (Filed as Exhibit 10.20 to the
S-1 Registration Statement).
37
<PAGE>
10.3* Form of Indemnification Agreement between the Company and certain of
its officers and directors (Filed as Exhibit 10.23 to the S-1
Registration Statement).
10.4* Vintage Petroleum, Inc. 1990 Stock Plan (Filed as Exhibit 4(d) to
the Company's Registration Statement on Form S-8, Registration No.
33-37505).
10.5* Amendment No. 1 to Vintage Petroleum, Inc. 1990 Stock Plan,
effective January 1, 1991 (Filed as Exhibit 10.15 to the Company's
report on Form 10-K for the year ended December 31, 1991, filed
March 30, 1992).
10.6* Amendment No. 2 to Vintage Petroleum, Inc. 1990 Stock Plan dated
February 24, 1994 (Filed as Exhibit 10.15 to the Company's report on
Form 10-K for the year ended December 31, 1993, filed March 29,
1994).
10.7* Amendment No. 3 to Vintage Petroleum, Inc. 1990 Stock Plan dated
March 15, 1996 (Filed as Exhibit A to the Company's Proxy Statement
for Annual Meeting of Stockholders dated April 1, 1996).
10.8* Amendment No. 4 to Vintage Petroleum, Inc. 1990 Stock Plan dated
March 11, 1998 (Filed as Exhibit A to the Company's Proxy Statement
for annual meeting of stockholders dated March 31, 1998).
10.9* Vintage Petroleum, Inc. 401(k) Plan (Filed as Exhibit 4(c) to the
Company's Registration Statement on Form S-8, Registration No.
33-55706).
10.10* Vintage Petroleum, Inc. Non-Management Director Stock Option Plan
(Filed as Exhibit 10.18 to the Company's report on Form 10-K for the
year ended December 31, 1992, filed March 31, 1993 (the "1992 Form
10-K")).
10.11* Form of Incentive Stock Option Agreement under the Vintage
Petroleum, Inc. 1990 Stock Plan (Filed as Exhibit 10.20 to the
Company's report on Form 10-K for the year ended December 31, 1990,
filed April 1, 1991).
10.12* Form of Non-Qualified Stock Option Agreement under the Vintage
Petroleum, Inc. 1990 Stock Plan (Filed as Exhibit 10.20 to the 1992
Form 10-K).
10.13 Amended and Restated Credit Agreement dated as of October 21, 1998,
among the Company, as borrower, and certain commercial lending
institutions, as lenders, Bank of Montreal, as administrative agent,
Nations Bank, N.A., as syndication agent, and Societe Generale
Southwest Agency, as documentation agent (Filed as Exhibit 10 to the
Company's Report on Form 10-Q for the quarter ended September 30,
1998, filed on November 13, 1998).
10.14 First Amendment to the Amended and Restated Credit Agreement dated
as of December 10, 1998, among the Company, as borrower, and certain
commercial lending institutions, as lenders, Bank of Montreal, as
administrative agent, Nations Bank, N.A., as syndication agent, and
Societe Generale Southwest Agency, as documentation agent.
21. Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Netherland, Sewell & Associates, Inc.
23.3 Consent of DeGolyer and MacNaughton.
38
<PAGE>
27. Financial Data Schedule.
____________________
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended December 31, 1998.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VINTAGE PETROLEUM, INC.
Date: March 12, 1999 By: /s/ C. C. Stephenson, Jr.
------------------------------------------
C. C. Stephenson, Jr.
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ C. C. Stephenson, Jr. Director and Chairman of the Board March 12, 1999
- ----------------------------
C. C. Stephenson, Jr.
/s/ Jo Bob Hille Director and Vice Chairman of the Board March 12, 1999
- ----------------------------
Jo Bob Hille
/s/ S. Craig George Director, President and March 12, 1999
- ---------------------------- Chief Executive Officer
S. Craig George (Principal Executive Officer)
/s/ William C. Barnes Director, Executive Vice President, March 12, 1999
- ----------------------------- Chief Financial Officer and
William C. Barnes Treasurer (Principal Financial Officer)
/s/ Bryan H. Lawrence Director March 12, 1999
- ----------------------------
Bryan H. Lawrence
/s/ John T. McNabb, II Director March 12, 1999
- ----------------------------
John T. McNabb, II
/s/ Michael F. Meimerstorf Vice President and Controller March 12, 1999
- ---------------------------- (Principal Accounting Officer)
Michael F. Meimerstorf
</TABLE>
40
<PAGE>
INDEX TO FINANCIAL STATEMENTS
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
Page
----
AUDITED FINANCIAL STATEMENTS OF VINTAGE PETROLEUM, INC. AND SUBSIDIARIES:
Report of Independent Public Accountants......................................................... 42
Consolidated Balance Sheets as of December 31, 1998 and 1997..................................... 43
Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996........... 44
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996............................................................. 45
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996....... 46
Notes to Consolidated Financial Statements for the years ended December 31, 1998, 1997 and 1996.. 47
</TABLE>
41
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Vintage Petroleum, Inc.:
We have audited the accompanying consolidated balance sheets of Vintage
Petroleum, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of income (loss), changes
in stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Vintage Petroleum, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Company has given retroactive effect to the change in accounting for oil and gas
properties from the full cost method to the successful efforts method.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
February 24, 1999
42
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares
and per share amounts)
ASSETS
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
------------ ----------
<S> <C> <C>
(Restated)
CURRENT ASSETS:
Cash and cash equivalents................................... $ 5,245 $ 5,797
Accounts receivable -
Oil and gas sales......................................... 54,680 60,878
Joint operations.......................................... 5,905 6,358
Deferred income taxes....................................... - 4,206
Prepaids and other current assets........................... 18,312 12,443
------------ ----------
Total current assets...................................... 84,142 89,682
------------ ----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, successful efforts method........... 1,368,914 1,158,749
Oil and gas gathering systems............................... 14,774 12,943
Other....................................................... 16,276 8,420
------------ ----------
1,399,964 1,180,112
Less accumulated depreciation, depletion and amortization... 501,722 373,225
------------ ----------
898,242 806,887
------------ ----------
OTHER ASSETS, net.............................................. 31,791 18,825
------------ ----------
$1,014,175 $ 915,394
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revenue payable............................................. $ 17,382 $ 27,085
Accounts payable - trade.................................... 24,812 21,088
Other payables and accrued liabilities...................... 24,731 31,504
------------ ----------
Total current liabilities................................. 66,925 79,677
------------ ----------
LONG-TERM DEBT................................................. 672,507 451,096
------------ ----------
DEFERRED INCOME TAXES.......................................... - 43,135
------------ ----------
OTHER LONG-TERM LIABILITIES.................................... 785 3,908
------------ ----------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY, per accompanying statements:
Preferred stock, $.01 par, 5,000,000 shares authorized,
zero shares issued and outstanding...................... - -
Common stock, $.005 par, 80,000,000 shares authorized,
53,107,066 and 51,558,886 shares issued and outstanding. 266 258
Capital in excess of par value.............................. 230,736 202,008
Retained earnings........................................... 42,956 135,312
------------ ----------
273,958 337,578
------------ ----------
$1,014,175 $ 915,394
============ ==========
</TABLE>
The accompanying notes are an integral part of these statements.
43
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------
1998 1997 1996
---------- ----------- ----------
(Restated) (Restated)
<S> <C> <C> <C>
REVENUES:
Oil and gas sales........................................... $ 266,661 $355,113 $258,368
Oil and gas gathering....................................... 7,741 18,063 20,508
Gas marketing............................................... 54,108 45,981 31,920
Other income (expense)...................................... 425 (2,567) 1,351
---------- ---------- ---------
328,935 416,590 312,147
---------- ---------- ---------
COSTS AND EXPENSES:
Lease operating, including production taxes................. 122,726 114,346 91,916
Exploration costs........................................... 24,056 12,667 10,192
Impairment of oil and gas properties........................ 70,913 8,785 -
Oil and gas gathering....................................... 6,258 14,932 16,985
Gas marketing............................................... 51,560 43,398 29,537
General and administrative.................................. 31,996 27,361 22,902
Depreciation, depletion and amortization.................... 108,975 96,307 66,861
Interest.................................................... 43,680 36,762 30,109
---------- ---------- ---------
460,164 354,558 268,502
---------- ---------- ---------
Income (loss) before income taxes and minority interest... (131,229) 62,032 43,645
---------- ---------- ---------
PROVISION (BENEFIT) FOR INCOME TAXES:
Current..................................................... (4,068) 5,235 2,610
Deferred.................................................... (39,496) 1,640 7,365
---------- ---------- ---------
(43,564) 6,875 9,975
---------- ---------- ---------
MINORITY INTEREST IN INCOME
OF SUBSIDIARY............................................... - (203) (482)
---------- ---------- ---------
NET INCOME (LOSS).................................................... $ (87,665) $ 54,954 $ 33,188
========== =========== =========
EARNINGS (LOSS) PER SHARE:
Basic....................................................... $(1.69) $1.07 $.69
========== =========== =========
Diluted..................................................... $(1.69) $1.05 $.68
========== =========== =========
Weighted Average Common Shares Outstanding:
Basic....................................................... 51,900 51,178 48,090
========== =========== =========
Diluted..................................................... 51,900 52,026 48,654
========== =========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
44
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Capital
Common Stock In Excess
---------------- of Par Retained
Shares Amount Value Earnings Total
-------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 (Restated)............. 47,322 $237 $149,606 $ 53,422 $203,265
Net income................................ - - - 33,188 33,188
Exercise of warrants...................... 612 3 1,529 - 1,532
Exercise of stock options and
resulting tax effects................. 204 1 1,065 - 1,066
Cash dividends declared ($.055 per share). - - - (2,645) (2,645)
-------- ------- --------- -------- --------
BALANCE AT DECEMBER 31, 1996 (Restated)............. 48,138 241 152,200 83,965 236,406
Net income................................ - - - 54,954 54,954
Issuance of common stock.................. 3,000 15 46,978 - 46,993
Exercise of stock options and
resulting tax effects................. 421 2 2,830 - 2,832
Cash dividends declared ($.07 per share).. - - - (3,607) (3,607)
-------- ------- --------- -------- --------
BALANCE AT DECEMBER 31, 1997 (Restated)............. 51,559 258 202,008 135,312 337,578
Net loss.................................. - - - (87,665) (87,665)
Issuance of common stock.................. 1,325 7 26,493 - 26,500
Exercise of stock options and
resulting tax effects................. 223 1 2,235 - 2,236
Cash dividends declared ($.09 per share).. - - - (4,691) (4,691)
-------- ------- --------- -------- --------
BALANCE AT DECEMBER 31, 1998........................ 53,107 $266 $230,736 $ 42,956 $273,958
======== ======= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
45
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------
1998 1997 1996
----------- ----------- ---------
(Restated) (Restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................................... $ (87,665) $ 54,954 $ 33,188
Adjustments to reconcile net income (loss) to cash
provided by operating activities -
Depreciation, depletion and amortization............ 108,975 96,307 66,861
Impairment of oil and gas properties................ 70,913 8,785 -
Exploration costs................................... 24,056 12,667 10,192
Provision (benefit) for deferred income taxes....... (39,496) 1,640 7,365
Minority interest in income of subsidiary........... - 203 482
----------- ---------- ---------
76,783 174,556 118,088
Decrease (increase) in receivables......................... 9,353 5,428 (24,614)
U.S. income tax refund receivable.......................... (5,323) - -
Increase (decrease) in payables and accrued liabilities.... (10,570) 7,187 14,619
Other...................................................... (3,993) (569) 2,493
----------- ---------- ---------
Cash provided by operating activities.................. 66,250 186,602 110,586
----------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -
Oil and gas properties............................... (252,254) (257,275) (156,133)
Gathering systems and other.......................... (9,960) (2,275) (1,430)
Proceeds from sales of oil and gas properties.............. 588 360 1,291
Purchase of companies, net of cash acquired................ (10,651) (38,788) (9,160)
Other...................................................... (3,042) (2,670) (3,233)
----------- ---------- ---------
Cash used by investing activities...................... (275,319) (300,648) (168,665)
----------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock....................................... 884 47,910 2,528
Sale of 8 5/8% Senior Subordinated Notes Due 2009.......... - 96,270 -
Advances on revolving credit facility and other borrowings. 232,736 192,521 149,014
Payments on revolving credit facility and other borrowings. (20,711) (216,335) (90,720)
Dividends paid............................................. (4,392) (3,297) (2,514)
----------- ---------- ---------
Cash provided by financing activities.................. 208,517 117,069 58,308
----------- ---------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (552) 3,023 229
CASH AND CASH EQUIVALENTS, beginning of year....................... 5,797 2,774 2,545
----------- ---------- ---------
CASH AND CASH EQUIVALENTS, end of year............................. $ 5,245 $ 5,797 $ 2,774
=========== ========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
46
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1998, 1997 and 1996
1. Business and Significant Accounting Policies
Consolidation
Vintage Petroleum, Inc. is an independent energy company with operations
primarily in the exploration and production, gas marketing and gathering
segments of the oil and gas industry. Approximately 96 percent of the Company's
operations are within the exploration and production segment based on 1998
operating income before impairments of oil and gas properties. Its core areas
of exploration and production operations include the West Coast, Gulf Coast,
East Texas and Mid-Continent areas of the United States, the San Jorge Basin of
Argentina, the Chaco Basin in Bolivia, and Ecuador beginning in 1998.
The consolidated financial statements include the accounts of Vintage
Petroleum, Inc. and its wholly- and majority-owned subsidiaries (collectively,
the "Company"). All significant intercompany accounts and transactions have
been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Change in Accounting Method
Effective January 1, 1998, the Company elected to change its accounting
method for oil and gas properties from the full cost method to the successful
efforts method. Management believes that the successful efforts method of
accounting is preferable and that the accounting change will more accurately
present the results of the Company's exploration and development activities,
minimize asset write-offs caused by temporary declines in oil and gas prices and
reflect an impairment in the carrying value of the Company's oil and gas
properties only when there has been a permanent decline in their fair value.
As a result of this change in accounting, all prior year financial
statements have been retroactively restated to give effect to this change in
accounting method. The effect, net of income taxes, was a reduction of retained
earnings as of December 31, 1997, of $46.0 million, primarily resulting from a
reduction of net property, plant and equipment of $74.7 million and a reduction
of deferred income tax liability of $28.7 million. The change in accounting
method decreased net income by $17.3 million ($0.34 per diluted share) and $8.0
million ($0.17 per diluted share) for 1997 and 1996, respectively.
Oil and Gas Properties
Under the successful efforts method of accounting, the Company capitalizes
all costs related to property acquisitions and successful exploratory wells, all
development costs and the costs of support equipment and facilities. All costs
related to unsuccessful exploratory wells are expensed when such wells are
determined to be non-productive; other exploration costs, including geological
and geophysical costs, are expensed as incurred. The Company recognizes gain or
loss on the sale of properties on a field basis.
47
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Unproved leasehold costs are capitalized and are reviewed periodically for
impairment. Costs related to impaired prospects are charged to expense. If oil
and gas prices decline further in the future, some of these unproved prospects
may not be economic to develop which could lead to increased impairment expense.
Costs of development dry holes and proved leaseholds are amortized on the
unit-of-production method based on proved reserves on a field basis. The
depreciation of capitalized production equipment and drilling costs is based on
the unit-of-production method using proved developed reserves on a field basis.
Estimated abandonment costs, net of salvage value, are included in the
depreciation and depletion calculation.
The Company reviews its proved oil and gas properties for impairment on a
field basis. For each field, an impairment provision is recorded whenever
events or circumstances indicate that the carrying value of those properties may
not be recoverable. The impairment provision is based on the excess of carrying
value over fair value. Fair value is defined as the present value of the
estimated future net revenues from production of total proved oil and gas
reserves over the economic life of the reserves, based on the Company's
expectations of future oil and gas prices and costs. In estimating the future
net revenues at December 31, 1998, the Company assumed oil and gas prices and
costs would escalate annually and that the current low oil and gas price
environment would return to more historical levels over a period of time. Due
to the volatility of oil and gas prices, it is possible that the Company's
assumptions regarding oil and gas prices may change in the future and may result
in future impairment provisions. The Company recorded impairment provisions
related to its proved oil and gas properties of $70.9 million and $8.8 million
in 1998 and 1997, respectively. No impairment provision was required for 1996.
Revenue Recognition
Natural gas revenues are recorded using the sales method. Under this
method, the Company recognizes revenues based on actual volumes of gas sold to
purchasers. The Company and other joint interest owners may sell more or less
than their entitlement share of the natural gas volumes produced. A liability
is recorded and revenue is deferred if the Company's excess sales of natural gas
volumes exceed its estimated remaining recoverable reserves.
Hedging
The Company periodically uses hedges (swap agreements) to reduce the impact
of oil and natural gas price fluctuations. Gains or losses on swap agreements
are recognized as an adjustment to sales revenue when the related transactions
being hedged are finalized. Gains or losses from swap agreements that do not
qualify for accounting treatment as hedges are recognized currently as other
income or expense. The cash flows from such agreements are included in operating
activities in the consolidated statements of cash flows.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement. Companies
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
48
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999;
however, beginning June 16, 1998, companies may implement the statement as of
the beginning of any fiscal quarter. SFAS No. 133 cannot be applied
retroactively and must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued, acquired,
or substantively modified after December 31, 1997 (and, at the company's
election, before January 1, 1998). The Company has not yet quantified the
impact of adopting SFAS No. 133 on its financial statements and has not
determined the timing of or method of the adoption of SFAS No. 133.
Depreciation
Depreciation of property, plant and equipment (other than oil and gas
properties) is provided using both straight-line and accelerated methods based
on estimated useful lives ranging from three to seven years.
Income Taxes
Deferred income taxes are provided on transactions which are recognized in
different periods for financial and tax reporting purposes. Such temporary
differences arise primarily from the deduction of certain oil and gas
exploration and development costs which are capitalized for financial reporting
purposes and differences in the methods of depreciation.
Statements of Cash Flows
Cash equivalents consist of highly liquid money-market mutual funds and
bank deposits with initial maturities of three months or less.
During the years ended December 31, 1998, 1997 and 1996, the Company made
cash payments for interest totaling $42.4 million, $33.2 million and $29.6
million, respectively, and cash payments for U.S. income taxes of $1.5 million,
$5.3 million and $1.3 million, respectively. Cash payments of $1.3 million and
$0.1 million were made during 1998 and 1996, respectively, for foreign tax
withholdings. No cash payments were made during 1997 for foreign income taxes.
In November 1996, the Company agreed to acquire 100 percent of the
outstanding common stock of Shamrock Ventures (Boliviana) Ltd. (subsequently
renamed Vintage Petroleum Boliviana Ltd.). Acquisition costs of $35.1 million
were unpaid at December 31, 1996. These acquisition costs were paid in 1997 and
are reflected in the Company's 1997 Consolidated Statement of Cash Flows.
In November 1998, the Company purchased 100 percent of the outstanding
common stock of Elf Hydrocarbures Equateur, S.A. ("EHE"), a French subsidiary of
Elf Aquitaine. Total consideration included cash and common stock of the
Company. The value of the non-cash consideration was $26.5 million and is not
reflected in the Company's 1998 Statement of Cash Flows.
49
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share ("SFAS No. 128"), establishing new standards for
computing and presenting earnings per share. The provisions of SFAS No. 128 are
effective for earnings per share calculations for periods ending after December
15, 1997. The Company has adopted SFAS No. 128 effective December 31, 1997, and
all earnings per share amounts disclosed herein have been calculated under the
provisions of SFAS No. 128. Basic earnings (loss) per common share were
computed by dividing net income (loss) by the weighted average number of shares
outstanding during the period. Diluted earnings per common share for 1997 and
1996 were computed assuming the exercise of all dilutive options, as determined
by applying the treasury stock method. For 1998, the computation of diluted
loss per share was antidilutive; therefore, the amounts reported for basic and
diluted loss per share were the same.
General and Administrative Expense
The Company receives fees for operation of jointly-owned oil and gas
properties and records such reimbursements as reductions of general and
administrative expense. Such fees totaled approximately $2.7 million, $2.6
million and $2.2 million in 1998, 1997 and 1996, respectively.
Revenue Payable
Amounts payable to royalty and working interest owners resulting from sales
of oil and gas from jointly-owned properties and from purchases of oil and gas
by the Company's marketing and gathering segments are classified as revenue
payable in the accompanying financial statements.
Accounts Receivable
The Company's oil and gas, gas marketing and gathering sales are made to a
variety of purchasers, including intrastate and interstate pipelines or their
marketing affiliates, independent marketing companies and major oil companies.
The Company's joint operations accounts receivable are from a large number of
major and independent oil companies, partnerships, individuals and others who
own interests in the properties operated by the Company.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income ("SFAS No. 130"), establishing standards for
reporting and display of comprehensive income and its components in financial
statements. SFAS No. 130 defines comprehensive income as the total of net
income and all other non-owner changes in equity. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. The Company had no non-owner
changes in equity other than net income and losses during the years ended
December 31, 1998, 1997 and 1996.
50
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. Long-Term Debt
Long-term debt at December 31, 1998 and 1997, consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
----------- ----------
<S> <C> <C>
Revolving credit facility........................... $423,500 $202,200
Senior subordinated notes:
9% Notes due 2005, less unamortized discount...... 149,714 149,674
8 5/8% Notes due 2009, less unamortized discount.. 99,292 99,222
----------- ---------
$672,506 $451,096
=========== =========
</TABLE>
The Company has no long-term debt maturities prior to December 1, 2001.
Aggregate maturities of long-term debt for each of the years ending December 31,
2001, through December 31, 2003, are $52.9 million, $211.8 million and $158.8
million, with $249.0 million thereafter. The Company had $5.3 million and $4.9
million of accrued interest payable related to its long-term debt at December
31, 1998 and 1997, respectively, included in other payables and accrued
liabilities.
Revolving Credit Facility
The Company has available an unsecured revolving credit facility under the
Amended and Restated Credit Agreement dated October 21, 1998, as amended (the
"Bank Facility"), between the Company and certain banks. The Bank Facility
establishes a borrowing base (currently $482.5 million including the impact of
the 9 3/4% Notes discussed below) based on 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 the eurodollar market rate ("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. 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. Total outstanding advances at December 31,
1998, were $423.5 million at an average interest rate of approximately 6.6
percent.
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. The
Company's borrowing base was last redetermined in October 1998. Oil and gas
prices have dropped substantially since the last redetermination and as a
result, the Company anticipates that at the next borrowing base redetermination
in April 1999, its borrowing base will be reduced. However, the amount of any
such reduction is unknown at this time. If the sum of outstanding senior debt
exceeds the borrowing base, as redetermined, the Company must repay such excess.
Any principal advances outstanding at September 11, 2001, will be payable in
eight equal consecutive quarterly installments commencing December 1, 2001, with
maturity at September 11, 2003.
The terms of the Bank Facility impose certain restrictions on the Company
regarding the pledging of assets and limitations on additional indebtedness. In
addition, the Bank Facility requires the maintenance of a minimum current ratio
(as defined) and tangible net worth (as defined) of not less than $250 million
plus 75 percent of the net proceeds of any future equity offerings less any
impairment writedowns required by GAAP or by the Securities and Exchange
Commission.
51
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Senior Subordinated Notes
On December 20, 1995, the Company issued $150 million of its 9% Senior
Subordinated Notes Due 2005 (the "9% Notes"). 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. The 9% Notes mature on December 15, 2005, with interest payable
semiannually on June 15 and December 15 of each year.
On February 5, 1997, the Company issued $100 million of its 8 5/8% Senior
Subordinated Notes Due 2009 (the "8 5/8% Notes"). 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. The 8 5/8% Notes mature on February 1, 2009, with
interest payable semiannually on February 1 and August 1 of each year.
On January 26, 1999, the Company issued $150 million of its 9 3/4% Senior
Subordinated Notes Due 2009 (the "9 3/4% Notes"). The 9 3/4% Notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after February 1, 2004. In addition, prior to February 1, 2002, the Company may
redeem up to 33 1/3% of the 9 3/4% Notes with the proceeds of certain
underwritten public offerings of the Company's common stock. The 9 3/4% Notes
mature on June 30, 2009, with interest payable semiannually on June 30 and
December 30 of each year. The net proceeds to the Company from the sale of the
9 3/4% Notes (approximately $146 million) were used to repay a portion of the
existing indebtedness under the Company's Bank Facility.
The 9% Notes, 8 5/8% Notes, and 9 3/4% Notes (collectively, the "Notes")
are unsecured senior subordinated obligations of the Company, rank subordinate
in right of payment to all senior indebtedness (as defined) and rank pari passu
with each other. Upon a change in control (as defined) of the Company, holders
of the Notes may require the Company to repurchase all or a portion of the Notes
at a purchase price equal to 101 percent of the principal amount thereof, plus
accrued and unpaid interest. The indentures for the Notes contain limitations
on, among other things, additional indebtedness and liens, the payment of
dividends and other distributions, certain investments and transfers or sales of
assets.
3. Capital Stock
On May 13, 1997, the Company's stockholders approved an increase in the
number of authorized shares of common stock, $.005 par value per share, from 40
million to 80 million.
On September 12, 1997, the Company's Board of Directors approved a two-for-
one stock split of its common stock effective October 7, 1997, to stockholders
of record on September 26, 1997. All references to the number of shares and per
share amounts in the financial statements and notes thereto have been restated
to reflect the stock split.
Public Offerings and Other Issuances
On February 5, 1997, the Company completed a public offering of 3,000,000
shares of common stock, all of which were sold by the Company. Net proceeds to
the Company of approximately $47 million were used to repay a portion of
existing indebtedness under the Company's revolving credit facility.
52
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On November 4, 1998, the Company issued 1,325,000 shares of common stock to
Elf Aquitaine as partial consideration for the acquisition of its French
subsidiary, Elf Hydrocarbures Equateur, S.A., which owns producing oil
properties and undeveloped acreage in Ecuador. The 1,325,000 shares of common
stock of the Company is valued at a guaranteed amount of $20 per share, or $26.5
million. If the Company's prevailing share price is not equal to at least $20
per share after two years from the date of closing, then the Company will be
required to deliver additional consideration under the price guarantee provision
of the agreement. Such additional consideration, if any, is payable, at the
Company's option, in cash or additional shares of the Company's common stock.
Stock Plans
The Company has three fixed plans which reserve shares of common stock for
issuance to key employees and non-management directors. The Company accounts
for these plans under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB No. 25") and has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation ("SFAS No. 123"). Accordingly, no compensation
cost has been recognized. Had compensation cost for these plans been determined
consistent with the provisions of SFAS No. 123, the Company's net income (loss)
and earnings (loss) per share would have been reduced (increased) to the
following pro forma amounts:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1998 1997 1996
--------- ---------- ----------
(Restated) (Restated)
<S> <C> <C> <C>
Net income (loss) - as reported........... $(87,665) $54,954 $33,188
Net income (loss) - pro forma............. (89,759) 53,501 32,599
Earnings (loss) per share - as reported:
Basic.............................. (1.69) 1.07 .69
Diluted............................ (1.69) 1.05 .68
Earnings (loss) per share - pro forma:
Basic.............................. (1.73) 1.05 .68
Diluted............................ (1.73) 1.03 .67
</TABLE>
The pro forma effect on net income (loss) for 1998, 1997 and 1996 may not
be representative of the pro forma effect on net income in future years because
SFAS No. 123 has not been applied to options granted prior to January 1, 1995.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model. The weighted average assumptions used
for options granted in 1998 include a dividend yield of 0.6 percent, expected
volatility of approximately 27.1 percent, a risk-free interest rate of
approximately 5.7 percent, and expected lives of 4.2 years. The weighted
average assumptions used for options granted in 1997 include a dividend yield of
0.4 percent, expected volatility of approximately 28.9 percent, a risk-free
interest rate of approximately 6.3 percent, and expected lives of 4.2 years.
The weighted average assumptions used for options granted in 1996 include a
dividend yield of 0.4 percent, expected volatility of approximately 29.5
percent, a risk-free interest rate of approximately 6.2 percent, and expected
lives of 4.2 years.
Under the 1983 Stock Option Plan, as amended (the "1983 Plan"), incentive
stock options were granted to key employees of the Company. Generally, options
granted under the 1983 Plan were exercisable for a two to seven year period
beginning three years from the date granted. As of December 31, 1998, all
available options have been granted and exercised under the 1983 Plan.
53
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Under the 1990 Stock Plan, as amended (the "1990 Plan"), a total of up to
6,000,000 shares of common stock are available for issuance to key employees of
the Company. The 1990 Plan permits the granting of any or all of the following
types of awards: (a) stock options, (b) stock appreciation rights, and (c)
restricted stock. As of December 31, 1998, awards for a total of 1,483,000
shares of common stock remain available for grant under the 1990 Plan.
The 1990 Plan is administered by the Board of Directors of the Company (the
"Board"). Subject to the terms of the 1990 Plan, the Board has the authority to
determine plan participants, the types and amounts of awards to be granted and
the terms, conditions and provisions of awards. Options granted pursuant to the
1990 Plan may, at the discretion of the Board, be either incentive stock options
or non-qualified stock options. The exercise price of incentive stock options
may not be less than the fair market value of the common stock on the date of
grant and the term of the option may not exceed 10 years. In the case of non-
qualified stock options, the exercise price may not be less than 85 percent of
the fair market value of the common stock on the date of grant. Any stock
appreciation rights granted under the 1990 Plan will give the holder the right
to receive cash in an amount equal to the difference between the fair market
value of the share of common stock on the date of exercise and the exercise
price. Restricted stock under the 1990 Plan will generally consist of shares
which may not be disposed of by participants until certain restrictions
established by the Board lapse.
Under the Non-Management Director Stock Option Plan (the "Director Plan"),
60,000 shares of common stock are available for issuance to the outside
directors of the Company. Each outside director receives an initial option to
purchase 5,000 shares of common stock during the director's first year of
service to the Company. Annually thereafter, options to purchase 1,000 shares
of common stock are to be granted to each outside director. Options granted
pursuant to the Director Plan are non-qualified stock options with terms not to
exceed 10 years and the option exercise price must equal the fair market value
of the common stock on the date of grant. As of December 31, 1998, options for
a total of 22,000 shares of common stock remain available for grant under the
Director Plan.
The following is an analysis of all option activity under the 1983 Plan,
the 1990 Plan and the Director Plan for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ---------------------------- ----------------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Beginning stock options
outstanding........................... 3,060,322 $10.53 2,688,904 $ 8.13 2,266,204 $7.41
Stock options granted.................. 819,000 20.11 810,000 15.53 630,000 9.71
Stock options canceled................. (50,000) 14.08 - - (4,000) 9.69
Stock options exercised................ (223,180) 8.44 (438,582) 4.99 (203,300) 4.94
------------ ----------- ------------
Ending stock options oustanding........ 3,606,142 $12.79 3,060,322 $10.53 2,688,904 $8.13
============ ======== =========== ======== ============ =======
Ending stock options exercisable....... 1,490,788 $ 8.47 1,406,757 $ 8.15 1,198,774 $6.93
============ ======== =========== ======== ============ =======
Weighted average fair value............ $4.14 $ 4.92 $3.17
of options............................ ========== ========== ==========
</TABLE>
54
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Of the 3,606,142 options outstanding at December 31, 1998: (a) 1,782,342
options have exercise prices between $3.50 and $9.81, with a weighted average
exercise price of $8.56 and a weighted average contractual life of 5.8 years
(1,261,988 of these options are exercisable currently at a weighted average
price of $8.10); (b) 1,823,800 options have exercise prices between $10.00 and
$20.19, with a weighted average exercise price of $16.92 and a weighted average
contractual life of 8.4 years (228,800 of these options are exercisable
currently at a weighted average price of $10.47).
All of the outstanding options are exercisable at various times in years
1999 through 2008. All incentive stock options and non-qualified options were
granted at fair market value on the date of grant. As of December 31, 1998, no
awards other than incentive and non-qualified stock options have been granted
under the 1990 Plan. Generally, options granted under the 1990 Plan have a 10-
year term and provide for vesting after three years.
At December 31, 1998, a total of 5,111,142 shares of the Company's common
stock are reserved for issuance pursuant to the 1990 Plan and the Director Plan.
Preferred Stock
Preferred stock at December 31, 1998, consists of 5,000,000 authorized but
unissued shares. Preferred stock may be issued from time to time in one or more
series, and the Board of Directors, without further approval of the
stockholders, is authorized to fix the dividend rates and terms, conversion
rights, voting rights, redemption rights and terms, liquidation preferences,
sinking fund and any other rights, preferences, privileges and restrictions
applicable to each series of preferred stock.
4. Commitments and Contingencies
The Company committed to perform 17,728 work units related to its
concession rights in the Naranjillos field in Santa Cruz Province, Bolivia
awarded in late 1997. The total work unit commitment was guaranteed by the
Company through an $88.6 million letter of credit; however, the Company
anticipated that it would fulfill this three-year work unit commitment through
approximately $50 to $60 million of various seismic and drilling capital
expenditures. During 1998, the Company spent approximately $7.6 million in the
fulfillment of 1,218 work units through the acquisition of seismic data and the
drilling of one well. The Company has budgeted to spend $24 million (7,500 work
units) in 1999 related to the fulfillment of its Naranjillos field commitment.
The Company had $111.2 million in letters of credit (including the $88.6
million letter of credit discussed above) outstanding at December 31, 1998.
These letters of credit relate primarily to various obligations for acquisition
and exploration activities in South America and bonding requirements of various
state regulatory agencies for oil and gas operations.
Under the Company's exploration contract on Block 19 in Ecuador, the
Company is required to participate in the drilling of one additional well. The
Company expects to drill this well during 2000 at a cost of approximately $4
million.
55
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company is also committed to spend approximately $11 million in the
Republic of Yemen over a two and one-half year period which began July 28, 1998.
The expenditures will include the acquisition and interpretation of over 150
square kilometers of seismic and the drilling of three exploration wells. At
the end of the first two and one-half years, the Company has the option to
extend the work program for a second two and one-half year period with similar
work and capital commitments required. During 1998, approximately $0.6 million
of the $11 million commitment was spent. The Company has budgeted to spend
approximately $5 million in 1999 on the acquisition of seismic data in Yemen.
On November 4, 1998, the Company issued 1,325,000 shares of common stock to
Elf Aquitaine as partial consideration for the acquisition of its French
subsidiary, Elf Hydrocarbures Equateur, S.A., which owns producing oil
properties and undeveloped acreage in Ecuador. The 1,325,000 shares of common
stock of the Company is valued at a guaranteed amount of $20 per share, or $26.5
million. If the Company's prevailing share price is not equal to at least $20
per share after two years from the date of closing, then the Company will be
required to deliver additional consideration under the price guarantee provision
of the agreement. Such additional consideration, if any, is payable, at the
Company's option, in cash or additional shares of the Company's common stock.
Had the Company been required to fulfill its commitment under the price
guarantee at December 31, 1998 (based on the average price for the preceding 60
trading days of $10.57), it would have had to pay an additional $12.8 million or
issue an additional 1.2 million shares of its common stock.
Rent expense was $1.2 million, $1.2 million and $1.0 million for 1998, 1997
and 1996, respectively. The future minimum commitments under long-term non-
cancellable leases for office space are $1.4 million, $1.4 million, $1.2 million
and $0.1 million for the calendar years 1999 through 2002, respectively.
On November 5, 1996, the Province of Santa Cruz, Argentina brought suit
against the Company's subsidiary Cadipsa S.A. in the Corte Suprema de Justicia
de la Nacion (the Supreme Court of Justice of the Argentine Republic, Buenos
Aires, Argentina), Dossier No. s-1451, seeking to recover approximately $10.6
million (which sum includes interest) allegedly due as additional royalties on
four concessions granted in 1990 in which the Company currently owns a 100
percent working interest. The Company and its predecessors in title have been
paying royalties at an eight percent rate; the Province of Santa Cruz claims the
rate should be 12 percent. The amount of such claim will increase at the
differential of these royalty rates until this claim is resolved. With respect
to the 50 percent interest in the two concessions that the Company acquired from
British Gas, plc, the Company believes that it is entitled to indemnification by
British Gas, plc for any loss sustained by the Company as a result of this
claim. Such indemnification equals approximately $4.7 million of the current
$18.0 million claim as of December 31, 1998. The Company has no indemnification
from its predecessors in title with respect to the payment of royalties on the
other two concessions. Although the Company cannot predict the outcome of this
litigation, based upon the advice of counsel, the Company does not expect this
claim to have a material adverse impact on the Company's financial position or
results of operations.
The Company is a defendant in various other lawsuits and is a party in
governmental proceedings from time to time arising in the ordinary course of
business. In the opinion of management, none of the various other pending
lawsuits and proceedings should have a material adverse impact on the Company's
financial position or results of operations.
56
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
5. Financial Instruments
Price Risk Management
The Company periodically uses hedges (swap agreements) to reduce the impact
of oil and natural gas price fluctuations on its operating results and cash
flows. These swap agreements typically entitle the Company to receive payments
from (or require it to make payments to) the counter parties based upon the
differential between a fixed price and a floating price based on a published
index. The Company's hedging activities are conducted with major corporations
and investment and commercial banks which the Company believes are minimal
credit risks.
At December 31, 1998, the Company was a party to natural gas basis swaps
for the calender year 1999 covering a total of 30,842,000 MMBtu of gas. These
natural gas basis swaps were used to hedge the basis differential between the
NYMEX reference price and industry delivery point indexes under which the gas is
sold. At December 31, 1997, the Company was not a party to any financial
derivative agreements.
Fair Value of Financial Instruments
The Company values financial instruments as required by Statement of
Financial Accounting Standards No. 107, Disclosures About Fair Value of
Financial Instruments. The Company estimates the value of the Notes based on
quoted market prices. The Company estimates the value of its other long-term
debt based on the estimated borrowing rates currently available to the Company
for long-term loans with similar terms and remaining maturities. The estimated
fair value of the Company's long-term debt at December 31, 1998 and 1997, was
$663.0 million and $463.6 million, respectively, compared with a carrying value
of $672.5 million and $451.1 million, respectively.
The fair value of commodity swap agreements is the amount at which they
could be settled, based on quoted market prices. The Company had no commodity
swap agreements in place at December 31, 1997. The Company is unable to
estimate the fair value of the natural gas basis swaps in place at December 31,
1998, as there is no quoted market price available.
The carrying value of other financial instruments approximates fair value
because of the short maturity of those instruments.
57
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Income Taxes
Income (loss) before income taxes and minority interest is composed of the
following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
------------ ----------- ---------
(Restated) (Restated)
<S> <C> <C> <C>
Domestic........................... $(122,331) $31,919 $27,999
Foreign............................ (8,898) 30,113 15,646
------------ ---------- ----------
$(131,229) $62,032 $43,645
============ ========== ==========
</TABLE>
The total provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
----------- ----------- ----------
(Restated) (Restated)
<S> <C> <C> <C>
Current:
Domestic......................... $ (5,324) $ 4,277 $ 2,610
Foreign.......................... 1,256 958 -
Deferred:
Domestic......................... (43,722) 6,003 8,431
Foreign.......................... 4,226 (4,363) (1,066)
---------- ---------- ----------
$(43,564) $ 6,875 $ 9,975
========== ========== ==========
</TABLE>
A reconciliation of the Federal statutory income tax rate to the effective
rate is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------------ ------------
(Restated) (Restated)
<S> <C> <C> <C>
Statutory income tax rate...................... (35.0)% 35.0% 35.0%
State income tax............................... (3.9) 3.9 3.9
Federal income tax credits..................... 1.8 (3.0) (4.0)
Foreign withholding tax........................ 1.3 - -
Foreign operations............................. (3.4) 0.6 (10.6)
Argentina NOL valuation allowance.............. 4.3 - -
Argentina NOL valuation allowance reversal..... - (5.0) -
Argentina NOL carryforward utilization......... - (18.4) -
Other.......................................... 1.7 (2.0) (1.4)
----- --------- ---------
(33.2)% 11.1% 22.9%
===== ========= =========
</TABLE>
58
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The components of the Company's net deferred tax asset (liability) as of
December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
--------- ---------
(Restated)
Deferred Tax Assets:
<S> <C> <C>
U.S. net operating loss carryforwards............. $31,396 $ -
Argentina net operating loss carryforwards........ 10,682 4,206
U.S. alternative minimum tax credit carryforward.. 4,815 2,949
Argentina asset tax credit carryforward........... 1,739 -
Other temporary book/tax differences.............. 5,433 425
--------- ---------
54,065 7,580
Valuation allowance............................... (5,677) -
--------- ---------
48,388 7,580
--------- ---------
Deferred Tax Liabilities:
Book/tax differences in property basis............ 45,436 45,890
Other temporary book/tax differences.............. 447 619
--------- ---------
45,883 46,509
--------- ---------
Net deferred tax asset (liability)............ $ 2,505 $(38,929)
========== =========
</TABLE>
Earnings of the Company's foreign subsidiaries are subject to foreign income
taxes. No U.S. deferred tax liability will be recognized related to the
unremitted earnings of these foreign subsidiaries, as it is the Company's
intention, generally, to reinvest such earnings permanently.
As of December 31, 1998, the Company has a U.S. Federal alternative minimum
tax ("AMT") credit carryforward of approximately $4.8 million. The AMT credit
carryforward does not expire and is available to offset U.S. Federal regular
income taxes in future years, but only to the extent that U.S. Federal regular
income taxes exceed the AMT in such years.
As of December 31, 1998, the Company had estimated net operating loss ("NOL")
carryforwards for U.S. Federal income tax purposes and U.S. state income tax
purposes of $75.3 million and $105.1 million, respectively. The U.S. Federal
carryforward can be carried forward 20 years and used to offset future taxable
income of the Company. The state carryforwards have varying lengths of
allowable carryforward periods ranging from 5 to 20 years and can be used to
offset future state taxable incomes.
As of December 31, 1998, the Company had estimated NOL carryforwards for
Argentina income tax reporting purposes of approximately $44.9 million which can
be used to offset future taxable income in Argentina. The carryforward amount
includes certain Argentina NOL carryforwards ($17.3 million) which were acquired
and are recorded at cost ($1.0 million), which is less than the calculated value
for the tax effect of these carryforwards ($6.0 million) under the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. These unrecorded NOL carryforwards ($14.4 million) will reduce the
Company's foreign income tax provision in future years by approximately $5.0
million if their benefit is realized. As a result of the significant decline in
oil prices in 1998, primarily in the fourth quarter, the Company currently
believes that of the $27.6 million of Argentina NOL carryforwards generated by
Cadipsa and VOA, $16.2 million will expire on December 31, 1999, unutilized and
has therefore recorded a valuation allowance against its Argentina deferred tax
asset of $5.7 million in 1998 related to these carryforwards.
59
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table details the year of expiration of the Argentina tax NOL
carryforwards and the financial statement value of the net operating losses
before any valuation allowances:
<TABLE>
<CAPTION>
(In thousands) Tax Financial
NOL Statement
Year of NOL Expiration Value Value
- ----------------------- --------- ---------
<S> <C> <C>
1999................... $17,114 $ 5,677
2000................... 3,843 654
2001................... 14,448 1,024
2002................... - -
2003................... 9,505 3,327
--------- ---------
$44,910 $10,682
========= =========
</TABLE>
7. Significant Acquisitions
On April 1, 1997, the Company acquired certain producing oil and gas
properties and facilities located in the Gulf Coast area of Texas and Louisiana
from subsidiaries of Burlington Resources Inc. for approximately $102.7 million
in cash (the "Burlington Acquisition"). Funds for this acquisition were provided
by advances under the Company's revolving credit facility.
If the Burlington Acquisition had been consummated as of January 1, 1996,
the Company's unaudited pro forma revenues, net income and earnings per share
for the years ended December 31, 1997 and 1996, would have been as shown below;
however, such pro forma information is not necessarily indicative of what
actually would have occurred had the transaction occurred on such date.
<TABLE>
<CAPTION>
1997 1996
----------------------
(Restated)
<S> <C> <C>
Revenues (in thousands).... $431,306 $376,207
Net income (in thousands).. 57,565 44,334
Earnings per share:
Basic................... 1.12 .92
Diluted................. 1.11 .91
</TABLE>
60
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8. Segment Information
The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures About Segments of an Enterprise and Related Information, in 1998
which changes the way the Company reports information about its operating
segments. The information for 1997 and 1996 has been restated from the prior
year's presentation to conform to the 1998 presentation.
The Company's reportable business segments have been identified based on
the differences in products or services provided. Revenues for the exploration
and production segment are derived from the production and sale of natural gas
and crude oil. Revenues for the gathering segment arise from the transportation
and sale of natural gas and crude oil. The gas marketing segment generates
revenue by earning fees through the marketing of Company produced gas volumes
and the purchase and resale of third party produced gas volumes. The Company
evaluates the performance of its operating segments based on operating income.
Operations in the gathering and gas marketing industries are in the United
States. The Company operates in the oil and gas exploration and production
industry in the United States, South America and in Yemen beginning in 1998.
Summarized financial information for the Company's reportable segments is shown
on the following page.
61
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
Exploration and Production
-------------------------------
Other Gas
U.S. Argentina Foreign Gathering Marketing Corporate Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
- --------------------------------------
Revenues from external customers...... $195,060 $ 65,819 $ 5,782 $ 7,741 $54,108 $ 425 $ 328,935
Intersegment revenues................. - - - 884 1,466 - 2,350
Depreciation, depletion and
amortization expense............ 75,479 26,610 2,968 1,693 - 2,225 108,975
Impairment of oil and gas properties.. 70,913 - - - - - 70,913
Operating income (loss)............... (66,275) 12,282 (2,098) (210) 2,548 (1,800) (55,553)
Total assets.......................... 569,560 256,525 113,956 7,500 8,735 57,899 1,014,175
Capital investments................... 177,970 44,592 63,798 1,831 - 3,156 291,347
Long-lived assets..................... 536,885 245,831 100,441 4,350 - 10,735 898,242
1997
- --------------------------------------
Revenues from external customers...... $252,353 $ 93,864 $ 8,896 $18,063 $45,981 $(2,567) $ 416,590
Intersegment revenues................. - - - 1,750 1,671 - 3,421
Depreciation, depletion and
amortization expense............ 66,798 23,333 3,419 1,360 - 1,397 96,307
Impairment of oil and gas properties.. 8,785 - - - - - 8,785
Operating income (loss)............... 78,927 45,707 1,131 3,388 2,584 (5,582) 126,155
Total assets.......................... 567,279 237,544 50,887 8,564 12,427 38,693 915,394
Capital investments................... 193,816 52,819 12,026 1,209 - 1,799 261,669
Long-lived assets..................... 527,321 227,774 42,933 4,190 - 4,669 806,887
1996
- --------------------------------------
Revenues from external customers...... $190,839 $ 67,529 $ - $20,508 $31,920 $ 1,351 $ 312,147
Intersegment revenues................. - - - 1,740 1,091 - 2,831
Depreciation, depletion and
and amortization expense........ 48,969 15,636 - 1,337 - 919 66,861
Operating income (loss)............... 64,961 30,601 (3,907) 2,186 2,383 432 96,656
Total assets.......................... 455,547 228,559 40,674 10,249 8,422 23,365 766,816
Capital investments................... 107,976 48,028 40,727 724 - 706 198,161
Long-lived assets..................... 418,162 199,244 37,496 5,073 - 4,050 664,025
</TABLE>
Intersegment sales are priced in accordance with terms of existing
contracts and current market conditions. Capital investments include expensed
exploratory costs. Corporate general and administrative costs and interest
costs are not allocated to segments.
During 1997 and 1996, sales to one crude oil purchaser of the exploration
and production segment represented approximately 10 percent and 15 percent,
respectively, of the Company's total revenues (exclusive of eliminations of
intersegment sales and the impact of hedges). The Company had no single
purchaser to which sales of any segment in 1998 exceeded 10 percent of the
Company's 1998 total revenues.
62
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
9. Detail of Prepaids and Other Current Assets
<TABLE>
<CAPTION>
(In thousands) 1998 1997
--------------------
<S> <C> <C>
Value added tax receivable......... $ 2,750 $ 5,494
U.S. Income tax refund receivable.. 5,323 -
Other prepaids and current assets.. 10,239 6,949
--------------------
$18,312 $12,443
====================
</TABLE>
10. Quarterly Results (Unaudited)
The following is a summary of the quarterly results of operations for the
years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) Quarter Ended
---------------------------------------
Mar. 31 Jun. 30 Sept. 30 Dec. 31
---------------------------------------
<S> <C> <C> <C> <C>
1998
- ------------------------------------------
Revenues................................... $89,994 $84,932 $ 79,285 $ 74,724
Operating income (loss).................... 13,497 4,137 3,781 (74,744)
Net income (loss).......................... (1,582) (9,508) (9,925) (66,650)
Earnings (loss) per share:
Basic................................... (.03) (.18) (.19) (1.27)
Diluted................................. (.03) (.18) (.19) (1.27)
1997 (Restated)
- ------------------------------------------
Revenues................................... $99,234 $99,843 $104,387 $113,124
Operating income........................... 37,658 29,364 33,067 27,463
Net income................................. 17,863 10,900 13,526 12,665
Earnings per share:
Basic................................... .36 .21 .26 .25
Diluted................................. .35 .21 .26 .24
</TABLE>
Revenues and operating income for the quarter ended December 31, 1997,
were decreased by a $4.4 million charge resulting from an adverse judgement
against the Company in a lawsuit involving a 1992 gas contract termination and
increased by $1.6 million from a gain on the sale of a gas gathering system.
Operating income for the quarters ended December 31, 1998 and 1997, were
decreased by $70.9 million and $8.8 million, respectively, due to impairments of
oil and gas properties resulting from declines in oil and gas prices during the
fourth quarters of each year. The net impact of these items reduced net income
for the quarters ended December 31, 1998 and 1997, by $43.3 million and $5.4
million, respectively, or 83 cents and 10 cents per basic and diluted share.
63
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11. Supplementary Financial Information for Oil and Gas Producing Activities
Results of Operations from Oil and Gas Producing Activities
The following sets forth certain information with respect to the Company's
results of operations from oil and gas producing activities for the years ended
December 31, 1998, 1997 and 1996. The Company began operations in Bolivia in
January 1997.
<TABLE>
<CAPTION>
1998
-------------------------------------------------
(In thousands) U.S. Argentina Bolivia Other Total
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues.................................... $195,060 $65,819 $ 5,334 $ 448 $266,661
Production (lifting) costs.................. 94,332 26,737 1,424 233 122,726
Exploration costs........................... 20,610 191 2,255 1,000 24,056
Impairment of proved properties............. 70,913 - - - 70,913
Depreciation, depletion and amortization.... 75,479 26,610 2,858 110 105,057
-------------------------------------------------
Results of operations before income taxes... (66,274) 12,281 (1,203) (895) (56,091)
Income tax expense (benefit)................ (25,781) 4,299 (423) (356) (22,261)
-------------------------------------------------
Results of operations (excluding corporate
overhead and interest costs)......... $(40,493) $ 7,982 $ (780) $ (539) $(33,830)
=================================================
</TABLE>
<TABLE>
<CAPTION>
1997 (Restated)
---------------------------------------------------
(In thousands).............................. U.S. Argentina Bolivia Other Total
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues.................................... $252,353 $93,864 $8,896 $ - $355,113
Production (lifting) costs.................. 89,069 24,129 1,148 - 114,346
Exploration costs........................... 8,774 695 130 3,068 12,667
Impairment of proved properties............. 8,785 - - - 8,785
Depreciation, depletion and amortization.... 66,798 23,333 3,401 18 93,550
---------------------------------------------------
Results of operations before income taxes... 78,927 45,707 4,217 (3,086) 125,765
Income tax expense (benefit)................ 30,703 - 1,433 (1,193) 30,943
---------------------------------------------------
Results of operations (excluding corporate
overhead and interest costs)......... $ 48,224 $45,707 $2,784 $(1,893) $ 94,822
===================================================
</TABLE>
64
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
1996 (Restated)
-----------------------------------------
(In thousands) U.S. Argentina Other Total
-----------------------------------------
<S> <C> <C> <C> <C>
Revenues.................................... $190,839 $67,529 $ - $258,368
Production (lifting) costs.................. 70,991 20,925 - 91,916
Exploration costs........................... 5,918 367 3,907 10,192
Depreciation, depletion and amortization.... 48,969 15,636 - 64,605
-----------------------------------------
Results of operations before income taxes... 64,961 30,601 (3,907) 91,655
Income tax expense (benefit)................ 23,256 - (1,360) 21,896
-----------------------------------------
Results of operations (excluding corporate
overhead and interest costs)......... $ 41,705 $30,601 $(2,547) $ 69,759
=========================================
</TABLE>
Capitalized Costs and Costs Incurred Relating to Oil and Gas Producing
Activities
The Company's net investment in oil and gas properties at December 31, 1998
and 1997, was as follows:
<TABLE>
<CAPTION>
1998
-----------------------------------------------------
(In thousands) U.S. Argentina Bolivia Other Total
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unproved properties not being amortized.. $ 14,906 $ - $ - $ 4,784 $ 19,690
Proved properties being amortized........ 932,334 314,997 67,675 34,218 1,349,224
-----------------------------------------------------
Total capitalized costs........... 947,240 314,997 67,675 39,002 1,368,914
Less accumulated depreciation,
depletion and amortization........ 410,355 69,166 6,126 110 485,757
-----------------------------------------------------
Net capitalized costs............. $536,885 $245,831 $61,549 $38,892 $ 883,157
=====================================================
</TABLE>
<TABLE>
<CAPTION>
1997 (Restated)
---------------------------------------------------
(In thousands) U.S. Argentina Bolivia Other Total
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unproved properties not being amortized.. $ 9,491 $ - $ - $477 $ 9,968
Proved properties being amortized........ 832,529 270,395 45,857 - 1,148,781
---------------------------------------------------
Total capitalized costs........... 842,020 270,395 45,857 477 1,158,749
Less accumulated depreciation,
depletion and amortization........ 314,699 42,621 3,401 - 360,721
---------------------------------------------------
Net capitalized costs............. $527,321 $227,774 $42,456 $477 $ 798,028
===================================================
</TABLE>
65
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following sets forth certain information with respect to costs incurred
(exclusive of general support facilities) in the Company's oil and gas
activities during 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998
-------------------------------------------------------
(In thousands) U.S. Argentina Bolivia Other Total
----------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Acquisitions:
Undeveloped properties. $ 6,460 $ - $ - $ 4,301 $ 10,761
Producing properties... 70,805 - - 34,218 105,023
Exploratory................... 49,952 1,416 10,324 1,000 62,692
Development................... 50,753 43,176 13,949 6 107,884
----------- ---------- --------- -------- ---------
Total costs incurred... $177,970 $44,592 $24,273 $39,525 $286,360
=========== ========== ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
1997 (Restated)
-------------------------------------------------------
(In thousands)................ U.S. Argentina Bolivia Other Total
----------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Acquisitions:
Undeveloped properties. $ 7,138 $ - $ 560 $ 75 $ 7,773
Producing properties... 133,548 - 6,201 - 139,749
Exploratory................... 16,463 3,971 - 2,983 23,417
Development................... 36,667 48,848 2,148 59 87,722
----------- ---------- -------- ------- --------
Total costs incurred... $193,816 $52,819 $8,909 $3,117 $258,661
=========== ========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1996 (Restated)
-------------------------------------------------------
(In thousands)................ U.S. Argentina Bolivia Other Total
----------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Acquisitions:
Undeveloped properties. $ 9,868 $ 2,080 $ - $3,679 $ 15,627
Producing properties... 50,480 3,754 37,048 - 91,282
Exploratory................... 6,502 1,383 - - 7,885
Development................... 41,126 40,811 - - 81,937
---------- ---------- --------- ------- --------
Total costs incurred... $107,976 $48,028 $37,048 $3,679 $196,731
========== ========== ======== ======== ========
</TABLE>
66
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Estimated Quantities of Proved Oil and Gas Reserves (Unaudited)
Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. Proved
developed oil and gas reserves are reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. The
following is an analysis of the Company's proved oil and gas reserves located in
the United States, Argentina and Ecuador as estimated by the independent
petroleum consultants of Netherland, Sewell & Associates, Inc. and in Bolivia as
estimated by the independent petroleum consultants of DeGolyer and MacNaughton.
<TABLE>
<CAPTION>
U.S. Argentina Bolivia Ecuador Total
------------------- ------------------ ----------------- -------- ------------------
Oil Gas Oil Gas Oil Gas Oil Oil Gas
(MBbls) (MMcf) (MBbls) (MMcf) (MBbls) (MMcf) (MBbls) (MBbls) (MMcf)
--------- -------- --------- ------- ----------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proved reserves at December 31, 1995... 80,227 310,762 67,644 - - - - 147,871 310,762
Revisions of previous estimates........ 13,382 21,834 12,449 - - - - 25,831 21,834
Extensions, discoveries and
other additions....................... 458 5,445 308 - - - - 766 5,445
Production............................. (7,694) (32,366) (4,245) - - - - (11,939) (32,366)
Purchase of reserves-in-place.......... 8,095 20,787 2,849 - 4,953 57,758 - 15,897 78,545
reserves-in-place
Sales of reserves-in-place............. (130) (1,374) - - - - - (130) (1,374)
--------- -------- ------- -------- ------ -------- ------- -------- -------
Proved reserves at December 31, 1996... 94,338 325,088 79,005 - 4,953 57,758 - 178,296 382,846
Revisions of previous estimates........ (9,693) (18,045) 7,065 - 607 28,414 - (2,021) 10,369
Extensions, discoveries and
other additions....................... 345 29,451 1,211 - - - - 1,556 29,451
Production............................. (9,692) (36,623) (5,630) - (135) (6,068) - (15,457) (42,691)
Purchase of reserves-in-place.......... 24,653 62,253 - - 758 111,212 - 25,411 173,465
Sales of reserves-in-place............. (17) (1,277) - - - - - (17) (1,277)
--------- -------- ------- -------- ------ -------- ------- -------- -------
Proved reserves at December 31, 1997... 99,934 360,847 81,651 - 6,183 191,316 - 187,768 552,163
Revisions of previous estimates........ (38,473) (11,252) (4,579) 12,024 (665) 101,624 2,546 (41,171) 102,396
Extensions, discoveries and
other additions....................... 306 28,345 4,091 - 2,968 121,419 - 7,365 149,764
Production............................. (9,912) (42,176) (6,322) - (122) (5,062) (78) (16,434) (47,238)
Purchase of reserves-in-place.......... 5,452 53,027 - - - - 21,577 27,029 53,027
Sales of reserves-in-place............. (100) (3,279) - - - - - (100) (3,279)
--------- -------- ------- -------- ------ -------- ------- -------- -------
Proved reserves at December 31, 1998... 57,207 385,512 74,841 12,024 8,364 409,297 24,045 164,457 806,833
========= ======== ======= ======== ====== ======== ======= ======= =======
Proved developed reserves at:
December 31, 1996............... 79,250 289,464 46,582 - 1,007 51,276 - 126,839 340,740
========= ======== ======= ======== ====== ======== ======= ======= =======
December 31, 1997............... 79,494 316,306 47,806 - 1,502 140,124 - 128,802 456,430
========= ======== ======= ======== ====== ======== ======= ======= =======
December 31, 1998............... 51,481 330,371 47,167 12,024 4,390 278,317 1,255 104,293 620,712
========= ======== ======= ======== ====== ======== ======= ======= =======
</TABLE>
67
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves (Unaudited)
The Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves ("Standardized Measure") is a disclosure requirement
under SFAS No. 69. The Standardized Measure does not purport to present the
fair market value of proved oil and gas reserves. This would require
consideration of expected future economic and operating conditions which are not
taken into account in calculating the Standardized Measure.
Under the Standardized Measure, future cash inflows were estimated by
applying year-end prices to the estimated future production of year-end proved
reserves. Future cash inflows were reduced by estimated future production,
development and abandonment costs based on year-end costs to determine pre-tax
cash inflows. Future income taxes were computed by applying the statutory tax
rate to the excess of pre-tax cash inflows over the Company's tax basis in the
associated proved oil and gas properties. Tax credits and permanent differences
were also considered in the future income tax calculation. Future net cash
inflows after income taxes were discounted using a 10 percent annual discount
rate to arrive at the Standardized Measure.
Set forth below is the Standardized Measure relating to proved oil and gas
reserves at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998
-------------------------------------------------------
(In thousands) U.S. Argentina Bolivia Ecuador Total
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Future cash inflows................ $1,314,729 $638,317 $439,241 $145,230 $2,537,517
Future production costs............ 570,034 311,989 41,582 44,758 968,363
Future development and
abandonment costs............... 129,903 125,204 48,613 49,087 352,807
-------------------------------------------------------
Future net cash inflows before
income tax expense.............. 614,792 201,124 349,046 51,385 1,216,347
Future income tax expense.......... 42,539 - 107,025 6,008 155,572
-------------------------------------------------------
Future net cash flows.............. 572,253 201,124 242,021 45,377 1,060,775
10 percent annual discount for
estimated timing of cash flows.. 188,044 74,049 130,825 19,635 412,553
-------------------------------------------------------
Standardized Measure of discounted
future net cash flows........... $ 384,209 $127,075 $111,196 $ 25,742 $ 648,222
=======================================================
</TABLE>
68
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
1997
-----------------------------------------------
(In thousands) U.S. Argentina Bolivia Total
-----------------------------------------------
<S> <C> <C> <C> <C>
Future cash inflows....................................... $2,321,760 $1,138,154 $357,767 $3,817,681
Future production costs................................... 1,005,407 448,262 32,321 1,485,990
Future development and abandonment costs.................. 177,792 150,544 27,985 356,321
-----------------------------------------------
Future net cash inflows before income tax expense......... 1,138,561 539,348 297,461 1,975,370
Future income tax expense................................. 281,019 99,588 97,739 478,346
-----------------------------------------------
Future net cash flows..................................... 857,542 439,760 199,722 1,497,024
10 percent annual discount for
estimated timing of cash flows.......................... 253,026 142,735 84,618 480,379
-----------------------------------------------
Standardized Measure of discounted future net cash flows.. $ 604,516 $ 297,025 $115,104 $1,016,645
===============================================
</TABLE>
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves (Unaudited)
The following is an analysis of the changes in the Standardized Measure
during 1998, 1997 and 1996:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Standardized Measure - beginning of year............... $1,016,645 $1,392,841 $ 736,546
Increases (decreases) -
Sales, net of production costs...................... (145,709) (240,767) (166,452)
Net change in sales price, net of production costs.. (505,314) (824,264) 644,367
Discoveries and extensions, net of related
future development and production costs............. 98,521 56,334 20,085
Changes in estimated future development costs....... (17,025) (89,637) (69,433)
Development costs incurred.......................... 98,434 77,127 77,174
Revisions of previous quantity estimates............ (124,097) 3,508 251,736
Accretion of discount............................... 122,256 180,714 88,411
Net change in income taxes.......................... 150,582 215,131 (248,427)
Purchase of reserves-in-place....................... 110,389 240,658 149,900
Sales of reserves-in-place.......................... (1,493) (2,518) (1,859)
Timing of production of reserves and other.......... (154,967) 7,518 (89,207)
-------------------------------------
Standardized Measure - end of year..................... $ 648,222 $1,016,645 $1,392,841
=====================================
</TABLE>
69
<PAGE>
INDEX TO EXHIBITS
The following documents are included as exhibits to this Form 10-K. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.
Exhibit
Number Description
------ -----------
3.1 Restated Certificate of Incorporation, as amended, of the Company
(Filed as Exhibit 3.2 to the Company's report on Form 10-Q for the
quarter ended June 30, 1997, filed August 13, 1997).
3.2 Restated By-laws of the Company (Filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1, Registration No. 33-35289 (the "S-1
Registration Statement").
4.1 Form of stock certificate for Common Stock, par value $.005 per share
(Filed as Exhibit 4.1 to the S-1 Registration Statement).
4.2 Indenture dated as of December 20, 1995, between The Chase Manhattan
Bank (formerly Chemical Bank), as Trustee, and the Company (Filed as
Exhibit 99.1 to the Company's report on Form 8-K filed January 16,
1996).
4.3 Indenture dated as of February 5, 1997, between The Chase Manhattan
Bank, as Trustee, and the Company (Filed as Exhibit 4.3 to the
Company's report on Form 10-K for the year ended December 31, 1996,
filed March 27, 1997).
4.4 Indenture dated as of January 26, 1999, between The Chase Manhattan
Bank, as Trustee, and the Company.
10.1* Employment and Noncompetition Agreement dated January 7, 1987, between
the Company and Charles C. Stephenson, Jr. (Filed as Exhibit 10.19 to
the S-1 Registration Statement).
10.2* Employment and Noncompetition Agreement dated January 7, 1987, between
the Company and Jo Bob Hille (Filed as Exhibit 10.20 to the S-1
Registration Statement).
10.3* Form of Indemnification Agreement between the Company and certain of
its officers and directors (Filed as Exhibit 10.23 to the S-1
Registration Statement).
10.4* Vintage Petroleum, Inc. 1990 Stock Plan (Filed as Exhibit 4(d) to the
Company's Registration Statement on Form S-8, Registration No. 33-
37505).
10.5* Amendment No. 1 to Vintage Petroleum, Inc. 1990 Stock Plan, effective
January 1, 1991 (Filed as Exhibit 10.15 to the Company's report on Form
10-K for the year ended December 31, 1991, filed March 30, 1992).
10.6* Amendment No. 2 to Vintage Petroleum, Inc. 1990 Stock Plan dated
February 24, 1994 (Filed as Exhibit 10.15 to the Company's report on
Form 10-K for the year ended December 31, 1993, filed March 29, 1994).
10.7* Amendment No. 3 to Vintage Petroleum, Inc. 1990 Stock Plan dated March
15, 1996 (Filed as Exhibit A to the Company's Proxy Statement for
Annual Meeting of Stockholders dated April 1, 1996).
<PAGE>
10.8* Amendment No. 4 to Vintage Petroleum, Inc. 1990 Stock Plan dated March
11, 1998 (Filed as Exhibit A to the Company's Proxy Statement for
annual meeting of stockholders dated March 31, 1998).
10.9* Vintage Petroleum, Inc. 401(k) Plan (Filed as Exhibit 4(c) to the
Company's Registration Statement on Form S-8, Registration No. 33-
55706).
10.10* Vintage Petroleum, Inc. Non-Management Director Stock Option Plan
(Filed as Exhibit 10.18 to the Company's report on Form 10-K for the
year ended December 31, 1992, filed March 31, 1993 (the "1992 Form 10-
K")).
10.11* Form of Incentive Stock Option Agreement under the Vintage Petroleum,
Inc. 1990 Stock Plan (Filed as Exhibit 10.20 to the Company's report on
Form 10-K for the year ended December 31, 1990, filed April 1, 1991).
10.12* Form of Non-Qualified Stock Option Agreement under the Vintage
Petroleum, Inc. 1990 Stock Plan (Filed as Exhibit 10.20 to the 1992
Form 10-K).
10.13 Amended and Restated Credit Agreement dated as of October 21, 1998,
among the Company, as borrower, and certain commercial lending
institutions, as lenders, Bank of Montreal, as administrative agent,
Nations Bank, N.A., as syndication agent, and Societe Generale
Southwest Agency, as documentation agent (Filed as Exhibit 10 the
Company's Report on Form 10-Q for the quarter ended September 30, 1998,
filed November 13, 1998).
10.14 First Amendment to the Amended and Restated Credit Agreement dated as
of December 10, 1998, among the Company, as borrower, and certain
commercial lending institutions, as lenders, Bank of Montreal, as
administrative agent, Nations Bank, N.A., as syndication agent, and
Societe Generale Southwest Agency, as documentation agent.
21. Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Netherland, Sewell & Associates, Inc.
23.3 Consent of DeGolyer and MacNaughton.
27. Financial Data Schedule.
____________________
* Management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
================================================================================
VINTAGE PETROLEUM, INC.
TO
THE CHASE MANHATTAN BANK
Trustee
Indenture
Dated as of January 26, 1999
9 3/4% SENIOR SUBORDINATED NOTES DUE 2009
================================================================================
<PAGE>
TABLE OF CONTENTS
--------
PAGE
----
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.....................................................1
Act...........................................................1
Additional Assets.............................................2
Adjusted Consolidated Net Tangible Assets.....................2
Affiliate.....................................................3
Asset Sale....................................................3
Authenticating Agent..........................................4
Average Life..................................................4
Bank Credit Facilities........................................4
Board of Directors............................................4
Board Resolution..............................................5
Business Day..................................................5
Capital Lease Obligation......................................5
Capital Stock.................................................5
Change of Control.............................................5
Change of Control Offer.......................................6
Change of Control Payment Date................................6
Commission....................................................6
Company.......................................................6
Company Request or Company Order..............................6
Consolidated Interest Coverage Ratio..........................6
Consolidated Interest Expense.................................7
Consolidated Net Income.......................................7
Consolidated Net Worth........................................8
Corporate Trust Office........................................8
corporation...................................................8
Covenant Defeasance...........................................8
CUSIP Number..................................................8
Default.......................................................9
Defaulted Interest............................................9
Defeasance....................................................9
Depositary....................................................9
Designated Senior Indebtedness................................9
Dollar-Denominated Production Payments........................9
EBITDA........................................................9
8-5/8% Indenture.............................................10
8-5/8% Notes.................................................10
Event of Default.............................................10
Excess Proceeds..............................................10
Exchange Act.................................................10
Exchanged Properties.........................................10
Exchange Rate Contract.......................................10
Expiration Date..............................................10
Expiry Date..................................................10
Fair Market Value............................................10
Foreign Subsidiary...........................................10
Global Security..............................................11
Guarantee....................................................11
Hedging Agreements...........................................11
Holder.......................................................11
Incur........................................................11
ii
<PAGE>
Indebtedness.................................................12
Indenture....................................................12
Interest Payment Date........................................12
Interest Rate Protection Agreement...........................12
Investment...................................................13
Investment Company Act.......................................13
Issue Date...................................................13
Legal Holiday................................................13
Lien.........................................................13
Liquid Securities............................................13
Maturity.....................................................14
Material Change..............................................14
Moody's......................................................14
Net Available Cash...........................................14
Net Working Capital..........................................15
9% Indenture.................................................15
9% Notes.....................................................15
Notice of Default............................................15
Officers' Certificate........................................15
OID..........................................................15
Oil and Gas Business.........................................15
Oil and Gas Liens............................................15
Oil and Gas Purchase and Sale Contract.......................16
Opinion of Counsel...........................................16
Original Securities..........................................16
Outstanding..................................................16
paid in full or payment in full..............................17
pari passu...................................................17
Pari Passu Indebtedness......................................17
Participants.................................................17
pay the Securities...........................................17
Paying Agent.................................................17
Payment Blockage Notice......................................17
Payment Blockage Period......................................17
Permitted Business Investments...............................17
Permitted Designee...........................................18
Permitted Holders............................................18
Permitted Indebtedness.......................................18
Permitted Investments........................................19
Permitted Liens..............................................20
Permitted Short-Term Investments.............................20
Person.......................................................21
Predecessor Security.........................................21
Preferred Stock..............................................21
Prepayment Offer.............................................21
Prepayment Offer Notice......................................21
primary obligor..............................................23
Production Payments and Reserve Sales........................23
Property.....................................................23
Public Equity Offering.......................................24
Purchase Amount..............................................24
Purchase Date................................................24
Purchase Price...............................................24
Redeemable Stock.............................................24
Redemption Date..............................................24
iii
<PAGE>
Redemption Price.............................................24
Registrar....................................................24
Regular Record Date..........................................24
Remaining Excess Proceeds....................................24
Representative...............................................24
Restricted Payment...........................................24
Restricted Subsidiary........................................25
Sale and Leaseback Transaction...............................25
Securities...................................................25
Securities Act...............................................25
Security Register and Security Registrar.....................25
Senior Indebtedness..........................................25
Special Record Date..........................................26
S&P..........................................................26
Stated Maturity..............................................26
Subsidiary...................................................26
Surviving Entity.............................................26
Transaction Date.............................................26
Trust Indenture Act..........................................26
Trust Officer................................................27
Trustee......................................................27
Unrestricted Subsidiary......................................27
U.S. GAAP ...................................................27
U.S. Government Obligation...................................27
Vice President...............................................27
Volumetric Production Payments...............................27
Voting Redeemable Stock......................................27
Voting Stock.................................................28
Wholly Owned Subsidiary......................................28
SECTION 102. Compliance Certificates and Opinions..........................28
SECTION 103. Form of Documents Delivered to Trustee........................28
SECTION 104. Acts of Holders; Record Dates.................................29
SECTION 105. Notices, Etc., to Trustee and Company.........................31
SECTION 106. Notice to Holders; Waiver.....................................32
SECTION 107. Conflict with Trust Indenture Act.............................32
SECTION 108. Effect of Headings, Table of Contents and
Cross-Reference Sheet.......................................33
SECTION 109. Successors and Assigns........................................33
SECTION 110. Separability Clause...........................................33
SECTION 111. Benefits of Indenture.........................................33
SECTION 112. Governing Law.................................................33
SECTION 113. Legal Holidays................................................33
ARTICLE TWO
SECURITY FORMS
SECTION 201. Form of Securities............................................34
SECTION 202. Form of Face of Securities....................................35
SECTION 203. Form of Reverse of Securities.................................35
SECTION 204. Form of Trustee's Certificate of Authentication...............35
iv
<PAGE>
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount of Securities; Issuable in Series......................35
SECTION 302. Denominations.................................................37
SECTION 303. Execution, Authentication, Delivery and Dating................37
SECTION 304. Temporary Securities..........................................38
SECTION 305. Registration, Registration of Transfer and Exchange...........39
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities..............41
SECTION 307. Payment of Interest; Interest Rights Preserved................42
SECTION 308. Persons Deemed Owners.........................................43
SECTION 309. Cancellation..................................................44
SECTION 310. Computation of Interest.......................................44
SECTION 311. CUSIP Numbers.................................................44
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.......................44
SECTION 402. Application of Trust Money....................................46
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default..............................................46
SECTION 502. Acceleration of Maturity; Rescission and Annulment.............48
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee...................................................49
SECTION 504. Trustee May File Proofs of Claim...............................49
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities................................................50
SECTION 506. Application of Money Collected.................................50
SECTION 507. Limitation on Suits............................................50
SECTION 508. Unconditional Right of Holders To Receive Principal,
Premium and Interest.........................................51
SECTION 509. Restoration of Rights and Remedies.............................51
SECTION 510. Rights and Remedies Cumulative.................................52
SECTION 511. Delay or Omission Not Waiver...................................52
SECTION 512. Control by Holders.............................................52
SECTION 513. Waiver of Past Defaults........................................52
SECTION 514. Undertaking for Costs..........................................53
SECTION 515. Waiver of Usury, Stay or Extension Laws........................53
v
<PAGE>
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities...........................53
SECTION 602. Notice of Defaults............................................54
SECTION 603. Certain Rights of Trustee.....................................54
SECTION 604. Trustee's Disclaimer..........................................55
SECTION 605. May Hold Securities...........................................55
SECTION 606. Money Held in Trust...........................................55
SECTION 607. Compensation and Reimbursement................................56
SECTION 608. Conflicting Interests.........................................56
SECTION 609. Corporate Trustee Required; Eligibility.......................57
SECTION 610. Resignation and Removal; Appointment of Successor.............57
SECTION 611. Acceptance of Appointment by Successor........................58
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business.................................................59
SECTION 613. Preferential Collection of Claims Against Company.............59
SECTION 614. Appointment of Authenticating Agent...........................59
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Company To Furnish Trustee Names and
Addresses of Holders........................................61
SECTION 702. Preservation of Information; Communications to Holders........61
SECTION 703. Reports by Trustee............................................62
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms...............................................63
SECTION 802. Successor Substituted.........................................64
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders............64
SECTION 902. Supplemental Indentures with Consent of Holders...............65
SECTION 903. Execution of Supplemental Indentures..........................66
SECTION 904. Effect of Supplemental Indentures.............................67
SECTION 905. Conformity with Trust Indenture Act...........................67
SECTION 906. Reference in Securities to Supplemental Indentures............67
SECTION 907. Payment for Consent...........................................67
vi
<PAGE>
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.....................67
SECTION 1002. Registrar and Paying Agent.....................................68
SECTION 1003. Money for Securities Payments To Be Held in Trust..............68
SECTION 1004. Statement by Officers as to Default............................69
SECTION 1005. Existence......................................................70
SECTION 1006. Maintenance of Properties......................................70
SECTION 1007. Payment of Taxes and Other Claims..............................70
SECTION 1008. Limitation on Indebtedness.....................................71
SECTION 1009. Limitation on Liens............................................71
SECTION 1010. Limitation on Restricted Payments..............................72
SECTION 1011. Limitation on Issuance and Sale of Capital Stock
of Restricted Subsidiaries...................................74
SECTION 1012. Limitation on Asset Sales......................................74
SECTION 1013. Incurrence of Layered Indebtedness.............................76
SECTION 1014. Transactions with Affiliates...................................76
SECTION 1015. Limitation on Restrictions on Distributions
from Restricted Subsidiaries.................................77
SECTION 1016. Restricted and Unrestricted Subsidiaries.......................78
SECTION 1017. Commission Reports.............................................79
SECTION 1018. Waiver of Certain Covenants....................................80
SECTION 1019. Mandatory Repurchase Upon a Change of Control..................80
SECTION 1020. Further Instruments and Acts...................................81
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Election To Redeem; Notice to Trustee..........................82
SECTION 1102. Selection by Trustee of Securities To Be Redeemed..............82
SECTION 1103. Notice of Redemption...........................................83
SECTION 1104. Deposit of Redemption Price....................................83
SECTION 1105. Securities Payable on Redemption Date..........................84
SECTION 1106. Securities Redeemed in Part....................................84
SECTION 1107. Purchase of Securities.........................................84
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Defeasance and Discharge.......................................84
SECTION 1202. Covenant Defeasance............................................85
SECTION 1203. Conditions to Defeasance or Covenant Defeasance................85
SECTION 1204. Deposited Money and U.S. Government Obligations
To Be Held in Trust; Miscellaneous Provisions..............87
SECTION 1205. Reinstatement..................................................88
vii
<PAGE>
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 1301. Agreement to Subordinate.......................................88
SECTION 1302. Liquidation, Dissolution and Bankruptcy........................89
SECTION 1303. Default on Senior Indebtedness.................................89
SECTION 1304. Acceleration of Payment of Securities..........................90
SECTION 1305. When Distribution Must Be Paid Over............................90
SECTION 1306. Subrogation....................................................91
SECTION 1307. Relative Rights................................................91
SECTION 1308. Subordination May Not Be Impaired by Company...................91
SECTION 1309. Rights of Trustee and Paying Agent.............................91
SECTION 1310. Distribution or Notice to Representative.......................92
SECTION 1311. Trust Moneys Not Subordinated..................................92
SECTION 1312. Trustee Entitled To Rely.......................................92
SECTION 1313. Trustee To Effectuate Subordination............................93
SECTION 1314. Trustee Not Fiduciary for Holders of Senior Indebtedness.......93
SECTION 1315. Reliance by Holders of Senior Indebtedness
on Subordination Provisions..................................93
SECTION 1316. Proofs of Claim................................................93
SECTION 1317. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights ............................94
SECTION 1318. Article Applicable to Paying Agents............................94
SECTION 1319. Defeasance of this Article Thirteen............................94
ARTICLE FOURTEEN
CONCERNING THE HOLDERS
SECTION 1401. Identification of Company-Owned Securities.....................94
SECTION 1402. Revocation of Consents.........................................95
ARTICLE FIFTEEN
HOLDERS' MEETINGS
SECTION 1501. Purposes of Meetings...........................................95
SECTION 1502. Call of Meetings by Trustee....................................95
SECTION 1503. Call of Meetings by Company or Holders.........................96
SECTION 1504. Qualifications for Voting......................................96
SECTION 1505. Regulations....................................................96
SECTION 1506. Voting.........................................................98
SECTION 1507. No Delay of Rights by Meeting..................................98
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 1601. Indenture and Securities Solely Corporate Obligations..........98
SECTION 1602. Execution in Counterparts......................................99
viii
<PAGE>
TESTIMONIUM..................................................................100
SIGNATURE AND SEALS..........................................................100
ACKNOWLEDGMENT..........................................................101, 102
APPENDIX A Provisions Relating to Initial Securities
and Exchange Securities
EXHIBIT 1 TO
APPENDIX A Form of Initial Security
EXHIBIT A Form of Exchange Security
ix
<PAGE>
INDENTURE, dated as of January 26, 1999, between VINTAGE PETROLEUM,
INC., a Delaware corporation (herein called the "Company"), having its principal
office at 4200 One Williams Center, Tulsa, OK 74172, and THE CHASE MANHATTAN
BANK, a New York banking corporation, as Trustee (herein called the "Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's 9 3/4% Senior
Subordinated Notes Due 2009 to be issued, from time to time, in one or more
series as in this Indenture provided (the "Initial Securities") and, if and when
issued pursuant to a registered or private exchange for the Initial Securities,
the Company's 9 3/4% Senior Subordinated Notes Due 2009 (the "Exchange
Securities" and, together with the Initial Securities, the "Securities").
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with U.S. GAAP; provided, however, that for
the avoidance of any possible doubt, any act or condition in accordance
herewith and permitted hereunder when taken, created or occurring shall not
become a violation of any provision of this Indenture as a result of a
subsequent change in U.S. GAAP;
(4) any reference to an "Article" or a "Section" refers to an Article
or a Section, as the case may be, of this Indenture;
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(6) all dollar amounts are expressed in United States dollars.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
<PAGE>
2
"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 Section 1016), (iii)
the acquisition from third parties of Capital Stock of a Restricted Subsidiary,
(iv) the costs of acquiring, exploiting, developing and exploring in respect of
oil and gas properties or (v) Permitted Business Investments.
"Adjusted Consolidated Net Tangible Assets" means (without
duplication), as of the date of determination, (a) the sum of (i) discounted
future net revenues from proved oil and gas reserves of the Company and its
Restricted Subsidiaries calculated in accordance with Commission guidelines
before any state, federal or foreign income taxes, as estimated by a nationally
recognized firm of independent petroleum engineers in a reserve report prepared
as of the end of the Company's most recently completed fiscal year for which
financial statements are available, as increased by, as of the date of
determination, the estimated discounted future net revenues from (A) estimated
proved oil and gas reserves acquired since the date of such year-end reserve
report, and (B) estimated oil and gas reserves attributable to upward revisions
of estimates of proved oil and gas reserves since the date of such year-end
reserve report due to exploration, development or exploitation activities, in
each case calculated in accordance with Commission guidelines (utilizing the
prices utilized in such year-end reserve report), and decreased by, as of the
date of determination, the estimated discounted future net revenues from (C)
estimated proved oil and gas reserves produced or disposed of since the date of
such year-end reserve report and (D) estimated oil and gas reserves attributable
to downward revisions of estimates of proved oil and gas reserves since the date
of such year-end reserve report due to changes in geological conditions or other
factors which would, in accordance with standard industry practice, cause such
revisions, in each case calculated in accordance with Commission guidelines
(utilizing the prices utilized in such year-end reserve report); provided that,
in the case of each of the determinations made pursuant to clauses (A) through
(D), such increases and decreases shall be as estimated by the Company's
petroleum engineers, unless there is a Material Change as a result of such
acquisitions, dispositions or revisions, in which event the discounted future
net revenues utilized for purposes of this clause (a)(i) shall be confirmed in
writing by a nationally recognized firm of independent petroleum engineers, (ii)
the capitalized costs that are attributable to oil and gas properties of the
Company and its Restricted Subsidiaries to which no proved oil and gas reserves
are attributable, based on the Company's books and records as of a date no
earlier than the date of the Company's latest annual or quarterly financial
statements, (iii) the Net Working Capital on a date no earlier than the date of
the Company's latest annual or quarterly financial statements and (iv) the
greater of (A) the net book value on a date no earlier than the date of the
Company's latest annual or quarterly financial statements or (B) the appraised
value, as estimated by independent appraisers, of other tangible assets
(including, without duplication, Investments in unconsolidated Restricted
<PAGE>
3
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% or more of any class
of the Voting Stock of such specified Person or of any Subsidiary of such
specified Person. For the purposes of this definition, "control", when used with
respect to any specified Person, means the power to direct the management and
policies of such Person directly or indirectly, whether through the ownership of
Voting Stock, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Sale" means, with respect to any Person, any transfer,
conveyance, sale, lease or other disposition (including, without limitation,
dispositions pursuant to any consolidation or merger) by such Person or any of
its Restricted Subsidiaries in any single transaction or series of transactions
of (a) shares of Capital Stock or other ownership interests of another Person
(including Capital Stock of Unrestricted Subsidiaries) or (b) any other Property
of such Person or any of its Restricted Subsidiaries; provided, however, that
the term "Asset Sale" shall not include: (i) the sale or transfer of Permitted
Short-Term Investments, inventory, accounts receivable or other Property in the
ordinary course of business; (ii) the liquidation of Property received in
settlement of debts owing to the Company or any Restricted Subsidiary as a
result of foreclosure, perfection or enforcement of any Lien or debt, which
debts were owing to the Company or any Restricted Subsidiary in the ordinary
course of business of the Company or such Restricted
<PAGE>
4
Subsidiary; (iii) when used with respect to the Company, any asset disposition
permitted pursuant to Section 801 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.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate the
Securities.
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each suc cessive scheduled principal or liquidation value payment
of such Indebtedness or Preferred Stock, respectively, and the amount of such
principal or liquidation value payment, by (ii) the sum of all such principal or
liquidation value payments, provided, however, that in the case of any
Indebtedness in respect of a revolving credit facility, the payment date shall
be deemed to be the later of (x) the date of expiration of such facility or, if
there is any interim reduction in the availability of credit thereunder, the
date of such reduction to the extent of such reduction and (y) the scheduled
repayment date in respect of such Indebtedness.
"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 Section 1008 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 herein, 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
this Indenture.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
<PAGE>
5
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each day that is not a Legal Holiday.
"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
Section 1009, 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.
"Change of Control" means the occurrence of any of the following
events: (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% 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
<PAGE>
6
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.
"Change of Control Offer" has the meaning specified in Section 1019.
"Change of Control Payment Date" has the meaning specified
in Section 1019.
"Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Interest Coverage Ratio" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount
of EBITDA of the Company and its consolidated Restricted Subsidiaries for the
four full fiscal quarters immediately prior to the Transaction Date for which
financial statements are available to (ii) the aggregate Consolidated Interest
Expense of the Company and its Restricted Subsidiaries that is anticipated to
accrue during a period consisting of the fiscal quarter in which the Transaction
Date occurs and the three fiscal quarters immediately subsequent thereto (based
upon the pro forma amount and maturity of, and interest payments in respect of,
Indebtedness of the Company and its Restricted Subsidiaries expected by the
Company to be outstanding on the Transaction Date), assuming for the purposes of
this measurement the continuation of market interest rates prevailing on the
Transaction Date and base interest rates in respect of floating interest rate
obligations equal to the base interest rates on such obligations in effect as of
the Transaction Date; provided, that if the Company or any of its Restricted
Subsidiaries is a party to any Interest Rate Protection Agreement which would
have the effect of changing the interest rate on any Indebtedness of the Company
or any of its Restricted Subsidiaries for such four quarter period (or a portion
thereof), the resulting rate shall be used for such four
<PAGE>
7
quarter period or portion thereof; provided further that any Consolidated
Interest Expense with respect to Indebtedness Incurred or retired by the Company
or any of its Restricted Subsidiaries during the fiscal quarter in which the
Transaction Date occurs shall be calculated as if such Indebtedness was so
Incurred or retired on the first day of the fiscal quarter in which the
Transaction Date occurs. In addition, if since the beginning of the four full
fiscal quarter period preceding the Transaction Date, (x) the Company or any of
its Restricted Subsidiaries shall have engaged in any Asset Sale, EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive), or
increased by an amount equal to the EBITDA (if negative), directly attributable
to the assets which are the subject of such Asset Sale for such period
calculated on a pro forma basis as if such Asset Sale and any related retirement
of Indebtedness had occurred on the first day of such period or (y) the Company
or any of its Restricted Subsidiaries shall have acquired any material assets,
EBITDA shall be calculated on a pro forma basis as if such asset acquisitions
had occurred on the first day of such four fiscal quarter period.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, (i) the sum of (a) the aggregate amount of cash
and non-cash interest expense (including capitalized interest) of such Person
and its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with U.S. GAAP in respect of Indebtedness (including,
without limitation, (A) any amortization of debt discount, (B) net costs
associated with Interest Rate Protection Agreements (including any amortization
of discounts), (C) the interest portion of any deferred payment obligation, (D)
all accrued interest, and (E) all commissions, discounts, commitment fees,
origination fees and other fees and charges owed with respect to Bank Credit
Facilities and other Indebtedness) paid, accrued or scheduled to be paid or
accrued during such period; (b) Redeemable Stock dividends of such Person (and
of its Restricted Subsidiaries if paid to a Person other than such Person or its
Wholly Owned Subsidiaries) declared and payable other than in kind; (c) the
portion of any rental obligation of such Person or its Restricted Subsidiaries
in respect of any Capital Lease Obligation allocable to interest expense in
accordance with U.S. GAAP; (d) the portion of any rental obligation of such
Person or its Restricted Subsidiaries in respect of any Sale and Leaseback
Transaction 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
<PAGE>
8
period on a consolidated basis, determined in accordance with U.S. GAAP;
provided that there shall be excluded therefrom, without duplication, (i) items
classified as extraordinary (other than the tax benefit of the utilization of
net operating loss carry-forwards and alternative minimum tax credits); (ii) any
gain or loss, net of taxes, on the sale or other disposition of assets
(including the Capital Stock of any other Person) in excess of $5.0 million,
from any sale or disposition, or series of related sales or dispositions (but in
no event shall this clause (ii) apply to the sale of oil and gas inventories in
the ordinary course of business); (iii) the net income of any Subsidiary of such
specified Person to the extent the transfer to that Person of that income is
restricted by contract or otherwise, except for any cash dividends or cash
distributions actually paid by such Subsidiary to such Person during such
period; (iv) the net income (or loss) of any other Person in which such
specified Person or any of its Restricted Subsidiaries has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of such specified Person in accordance with U.S. GAAP or is
an interest in a consolidated Unrestricted Subsidiary), except to the extent of
the amount of cash dividends or other cash distributions actually paid to such
Person or its Restricted Subsidiaries by such other Person during such period;
(v) the net income of any Person acquired by such specified Person or any of its
Restricted Subsidiaries in a pooling-of-interests transaction for any period
prior to the date of such acquisition; (vi) any gain or loss, net of taxes,
realized on the termination of any employee pension benefit plan; (vii) any
adjustments of a deferred tax liability or asset pursuant to Statement of
Financial Accounting Standards No. 109 which result from changes in enacted tax
laws or rates; (viii) the cumulative effect of a change in accounting
principles; and (ix) impairment losses on oil and gas properties.
"Consolidated Net Worth" of any Person means the stockholders' equity
of such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with U.S. GAAP, less (to the extent included in
stockholders' equity) amounts attributable to Redeemable Stock of such Person or
its Restricted Subsidiaries.
"Corporate Trust Office" means the office of the Trustee in The Borough
of Manhattan, The City of New York, at which at any particular time its
corporate trust business shall be principally administered and which at the date
hereof is located at 450 West 33rd Street, New York, NY 10001.
"corporation" means a corporation, association, company,
joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in
Section 1202.
"CUSIP Number" means, with respect to the Securities, an identification
number assigned to such security pursuant to the procedures of the Committee on
Uniform Security Identification Procedures and by the CUSIP Service Bureau.
<PAGE>
9
"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.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1201.
"Depositary" means, with respect to Securities issuable in whole or in
part in the form of one or more Global Securities, a clearing agency registered
under the Exchange Act that is designated by the Company to act as Depositary
for such Securities. Initially, the Depositary shall be The Depository Trust
Company, its nominees and their respective successors.
"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) and 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
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), (ii) Consolidated Interest Expense, (iii) depreciation
and depletion expense, (iv) amortization expense, (v) exploration expense, and
(vi) any other non-cash 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.
<PAGE>
10
"8 5/8% Indenture" means the indenture dated as of February 5, 1997,
between the Company and The Chase Manhattan Bank, as trustee, relating to the
issuance of the 85/8% Notes.
"8 5/8% Notes" means the 85/8% Senior Subordinated Notes Due 2009 of
the Company, issued pursuant to the 85/8% Indenture.
"Event of Default" has the meaning specified in Section 501.
"Excess Proceeds" shall have the meaning specified in
Section 1012.
"Exchange Act" means the United States Securities Exchange Act of 1934
and any statute successor thereto, in each case as amended from time to time.
"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.
"Expiration Date" has the meaning specified in Section 104.
"Expiry Date" has the meaning specified in the definition of
"Prepayment Offer Notice" set forth in this Section 101.
"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 as evidenced by a Board Resolution 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
<PAGE>
11
State thereof or the District of Columbia and engages in the Oil and Gas
Business exclusively outside the United States of America.
"Global Security" means a Security that evidences all or part of the
Securities and bears the Global Securities Legend set forth in Exhibit 1 to
Appendix A hereto or Exhibit A hereto.
"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
(i) endorsements by such Person for collection or deposit, in either case, in
the ordinary course of business or (ii) a contractual commitment by one Person
to invest in another Person for so long as such Investment is reasonably
expected to constitute a Permitted Investment under clause (b) of the definition
of Permitted Investments.
"Hedging Agreements" means Interest Rate Protection Agreements,
Exchange Rate Contracts and Oil and Gas Purchase and Sale Contracts.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"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.
<PAGE>
12
"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 this
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.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"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.
<PAGE>
13
"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.
"Investment Company Act" means the United States Investment Company Act
of 1940 and any statute successor thereto, in each case as amended from time to
time.
"Issue Date" means the date upon which the Original Securities first
were issued and authenticated hereunder.
"Legal Holiday" has the meaning specified in Section 113.
"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 Section 1009, 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 Section 1012, such securities
shall be deemed not to have been Liquid Securities at any time.
<PAGE>
14
"Maturity" means the date on which the principal of the Securities or
an installment of principal becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption, pursuant to a Prepayment Offer or Change of Control Offer or
otherwise.
"Material Change" means an increase or decrease (except to the extent
resulting from changes in prices) of more than 30% during a fiscal quarter in
the estimated discounted future net revenues from proved oil and gas reserves of
the Company and its Restricted Subsidiaries, calculated in accordance with
clause (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 Section 1012.
"Moody's" means Moody's Investors Service Inc., and any successor to
its business or operations.
"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
<PAGE>
15
Available Cash at such time and shall thereafter be applied in accordance with
Section 1012.
"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.
"9% Indenture" means the indenture dated as of December 20, 1995,
between the Company and The Chase Manhattan Bank (formerly known as Chemical
Bank), as trustee, relating to the issuance of the 9% Notes.
"9% Notes" means the 9% Senior Subordinated Notes Due 2005 of the
Company, issued pursuant to the 9% Indenture.
"Notice of Default" means a written notice of the kind
specified in Section 501.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Vice Chairman of the Board, the President or any Vice President,
together with any one of the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Assistant Secretary, of the Company, and delivered to the
Trustee. One of the officers signing an Officers' Certificate given pursuant to
Section 1004 shall be the principal executive, financial or accounting officer
of the Company.
"OID" has the meaning specified in Section 301.
"Oil and Gas Business" means the business of exploiting, exploring for,
developing, acquiring, producing, processing, gathering, marketing, storing and
transporting hydrocarbons and other related energy businesses.
"Oil and Gas Liens" means (i) Liens on any specific property or any
interest therein, construction thereon or improvement thereto to secure all or
any part of the costs incurred for surveying, exploration, drilling, extraction,
development, operation, production, construction, alteration, repair or
improvement of, in, under or on such property and the plugging and abandonment
of wells located thereon (it being understood that, in the case of oil and gas
producing properties, or any interest therein, costs incurred for "development"
shall include costs incurred for all facilities relating to such properties or
to projects, ventures or other arrangements of which such properties form a part
or which relate to such properties or interests); (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
<PAGE>
16
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.
"Opinion of Counsel" means a written opinion of counsel, who may be
internal legal counsel for the Company, who shall be acceptable to the Trustee
and who may rely as to factual matters on Officers' Certificates.
"Original Securities" shall have the meaning set forth in
Section 301.
"Outstanding" means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture, except:
(1) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Paying Agent (other than the
Company or its Wholly Owned Subsidiaries) in trust for the Holders of such
Securities and the Paying Agent is not prohibited from paying such money to
the Holders of Securities on that date pursuant to the terms of this
Indenture; provided that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(3) Securities as to which Defeasance has been effected pursuant to
Section 1201; and
(4) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
<PAGE>
17
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which the Trustee actually knows to be so owned shall be
so disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"paid in full" or "payment in full" has the meaning specified in
Section 1302.
"pari passu", when used with respect to the ranking of any Indebtedness
of any Person in relation to other Indebtedness of such Person, means that each
such Indebtedness (a) either (i) is not subordinated in right of payment to any
other Indebtedness of such Person or (ii) is subordinate in right of payment to
the same Indebtedness of such person as is the other and is so subordinate to
the same extent and (b) is not subordinate in right of payment to the other or
to any Indebtedness of such Person as to which the other is not so subordinated.
"Pari Passu Indebtedness" means any Indebtedness of the Company
(including, without limitation, the 9% Notes and the 85/8% Notes) that is pari
passu in right of payment to the Securities.
"Participants" has the meaning specified in Section 305.
"pay the Securities" has the meaning specified in Section 1303.
"Paying Agent" has the meaning specified in Section 1002.
"Payment Blockage Notice" has the meaning specified in Section 1303.
"Payment Blockage Period" has the meaning specified in Section 1303.
"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
<PAGE>
18
other objectives customarily achieved through the conduct of Oil and Gas
Business jointly with third parties, including, without limitation, (i)
ownership interests in oil and gas properties or gathering, transportation,
processing, storage or related systems and (ii) Investments and expenditures in
the form of or pursuant to operating agreements, processing agreements, farm-in
agreements, farm-out agreements, development agreements, area of mutual interest
agreements, unitization agreements, pooling arrangements, joint bidding
agreements, service contracts, joint venture agreements, partnership agreements
(whether general or limited), subscription agreements, stock purchase agreements
and other similar agreements with third parties (including Unrestricted
Subsidiaries).
"Permitted 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% of the voting power of all classes of the Voting Stock of such Person.
"Permitted Holders" means Charles C. Stephenson, Jr., Jo Bob Hille, S.
Craig George, William C. Barnes and their Permitted Designees.
"Permitted Indebtedness" means any and all of the following: (a)
Indebtedness evidenced by the Original Securities; (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% 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
Section 1012; (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
<PAGE>
19
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 Section
801, 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 Section 1008; (g) Indebtedness under Exchange Rate
Contracts, provided that such Exchange Rate Contracts were entered into for the
purpose of limiting exchange rate risks in connection with transactions entered
into in the ordinary course of business; (h) Indebtedness under Oil and Gas
Purchase and Sale Contracts, provided that such contracts were entered into in
the ordinary course of business for the purpose of limiting risks that arise in
the ordinary course of business of the Company and its Subsidiaries; (i) in-kind
obligations relating to net oil or gas balancing positions arising in the
ordinary course of business that are customary in the Oil and Gas Business; (j)
Indebtedness outstanding on the Issue Date not otherwise permitted in clauses
(a) through (i) above; (k) Indebtedness not otherwise permitted to be Incurred
pursuant to this paragraph, provided that the aggregate principal amount of all
Indebtedness Incurred pursuant to this clause (k), together with all
Indebtedness Incurred pursuant to clause (l) of this paragraph in respect of
Indebtedness previously Incurred pursuant to this clause (k), at any one time
outstanding does not exceed $25 million; (l) Indebtedness Incurred in exchange
for, or the proceeds of which are used to refinance, (i) Indebtedness referred
to in clauses (a) through (k) of this paragraph (including Indebtedness
previously Incurred pursuant to this clause (l)) and (ii) Indebtedness Incurred
pursuant to clause (a) of Section 1008; 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 Securities 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.
"Permitted Investments" means any and all of the following: (a)
Permitted Short-Term Investments; (b) Investments in
<PAGE>
20
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 Section 1016 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 Section 1012; 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).
"Permitted Liens" shall have the meaning specified in Section 1009.
"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, (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
$500 million, (d)
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21
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 or "A-1" (or higher) according to S&P, 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.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"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.
"Prepayment Offer" has the meaning specified in Section 1012(c).
"Prepayment Offer Notice" means a written notice of a Prepayment Offer
sent by the Company by first-class mail, postage prepaid, to each Holder at his
address appearing in the Security Register on the date of the Prepayment Offer
offering to purchase up to the principal amount of Securities specified in such
Prepayment Offer at the purchase price specified in such Prepayment Offer (as
determined pursuant to this Indenture). Unless otherwise required by applicable
law, the Prepayment Offer Notice shall specify an expiry date (the "Expiry
Date") of the Prepayment Offer which shall be, subject to any contrary
requirements of applicable law, and a settlement date (the
<PAGE>
22
"Purchase Date") for purchase of the Securities which shall be, subject to any
contrary requirements of applicable law, not less than 30 days nor more than 60
days after the date the Prepayment Offer Notice is mailed. The Prepayment Offer
Notice shall contain information concerning the business of the Company and its
Subsidiaries which the Company in good faith believes will enable such Holders
to make an informed decision with respect to the Prepayment Offer, which at a
minimum will include (i) the Company's most recent annual and quarterly
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" (which requirements may be satisfied by
delivery of such documents together with the Prepayment Offer), (ii) a
description of material developments in the Company's business subsequent to the
date of the latest of such financial statements referred to in clause (i), (iii)
if applicable, appropriate pro forma financial information concerning the
Prepayment Offer, (iv) a description of the events requiring the Company to make
the Prepayment Offer, (v) a description of the procedure which Holders must
follow and any other information necessary to enable such Holders to tender
Securities pursuant to the Prepayment Offer, (vi) a description of the procedure
which Holders must follow and any other information necessary to enable such
Holders to withdraw an election to tender Securities for payment, and (vi) any
other information required by applicable law to be included therein. The
Prepayment Offer Notice shall also state:
(1) the Expiry Date and the Purchase Date;
(2) that any Securities (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;
(3) the aggregate principal amount of the Securities offered to be
purchased by the Company pursuant to the Prepayment Offer (including, if
less than 100%, the manner by which such has been determined pursuant to
the Indenture) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Securities are to be surrendered for
tender pursuant to the Prepayment Offer;
(7) that each Holder electing to tender a Security pursuant to the
Prepayment Offer will be required to surrender such Security at the place
or places specified in the Prepayment Offer Notice prior to the close of
business on the Expiry Date
<PAGE>
23
(such Security being, if the Company or the Trustee so requires, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing);
(8) that Holders will be entitled to withdraw all or any portion of the
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the Expiry Date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security the Holder tendered, the certificate number of the
Security the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(9) that if Securities in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Prepayment Offer, the Company shall purchase all such Securities;
and
(10) that in case of any Holder whose Security is purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered.
Any Prepayment Offer Notice shall be governed by and effected in accordance with
Section 1012.
"primary obligor" has the meaning specified in the definition of
"Guarantee" set forth in this Section 101.
"Production Payments and Reserve Sales" means the grant or transfer to
any Person of a royalty, overriding royalty, net profits interest, production
payment (whether volumetric or dollar denominated), master limited partnership
interest or other interest in oil and gas properties, reserves or the right to
receive all or a portion of the production or the proceeds from the sale of
production attributable to such properties where the holder of such interest has
recourse solely to such production or proceeds of production, subject to the
obligation of the grantor or transferor to operate and maintain, or cause the
subject interests to be operated and maintained, in a reasonably prudent manner
or other customary standard or subject to the obligation of the grantor or
transferor to indemnify for environmental matters.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other Person (but excluding Capital Stock or other securities issued by such
first mentioned Person).
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24
"Public Equity Offering" means an underwritten public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Purchase Amount" has the meaning specified in the definition of
"Prepayment Offer Notice" set forth in this Section 101.
"Purchase Date" has the meaning specified in the definition of
"Prepayment Offer Notice" set forth in this Section 101.
"Purchase Price" has the meaning specified in the definition of
"Prepayment Offer Notice" set forth in this Section 101.
"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 Securities; 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 Securities; 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.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrar" has the meaning specified in Section 1002.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities means the date specified for that purpose in the
Securities.
"Remaining Excess Proceeds" shall have the meaning specified
in Section 1012.
"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
<PAGE>
25
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 Securities, (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 Section
1016.
"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.
"Securities" has the meaning stated in the preamble of this Indenture,
as amended or supplemented from time to time in accordance with the terms
hereof, and more particularly means any Securities authenticated and delivered
under this Indenture.
"Securities Act" means the United States Securities Act of 1933 and any
statute successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"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 this 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'
<PAGE>
26
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 this 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 Securities;
(ii) any Indebtedness Incurred in violation of the provisions of this 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.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"S&P" means Standard & Poor's Ratings Group and any successor to its
business or operations.
"Stated Maturity", when used with respect to any security or any
installment of principal thereof or interest thereon, means the date specified
in such security as the fixed date on which the principal of such security or
such installment of principal or interest is due and payable, including pursuant
to any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subsidiary" of a Person means (a) another Person which is a
corporation a majority of whose Voting Stock is at the time, directly or
indirectly, owned or controlled by (i) the first Person, (ii) the first Person
and one or more of its Subsidiaries, or (iii) one or more of the first Person's
Subsidiaries or (b) another Person which is not a corporation (x) at least 50%
of the ownership interest of which and (y) the power to elect or direct the
election of a majority of the directors or other governing body of which are
controlled by Persons referred to in clauses (i), (ii) or (iii) above.
"Surviving Entity" has the meaning specified in Section 801.
"Transaction Date" has the meaning specified in the definition of
"Consolidated Interest Coverage Ratio" set forth in this Section 101.
"Trust Indenture Act" means the United States Trust Indenture Act of
1939 as in force at the date as of which this instrument was executed; provided,
however, that in the event the United States Trust Indenture Act of 1939 is
amended after such date, "Trust Indenture Act" means, to the extent required by
any
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27
such amendment, the United States Trust Indenture Act of 1939 as so amended.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include the successor.
"Unrestricted Subsidiary" means (i) each Subsidiary of the Company that
the Company has designated pursuant to Section 1016 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 this Indenture, unless stated otherwise.
"U.S. Government Obligation" means (x) any security which is (i) a
direct obligation of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof, and (y) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any U.S. Government Obligation which is specified in
clause (x) above and held by such bank for the account of the holder of such
depositary receipt, or with respect to any specific payment of principal of or
interest on any U.S. Government Obligation which is so specified and held,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal or interest evidenced
by such depositary receipt.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"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)
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28
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.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (except for certificates
provided for in Section 1004) shall include,
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person
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29
may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify or give
an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given, made or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing or alternatively, may be embodied in and evidenced by the
record of Holders voting in favor thereof, either in person or by proxies duly
appointed in writing, at any meeting of Holders duly called and held in
accordance with the provisions of Article Fifteen, or a combination of such
instruments and any such record; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
or record or both are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments and any such record
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments
or so voting at any such meeting. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Section 601) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section. The record of
any meeting of Holders shall be proved in the manner provided in Section 1506.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds,
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30
certifying that the individual signing such instrument or writing acknowledged
to him the execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or affidavit shall
also constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Except as provided in Section 1402, any request, demand, authorization,
direction, notice, consent, waiver or other Act of the Holder of any Security
shall bind every future Holder of the same Security and the Holder of every
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustee or the Company in reliance thereon, whether or not
notation of such action is made upon such Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities; provided that the Company may not set a record date for,
and the provisions of this paragraph shall not apply with respect to, the giving
or making of any notice, declaration, request or direction referred to in the
next paragraph. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Securities on such record date, and no other Holders,
shall be entitled to take or revoke the relevant action, whether or not such
Holders remain Holders after such record date; provided that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be cancelled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Company, at its own
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Trustee in writing and to
each Holder of Securities in the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 502, (iii) any request to institute proceedings referred
to in
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31
Section 507(2) or (iv) any direction referred to in Section 512, in each case
with respect to the Securities. If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities on such record date, and no
other Holders, shall be entitled to join in such notice, declaration, request or
direction or to revoke the same, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Securities on such record date.
Nothing in this paragraph shall be construed to prevent the Trustee from setting
a new record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities on the date such action is taken. Promptly after any record date is
set pursuant to this paragraph, the Trustee, at the Company's expense, shall
cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Company in writing and to each
Holder of Securities in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record date may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities in the manner set forth in Section 106, on or prior
to the existing Expiration Date; provided further, that the Expiration Date
shall be no later than 180 days following the record date relating to such
Expiration Date. If an Expiration Date is not designated with respect to any
record date set pursuant to this Section, the party hereto which set such record
date shall be deemed to have designated the 180th day after such record date as
the Expiration Date with respect thereto, subject to its right to change the
Expiration Date to any earlier day as provided in this paragraph.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to the Securities may do so with regard to all or
any part of the principal amount of such Securities or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
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32
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, Attention: Corporate
Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed
to it at the address of its principal office specified in the first
paragraph of this instrument, Attention: Chief Financial Officer or at any
other address previously furnished in writing to the Trustee by the
Company.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification shall constitute a sufficient notification for every
purpose hereunder if made, given, furnished or filed in writing by facsimile
transmission or otherwise to or with the Company at its principal office
specified in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act which is required under the Trust Indenture Act to be
a part of and govern this
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33
Indenture, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be.
SECTION 108. Effect of Headings, Table of Contents and Cross-
Reference Sheet.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the internal laws of the State of New York without reference to
principles of conflicts of laws.
SECTION 113. Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date, Change of Control Payment Date or Stated Maturity of any Security shall be
a Legal Holiday, then (notwithstanding any other provision of this Indenture or
of the Securities other than a provision in the Securities which
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34
expressly states that such provision shall apply in lieu of this Section)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding day that is not a Legal Holiday
with the same force and effect as if made on the Interest Payment Date,
Redemption Date, Purchase Date, Change of Control Payment Date or at the Stated
Maturity, provided that no interest shall accrue from and after such Interest
Payment Date, Redemption Date, Purchase Date, Change of Control Payment Date or
Stated Maturity, as the case may be. If a regular record date is a Legal
Holiday, the record date shall not be affected.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Form of Securities.
The Securities of each series shall be in substantially the applicable
forms set forth in Exhibit 1 to Appendix A hereto or Exhibit A hereto with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture. The Securities of each series may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or Depositary therefor or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof.
The Securities of each series shall be issued initially in the form of
one or more permanent Global Securities in definitive, fully registered form
without interest coupons in substantially the form set forth in Exhibit 1 to
Appendix A hereto or Exhibit A hereto, as applicable, which shall be deposited
on behalf of the purchasers of the Securities represented thereby with the
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or a nominee of the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee in the limited circumstances hereinafter provided.
The Securities of each series shall be typed, printed, lithographed or
engraved or may be produced in any other manner, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
Provisions relating to the Initial Securities of each series and the
Exchange Securities are set forth in Appendix A, which is hereby incorporated in
and expressly made part of this Indenture. The terms of the Securities of each
series set forth in Exhibit 1 to Appendix A and Exhibit A are part of the terms
of this Indenture.
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35
SECTION 202. Form of Face of Securities.
The face of the Initial Securities of each series shall be
substantially in the form of Exhibit 1 to Appendix A, which is hereby
incorporated in and expressly made a part of this Indenture. The face of the
Exchange Securities shall be substantially in the form of Exhibit A, which is
hereby incorporated in and expressly made a part of this Indenture.
SECTION 203. Form of Reverse of Securities.
The reverse of the Initial Securities of each series shall be
substantially in the form of Exhibit 1 to Appendix A, which is hereby
incorporated in and expressly made a part of this Indenture. The reverse of the
Exchange Securities shall be substantially in the form of Exhibit A, which is
hereby incorporated in and expressly made a part of this Indenture.
SECTION 204. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the following form:
This is one of the Company's 9 3/4% Senior Subordinated Notes Due 2009
referred to in the within-mentioned Indenture.
Dated:
The Chase Manhattan Bank,
As Trustee
By
---------------------------------
Authorized Officer
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount of Securities; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is $200,000,000 (except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 906,
1012, 1019 or 1106 or Appendix A). All Securities shall be identical in all
respects other than issue price, issuance dates, title and original interest
accrual dates. The Securities may be issued in one or more series; provided,
however, that any Securities issued with original issue discount ("OID") for
Federal income tax purposes shall not be issued as part of the same series as
any Securities that are issued with a different amount of OID or are
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36
not issued with OID. All Securities of any one series shall be substantially
identical except as to denomination.
Subject to Section 303, the Trustee shall authenticate Securities for
original issue on the Issue Date in the aggregate principal amount of
$150,000,000 (the "Original Securities"). With respect to any Securities
originally issued after the Issue Date, there shall be established in or
pursuant to a resolution of the Board of Directors and set forth or determined
in the manner provided in an Officers' Certificate, or established in one or
more indentures supplemental hereto, prior to the issuance of such Securities:
(1) whether such Securities shall be issued as part of a new
or existing series of Securities and the title of such Securities
(which shall distinguish the Securities of the series from Securities
of any other series);
(2) the aggregate principal amount of such Securities which
may be authenticated and delivered under this Indenture, which shall be
in an aggregate principal amount not to exceed $50,000,000 (except for
Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities of the same
series pursuant to Section 304, 305, 306, 906, 1012, 1019 or 1106 or
Appendix A and except for Securities which, pursuant to Section 303,
are deemed never to have been authenticated and delivered hereunder);
(3) the issue price and issuance date of such Securities,
including the date from which interest on such Securities shall accrue;
(4) if applicable, that such Securities shall be issuable in
whole or in part in the form of one or more Global Securities and, in
such case, the respective Depositaries for such Global Securities, the
form of any legend or legends which shall be borne by any such Global
Security in addition to or in lieu of that set forth in Exhibit 1 to
Appendix A and any circumstances in addition to or in lieu of those set
forth in Section 2.4 of Appendix A in which any such Global Security
may be exchanged in whole or in part for Securities registered, and any
transfer of such Global Security in whole or in part may be registered,
in the name or names of Persons other than the Depositary for such
Global Security or a nominee thereof;
(5) if applicable, that such Securities shall not be issued in
the form of Initial Securities set forth in Appendix A, but shall be
issued in the form of Exchange Securities as set forth in Exhibit A.
If any of the terms of any series are established by action
taken pursuant to a resolution of the Board of Directors, a copy of an
appropriate record of such action shall be certified by the Secretary
or any Assistant Secretary of the Company and delivered to the Trustee
at or
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37
prior to the delivery of the Officers' Certificate or the indenture
supplemental hereto setting forth the terms of the series.
Notwithstanding anything to the contrary in this Section or
otherwise in this Indenture, any additional issuance of Securities
after the Issue Date, whether such Securities are of the same or a
different series than the Original Securities, shall be in a principal
amount greater than or equal to $25,000,000.
The Trustee shall not be required to authenticate any Securities in
addition to the Original Securities if the issue of such Securities pursuant to
this Indenture will affect the Trustee's own rights, duties or immunities under
the Securities and this Indenture or otherwise in a manner which is not
reasonably acceptable to the Trustee.
In authenticating such Securities after the Issue Date, and accepting
the additional responsibilities under this Indenture in relation to such
Securities, the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating,
(a) that the form of such Securities has been established in
conformity with the provisions of this Indenture;
(b) that the terms of such Securities have been established
in conformity with the provisions of this Indenture; and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company, enforceable in
accordance with their terms, subject to applicable bankruptcy,
reorganization, insolvency, fraudulent transfer, moratorium or other
laws affecting creditors' rights generally from time to time in effect
and to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 or an integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or by any
Vice President, together with any one of the Treasurer, any Assistant Treasurer,
the Secretary or any
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38
Assistant Secretary of the Company. The signature of any of these officers on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 309, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.
The Trustee shall, subject to Section 301, authenticate and deliver
Securities for original issue in an aggregate principal amount of up to
$200,000,000, upon Company Order. Such Company Order shall specify the date on
which the original issue of Securities is to be authenticated and shall further
provide instructions concerning registration, amounts for each Holder and
delivery. The aggregate principal amount of Securities outstanding at any time
may not exceed $200,000,000, except as provided in Section 306.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company maintained for that purpose, without charge to the
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39
Holder. Upon surrender for cancellation of any one or more temporary Securities,
the Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor one or more definitive Securities, of any authorized
denominations and of like series, tenor and aggregate principal amount. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office or in any other office or
agency of the Company maintained pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company maintained for such purpose, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities, of any
authorized denominations and of like series, tenor and aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities, of any authorized denominations and of like series, tenor and
aggregate principal amount, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
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40
exchanges pursuant to Section 304, 906, 1012, 1019 or 1106 not involving any
transfer.
If the Securities are to be redeemed in part, the Company shall not be
required (A) to issue, register the transfer of or exchange any Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of any such Securities selected for
redemption under Section 1102 and ending at the close of business on the day of
such mailing, or (B) to register the transfer of or exchange any Security so
selected for redemption, in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
With respect to Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global
Security or a nominee thereof and deposited with such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(2) A Global Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary. A Global Security is exchangeable for certificated
Securities only if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a Depositary for such Global Security or
if at any time the Depositary ceases to be a clearing agency registered
under the Exchange Act and a successor Depositary is not appointed by the
Company within 90 days of such notice or after it becomes aware of such
cessation, (ii) the Company executes and delivers to the Trustee a notice
that such Global Security shall be so transferable, registrable, and
exchangeable, and such transfers shall be registrable or (iii) there shall
have occurred and be continuing an Event of Default or an event which, with
the giving of notice or lapse of time or both, would constitute an Event of
Default with respect to the Securities represented by such Global Security.
Any Global Security that is exchangeable for certificated Securities
pursuant to the preceding sentence will be transferred to, and registered
and exchanged for, certificated Securities in authorized denominations,
without legends applicable to a Global Security, 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 Securities, (i) certificated Securities 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 Securities will be payable, and the
transfer of the certificated Securities will be registerable, 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
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41
certificated Securities, although the Company may require payment of a sum
sufficient to cover any tax or governmental charge imposed in connection
therewith.
(3) Securities issued in exchange for a Global Security or any portion
thereof shall have an aggregate principal amount equal to that of such
Global Security or portion thereof to be so exchanged, shall be registered
in such names and be in such authorized denominations as the Depositary
shall designate and shall bear the applicable legends provided for herein.
Any Global Security to be exchanged in whole shall be surrendered by the
Depositary to the Trustee. With respect to any Global Security to be
exchanged in part, either such Global Security shall be so surrendered for
exchange or, if the Trustee is acting as custodian for the Depositary or
its nominee with respect to such Global Security, the principal amount
thereof shall be reduced, by an amount equal to the portion thereof to be
so exchanged, by means of an appropriate adjustment made on the records of
the Trustee. Upon any such surrender or adjustment, the Trustee shall
authenticate and deliver the Security issuable on such exchange to or upon
the order of the Depositary or an authorized representative thereof.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 304, 306, 906 or
1106 or otherwise, shall be authenticated and delivered in the form of, and
shall be, a Global Security, unless such Security is registered in the name
of a Person other than the Depositary for such Global Security or a nominee
thereof.
Members of, or participants in, the Depositary ("Participants") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Participants, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like series, tenor and principal amount and bearing a
number not contemporaneously outstanding.
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42
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like series, tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date
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43
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security
and the date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be given to each Holder of
Securities in the manner set forth in Section 106, not less than 10
days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and
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44
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption or registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be disposed of as
directed by a Company Order; provided, however, that the Trustee shall not be
required to destroy such cancelled Securities.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 311. CUSIP Numbers.
The Company in issuing the Securities may use CUSIP numbers, and, if
so, the Trustee shall use CUSIP numbers in notices of redemption, any Prepayment
Offer Notice or any notice of a Change of Control Offer as a convenience to
Holders; provided that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of redemption, Prepayment Offer Notice or any notice of
a Change of Control Offer and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption,
prepayment or offer shall not be affected by any defect in or omission of such
numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided
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45
for), and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company;
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably depos ited with the
Trustee, as trust funds in trust for the purpose, money in an amount
sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation
(and the Company is not prohibited from depositing such money for such
purpose on that date pursuant to the terms of this Indenture) for
principal and any premium and interest to the date of such deposit (in
the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614, the obligation of the
Company under the last paragraph of Section 1003 and, if money shall have been
deposited with the Trustee pursuant to subclause (B) of
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46
Clause (1) of this Section, the obligations of the Trustee under Section 402
shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accor dance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent as the
Trustee may determine, to the Persons entitled thereto, of the principal and any
premium and interest for whose payment such money has been deposited with the
Trustee. Money held by the Trustee pursuant to this Article shall not be subject
to the claims of the holders of Senior Indebtedness.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be occasioned by the
provisions of Article Thirteen or be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of (or premium, if any, on)
any Security at its Maturity; or
(3) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with) and continuance of such default or breach for a
period of 60 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of the Outstanding
Securities a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(4) a default under any Indebtedness for borrowed money by the Company
or any Restricted Subsidiary, or under any mortgage, indenture or
instrument (including this Indenture) under which there may be issued or by
which there may be secured or evidenced any such Indebtedness, which
default shall have resulted in an amount greater than $10 million ($40
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47
million in the case of Indebtedness of a Foreign Subsidiary the recourse
for which is limited to solely Foreign Subsidiaries) of such Indebtedness
becoming or being declared due and payable prior to the date on which it
would otherwise have become due and payable, or a failure to pay any
Indebtedness 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) at maturity, in each case without such
Indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 10 days after there shall have
been given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice specifying
such default and requiring the Company to cause such Indebtedness to be
discharged or cause such acceleration to be rescinded or annulled, as the
case may be, and stating that such notice is a "Notice of Default"
hereunder; or
(5) a final judgment or order or final judgments or orders for the
payment of money are entered against the Company or any Restricted
Subsidiary in an uninsured or unindemnified aggregate amount in excess of
$10 million by a court or courts of competent jurisdiction, which judgments
or orders are not discharged, waived, stayed, satisfied or bonded within a
period (during which execution shall not be effectively stayed) of 60
consecutive days after the right to appeal all such judgments or orders has
expired; or
(6) the Company or any Restricted Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating
to insolvency; or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted Subsidiary in
an involuntary case;
(B) appoints a Custodian of the Company or any Restricted Subsidiary or
for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Restricted Subsidiary;
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48
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(6) or 501(7)) shall occur and be continuing, then in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal amount of and accrued and
unpaid interest on all the Securities to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such declaration such principal amount and accrued and unpaid interest
shall become immediately due and payable. If an Event of Default specified in
Section 501(6) or 501(7) occurs, the principal amount of and interest on all the
Securities shall automatically, and without any declaration or other action on
the part of the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree based on acceleration for payment of the money due
has been obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in aggregate principal amount of the Outstanding
Securities, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on all Securities,
(B) to the extent that payment of such interest is lawful and is
required hereunder, interest upon overdue interest at the rate borne by
such Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the principal
or interest of the Securities which has become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
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49
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on the Securities
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) the Securities at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of the Securities, the whole amount then due and payable on the
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate borne by the
Securities, and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders of the Securities by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on
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50
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding; provided, however, that the Trustee may, on behalf of the Holders,
vote for the election of a trustee in bankruptcy or similar official and be a
member of a creditors' or other similar committee.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee under Section
607; and
SECOND: subject to Article Thirteen, to the payment of the amounts
then due and unpaid for principal of and any premium and interest on the
Securities in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for principal
and any premium and interest, respectively; and
THIRD: to the Company.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
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51
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 508. Unconditional Right of Holders To Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, a Holder of the
Securities shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 307)
interest on the Securities on the Stated Maturities expressed in the Securities
(or, in the case of redemption, prepayment or Change of Control, on the
Redemption Date, Purchase Date or Change of Control Payment Date, respectively)
and to institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee
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52
and the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of the Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall 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 con ferred on the Trustee with respect to the Securities;
provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture and would not involve the Trustee in personal
liability, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may by Act of such Holders on behalf of the Holders of
all the Securities waive any past or existing Default or Event of Default
hereunder and its consequences, except a Default
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53
(1) in the payment of the principal of or any premium or interest on
the Securities, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereto.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or the Trustee.
SECTION 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability
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54
is not reasonably assured to it. Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.
SECTION 602. Notice of Defaults.
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Holder notice of the Default within 90
days after it occurs. Except in the case of a Default in payment of principal of
or interest on any Security (including payments pursuant to the mandatory
redemption provisions of such Security, if any), the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Holders.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any
resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel reasonably selected by it and
the written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
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55
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 604. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
in any document issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication. The Trustee
shall not be charged with notice or knowledge of any Default or Event of Default
unless (i) a Trust Officer shall have actual knowledge thereof or (ii) the
Trustee shall have received notice thereof in accordance with Section 105 from
the Company or any Holder.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company. So long as no Event of Default
shall have occurred and be continuing, all interest allowed on any such money
shall be paid to the Company from time to time upon receipt by the Trustee of a
Company Order except as otherwise provided in this Indenture.
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56
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such compensation as shall
be agreed to in writing by the Company and the Trustee for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, liability, damage, claim
or expense incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance or administration of the trust
or trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
Without limiting any rights available to the Trustee under applicable
law, when the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(6) or Section 501(7), the expenses
(including the reasonable fees and expenses of its counsel) and the compensation
for the services are intended to constitute expenses of administration under any
applicable Federal or State bankruptcy, insolvency or other similar law.
To secure the Company's payment obligations under this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee as such, except money or property held in trust to
pay the principal of or interest on particular Securities.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by the Trust Indenture Act, the Trustee shall not be deemed to
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have a conflicting interest by virtue of being trustee under the 9% Indenture,
relating to the 9% Notes or by virtue of being trustee under the 85/8%
Indenture, relating to the 85/8% Notes.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee hereunder. The
Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act
to act as such and has a combined capital and surplus of at least $50,000,000.
If any such Person publishes reports of condition at least annually, pursuant to
law or to the requirements of its supervising or examining authority, then for
the purposes of this Section and to the extent permitted by the Trust Indenture
Act, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
The Trustee may resign at any time by giving written notice thereof to
the Company.
The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
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then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee, or (B) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
(i) the giving of such notice of resignation or (ii) the removal of the Trustee
by the Company pursuant to a Board Resolution, the Trustee who has so resigned
or been removed may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any reason, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee (it
being understood that at any time there shall be only one Trustee) and shall
comply with the applicable requirements of Section 611. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 611, become the successor Trustee and to that
extent supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 611, any Holder who has been a
bona fide Holder of a Security for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.
The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to all Holders of
Securities in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee, every such
successor Trustee so appointed shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; provided that, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall
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duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder.
Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in the
preceding paragraph.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee, with the prior written consent of the Company and after
giving notice of the appointment described in this Section 614 in the manner
provided in Section 106 to all Holders of Securities, may appoint an
Authenticating Agent or Agents which shall be authorized to act on behalf of the
Trustee to authenticate Securities issued upon exchange, registration of
transfer or partial redemption thereof or pursuant to Section 306, and the
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be
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deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authenti cation executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate agency or corporate trust business of an Authenticating Agent,
shall continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the
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Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:
This is one of the Company's 9 3/4% Senior Subordinated Notes Due 2009
referred to in the within-mentioned Indenture.
The Chase Manhattan Bank,
As Trustee
By
--------------------------------------
As Authenticating Agent
By
--------------------------------------
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Company To Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee
(1) semiannually, not later than June 30 and December 30 in
each year, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders of Securities as of the
preceding June 15 or December 15, as the case may be, and
(2) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders
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received by the Trustee in its capacity as Security Registrar. The Trustee may
destroy any list furnished to it as provided in Section 701 upon receipt of a
new list so furnished.
The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee.
The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within
60 days after each May 15 following the date of this Indenture, deliver to
Holders a brief report, dated as of such May 15, which complies with the
provisions of such Section 313(a).
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when the Securities are listed on any stock
exchange.
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63
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not merge or consolidate with or into any other
entity (other than a merger of a Restricted Subsidiary into the Company) or
sell, transfer, assign, lease, convey or otherwise dispose of all or
substantially all of its Property or assets in any one transaction or series of
transactions unless:
(a) the entity formed by or surviving any such consolidation
or merger (if the Company is not the surviving entity) or the Person to
which such sale, assignment, transfer, lease or conveyance is made (the
"Surviving Entity") shall be a corporation organized and existing under
the laws of the United States of America or a State thereof or the
District of Columbia and such corporation expressly assumes, by
supplemental indenture in form 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
Securities, 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
Section 1008;
(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; and
(f) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
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64
stating that such consolidation, merger, sale, assignment, conveyance,
transfer or lease and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any sale, conveyance, transfer, assignment or lease of
all or substantially all of the Property or assets of the Company in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company is merged or to which such sale, conveyance, assignment,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a sale, conveyance, assignment, transfer
or lease of the Property or assets of the Company, the predecessor Person shall
be relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto or otherwise amend this
Indenture, in form satisfactory to the Trustee, for any of the following
purposes:
(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company herein and
in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of the Securities or to surrender any right or power herein
conferred upon the Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of the Securities; or
(4) to add to or change any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
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(5) to secure the Securities pursuant to the requirements of Section
1009 or otherwise; or
(6) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee pursuant to the requirements of Section 611; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such action pursuant
to this Clause (7) shall not adversely affect the interests of the Holders
of Securities in any material respect; or
(8) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the Trust Indenture Act; or
(9) to make any other change that does not adversely affect the
interests of any Holder of Securities in any material respect; or
(10) to provide for the issuance of additional Securities in accordance
with Section 301.
After an amendment under this Section becomes effective, the Company
shall mail to Holders of Securities a notice briefly describing such amendment.
The failure to give such notice to all Holders of Securities, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto, amendments to this Indenture or waivers for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of the Securities under this Indenture; provided, however, that no such
supplemental indenture, amendment or waiver shall, without the consent of the
Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or reduce the amount of the principal of any Security which would
be due and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 502 or alter the redemption or, except as
provided in clause (5) below, repurchase provisions with respect thereto,
or change the coin or currency in which
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66
any Security or any premium or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption, prepayment or
Change of Control, on or after the Redemption Date, Purchase Date or Change
of Control Payment Date, respectively);
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(3) modify any of the provisions of this Section, Section 513 or
Section 1018, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby;
(4) modify any of the provisions of this Indenture relating to the
subordination of the Securities or reduce the relative ranking of any
Securities in a manner adverse to Holders;
(5) following the mailing of a Prepayment Offer pursuant to Section
1012 or a Change of Control Offer pursuant to Section 1019, modify the
provisions of this Indenture with respect to such Prepayment Offer or
Change of Control Offer in a manner adverse in any material respect to such
Holder; or
(6) release any security that may have been granted in respect of the
Securities.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed amendment, waiver or supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Holders of Securities a notice briefly describing such amendment.
The failure to give such notice to all Holders of Securities, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such
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supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. No such supplemental indenture shall directly or
indirectly modify the provisions of Article Thirteen in any manner which might
terminate or impair the rights of the holders of Senior Indebtedness pursuant to
such subordination provisions without the consent of such holders.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture or amendment executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. Payment for Consent.
Neither the Company nor any Affiliate of the Company shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid to all Holders
that so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
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The Company covenants and agrees for the benefit of the Securities that
it will duly and punctually pay the principal of and any premium and interest on
the Securities in accordance with the terms of the Securities and this
Indenture. Principal, premium, if any, and interest shall be considered paid on
the date due if on such date the Trustee or Paying Agent (other than the Company
or its Wholly Owned Subsidiaries) holds in accordance with this Indenture money
sufficient to pay all principal, premium, if any, and interest then due and the
Trustee or such Paying Agent, as the case may be, is not prohibited from paying
such money to the Holders of Securities on that date pursuant to the terms of
this Indenture.
SECTION 1002. Registrar and Paying Agent.
The Company shall maintain in The City of New York an office or agency
where Securities may be presented for registration of transfer or for exchange
(the "Registrar") and an office or agency where Securities may be presented for
payment (the "Paying Agent"). The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the Trust Indenture Act. Such agreement shall
implement the provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee of the name and address of any such agent. If
the Company fails to maintain or act as Registrar or Paying Agent, the Trustee
shall act as such and shall be entitled to appropriate compensation therefor
pursuant to Section 607. The Company or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or
transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 1003. Money for Securities Payments To Be Held in Trust.
If the Company or any of its Wholly Owned Subsidiaries shall at any
time act as Paying Agent, it will, on or before each due date of the principal
of or any premium or interest on any of the Securities, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal and any premium and interest so becoming due until such sums shall
be paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or prior to each due date of the principal of or any
premium or interest on any Securities, deposit with a Paying Agent a sum
sufficient to pay such amount,
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69
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company will cause each Paying Agent for the Securities other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will (1) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (2) during the continuance
of any default by the Company (or any other obligor upon the Securities) in the
making of any payment in respect of the Securities, upon the written request of
the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent for payment in respect of the Securities.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
The Trustee and the Paying Agent shall promptly pay to the Company upon
Company Request any money or securities held by them at any time in excess of
amounts required to pay principal of, premium, if any, or interest on the
Securities.
Any money deposited with the Trustee or any other Paying Agent, or then
held by the Company, in trust for the payment of the principal of or any premium
or interest on any Security and remaining unclaimed for one year after such
principal, premium or interest has become due and payable may be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, shall at the expense of the Company cause
to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in The
City of New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company ending after the
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date hereof, an Officers' Certificate, stating whether or not to the best
knowledge of the signers thereof the Company is in default in the performance
and observance of any of the terms, provisions and conditions of this Indenture
(without regard to any period of grace or requirement of notice provided
hereunder) and, if the Company shall be in default, specifying all such defaults
and the nature and status thereof of which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
SECTION 1007. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
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SECTION 1008. Limitation on Indebtedness.
The Company shall not, and it shall 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.
SECTION 1009. Limitation on Liens.
The Company shall 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 Securities 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 Securities and other obligations
arising under this Indenture;
(e) Liens to secure any permitted extension, renewal, refinancing,
refunding or exchange (or successive extensions, renewals, refinancings,
refundings or exchanges), in whole or in part, of or for any Indebtedness
secured by Liens referred to in clauses (a) through (d) of this Section 1009;
provided, however, that (i) such new Lien shall be limited to all or part of the
same Property that secured the original Lien, plus improvements on such Property
and (ii) the Indebtedness secured by such Lien at such time is not increased to
any amount greater than the sum of (A) the outstanding principal amount or, if
greater, committed amount of the Indebtedness secured by Liens described under
clauses (a) through (d) of this Section 1009 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;
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(f) any Lien incidental to the normal conduct of the business of the
Company, the ownership of its property or the conduct in the ordinary course of
its business (including, without limitation, (i) easements, rights of way and
similar encumbrances, (ii) rights of lessees under leases, (iii) rights of
collecting banks having rights of setoff, revocation, refund or chargeback with
respect to money or instruments of the Company or on deposit with or in the
possession of such banks, (iv) Liens imposed by law, including, without
limitation, Liens under workers' compensation or similar legislation and
mechanics', carriers', warehousemen's, materialmen's, suppliers' and vendors'
Liens, (v) Oil and Gas Liens, and (vi) Liens Incurred to secure performance of
obligations with respect to statutory or regulatory requirements, performance or
return-of-money bonds, surety bonds or other obligations of a like nature and
Incurred in a manner consistent with industry practice) 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 Section 1008;
(j) Liens in connection with Sale and Leaseback Transactions permitted
pursuant to Section 1008;
(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
Section 1010.
SECTION 1010. Limitation on Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any
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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 Section 1008; or
(c) the aggregate amount expended or declared for all Restricted
Payments from December 20, 1995 would exceed the sum of (i) $25 million, (ii)
100% 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% of the aggregate Consolidated Net Income of the Company
(or, if Consolidated Net Income shall be a deficit, less 100% 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.
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.
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SECTION 1011. Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries.
The Company will not (a) permit any Restricted Subsidiary to issue any
Capital Stock other than to the Company or one of its Wholly Owned Subsidiaries
or (b) permit any Person other than the Company or a Restricted Subsidiary to
own any Capital Stock of any other Restricted Subsidiary (other than directors'
qualifying shares), except, in each case, for (i) a sale of the Capital Stock of
a Restricted Subsidiary owned by the Company or its Restricted Subsidiaries
effected in accordance with Section 1012, (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 under this Section 1011 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
Section 1010.
SECTION 1012. Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, consummate any Asset Sale after the Issue Date, 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 Securities) 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% of Adjusted Consolidated Net Tangible Assets.
(b) The Net Available Cash from Asset Sales may be applied by the
Company or a Restricted Subsidiary, to the extent the
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Company or such Restricted Subsidiary elects (or is required by the terms of any
Senior Indebtedness), (A) to prepay, repay or purchase Senior Indebtedness or
Indebtedness of a Restricted Subsidiary (in each case excluding Indebtedness
owed to the Company or an Affiliate of the Company); (B) to reinvest in
Additional Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Available Cash received by the Company or another
Restricted Subsidiary); or (C) if there are no 9% Notes or 85/8% Notes
outstanding, to purchase Securities (excluding Securities owned by the Company
or an Affiliate of the Company).
(c) 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 9% Indenture 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%
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 Securities 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 (the "Prepayment Offer"), on a pro rata basis, the
Securities and any then outstanding Pari Passu Indebtedness (other than the 9%
Notes), at a purchase price of at least 100% of their principal amount plus
accrued and unpaid interest thereon (if any) to the Purchase Date. Such
Prepayment Offer with respect to the Securities shall be made in accordance with
the procedures (including prorating in the event of oversubscription) set forth
herein. If the aggregate principal amount of Securities surrendered for purchase
by Holders thereof exceeds the pro rata amount of Remaining Excess Proceeds
allocated for the purchase thereof, then the Trustee shall select the Securities
to be purchased pro rata according to principal amount with such adjustments as
may be deemed appropriate by the Company so that any Securities in denominations
of $1,000, or integral multiples thereof, shall be purchased. 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 Securities have
been given the opportunity to tender their Securities 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.
(d) 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 9% Indenture, the Company shall, if it is obligated to apply an
amount equal to any Remaining Excess Proceeds (or any portion thereof) to fund
an
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offer to purchase the Securities, send a Prepayment Offer Notice to the Holders
of Securities. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Prepayment Offer Notice of the Company's obligation to make a Prepayment
Offer, and the Prepayment Offer Notice shall be mailed by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the Company.
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 Securities 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.
Notwithstanding the foregoing provisions of this clause (d), if any
Security (or any portion thereof) accepted for payment shall not be so paid
pursuant to the provisions described in the preceding paragraph, then, from the
Purchase Date until the date on which the principal of and premium (if any) and
interest on such Security is paid, interest shall be paid on the unpaid
principal and premium (if any) and, to the extent permitted by law, on any
accrued but unpaid interest thereon, in each case, at the rate borne by such
Security.
SECTION 1013. Incurrence of Layered Indebtedness.
The Company shall 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 Securities
in right of payment.
SECTION 1014. Transactions with Affiliates.
The Company shall not, and shall 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
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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 (including a
majority of the disinterested members of the Board of Directors) 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 Board Resolution 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 (including a majority of
the disinterested members of the Board of Directors) 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 Board Resolution.
The limitations of the preceding paragraph do not apply to (a) the
payment of reasonable and customary regular fees to directors of the Company or
any of its Restricted Subsidiaries who are not employees of the Company or any
of its Restricted Subsidiaries, (b) indemnities of officers and directors of the
Company or any Subsidiary consistent with such Person's bylaws and applicable
statutory provisions, (c) any employment agreement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted Subsidiary,
(d) loans made (i) to officers and directors of the Company or any Subsidiary
approved by the Board of Directors (or by a duly authorized officer), the
proceeds of which are used solely to exercise stock options received pursuant to
an employee stock option plan or other incentive plan, in a principal amount not
to exceed the exercise price of such stock options or (ii) to refinance loans,
together with accrued interest thereon, made pursuant to this clause (d), (e)
advances and loans to officers and directors of the Company or any Subsidiary in
the ordinary course of business, provided such loans and advances do not exceed
$3.0 million at any one time outstanding, or (f) transactions with Restricted
Subsidiaries.
SECTION 1015. Limitation on Restrictions on Distributions from Restricted
Subsidiaries.
The Company shall not, and shall 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
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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 Section 1008 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) above, 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
Securities 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 Section 1009, (ii) any encumbrance or restriction in connection
with an acquisition of Property, so long as such encumbrance or restriction
relates solely to the Property so acquired and was not created in connection
with or in anticipation of such acquisition, (iii) customary provisions
restricting subletting or assignment of leases and customary provisions in other
agreements that restrict assignment of such agreements or rights thereunder,
(iv) any encumbrance or restriction due to applicable law, (v) customary
restrictions contained in asset sale agreements limiting the transfer of such
assets pending the closing of such sale and (vi) restrictions contained in
purchase money obligations for Property acquired in the ordinary course of
business with respect to transfers of such Property.
SECTION 1016. 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
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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 Section
1010. 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 pursuant to a Board Resolution 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 Section 1008 and (ii) no Default or Event of Default would occur
or be continuing.
SECTION 1017. Commission Reports.
The Company shall file with the Trustee and provide Holders of
Securities, within 15 days after it files them with the Commission, copies of
its annual report and the information, documents and other reports which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act, and, with respect to the annual consolidated financial
statements only, a report thereon by the Company's independent auditors.
Notwithstanding that the Company may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall continue to file with the Commission and provide the Trustee and Holders
of Securities with the annual reports and the information, documents and other
reports which are specified in Sections 13 and 15(d) of the Exchange Act, and,
with respect to the annual consolidated financial statements only, a report
thereon by the Company's independent auditors. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers' Certificates). The Company also shall comply with the other
provisions of ss. 314(a) of the Trust Indenture Act.
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SECTION 1018. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in any covenant provided pursuant to
Sections 901(2) for the benefit of the Holders or in any of Sections 1008
through 1017 (second sentence only), inclusive, if before the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders and on behalf of the
Holders of all Securities, either waive such compliance in such instance or
generally waive compliance with such term, provision or condition, but no such
waiver shall extend to or affect such term, provision or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and effect.
SECTION 1019. Mandatory Repurchase Upon a Change of Control.
(a) Upon the occurrence of a Change of Control, the Company will, in
accordance with Section 1019(b), notify each Holder, with a copy of such notice
to the Trustee, in writing of the occurrence of a Change of Control and
accompanying such notice will be an offer to purchase the Securities (a "Change
of Control Offer") at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon to the date of purchase.
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder stating: (1) that a Change of Control has occurred
and a Change of Control Offer is being made pursuant to this Section and that
all Securities (or portions thereof) timely tendered will be accepted for
payment; (2) the purchase price and the purchase 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 Security (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 Securities (or portions thereof) not tendered will continue
to accrue interest; (5) a description of the transaction or transactions
constituting the Change of Control; (6) the procedures that Holders of
Securities must follow in order to tender their Securities (or portions thereof)
for payment and the procedures that Holders of Securities must follow in order
to withdraw an election to tender Securities (or portions thereof) for payment;
and (7) that in case of any Holder whose Security is purchased only in part, the
Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge, a new Security or Securities, of
any authorized denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of the
Security so tendered.
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(c) On or prior to the Change of Control Payment Date, the Company
shall irrevocably deposit with the Trustee or with a Paying Agent (or, if the
Company or any of its Wholly Owned Subsidiaries is acting as Paying Agent,
segregate and hold in trust) in cash an amount equal to the purchase price plus
accrued and unpaid interest, if any, payable to the Holders entitled thereto, to
be held for payment in accordance with the provisions of this Section. Holders
electing to have a Security (or portion thereof) purchased will be required to
surrender the Security, with an appropriate form duly completed, to the Company
at the address specified in the notice at least five Business Days prior to the
Change of Control Payment Date. Holders will be entitled to withdraw their
election if the Trustee or the Company receives not later than three Business
Days prior to the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security (or
portion thereof) purchased.
(d) On the Change of Control Payment Date, the Company shall deliver to
the Trustee the Securities or portions thereof which have been properly tendered
to and are to be accepted by the Company for payment. The Trustee shall, on the
Change of Control Payment Date, mail or deliver payment to each tendering Holder
of the purchase price. In the event that the aggregate purchase price of the
Securities delivered by the Company to the Trustee is less than the amount
deposited with the Trustee, the Trustee shall deliver the excess to the Company
immediately after the Change of Control Payment Date.
(e) 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 purchase of Securities 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.
Notwithstanding the foregoing provisions of this Section, if any
Security (or any portion thereof) accepted for payment shall not be so paid
pursuant to the provisions described in paragraph (d), then, from the Change of
Control Payment Date until the date on which the principal of and premium (if
any) and interest on such Security is paid, interest shall be paid on the unpaid
principal and premium (if any) and, to the extent permitted by law, on any
accrued but unpaid interest thereon, in each case, at the rate borne by such
Security.
SECTION 1020. Further Instruments and Acts.
Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may
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be reasonably necessary or proper to carry out more effectively the purpose of
this Indenture.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Election To Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company
of (i) less than all the Securities (including any such redemption affecting
only a single Security), the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company or (ii) all the Securities, the Company
shall, at least 45 days prior to the Redemption Date fixed by the Company (in
either case, unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Securities to be redeemed. In connection with any redemption pursuant to the
fourth paragraph of the reverse of the Securities, such notice shall be
accompanied by an Officers' Certificate to the effect that all conditions
precedent provided for herein to the right of the Company to redeem the
Securities pursuant to such paragraph have been complied with.
SECTION 1102. Selection by Trustee of Securities To Be Redeemed.
If less than all the Securities are to be redeemed (unless such
redemption affects only a single security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of a portion of the principal
amount of any Security, provided that the unredeemed portion of the principal
amount of any Security shall be in an authorized denomination (which shall not
be less than the minimum authorized denomination) for such Security.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of
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Securities shall relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of the principal amount of such Securities
which has been or is to be redeemed.
SECTION 1103. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number) and state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities consisting of
more than a single Security are to be redeemed, the identification
(and, in the case of partial redemption of any such Securities, the
principal amounts) of the particular Securities to be redeemed and, if
less than all the Outstanding Securities consisting of a single
Security are to be redeemed, the principal amount of the particular
Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after
said date, and
(5) the place or places where each such Security is to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
SECTION 1104. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company or any of its Wholly Owned
Subsidiaries is acting as Paying Agent, segregate and hold in trust as provided
in Section 1003) an amount of money sufficient to pay the Redemption Price of,
and (except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that date. Upon
Company Order, the Paying Agent shall promptly return to the Company any money
so deposited which is not required for such purpose.
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SECTION 1105. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest or the Paying Agent is prohibited from making such payment pursuant to
the terms of this Indenture) such Securities shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with said notice,
such Security shall be paid by the Company at the Redemption Price, together
with accrued interest to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate borne by the Security.
SECTION 1106. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security or
Securities of the same series, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
SECTION 1107. Purchase of Securities.
The Company shall have the right at any time and from time to time to
purchase Securities in the open market or otherwise at any price.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Defeasance and Discharge.
The Company shall be deemed to have been discharged from its
obligations, and the provisions of Article Thirteen shall cease to be effective,
with respect to the Securities as provided in this Section on and after the date
the conditions set forth in
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Section 1203 are satisfied (hereinafter called "Defeasance"). For this purpose,
such Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Securities and to have
satisfied all its other obligations under the Securities and this Indenture
insofar as the Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), subject to
the following which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of the Securities to receive, solely from
the trust fund described in Section 1203 and as more fully set forth in such
Section, payments in respect of the principal of and any premium and interest on
the Securities when payments are due, (2) the Company's obligations with respect
to the Securities under Sections 304, 305, 306, 1002 and 1003, (3) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (4) this
Article. Subject to compliance with this Article, the Company may exercise its
option (if any) to have this Section applied to any Securities notwithstanding
the prior exercise of its option (if any) to have Section 1202 applied to the
Securities.
SECTION 1202. Covenant Defeasance.
(1) The Company shall be released from its obligations under Sections
1007 through 1016, inclusive, and 1019, and Sections 801(d) and 801(e), and any
covenants provided pursuant to Section 901(2) for the benefit of the Holders of
the Securities, (2) the occurrence of any event specified in Sections 501(3)
(with respect to any of Sections 801(d) and 801(e), Sections 1007 through 1016,
inclusive, and 1019, and any such covenants provided pursuant to Section
901(2)), 501(4) and 501(5) shall be deemed not to be or result in an Event of
Default and (3) the provisions of Article Thirteen shall cease to be effective,
in each case with respect to the Securities as provided in this Section on and
after the date the conditions set forth in Section 1203 are satisfied
(hereinafter called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that, with respect to the Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent so specified
in the case of Section 501(3)) or Article Thirteen, whether directly or
indirectly by reason of any reference elsewhere herein to any such Section or
Article or by reason of any reference in any such Section or Article to any
other provision herein or in any other document, but the remainder of this
Indenture and the Securities shall be unaffected thereby.
SECTION 1203. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section
1201 or Section 1202 to the Securities:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose
of making the following payments,
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specifically pledged as security for, and dedicated solely to, the
benefits of the Holders of the Securities, money in an amount, 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, not later than one day before the due date of
any payment, money in an amount, in each case sufficient, in the
opinion of a United States nationally recognized firm of independent
public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee to pay and discharge, the principal of and any
premium and interest on the Securities at Stated Maturity or on earlier
redemption in accordance with the terms of this Indenture and the
Securities.
(2) With respect to Section 1201, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that (i)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (ii) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the Securities will not
recognize gain or loss for Federal income tax purposes as a result of
the deposit, Defeasance and discharge to be effected with respect to
the Securities 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.
(3) With respect to Section 1202, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Securities will not recognize gain or loss for Federal
income tax purposes as a result of the deposit and Covenant Defeasance
to be effected with respect to the Securities and will be subject to
Federal income tax on the same amount, in the same manner and at the
same times as would be the case if such deposit and Covenant Defeasance
were not to occur.
(4) The Company shall have delivered to the Trustee an
Officers' Certificate to the effect that the Securities, if then listed
on any securities exchange, will not be delisted as a result of such
deposit.
(5) No Default shall have occurred and be continuing at the
time of such deposit or, with regard to any such event specified in
Sections 501(6) and 501(7), at any time on or prior to the 90th day
after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the
meaning of such Act).
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(7) Such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act unless such trust
shall be registered under such Act or exempt from registration
thereunder.
(9) At the time of such deposit, (A) no default in the payment
of any principal of or premium or interest on any Senior Indebtedness
shall have occurred and be continu ing, (B) no event of default with
respect to any Senior Indebtedness shall have resulted in such Senior
Indebtedness becoming, and continuing to be, due and payable prior to
the date on which it would otherwise have become due and payable
(unless payment of such Senior Indebtedness has been made or duly
provided for), (C) no other event of default with respect to any Senior
Indebtedness shall have occurred and be continuing permitting (after
notice or lapse of time or both) the holders of such Senior
Indebtedness (or a trustee on behalf of such holders) to declare such
Senior Indebtedness due and payable prior to the date on which it would
otherwise have become due and payable and (D) the Company is not
prohibited from making such deposit for such purpose pursuant to the
terms of this Indenture.
(10) If the Securities are to be redeemed prior to their
Stated Maturity, notice of such redemption shall have been duly given
pursuant to this Indenture or provision therefor satisfactory to the
Trustee shall have been made.
(11) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
SECTION 1204. Deposited Money and U.S. Government Obligations To Be Held in
Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee pursuant to Section 1203 in respect of any Securities shall be
held in trust and applied by the Trustee, in accordance with the provisions of
the Securities and this Indenture, to the payment, either directly or through
any such Paying Agent as the Trustee may determine, to the Holders of the
Securities, of all sums due and to become due thereon in respect of principal
and any premium and interest, but money so held in trust need not be segregated
from other funds except to the extent required by law. Money and U.S. Government
Obligations so held in trust shall not be subject to the provisions of Article
Thirteen.
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The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1203 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1203 with
respect to any Securities which, in the opinion of a United States nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect the Defeasance or
Covenant Defeasance, as the case may be, with respect to the Securities.
SECTION 1205. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and the Securities from which the Company has been discharged or
released pursuant to Section 1201 or 1202 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to the
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1204 with respect to the Securities
in accordance with this Article; provided, however, that if the Company makes
any payment of principal of or any premium or interest on any Security following
such reinstatement of its obligations, the Company shall be subrogated to the
rights (if any) of the Holders of the Securities to receive such payment from
the money so held in trust.
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 1301. Agreement to Subordinate.
The Company covenants and agrees, and each Holder by accepting a
Security agrees, that the Indebtedness evidenced by the Securities is
subordinated in right of payment, to the extent and in the manner provided in
this Article Thirteen (subject to the provisions of Articles Four and Twelve),
to the prior payment of all Senior Indebtedness and that the subordination is
for the benefit of and enforceable by the holders of Senior Indebtedness. The
Securities shall in all respects rank pari passu with all other existing and
future senior subordinated Indebtedness of the Company (including, without
limitation, the 9% Notes and the 85/8% Notes) and only Indebtedness of the
Company which is Senior
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Indebtedness shall rank senior to the Securities in accordance with the
provisions set forth herein. All provisions of this Article Thirteen shall be
subject to Section 1312.
SECTION 1302. Liquidation, Dissolution and Bankruptcy.
Upon any payment or distribution of the assets of the Company to
creditors 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 (each such event, if any,
herein sometimes referred to as a "Proceeding"):
(1) holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of the Senior Indebtedness before
Holders shall be entitled to receive any payment of principal of, or
premium, if any, or interest on the Securities; and
(2) until the Senior Indebtedness is paid in full in cash, any
distribution to which Holders would be entitled but for this Article
Thirteen shall be made to holders of Senior Indebtedness as their
interests may appear, except that Holders 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 Securities.
For purposes of this Section "paid in full" or "payment in full", as used with
respect to Senior Indebtedness, means the receipt of cash in payment of the
principal amount of the Senior Indebtedness and premium, if any, and interest
thereon (including any interest thereon accruing after the commencement of any
Proceeding) to the date of such payment.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the sale, conveyance, assignment, lease or transfer of all or substantially all
of its Property or assets to another Person upon the terms and conditions set
forth in Article Eight shall not be deemed a Proceeding for the purposes of this
Section if the Person formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, conveyance, assignment, lease or
transfer such Property or assets, as the case may be, shall, as a part of such
consolidation, merger, sale, conveyance, assignment, lease or transfer, comply
with the conditions set forth in Article Eight.
SECTION 1303. Default on Senior Indebtedness.
The Company may not pay the principal of, premium, if any, or interest
on, the Securities or make any deposit pursuant to Sections 1203 or 401 and may
not repurchase, redeem or otherwise retire any Securities (collectively, "pay
the Securities") if (a) any principal, premium or interest in respect of Senior
Indebtedness is not paid when due (after giving effect to any
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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 Securities 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 Securities 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 (or earlier if such Payment Blockage
Period is terminated (i) by written notice to the Trustee and the Company from
the Representative which gave such Payment Blockage Notice, (ii) because the
default specified in such Payment Blockage Notice 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 shall have accelerated the maturity of such Designated Senior
Indebtedness and not rescinded such acceleration, the Company may resume payment
on the Securities after the end of such Payment Blockage Period (unless
otherwise prohibited pursuant to the first sentence of this Section). Not more
than one Payment Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to any number of issues of
Designated Senior Indebtedness during such period.
SECTION 1304. Acceleration of Payment of Securities.
If payment of the Securities is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the Representative of
each issue of Designated Senior Indebtedness of the acceleration. The Company
may not pay the Securities until five days after such notice is received and,
thereafter, may pay the Securities only if this Article Thirteen otherwise
permits the payment at that time.
SECTION 1305. When Distribution Must Be Paid Over.
If a distribution is made to Holders that because of this Article
Thirteen should not have been made to them, the Holders who receive the
distribution shall hold it in trust for holders of Senior Indebtedness and pay
it over to them as their interests may appear.
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SECTION 1306. Subrogation.
After all Senior Indebtedness is paid in full and until the Securities
are paid in full, the Holders shall be subrogated to the rights of holders of
Senior Indebtedness to receive distributions applicable to Senior Indebtedness.
A distribution made under this Article Thirteen to holders of Senior
Indebtedness which otherwise would have been made to Holders is not, as between
the Company and Holders, a payment by the Company on Senior Indebtedness.
SECTION 1307. Relative Rights.
This Article Thirteen defines the relative rights of Holders and
holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the obligation
of the Company, which is absolute and unconditional, to pay principal
of, premium, if any, and interest on the Securities in accordance with
their terms; or
(2) except as set forth in Section 1304, prevent the Trustee
or any Holder from exercising its available remedies upon a Default,
subject to the rights of holders of Senior Indebtedness to receive
distributions otherwise payable to Holders.
SECTION 1308. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 1309. Rights of Trustee and Paying Agent.
Notwithstanding Section 1303 (but subject to Section 1305), the Trustee
or Paying Agent may continue to make payments on the Securities and shall not be
charged with knowledge of the existence of facts that would prohibit the making
of any such payments unless, not less than two Business Days prior to the date
of such payment, a Trust Officer of the Trustee receives notice satisfactory to
it that payments may not be made under this Article Thirteen. The Company, the
Security Registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness may give the notice; provided, however, that, if an issue of Senior
Indebtedness has a Representative, only the Representative may give the notice.
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SECTION 1310. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
SECTION 1311. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments
from money or the proceeds of U.S. Government Obligations held in trust under
Article Four or Twelve by the Trustee for the payment of principal of and
interest on the Securities shall not be subordinated to the prior payment of any
Senior Indebtedness or subject to the restrictions set forth in this Article
Thirteen, and none of the Holders or the Trustee shall be obligated to pay over
any such amount to the Company or any holder of Senior Indebtedness of the
Company or any other creditor of the Company or any Representative.
SECTION 1312. Trustee Entitled To Rely.
Upon any payment or distribution pursuant to this Article Thirteen, the
Trustee and the Holders shall be entitled to rely (i) upon any order or decree
of a court of competent jurisdiction in which any proceedings of the nature
referred to in Section 1302 are pending, (ii) upon a certificate of the
liquidating trustee, receiver, trustee in bankruptcy or agent or other Person
making such payment or distribution to the Trustee or to the Holders or (iii)
upon the Representatives for the holders of Senior Indebtedness or such holders
if there is no Representative with respect to any Senior Indebtedness, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Thirteen. In the event that the Trustee determines, in good faith, that evidence
is required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Thirteen, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and other facts pertinent to the rights of such
Person under this Article Thirteen, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment. The provisions of Sections
601 and 603 shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article Thirteen.
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SECTION 1313. Trustee To Effectuate Subordination.
Each Holder by accepting a Security authorizes and directs the Trustee
on his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Holders and the holders
of Senior Indebtedness as provided in this Article Thirteen and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 1314. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Holders or the Company or any other
Person, money or assets to which any holders of Senior Indebtedness shall be
entitled by virtue of this Article Thirteen or otherwise. With respect to the
holders of Senior Indebtedness, the Trustee undertakes to perform or to observe
only such of its covenants or obligations as are specifically set forth in this
Article Thirteen and no implied covenants or obligations with respect to holders
of Senior Indebtedness shall be read into this Indenture against the Trustee.
SECTION 1315. Reliance by Holders of Senior Indebtedness on Subordination
Provisions.
Each Holder by accepting a Security acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness, whether such
Senior Indebtedness was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.
SECTION 1316. Proofs of Claim.
In the event that the Company is subject to any proceeding under any
bankruptcy, insolvency or analogous laws and the Holders and the Trustee fail to
file any proof of claim permitted to be filed in such proceeding with respect to
the Securities, then any Representative of Senior Indebtedness or any holder
thereof if there is no Representative therefor may file such proof of claim no
earlier than the later of (i) the expiration of 15 days after such
Representative notified the Trustee and the Company of its intention to do so
and (ii) 30 days preceding the last day it is permitted to file such claim.
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SECTION 1317. Rights of Trustee as Holder of Senior Indebtedness; Preservation
of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
SECTION 1318. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that neither Section 1309 nor Section 1312 shall apply to the Company
or any Wholly Owned Subsidiary if it or such Wholly Owned Subsidiary acts as
Paying Agent.
SECTION 1319. Defeasance of this Article Thirteen.
The subordination of the Securities provided by this Article Thirteen
is expressly made subject to the provisions for Defeasance or Covenant
Defeasance in Article Twelve hereof and, anything herein to the contrary
notwithstanding, upon the effectiveness of any such Defeasance or Covenant
Defeasance, the Securities then outstanding shall thereupon cease to be
subordinated pursuant to this Article Thirteen.
ARTICLE FOURTEEN
CONCERNING THE HOLDERS
SECTION 1401. Identification of Company-Owned Securities.
Upon request of the Trustee, the Company shall furnish to the Trustee
promptly an Officers' Certificate listing and identifying all Securities, if
any, known by the Company to be owned or held by or for the account of the
Company or any other obligor on the Securities or by any Affiliate of the
Company or any other obligor on the Securities; and, subject to the provisions
of Section 601, the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Securities not listed therein are Outstanding for the purpose of
any such determination.
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SECTION 1402. Revocation of Consents.
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 104, of the taking of any action by the Holders of the
percentage in aggregate principal amount of the Securities specified in this
Indenture in connection with such action, any Holder of a Security, except as
provided in Section 104 with respect to record dates, the serial number of which
is shown by the evidence to be included in the Securities the Holders of which
have consented to or are bound by consents to such action may, by filing written
notice with the Trustee at its Corporate Trust Office and upon proof of holding
as provided in Section 104, revoke such action so far as concerns such Security.
ARTICLE FIFTEEN
HOLDERS' MEETINGS
SECTION 1501. Purposes of Meetings.
A meeting of Holders of Securities may be called at any time and from
time to time pursuant to the provisions of this Article Fifteen for any of the
following purposes:
(1) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the waiving of any
Default hereunder and its consequences, or to take any other action
authorized to be taken by Holders of Securities pursuant to any of the
provisions of Article Five;
(2) to remove the Trustee and nominate a successor
trustee pursuant to the provisions of Article Six;
(3) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to the provisions of
Section 902; or
(4) to take any other action authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of
the Securities under any other provision of this Indenture or under
applicable law.
SECTION 1502. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Holders of Securities to
take any action specified in Section 1501, to be held at such time and at such
place in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of the Holders of Securities, setting forth
the time and the place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be mailed to all Holders of Securities at
their addresses as they shall appear on the Security Register. Such notice shall
be mailed not less than 20 nor more than 180 days prior to the date fixed for
the
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meeting (or, in the case of a meeting of Holders with respect to the Securities
all or part of which are represented by a Global Security, not less than 20 nor
more than 40 days).
Upon the calling of a meeting of Holders with respect to the Securities
all or part of which are represented by a Global Security, a record date shall
be established for determining Holders of Outstanding Securities entitled to
vote at such meeting, which record date shall be the close of business on the
day the Trustee mails the notice of the Meeting of Holders. The Holders on such
record date, and their designated proxies, and only such Persons, shall be
entitled to vote at such meeting of Holders.
SECTION 1503. Call of Meetings by Company or Holders.
In case at any time the Company, pursuant to a resolution of its Board
of Directors, or the Holders, or their designated proxies, of at least 25% in
aggregate principal amount of the Outstanding Securities, shall have requested
the Trustee to call a meeting of the Holders, by written request setting forth
in reasonable detail the action proposed to be taken at the meeting and the
Trustee shall not have mailed the notice of such meeting within 20 days after
receipt of such request, then the Company or such Holders may determine the time
and the place in said Borough of Manhattan for such meeting and may call such
meeting to take any action authorized in Section 1501, by mailing notice thereof
as provided in Section 1502.
SECTION 1504. Qualifications for Voting.
To be entitled to vote at any meeting of Holders a Person shall (a) be
a Holder of one or more Securities or (b) be a Person appointed by an instrument
in writing as proxy by a Holder of one or more Securities; provided, however,
that in the case of any meeting of Holders with respect to the Securities all or
part of which are represented by a Global Security, only Holders, or their
designated proxies, of record of Outstanding Securities on the record date
established pursuant to Section 1502 hereof shall be entitled to vote at such
meeting. The only Persons who shall be entitled to be present or to speak at any
meeting of Holders shall be the Persons entitled to vote at such meeting and
their counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION 1505. Regulations.
Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Holders, in regard to proof of the holding of Securities and of the appointment
of proxies, and in regard to the appointment and duties of inspectors of votes,
the submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning
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the conduct of the meeting as it shall think fit. Except as otherwise permitted
or required by any such regulation, the holding of Securities shall be proved in
the manner specified in Section 104 and the appointment of any proxy shall be
proved in the manner specified in said Section 104 or by having the signature of
the Person executing the proxy witnessed or guaranteed.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman and a temporary secretary of the meeting, unless the meeting shall have
been called by the Company or by Holders as provided in Section 1503, in which
case the Company or the Holders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman and a temporary secretary. A
permanent chairman and a permanent secretary of the meeting shall be elected by
the Persons holding or representing a majority of the Outstanding Securities
represented at the meeting.
Subject to the provisions of Section 1504, at any meeting each Holder
or proxy shall be entitled to one vote for each $1,000 principal amount of
Securities held or represented by him; provided, however, that no vote shall be
cast or counted at any meeting in respect of any Security challenged as not
Outstanding and ruled by the permanent chairman (or the temporary chairman, if
no permanent chairman shall have been elected pursuant to this Section) of the
meeting to be not Outstanding. Neither the temporary chairman nor the permanent
chairman of the meeting shall have a right to vote other than by virtue of
Securities held by him or instruments in writing as aforesaid duly designating
him as the Person to vote on behalf of other Holders. Any meeting of Holders
duly called pursuant to the provisions of Section 1502 or 1503 may be adjourned
from time to time by the Persons holding or representing a majority of the
Securities represented at the meeting, whether or not constituting a quorum, and
the meeting may be held as so adjourned without further notice.
At any meeting of the Holders of Securities a quorum shall consist of
Holders present in person or by proxy and representing at least 25% in principal
amount of the Outstanding Securities. If a quorum of the Holders of Securities
shall not be present within 30 minutes from the time fixed for holding any
meeting, the meeting, if summoned by the Holders or pursuant to a request of the
Holders, shall be dissolved; but in any other case the meeting shall be
adjourned to the same day in the next week (unless such day is a Legal Holiday
in which case it shall be adjourned to the next following day thereafter that is
not a Legal Holiday) at the same time and place and no notice shall be required
to be given in respect of such adjourned meeting. At the adjourned meeting the
Holders of Securities present in person or by proxy shall form a quorum and may
transact the business for which the meeting was originally convened
notwithstanding that they may not represent 25% of the principal amount of the
Outstanding Securities.
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SECTION 1506. Voting.
The vote upon any resolutions submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the Holders
of Securities or of their representatives by proxy. The permanent chairman (or
the temporary chairman, if no permanent chairman shall have been elected
pursuant to Section 1505) of the meeting shall appoint two inspectors of votes
who shall count all votes cast at the meeting for or against any resolution and
who shall make and file with the permanent secretary (or the temporary
secretary, if no permanent secretary shall have been elected pursuant to Section
1505) of the meeting their verified written reports in duplicate of all votes
cast at the meeting. A record in duplicate of the proceedings of each meeting of
Holders shall be prepared by the permanent secretary (or the temporary
secretary, if no permanent secretary shall have been elected pursuant to Section
1505) of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 1502. The record shall be signed and verified by the
affidavits of the permanent chairman and the permanent secretary of the meeting
(or if no permanent chairman and/or permanent secretary shall have been elected
pursuant to Section 1505, then the temporary chairman and/or the temporary
secretary, as the case may be, shall take such action) and one of the duplicates
shall be delivered to the Company and the other to the Trustee to be preserved
by the Trustee, the latter to have attached thereto the ballots voted at the
meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 1507. No Delay of Rights by Meeting.
Nothing in this Article Fifteen contained shall be deemed or construed
to authorize or permit, by reason of any call of a meeting of Holders or any
rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Holders under any of the provisions of this
Indenture or of the Securities.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 1601. Indenture and Securities Solely Corporate Obligations.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, any supplemental indenture, or of any Security, or for any claim
based thereon or otherwise in
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respect thereof, shall be had against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation or Person, either directly or through the Company, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the obligations issued hereunder are solely corporate obligations,
and that no such personal liability whatever shall attach to, or is or shall be
incurred by, the incorporators, shareholders, officers or directors, as such, of
the Company or of any successor corporation or Person, or any of them, because
of the creation of the indebtedness hereby authorized, or under or by reason of
the obligations, covenants or agreements contained in this Indenture or any of
the Securities or implied therefrom; and that any and all such personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such incorporator,
shareholder, officer or director, as such, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Securities
or implied therefrom, are hereby expressly waived and released as a condition
of, and as a consideration for, the execution of this Indenture and the issue of
such Securities.
SECTION 1602. Execution in Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and have caused their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
VINTAGE PETROLEUM, INC.,
By /s/ S. Craig George
------------------------------------
By /s/ William C. Barnes
------------------------------------
Attest:
/s/ William C. Barnes
- ---------------------------------
THE CHASE MANHATTAN BANK, as Trustee,
By /s/ Lawrence O'Brien
------------------------------------
Attest:
/s/ William G. Keenan
- ---------------------------------
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STATE OF )
) SS.:
COUNTY OF )
Personally appeared before me, the undersigned authority in
and for the said county and state, on this 26th day of January 1999 within my
jurisdiction, the within named S. Craig George and William C. Barnes, who
acknowledged that they are President and Chief Executive Officer and Executive
Vice President, Chief Financial Officer and Secretary, respectively, of Vintage
Petroleum, Inc. and that for and on behalf of the said corporation, and as its
act and deed they executed the above and foregoing instrument, after first
having been duly authorized by said corporation so to do.
/s/ William J. Walsh
------------------------------
NOTARY PUBLIC
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STATE OF NEW YORK, )
) SS.:
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned authority in
and for the said county and state, on this 26th day of January 1999, within my
jurisdiction, the within named Lawrence O'Brien who acknowledged that he is a
Senior Trust Officer of The Chase Manhattan Bank and that for and on behalf of
the said corporation, and as its act and deed he executed the above and
foregoing instrument, after first having been duly authorized by said
corporation so to do.
/s/ William J. Walsh
---------------------------
NOTARY PUBLIC
<PAGE>
APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS
PURSUANT TO RULE 144A AND TO CERTAIN PERSONS IN
OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security
bearing, if required, the restricted securities legend set forth in Section
2.3(d).
"Depository" means The Depository Trust Company, its nominees
and their respective successors.
"Exchange Securities" means the 9 3/4% Senior Subordinated
Notes Due 2009 to be issued pursuant to this Indenture in connection with a
Registered Exchange Offer or a Private Exchange pursuant to a Registration
Rights Agreement.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchaser" means Warburg Dillon Read LLC.
"Initial Securities" means the 9 3/4% Senior Subordinated
Notes Due 2009, to be issued from time to time, in one or more series as
provided for in this Indenture.
"Private Exchange" means the offer by the Company, pursuant to
Section 2(f) of the Registration Rights Agreement dated January 20, 1999, or
pursuant to any similar provision of any other Registration Rights Agreement, to
issue and deliver to certain purchasers, in exchange for the Initial Securities
held by such purchasers as part of their initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Private Exchange Securities" means the 9 3/4% Senior
Subordinated Notes Due 2009 to be issued pursuant to this Indenture in
connection with a Private Exchange pursuant to a Registration Rights Agreement.
"Purchase Agreement" means the Purchase Agreement dated
January 20, 1999, between the Company and the Initial Purchaser relating to the
Original Securities, or any similar agreement relating to any future sale of
Initial Securities by the Company.
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2
"QIB" means a "qualified institutional buyer" as
defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to a Registration Rights Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated January 20, 1999, between the Company and the Initial Purchaser
relating to the Original Securities, or any similar agreement relating to any
additional Initial Securities.
"Securities" means the Initial Securities and the Exchange
Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depository), or any successor person
thereto, who shall initially be the Trustee.
"Shelf Registration Statement" means a registration statement
issued by the Company in connection with the offer and sale of Initial
Securities pursuant to a Registration Rights Agreement.
"Transfer Restricted Securities" means Definitive Securities
and any other Securities that bear or are required to bear the legend set forth
in Section 2.3(d) hereto.
1.2 Other Definitions
Defined in
Term Section:
---- --------
"Agent Members"............................................... 2.1(b)
"Global Security"............................................. 2.1(a)
"Regulation S" ............................................... 2.1
"Rule 144A"................................................... 2.1
2. The Securities
2.1 Form
The Initial Securities will be offered and sold by the
Company, from time to time, pursuant to one or more Purchase Agreements. The
Initial Securities will be resold initially only to QIBs in reliance on Rule
144A under the Securities Act ("Rule 144A") or in reliance on Regulation S under
the Securities Act ("Regulation S"). Initial Securities may thereafter be
transferred to, among others, QIBs, IAIs and purchasers in reliance on
Regulation S.
(a) Global Securities. Initial Securities shall be issued
initially in the form of one or more permanent global Securities in definitive,
fully registered form without interest
<PAGE>
3
coupons with the global securities legend and restricted securities legend set
forth in Exhibit 1 hereto (each, a "Global Security"), which shall be deposited
on behalf of the purchasers of the Initial Securities represented thereby with
the Securities Custodian, and registered in the name of the Depository or a
nominee of the Depository, duly executed by the Company and authenticated by the
Trustee as provided in this Indenture. The aggregate principal amount of the
Global Securities may from time to time be increased or decreased by adjustments
made on the records of the Trustee and the Depository or its nominee as
hereinafter provided. Beneficial interests in Initial Securities that are sold
to QIBs, that are sold pursuant to Regulation S of the Securities Act or that
are sold to IAIs will be represented by separate Global Securities.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b) and pursuant to a Company Order, authenticate and
deliver initially one or more Global Securities that (a) shall be registered in
the name of the Depository for such Global Security or Global Securities or the
nominee of such Depository and (b) shall be delivered by the Trustee to such
Depository or pursuant to such Depository's instructions or held by the Trustee
as Securities Custodian.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository or by the Trustee as Securities
Custodian or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices of such Depository governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in Section 2.3
or 2.4, owners of beneficial interests in Global Securities will not be entitled
to receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Original Securities for original issue in an aggregate principal amount of
$150,000,000, (2) subject to the terms of this Indenture, additional Initial
Securities, if and when issued, in an aggregate principal amount of up to
$50,000,000 and (3) Exchange Securities for issue only in a Registered Exchange
Offer or a Private Exchange pursuant to a Registration Rights Agreement, for a
like principal amount of Initial Securities, upon receipt of a Company Order.
Such order shall specify the amount of the Securities to be authenticated and
the date on which the original issue of Securities is to be
<PAGE>
4
authenticated and whether the Securities are to be Initial Securities or
Exchange Securities. The aggregate principal amount of Securities outstanding at
any time may not exceed $200,000,000, except as provided in Section 306 of this
Indenture. Notwithstanding anything to the contrary contained in this Appendix
or otherwise in this Indenture, there shall be allowed only one additional
issuance of Securities after the Issue Date, whether such additional Securities
are of the same or a different series than the Original Securities.
2.3 (a) Transfer and Exchange. (a) Transfer and Exchange
of Definitive Securities. When Definitive Securities are
presented to the Registrar or a co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if the requirements for such transaction set forth in Section 305
of this Indenture are met; provided, however, that the Definitive Securities
surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument
of transfer in form reasonably satisfactory to the Company and the
Registrar or co-registrar, duly executed and completed by the Holder
thereof or his attorney duly authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.3(b) or pursuant to clause (ii)(A), (ii)(B) or (ii)(C) below, and are
accompanied by the following additional information and documents, as
applicable:
(A) if such Definitive Securities are being delivered to the
Security Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such Holder to
that effect; or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect (in the form set forth on
the reverse of such Security); or
(C) if such Definitive Securities are being transferred
pursuant to an exemption from registration in accordance with Rule
144 under the Securities Act or in reliance on another exemption
from the registration requirements of the Securities Act, (i) a
certification to that effect (in the form set forth on the reverse
of such Security) and (ii) if the Company requests, an opinion of
counsel or other evidence reasonably satisfactory to it as to the
compliance
<PAGE>
5
with the restrictions set forth in the legend set forth in Section
2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form reasonably satisfactory to the Company and the Registrar or
co-registrar, together with:
(i) certification, in the form set forth on the reverse of
such Security, that such Definitive Security is being transferred (A)
to a QIB in accordance with Rule 144A, (B) to an IAI that has furnished
to the Trustee a signed letter containing certain representations and
agreements (the form of which has been approved by the Company) or (C)
outside the United States in an offshore transaction within the meaning
of Regulation S and in compliance with Rule 904 under the Securities
Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the
Global Security, such instructions to contain information regarding the
participant account of the Depository to be credited with such
increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the related Global
Security to be increased by the aggregate principal amount of the Definitive
Security to be exchanged and shall credit or cause to be credited to the account
of the Person specified in such instructions a beneficial interest in such
Global Security equal to the principal amount of the Definitive Security so
cancelled. If the related Global Security is not then outstanding and such
Global Security has not been previously exchanged pursuant to Section 2.4, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depository therefor. A transferor of a beneficial interest in a Global
Security shall deliver a written order given in accordance with the Depository's
procedures containing information regarding the participant account of the
Depository to be credited with a beneficial interest in the Global Security and
such account shall be credited in accordance with such instructions with a
beneficial interest in the Global Security and the account of the
<PAGE>
6
Person making the transfer shall be debited by an amount equal to the beneficial
interest in the Global Security being transferred. In the case of a transfer of
a beneficial interest in one Global Security to a beneficial interest in another
Global Security, the transferor and/or the transferee, as applicable, must
furnish a signed letter to the Trustee containing certain representations and
agreements as to compliance with the restrictions set forth in the legend set
forth in Section 2.3(d)(i) in connection with such transfer (the form of which
letter shall be obtained from the Company).
(ii) If the proposed transfer is a transfer of a beneficial
interest in one Global Security to a beneficial interest in another
Global Security, the Registrar shall reflect on its books and records
the date of such transfer and an increase in the principal amount of
the Global Security to which such interest is being transferred in an
amount equal to the principal amount of the interest to be so
transferred, and the Registrar shall reflect on its books and records
the date and a corresponding decrease in the principal amount of the
Global Security from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix A
(other than the provisions set forth in Section 2.4), a Global Security
may not be transferred as a whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor
Depository.
(iv) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 prior
to the consummation of a Registered Exchange Offer or the effectiveness
of a Shelf Registration Statement with respect to such Securities, such
Securities may be exchanged and subsequently transferred and exchanged
only in accordance with such procedures as are substantially consistent
with the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Securities
intended to ensure that such transfers comply with Rule 144A,
Regulation S or such other applicable exemption from registration under
the Securities Act, as the case may be) and such other procedures as
may from time to time be adopted by the Company.
(d) Legend.
(i) Except as permitted by the following para graphs (ii),
(iii), (iv) and (vi), each Security certificate evidencing Global
Securities (which represent Initial Securities) and the Definitive
Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
<PAGE>
7
HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE
COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF
(OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A LETTER WHICH MAY BE
OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE
TO THE COMPANY AND THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. EACH HOLDER OF THIS SECURITY AGREES IT WILL FURNISH TO
THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS
THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS
SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF,
BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF
THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT
PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (k) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT."
Each Definitive Security will also bear the following
additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
<PAGE>
8
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule
144 under the Securities Act:
(A) in the case of any Transfer Restricted Security
that is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security
for a Definitive Security that does not bear the legends set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
that is represented by a Global Security, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Definitive Security that does not bear the
legends set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security,
in either case, if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Security).
(iii) After a transfer of any Initial Securities during the
period of the effectiveness of a Shelf Registration Statement with
respect to such Initial Securities, all requirements pertaining to
legends on such Initial Security will cease to apply and the
requirements requiring that any such Initial Security be issued in
global form will continue to apply. Upon the occurrence of any of the
circumstances described in this paragraph, the Company will deliver an
Officers' Certificate to the Trustee instructing the Trustee to issue
Securities without legends.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which certain Holders of
such Initial Securities are offered Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities be issued in global form will
continue to apply, and Exchange Securities in global form will be
available to Holders that exchange such Initial Securities in such
Registered Exchange Offer. Upon the occurrence of any of the
circumstances described in this paragraph, the Company will deliver an
Officers' Certificate to the Trustee instructing the Trustee to issue
Securities without legends.
(v) Upon the consummation of a Private Exchange with respect
to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Private Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will continue to apply, and Private Exchange Securities
in global form with the restricted securities legend set forth in
Exhibit 1 hereto will be available to
<PAGE>
9
Holders that exchange such Initial Securities in such Private Exchange.
(vi) Upon a sale or transfer of any Initial Security acquired
pursuant to Regulation S, all requirements pertaining to legends on
such Initial Security will cease to apply, the requirements requiring
any such Initial Security be issued in global form will continue to
apply, and an Initial Security in global form without the restricted
security legend set forth in Exhibit 1 hereto will be available to the
transferee of the Holder of such Initial Securities.
(e) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for certificated or Definitive Securities, redeemed, repurchased or cancelled,
such Global Security shall be returned by the Depository to the Trustee for
cancellation or retained and cancelled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Security is exchanged for
certificated or Definitive Securities, redeemed, repurchased or cancelled, the
principal amount of Securities represented by such Global Security shall be
reduced and an adjustment shall be made on the books and records of the Trustee
(if it is then the Securities Custodian for such Global Security) with respect
to such Global Security, by the Trustee or the Securities Custodian, to reflect
such reduction.
(f) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of, or a
participant in the Depository or any other Person with respect to the
accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership interest
in the Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the Depository) of
any notice (including any notice of redemption or repurchase) or the
payment of any amount, under or with respect to such Securities. All
notices and communications to be given to the Holders and all payments
to be made to Holders under the Securities shall be given or made only
to the registered Holders (which shall be the Depository or its nominee
in the case of a Global Security). The rights of beneficial owners in
any Global Security shall be exercised only through the Depository
subject to the applicable rules and procedures of the Depository. The
Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers
between or among Depository participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are
<PAGE>
10
expressly required by, and to do so if and when expressly required by,
the terms of this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
2.4 Certificated Securities
(a) A Global Security deposited with the Depository or with
the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred
to the beneficial owners thereof in the form of certificated Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depository notifies the Company that it is
unwilling or unable to continue as a Depository for such Global Security or if
at any time the Depository ceases to be a "clearing agency" registered under the
Exchange Act, and a successor depositary is not appointed by the Company within
90 days of such notice or after it becomes aware of such ineligibility, or (ii)
an Event of Default has occurred and is continuing or (iii) the Company, in its
sole discretion, notifies the Trustee in writing that it elects to cause the
issuance of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depository to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Security, an equal aggregate
principal amount of certificated Securities of authorized denominations. Any
portion of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the Depository shall
direct. Any certificated Initial Security delivered in exchange for an interest
in the Global Security shall, except as otherwise provided by Section 2.3(d),
bear the restricted securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make
available to the Trustee a reasonable supply of certificated Securities in
definitive, fully registered form without interest coupons.
<PAGE>
EXHIBIT 1
to APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR
A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY
BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY
OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING
THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A LETTER
WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (5) PURSUANT TO AN
<PAGE>
2
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. EACH HOLDER OF
THIS SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH
CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITU TIONAL
BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
[Definitive Securities Legend]
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.]
<PAGE>
-------------------------
9 3/4% Senior Subordinated Note Due 2009
-------------------------
No. _______ [up to]* $_______
CUSIP No. [ ]
VINTAGE PETROLEUM, INC., a Delaware corporation (herein called
the "Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
________________ or registered assigns, the principal sum [set forth in the
attached Schedule of Increases and Decreases in Global Security]* [of
$___________]** on June 30, 2009, and to pay interest thereon from January 26,
1999, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semiannually in arrears on June 30 and December 30 in
each year, commencing June 30, 1999, at the rate of 9 3/4% per annum, both
before and after default, with interest upon overdue interest at the same rate
(to the extent legally permitted) until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the June 15 or December 15 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan in The City of New York,
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest
- --------
* Insert for Global Securities
** Insert for Certificated Securities
<PAGE>
2
may be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
VINTAGE PETROLEUM, INC.
By
-------------------------------------
By
-------------------------------------
This is one of the Company's 9 3/4% Senior Subordinated Notes
Due 2009 referred to in the within-mentioned Indenture.
Dated:
The Chase Manhattan Bank, As Trustee
By
--------------------------------------
Authorized Officer
<PAGE>
3
[FORM OF REVERSE OF INITIAL SECURITY]
This Security is one of a duly authorized issue of securities
of the Company (herein called the "Securities"), issued under an Indenture,
dated as of January 26, 1999 (herein called the "Indenture", which term shall
have the meaning assigned to it in such instrument), between the Company and The
Chase Manhattan Bank, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), and reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness and the Holders of the Securities and of the
terms upon which the Securities are, and are to be, authenticated and delivered.
[This Security is one of the Original Securities referred to
in the Indenture issued in an aggregate principal amount of $150,000,000. The
Securities include the Original Securities, up to $50,000,000 aggregate
principal amount of additional Initial Securities that may be issued under the
Indenture and any Exchange Securities issued in exchange for Initial Securities.
The Original Securities, such additional Initial Securities and the Exchange
Securities are treated as a single class of securities under the Indenture.]
[This Security is one of up to $50,000,000 aggregate principal amount of
additional Initial Securities that may be issued under the Indenture. The
Securities include such additional Securities, the Original Securities in an
aggregate principal amount of $150,000,000 previously issued under the Indenture
and any Exchange Securities issued in exchange for Initial Securities. The
additional Initial Securities, the Original Securities and the Exchange
Securities are treated as a single class of securities under the Indenture.]
The Securities are subject to redemption upon not less than 30
nor more than 60 days' notice by mail, at any time on or after February 1, 2004,
in whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount): If redeemed during
the 12- month period beginning February 1 of the years indicated:
Redemption
Year Price
---- -----
2004 104.875%
2005 103.250%
2006 101.625%
and thereafter, beginning February 1, 2007, at a Redemption Price equal to 100%
of the principal amount, together, in the case of any such redemption, with
accrued and unpaid interest (if any) to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of the Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture.
<PAGE>
4
Notwithstanding the foregoing, prior to February 1, 2002, the
Company may redeem, at any time or from time to time, up to 331/3% of the
original aggregate principal amount of Securities actually issued, at a
Redemption Price of 109.750% of the principal amount thereof plus accrued and
unpaid interest, if any, to the Redemption Date (but interest installments whose
Stated Maturity is on or prior to such Redemption Date will be payable to the
Holders of the Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Record Dates referred to on the face
hereof, all as provided in the Indenture) with the net proceeds of one or more
Public Equity Offerings of the Company, provided that at least 662/3% of the
original aggregate principal amount of the Securities actually issued remains
outstanding after the occurrence of such redemption and provided, further, that
such redemption shall occur not later than 75 days after the date of the closing
of any such Public Equity Offering and upon not less than 30 nor more than 60
days' prior notice.
In the event of redemption of this Security in part only, a
new Security or Securities of like tenor for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the cancellation hereof.
Upon a Change of Control, any Holder of Securities will have
the right to cause the Company to purchase all or any part of the Securities of
such Holder at a purchase price equal to 101% of the principal amount of the
Securities to be purchased plus accrued and unpaid interest thereon to the
Change of Control Payment Date as provided in, and subject to the terms of, the
Indenture.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided, and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
The Indenture contains provisions for defeasance at any time
of the entire indebtedness of this Security or certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
If an Event of Default with respect to the Securities shall
occur and be continuing, the principal of and accrued and unpaid interest on the
Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
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 Securities in certain limited circumstances. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
<PAGE>
5
the modification of the rights and obligations of the Company and the rights of
the Holders of the Securities under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities at the time Outstanding, on behalf of the Holders of all
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity, and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in any place where the principal
of and any premium and interest on this Security are payable, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
like tenor, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
<PAGE>
6
The Securities are issuable only in registered form without
coupons in denominations of $1,000 or any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth, the
Securities are exchangeable for a like aggregate principal amount of Securities
of like tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and none of
the Company, the Trustee and any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
[The holder of this Security is entitled to the benefits of a
Registration Rights Agreement dated January 20, 1999 (the "Registration Rights
Agreement"), between the Company and the Initial Purchaser named therein.
Capitalized terms used in this paragraph but not defined herein have the
meanings assigned to them in the Registration Rights Agreement. In the event
that (i) neither the Exchange Offer Registration Statement nor the Shelf
Registration Statement has been filed with the Commission on or prior to the
75th day following the date of original issuance of the Securities, (ii) neither
the Exchange Offer Registration Statement nor the Shelf Registration Statement
has been declared effective on or prior to the 150th day following the date of
the original issuance of the Securities, (iii) neither the Registered Exchange
Offer has been consummated nor the Shelf Registration Statement has been
declared effective on or prior to the 45th day following the date the Exchange
Offer Registration Statement is declared effective under the Securities Act, or
(iv) after either the Exchange Offer Registration Statement or the Shelf
Registration Statement has been declared effective, such Registration Statement
thereafter ceases to be effective or usable in connection with resales of the
Securities at any time that the Company is obligated to maintain the
effectiveness thereof pursuant to the Registration Rights Agreement (each such
event referred to in clauses (i) through (iv) above being referred to herein as
a "Registration Default"), then, as liquidated damages for such Registration
Default, additional interest (the "Special Interest") shall accrue (in addition
to stated interest on the Securities) from and including the date on which the
first such Registration Default shall occur to but excluding the date on which
all Registration Defaults have been cured, in an amount equal to $.05 per
calendar week per $1,000 principal amount of the Securities; provided, however,
that such rate shall increase by an amount equal to $.05 per calendar week per
$1,000 principal amount of the Securities from and including the 91st day after
the first such Registration
<PAGE>
7
Default (and each successive 91st day thereafter) unless and until all
Registration Defaults have been cured; provided further, however, that in no
event shall the Special Interest exceed $.30 per calendar week per $1,000
principal amount of the Securities. The Special Interest will be payable in cash
semiannually in arrears each June 30 and December 30 in the same manner and to
the same Persons as regular interest.]1
- --------
1 Modify as necessary to conform to applicable Registration Rights Agreement.
<PAGE>
8
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
________________________________________________________________________________
Date:_______________________________ Your Signature:____________________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to an effective registration statement
under the Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933) that purchases
for its own account or for the account of a
qualified institutional buyer to whom notice is
given that such transfer is being made in
reliance on Rule 144A, in each case pursuant to
and in compliance with Rule 144A under the
Securities Act of 1933; or
(4) [ ] outside the United States in an offshore
transaction within the meaning of Regulation S under
the Securities Act in compliance with Rule 904 under
the Securities Act of 1933; or
(5) [ ] to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933) that has furnished to
<PAGE>
9
the Trustee a signed letter containing certain
representations and agreements (the form of which
letter to be obtained from the Company); or
(6) [ ] pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (4), (5) or (6) is checked, the Trustee may require, prior
to registering any such transfer of the Securities, such legal
opinions, certifications and other information as the Company has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933.
-----------------------------------
Your Signature
Signature Guarantee:
Date:______________________________ ____________________________________
Signature must be guaranteed by a Signature of Signature
participant in a recognized Guarantee
signature guaranty medallion
program or other signature
guarantor acceptable to the Trustee
________________________________________________________________________________
<PAGE>
10
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
-------------------------- ------------------------------------
NOTICE: To be executed by an executive
officer
<PAGE>
11
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is
$[ ]. The following increases or decreases in this Global Security
have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of increase Principal amount of Signature of
Exchange in Principal Amount in Principal Amount this Global Security authorized signatory
of this Global of this Global following such of Trustee or
Security Security decrease or increase Securities Custodian
</TABLE>
<PAGE>
EXHIBIT A
[FORM OF FACE OF SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR
A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY
BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
<PAGE>
$150,000,000
----------------------------
9 3/4% Senior Subordinated Note Due 2009
----------------------------
No.________ [up to]* $ _______
CUSIP No. [ ]
VINTAGE PETROLEUM, INC., a Delaware corporation (herein called
the "Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
________________ or registered assigns, the principal sum [set forth in the
attached Schedule of Increases and Decreases in Global Security]* [of
$___________]** on June 30, 2009, and to pay interest thereon from January 26,
1999, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semiannually in arrears on June 30 and December 30 in
each year, commencing June 30, 1999, at the rate of 9 3/4% per annum, both
before and after default, with interest upon overdue interest at the same rate
(to the extent legally permitted) until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the June 15 or December 15 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan in The City of New York,
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest
- --------
* Insert for Global Securities
** Insert for Certificated Securities
<PAGE>
2
may be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
VINTAGE PETROLEUM, INC.
By
--------------------------------
By
--------------------------------
This is one of the Company's 9 3/4% Senior Subordinated Notes
Due 2009 referred to in the within-mentioned Indenture.
Dated:
The Chase Manhattan Bank,
As Trustee
By
---------------------------------
Authorized Officer
<PAGE>
3
[FORM OF REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities
of the Company (herein called the "Securities"), issued under an Indenture,
dated as of January 26, 1999 (herein called the "Indenture", which term shall
have the meaning assigned to it in such instrument), between the Company and The
Chase Manhattan Bank, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), and reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness and the Holders of the Securities and of the
terms upon which the Securities are, and are to be, authenticated and delivered.
This Security is one of the Exchange Securities referred to in
the Indenture issued in exchange for Initial Securities. The Securities include
the Exchange Securities, the Original Securities in the aggregate principal
amount of $150,000,000 and up to $50,000,000 aggregate principal amount of
additional Initial Securities. The Exchange Securities, the Original Securities
and such additional Initial Securities are treated as a single class of
securities under the Indenture.
The Securities are subject to redemption upon not less than 30
nor more than 60 days' notice by mail, at any time on or after February 1, 2004,
in whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount): If redeemed during
the 12- month period beginning February 1 of the years indicated:
Redemption
Year Price
---- -----
2004 104.875%
2005 103.250%
2006 101.625%
and thereafter, beginning February 1, 2007, at a Redemption Price equal to 100%
of the principal amount, together, in the case of any such redemption, with
accrued and unpaid interest (if any) to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of the Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture.
Notwithstanding the foregoing, prior to February 1, 2002, the
Company may redeem, at any time or from time to time, up to 33-1/3% of the
original aggregate principal amount of Securities actually issued, at a
Redemption Price of 109.750% of the principal amount thereof plus accrued and
unpaid interest, if any, to the Redemption Date (but interest installments whose
Stated Maturity is on or prior to such Redemption Date will be payable to the
Holders of the Securities, or one or more Predecessor Securities, of record at
the close of business on the
<PAGE>
4
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture) with the net proceeds of one or more Public Equity Offerings of the
Company, provided that at least 66-2/3% of the original aggregate principal
amount of the Securities actually issued remains outstanding after the
occurrence of such redemption and provided further, that such redemption shall
occur not later than 75 days after the date of the closing of any such Public
Equity Offering and upon not less than 30 nor more than 60 days' prior notice.
In the event of redemption of this Security in part only, a
new Security or Securities of like tenor for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the cancellation hereof.
Upon a Change of Control, any Holder of Securities will have
the right to cause the Company to purchase all or any part of the Securities of
such Holder at a purchase price equal to 101% of the principal amount of the
Securities to be purchased plus accrued and unpaid interest thereon to the
Change of Control Payment Date as provided in, and subject to the terms of, the
Indenture.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided, and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
The Indenture contains provisions for defeasance at any time
of the entire indebtedness of this Security or certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
If an Event of Default with respect to the Securities shall
occur and be continuing, the principal of and accrued and unpaid interest on the
Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
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 Securities in certain limited circumstances. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of
the Holders of the Securities under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities at the time Outstanding, on behalf of the Holders of all
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain
<PAGE>
5
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity, and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in any place where the principal
of and any premium and interest on this Security are payable, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
like tenor, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 or any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth, the
Securities are exchangeable for a like aggregate principal amount of Securities
of like tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
<PAGE>
6
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and none of
the Company, the Trustee and any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
________________________________________________________________________________
Date:_____________________________ __________________________________
Your Signature
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
Signature Guarantee:
Date:_______________________________ _____________________________________
Signature must be guaranteed by a Signature of Signature
participant in a recognized Guarantee
signature guaranty medallion
program or other signature
guarantor acceptable to the Trustee
________________________________________________________________________________
<PAGE>
Exhibit 10.14
FIRST AMENDMENT TO THE AMENDED
AND RESTATED CREDIT AGREEMENT
dated as of December 10, 1998
among
VINTAGE PETROLEUM, INC.,
as the Borrower,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
as the Lenders,
BANK OF MONTREAL,
acting through certain U.S. branches or agencies,
as administrative agent,
NATIONSBANK, N.A.,
as syndication agent,
and
SOCIETE GENERALE, SOUTHWEST AGENCY,
as documentation agent.
Bank of Montreal
as Arranger
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
December 10, 1998, among VINTAGE PETROLEUM, INC., a Delaware corporation (the
"Borrower"), the various financial institutions as are or may become parties
hereto (collectively, the "Lenders"), NATIONSBANK, N.A., as syndication agent,
SOCIETE GENERALE, SOUTHWEST AGENCY, as documentation agent, and BANK OF
MONTREAL, acting through certain of its U.S. branches or agencies ("Bank of
Montreal"), as administrative agent (the "Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower and Bank of Montreal (in its capacity as Agent
and as Lender) have heretofore entered into that certain Amended and Restated
Credit Agreement, dated as of October 21, 1998 (as amended the "Credit
Agreement"); and
WHEREAS, the Borrower, the Agent and the Lenders now intend to amend
the Credit Agreement in certain respects.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, each of the Borrower, the Agent and the Lenders
agree as follows:
SECTION 1. Defined Terms. Terms defined in the Credit Agreement are
used in this First Amendment with the same meaning, unless otherwise indicated.
SECTION 2. Amendment to Credit Agreement.
A. Section 7.2.2 is hereby amended by adding the following clause (s)
at the end of such Section before the period:
"; and (s) Indebtedness of the Borrower in an aggregate outstanding
amount not to exceed $150,000,000, plus premium and interest, to be
issued on or before May 1, 1999; provided such Indebtedness (i) is
subordinated in right of payment to the payment in full in cash of all
Obligations, upon terms similar to those in Borrower's $150,000,000
Senior Subordinated Notes Due 2005 and Borrower's $100,000,000 Senior
Subordinated Notes Due 2009 (the "Existing Subordinated Debt"), (ii)
has terms, provisions, covenants and events of default not materially
more restrictive than the Borrower's Existing Subordinated Debt, (iii)
has no scheduled principal payments due sooner than ten years from the
date of issuance and (iv) bears interest at a coupon rate of 10% or
less".
B. Section 7.2.11 is hereby amended (i) by replacing the reference to
"clause (b), (p) or (r) of Section 7.2.2" with "clause (b), (p), (r) or (s) of
Section 7.2.2" and (ii) by replacing each reference to "clause (p) or (r) of
Section 7.2.2" with "clause (p), (r) or (s) of Section 7.2.2".
2
<PAGE>
C. Section 2.7.1 is hereby amended by adding the following sentence at
the end of such section following the period:
"As of the date of the issuance of the subordinated Indebtedness
referred to in Section 7.2.2(s), the then Borrowing Base shall be
reduced by an amount equal to 45% of the principal amount of such
subordinated Indebtedness".
SECTION 3. Reaffirmation of Credit Agreement. This First Amendment
shall be deemed to be an amendment to the Credit Agreement, and the Credit
Agreement, as amended hereby, is hereby ratified, approved and confirmed in each
and every respect. All references to the Credit Agreement in any other document,
instrument, agreement or writing shall hereafter be deemed to refer to the
Credit Agreement as amended hereby.
SECTION 4. Severability. Any provision of this First Amendment, the
Credit Agreement as amended by this First Amendment or any other Loan Document
which is prohibited or unenforceable in any jurisdiction shall, as to such
provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this First Amendment, the Credit Agreement as amended by this First Amendment or
such Loan Document or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 5. Headings. The various headings of this First Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this First Amendment or any provisions hereof.
SECTION 6. Execution in Counterparts, Effectiveness, etc. This First
Amendment may be executed by the parties hereto in several counterparts, each of
which shall be executed by the different parties on different counterparts and
be deemed to be an original and all of which shall constitute together but one
and the same First Amendment.
SECTION 7. Governing Law; Entire Agreement. THIS FIRST AMENDMENT SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS. This First Amendment constitutes the entire understanding
among the parties hereto with respect to the subject matter hereof and
supersedes any prior agreements, written or oral, with respect thereto.
THIS WRITTEN FIRST AMENDMENT REPRESENTS THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
3
<PAGE>
SECTION 8. Successors and Assigns. This First Amendment shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that (i) the Borrower may
not assign or transfer its rights or obligations hereunder without the prior
written consent of the Agent and all Lenders; and (ii) the rights of sale,
assignment and transfer of the Lenders are subject to Section 10.11 of the
Credit Agreement.
SECTION 9. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS FIRST
AMENDMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS FIRST AMENDMENT OR ANY OTHER
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER MAY BE
BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS. THE BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE
OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF ILLINOIS. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE
OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS FIRST AMENDMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS
FIRST AMENDMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10. Waiver of Jury Trial. THE AGENT, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS FIRST AMENDMENT, THE CREDIT
AGREEMENT AS AMENDED BY THIS FIRST AMENDMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
4
<PAGE>
WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER. THE BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO
WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
AGENT AND THE LENDERS ENTERING INTO THIS FIRST AMENDMENT, THE CREDIT AGREEMENT
AS AMENDED BY THIS FIRST AMENDMENT AND EACH SUCH OTHER LOAN DOCUMENT.
IN WITNESS WHEREOF, the requisite parties hereto have caused this First
Amendment to be executed by their respective officers thereunto duly authorized
as of the day and year first above written and shall be effective as of such
date.
VINTAGE PETROLEUM, INC.
By: /s/ William C. Barnes
--------------------------
William C. Barnes,
Executive Vice President and
Chief Financial Officer
Address: 4200 One Williams Center
Tulsa, Oklahoma 74172
Facsimile No.: (918) 584-7282
Attention: William C. Barnes,
Executive Vice President
and Chief Financial
Officer
5
<PAGE>
BANK OF MONTREAL
acting through its U.S. branches
and agencies, including initially
its Chicago, Illinois branch,
as Agent
By: /s/ Melissa A. Bauman
------------------------------------
Name: Melissa A. Bauman
Title: Director
Address: 115 South LaSalle Street,
11th Floor West
Chicago, Illinois 60603
Facsimile No.: (312) 750-3456
Attention: Terri Perez-Ford,
Specialist
with copy to:
Bank of Montreal
Houston Agency
700 Louisiana Street
4400 NationsBank Center
Houston, Texas 77002
Facsimile No.: (713) 223-4007
Attention: Brian Otis, Associate
6
<PAGE>
LENDERS:
BANK OF MONTREAL, as Lender
By: /s/ Melissa A. Bauman
-------------------------------------
Name: Melissa A. Bauman
Title: Director
Domestic
Office: 115 South LaSalle Street
11th Floor West
Chicago, Illinois 60603
Facsimile No. (312) 750-3456
-------------------------
Attention: Terri Perez-Ford,
Specialist
-------------------------
LIBOR
Office: 115 South LaSalle Street
Chicago, Illinois 60603
Facsimile No.:
-------------------------
Attention:
-------------------------
with copy to:
Bank of Montreal
Houston Agency
700 Louisiana Street
4400 NationsBank Center
Houston, Texas 77002
Facsimile No.: (713) 223-4007
Attention: Brian Otis, Associate
7
<PAGE>
ABN AMRO BANK, N.V.,
as Lender and Co-Agent
By: /s/ Robert J. Cunningham
------------------------------------
Name: Robert J. Cunningham
Title: Group Vice President
By: /s/ Jamie A. Conn
------------------------------------
Name: Jamie A. Conn
Title: Vice President
Domestic
Office: Three Riverway
Suite 1700
Houston, TX 77056
Facsimile No. (713) 621-5801
Attention: Robert Cunningham
Chuck Randall
LIBOR
Office: Three Riverway
Suite 1700
Houston, TX 77056
Facsimile No.: (713) 621-5801
Attention: Robert Cunningham
Chuck Randall
with a copy to:
ABN Amro Bank
135 S. LaSalle, Suite 2805
Chicago, IL 60603
Attention: Karen MacAllister
8
<PAGE>
BANKBOSTON, N.A.,
as Lender and Co-Agent
By: /s/ Terrence Ronan
------------------------------------
Name: Terrence Ronan
Title: Director
Domestic
Office: 100 Federal Street
MS 01-08-04
Boston, MA 02110
Facsimile No. (617) 434-3652
Attention: Allison Rossi
LIBOR
Office: 100 Federal Street
MS 01-08-04
Boston, MA 02110
Facsimile No.: (617) 434-3652
Attention: Allison Rossi
9
<PAGE>
THE BANK OF NEW YORK,
as Lender
By: /s/ Raymond J. Palmer
------------------------------------
Name: Raymond J. Palmer
Title: Vice President
Domestic
Office: One Wall Street
New York, NY 10286
Facsimile No.: (212) 635-7923
Attention: Ray Palmer
LIBOR
Office: One Wall Street
New York, NY 10286
Facsimile No.: (212) 635-7923
Attention: Ray Palmer
10
<PAGE>
THE BANK OF NOVA SCOTIA,
as Lender and Lead Manager
By: /s/ M. D. Smith
------------------------------------
Name: M. D. Smith
Title: Agent Operations
Domestic
Office: The Bank of Nova Scotia
, Atlanta Office
600 Peachtree Street,N.E.
Suite 2700
Atlanta, GA 30308
Facsimile No. (404) 888-8998
Attention: Cleve Bushey
LIBOR
Offi The Bank of Nova Scotia,
Atlanta Office
600 Peachtree Street, N.E.
Suite 2700
Atlanta, GA 30308
Facsimile No.: (404) 888-8998
Attention: Cleve Bushey
with a copy to:
The Bank of Nova Scotia
1100 Louisiana Street, Suite 3000
Houston, TX 77002
Attention: Greg Smith
11
<PAGE>
BANK OF OKLAHOMA,
NATIONAL ASSOCIATION, as Lender
By: /s/ Michael M. Coats
------------------------------------
Name: Michael M. Coats
Title: Senior Vice President
Domestic
Office: One Williams Center,
8th Floor
Tulsa, OK 74172
Facsimile No.: (918) 588-6880
Attention: Michael Coats
LIBOR
Office: One Williams Center,
8th Floor
Tulsa, OK 74172
Facsimile No.: (918) 588-6880
Attention: Michael Coats
12
<PAGE>
PARIBAS,
as Lender and Co-Agent
By: /s/ Illegible
------------------------------------
Name:
Title:
By: /s/ Betsy Jocher
------------------------------------
Name: Betsy R. Jocher
Title: Assistant Vice President
Domestic
Office: 1200 Smith Street,
Suite 3100
Houston, TX 77002
Facsimile No. (713) 659-3832
Attention: Leah Evans-Hughes
LIBOR
Office: 1200 Smith Street,
Suite 3100
Houston, TX 77002
Facsimile No. (713) 659-3832
Attention: Leah Evans-Hughes
13
<PAGE>
THE CHASE MANHATTAN BANK,
as Lender and Co-Agent
By: /s/ Peter M. Ling
------------------------------------
Name: Peter M. Ling
Title: Vice President
Domestic
Office: 270 Park Avenue,
32nd Floor
New York, NY 10017
Facsimile No. (212) 270-3897
Attention: Peter Ling
LIBOR
Office: 270 Park Avenue,
32nd Floor
New York, NY 10017
Facsimile No.: (212)
Attention: LuAnn DeStephano
14
<PAGE>
CHRISTIANIA BANK OG KREDITKASSE ASA,
as Lender
By: /s/ Peter M. Dodge; William S. Phillips
------------------------------------------
Name: Peter M. Dodge/William S. Phillips
Title: Senior Vice President/
First Vice President
Domestic
Office: New York Branch
11 West 42nd Street
New York, NY 10036
Facsimile No. (212) 827-4888
Attention: Peter Dodge
LIBOR
Office: New York Branch
11 West 42nd Street
New York, NY 10036
Facsimile No.: (212) 827-4888
Attention: Peter Dodge
15
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
as Lender and Co-Agent
By: /s/ Dixon P. Schultz
-----------------------------------------
Name: Dixon P. Schultz
Title: First Vice President
Domestic
Office: 1100 Louisiana, 32nd Floor
Houston, TX 77002
Facsimile No. (713) 654-7370
Attention: Dixon Schultz
LIBOR
Office: One First National Plaza
Chicago, IL 60670
Facsimile No.: (312) 732-4840
Attention: Kathy Murphy
with copy to:
Mr. Robert Long
First Chicago NBD
One National Plaza
20th Floor, Suite 0573
Chicago, IL 60670
Facsimile No.: (312) 732-5144
16
<PAGE>
FIRST UNION NATIONAL BANK,
as Lender and Lead Manager
By: /s/ Robert R. Wetteroff
-----------------------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
Domestic
Office: 301 South College Street
Charlotte, NC 28288
Facsimile No. (713) 650-6354
Attention: David E. Humphreys
LIBOR
Office: 301 South College Street
Charlotte, NC 28288
Facsimile No.: (713) 650-6354
Attention: David E. Humphreys
17
<PAGE>
NATEXIS Banque BFCE,
as Lender
By: /s/ Mark A. Harrington
-----------------------------------------
Name: Mark A. Harrington
Title: Senior Vice President and Regional
Manager
By: /s/ N. Eric Ditges
-----------------------------------------
Name: N. Eric Ditges
Title: Assistant Vice President
Domestic
Office: NATEXIS Banque
Southwest Representative Office
333 Clay Street, Suite 4340
Houston, TX 77002
Facsimile No.(713) 759-9908
Attention: Eric Ditges
LIBOR
Office: NATEXIS Banque
Southwest Representative Office
333 Clay Street, Suite 4340
Houston, TX 77002
Facsimile No.: (713) 759-9908
Attention: Tanya McAllister
with a copy to:
NATEXIS Banque
New York Branch
645 5th Avenue, 20th Floor
New York, NY 10022
Facsimile No.: (212) 872-5045
Attention: Joan Rankine
18
<PAGE>
NATIONSBANK, N.A.,
as Lender and Syndication Agent
By: /s/ Tracey S. Barclay
-----------------------------------------
Name: Tracey S. Barclay
Title: Senior Vice President
Domestic
Office: 901 Main Street, 64th Floor
Dallas, TX 75202
Facsimile No. (214) 508-1285
Attention: Denise Smith
LIBOR
Office: 901 Main Street, 64th Floor
Dallas, TX 75202
Facsimile No.: (214) 508-1285
Attention: Denise Smith
with copy to:
901 Main Street, 14th Floor
Dallas, Texas 75202
Facsimile No.: (214) 508-1215
Attention: Betty Canales
19
<PAGE>
THE SANWA BANK LIMITED,
as Lender and Lead Manager
By: /s/ C. Lawrence Murphy
-----------------------------------------
Name: C. Lawrence Murphy
Title:
Domestic
Office: 55 East 52nd Street
New York, NY 10055
Facsimile No.
Attention: T. Ojima
LIBOR
Office: 55 East 52nd Street
New York, NY 10055
Facsimile No.:
Attention: T. Ojima
20
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY,
as Lender and Documentation Agent
By: /s/ Richard A. Erbert
----------------------------------------
Name: Richard A. Erbert
Title: Vice President
Domestic
Office: 4800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Facsimile No. (214) 754-0171
Attention: Loan Operations
LIBOR
Office: 4800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Facsimile No.: (214) 754-0171
Attention: Loan Operations
with copy to:
Societe Generale, Southwest Agency
1111 Bagby, Suite 2020
Houston, Texas 77002
Facsimile No. (713) 650-0824
Attention: Richard A. Erbert
21
<PAGE>
UNION BANK OF CALIFORNIA, N.A.,
as Lender and Lead Manager
By: /s/ Gary Shekerjian
-----------------------------------------
Name: Gary Shekerjian
Title: Assistant Vice President
Domestic
Office: 500 North Akard St. #4200
Dallas, Texas 75201
Facsimile No. (214) 922-4209
Attention: Gary Shekerjian
LIBOR
Office: Energy Capital Services
445 S. Figueroa Street,
15th Floor
Los Angeles, CA 90071
Facsimile No.: (213) 236-4096
Attention: Patricia Gonzales
22
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
<TABLE>
<CAPTION>
State or Jurisdiction Ownership
Name of Incorporation Percentage
---- --------------------- ----------
<S> <C> <C>
Vintage Gas, Inc. Oklahoma 100
Vintage Marketing, Inc. Oklahoma 100
Vintage Pipeline, Inc. Oklahoma 100
Vintage Petroleum
International, Inc. Oklahoma 100
Vintage Oil Argentina, Inc.
(formerly BG Argentina, S.A.) Cayman Islands 100
Cadipsa S.A. Republic of Argentina 97
Vintage Petroleum
Argentina, Inc. Cayman Islands 100
Vintage Petroleum
Ecuador, Inc. Cayman Islands 100
Vintage Petroleum Boliviana, Ltd.
(formerly Shamrock Ventures
(Boliviana) Ltd.) Bermuda 100
VP Argentina, Inc. Cayman Islands 100
Vintage Petroleum Yemen, Inc. Cayman Islands 100
Elf Hydrocarbures Equateur, S.A. France 100
</TABLE>
<PAGE>
EXHIBIT 23.1
[LOGO OF ARTHUR ANDERSEN LLP APPEARS HERE]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 24, 1999, included in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 (File Nos. 33-37505 and
333-09205) and Registration Statement on Form S-3 (File No. 333-68351).
/s/ ARTHUR ANDERSEN LLP
-------------------------------
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 12, 1999
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF NETHERLAND, SEWELL & ASSOCIATES, INC. APPEARS HERE]
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
---------------------------------------------------------
As Petroleum Engineers, we hereby consent to the inclusion of the
information included in this Form 10-K with respect to the oil and gas reserves
of Vintage Petroleum, Inc., the future net revenues from such reserves, and the
present value thereof, which information has been included in this Form 10-K 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 10-K and to the incorporation by reference in the
Registration Statements on Form S-8, Nos. 33-37505 and 333-09205, and the
Registration Statement on Form S-3, No. 333-68351, of Vintage Petroleum, Inc. of
such information with respect to the oil and gas reserves of vintage Petroleum,
Inc., the future net revenues from such reserves, and the present value thereof.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ Frederic D. Sewell
-------------------------------------
Frederic D. Sewell
President
Dallas, Texas
March 12, 1999
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF DEGOLYER AND MACNAUGHTON APPEARS HERE]
March 12, 1999
Vintage Petroleum, Inc.
4200 One Williams Center
Tulsa, Oklahoma 74172
Gentlemen:
We hereby consent to the references to our firm and to our reserves
etimates for the year ended December 31, 1998, as set forth in the Annual Report
on Form 10-K (the Annual Report) of Vintage Petroleum, Inc. (the Company). Our
estimates of the oil, condensate, and natural gas reserves of certain properties
owned by the Company are contained in our report entitled "Appraisal Report, as
of December 31, 1998, on Reserves of Certain Properties in Bolivia Operated by
Vintage Petroleum, Inc." References to us and our estimates are included in the
"Oil and Gas Properties" section on page 9, the "Reserves" section on page 12,
and "Notes to Consolidated Financial Statements" on page 68. However, we are
necessarily unable to verify (i) the accuracy of future net revenues and
discounted present value of future net revenues contained in the Annual Report
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. Additionally, we
hereby consent to the incorporation by reference in the Company's Registration
Statements Nos. 33-37505 and 333-09205 on Form S-8 and No. 333-68351 on Form
S-3 of such references made in the Annual Report.
Very truly yours,
/s/ DeGOLYER and MacNAUGHTON
DeGOLYER and MacNAUGHTON
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1998 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,245
<SECURITIES> 0
<RECEIVABLES> 60,585
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 84,142
<PP&E> 1,399,964
<DEPRECIATION> 501,722
<TOTAL-ASSETS> 1,014,175
<CURRENT-LIABILITIES> 66,925
<BONDS> 672,507
0
0
<COMMON> 266
<OTHER-SE> 273,692
<TOTAL-LIABILITY-AND-EQUITY> 1,014,175
<SALES> 328,510
<TOTAL-REVENUES> 328,935
<CGS> 204,600
<TOTAL-COSTS> 204,600
<OTHER-EXPENSES> 211,884
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,680
<INCOME-PRETAX> (131,229)
<INCOME-TAX> (43,564)
<INCOME-CONTINUING> (87,665)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87,665)
<EPS-PRIMARY> (1.69)
<EPS-DILUTED> (1.69)
</TABLE>
