<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+This prospectus supplement relates to an effective registration statement +
+under the Securities Act of 1933. The information in this prospectus +
+supplement is not complete and may be changed. We will deliver to purchasers +
+of these securities a final prospectus supplement and prospectus. We are not +
+using this prospectus supplement and the prospectus to offer to sell these +
+securities or to solicit offers to buy these securities in any place where +
+the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Filed pursuant to Rule 424(B)(5)
SEC File No. 333-77619
SUBJECT TO COMPLETION, DATED JUNE 4, 1999
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 11, 1999)
9,000,000 Shares
[LOGO OF VINTAGE PETROLEUM APPEARS HERE]
Vintage Petroleum, Inc.
Common Stock
$ per share
--------
Vintage Petroleum, Inc. is selling 9,000,000 shares of its common stock. The
underwriters named in this prospectus supplement may purchase up to 1,350,000
additional shares of common stock from Vintage under certain circumstances.
The common stock is listed on the New York Stock Exchange under the symbol
"VPI." The last reported sale price of the common stock on the New York Stock
Exchange on June 4, 1999, was $11.8125 per share.
--------
Investing in the common stock involves certain risks. See "Risk Factors"
beginning on page S-12 in this prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
--------
<TABLE>
<CAPTION>
Per Share Total
--------- ---------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to Vintage (before expenses) $ $
</TABLE>
The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about ,
1999.
--------
Salomon Smith Barney
Warburg Dillon Read LLC
Morgan Stanley Dean Witter
Banc of America Securities LLC
Jefferies & Company, Inc.
, 1999
<PAGE>
You should rely only on the information contained or incorporated by
reference in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information contained in this
prospectus supplement or the accompanying prospectus is accurate as of any date
other than the date on the front of those documents.
------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Certain Definitions...................................................... S-2
Prospectus Summary....................................................... S-3
Risk Factors............................................................. S-12
Forward-Looking Statements............................................... S-19
Use of Proceeds.......................................................... S-20
Capitalization........................................................... S-21
Price Range of Common Stock and Dividends................................ S-22
Pending Acquisition...................................................... S-23
United States Federal Tax Consequences to Non-U.S. Holders of Common
Stock................................................................... S-24
Underwriting............................................................. S-27
Legal Opinions........................................................... S-28
Experts.................................................................. S-28
Prospectus
About This Prospectus.................................................... 3
Where You Can Find More Information...................................... 3
The Company.............................................................. 4
The Trust................................................................ 4
Ratio of Earnings to Fixed Charges....................................... 5
Use of Proceeds.......................................................... 5
Description of Debt Securities........................................... 6
Description of Junior Subordinated Debt Securities....................... 18
Description of Preferred Stock........................................... 26
Description of Depositary Shares......................................... 26
Description of Common Stock.............................................. 29
Description of Preferred Securities...................................... 31
Description of Guarantee................................................. 33
Plan of Distribution..................................................... 37
Legal Opinions........................................................... 39
Experts.................................................................. 39
</TABLE>
CERTAIN DEFINITIONS
As used in this prospectus supplement, "Mcf" means thousand cubic feet,
"MMcf" means million cubic feet, "Bcf" means billion cubic feet, "Bbl" means
barrel, "MBbls" means thousand barrels, "MMBbls" means million barrels, "BOE"
means equivalent barrels of oil, "MBOE" means thousand equivalent barrels of
oil and "MMBOE" means million equivalent barrels of oil.
Unless otherwise indicated in this prospectus supplement, gas volumes are
stated at the legal pressure base of the state or area in which the reserves
are located and at 60(degrees) Fahrenheit. Equivalent barrels of oil are
determined using the ratio of six Mcf of gas to one Bbl of oil.
The term "gross" refers to the total acres or wells in which we have a
working interest, and "net" refers to gross acres or wells multiplied by the
percentage working interest owned by us. "Net production" means production that
is owned by us less royalties and production due others. The terms "net" and
"net production" include 100 percent of our subsidiary Cadipsa S.A. and do not
reflect reductions for minority interest ownership.
The term "oil" includes crude oil, condensate and natural gas liquids.
"Finding cost" means an amount per BOE equal to the sum of all costs
incurred relating to oil and gas property acquisition, exploration and
development activities divided by the sum of all additions and revisions to
estimated proved reserves, including reserve purchases.
S-2
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
supplement and the accompanying prospectus and may not contain all of the
information that is important to you. For a more complete understanding of this
offering, we encourage you to read this entire prospectus supplement, the
accompanying prospectus and the documents to which we have referred you. Unless
otherwise indicated, all information in this prospectus supplement and the
accompanying prospectus relating to our capital stock has been adjusted to
reflect a two-for-one common stock split effected on October 7, 1997. Certain
terms used in this prospectus supplement and the accompanying prospectus are
defined under the section "Certain Definitions."
The Company
We are an independent oil and gas company engaged in the development,
exploitation, exploration, acquisition and production of oil and natural gas.
We are focused on the acquisition of producing oil and gas properties which
contain the potential for increased value through exploitation and development.
Through our experienced management and engineering staff, we have been
successful in increasing the values of prior acquisitions by restoring or
increasing production of producing wells, adding production from new formations
in existing wells, instituting enhanced recovery operations, reducing operating
costs and drilling development wells. We believe that our primary strengths are
our ability to add reserves at attractive prices and our low cost operating
structure.
At March 31, 1999, we owned and operated producing properties in 13 states,
with our domestic proved reserves located primarily in four core areas: the
West Coast, Gulf Coast, East Texas and Mid-Continent areas of the United
States. During 1998, we acquired additional producing properties in California
and Texas. Internationally, we established a new core area in 1995 by acquiring
12 oil concessions, all of which are currently producing and operated by us, in
the south flank of the San Jorge Basin of southern Argentina. In 1996, we
expanded our South American operations into Bolivia through the acquisition of
Vintage Petroleum Boliviana, Ltd. (formerly Shamrock Ventures (Boliviana) Ltd.)
which owns and operates three blocks covering approximately 570,000 acres in
the Chaco Plains area of southern Bolivia. During 1997, we enhanced our
operations in Bolivia by obtaining the concession rights to the Naranjillos
concession located in the Santa Cruz Province. In November 1998, we purchased,
through a wholly-owned subsidiary, a subsidiary of Elf Aquitaine which operates
through a branch in Ecuador. This subsidiary currently has producing properties
in the Oriente Basin which it operates and provides us with substantial
undeveloped acreage which we believe has significant exploration potential.
As of December 31, 1998, we owned interests in 4,495 gross (2,398 net)
producing wells in the United States, of which approximately 80 percent are
operated by us, 712 gross (696 net) producing wells in Argentina, of which
approximately 97 percent are operated by us, 4 gross (3 net) producing wells in
Bolivia, 100 percent of which are operated by us and 5 gross (2 net) producing
wells in Ecuador, 100 percent of which are operated by us. As of December 31,
1998, our properties had proved reserves of 298.9 MMBOE, comprised of 164.5
MMBbls of oil and 806.8 Bcf of gas, with a present value of estimated future
net revenues before income taxes (utilizing a 10 percent discount rate) of $703
million and a standardized measure of discounted future net cash flows of $648
million, based on a historically low year-end oil market price of $12.05 per
Bbl and a year-end gas market price of $2.14 per Mcf. If year-end 1998 oil and
gas market prices had been at the same levels as year-end 1997 prices (oil
price of $18.34 per Bbl and gas price of $2.68 per Mcf), our proved reserves
would have been 49.0 MMBOE higher at December 31, 1998, or 347.9 MMBOE, with a
present value of $1.5 billion and a standardized measure of $1.3 billion.
The significant decrease in oil prices realized during 1998 for our oil
production, which accounted for approximately 68 percent of our total
production for 1998, has resulted in losses and a significant reduction in our
cash flow compared to 1997. To the extent low oil prices are realized, our
earnings and cash flow from operations will continue to be adversely impacted.
Lower prices are likely to also result in decreased future earnings or losses
resulting from higher depreciation, depletion and amortization expense due to
lower reserves.
S-3
<PAGE>
Our principal office is located at 4200 One Williams Center, Tulsa, Oklahoma
74172, and our telephone number is (918) 592-0101.
Business Strategy
Our overall goal is to maximize our value through profitable growth in our
oil and gas reserves and production. We have been successful at achieving this
goal through our ongoing strategy of:
. acquiring producing oil and gas properties with significant upside
potential at favorable prices;
. focusing on exploitation, development and exploration activities to
maximize production and ultimate reserve recovery;
. exploring non-producing properties;
. maintaining a low cost operating structure; and
. maintaining financial flexibility.
Key elements of our strategy include:
. Acquisitions of Producing Properties. We have an experienced management
and engineering team which focuses on acquisitions of operated producing
properties that meet our selection criteria which include:
. significant potential for increasing reserves and production through
exploitation, development and exploration;
. attractive purchase price; and
. opportunities for improved operating efficiency.
Our emphasis on property acquisitions reflects our belief that continuing
consolidation and restructuring activities on the part of major
integrated and large independent oil companies has afforded in recent
years, and should afford in the future, attractive opportunities to
purchase domestic and international producing properties. This
acquisition strategy has allowed us to rapidly grow our reserves at
favorable acquisition prices. From January 1, 1996, through December 31,
1998, we acquired 119.2 MMBOE of proved oil and gas reserves at an
average acquisition cost of $2.82 per BOE. We replaced through
acquisitions approximately 1.9 times our production of 64.2 MMBOE during
the same period. We are continually identifying and evaluating
acquisition opportunities, including acquisitions that would be
significantly larger than those consummated to date by us. We cannot
assure you that any such acquisitions will be successfully consummated.
. Exploitation and Development. We pursue workovers, recompletions,
secondary recovery operations and other production optimization
techniques on our properties, as well as development and infill drilling,
to offset normal production declines and replace our annual production.
From January 1, 1996, through December 31, 1998, we spent approximately
$277.5 million on exploitation and development activities. During this
period, our recompletion and workover activities resulted in improved
production or operating efficiencies in approximately 75 percent of these
operations. As a result of all of our exploitation activities, including
development and infill drilling, during the three-year period
S-4
<PAGE>
ended December 31, 1998, we succeeded in adding 54.1 MMBOE to proved
reserves, replacing approximately 84 percent of production during this
period. However, year-end 1998 oil and gas prices, which were much lower
than year-end 1997 prices, reduced reserves 49.0 MMBOE, resulting in net
upward revisions for the three years ended December 31, 1998, of 5.1
MMBOE. We have an extensive inventory of exploitation and development
opportunities including identified projects which represent an inventory
of over 10 years at 1998 activity levels. We anticipate reduced spending
of approximately $17 million in 1999 on exploitation and development
projects, primarily in the United States.
. Exploration. Our overall exploration strategy balances high potential
international prospects with lower risk drilling in known formations in
the United States and Argentina. This prospect mix and our practice of
risk-sharing with industry partners is intended to lower the incidence
and costs of dry holes. We make extensive use of geophysical studies,
including 3-D seismic, which further reduces the cost by increasing the
success of our exploration program. From January 1, 1996, through
December 31, 1998, we spent approximately $128.2 million on exploration
activities, including the drilling of 70 gross (39.37 net) exploration
wells, of which approximately 57 percent gross (66 percent net) were
productive. These exploration activities added approximately 40.5 MMBOE
to proved reserves and replaced approximately 63 percent of production
during the period. Our exploration activities in 1998 were focused on our
core areas in the United States and Argentina as well as in Bolivia. We
anticipate spending approximately $39 million during 1999 on exploration
projects, primarily in the United States and Bolivia.
. Low Cost Structure. We are an efficient operator and capitalize on our
low cost structure in evaluating acquisition opportunities. We generally
achieve substantial reductions in labor and other field level costs from
those experienced by the previous operators. In addition, we target
acquisition candidates which are located in our core areas and provide
opportunities for cost efficiencies through consolidation with our other
operations. The lower cost structure has generally allowed us to
substantially improve the cash flow of newly acquired properties.
. Financial Flexibility. We are committed to maintaining financial
flexibility, which management believes is important for the successful
execution of our acquisition, exploitation and exploration strategy. In
conjunction with the purchase of substantial oil and gas assets in 1990,
1992 and 1995, we completed three public equity offerings, as well as a
public debt offering in 1995. We also successfully completed simultaneous
public debt and equity offerings in February 1997 and the offering of
senior subordinated notes in January 1999 under Rule 144A. These seven
offerings provided us with aggregate net proceeds of approximately $561
million. The unused portion of our revolving credit facility as of June
3, 1999, was approximately $107 million.
Pending Acquisition
In June 1999, we entered into a definitive purchase and sale agreement with
Total Austral S.A. to acquire its undivided 70 percent operating interest
(effective 61.6 percent net revenue interest) in the El Huemul-Koluel Kaike
concession (the "El Huemul Properties") located in Santa Cruz Province,
Argentina, which Total currently operates (the "Total Acquisition"). Total's
ownership interest in the concession is through a joint venture agreement. The
acquisition will be effective January 1, 1999, with an expected closing date of
June 30, 1999. We cannot assure you that this acquisition will close.
The purchase price for the Total Acquisition is $93 million in cash, with
$80 million payable at closing, adjusted for net cash flow from the effective
date until closing, and the remaining $13 million payable on or before
December 31, 1999. The purchase and sale agreement contains certain conditions
precedent to closing, including obtaining from the owner of the remaining 30
percent operating interest in the El Huemul Properties (the "Joint Venture
Partner") (i) its consent to the transfer of Total's interest in the joint
venture agreement; (ii) a waiver of its preferential right to purchase Total's
interest in the joint venture agreement; and (iii) its consent to allow us to
succeed as operator of the El Huemul Properties.
S-5
<PAGE>
We are currently pursuing the purchase of the Joint Venture Partner's
interest in the joint venture agreement as well as its concession rights to the
El Huemul Properties. However, our efforts may not be successful.
The El Huemul Properties cover approximately 150,000 gross acres and are
located adjacent to our existing operated concessions in the Santa Cruz
Province. The El Huemul Properties are similar to our existing properties in
this basin and are characterized by mature fields having stable production
decline trends, similar geological formations and production zones, established
waterflood potential and exploration and exploitation upside potential. Because
of these similarities, we believe that the exploitation and exploration success
we have experienced in our current Argentine operations, including development
drilling, workover and recompletion techniques, secondary recovery projects and
exploratory drilling, will be available in the El Huemul Properties as well. We
estimate that the El Huemul Properties have proved exploitation potential
through adding new non-producing behind pipe zones in 107 wells, expanding upon
the 13 waterflood areas, and infill or extensional drilling of up to 66 new
wells. In addition, we have identified non-proved opportunities within the
concession that include behind pipe zones in 117 wells, installing up to 18
additional waterflood areas and 50 additional drilling locations. There is also
exploration potential that we identified through a thorough review of 3-D
seismic provided during the evaluation process.
Proved reserves for the El Huemul Properties as of July 1, 1999, as
estimated by Netherland, Sewell & Associates, Inc., using a NYMEX reference oil
price of $17.32 per Bbl and an average gas price of $1.02 per Mcf, are 44.7
MMBbls (31.3 MMBbls net to Total) of oil and 81.1 Bcf (56.8 Bcf net to Total)
of gas, or 58.2 MMBOE (40.7 MMBOE net to Total). The present value of the
estimated future net revenues before income taxes (utilizing a 10 percent
discount rate) is $233.3 million ($163.3 million net to Total). We estimate
that the purchase price for the Total Acquisition will be approximately $89.1
million after closing adjustments consisting of (i) a reduction for revenues
less direct operating expenses of approximately $8.2 million from the effective
date to the anticipated closing date, and (ii) an increase for other
adjustments of approximately $4.3 million. This results in an acquisition cost
of $2.19 per BOE. Current daily production, net of royalties, is approximately
9,400 Bbls (6,580 Bbls net to Total) of oil and 19,000 Mcf (13,300 Mcf net to
Total) of gas, or 12,567 BOE (8,797 BOE net to Total), from 462 active
producing wells. The realized oil price for the production, net of
transportation and selling expenses, currently averages approximately $3.30 per
barrel below the NYMEX reference price. Realized prices for the gas production
are currently averaging approximately $1.00 per Mcf. We anticipate that we will
be able to reduce operating costs on the El Huemul Properties to a level
consistent with our historical operating costs in Argentina by combining
certain aspects of the operations with those of our nearby existing properties.
We anticipate no significant additions to our overhead costs.
S-6
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered....................... 9,000,000 shares
Common stock to be outstanding
after this offering....................... 62,107,066 shares(1)
Use of proceeds............................ To fund the pending Total Acquisition
discussed above under the section "Pending
Acquisition."
New York Stock Exchange Symbol............. VPI
</TABLE>
- --------
(1) Does not include 1,350,000 shares of common stock that may be sold by us
upon exercise of the underwriters' over-allotment option and 4,664,142 shares
of common stock reserved for issuance pursuant to outstanding stock options.
Risk Factors
You should consider carefully the "Risk Factors" beginning on page S-12 of
this prospectus supplement before making an investment in the common stock.
S-7
<PAGE>
Summary Financial Data(a)
The following table presents a summary of our financial information for the
periods indicated. It should be read in conjunction with our consolidated
financial statements and related notes and the section "Management's Discussion
and Analysis of Financial Condition and Results of Operations," incorporated by
reference in the accompanying prospectus. The summary financial information as
of and for the three months ended March 31, 1998 and 1999, is unaudited.
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
-------------------------------------------------- --------------------
1994(b) 1995(b) 1996(b) 1997(b) 1998 1998(b) 1999
-------- -------- -------- -------- ---------- -------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Oil and gas sales...... $141,357 $160,254 $258,368 $355,113 $ 266,661 $ 72,647 $ 53,494
Oil and gas gathering.. 14,635 12,380 20,508 18,063 7,741 2,679 1,580
Gas marketing.......... 27,285 20,912 31,920 45,981 54,108 14,255 10,318
Other income
(expense)............. 2,474 1,669 1,351 (2,567) 425 413 612
-------- -------- -------- -------- ---------- -------- ----------
185,751 195,215 312,147 416,590 328,935 89,994 66,004
-------- -------- -------- -------- ---------- -------- ----------
Costs and expenses:
Lease operating,
including production
taxes................. 59,292 66,771 91,916 114,346 122,726 32,180 23,847
Exploration costs...... 3,012 3,834 10,192 12,667 24,056 1,998 5,887
Impairment of oil and
gas properties........ -- -- -- 8,785 70,913 -- --
Oil and gas gathering.. 12,294 9,511 16,985 14,932 6,258 2,253 1,194
Gas marketing.......... 24,963 18,839 29,537 43,398 51,560 13,601 9,794
General and
administrative........ 11,657 15,505 22,902 27,361 31,996 7,083 7,933
Depreciation, depletion
and amortization...... 39,341 48,336 66,861 96,307 108,975 26,867 32,205
Interest............... 12,002 20,178 30,109 36,762 43,680 9,291 14,560
-------- -------- -------- -------- ---------- -------- ----------
162,561 182,974 268,502 354,558 460,164 93,273 95,420
-------- -------- -------- -------- ---------- -------- ----------
Income (loss) before
income taxes and
minority interest...... 23,190 12,241 43,645 62,032 (131,229) (3,279) (29,416)
Provision (benefit) for
income taxes:
Current................ 1,576 (955) 2,610 5,235 (4,068) (442) 28
Deferred............... 7,225 4,566 7,365 1,640 (39,496) (1,255) (11,323)
Minority interest in
(income) loss of
subsidiary(c).......... -- 819 (482) (203) -- -- --
-------- -------- -------- -------- ---------- -------- ----------
Net income (loss)....... $ 14,389 $ 9,449 $ 33,188 $ 54,954 $ (87,665) $ (1,582) $ (18,121)
======== ======== ======== ======== ========== ======== ==========
Earnings (loss) per
share(d)(e)............ $ .34 $ .22 $ .68 $ 1.05 $ (1.69) $ (.03) $ (.34)
Weighted average common
shares
outstanding(d)(e)(f)... 42,348 42,081 48,654 52,026 51,900 51,608 53,107
Cash Flow Data:
Cash provided (used) by:
Operating activities... $ 56,001 $ 50,713 $110,586 $186,602 $ 66,250 $ 28,963 $ 14,942
Investing activities... (67,999) (183,765) (168,665) (300,648) (275,319) (49,945) (18,366)
Financing activities... 11,867 135,166 58,308 117,069 208,517 17,017 5,400
Balance Sheet Data (end
of period):
Property, plant and
equipment, net........ $335,922 $543,603 $664,025 $806,887 $ 898,242 $827,567 $ 879,837
Total assets........... 377,010 613,397 766,816 915,394 1,014,175 923,828 1,002,490
Total debt............. 193,864 323,776 379,019 451,096 672,507 467,924 684,635
Stockholders' equity... 137,209 203,265 236,406 337,578 273,958 336,172 255,837
Other Financial Data:
Dividends declared per
share(d)(g)........... $ .035 $ .045 $ .055 $ .07 $ .09 $ .02 --
EBITDA(h).............. $ 77,545 $ 84,589 $150,807 $216,553 $ 116,395 $ 34,877 $ 23,236
</TABLE>
(See notes on following page)
S-8
<PAGE>
- --------
(a) Significant acquisitions of producing oil and gas properties affect the
comparability of the financial data for the periods presented above.
(b) Restated for change in accounting method. Effective January 1, 1998, we
elected to change our accounting method for oil and gas properties from the
full cost method to the successful efforts method.
(c) Reflects the minority interest in our subsidiary Cadipsa S.A.
(d) Amounts have been adjusted to give effect to our two-for-one common stock
split effected on October 7, 1997.
(e) Amounts have been restated to give effect to the adoption of Statement of
Financial Accounting Standards No. 128, Earnings Per Share, as of December
31, 1997. Amounts shown represent diluted earnings (loss) per share and
diluted weighted average common shares outstanding as calculated under the
provisions of SFAS No. 128.
(f) For the year ended December 31, 1998, and the three months ended March 31,
1998 and 1999, the computation of diluted loss per share was antidilutive;
therefore, our basic and diluted weighted average common shares outstanding
were the same. Had we been in a net income position for these periods, our
diluted weighted average common shares outstanding as calculated under SFAS
No. 128 would have been 54,604,530, 52,924,073 and 55,694,353,
respectively. In addition, for the same periods we had outstanding stock
options for 1,629,000, 750,000 and 3,531,322, respectively, which were
antidilutive.
(g) Due to the recent historically low oil and gas price environment, we have
temporarily suspended our regular quarterly cash dividend. Subject to
restrictions under credit arrangements, the determination of the amount of
future cash dividends, if any, to be declared and paid, will depend upon,
among other things, our financial condition, funds from operations, the
level of our capital expenditures and our future business prospects.
(h) EBITDA represents earnings before interest, income taxes, depreciation,
depletion and amortization, exploration costs and impairment of oil and gas
properties. EBITDA is included as a supplemental disclosure because it is
commonly accepted as providing useful information regarding a company's
ability to service and incur debt. EBITDA, however, should not be
considered in isolation or as a substitute for net income, cash flow
provided by operating activities or other income or cash flow data prepared
in accordance with generally accepted accounting principles or as a measure
of a company's profitability or liquidity.
S-9
<PAGE>
Summary Operating and Reserve Data(a)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
Years Ended December 31, March 31,
-------------------------------------------------------- --------------
1994(b) 1995(b) 1996(b) 1997(b) 1998 1998(b) 1999
-------- -------- ---------- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Production:
Oil (MBbls)............. 6,657 7,608 11,939 15,457 16,434 4,047 3,787
Gas (MMcf).............. 28,884 30,610 32,366 42,691 47,238 11,568 10,884
Oil equivalent (MBOE)... 11,471 12,710 17,333 22,573 24,307 5,975 5,601
Average sales prices:
Oil (per Bbl)........... $13.53 $15.26 $16.73(c) $17.02(c) $10.87 $12.59 $9.67
Gas (per Mcf)........... 1.78 1.46 1.81 2.16 1.86 1.88 1.55(c)
Production costs (per
BOE)(d)................. 5.17 5.25 5.30 5.07 5.05 5.39 4.26
Three-year average
finding cost (per
BOE)(e)................. 3.15 2.93 2.94 3.30 4.50 N/A N/A
Proved reserves (end of
year):
Oil (MBbls)............. 70,789 147,871 178,296 187,768 164,457 N/A N/A
Gas (MMcf).............. 281,638 310,762 382,846 552,163 806,833 N/A N/A
Total proved reserves
(MBOE)................. 117,729 199,665 242,104 279,795 298,929 N/A N/A
Proved developed
reserves (MBOE)........ 91,722 145,790 183,629 204,874 207,745 N/A N/A
Annual reserve
replacement ratio(f).... 179% 747% 347% 268% 181% N/A N/A
Estimated reserve life
(in years)(g)........... 10.3 15.7 14.0 12.4 12.3 N/A N/A
Present value of
estimated future net
revenues before income
taxes (discounted at
10%)(in thousands)...... $446,987 $894,249 $1,807,137 $1,222,560 $703,211 N/A N/A
Standardized measure of
discounted future net
cash flows
(in thousands).......... 385,721 736,546 1,392,841 1,016,645 648,222 N/A N/A
</TABLE>
- -------
(a) Significant acquisitions of producing oil and gas properties affect the
comparability of the operating data for the periods presented.
(b) Restated for change in accounting method. Effective January 1, 1998, we
elected to change our accounting method for oil and gas properties from the
full cost method to the successful efforts method.
(c) During the calendar year 1996, the impact of oil hedges reduced our overall
average oil price per Bbl by $2.00 to $16.73. During the calendar year
1997, the impact of oil hedges reduced our overall average oil price per
Bbl by $0.24 to $17.02. During the three months ended March 31, 1999, the
impact of natural gas basis swaps reduced our overall average gas price per
Mcf by $0.06 to $1.55.
(d) Includes lease operating costs and production and ad valorem taxes.
(e) Represents the average finding cost per BOE during the three years ended
December 31 of the year shown in the column. See the section "Certain
Definitions."
(f) The annual reserve replacement ratio is a percentage determined on a BOE
basis by dividing the estimated reserves added during a year from
exploitation, development and exploration activities, acquisitions of
proved reserves and revisions of previous estimates, excluding property
sales, by the oil and gas volumes produced during that year.
(g) Estimated reserve life is calculated on a BOE basis by dividing the total
estimated proved reserves at year-end by the total production during the
year. This calculation can be affected by the timing of major acquisitions.
For example, major acquisitions were made during the second half of 1995
which resulted in an estimated reserve life of 15.7 years for 1995. This
compares to an estimated reserve life of 12.0 years for 1995 based on
annualized first quarter 1996 production.
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<PAGE>
Summary Oil and Gas Reserve Data
The following table sets forth summary information with respect to the
estimates of our proved oil and gas reserves at December 31, 1998, as estimated
by the independent petroleum engineers of Netherland, Sewell & Associates,
Inc., for the United States, Argentina and Ecuador and as estimated by the
independent petroleum engineers of DeGolyer and MacNaughton for Bolivia. For
additional information relating to our oil and gas reserves, see Note 11
"Supplementary Financial Information for Oil and Gas Producing Activities" to
our consolidated financial statements incorporated by reference in the
accompanying prospectus.
<TABLE>
<CAPTION>
Proved Reserves at
December 31, 1998
-----------------------------
Developed Undeveloped Total
--------- ----------- -------
<S> <C> <C> <C>
United States:
Oil (MBbls)..................................... 51,481 5,726 57,207
Gas (MMcf)...................................... 330,371 55,141 385,512
MBOE............................................ 106,543 14,916 121,459
Argentina:
Oil (MBbls)..................................... 47,167 27,674 74,841
Gas (MMcf)...................................... 12,024 -- 12,024
MBOE............................................ 49,171 27,674 76,845
Bolivia:
Oil (MBbls)..................................... 4,390 3,974 8,364
Gas (MMcf)...................................... 278,317 130,980 409,297
MBOE............................................ 50,776 25,804 76,580
Ecuador:
Oil (MBbls)..................................... 1,255 22,790 24,045
Gas (MMcf)...................................... -- -- --
MBOE............................................ 1,255 22,790 24,045
Total:
Oil (MBbls)..................................... 104,293 60,164 164,457
Gas (MMcf)...................................... 620,712 186,121 806,833
MBOE............................................ 207,745 91,184 298,929
</TABLE>
S-11
<PAGE>
RISK FACTORS
Before you buy any shares of common stock offered by this prospectus
supplement and the accompanying prospectus you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors, together with all of the other information in this
prospectus supplement, the accompanying prospectus and the documents that are
incorporated by reference, before you decide to purchase any shares.
Low Oil and Gas Prices Have Caused Our Cash Flow to Decline and Resulted in
Losses
Our revenues, operating results, cash flow and future rate of growth depend
substantially upon prevailing prices for oil and gas. Historically, oil and
gas prices and markets have been volatile, and they are likely to continue to
be volatile in the future. For the year ended December 31, 1998, approximately
68 percent of our production was oil. The prices we received for our oil for
the period decreased by 36 percent as compared to the same period in 1997. As
a result, although total production on an equivalent barrels of oil basis
increased by eight percent for 1998, our earnings and cash flows have been
materially reduced compared to the same period in 1997, and we have incurred
net losses for 1998 and the first quarter of 1999. While oil prices have
recovered modestly since year end, they still remain well below the average
price historically seen by the industry. To the extent low oil prices
continue, our earnings and cash flow from operations will be adversely
impacted.
Prices for oil and gas are subject to wide fluctuations in response to
relatively minor changes in the supply of and demand for oil and gas, market
uncertainty and a variety of additional factors that are beyond our control,
including:
. political conditions in oil producing regions, including the Middle East;
. the domestic and foreign supply of oil and gas;
. the level of consumer demand;
. weather conditions;
. domestic and foreign government regulations;
. the price and availability of alternative fuels; and
. overall economic conditions.
In addition, various factors may adversely affect our ability to market our
oil and gas production, including:
. the capacity and availability of oil and gas gathering systems and
pipelines;
. the effect of federal and state regulation of production and
transportation;
. general economic conditions;
. changes in supply due to drilling by other producers;
. the availability of drilling rigs; and
. changes in demand.
Lower Oil and Gas Prices Have Reduced Our Capital Expenditures and Adversely
Affect Our Reserve Estimates
Lower oil and gas prices have various adverse effects on us, including
reducing cash flows which, among other things, have caused us currently, and
may cause us in the future, to decrease our capital expenditures. Our planned
capital expenditure program in 1999, before acquisitions, is set at $56
million, compared to $185 million in 1998 and $119 million in 1997. The
Company anticipates an additional $11 million of capital expenditures in 1999
if the Total Acquisition is consummated. Because the timing of most of our
capital
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<PAGE>
expenditures is discretionary, should oil and gas prices improve during 1999,
our 1999 capital expenditure program may be adjusted upwards.
A smaller capital expenditure program may adversely affect our ability to
increase or maintain our reserve and production levels. Lower prices may also
result in reduced reserve estimates, the one-time write-off of impaired assets
and decreased earnings or losses due to lower reserves and higher depreciation,
depletion and amortization expense. For example, we recorded in the fourth
quarter of 1998 a significant non-cash charge for the impairment of our oil and
gas properties due to lower oil and gas prices.
Lower Oil and Gas Prices May Significantly Reduce the Amount We Can Borrow
Under Our Credit Arrangements
Lower oil and gas prices could also result in future reductions in the
borrowing base (currently $400 million) under our revolving credit facility
because of lower oil and gas reserve values, reducing our liquidity and even
triggering mandatory loan repayments. Any reduction in our liquidity could
impede our ability to fund future acquisitions. Lower prices may also cause us
to not be in compliance with maintenance covenants under our revolving credit
facility and may negatively affect our credit statistics and coverage ratios.
Our Significant Indebtedness Could Have Important Consequences to You
We currently have, and after this offering will continue to have, a
substantial amount of indebtedness. At March 31, 1999, our total long-term debt
outstanding was approximately $685 million and we had a long-term debt to total
capitalization ratio of 73 percent. After giving effect to this offering, this
ratio would decrease to 65 percent. Our significant indebtedness could have
important consequences to you. For example:
. our ability to obtain any necessary financing in the future for working
capital, capital expenditures, acquisitions, debt service requirements or
other purposes may be limited;
. a portion of our cash flow from operations must be utilized for the
payment of interest on our indebtedness and will not be available for
financing capital expenditures or other purposes; for example, interest
payments for 1998 represented approximately 35 percent of our cash flows
from operations before interest expense and will likely represent a
significantly higher percentage in 1999 due to the adverse effect of low
oil and gas prices on our cash flow from operations;
. our level of indebtedness and the covenants governing our current
indebtedness could limit our flexibility in planning for, or reacting to,
changes in our business because certain financing options may be limited
or prohibited;
. we are more highly leveraged than some of our competitors, which may
place us at a competitive disadvantage;
. our level of indebtedness may make us more vulnerable during periods of
low oil and gas prices or in the event of a downturn in our business
because of our fixed debt service obligations; and
. the terms of our revolving credit facility require us to make interest
and principal payments and to maintain stated financial covenants. If the
requirements of this facility are not satisfied, the lenders under this
facility would be entitled to accelerate the payment of all outstanding
indebtedness under this facility, and a default would be deemed to occur
under the terms of our senior subordinated notes. In such event, we
cannot assure you that we would have sufficient funds available or could
obtain the financing required to meet our obligations.
We May Take On More Debt Which Would Increase the Risks Our Debt Levels Pose
We may be able to incur substantial additional indebtedness in the future.
As of June 3, 1999, our revolving credit facility, which has a current
borrowing base of $400 million, would permit additional borrowings of up to
approximately $107 million. In addition, the terms of the indentures governing
our senior subordinated notes permit us to incur additional indebtedness. If we
were to add additional indebtedness to our current debt levels, the related
risks discussed above that we now face could intensify.
S-13
<PAGE>
Our Future Performance Depends Upon Our Ability to Find or Acquire Additional
Oil and Gas Reserves that are Economically Recoverable
Unless we successfully replace the reserves that we produce, our reserves
will decline, resulting eventually in a decrease in oil and gas production and
lower revenues and cash flow from operations. We historically have succeeded in
substantially replacing reserves through exploitation, development and
exploration. We have conducted such activities on our existing oil and gas
properties as well as on newly acquired properties. We may not be able to
continue to replace reserves from such activities at acceptable costs. Lower
prices of oil and gas may further limit the kinds of reserves that can be
developed at an acceptable cost. Lower prices also decrease our cash flow and
may cause us to decrease capital expenditures. The business of exploring for,
developing or acquiring reserves is capital intensive. We may not be able to
make the necessary capital investment to maintain or expand our oil and gas
reserves if cash flow from operations is reduced and external sources of
capital become limited or unavailable. In addition, exploitation, development
and exploration involve numerous risks that may result in dry holes, the
failure to produce oil and gas in commercial quantities and the inability to
fully produce discovered reserves.
We are continually identifying and evaluating acquisition opportunities,
including acquisitions that would be significantly larger than those
consummated to date by us. We cannot assure you that we will successfully
consummate any acquisition, that we will be able to acquire producing oil and
gas properties that contain economically recoverable reserves or that any
acquisition will be profitably integrated into our operations.
Our Pending Acquisition Might Not Be Consummated As Expected
The consummation of the Total Acquisition is subject to the satisfaction of
the conditions contained in the purchase and sale agreement. The conditions to
the obligations of the parties to complete the pending acquisition include:
. the Joint Venture Partner's consent to the transfer of Total's interest
in the joint venture agreement covering the El Huemul Properties;
. the waiver by the Joint Venture Partner of its preferential right to
purchase Total's interest in the joint venture agreement covering the El
Huemul Properties; and
. the Joint Venture Partner's agreement to allow us to succeed as operator
of the El Huemul Properties.
In addition, the purchase agreement may be terminated by us or Total if the
closing does not occur by September 30, 1999.
Although we believe that the conditions for closing the purchase of Total's
interest in the El Huemul Properties will be satisfied, we cannot be sure that
the transaction will be consummated. If the acquisition is not consummated, we
intend to utilize the net proceeds from this offering as discussed under the
section "Use of Proceeds."
Acquisitions Carry Unknown Risks Including Potential for Environmental Problems
Our focus on acquiring producing oil and gas properties may increase our
potential exposure to liabilities and costs for environmental and other
problems existing on such properties. We expect to continue to focus, as we
have done in the past, on acquiring producing oil and gas properties to replace
reserves. Although we perform a review of the acquired properties that we
believe is consistent with industry practice, such reviews are inherently
incomplete. In general, it is not feasible to review in depth each individual
property being acquired. Ordinarily, we focus our review efforts on the higher-
valued properties and sample the remainder. However, even an in-depth review of
all properties and records may not necessarily reveal existing or potential
problems nor will it permit us to become sufficiently familiar with the
properties to fully assess their deficiencies and capabilities. Inspections may
not always be performed on each well included in an acquisition, and
environmental problems, such as ground water contamination and surface and
subsurface damages from the leakage, spills, disposal or other releases of
hazardous substances on such properties or from adjoining properties that have
migrated to such properties, are not necessarily observable even when an
inspection is performed.
S-14
<PAGE>
Estimating Reserves and Future Net Revenues Involves Uncertainties and Oil and
Gas Price Declines May Lead to Impairment of Oil and Gas Assets
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting future rates of production and timing of
developmental expenditures, including many factors beyond the control of the
producer. The reserve data included or incorporated by reference in this
prospectus supplement and accompanying prospectus represent only estimates. In
addition, the estimates of future net revenues from our proved reserves and the
present value of such estimates are based upon certain assumptions about future
production levels, prices and costs that may not prove to be correct over time.
Quantities of proved reserves are estimated based on economic conditions in
existence in the period of assessment. Lower oil and gas prices may have the
impact of shortening the economic lives on certain fields because it becomes
uneconomic to produce all recoverable reserves on such fields, thus reducing
proved property reserve estimates. If such revisions in the estimated
quantities of proved reserves occur, it will have the effect of increasing the
rates of depreciation, depletion and amortization on the affected properties,
which would decrease earnings or result in losses through higher depreciation,
depletion and amortization expense. The revisions may also be sufficient to
trigger impairment losses on certain properties which would result in a further
non-cash charge to earnings. For example, we recorded a significant non-cash
charge for the impairment of oil and gas properties in the fourth quarter of
1998 due to lower oil and gas prices.
Our International Operations May Be Adversely Affected By a Number of Factors
International investments represent, and are expected to continue to
represent, a significant portion of our total assets. We have international
operations in Argentina, Bolivia, Ecuador and Yemen. For the first quarter of
1999, our operations in Argentina accounted for approximately 22 percent of our
revenues and 25 percent of our total assets. Our operations in Argentina
produced a net operating profit (pre-tax income before general and
administrative and interest expenses) of $2.7 million compared to an overall
loss by us of $6.9 million for the first three months of 1999. During such
period, our operations in Argentina represented our only foreign operations
accounting for more than 10 percent of our revenues, operating income or total
assets, and such operations will account for a greater percentage if the Total
Acquisition is consummated. We continue to identify and evaluate international
investment opportunities but currently have no binding agreements or
commitments to make any material international investment, other than as
discussed under "Pending Acquisition."
Our foreign properties, operations or investments in Argentina, Bolivia,
Ecuador and Yemen may be adversely affected by a number of factors, including:
. local political and economic developments could restrict or increase the
cost of our foreign operations;
. exchange controls and currency fluctuations;
. royalty and tax increases and retroactive tax claims could increase costs
of our foreign operations;
. expropriation of our property could result in loss of revenue, property
and equipment;
. import and export regulations and other foreign laws or policies could
result in loss of revenues; and
. laws and policies of the United States affecting foreign trade, taxation
and investment could restrict our ability to fund foreign operations or
make foreign operations more costly.
In particular, our Bolivian projects are dependent, at least in part, on the
development and operation of the Bolivia-to-Brazil gas pipeline. The operation
of this pipeline is subject to various factors outside our control. In
S-15
<PAGE>
addition, in the event of a dispute arising from foreign operations, we may be
subject to the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdiction of the courts in
the United States. We may also be hindered or prevented from enforcing our
rights with respect to actions taken by a foreign government or its agencies.
Our Hedging Activities May Reduce the Effect of Volatility of Oil and Gas
Prices on Us But May Expose Us to the Risk of Financial Loss in Certain
Circumstances
We have previously engaged in oil and gas hedging activities and intend to
continue to consider various hedging arrangements to realize commodity prices
which we consider favorable. We currently have in place natural gas basis swaps
covering 82,000 million british thermal units of gas per day for April through
December 1999 and covering an additional 3,000 million british thermal units of
gas per day for the period of April through October 1999. We have also recently
entered into contracts hedging 20,000 barrels of oil per day for the months of
May, June and July 1999 at an average NYMEX reference price of $18.07 per
barrel. The impact of changes in the market prices for oil and gas on the
average oil and gas prices received by us may be reduced from time to time
based on the level of our hedging activities. These hedging arrangements may
limit our potential gains if the market prices for oil and gas were to rise
substantially over the price established by the hedge. In addition, our hedging
arrangements expose us to the risk of financial loss in certain circumstances,
including instances in which:
. production is less than expected;
. a change in the difference between published price indexes established by
pipelines in which our hedged production is delivered and the reference
price established in the hedging arrangements is such that we are
required to make payments to the counterparties to our arrangements; or
. the counterparties to our hedging arrangements fail to honor their
financial commitments.
Possible Financial Loss Due to Uninsured Risks Associated with Our Operations
Our operations are subject to all of the risks and hazards typically
associated with the exploitation, development and exploration for, the
production of, and the transportation of oil and gas. Operating risks include
but are not limited to:
. blowouts, cratering and explosions;
. uncontrollable flows of oil, natural gas or well fluids;
. fires;
. formations with abnormal pressures;
. pollution and other environmental risks; and
. natural disasters.
Any of such events could result in loss of human life, significant damage to
property, environmental pollution, impairment of our operations and substantial
losses to us. In accordance with customary industry practice, we maintain
insurance against some, but not all, of such risks and losses. The occurrence
of such an event not fully covered by insurance could have a material adverse
effect on our financial position and results of operations.
Governmental and Environmental Regulations Could Adversely Affect Our Business
Our business is subject to certain foreign, federal, state and local laws
and regulations on taxation, the exploration for and development, production
and marketing of oil and gas, and environmental and safety matters. Many laws
and regulations require drilling permits and govern the spacing of wells, rates
of
S-16
<PAGE>
production, prevention of waste and other matters. Such laws and regulations
have increased the costs of planning, designing, drilling, installing,
operating and abandoning our oil and gas wells and other facilities. In
addition, these laws and regulations, and any others that are passed by the
jurisdictions where we have production, could limit the total number of wells
drilled or the allowable production from successful wells which could limit our
revenues.
Our operations are subject to complex environmental laws and regulations
adopted by the various jurisdictions where we operate. We could incur liability
to governments or third parties for any unlawful discharge of oil, gas or other
pollutants into the air, soil or water, including responsibility for remedial
costs. We could potentially discharge such materials into the environment in
any of the following ways:
. from a well or drilling equipment at a drill site;
. leakage from gathering systems, pipelines, transportation facilities and
storage tanks;
. damage to oil and natural gas wells resulting from accidents during
normal operations; and
. blowouts, cratering and explosions.
Because the requirements imposed by such laws and regulations are frequently
changed, we cannot assure you that laws and regulations enacted in the future,
including changes to existing laws and regulations, will not adversely affect
our business. In addition, because we acquire interests in properties that have
been operated in the past by others, we may be liable for environmental damage
caused by such former operators.
Highly Competitive Industry May Impede Our Growth
The oil and gas industry is highly competitive. We compete in the areas of
property acquisitions and the development, production and marketing of, and
exploration for, oil and natural gas with major oil companies, other
independent oil and natural gas concerns and individual producers and
operators. We also compete with major and independent oil and natural gas
concerns in recruiting and retaining qualified employees. Many of these
competitors have substantially greater financial and other resources than we
do.
Additional Payments May Be Due Under Our Stock Price Guarantee
In November 1998, we 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, we issued to Elf Aquitaine 1,325,000 shares
of our common stock. In connection with this acquisition, we entered into a
consideration guarantee agreement with Elf Aquitaine, which guarantees Elf
Aquitaine a price of $20 per share on November 4, 2000, for the 1,325,000
shares of our common stock issued to it. If on such date, the average of the
daily closing prices of our common stock on the New York Stock Exchange for the
60 trading days preceding that date is less than $20 per share, at our option
we must either issue additional shares of our common stock or deliver cash to
Elf Aquitaine for such price difference. Since our obligations under the price
guarantee are based on the future price of our common stock, we are unable to
predict whether any additional payments will be due under such guarantee.
However, based on $9.49 per share, which is the average price of our common
stock for the 60 trading days preceding May 31, 1999, we would be required, at
our option, to either pay cash of approximately $7.4 million or issue
approximately 782,000 additional shares of our common stock to Elf Aquitaine.
Pending Litigation
We are currently involved in pending litigation in Argentina with respect to
the amount of royalties due the Province of Santa Cruz, Argentina, on
production from four of our Argentine concessions. At March 31, 1999, the
disputed claim totaled approximately $18.7 million (which amount includes
interest). The amount of this claim will increase, until resolved, as a result
of the continued payment of a lower royalty rate than that claimed to be
applicable by the Province of Santa Cruz. We believe that, with respect to our
50 percent interest
S-17
<PAGE>
in two concessions acquired from British Gas, plc, we will be entitled to
indemnification by British Gas, plc for any loss sustained by us as a result of
this claim. Such indemnification is estimated at approximately $4.8 million at
March 31, 1999. We may not be able to collect this amount.
Control by Certain Stockholders May Have the Effect of Delaying or Preventing a
Change in Control of Us
Upon completion of this offering, our current officers and directors as a
group will own approximately 27 percent of our outstanding common stock.
Consequently, these stockholders may be in a position to effectively control
our affairs, including the election of all of our directors and the approval or
prevention of certain corporate transactions which require majority stockholder
approval. Such a concentration of ownership may have the effect of delaying or
preventing a change in control of us, including transactions in which our
stockholders might otherwise receive a premium for their shares over then
current market prices.
Our Stock Price is Volatile
Our common stock has experienced significant price volatility, and such
volatility may continue in the future. The price of our common stock could
fluctuate widely in response to a range of factors, including variations in our
quarterly results and changing conditions in the economy in general or in our
industry in particular. In addition, stock markets generally experience
significant price and volume volatility from time to time which may affect the
market price of our common stock unrelated to our performance.
Certain Anti-takeover Provisions May Have the Effect of Discouraging
Unsolicited Takeover Proposals for Us
Our Restated Certificate of Incorporation and Restated By-laws and the
Delaware General Corporation Law contain provisions that may have the effect of
discouraging unsolicited takeover proposals for us that a stockholder might
consider to be in that stockholder's best interest. These provisions, among
other things:
. provide for a classified board of directors, which allows only one-third
of our directors to be elected each year;
. restrict the ability of stockholders to take action by written consent;
. authorize the board of directors to designate the terms of and issue new
series of preferred stock;
. establish advance notice requirements for nominations for election to the
board of directors;
. limit the personal liability of directors;
. require us to indemnify directors and officers to the fullest extent
permitted by applicable law; and
. impose restrictions on business combinations with certain interested
parties.
In addition, we have a stockholder rights plan that may have the effect of
discouraging unsolicited takeover proposals. The rights issued under the
stockholder rights plan would cause substantial dilution to a person or group
that attempts to acquire us on terms not approved in advance by our board of
directors.
Year 2000 Risks Could Have a Material Adverse Impact on Our Operations and
Financial Condition Despite Our Own Efforts to Ensure Year 2000 Compliance
We have undertaken various initiatives to assess and ensure that our
information systems and our production and field equipment, gathering systems,
security systems and other systems and equipment will function properly before
and after January 1, 2000. We have formed a Year 2000 Project team, which is
chaired by our Manager of Information Services, and have developed a Year 2000
compliance time line that covers the phases of identification, assessment,
remediation and testing. We are currently developing
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<PAGE>
contingency plans in the event that Year 2000 problems arise due to any
failures of our systems or any failures on the part of our business partners to
become Year 2000 compliant. We presently believe that the Year 2000 issue will
not cause significant internal operational problems. However, in the event we
have not properly identified all Year 2000 issues, or we have not effected
assessment, remediation and testing on a timely basis, we cannot assure you
that Year 2000 issues will not have a material adverse impact on our results of
operations or financial condition.
The Year 2000 issues also affect numerous other companies with whom we do
business, including oil and gas purchasers, pipeline companies, vendors,
service companies, utility providers and financial institutions. We have
submitted over 14,000 Year 2000 compliance questionnaires to our various
business partners. To date, we have received over 5,600 responses to these
questionnaires. Responses to these questionnaires are being evaluated to
determine the preparation and readiness of our key business partners with
respect to Year 2000 issues. There can be no assurance, however, that the
failure of our key business partners to adequately prepare for Year 2000 issues
will not have a material adverse impact on our operations and financial
condition notwithstanding our own efforts to ensure Year 2000 compliance.
FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents we
incorporate by reference include "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All statements, other than statements of
historical facts, included or incorporated by reference in this prospectus
supplement and the accompanying prospectus, which address activities, events or
developments which we expect or anticipate will or may occur in the future are
forward-looking statements. The words "believe," "intend," "expect,"
"anticipate," "project," "estimate," "predict" 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;
. future earnings and cash flow;
. exploitation and exploration prospects;
. estimates of proved oil and gas reserves;
. reserve potential;
. development and infill drilling potential;
. drilling prospects;
. expansion and other development trends of the oil and gas industry;
. business strategy;
. production of oil and gas reserves;
. expansion and growth of our business and operations; and
. the pending Total Acquisition.
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<PAGE>
These statements are based on certain assumptions and analyses made by us in
light of our experience and our perception of historical trends, current
conditions and expected future developments as well as other factors we believe
are appropriate in the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is subject to a
number of risks and uncertainties which could cause actual results to differ
materially from our expectations, including
. the risk factors discussed in this prospectus supplement and in the
documents we incorporate by reference;
. oil and gas prices;
. exploitation and exploration successes;
. continued availability of capital and financing;
. the acquisition and other business opportunities (or lack thereof) that
may be presented to and pursued by us;
. general economic, market or business conditions;
. changes in laws or regulations; and
. other factors, most of which are beyond our control.
Consequently, all of the forward-looking statements made in this prospectus
supplement and the accompanying prospectus and in the documents we incorporate
by reference are qualified by these cautionary statements, and there can be no
assurance that the actual results or developments anticipated by us will be
realized or, even if substantially realized, that they will have the expected
consequences to or effects on us or our business or operations. We assume no
obligation to update publicly any such forward-looking statements, whether as a
result of new information, future events or otherwise.
USE OF PROCEEDS
We expect the net proceeds from this offering of common stock to be
approximately $101.0 million, after deducting discounts to the underwriters and
estimated expenses of this offering that we will pay. Such net proceeds will be
used in part to finance our pending acquisition from Total of the El Huemul
Properties. There can be no assurance that the Total Acquisition will be
consummated. Pending such application, we may invest the net proceeds in short-
term, interest bearing, investment grade securities or repay a portion of our
indebtedness outstanding under our revolving credit facility, or a combination
of both. Net proceeds in excess of those required for the Total Acquisition may
be utilized to repay a portion of our outstanding indebtedness under our
revolving credit facility or may be invested in short-term, interest bearing,
investment grade securities until utilized for general corporate purposes or
possible future acquisitions, including the possible acquisition of the Joint
Venture Partner's operating interest in the El Huemul Properties, as well as
its concession rights.
To the extent the net proceeds are used to repay a portion of the
outstanding indebtedness under our revolving credit facility, the cash amount
due at the closing of the Total Acquisition will then be funded by advances
under our revolving credit facility. In the event that such Total Acquisition
is not consummated, we intend to use the net proceeds to repay a portion of our
indebtedness outstanding under our revolving credit facility. At March 31,
1999, the outstanding balance under our revolving credit facility totaled
approximately $285.6 million, with an average interest rate of approximately
6.0 percent. Our revolving credit facility has a final maturity of September
11, 2003. Our indebtedness under this facility was incurred, in part, to
finance acquisitions of oil and gas reserves during 1998, including the
acquisitions of certain oil and gas properties from Western Gas Resources, Inc.
and affiliates of Texaco and the acquisition of Elf Hydrocarbures Equateur,
S.A.
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CAPITALIZATION
The following table sets forth at March 31, 1999:
(a) our historical capitalization, and
(b) our as adjusted capitalization after giving effect to
(i) the Total Acquisition (see "Pending Acquisition"),
(ii) this offering, and
(iii) the application of the estimated net proceeds from this
offering as set forth in "Use of Proceeds."
This table should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this prospectus supplement
or incorporated by reference in the accompanying prospectus.
<TABLE>
<CAPTION>
March 31, 1999
---------------------
As
Historical Adjusted
---------- ----------
(In thousands)
<S> <C> <C>
Current portion of long-term debt.................... $ -- $ --
--------- ----------
Long-term debt:
Bank Revolving Loan Facility....................... $ 285,600 $ 273,696
9% Senior Subordinated Notes Due 2005, net of
discount.......................................... 149,725 149,725
8 5/8% Senior Subordinated Notes Due 2009, net of
discount.......................................... 99,310 99,310
9 3/4% Senior Subordinated Notes Due 2009.......... 150,000 150,000
--------- ----------
Total long-term debt............................. 684,635 672,731
--------- ----------
Stockholders' equity:
Common stock (a)................................... 266 311 (b)
Capital in excess of par value..................... 230,736 331,688 (b)
Retained earnings.................................. 24,835 24,835
--------- ----------
Total stockholders' equity....................... 255,837 356,834
--------- ----------
Total capitalization................................. $ 940,472 $1,029,565
========= ==========
</TABLE>
- --------
(a) There were 53,107,066 shares of common stock issued and outstanding prior
to this offering, and 62,107,066 shares outstanding after giving effect to
this offering. The number of shares of common stock outstanding excludes
(a) 1,350,000 shares of common stock that may be sold by us upon exercise
of the underwriters' over-allotment option, and (b) 4,664,142 shares of
common stock reserved for issuance upon exercise of outstanding options
granted under our 1990 Stock Plan and Non-Management Director Stock Option
Plan, at an average exercise price of $11.53 per share. In addition, an
aggregate of 447,000 shares are available to be granted under these Plans.
(b) Reflects the issuance of 9,000,000 shares of common stock by us at an
assumed public offering price of $11.8125 per share, resulting in estimated
net proceeds of $101.0 million, of which $45,000 (equal to the par value of
the shares issued) is reflected in Common stock and $101.0 million is
reflected in Capital in excess of par value.
S-21
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our 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 our 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>
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
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
1999
First Quarter............................. 10 1/16 4 1/16 .025
Second Quarter (through June 4)........... 11 7/8 8 1/8 --
</TABLE>
On June 4, 1999, the last reported sales price of the common stock on the
New York Stock Exchange was $11.8125 per share. Substantially all of our
stockholders maintain their shares in "street name" accounts and are not,
individually, stockholders of record. As of March 25, 1999, the common stock
was held by 112 holders of record and approximately 7,200 beneficial owners.
We began paying a quarterly cash dividend in the fourth quarter of 1992. Due
to the recent historically low oil and gas price environment, we temporarily
suspended, beginning in the second quarter of 1999, paying a regular quarterly
cash dividend. Subject to restrictions under credit arrangements, the
determination of the amount of future cash dividends, if any, to be declared
and paid, will depend upon, among other things, our financial condition, funds
from operations, the level of our capital expenditures and our future business
prospects. Our credit arrangements (including the indentures for our
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 our Consolidated Interest Coverage Ratio (as
defined in the indentures) does not exceed 2.5 to 1.0. We are currently
prohibited from paying cash dividends.
S-22
<PAGE>
PENDING ACQUISITION
In June 1999, we entered into a definitive purchase and sale agreement with
Total Austral S.A. to acquire its undivided 70 percent operating interest
(effective 61.6 percent net revenue interest) in the El Huemul-Koluel Kaike
concession (the "El Huemul Properties") located in Santa Cruz Province,
Argentina, which Total currently operates (the "Total Acquisition"). Total's
ownership interest in the concession is through a joint venture agreement. The
acquisition will be effective January 1, 1999, with an expected closing date of
June 30, 1999. We cannot assure you that this acquisition will close.
The purchase price for the Total Acquisition is $93 million in cash, with
$80 million payable at closing, adjusted for net cash flow from the effective
date until closing, and the remaining $13 million payable on or before
December 31, 1999. The purchase and sale agreement contains certain conditions
precedent to closing, including obtaining from the owner of the remaining 30
percent operating interest in the El Huemul Properties (the "Joint Venture
Partner") (i) its consent to the transfer of Total's interest in the joint
venture agreement; (ii) a waiver of its preferential right to purchase Total's
interest in the joint venture agreement; and (iii) its consent to allow us to
succeed as operator of the El Huemul Properties.
We are currently pursuing the purchase of the Joint Venture Partner's
interest in the joint venture agreement as well as its concession rights to the
El Huemul Properties. However, our efforts may not be successful.
The El Huemul Properties cover approximately 150,000 gross acres and are
located adjacent to our existing operated concessions in the Santa Cruz
Province. The El Huemul Properties are similar to our existing properties in
this basin and are characterized by mature fields having stable production
decline trends, similar geological formations and production zones, established
waterflood potential and exploration and exploitation upside potential. Because
of these similarities, we believe that the exploitation and exploration success
we have experienced in our current Argentine operations, including development
drilling, workover and recompletion techniques, secondary recovery projects and
exploratory drilling, will be available in the El Huemul Properties as well. We
estimate that the El Huemul Properties have proved exploitation potential
through adding new non-producing behind pipe zones in 107 wells, expanding upon
the 13 waterflood areas, and infill or extensional drilling of up to 66 new
wells. In addition, we have identified non-proved opportunities within the
concession that include behind pipe zones in 117 wells, installing up to 18
additional waterflood areas and 50 additional drilling locations. There is also
exploration potential that we identified through a thorough review of 3-D
seismic provided during the evaluation process.
Proved reserves for the El Huemul Properties as of July 1, 1999, as
estimated by Netherland, Sewell & Associates, Inc., using a NYMEX reference oil
price of $17.32 per Bbl and an average gas price of $1.02 per Mcf, are 44.7
MMBbls (31.3 MMBbls net to Total) of oil and 81.1 Bcf (56.8 Bcf net to Total)
of gas, or 58.2 MMBOE (40.7 MMBOE net to Total). The present value of the
estimated future net revenues before income taxes (utilizing a 10 percent
discount rate) is $233.3 million ($163.3 million net to Total). We estimate
that the purchase price for the Total Acquisition will be approximately $89.1
million after closing adjustments consisting of (i) a reduction for revenues
less direct operating expenses of approximately $8.2 million from the effective
date to the anticipated closing date, and (ii) an increase for other
adjustments of approximately $4.3 million. This results in an acquisition cost
of $2.19 per BOE. Current daily production, net of royalties, is approximately
9,400 Bbls (6,580 Bbls net to Total) of oil and 19,000 Mcf (13,300 Mcf net to
Total) of gas, or 12,567 BOE (8,797 BOE net to Total), from 462 active
producing wells. The realized oil price for the production, net of
transportation and selling expenses, currently averages approximately $3.30 per
barrel below the NYMEX reference price. Realized prices for the gas production
are currently averaging approximately $1.00 per Mcf. We anticipate that we will
be able to reduce operating costs on the El Huemul Properties to a level
consistent with our historical operating costs in Argentina by combining
certain aspects of the operations with those of our nearby existing properties.
We anticipate no significant additions to our overhead costs.
S-23
<PAGE>
UNITED STATES FEDERAL TAX CONSEQUENCES TO
NON-U.S. HOLDERS OF COMMON STOCK
General
This is a general discussion of certain United States federal tax
consequences of the acquisition, ownership, and disposition of our common stock
by a holder that, for United States federal income tax purposes, is not a "U.S.
person" as we define that term below (a "Non-U.S. Holder"). We assume in this
discussion that you will hold our common stock as a capital asset (generally,
property held for investment). We do not discuss all aspects of United States
federal taxation that may be important to you in light of your individual
investment circumstances, such as if special tax rules apply to you, for
example, if you are a dealer in securities, financial institution, bank,
insurance company, tax-exempt organization, partnership or owner of more than 5
percent of our common stock. Our discussion is based on current provisions of
the Internal Revenue Code of 1986, as amended, Treasury Regulations, judicial
opinions, published positions of the United States Internal Revenue Service
(the "IRS"), and other applicable authorities, all as in effect on the date of
this prospectus and all of which are subject to differing interpretations or
change, possibly with retroactive effect. We urge you to consult your tax
advisor about the United States federal tax consequences of acquiring, holding,
and disposing of our common stock, as well as any tax consequences that may
arise under the laws of any foreign, state, local, or other taxing
jurisdiction.
For purposes of this discussion, a "U.S. person" means any one of the
following:
. a citizen or resident of the United States;
. a corporation or other entity taxable as a corporation created or
organized in the United States or under the laws of the United States or
of any political subdivision of the United States;
. an estate, the income of which is includable in gross income for United
States federal income tax purposes regardless of its source;
. a trust, the administration of which is subject to the primary
supervision of a United States court and that has one or more U.S.
persons who have the authority to control all substantial decisions of
the trust.
Dividends
Dividends paid to a Non-U.S. Holder will generally be subject to withholding
of United States federal income tax at the rate of 30 percent. If, however, the
dividend is effectively connected with the conduct of a trade or business in
the United States by the Non-U.S. Holder or, if a tax treaty applies, is
attributable to a United States permanent establishment of such Non-U.S.
Holder, the dividend will be exempt from such withholding, provided the Non-
U.S. Holder complies with applicable certification and disclosure requirements.
Instead, the dividend will be subject to United States federal income tax
imposed on net income on the same basis that applies to U.S. persons generally,
and, for corporate Non-U.S. Holders, may be subject to the branch profits tax.
Non-U.S. Holders should consult any applicable income tax treaties that may
provide for a reduction of, or exemption from, withholding taxes. For purposes
of determining whether tax is to be withheld at a reduced rate as specified by
a treaty, we generally will presume that dividends we pay on or before December
31, 2000, to an address in a foreign country are paid to a resident of that
country.
Under finalized Treasury Regulations, which in general apply to dividends
that we pay after December 31, 2000, to obtain a reduced rate of withholding
under a treaty, a Non-U.S. Holder generally will be required to provide an IRS
Form W-8 certifying as to that Non-U.S. Holder's entitlement to treaty
benefits. These regulations also provide special rules to determine whether,
for treaty applicability purposes, dividends that we pay to a Non-U.S. Holder
that is an entity should be treated as paid to holders of interests in that
entity.
A Non-U.S. Holder may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund with the IRS.
S-24
<PAGE>
Gain on Disposition
A Non-U.S. Holder will generally not be subject to United States federal
income tax, including by way of withholding, on gain recognized on a sale or
other disposition of our common stock unless any one of the following is true:
. the gain is effectively connected with the conduct of a trade or business
in the United States by the Non-U.S. Holder;
. the Non-U.S. Holder is a nonresident alien individual present in the
United States for 183 or more days in the taxable year of the disposition
and certain other requirements are met;
. the Non-U.S. Holder is subject to tax pursuant to provisions of the
United States federal income tax law applicable to certain United States
expatriates;
. we are or have been during certain periods a "United States real property
holding corporation" for United States federal income tax purposes.
We believe that we are currently a "U.S. real property holding corporation"
for federal income tax purposes. Under the "U.S. real property holding
corporation" rules, a Non-U.S. Holder will generally not be subject to United
States federal income tax on gain recognized on a sale or other disposition of
our common stock so long as:
. the Non-U.S. Holder does not hold (and has not held during certain
periods), directly or indirectly, more than 5 percent of our outstanding
common stock, and
. our common stock continues to be traded on an established securities
market for United States federal income tax purposes.
We believe that our common stock will be traded on an established securities
market for this purpose in any quarter during which it is listed on the New
York Stock Exchange.
If the above exception does not apply, a Non-U.S. Holder will be subject to
United States federal income tax with respect to gain realized on any sale or
other disposition of our common stock as well as to a withholding tax
(generally at a rate of 10 percent of the cash proceeds). Any amount withheld
pursuant to a withholding tax will be creditable against a Non-U.S. Holder's
United States federal income tax liability.
Gain that is effectively connected with the conduct of a trade or business
in the United States by the Non-U.S. Holder will be subject to the United
States federal income tax imposed on net income on the same basis that applies
to United States persons generally, and, for corporate holders, may be subject
to the branch profits tax. Non-U.S. Holders should consult any applicable
income tax treaties that may provide for different rules.
United States Federal Estate Taxes
Our common stock that is owned or treated as owned by an individual who is
not a citizen or resident, as specifically defined for United States federal
estate tax purposes, of the United States on the date of that person's death
will be included in his or her estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
Generally, we must report annually to the IRS and to each Non-U.S. Holder
the amount of dividends that we paid to such Non-U.S. Holder, and the amount of
tax that we withheld on those dividends. This information may also be made
available to the tax authorities of a country in which the Non-U.S. Holder
resides.
S-25
<PAGE>
Under current United States Treasury Regulations, United States information
reporting requirements and backup withholding tax will generally not apply to
dividends that we pay on our common stock to a Non-U.S. Holder at an address
outside the United States. Payments of the proceeds of a sale or other taxable
disposition of our common stock by a United States office of a broker are
subject to both backup withholding at a rate of 31 percent and information
reporting, unless the holder certifies as to its Non-U.S. Holder status under
penalties of perjury or otherwise establishes an exemption. Information
reporting requirements, but not backup withholding tax, will also apply to
payments of the proceeds of a sale or other taxable disposition of our common
stock by foreign offices of United States brokers, or foreign brokers with
certain types of relationships to the United States, unless the broker has
documentary evidence in its records that the holder is a Non-U.S. Holder and
certain other conditions are met, or the holder otherwise establishes an
exemption.
Backup withholding is not an additional tax. Any amounts that we withhold
under the backup withholding rules will be refunded or credited against the
Non-U.S. Holder's United States federal income tax liability if certain
required information is furnished to the IRS.
The United States Treasury Department has promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, those regulations do not significantly alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify reliance standards. The final
regulations are generally effective for payments made after December 31, 2000,
subject to transition rules.
The foregoing discussion is a summary of the principal United States federal
income and estate tax consequences of the ownership, sale or other disposition
of the common stock by Non-U.S. Holders. Accordingly, investors are urged to
consult with their tax advisors with respect to the United States federal
income tax consequences of the ownership and disposition of the common stock
including the application and effect of the laws of any state, local, foreign
or other taxing jurisdiction.
S-26
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date of this prospectus supplement, each underwriter named below has
severally agreed to purchase, and we have agreed to sell to such underwriter,
the number of shares set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
Number
Name of shares
---- ---------
<S> <C>
Salomon Smith Barney Inc........................................
Warburg Dillon Read LLC ........................................
Morgan Stanley & Co. Incorporated...............................
Banc of America Securities LLC..................................
Jefferies & Company, Inc........................................
------
Total.........................................................
------
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.
The underwriters, for whom Salomon Smith Barney Inc., Warburg Dillon Read
LLC, Morgan Stanley & Co. Incorporated, Banc of America Securities LLC and
Jefferies & Company, Inc. are acting as representatives, propose to offer some
of the shares directly to the public at the public offering price set forth on
the cover page of this prospectus supplement and some of the shares to certain
dealers at the public offering price less a concession not in excess of $ per
share. The underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share on sales to certain other dealers. If all of the
shares are not sold at the initial offering price, the representatives may
change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to 1,350,000 additional
shares of our common stock at the public offering price less the underwriting
discount. The underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, in connection with this offering. To the
extent such option is exercised, each underwriter will be obligated, subject to
certain conditions, to purchase a number of additional shares approximately
proportionate to such underwriter's initial purchase commitment.
We and our officers and directors have agreed that, for a period of 90 days
from the date of this prospectus supplement, we and they will not, without the
prior written consent of Salomon Smith Barney Inc., offer, sell, contract to
sell, or otherwise dispose of, any shares of our common stock or any securities
convertible into, or exercisable or exchangeable for, common stock, except:
. we may sell the shares of common stock offered in this offering;
. we may issue securities pursuant to our stock option or other benefit or
incentive plans maintained for our officers, directors or employees; and
. our officers may, without such consent, sell up to 800,000 shares of our
common stock in the aggregate.
In November 1998, we entered into a registration rights agreement with Elf
Aquitaine with respect to 1,325,000 shares of our common stock issued to Elf
Aquitaine in connection with our acquisition of all the shares of capital stock
of Elf Hydrocarbures Equateur, S.A. Pursuant to the registration rights
agreement, we have registered the offer and sale of the 1,325,000 shares of
common stock on behalf of Elf Aquitaine under the Securities Act on a
registration statement on Form S-3. In addition, Elf Aquitaine was granted
"piggyback" registration rights whereby it is entitled, in the event we propose
to publicly offer shares of our common stock under the Securities Act (other
than by a registration on Form S-4 or Form S-8), to require us, subject to
certain conditions, to include all or a portion of these shares. The foregoing
registration rights are
S-27
<PAGE>
subject to certain notice requirements, timing restrictions and volume
limitations which may be imposed by the underwriters of an offering. Pursuant
to the terms of the registration rights agreement, Elf Aquitaine may be
prohibited from any public sale or distribution of any of these shares not
included in a "piggyback" registration for a period of 90 days in connection
with any public offering of our common stock under the Securities Act.
Salomon Smith Barney Inc. in its sole discretion may release any of the
securities subject to these lock-up agreements at any time without notice.
The common stock is listed on the New York Stock Exchange under the symbol
"VPI."
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of our common stock.
<TABLE>
<CAPTION>
Paid by Vintage
-------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per share....................................... $ $
Total........................................... $ $
</TABLE>
In connection with this offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may purchase and sell shares in the open market. These
transactions may include over-allotment, syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of common stock in excess of the number of shares to be purchased by the
underwriters in this offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of our common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of our common stock made for the purpose of preventing or retarding a
decline in the market price of our common stock while this offering is in
progress. Penalty bids permit the underwriters to reclaim a selling concession
from a selling member when Salomon Smith Barney Inc., in covering syndicate
short positions or market stabilizing purchases, repurchases shares originally
sold by that syndicate member. Any of these activities may cause the price of
the common stock to be higher than that price that would otherwise exist in the
absence of such transactions. These transactions may be effected on the New
York Stock Exchange or in the over-the-counter market, or otherwise and, if
commenced, may be discontinued at any time.
We estimate that our total expenses of this offering will be $265,000.
The representatives have performed certain investment banking and advisory
services for us from time to time for which they have received customary fees
and expenses. The representatives may, from time to time, engage in
transactions with and perform services for us in the ordinary course of their
business.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
LEGAL OPINIONS
Conner & Winters, A Professional Corporation, Tulsa, Oklahoma, as our
counsel, will issue an opinion for us regarding the validity of the shares of
common stock offered by this prospectus supplement and the accompanying
prospectus. Certain legal matters related to this offering will be passed upon
for the underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
Our audited financial statements incorporated by reference in the
accompanying prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect to such audited
financial statements, and are incorporated by reference in reliance upon the
authority of such firm as experts in giving such report.
S-28
<PAGE>
The estimated reserve evaluations and related calculations of Netherland,
Sewell & Associates, Inc. for the United States, Argentina, Ecuador and the El
Huemul Properties set forth or incorporated by reference in this prospectus
supplement and the accompanying prospectus have been included or incorporated
by reference in reliance upon the authority of such firm as experts in
petroleum engineering.
The estimated reserve evaluations and related calculations of DeGolyer and
MacNaughton for Bolivia set forth or incorporated by reference in this
prospectus supplement and the accompanying prospectus have been included or
incorporated by reference in reliance upon the authority of such firm as
experts in petroleum engineering.
S-29
<PAGE>
PROSPECTUS
$400,000,000
----------------
VINTAGE PETROLEUM, INC.
4200 One Williams Center
Tulsa, Oklahoma 74172
(918) 592-0101
Debt Securities
Junior Subordinated Debt Securities
Preferred Stock
Depositary Shares
Common Stock
----------------
VINTAGE PETROLEUM CAPITAL TRUST I
4200 One Williams Center
Tulsa, Oklahoma 74172
(918) 592-0101
Preferred Securities
Guaranteed to the extent
set forth in this Prospectus by
Vintage Petroleum, Inc.
----------------
We will provide specific terms of these securities in supplements to this
Prospectus. Before you invest, you should carefully read this Prospectus and
any supplements to this Prospectus.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
This Prospectus may not be used to sell securities unless accompanied by a
supplement to this Prospectus.
This Prospectus is dated May 11, 1999.
<PAGE>
You should rely only on the information incorporated by reference or
contained in this Prospectus or any Prospectus Supplement. We have not
authorized anyone to provide you with different information. We are not making
an offer of these securities in any state where the offer is not permitted. You
should not assume that the information contained in this Prospectus or any
Prospectus Supplement is accurate as of any date other than the date on the
front of those documents.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
About This Prospectus...................................................... 3
Where You Can Find More Information........................................ 3
The Company................................................................ 4
The Trust.................................................................. 4
Ratio of Earnings to Fixed Charges......................................... 5
Use of Proceeds............................................................ 5
Description of Debt Securities............................................. 6
Description of Junior Subordinated Debt Securities......................... 18
Description of Preferred Stock............................................. 26
Description of Depositary Shares........................................... 26
Description of Common Stock................................................ 29
Description of Preferred Securities........................................ 31
Description of Guarantee................................................... 33
Plan of Distribution....................................................... 37
Legal Opinions............................................................. 39
Experts.................................................................... 39
</TABLE>
2
<PAGE>
ABOUT THIS PROSPECTUS
This Prospectus is part of a Registration Statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may,
from time to time, sell any combination of the securities described in this
Prospectus in one or more offerings up to a total dollar amount of
$400,000,000. This Prospectus provides you with a general description of the
securities we may offer. Each time we offer to sell securities, we will provide
a Prospectus Supplement that will contain specific information about the terms
of that offering. The Prospectus Supplement may also add, update, or change
information contained in this Prospectus. You should read both this Prospectus
and any Prospectus Supplement together with the additional information
described under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Our common stock is listed
and traded on the New York Stock Exchange under the symbol "VPI." Our reports,
proxy statements, and other information filed with the SEC can also be
inspected and copied at the New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
This Prospectus, which constitutes a part of a Registration Statement on
Form S-3 filed by us with the SEC under the Securities Act of 1933, omits
certain of the information set forth in the Registration Statement.
Accordingly, you should refer to the Registration Statement and its exhibits
for further information with respect to us and the securities described in this
Prospectus. Copies of the Registration Statement and its exhibits are on file
at the offices of the SEC. Furthermore, statements contained in this Prospectus
concerning any document filed as an exhibit are not necessarily complete and,
in each instance, we refer you to the copy of such document filed as an exhibit
to the Registration Statement.
The SEC allows us to "incorporate by reference" the information we file with
them into this Prospectus, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this Prospectus (except
for any information that is superseded by information included directly in this
Prospectus and any Prospectus Supplement), and information that we file later
with the SEC will automatically update and supersede the information in this
Prospectus. We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d)
of the Securities Exchange Act of 1934 until we sell all of the securities:
.Our Annual Report on Form 10-K for the year ended December 31, 1998;
.Our Quarterly Report on From 10-Q for the quarter ended March 31, 1999;
.Our Current Reports on Form 8-K dated February 24, 1999, and March 16,
1999;
. The description of our common stock contained in our Registration
Statement on Form 8-A, dated July 18, 1990, including any amendment or
report filed before or after the date of this Prospectus for the purpose
of updating the description; and
. The description of our preferred share purchase rights contained in our
Registration Statement on Form 8-A, dated March 22, 1999, including any
amendment or report filed before or after the date of this Prospectus for
the purpose of updating the description.
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You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
William C. Barnes, Secretary
Vintage Petroleum, Inc.
4200 One Williams Center
Tulsa, Oklahoma 74172
(918) 592-0101
THE COMPANY
Vintage Petroleum, Inc. (the "Company") is an independent oil and gas
company engaged in the development, exploitation, exploration, acquisition and
production of oil and natural gas. The Company is focused on acquiring
producing oil and gas properties containing the potential for increased value
through exploitation and development activities. The Company has been
successful at increasing the values of prior acquisitions by restoring or
increasing production of producing wells, adding production from new
formations in existing wells, instituting waterflood and other enhanced
recovery operations, reducing operating costs and drilling development wells.
The Company believes that its primary strengths are its ability to add
reserves at attractive prices and its low cost operating structure.
THE TRUST
Vintage Petroleum Capital Trust I (the "Trust") is a statutory business
trust formed by the Company, as sponsor of the Trust, under Delaware law. In
connection with an offering of the preferred securities of the Trust (the
"Preferred Securities"), the declaration of trust of the Trust will be amended
and restated in its entirety (as so amended and restated, the "Declaration")
substantially in the form filed as an exhibit to the Registration Statement
and will be qualified as an indenture under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act").
The Trust exists for the sole purposes of:
. issuing the Preferred Securities;
. investing the gross proceeds of the sale of the Preferred Securities in a
specific series of Junior Subordinated Debt Securities of the Company;
and
. engaging in only those other necessary or incidental activities.
The Company will acquire all of the common securities of the Trust (the
"Common Securities") which will have an aggregate liquidation amount equal to
a minimum of 3% of the total capital of the Trust. The Common Securities will
rank equally, and payments will be made on the Common Securities pro rata,
with the Preferred Securities, except that upon the occurrence and continuance
of an event of default under the Declaration, the rights of the holders of the
Common Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of
the holders of the Preferred Securities. The Company will pay all fees and
expenses related to the Trust and the offering of the Preferred Securities.
The Trust's business and affairs will be conducted by a number of trustees
(its "Trustees") as provided in the Declaration. The Company, as holder of all
of the Common Securities, will be entitled to appoint, remove or replace any
of, or increase or reduce the number of, the Trustees of the Trust. The duties
and obligations of the Trustees of the Trust will be governed by the
Declaration.
At least one of the Trustees of the Trust will be a person who is an
employee or officer of or who is affiliated with the Company (a "Regular
Trustee"). One Trustee of the Trust will be a financial institution that
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is not affiliated with the Company, which shall act as property trustee and as
indenture trustee for the purposes of the Trust Indenture Act (the "Property
Trustee") pursuant to the terms of the Declaration as may be further described
in a Prospectus Supplement. In addition, unless the Property Trustee maintains
a principal place of business in the State of Delaware and otherwise meets the
requirements of applicable laws, one Trustee of the Trust will be a legal
entity having a principal place of business in, or an individual resident of,
the State of Delaware (the "Delaware Trustee").
The Property Trustee will be The Chase Manhattan Bank, and the Delaware
Trustee will be Chase Manhattan Bank Delaware. The office of the Delaware
Trustee in the State of Delaware is Chase Manhattan Bank Delaware, 1201 Market
Street, Wilmington, Delaware 19801.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1994(/1/) 1995(/1/) 1996(/1/) 1997(/1/) 1998
--------- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(/2/)(/3/)... 2.9x 1.6x 2.4x 2.7x --(/4/)
</TABLE>
- --------
(1) Restated to reflect change in accounting method for the Company's oil and
gas properties effective January 1, 1998, from the full cost method to the
successful efforts method.
(2) For purposes of calculating the ratio of earnings to fixed charges,
earnings are defined as income of the Company and its subsidiaries before
income taxes and fixed charges. Fixed charges consist of interest expense,
including amortization of financing costs and any discount or premium
related to any indebtedness.
(3) The Company had no Preferred Stock outstanding and paid no dividends on
Preferred Stock during any of the periods presented. Therefore, the ratio
of earnings to combined fixed charges and preferred stock dividend
requirements is the same as the ratio of earnings to fixed charges.
(4) Earnings for the year were insufficient to cover fixed charges by
approximately $131.2 million.
USE OF PROCEEDS
The net proceeds from the sale of the Company's securities offered by this
Prospectus and the accompanying Prospectus Supplement will be used for general
corporate purposes, including:
.repayment of debt,
.working capital,
.capital expenditures,
.acquisitions, and
.other business opportunities.
The net proceeds may be invested temporarily until they are used for their
stated purpose. The Trust will use all proceeds received from the sale of
Preferred Securities to purchase Junior Subordinated Debt Securities of the
Company.
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<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Company's unsecured debt
securities, which may consist of senior notes and debentures and subordinated
notes and debentures (the "Debt Securities"), sets forth certain general terms
and provisions of the Debt Securities to which any Prospectus Supplement may
relate. The particular terms of the Debt Securities offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply
to the Debt Securities being offered will be described in the Prospectus
Supplement relating to such Debt Securities. Accordingly, for a description of
the terms of a particular issue of Debt Securities, reference should be made to
both the Prospectus Supplement and to the following description.
The Debt Securities will be general obligations of the Company and may be
subordinated to "Senior Indebtedness" (as defined below) of the Company to the
extent set forth in the applicable Prospectus Supplement. See "Description of
Debt Securities--Subordination" below. Debt Securities will be issued under an
indenture (the "Indenture") to be entered into between the Company and The
Chase Manhattan Bank or such other trustee as may be named in a Prospectus
Supplement (the "Trustee"). A copy of the form of Indenture has been filed as
an exhibit to the Registration Statement. The following discussion of certain
provisions of the Indenture is a summary only and does not purport to be a
complete description of the terms and provisions of the Indenture. Accordingly,
the following discussion is qualified in its entirety by reference to the
provisions of the Indenture. Capitalized terms used in the following summary
but not defined have the meanings specified in the Indenture.
General
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued. The Debt Securities may be issued in one or more
series as may be authorized from time to time by the Company. The Indenture
does not limit the amount of other unsecured indebtedness or securities which
may be issued by the Company. Unless otherwise indicated in the applicable
Prospectus Supplement, the Debt Securities will not benefit from any covenant
or other provision that would afford holders of Debt Securities special
protection in the event of a highly leveraged transaction involving the
Company. Reference is made to the applicable Prospectus Supplement for the
following terms of the Debt Securities of the series with respect to which the
Prospectus Supplement is being delivered:
(a) the title of Debt Securities of the series;
(b) any limit on the aggregate principal amount of the Debt Securities
of the series that may be authenticated and delivered under the Indenture;
(c) the date or dates on which the principal and premium, if any, with
respect to the Debt Securities of the series are payable;
(d) the rate or rates (which may be fixed or variable), or the method of
determination of the rate or rates, at which the Debt Securities of the
series will bear interest, the date or dates from which such interest shall
accrue, the interest payment dates on which such interest will be payable
or the method by which such date will be determined, the record dates for
the determination of holders of Debt Securities of the series to whom such
interest is payable, and the basis upon which interest will be calculated
if other than that of a 360-day year of twelve 30-day months;
(e) the place or places of payment, if any, in addition to or instead of
the corporate trust office of the Trustee where the principal, premium, if
any, and interest with respect to Debt Securities of the series will be
payable;
(f) the price or prices at which, the period or periods within which,
and the terms and conditions upon which Debt Securities of the series may
be redeemed, in whole or in part, at the option of the Company or
otherwise;
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<PAGE>
(g) the obligation, if any, of the Company to redeem, purchase, or repay
Debt Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a holder of Debt Securities of the series
and the price or prices at which, the period or periods within which, and
the terms and conditions upon which Debt Securities of the series will be
redeemed, purchased, or repaid, in whole or in part, pursuant to such
obligations;
(h) the terms, if any, upon which the Debt Securities of the series may
be convertible into or exchanged for securities of the Company or any other
issuer or obligor and the terms and conditions upon which such conversion
or exchange will be effected, including the initial conversion or exchange
price or rate, the conversion or exchange period and any other provision in
addition to or in lieu of those described herein;
(i) if other than denominations of $1,000 or any integral multiple of
$1,000, the denominations in which Debt Securities of the series will be
issuable;
(j) if the amount of principal, premium, if any, or interest with
respect to the Debt Securities of the series may be determined with
reference to an index or pursuant to a formula, the manner in which such
amounts will be determined;
(k) if the principal amount payable at the stated maturity of Debt
Securities of the series will not be determinable as of any one or more
dates prior to such stated maturity, the amount that will be deemed to be
such principal amount as of any such date for any purpose, including the
principal amount that will be due and payable upon any maturity other than
the stated maturity or that will be deemed to be outstanding as of any such
date (or, in such case, the manner in which such deemed principal amount is
to be determined), and if necessary, the manner of determining the
equivalent principal amount in United States currency;
(l) any changes or additions to the provisions of the Indenture dealing
with defeasance, including the addition of additional covenants that may be
subject to the Company's covenant defeasance option;
(m) if other than United States dollars, the coin or currency or
currencies or units of two or more currencies in which payment of the
principal, premium, if any, and interest with respect to Debt Securities of
the series shall be payable;
(n) if other than the principal amount of Debt Securities of the series,
the portion of the principal amount of Debt Securities of the series which
shall be payable upon declaration of acceleration or provable in
bankruptcy;
(o) the terms, if any, of the transfer, mortgage, pledge or assignment
as security for the Debt Securities of the series of any properties,
assets, moneys, proceeds, securities or other collateral, including whether
certain provisions of the Trust Indenture Act are applicable and any
corresponding changes to provisions of the Indenture as currently in
effect;
(p) any addition to or change in the Events of Default with respect to
the Debt Securities of the series and any change in the right of the
Trustee or the holders to declare the principal of and interest on such
Debt Securities due and payable;
(q) whether the Debt Securities of the series will be issued in whole or
in part in global form, the terms and conditions, if any, upon which any
global security may be exchanged in whole or in part for other individual
Debt Securities in definitive registered form and the depositary for any
such global security;
(r) any trustees, authenticating or paying agents, transfer agents or
registrars;
(s) the applicability of, and any addition to or change in the covenants
and definitions currently set forth in the Indenture or in the terms
relating to permitted consolidations, mergers, or sales of assets,
including conditioning any merger, conveyance, transfer or lease permitted
by the Indenture upon the satisfaction of an Indebtedness coverage standard
by the Company and Successor Company;
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<PAGE>
(t) the terms, if any, of any guarantee of the payment of principal of,
and premium, if any, and interest on, Debt Securities of the series and any
corresponding changes to the provisions of the Indenture as currently in
effect;
(u) the subordination, if any, of the Debt Securities of the series and
any changes or additions to the provisions of the Indenture relating to
subordination;
(v) if Debt Securities of the series do not bear interest, the dates for
certain required reports to the Trustee; and
(w) any other terms of the Debt Securities of the series (which terms
shall not be prohibited by the Indenture).
The Prospectus Supplement will also describe any material United States
federal income tax consequences or other special considerations applicable to
the series of Debt Securities to which such Prospectus Supplement relates,
including those applicable to:
(a) Debt Securities with respect to which payments of principal,
premium, or interest are determined with reference to an index or formula
(including changes in prices of particular securities, currencies, or
commodities);
(b) Debt Securities with respect to which principal, premium, or
interest is payable in a foreign or composite currency;
(c) Debt Securities that are issued at a discount below their stated
principal amount, bearing no interest or interest at a rate that at the
time of issuance is below market rates ("Original Issue Discount Debt
Securities"); and
(d) variable rate Debt Securities that are exchangeable for fixed rate
Debt Securities.
Payments of interest on Debt Securities shall be made at the corporate trust
office of the Trustee or at the option of the Company by check mailed to the
registered holders of Debt Securities or, if so provided in the applicable
Prospectus Supplement, at the option of a holder by wire transfer to an account
designated by such holder.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities may be transferred or exchanged at the office of the Trustee at
which its corporate trust business is principally administered in the United
States or at the office of the Trustee or the Trustee's agent in the Borough of
Manhattan, the City and State of New York, at which its corporate agency
business is conducted, subject to the limitations provided in the Indenture,
without the payment of any service charge, other than any applicable tax or
governmental charge.
Global Securities
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Global Security")
that will be deposited with a depositary or its nominee identified in the
Prospectus Supplement relating to such series. In such case, one or more Global
Securities will be issued in a denomination or aggregate denominations equal to
the portion of the aggregate principal amount of outstanding registered Debt
Securities of the series to be represented by such Global Security or
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in definitive registered form, a Global Security may not be
transferred except as a whole by the depositary for such Global Security to a
nominee of such depositary or by a nominee of such depositary to such
depositary or another nominee of such depositary or by such depositary or any
such nominee to a successor of such depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Global Security will be
described in the Prospectus Supplement relating to such series. The Company
anticipates that the following provisions will apply to all depositary
arrangements.
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<PAGE>
Upon the issuance of a Global Security, the depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of persons that have accounts with such depositary
("participants"). The amounts to be credited shall be designated by any
underwriters or agents participating in the distribution of such Debt
Securities. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in such Global Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the depositary for such Global Security (with respect to
interests of participants) or by participants or persons that hold through
participants (with respect to interests of persons other than participants). So
long as the depositary for a Global Security, or its nominee, is the registered
owner of such Global Security, such depositary or such nominee, as the case may
be, will be considered the sole owner or holder of the Debt Securities
represented by such Global Security for all purposes under the Indenture.
Except as set forth below, owners of beneficial interests in a Global Security
will not be entitled to have the Debt Securities represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of such Debt Securities in definitive form and will not be
considered the owners or holders of such Debt Securities under the Indenture.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Global Security registered in the name of a depositary or its
nominee will be made to such depositary or its nominee, as the case may be, as
the registered owner of such Global Security. None of the Company, the Trustee
or any paying agent for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in such Global Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the depositary for any Debt Securities represented
by a Global Security, upon receipt of any payment of principal, premium, or
interest, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such depositary. The
Company also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with the securities held for the accounts of customers registered in "street
name," and will be the responsibility of such participants.
If the depositary for any Debt Securities represented by a Global Security
is at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
issue such Debt Securities in definitive form in exchange for such Global
Security. In addition, the Company may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Global Securities and, in such event, will issue Debt Securities of
such series in definitive form in exchange for the Global Security or
Securities representing such Debt Securities.
Subordination
Debt Securities may be subordinated ("Subordinated Debt Securities") in
right of payment, to the extent and in the manner set forth in the Indenture
and the applicable Prospectus Supplement, to the prior payment of all
Indebtedness of the Company that is designated as "Senior Indebtedness." Senior
Indebtedness, with respect to any series of Subordinated Debt Securities, will
consist of any Indebtedness of the Company that is designated in a resolution
of the Company's Board of Directors or the supplemental Indenture establishing
such series as Senior Indebtedness with respect to such series.
Upon any payment or distribution of assets of the Company to creditors or
upon a total or partial liquidation or dissolution of the Company or in a
bankruptcy, receivership, or similar proceeding relating to the Company or its
property, holders of Senior Indebtedness shall be entitled to receive payment
in full in cash of
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the Senior Indebtedness before holders of Subordinated Debt Securities shall be
entitled to receive any payment of principal, premium, or interest with respect
to the Subordinated Debt Securities, and until the Senior Indebtedness is paid
in full, any distribution to which holders of Subordinated Debt Securities
would otherwise be entitled shall be made to the holders of Senior Indebtedness
(except that such holders may receive shares of stock and any debt securities
that are subordinated to Senior Indebtedness to at least the same extent as the
Subordinated Debt Securities).
The Company may not make any payments of principal, premium, or interest
with respect to Subordinated Debt Securities, make any deposit for the purpose
of defeasance of such Subordinated Debt Securities, or repurchase, redeem, or
otherwise retire (except, in the case of Subordinated Debt Securities that
provide for a mandatory sinking fund, by the delivery of Subordinated Debt
Securities by the Company to the Trustee in satisfaction of the Company's
sinking fund obligation) any Subordinated Debt Securities if:
(a) any principal, premium, if any, or interest with respect to Senior
Indebtedness is not paid within any applicable grace period (including at
maturity), or
(b) any other default on Senior Indebtedness occurs and the maturity of
such Senior Indebtedness is accelerated in accordance with its terms,
unless, in either case,
(i) the default has been cured or waived and such acceleration has been
rescinded,
(ii) such Senior Indebtedness has been paid in full in cash, or
(iii) the Company and the Trustee receive written notice approving such
payment from the representatives of each issue of "Designated Senior
Indebtedness" (which will include any specified issue of Senior
Indebtedness).
During the continuance of any default (other than a default described in clause
(a) or (b) above) with respect to any Senior Indebtedness pursuant to which the
maturity of such Senior Indebtedness may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company
may not pay the Subordinated Debt Securities for a period (the "Payment
Blockage Period") commencing on the receipt by the Company and the Trustee of
written notice of such default from the representative of any Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period (a
"Blockage Notice") and expiring 179 days thereafter. The Payment Blockage
Period may be terminated before its expiration by written notice to the Trustee
and the Company from the person who gave the Blockage Notice, by repayment in
full in cash of the Senior Indebtedness with respect to which the Blockage
Notice was given, or because the default giving rise to the Payment Blockage
Period is no longer continuing. Unless the holders of such Senior Indebtedness
shall have accelerated the maturity of such Senior Indebtedness, the Company
may resume payments on the Subordinated Debt Securities after the expiration of
the Payment Blockage Period. Not more than one Blockage Notice may be given in
any period of 360 consecutive days unless the first Blockage Notice within such
360-day period is given by or on behalf of holders of Designated Senior
Indebtedness other than the Bank Indebtedness, in which case the representative
of the Bank Indebtedness may give another Blockage Notice within such period.
In no event, however, may the total number of days during which any Payment
Blockage Period or Periods is in effect exceed 179 days in the aggregate during
any period of 360 consecutive days. After all Senior Indebtedness is paid in
full and until the Subordinated Debt Securities are paid in full, holders of
the Subordinated Debt Securities shall be subrogated to the rights of holders
of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness.
As a result of the subordination provisions, in the event of the Company's
bankruptcy or insolvency, creditors of the Company who are holders of Senior
Indebtedness, as well as certain general creditors of the Company, may recover
ratably more than the holders of the Subordinated Debt Securities.
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Events of Default and Remedies
The following events are defined in the Indenture as "Events of Default"
with respect to a series of Debt Securities:
(a) default in the payment of any installment of interest on any Debt
Securities of that series when due and payable (whether or not, in the case
of Subordinated Debt Securities, such payment shall be prohibited by reason
of the subordination provision described above) and continuance of such
default for a period of 30 days;
(b) default in the payment of principal or premium, if any, with respect
to any Debt Securities of that series when due and payable, whether at
maturity, upon redemption, by declaration, upon required repurchase, or
otherwise (whether or not, in the case of Subordinated Debt Securities,
such payment shall be prohibited by reason of the subordination provision
described above);
(c) default in the payment of any sinking fund payment with respect to
any Debt Securities of that series when due and payable;
(d) the Company fails to comply with the provisions of the Indenture
relating to consolidations, mergers and sales of assets;
(e) the Company fails to observe or perform any other of its covenants
or agreements in the Debt Securities of that series, in any resolution of
the Board of Directors of the Company authorizing the issuance of that
series of Debt Securities, in the Indenture with respect to such series, or
in any supplemental Indenture with respect to such series (other than a
covenant or agreement a default in the performance of which is otherwise
specifically dealt with) for a period of 60 days after the date on which
written notice specifying such failure and requiring the Company to remedy
the same has been given to the Company by the Trustee or to the Company and
the Trustee by the holders of at least 25% in aggregate principal amount of
the Debt Securities of that series at the time outstanding;
(f) the Company or any Subsidiary does not pay its Indebtedness within
any applicable grace period after final maturity or such Indebtedness is
accelerated by the holders of such Indebtedness because of a default, the
total amount of such Indebtedness unpaid or accelerated exceeds $40 million
or the United States dollar equivalent of $40 million at the time, and such
default remains uncured or such acceleration is not rescinded for 10 days
after the date on which written notice specifying such failure and
requiring the Company to remedy such failure shall have been given to the
Company by the Trustee or to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the Debt Securities of that
series at the time outstanding;
(g) the Company shall
(1) voluntarily commence any proceeding or file any petition seeking
relief under the United States Bankruptcy Code or other federal or
state bankruptcy, insolvency, or similar law,
(2) consent to the institution of, or fail to controvert within the
time and in the manner prescribed by law, any such proceeding of the
filing of any such petition,
(3) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, or similar official for the Company for a
substantial part of its property,
(4) file an answer admitting the material allegations of a petition
filed against it in any such proceeding,
(5) make a general assignment for the benefit of creditors,
(6) admit in writing its inability or fail generally to pay its
debts as they become due,
(7) take corporate action for the purpose of effecting any of the
foregoing, or
(8) take any comparable action under any foreign laws relating to
insolvency;
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(h) the entry of an order or decree by a court having competent
jurisdiction for
(1) relief with respect to the Company or a substantial part of its
property under the United States Bankruptcy Code or any other federal
or state bankruptcy, insolvency, or similar law,
(2) the appointment of a receiver, trustee, custodian, sequestrator,
or similar official for the Company or for a substantial part of its
property, or
(3) the winding-up or liquidation of the Company;
and such order or decree shall continue unstayed and in effect for 60
consecutive days, or any similar relief is granted under any foreign laws and
the order or decree stays in effect for 60 consecutive days; or
(i) any other Event of Default provided under the terms of the Debt
Securities of that series.
An Event of Default with respect to one series of Debt Securities is not
necessarily an Event of Default for another series.
If an Event of Default occurs and is continuing with respect to any series
of Debt Securities, unless the principal and interest with respect to all the
Debt Securities of such series shall have already become due and payable,
either the Trustee or the holders of not less than 25% in aggregate principal
amount of the Debt Securities of such series then outstanding may declare the
principal of (or, if Original Issue Discount Debt Securities, such portion of
the principal amount as may be specified in such series) and interest on all
the Debt Securities of such series due and payable immediately.
If an Event of Default occurs and is continuing, the Trustee shall be
entitled and empowered to institute any action or proceeding for the collection
of the sums so due and unpaid or to enforce the performance of any provision of
the Debt Securities of the affected series or the Indenture, to prosecute any
such action or proceeding to judgment or final decree, and to enforce any such
judgment or final decree against the Company or any other obligor on the Debt
Securities of such series. In addition, if there shall be pending proceedings
for the bankruptcy or reorganization of the Company or any other obligor on the
Debt Securities, or if a receiver, trustee, or similar official shall have been
appointed for its property, the Trustee shall be entitled and empowered to file
and prove a claim for the whole amount of principal, premium and interest (or,
in the case of Original Issue Discount Debt Securities, such portion of the
principal amount as may be specified in the terms of such series) owing and
unpaid with respect to the Debt Securities. No holder of any Debt Securities of
any series shall have any right to institute any action or proceeding upon or
under or with respect to the Indenture, for the appointment of a receiver or
trustee, or for any other remedy, unless:
(a) such holder previously shall have given to the Trustee written
notice of an Event of Default with respect to Debt Securities of that
series and of the continuance of such Event of Default;
(b) the holders of not less than 25% in aggregate principal amount of
the outstanding Debt Securities of that series shall have made written
request to the Trustee to institute such action or proceeding with respect
to such Event of Default and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses, and
liabilities to be incurred in connection with such action or proceeding;
and
(c) the Trustee, for 60 days after its receipt of such notice, request,
and offer of indemnity shall have failed to institute such action or
proceeding and no direction inconsistent with such written request shall
have been given to the Trustee pursuant to the provisions of the Indenture.
Prior to the acceleration of the maturity of the Debt Securities of any
series, the holders of a majority in aggregate principal amount of the Debt
Securities of that series at the time outstanding may, on behalf of the holders
of all Debt Securities of that series, waive any past default or Event of
Default and its consequences for that series, except:
(a) a default in the payment of the principal, premium, if any, or
interest with respect to such Debt Securities; or
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(b) a default with respect to a provision of the Indenture that cannot
be amended without the consent of each holder so affected.
In case of any such waiver, such default shall cease to exist, any Event of
Default arising from such default shall be deemed to have been cured for all
purposes, and the Company, the Trustee and the holders of the Debt Securities
of that series shall be restored to their former positions and rights under the
Indenture.
The Trustee shall, within 90 days after the occurrence of a default known to
it with respect to a series of Debt Securities, give to the holders of the Debt
Securities of such series notice of all uncured defaults with respect to such
series known to it, unless such defaults shall have been cured or waived before
the giving of such notice; provided, however, that except in the case of
default in the payment of principal, premium, or interest with respect to the
Debt Securities of such series or in the making of any sinking fund payment
with respect to the Debt Securities of such series, the Trustee shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the holders of such Debt
Securities.
Modification of the Indenture
The Company and the Trustee may enter into supplemental Indentures without
the consent of the holders of Debt Securities issued under the Indenture for
one or more of the following purposes:
(a) to evidence the succession of another person to the Company pursuant
to the provisions of the Indenture relating to consolidations, mergers, and
sales of assets and the assumption by such successor of the covenants,
agreements, and obligations of the Company in the Indenture and in the Debt
Securities;
(b) to surrender any right or power conferred upon the Company by the
Indenture, to add to the covenants of the Company such further covenants,
restrictions, conditions, or provisions for the protection of the holders
of all or any series of Debt Securities as the Board of Directors of the
Company shall consider to be for the protection of the holders of such Debt
Securities, and to make the occurrence, or the occurrence and continuance
of a default in any of such additional covenants, restrictions, conditions,
or provisions, a default or an Event of Default under the Indenture
(provided, however, that with respect to any such additional covenant,
restriction, condition, or provision, such supplemental Indenture may
provide for a period of grace after default, which may be shorter or longer
than that allowed in the case of other defaults, may provide for an
immediate enforcement upon such default, may limit the remedies available
to the Trustee upon such default, or may limit the right of holders of a
majority in aggregate principal amount of any or all series of Debt
Securities to waive such default);
(c) to cure any ambiguity or to correct or supplement any provision
contained in the Indenture, in any supplemental Indenture, or in any Debt
Securities that may be defective or inconsistent with any other provision
contained in the Indenture, in any supplemental Indenture, or in any Debt
Securities, to convey, transfer, assign, mortgage, or pledge any property
to or with the Trustee, or to make such other provisions in regard to
matters or questions arising under the Indenture as shall not adversely
affect the interests of any holders of Debt Securities of any series;
(d) to modify or amend the Indenture in such a manner as to permit the
qualification of the Indenture or any supplemental Indenture under the
Trust Indenture Act as then in effect;
(e) to add or change any of the provisions of the Indenture to change or
eliminate any restriction on the payment of principal or premium with
respect to Debt Securities so long as any such action does not adversely
affect the interest of the holders of Debt Securities in any material
respect or permit or facilitate the issuance of Debt Securities of any
series in uncertificated form;
(f) to comply with the provisions of the Indenture relating to
consolidations, mergers, and sales of assets;
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(g) in the case of Subordinated Debt Securities, to make any change in
the provisions of the Indenture relating to subordination that would limit
or terminate the benefits available to any holder of Senior Indebtedness
under such provisions (but only if such holder of Senior Indebtedness
consents to such change);
(h) to add guarantees with respect to the Debt Securities or to secure
the Debt Securities;
(i) to add to, change, or eliminate any of the provisions of the
Indenture with respect to one or more series of Debt Securities, so long as
any such addition, change, or elimination not otherwise permitted under the
Indenture shall
(1) neither apply to any Debt Securities of any series created prior
to the execution of such supplemental Indenture and entitled to the
benefit of such provision nor modify the rights of the holders of any
such Debt Security with respect to such provision, or
(2) become effective only when there is no such Debt Security
outstanding;
(j) to evidence and provide for the acceptance of appointment by a
successor or separate Trustee with respect to the Debt Securities of one or
more series and to add to or change any of the provisions of the Indenture
as shall be necessary to provide for or facilitate the administration of
the Indenture by more than one Trustee; and
(k) to establish the form or terms of Debt Securities of any series, as
described under "Description of Debt Securities--General" above.
With the consent of the holders of a majority in aggregate principal amount
of the outstanding Debt Securities of each series affected, the Company and the
Trustee may from time to time and at any time enter into a supplemental
Indenture for the purpose of adding any provisions to, changing in any manner,
or eliminating any of the provisions of the Indenture or of any supplemental
Indenture or modifying in any manner the rights of the holder of the Debt
Securities of such series. However, without the consent of the holders of each
Debt Security so affected, no such supplemental Indenture may:
(a) reduce the percentage in principal amount of Debt Securities of any
series whose holders must consent to an amendment;
(b) reduce the interest rate or extend the time for payment of interest
on any Debt Security;
(c) reduce the principal of or extend the stated maturity of any Debt
Security;
(d) reduce the premium payable upon the redemption of any Debt Security
or change the time at which any Debt Security may or shall be redeemed;
(e) make any Debt Security payable in a currency other than that stated
in the Debt Security;
(f) in the case of any Subordinated Debt Security, make any change in
the provisions of the Indenture relating to subordination that adversely
affects the rights of any holder under such provisions;
(g) release any security that may have been granted with respect to the
Debt Securities; or
(h) make any change in the provisions of the Indenture relating to
waivers of defaults or amendments that require unanimous consent.
Consolidation, Merger, and Sale of Assets
The Indenture provides that the Company may not consolidate with or merge
with or into any person, or convey, transfer, or lease all or substantially all
of its assets, unless the following conditions have been satisfied:
(a) Either
(i) the Company is the continuing person in the case of a merger, or
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(ii) the successor corporation is a corporation organized and
existing under the laws of the United States, any State, or the District
of Columbia and shall expressly assume all of the obligations of the
Company under the Debt Securities and the Indenture;
(b) Immediately after giving effect to the transaction (and treating any
Indebtedness that becomes an obligation of the successor corporation or any
Subsidiary of the Company as a result of the transaction as having been
incurred by the successor corporation or such Subsidiary at the time of
such transaction), no default or Event of Default would occur or be
continuing; and
(c) The Company has delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger, or
transfer complies with the Indenture.
Certain Definitions
The following definitions, among others, are used in the Indenture. Many of
the definitions of terms used in the Indenture have been negotiated
specifically for the purposes of inclusion in the Indenture and may not be
consistent with the manner in which such terms are defined in other contexts.
Prospective purchasers of Debt Securities are encouraged to read each of the
following definitions carefully and to consider such definitions in the context
in which they are used in the Indenture.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined
in accordance with GAAP, and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Disqualified Stock" of a Person means Redeemable Stock of such Person as to
which the maturity, mandatory redemption, conversion or exchange or redemption
at the option of the holder thereof occurs, or may occur, on or prior to the
first anniversary of the Stated Maturity of the Debt Securities.
"GAAP" means generally accepted accounting principles in the United States
as in effect as of the date on which the Debt Securities of the applicable
series are issued, including those set forth in the opinions and pronouncements
of the Accounting Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in this Indenture shall be computed in
conformity with GAAP consistently applied.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(a) the principal of Indebtedness of such Person for borrowed money;
(b) the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(c) all Capitalized Lease Obligations of such Person;
(d) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables);
(e) all obligations of such Person in respect of letters of credit,
banker's acceptances or other similar instruments or credit transactions
(including reimbursement obligations with respect thereto), other than
obligations with respect to letters of credit securing obligations (other
than obligations described in (a) through (d) above) entered into in the
ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing
is reimbursed no later than the third business day following receipt by
such Person of a demand for reimbursement following payment on the letter
of credit;
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(f) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock (but
excluding, in each case, any accrued dividends);
(g) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of such Indebtedness shall be the lesser
of (A) the fair market value of such asset at such date of determination or
(B) the amount of such Indebtedness of such other Persons; and
(h) all Indebtedness of other Persons to the extent Guaranteed by such
Person.
For purposes of this definition, the maximum fixed redemption, repayment or
repurchase price of any Disqualified Stock or Preferred Stock that does not
have a fixed redemption, repayment or repurchase price shall be calculated in
accordance with the terms of such Stock as if such Stock were redeemed, repaid
or repurchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture; provided, however, that if such Stock
is not then permitted to be redeemed, repaid or repurchased, the redemption,
repayment or repurchase price shall be the book value of such Stock as
reflected in the most recent financial statements of such Person. 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, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Redeemable Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any
event
(i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness (other than
Preferred Stock) or Disqualified Stock, or
(iii) is redeemable at the option of the holder thereof, in whole or in
part.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by
(i) such Person,
(ii) such Person and one or more Subsidiaries of such Person, or
(iii) one or more Subsidiaries of such Person.
Satisfaction and Discharge of the Indenture; Defeasance
The Indenture shall generally cease to be of any further effect with
respect to a series of Debt Securities if
(a) the Company has delivered to the Trustee for cancellation all Debt
Securities of such series (with certain limited exceptions), or
(b) all Debt Securities of such series not previously delivered to the
Trustee for cancellation shall have become due and payable, or are by their
terms to become due and payable within one year or are to be called for
redemption within one year, and the Company shall have deposited with the
Trustee as trust funds the entire amount in the currency in which the Debt
Securities are denominated sufficient to pay at maturity or upon redemption
all such Debt Securities;
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and if, in either case, the Company shall also pay or cause to be paid all
other sums payable under the Indenture by the Company.
In addition, the Company shall have a "legal defeasance option" (pursuant to
which it may terminate, with respect to the Debt Securities of the particular
series, all of its obligations under such Debt Securities and the Indenture
with respect to such Debt Securities) and "covenant defeasance option"
(pursuant to which it may terminate, with respect to the Debt Securities of a
particular series, its obligations with respect to such Debt Securities under
certain specified covenants contained in the Indenture). If the Company
exercises its legal defeasance option with respect to a series of Debt
Securities, payment of such Debt Securities may not be accelerated because of
an Event of Default. If the Company exercises its covenant defeasance option
with respect to a series of Debt Securities, payment of such Debt Securities
may not be accelerated because of an Event of Default related to the specified
covenants.
The Company may exercise its legal defeasance option or its covenant
defeasance option with respect to the Debt Securities of a series only if:
(a) the Company irrevocably deposits in trust with the Trustee cash or
U.S. Government Obligations (as defined in the Indenture) for the payment
of principal, premium, and interest with respect to such Debt Securities to
maturity or redemption, as the case may be;
(b) the Company delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that
the payment of principal and interest when due and without reinvestment on
the deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will be
sufficient to pay the principal, premium, if any, and interest when due
with respect to all the Debt Securities of such series to maturity or
redemption, as the case may be;
(c) 91 days pass after the deposit is made and during the 91-day period
no default described in clause (g) or (h) under "Description of Debt
Securities--Events of Default and Remedies" above with respect to the
Company occurs that is continuing at the end of such period;
(d) no default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(e) the deposit does not constitute a default under any other agreement
binding on the Company, and, in the case of Subordinated Debt Securities,
is not prohibited by the provisions of the Indenture relating to
subordination;
(f) the Company delivers to the Trustee an opinion of counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(g) the Company shall have delivered to the Trustee an opinion of
counsel addressing certain federal income tax matters relating to the
defeasance; and
(h) the Company delivers to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent to the
defeasance and discharge of the Debt Securities of such series as
contemplated by the Indenture have been complied with.
The Trustee shall hold in trust cash or U.S. Government Obligations
deposited with it as described above and shall apply the deposited cash and the
proceeds from deposited U.S. Government Obligations to the payment of
principal, premium, if any, and interest with respect to the Debt Securities of
the defeased series. In the case of Subordinated Debt Securities, the money and
U.S. Government Obligations so held in trust will not be subject to the
subordination provisions of the Indenture.
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The Trustee
The Company may maintain banking and other commercial relationships with the
Trustee and its affiliates in the ordinary course of business and the Trustee
may own Debt Securities. The Prospectus Supplement relating to a particular
issue of Debt Securities will provide additional information with respect to
any relationship the Company may have with the Trustee for such Debt
Securities.
DESCRIPTION OF JUNIOR SUBORDINATED DEBT SECURITIES
The following description of the terms of the Company's junior subordinated
debt securities (the "Junior Subordinated Debt Securities") summarizes certain
general terms and provisions of the Junior Subordinated Debt Securities to
which any Prospectus Supplement may relate. The particular terms of the Junior
Subordinated Debt Securities offered by any Prospectus Supplement and the
extent, if any, to which such general provisions may apply to the Junior
Subordinated Debt Securities being offered will be described in the applicable
Prospectus Supplement. Accordingly, for a description of the terms of a
particular issue of Junior Subordinated Debt Securities, reference must be made
to both the applicable Prospectus Supplement relating to the particular issue
of Junior Subordinated Debt Securities and to the following description.
Junior Subordinated Debt Securities may be issued from time to time in one
or more series under an indenture (the "Junior Subordinated Indenture") between
the Company and The Chase Manhattan Bank or such other trustee as may be named
in a Prospectus Supplement (the "Junior Subordinated Indenture Trustee"). A
copy of the form of Junior Subordinated Indenture has been filed as an exhibit
to the Registration Statement. The following discussion is a summary of the
material terms of the Junior Subordinated Indenture and those made part of the
Junior Subordinated Indenture by the Trust Indenture Act only and is not a
complete description of its terms and provisions. Accordingly, the following
summary is qualified in its entirety by reference to the Junior Subordinated
Indenture and the Trust Indenture Act. Capitalized terms used in the following
summary but not defined have the meanings specified in the Junior Subordinated
Indenture.
General
The Junior Subordinated Debt Securities will be unsecured, junior
subordinated obligations of the Company. The Junior Subordinated Indenture does
not limit the amount of additional indebtedness the Company or any of its
subsidiaries may incur. Because of the Company's holding company structure, the
Company's rights and the rights of its creditors, including the holders of
Junior Subordinated Debt Securities, to participate in the assets of any
subsidiary upon such subsidiary's liquidation or recapitalization will be
subject to the prior claims of the subsidiary's creditors, except to the extent
that the Company may itself be a creditor with recognized claims against the
subsidiary. The Junior Subordinated Indenture and the Junior Subordinated Debt
Securities do not contain any covenants or other provisions designed to protect
holders of Junior Subordinated Debt Securities in the event of a highly
leveraged transaction involving the Company or any of its subsidiaries.
The Junior Subordinated Indenture does not limit the aggregate principal
amount of indebtedness which may be issued under it. Junior Subordinated Debt
Securities may be issued under the Junior Subordinated Indenture from time to
time in one or more series pursuant to a supplement to the Junior Subordinated
Indenture.
In the event Junior Subordinated Debt Securities are issued to the Trust or
a Trustee of the Trust in connection with the issuance of Preferred Securities
by the Trust, such Junior Subordinated Debt Securities subsequently may be
distributed pro rata to the holders of such Preferred Securities in connection
with the dissolution of the Trust upon the occurrence of certain events
described in the applicable Prospectus Supplement. Only one series of Junior
Subordinated Debt Securities will be issued to the Trust or a Trustee of such
Trust in connection with the issuance of Preferred Securities by such Trust.
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Reference is made to the applicable Prospectus Supplement for a description
of the following terms of the series of Junior Subordinated Debt Securities in
respect of which such Prospectus Supplement is being delivered (to the extent
such terms are applicable to the Junior Subordinated Debt Securities):
(a) the specific designation of such Junior Subordinated Debt
Securities, aggregate principal amount and purchase price;
(b) any limit on the aggregate principal amount of such Junior
Subordinated Debt Securities;
(c) the date or dates on which the principal of such Junior Subordinated
Debt Securities is payable and the right, if any, to extend such date or
dates;
(d) the rate or rates at which such Junior Subordinated Debt Securities
will bear interest or the method of calculating such rate or rates, if any;
(e) the date or dates from which such interest shall accrue, the
interest payment dates on which such interest will be payable or the manner
of determination of such interest payment dates and the record dates for
the determination of holders to whom interest is payable on any such
interest payment dates;
(f) the right, if any, to extend the interest payment periods and the
duration of such extension;
(g) the period or periods within which, the price or prices at which,
and the terms and conditions upon which, such Junior Subordinated Debt
Securities may be redeemed, in whole or in part, at the option of the
Company;
(h) the obligation, if any, of the Company to redeem or purchase such
Junior Subordinated Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of the holder of such Junior
Subordinated Debt Securities and the period or periods within which, the
price or prices at which, and the terms and conditions upon which, such
Junior Subordinated Debt Securities shall be redeemed or purchased, in
whole or part, pursuant to such obligation;
(i) whether and under what circumstances the Company will pay additional
amounts on the Junior Subordinated Debt Securities held by a person who is
not a U.S. person in respect of any tax, assessment or governmental charge
withheld or deducted and, if so, whether the Company will have the option
to redeem such Junior Subordinated Debt Securities rather than pay such
additional amounts;
(j) the form of such Junior Subordinated Debt Securities;
(k) if other than denominations of $50 or any integral multiple of $50,
the denominations in which such Junior Subordinated Debt Securities shall
be issuable;
(l) any and all other terms with respect to such series, including any
modification of or additions to the events of default or covenants provided
for with respect to the Junior Subordinated Debt Securities, and any terms
which may be required by or advisable under applicable laws or regulations
not inconsistent with the Junior Subordinated Indenture;
(m) the terms and conditions upon which the Junior Subordinated Debt
Securities may be convertible into or exchanged for Common Stock, Preferred
Stock, Preferred Securities, or indebtedness or other securities of any
kind of the Company; and
(n) whether such Junior Subordinated Debt Securities are issuable as a
global security, and in such case, the identity of the depositary.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issued in United States dollars in fully
registered form without coupons in denominations of $50 or integral multiples
of $50. No service charge will be made for any transfer or exchange of any
Junior Subordinated Debt Securities, but the Company may, except in certain
specified cases not involving any transfer, require payment of a sum sufficient
to cover any applicable tax or other governmental charge. Unless otherwise set
forth in the Prospectus Supplement, interest on outstanding Junior Subordinated
Debt Securities will be paid to holders of record on the date which is 15 days
immediately prior to the date such interest is to be paid.
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Junior Subordinated Debt Securities may bear interest at a fixed rate or a
floating rate. Junior Subordinated Debt Securities bearing no interest or
interest at a rate that at the time of issuance is below the prevailing market
rate will be sold at a discount below their stated principal amount. Special
federal income tax considerations applicable to any such discounted Junior
Subordinated Debt Securities or to certain Junior Subordinated Debt Securities
issued at par which are treated as having been issued at a discount for federal
income tax purposes will be described in the applicable Prospectus Supplement.
Global Securities
If any Junior Subordinated Debt Securities of a series are represented by
one or more Global Securities, the applicable Prospectus Supplement will
describe the circumstances, if any, under which beneficial owners of interests
in any such Global Security may exchange such interests for Junior Subordinated
Debt Securities of such series and of like tenor and principal amount in any
authorized form and denomination. Principal of, and any premium and interest
on, a Global Security will be payable in the manner described in the applicable
Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Junior Subordinated Debt Securities to be represented by a
Global Security will be described in the applicable Prospectus Supplement.
Consolidation, Merger, Conveyance or Transfer
The Junior Subordinated Indenture provides that the Company may not
consolidate with or merge with or into any other person or convey, transfer or
lease all or substantially all of its assets to any person, unless the
following conditions have been satisfied:
(a) either
(i) the Company is the continuing person in the case of a merger, or
(ii) the successor corporation is a corporation organized and
existing under the laws of the United States, any State, or the
District of Columbia and shall expressly assume all of the obligations
of the Company under the Junior Subordinated Debt Securities and the
Junior Subordinated Indenture;
(b) immediately after giving effect to the transaction, no default or
Event of Default would occur or be continuing; and
(c) the Company has delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger, or
transfer complies with the Junior Subordinated Indenture.
Events of Default; Waiver and Notice of Events of Default
As to any series of Junior Subordinated Debt Securities, an "Event of
Default" is defined in the Junior Subordinated Indenture as:
(a) default for 90 days in payment of any interest on the Junior
Subordinated Debt Securities of such series when due and payable (subject
to the deferral of any due date in the case of an Extension Period);
(b) default in payment of principal of or any premium on the Junior
Subordinated Debt Securities of such series when due and payable;
(c) default in payment of any sinking or purchase fund or analogous
obligation, if any, on the Junior Subordinated Debt Securities of such
series;
(d) default by the Company in the performance, or breach, of any other
covenant or warranty contained in the Junior Subordinated Indenture for the
benefit of such series which shall not have been remedied for a period of
90 days after notice is given as specified in the Junior Subordinated
Indenture; and
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(e) certain events of bankruptcy, insolvency and reorganization of the
Company.
A default under other indebtedness of the Company will not be a default
under the Junior Subordinated Indenture and a default under one series of Debt
Securities or Junior Subordinated Debt Securities will not necessarily be a
default under another series.
The Junior Subordinated Indenture provides that if an Event of Default shall
have occurred and be continuing with respect to any series, either the Junior
Subordinated Indenture Trustee or the holders of not less than 25% in aggregate
principal amount of the Junior Subordinated Debt Securities of that series then
outstanding (each series acting as a separate class) may declare the principal
(or, in the case of Original Issue Discount Securities, the portion thereof
specified in the terms thereof) of all outstanding Junior Subordinated Debt
Securities of such series and the accrued interest, if any, to be due and
payable immediately. However, in certain circumstances the declarations may be
annulled and past defaults (except for defaults in the payment of principal of,
any premium on, or any interest on, such Junior Subordinated Debt Securities
and in compliance with certain covenants) may be waived by the holders of a
majority in aggregate principal amount of the Junior Subordinated Debt
Securities of such series then outstanding (subject to, in the case of any
series of Junior Subordinated Debt Securities held as trust assets of the Trust
and with respect to which a Security Exchange has not previously occurred, such
consent of the holders of the Preferred Securities and the Common Securities of
the Trust as may be required under the Declaration).
A "Security Exchange" means the distribution of the Junior Subordinated Debt
Securities held as trust assets of the Trust in exchange for the Preferred
Securities and the Common Securities of the Trust in dissolution of the Trust
pursuant to the Declaration.
Under the Junior Subordinated Indenture, the Junior Subordinated Indenture
Trustee must give to the holders of each series of Junior Subordinated Debt
Securities notice of all uncured defaults known to it with respect to such
series within 90 days after such a default occurs (the term "default" to
include the events specified above without notice or grace periods, except that
in the case of any default of the type described in clause (d) above, no such
notice shall be given until at least 90 days after the occurrence of such
default); provided that, except in the case of default in the payment of
principal of, any premium on, or any interest on, any of the Junior
Subordinated Debt Securities, or default in the payment of any sinking or
purchase fund installment or analogous obligations, the applicable Junior
Subordinated Indenture Trustee shall be protected in withholding such notice if
it in good faith determines that the withholding of such notice is in the
interests of the holders of the Junior Subordinated Debt Securities of such
series.
No holder of any Junior Subordinated Debt Securities of any series may
institute any action under the Junior Subordinated Indenture unless:
(a) the holder gives the Junior Subordinated Indenture Trustee written
notice of a continuing Event of Default with respect to such series;
(b) the holders of not less than 25% in aggregate principal amount of
the Junior Subordinated Debt Securities of such series then outstanding
request the Junior Subordinated Indenture Trustee to institute proceedings
in respect of the Event of Default;
(c) the holder or holders have offered the Junior Subordinated Indenture
Trustee such reasonable indemnity as the Junior Subordinated Indenture
Trustee may require;
(d) the Junior Subordinated Indenture Trustee has failed to institute an
action for 60 days thereafter; and
(e) no inconsistent direction has been given to the Junior Subordinated
Indenture Trustee during such 60-day period by the holders of a majority in
aggregate principal amount of Junior Subordinated Debt Securities of such
series then outstanding (subject to, in the case of any series of Junior
Subordinated Debt Securities held as trust assets of the Trust and with
respect to which a Security Exchange has not previously occurred, such
consent of the holders of the Preferred Securities and the Common
Securities of the Trust as may be required under the Declaration).
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The holders of a majority in aggregate principal amount of the Junior
Subordinated Debt Securities of any series affected and then outstanding
(subject to, in the case of any series of Junior Subordinated Debt Securities
held as trust assets of the Trust and with respect to which a Security Exchange
has not previously occurred, such consent of the holders of the Preferred
Securities and the Common Securities of the Trust as may be required under the
Declaration) will have the right, subject to certain limitations, to direct the
time, method and place of conducting any proceeding for any remedy available to
the applicable Junior Subordinated Indenture Trustee or exercising any trust or
power conferred on such Junior Subordinated Indenture Trustee with respect to
such series of Junior Subordinated Debt Securities. The Junior Subordinated
Indenture provides that, in case an Event of Default shall occur and be
continuing, the Junior Subordinated Indenture Trustee, in exercising its rights
and powers under such Junior Subordinated Indenture, will be required to use
the degree of care of a prudent person in the conduct of such person's own
affairs. The Junior Subordinated Indenture further provides that the Junior
Subordinated Indenture Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties under the Junior Subordinated Indenture unless it has reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is reasonably assured to it.
The Company must furnish to the Junior Subordinated Indenture Trustee by May
15 of each year a statement signed by one of certain officers of the Company to
the effect that a review of the activities of the Company during such year and
of its performance under the Junior Subordinated Indenture and the terms of the
Junior Subordinated Debt Securities has been made, and, to the best of the
knowledge of the signatories based on such review, the Company has complied
with all conditions and covenants of such Junior Subordinated Indenture through
such year or, if the Company is in default, specifying such default.
Modification of the Junior Subordinated Indenture
The Junior Subordinated Indenture provides that the Company and the Junior
Subordinated Indenture Trustee may, without the consent of any holders of
Junior Subordinated Debt Securities, enter into supplemental indentures for the
purposes, among other things, of adding to the Company's covenants, adding
additional Junior Subordinated Indenture Events of Default, establishing the
form or terms of any series of Junior Subordinated Debt Securities or curing
ambiguities or inconsistencies in the Junior Subordinated Indenture or making
other provisions.
With certain exceptions, the Junior Subordinated Indenture or the rights of
the holders of the Junior Subordinated Debt Securities may be modified by the
Company and the Junior Subordinated Indenture Trustee with the consent of the
holders of a majority in aggregate principal amount of the Junior Subordinated
Debt Securities of each series affected by such modification then outstanding
(subject to, in the case of any series of Junior Subordinated Debt Securities
held as trust assets of the Trust and with respect to which a Security Exchange
has not previously occurred, such consent of the holders of the Preferred
Securities and the Common Securities of the Trust as may be required under the
Declaration). No such modification may be made without the consent of the
holder of each outstanding Junior Subordinated Debt Security so affected
(subject to, in the case of any series of Junior Subordinated Debt Securities
held as trust assets of the Trust and with respect to which a Security Exchange
has not previously occurred, such consent of the holders of the Preferred
Securities and the Common Securities of the Trust as may be required under the
Declaration) which would:
(a) change the maturity of any payment of principal of, or any premium
on, or any installment of interest on any Junior Subordinated Debt
Security, or reduce the principal amount of any Junior Subordinated Debt
Security or the interest or any premium on any Junior Subordinated Debt
Security, or change the method of computing the amount of principal of any
Junior Subordinated Debt Security or interest on any Junior Subordinated
Debt Security on any date or change any place of payment where, or the coin
or currency in which, any Junior Subordinated Debt Security or any premium
or interest on any Junior Subordinated Debt Security is payable, or impair
the right to institute suit for the enforcement of any such payment on or
after the maturity of any Junior Subordinated Debt Security (or, in the
case of redemption or repayment, on or after the redemption date or the
repayment date, as the case may be); or
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(b) reduce the percentage in principal amount of the outstanding Junior
Subordinated Debt Securities of any series, the consent of whose holders is
required for any modification or for any waiver of compliance with certain
provisions of the Junior Subordinated Indenture or certain defaults under
the Junior Subordinated Indenture and their consequences.
Defeasance and Discharge
Under the terms of the Junior Subordinated Indenture, the Company will be
discharged from any and all obligations in respect of a series of the Junior
Subordinated Debt Securities (except in each case for certain obligations to
register the transfer or exchange of such Junior Subordinated Debt Securities,
replace stolen, lost or mutilated Junior Subordinated Debt Securities of such
series, maintain paying agencies and hold moneys for payment in trust) if:
(a) the Company irrevocably deposits with the Junior Subordinated
Indenture Trustee cash or U.S. Government Obligations or a combination
thereof, as trust funds in an amount certified to be sufficient to pay at
maturity (or upon redemption) the principal of, premium, if any, and
interest on all outstanding Junior Subordinated Debt Securities of such
series;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which the
Company is a party or by which it is bound;
(c) the Company delivers to the Junior Subordinated Indenture Trustee an
opinion of counsel to the effect that the holders of the Junior
Subordinated Debt Securities of such series will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and that such deposit, defeasance and discharge
will not otherwise alter holders' federal income tax treatment with respect
to payments on such Junior Subordinated Debt Securities of such series
(such opinion must be based on a ruling of the Internal Revenue Service or
a change in federal income tax law occurring after the date of the Junior
Subordinated Indenture, since such a result would not occur under current
tax law);
(d) the Company has delivered to the Junior Subordinated Indenture
Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent provided for relating to such defeasance and
discharge have been complied with; and
(e) no event or condition shall exist that, pursuant to the applicable
subordination provisions, would prevent the Company from making payments of
principal of, premium, if any, and interest on the Junior Subordinated Debt
Securities at the date of the irrevocable deposit referred to above.
The Junior Subordinated Indenture Trustee will hold in trust cash or U.S.
Government Obligations deposited with it as described above and will apply the
deposited cash and the proceeds from deposited U.S. Government Obligations to
the payment of principal, premium, if any, and interest with respect to the
Junior Subordinated Debt Securities of the defeased series.
Certain Covenants of the Company Applicable to the Junior Subordinated Debt
Securities
If Junior Subordinated Debt Securities are issued to the Trust in connection
with the issuance of Preferred Securities by the Trust, the Company covenants
in the Junior Subordinated Indenture that, so long as the Preferred Securities
of the Trust remain outstanding, the Company will not declare or pay any
dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any Common Stock or Preferred Stock or
make any guarantee payments with respect thereto if at such time:
(a) the Company shall be in default with respect to any guaranteed
payments or distributions, or other payment obligations, under the related
Guarantee;
(b) there shall have occurred any Event of Default under the Junior
Subordinated Indenture with respect to such Junior Subordinated Debt
Securities; or
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(c) in the event that Junior Subordinated Debt Securities are issued to
the Trust in connection with the issuance of Preferred Securities by the
Trust, the Company shall have given notice of its election to defer
payments of interest on such Junior Subordinated Debt Securities by
extending the interest payment period as provided in the terms of the
Junior Subordinated Debt Securities and such period, or any extension of
such period, is continuing.
The restrictions above will not apply to:
(a) dividends, redemptions, purchases, acquisitions, distributions or
payments made by the Company by way of issuance of shares of its capital
stock;
(b) any declaration of a dividend under a stockholder rights plan or in
connection with the implementation of a stockholder rights plan, the
issuance of capital stock of the Company under a stockholder rights plan or
the redemption, repurchase or exchange of any such right distributed
pursuant to a stockholder rights plan;
(c) payments of accrued dividends by the Company upon the redemption,
exchange or conversion of any Preferred Stock as may be outstanding from
time to time in accordance with the terms of such Preferred Stock;
(d) cash payments made by the Company in lieu of delivering fractional
shares upon the redemption, exchange or conversion of any Preferred Stock
as may be outstanding from time to time in accordance with the terms of
such Preferred Stock;
(e) payments under the Guarantee; or
(f) purchases of Common Stock related to the issuance of Common Stock or
rights under any of the Company's benefit plans for its directors, officers
or employees, or related to the issuance of Common Stock or rights under a
dividend reinvestment and stock purchase plan.
In addition, if Junior Subordinated Debt Securities are issued to the Trust
in connection with the issuance of Preferred Securities by the Trust, for so
long as the Preferred Securities of the Trust remain outstanding, the Company
has agreed
(1) to remain the sole direct or indirect owner of all the outstanding
Common Securities issued by the Trust and not to cause or permit such
Common Securities to be transferred except to the extent permitted by the
Declaration of such Trust, provided that any permitted successor of the
Company under the Junior Subordinated Indenture may succeed to the
Company's ownership of such Common Securities,
(2) to comply fully with all its obligations and agreements under such
Declaration, and
(3) not to take any action which would cause the Trust to cease to be
treated as a grantor trust for federal income tax purposes, except in
connection with a distribution of Junior Subordinated Debt Securities.
Subordination
The Junior Subordinated Debt Securities will be subordinated and junior in
right of payment to certain other indebtedness of the Company to the extent set
forth in the applicable Prospectus Supplement.
The payment of the principal of, premium, if any, and interest on the Junior
Subordinated Debt Securities will be subordinated in right of payment to the
prior payment in full of all Senior Indebtedness of the Company. No payment on
account of principal of, premium, if any, or interest on the Junior
Subordinated Debt Securities and no acquisition of, or payment on account of
any sinking fund for, the Junior Subordinated Debt Securities may be made
unless full payment of amounts then due for principal, premium, if any, and
interest then due on all Senior Indebtedness by reason of the maturity of such
Senior Indebtedness (by lapse of time, acceleration or otherwise) has been made
or duly provided for in cash or in a manner satisfactory to the holders
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of such Senior Indebtedness. In addition, the Junior Subordinated Indenture
provides that if a default has occurred giving the holders of such Senior
Indebtedness the right to accelerate the maturity of such Senior Indebtedness,
or an event has occurred which, with the giving of notice, or lapse of time, or
both, would constitute such an event of default, then unless and until such
event shall have been cured or waived or shall have ceased to exist, no payment
on account of principal, premium, if any, or interest on the Junior
Subordinated Debt Securities and no acquisition of, or payment on account of a
sinking fund for, the Junior Subordinated Debt Securities may be made. The
Company shall give prompt written notice to the Junior Subordinated Indenture
Trustee of any default under any Senior Indebtedness or under any agreement
pursuant to which Senior Indebtedness may have been issued. The Junior
Subordinated Indenture provisions described in this paragraph, however, do not
prevent the Company from making a sinking fund payment with Junior Subordinated
Debt Securities acquired prior to the maturity of Senior Indebtedness or, in
the case of default, prior to such default and notice thereof. Upon any
distribution of its assets in connection with any dissolution, liquidation or
reorganization of the Company, all Senior Indebtedness must be paid in full
before the holders of the Junior Subordinated Debt Securities are entitled to
any payments whatsoever. As a result of these subordination provisions, in the
event of the Company's insolvency, holders of the Junior Subordinated Debt
Securities may recover ratably less than senior creditors of the Company.
For purposes of the description of the Junior Subordinated Debt Securities,
the term "Senior Indebtedness" means the principal of and premium, if any, and
interest on the following, whether outstanding on the date of execution of the
Junior Subordinated Indenture or thereafter incurred or created:
(a) indebtedness of the Company for money borrowed;
(b) guarantees by the Company of indebtedness of others;
(c) indebtedness evidenced by notes, debentures, bonds, guarantees or
other instruments of indebtedness for the payment of which the Company is
responsible or liable; or
(d) obligations of the Company under any lease or agreement to lease,
any other indebtedness, liability or obligation of the Company, or
renewals, extensions or refundings of any of the indebtedness referred to
in the preceding clauses (a), (b) and (c), unless, in the case of any
particular indebtedness, renewal, extension or refunding, under the express
provisions of the instrument creating or evidencing such indebtedness, or
pursuant to which such indebtedness is outstanding, such indebtedness or
such renewal, extension or refunding of such indebtedness is not superior
in right of payment to the Junior Subordinated Debt Securities.
Notwithstanding the foregoing, Senior Indebtedness does not include any
obligation of the Company to a Subsidiary.
Concerning the Junior Subordinated Indenture Trustee
The Junior Subordinated Indenture Trustee for the Junior Subordinated Debt
Securities will be identified in the applicable Prospectus Supplement. In
certain instances, the Company or the holders of a majority of the then
outstanding principal amount of the Junior Subordinated Debt Securities issued
under the Junior Subordinated Indenture may remove the Junior Subordinated
Indenture Trustee and appoint a successor Junior Subordinated Indenture
Trustee. The Junior Subordinated Indenture Trustee may become the owner or
pledgee of any of the Junior Subordinated Debt Securities with the same rights,
subject to certain conflict of interest restrictions, it would have if it were
not the Junior Subordinated Indenture Trustee. The Junior Subordinated
Indenture Trustee and any successor trustee must be a corporation organized and
doing business as a commercial bank or trust company under the laws of the
United States or of any state, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $50,000,000 and
subject to examination by federal or state authority. From time to time and
subject to applicable law relating to conflicts of interest, the Junior
Subordinated Indenture Trustee may also serve as trustee under other indentures
relating to Debt Securities or Junior Subordinated Debt Securities issued by
the Company or affiliated
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companies and it may maintain banking and commercial relationships with the
Company and affiliated companies. The Prospectus Supplement relating to a
particular series of Junior Subordinated Debt Securities will provide
additional information with respect to any relationship the Company may have
with the Junior Subordinated Indenture Trustee for such Junior Subordinated
Debt Securities.
DESCRIPTION OF PREFERRED STOCK
The Company has 5,000,000 authorized shares of Preferred Stock, having a par
value of $.01 per share. As of the date of this Prospectus, no shares of
Preferred Stock were issued or outstanding; however, the Board of Directors of
the Company has reserved for issuance pursuant to the Company's Stockholder
Rights Plan described below 80,000 shares of Series A Junior Participating
Preferred Stock.
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. The particular terms of any series of Preferred
Stock will be described in the Prospectus Supplement relating to that series of
Preferred Stock.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the deposit agreement and of the depositary shares and depositary
receipts is not complete. You should carefully review the Prospectus Supplement
and the form of deposit agreement and form of depositary receipts relating to
each series of the Preferred Stock.
General
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Stock which will be represented by depositary shares rather
than shares of Preferred Stock. The shares of any series of the Preferred Stock
underlying the depositary shares will be deposited under a separate deposit
agreement (the "Deposit Agreement") into which the Company will enter with a
bank or trust company having its principal office in the United States and a
combined capital and surplus of at least $50,000,000. Such bank will be
considered the depositary (the "Depositary"). The Prospectus Supplement
relating to a series of depositary shares will set forth the name and address
of the Depositary. Subject to the terms of the Deposit Agreement, each owner of
a depositary share will be entitled, in proportion to the applicable interest
in the number of shares of Preferred Stock underlying such depositary share, to
all the rights and preferences of the Preferred Stock underlying such
depositary share, including dividend, voting, redemption, conversion, exchange
and liquidation rights.
The depositary shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement. Depositary receipts will be
distributed to those persons purchasing depositary shares in accordance with
the terms of the offering described in the related Prospectus Supplement.
Unless otherwise specified in the Prospectus Supplement, a holder of
depositary shares is not entitled to receive the shares of Preferred Stock
underlying the depositary shares.
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Dividends and Other Distributions
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of depositary shares representing such Preferred Stock in proportion to the
numbers of such depositary shares owned by such holders on the relevant record
date. The Depositary will distribute only such amount, however, as can be
distributed without attributing to any holder of depositary shares a fraction
of one cent, and any balance not so distributed will be added to and treated as
part of the next sum received by the Depositary for distribution.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of depositary shares
entitled to such property, as nearly as practicable, in proportion to the
number of depositary shares owned by such holder. However, if the Depositary
determines that it is not feasible to make such distribution, it may, with the
Company's approval, sell such property and distribute the net proceeds from
such sale to such holders.
The Deposit Agreement also contains provisions relating to the manner in
which any subscription or similar rights that the Company offers to holders of
Preferred Stock shall be made available to holders of depositary shares.
Conversion and Exchange
If any series of the Preferred Stock underlying the depositary shares is
subject to provisions relating to its conversion or exchange as set forth in
the applicable Prospectus Supplement, each record holder of depositary shares
will have the right or obligation to convert or exchange such depositary shares
pursuant to its terms.
Redemption of Depositary Shares
If a series of the Preferred Stock underlying the depositary shares is
subject to redemption, the depositary shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Stock held by the Depositary. The redemption
price per depositary share will be equal to the applicable fraction of the
redemption price payable with respect to the shares of Preferred Stock
underlying the depositary shares. Whenever the Company redeems Preferred Stock
from the Depositary, the Depositary will redeem as of the same redemption date
a proportionate number of depositary shares representing the shares of
Preferred Stock that were redeemed. If less than all the depositary shares are
to be redeemed, the depositary shares to be redeemed will be selected by lot or
pro rata as may be determined by the Depositary.
After the date fixed for redemption, the depositary shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the depositary shares will cease, except the right to receive the
redemption price payable upon such redemption and any money and other property
to which the holders of depositary shares were otherwise entitled at the time
of redemption upon surrender to the Depositary of the depositary receipts
evidencing such depositary shares.
Voting
Upon receipt of notice of any meeting or action in lieu of any meeting at
which the holders of any shares of Preferred Stock underlying the depositary
shares are entitled to vote, the Depositary will mail the information contained
in such notice to the record holders of the depositary shares relating to such
Preferred Stock. Each record holder of such depositary shares on the record
date, which will be the same date as the record date for the Preferred Stock,
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the number of shares of Preferred Stock underlying such
holder's depositary shares. The Depositary will endeavor, insofar as
practicable, to vote the number of shares of Preferred Stock underlying such
depositary shares in accordance with such instructions, and the Company will
agree to take all action that the Depositary may deem necessary in order to
enable the Depositary to do so.
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Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which materially
and adversely alters the rights of the existing holders of depositary shares
will not be effective unless such amendment has been approved by the holders of
at least a majority of the depositary shares then outstanding.
The Deposit Agreement may be terminated by the Company or by the Depositary
only if
(i) all outstanding depositary shares have been redeemed, or
(ii) there has been a final distribution of the underlying shares of the
Preferred Stock in connection with the liquidation, dissolution or winding
up of the Company and the Preferred Stock has been distributed to the
holders of the depositary receipts.
Charges of Depositary
The Company will pay all transfer and other taxes and governmental charges
that arise solely from the existence of the depositary arrangements. It will
also pay charges of the Depositary in connection with the initial deposit of
the Preferred Stock and any exchange or redemption of the Preferred Stock.
Holders of depositary shares will pay all other transfer and other taxes and
governmental charges, and, in addition, such other charges as are expressly
provided in the Deposit Agreement to be for their accounts.
Miscellaneous
The Company, or at its option, the Depositary, will forward to the holders
of depositary shares all of the reports and communications that it is required
to furnish to the holders of Preferred Stock.
Neither the Company nor the Depositary will be liable if either is prevented
or delayed by law or any circumstances beyond their respective control in
performing their respective obligations under the Deposit Agreement. The
obligations of the Company and the Depositary under the Deposit Agreement will
be limited to performance in good faith of their respective duties under the
Deposit Agreement and neither will be obligated to prosecute or defend any
legal proceeding in respect of any depositary share or Preferred Stock unless
satisfactory indemnity has been furnished. Both the Company and the Depositary
may rely upon written advice of counsel or accountants, or information provided
by persons presenting Preferred Stock for deposit, holders of depositary shares
or other persons believed to be competent and on documents believed to be
genuine.
Resignation and Removal of Depositary
The Depositary may resign at any time by delivering notice to the Company of
its election to do so, and the Company may at any time remove the Depositary.
Any such resignation or removal will take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. The successor
Depositary must be appointed by the Company within 60 days after delivery of
the notice of resignation or removal and must be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
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DESCRIPTION OF COMMON STOCK
General
The Company has 80,000,000 authorized shares of Common Stock, having a par
value of $.005 per share. As of March 31, 1999, there were 53,107,066 shares of
Common Stock outstanding. All outstanding shares of Common Stock are fully paid
and nonassessable.
Holders of Common Stock are entitled to receive dividends, when, as and if
declared by the Board of Directors of the Company out of assets legally
available for their payment. In certain cases, the Company may not pay
dividends to holders of Common Stock until any dividend obligations of the
Company to the holders of any Preferred Stock then outstanding have been
satisfied. The Company is subject to certain restrictions on the payment of
dividends under the provisions of its credit arrangements.
In the event of the Company's voluntary or involuntary liquidation,
dissolution or winding up, the holders of Common Stock will be entitled to
share equally in the assets of the Company remaining after payment of all
liabilities and after holders of all series of outstanding Preferred Stock have
received their liquidation preferences in full.
The holders of Common Stock have no preemptive, subscription, conversion or
redemption rights, and are not subject to further calls or assessments of the
Company. There are no sinking fund provisions applicable to the Common Stock.
Holders of Common Stock are entitled to one vote per share for the election
of directors and on all other matters submitted to a vote of stockholders.
Holders of Common Stock have no right to cumulate their votes in the election
of directors.
Stockholder Rights Plan
Each share of Common Stock includes an associated preferred share purchase
right (the "Right") under the Company's Rights Agreement (the "Rights
Agreement") between the Company and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent. Until the Rights become exercisable, the Rights will be
attached to all certificates representing outstanding shares of Common Stock
and will be transferred with and only with these certificates. The Rights
become exercisable under certain circumstances specified in the Rights
Agreement, including the event any person or group becomes the beneficial owner
of 15% or more of the shares of Common Stock (an "Acquiring Person"), except in
certain exceptions. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred Stock at a
price of $60 per one one-thousandth of a share, subject to adjustment in
certain circumstances. Upon the occurrence of certain events specified in the
Rights Agreement, each holder of a Right (other than an Acquiring Person) will
have the right, upon exercise of the Right, to receive that number of shares of
Common Stock (or, in certain circumstances, other securities of the Company)
having a value of two times the exercise price of the Right. In the event that,
at any time following the first date of the public announcement that a person
or group becomes an Acquiring Person,
(a) the Corporation is acquired in a merger or other business
combination in which the holders of all the Common Stock immediately prior
to the transaction are not the holders of all of the surviving
corporation's voting power, or
(b) more than 50% of the Company's assets or earning power is sold or
transferred,
then each holder of a Right (other than an Acquiring Person) will have the
right, upon exercise of the Right, to receive common shares of the acquiring
company having a value equal to two times the exercise price of the Right. The
Rights are redeemable in whole, but not in part, by action of the Board of
Directors of the Company at a price of $.01 per Right prior to the earlier to
occur of a person becoming an Acquiring Person or the expiration of the Rights.
The Rights expire on April 5, 2009. The Rights are designed to protect the
interests of the Company and its stockholders against coercive takeover
tactics.
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Certain Other Possible Anti-takeover Provisions
The Company's Restated Certificate of Incorporation (the "Company's
Charter") and Delaware law contain certain provisions that might be
characterized as anti-takeover provisions. These provisions may make it more
difficult to acquire control of the Company or remove management of the
Company.
Classified Board of Directors; Removal of Directors by Stockholders; Advance
Notice Provisions for Stockholder Nominations.
The Company's Charter provides for the Board of Directors to be divided into
three classes of directors serving staggered three-year terms, with the number
of directors in each class to be as nearly equal as possible. As a result, only
one-third of the Company's directors are elected each year. Any director of the
Company may be removed from office, but only for cause and only by the
affirmative vote of a majority of the then outstanding shares of stock entitled
to vote on the matter. Any stockholder wishing to submit a nomination to the
Board of Directors must follow certain advance notice procedures outlined in
the Company's Charter.
No Stockholder Action by Written Consent.
The Company's Charter also provides that stockholder action may be taken
only at an annual or special meeting of stockholders, and may not be taken by
written consent of the stockholders.
Issuance of Preferred Stock.
The Company's Charter authorizes a class of undesignated Preferred Stock
consisting of 5,000,000 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 rights, preferences, privileges and
restrictions applicable to each series of Preferred Stock. The purpose of
authorizing the Board of Directors to determine such rights, preferences,
privileges and restrictions is to eliminate delays associated with a
stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
power of the holders of Common Stock and, under certain circumstances, make it
more difficult for a third party to gain control of the Company.
"Fair Price Provisions."
The Company's Charter also contains certain "fair price provisions" designed
to provide safeguards for stockholders when an "interested stockholder"
(defined as a stockholder owning 10% or more of the Company's voting stock)
attempts to effect a "business combination" with the Company. The term
"business combination" includes:
.any merger or consolidation of the Company involving the interested
stockholder,
.certain dispositions of our assets,
.any issuance of the Company's securities meeting certain threshold
amounts, to the interested stockholder,
.adoption of any plan of liquidation or dissolution of the Company proposed
by the interested stockholder, and
.any reclassification of the Company's securities having the effect of
increasing the proportionate share of ownership of the interested
stockholder.
In general, a business combination between the Company and the interested
stockholder must be approved by the affirmative vote of two-thirds of the
outstanding voting stock, excluding voting stock owned by such interested
stockholder, unless the transaction is approved by a majority of the members of
the Board of Directors who are not affiliated with the interested stockholder
or certain minimum price and form of consideration requirements are satisfied.
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Delaware Business Combination Statute.
The Company is incorporated under the laws of the State of Delaware.
Section 203 of the Delaware General Corporation Law prevents an "interested
stockholder" (defined as a stockholder owning 15% or more of a corporation's
voting stock) from engaging in a business combination with the corporation for
a period of three years from the date the stockholder became an interested
stockholder unless:
.the corporation's board of directors had earlier approved either the
business combination or the transaction by which the stockholder became
an interested stockholder, or
.upon attaining that status, the interested stockholder had acquired at
least 85% of the corporation's voting stock (not counting shares owned by
persons who are directors and also officers), or
.the business combination is later approved by the board of directors and
authorized by a vote of two-thirds of the stockholders (not including the
shares held by the interested stockholder).
Since the Company has not amended its Charter or Restated By-laws to exclude
the application of Section 203, its provisions apply to the Company.
Accordingly, Section 203 may inhibit an interested stockholder's ability to
acquire additional shares of Common Stock or otherwise engage in a business
combination with the Company.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
DESCRIPTION OF PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The following description of the terms of the Preferred
Securities summarizes certain general terms and provisions of the Preferred
Securities to which a Prospectus Supplement may relate. The Declaration will
be qualified under the Trust Indenture Act. The Chase Manhattan Bank or such
other trustee as may be named in a Prospectus Supplement (the "Property
Trustee") will act as indenture trustee for the Preferred Securities for
purposes of compliance with the provisions of the Trust Indenture Act. A copy
of the form of Declaration has been filed as an exhibit to the Registration
Statement. The terms of the Preferred Securities will include those stated in
the Declaration and those made part of the Declaration by the Trust Indenture
Act. The following summary of the Preferred Securities is qualified in its
entirety by reference to the Declaration and the Trust Indenture Act.
Capitalized terms used in the following summary but not defined have the
meanings specified in the Declaration.
General
The Preferred Securities represent undivided beneficial ownership interests
in the assets of the Trust and entitle the holders thereof to a preference in
certain circumstances with respect to distributions and amounts payable on
redemption or liquidation over the Common Securities of the Trust, as well as
such other preferred, deferred or other special rights or such restrictions as
shall be set forth in the Declaration or made part of the Declaration by the
Trust Indenture Act. Reference is made to the Prospectus Supplement relating
to the Preferred Securities for the specific terms, including:
(a) the specific designation of such Preferred Securities;
(b) the number of Preferred Securities issued by the Trust;
(c) the annual distribution rate (or method of calculation of such rate)
for the Preferred Securities, the date or dates upon which such
distributions shall be payable and the record date or dates for the payment
of such distributions;
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(d) whether distributions on the Preferred Securities shall be
cumulative, and, in the case of Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on the Preferred Securities shall be
cumulative;
(e) the amount or amounts which shall be paid out of the assets of the
Trust to the holders of the Preferred Securities upon voluntary or
involuntary liquidation, dissolution, winding-up or termination of the
Trust;
(f) the obligation or right, if any, of the Trust to purchase or redeem
the Preferred Securities and the price or prices at which, the period or
periods within which and the terms and conditions upon which the Preferred
Securities shall or may be purchased or redeemed, in whole or in part,
pursuant to such obligation or right;
(g) the voting rights, if any, of the Preferred Securities in addition
to those required by law, including the number of votes per Preferred
Security and any requirement for the approval by the holders of Preferred
Securities as a condition to specified actions or amendments to the
Declaration;
(h) the terms and conditions upon which the Preferred Securities may be
convertible into or exchanged for Common Stock, Preferred Stock, Debt
Securities, Junior Subordinated Debt Securities, or indebtedness or other
securities of any kind of the Company; and
(i) any other relevant rights, preferences, privileges, limitations or
restrictions of the Preferred Securities consistent with the Declaration or
with applicable law.
All Preferred Securities offered by this Prospectus will be guaranteed by
the Company as and to the extent set forth below under "Description of
Guarantee."
In connection with the issuance of the Preferred Securities, the Trust will
issue one series of Common Securities. The Declaration authorizes the Regular
Trustees to issue on behalf of the Trust one series of Common Securities having
such terms including distributions, redemption, voting, liquidation rights or
such restrictions as will be set forth in the Declaration. The terms of the
Common Securities issued by the Trust will be substantially identical to the
terms of the Preferred Securities and the Common Securities will rank pari
passu and payments will be made on the Common Securities on a pro rata basis
with the Preferred Securities except that, if an Event of Default under the
Declaration occurs and is continuing, the rights of the holders of such Common
Securities to payment in respect of distributions and payments upon
liquidation, redemption and maturity will be subordinated to the rights of the
holders of the Preferred Securities. Except in certain limited circumstances,
the Common Securities will also carry the right to vote and to appoint, remove
or replace any of the Trustees of the Trust. All of the Common Securities will
be directly or indirectly owned by the Company.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debt Securities, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities primarily
because
(i) the aggregate principal amount of Junior Subordinated Debt
Securities held as trust assets will be equal to the sum of the aggregate
stated liquidation amount of the Preferred Securities; and
(ii) the interest rate and interest and other payment dates on the
Junior Subordinated Debt Securities will match the distribution rate and
distribution and other payment dates for the Preferred Securities.
Events of Default and Remedies
An Event of Default under the Junior Subordinated Indenture (as defined
under "Description of Junior Subordinated Debt Securities--Events of Default;
Waiver and Notice of Events of Default") constitutes an "Event of Default"
under the Declaration.
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If an Event of Default with respect to the Declaration occurs and is
continuing, then the holders of the Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the Junior
Subordinated Debt Securities deposited in the Trust against the Company. In
addition, the holders of a majority in liquidation amount of the Preferred
Securities will have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Property Trustee or
to direct the exercise of any trust or power conferred upon the Property
Trustee under the Declaration, including the right to direct the Property
Trustee to exercise the remedies available to it as a holder of the Junior
Subordinated Debt Securities. If the Property Trustee fails to enforce its
rights under the Junior Subordinated Debt Securities deposited in the Trust,
any holder of the Preferred Securities may, to the extent permitted by
applicable law, after a period of 30 days has elapsed from the holder's written
request, institute a legal proceeding against the Company to enforce the
Property Trustee's rights under such Junior Subordinated Debt Securities
without first instituting any legal proceeding against the Property Trustee or
any other person or entity. Notwithstanding the foregoing, if an Event of
Default with respect to the Declaration occurs and is continuing and the event
is attributable to the failure of the Company to pay interest or principal on
the Junior Subordinated Debt Securities on the date the interest or principal
is otherwise payable (or in the case of redemption, on the redemption date),
then a holder of the Preferred Securities may also directly institute a
proceeding against the Company for enforcement of payment to such holder of the
principal of or interest on the Junior Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of such Preferred
Securities held by such holder on or after the respective due date specified in
the Junior Subordinated Debt Securities.
Miscellaneous
The Regular Trustees are authorized to take all action with respect to the
Trust, not inconsistent with applicable law or the Declaration, in order that
the Trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act of 1940 or characterized as other
than a grantor trust for federal income tax purposes so that the Junior
Subordinated Debt Securities will be treated as indebtedness of the Company for
federal income tax purposes.
Certain federal income tax considerations applicable to an investment in
Preferred Securities will be described in the applicable Prospectus Supplement.
Concerning the Property Trustee
Unless otherwise specified in the applicable Prospectus Supplement, The
Chase Manhattan Bank will be the Property Trustee with respect to the Preferred
Securities. The Property Trustee maintains normal banking relationships with
the Company and its subsidiaries and may perform certain services for and
transact other business with the Company and its subsidiaries from time to time
in the ordinary course of business. The Prospectus Supplement relating to the
Preferred Securities will provide additional information with respect to any
relationship the Company may have with the Property Trustee.
DESCRIPTION OF GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders
from time to time of Preferred Securities of the Trust. The Guarantee will be
separately qualified under the Trust Indenture Act and will be held by The
Chase Manhattan Bank or such other trustee as may be named in a Prospectus
Supplement, acting in its capacity as indenture trustee with respect to the
Guarantee (the "Guarantee Trustee"), for the benefit of holders of the
Preferred Securities of the Trust. A copy of the form of Guarantee has been
filed as an exhibit to the Registration Statement. The terms of the Guarantee
will be those set forth in such Guarantee and those made part of such Guarantee
by the Trust Indenture Act. This description summarizes the material terms of
the Guarantee and is qualified in its entirety by reference to the form of
Guarantee and the Trust Indenture Act.
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General
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth in the Guarantee, to pay in full, to the holders
of the Preferred Securities issued by the Trust, the Guarantee Payments (as
defined below), to the extent not paid by the Trust, regardless of any defense,
right of set-off or counterclaim that the Trust may have or assert. The
following distributions and other payments with respect to Preferred Securities
issued by the Trust to the extent not made or paid by the Trust (the "Guarantee
Payments"), will be subject to the Guarantee (without duplication):
(i) any accrued and unpaid distributions on such Preferred Securities,
but only if and to the extent that in each case the Company has made a
payment to the Property Trustee of interest on the Junior Subordinated Debt
Securities,
(ii) the redemption price, including all accrued and unpaid
distributions to the date of redemption, with respect to any Preferred
Securities called for redemption by the Trust, but only if and to the
extent that in each case the Company has made a payment to the Property
Trustee of interest or principal on the Junior Subordinated Debt Securities
deposited in the Trust as trust assets, and
(iii) upon a voluntary or involuntary liquidation, dissolution, winding-
up or termination of the Trust (other than in connection with the
distribution of such Junior Subordinated Debt Securities to the holders of
such Preferred Securities or the redemption of all such Preferred
Securities upon the maturity or redemption of such Junior Subordinated Debt
Securities) the lesser of
(a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on such Preferred Securities to the date of
payment, to the extent the Trust has funds available therefor, and
(b) the amount of assets of the Trust remaining available for
distribution to holders of such Preferred Securities upon liquidation
of the Trust.
The Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of the applicable
Preferred Securities or by causing the Trust to pay such amounts to such
holders. The Company will be subrogated to all rights of the holders of the
Preferred Securities against the Trust in respect of any Guarantee Payments
unless, at the time of such payment, any amounts are due and unpaid under the
Guarantee.
The Guarantee is a full and unconditional guarantee from the time of
issuance of the Preferred Securities, but the Guarantee covers distributions
and other payments on the Preferred Securities only if and to the extent that
the Company has made a payment to the Property Trustee of interest or principal
on the Junior Subordinated Debt Securities deposited in the Trust as trust
assets. If the Company does not make interest or principal payments on the
Junior Subordinated Debt Securities deposited in the Trust as trust assets, the
Property Trustee will not make distributions on the Preferred Securities of the
Trust and the Trust will not have funds available for such distributions.
The Company's obligations under the Declaration, the Guarantee, the Junior
Subordinated Debt Securities purchased by the Trust and the Junior Subordinated
Indenture in the aggregate will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Preferred Securities
issued by the Trust.
Certain Covenants of the Company
In the Guarantee, the Company will covenant that, so long as any Preferred
Securities issued by the Trust remain outstanding, the Company will not declare
or pay any dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any Common Stock or Preferred Stock or
make any guarantee payment with respect thereto, if at such time:
(a) the Company shall be in default with respect to its Guarantee
Payments or other payment obligations under the Guarantee;
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(b) there shall have occurred any Event of Default under the
Declaration; or
(c) in the event that Junior Subordinated Debt Securities are issued to
the Trust in connection with the issuance of Preferred Securities by the
Trust, the Company shall have given notice of its election to defer
payments of interest on such Junior Subordinated Debt Securities by
extending the interest payment period as provided in the terms of the
Junior Subordinated Debt Securities and such period, or any extension of
such period, is continuing.
The foregoing restrictions shall not apply to:
(a) dividends, redemptions, purchases, acquisitions, distributions or
payments made by the Company by way of issuance of shares of its capital
stock;
(b) any declaration of a dividend under a stockholder rights plan or in
connection with the implementation of a stockholder rights plan, the
issuance of capital stock of the Company under a stockholder rights plan or
the redemption, repurchase or exchange of any such right distributed
pursuant to a stockholder rights plan;
(c) payments of accrued dividends by the Company upon the redemption,
exchange or conversion of any Preferred Stock as may be outstanding from
time to time in accordance with the terms of such Preferred Stock;
(d) cash payments made by the Company in lieu of delivering fractional
shares upon the redemption, exchange or conversion of any Preferred Stock
as may be outstanding from time to time in accordance with the terms of
such Preferred Stock;
(e) payments under the Guarantee; or
(f) purchases of Common Stock related to the issuance of Common Stock or
rights under any of the Company's benefit plans for its directors, officers
or employees, or related to the issuance of Common Stock or rights under a
dividend reinvestment and stock purchase plan.
In addition, so long as any Preferred Securities of the Trust remain
outstanding, the Company has agreed to
(1) remain the sole direct or indirect owner of all the outstanding
Common Securities issued by the Trust and not to cause or permit such
Common Securities to be transferred except to the extent permitted by the
Declaration, provided that any permitted successor of the Company under the
Junior Subordinated Indenture may succeed to the Company's ownership of
such Common Securities, and
(2) use reasonable efforts to cause the Trust to continue to be treated
as a grantor trust for federal income tax purposes, except in connection
with a distribution of Junior Subordinated Debt Securities.
Amendments and Assignment
Except with respect to any changes that do not adversely affect the rights
of holders of the applicable Preferred Securities (in which case no consent
will be required), the Guarantee may be amended only with the prior approval of
the holders of not less than 66 2/3% in liquidation amount of the outstanding
Preferred Securities issued by the Trust. The manner of obtaining any such
approval of holders of the Preferred Securities will be set forth in an
accompanying Prospectus Supplement. All guarantees and agreements contained in
the Guarantee shall bind the successors, assignees, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities of the Trust then outstanding. Except in connection
with a consolidation, merger, conveyance, or transfer of assets involving the
Company that is permitted under the Junior Subordinated Indenture, the Company
may not assign its obligations under the Guarantee.
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Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect as to the
Preferred Securities issued by the Trust
(a) upon full payment of the redemption price of all Preferred
Securities of the Trust, or
(b) upon distribution of the Junior Subordinated Debt Securities to the
holders of the Preferred Securities of the Trust in exchange for all the
Preferred Securities, or
(c) upon full payment of the amounts payable upon liquidation of the
Trust.
Notwithstanding the foregoing, the Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities issued by the Trust must restore payment of any sums paid under such
Preferred Securities or such Guarantee.
Status of the Guarantee
The Company's obligations under the Guarantee to make the Guarantee Payments
will constitute an unsecured obligation of the Company and will rank
(i) subordinate and junior in right of payment to all other
indebtedness, liabilities and obligations of the Company and any
guarantees, endorsements or other contingent obligations of the Company in
respect of such indebtedness, liabilities or obligations, including the
Junior Subordinated Debt Securities, except those made pari passu or
subordinate by their terms, and
(ii) senior to all capital stock now or hereafter issued by the Company
and to any guarantee now or hereafter entered into by the Company in
respect of any of its capital stock.
The Company's obligations under the Guarantee will rank pari passu with any
guaranty now or hereafter entered into by the Company in respect of any
preferred securities of any business trust of which the Company holds the
common securities. Because of the Company's holding company structure, the
Company's obligations under the Guarantee are also effectively subordinated to
all existing and future liabilities, including trade payables, of the Company's
subsidiaries, except to the extent that the Company is a creditor of the
subsidiaries and is recognized as such. The Declaration provides that each
holder of Preferred Securities issued by the Trust, by acceptance thereof,
agrees to the subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be deposited with the Guarantee Trustee, to be held for the
benefit of the holders of the Preferred Securities issued by the Trust. The
Guarantee Trustee shall enforce the Guarantee on behalf of the holders of the
Preferred Securities. The holders of not less than a majority in aggregate
liquidation amount of the Preferred Securities issued by the Trust have the
right to direct the time, method and place of conducting any proceeding for any
remedy available in respect of the Guarantee, including the giving of
directions to the Guarantee Trustee. If the Guarantee Trustee fails to enforce
the Guarantee as above provided, any holder of Preferred Securities issued by
the Trust may institute a legal proceeding directly against the Company to
enforce its rights under the Guarantee, without first instituting a legal
proceeding against the Trust, or any other person or entity. Notwithstanding
the foregoing, if the Company has failed to make a Guarantee Payment, a holder
of Preferred Securities may directly institute a proceeding against the Company
for enforcement of such holder's right to receive payment under the Guarantee.
The Company waives any right or remedy to require that any action be brought
first against the Trust or any other person or entity before proceeding
directly against the Company.
Miscellaneous
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Guarantee and as to any default in such
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performance. The Company is required to file annually with the Guarantee
Trustee an officer's certificate as to the Company's compliance with all
conditions to be complied with by it under the Guarantee.
The Guarantee Trustee, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to a Guarantee, shall exercise the same degree of
care as a prudent individual would exercise under the circumstances in the
conduct of his or her own affairs. Subject to such provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by
the Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable security and indemnity against the costs, expenses and
liabilities that might be incurred.
Concerning the Guarantee Trustee
Unless otherwise specified in the applicable Prospectus Supplement, The
Chase Manhattan Bank will be the Guarantee Trustee with respect to the
Guarantee. The Guarantee Trustee maintains normal banking relationships with
the Company and its subsidiaries and may perform certain services for and
transact other business with the Company and its subsidiaries from time to time
in the ordinary course of business. The Prospectus Supplement relating to the
Guarantee will provide additional information with respect to any relationship
the Company may have with the Guarantee Trustee.
PLAN OF DISTRIBUTION
The Company or the Trust may sell the securities offered by this Prospectus
(the "Securities"):
.through underwriters or dealers;
.through agents;
.directly to purchasers; or
.through a combination of any such methods of sale.
Any such underwriter, dealer or agent may be deemed to be an underwriter within
the meaning of the Securities Act of 1933. The Prospectus Supplement relating
to the Securities will set forth:
.their offering terms, including the name or names of any underwriters,
dealers or agents,
.the purchase price of the Securities and the proceeds to the Company or
the Trust from such sale,
.any underwriting discounts, commissions and other items constituting
compensation to underwriters, dealers or agents,
.any initial public offering price,
.any discounts or concessions allowed or reallowed or paid by underwriters
or dealers to other dealers, and
.any securities exchanges on which the Securities may be listed.
If underwriters or dealers are used in the sale, the Securities will be
acquired by the underwriters or dealers for their own account and may be resold
from time to time in one or more transactions,
.at a fixed price or prices which may be changed, or
.at market prices prevailing at the time of sale, or
.at prices related to such prevailing market prices, or
.at negotiated prices.
The Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more of such firms. Unless otherwise set forth in the Prospectus
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Supplement, the obligations of underwriters or dealers to purchase the
Securities will be subject to certain conditions precedent and the underwriters
or dealers will be obligated to purchase all the Securities if any are
purchased. Any public offering price and any discounts or concessions allowed
or reallowed or paid by underwriters or dealers to other dealers may be changed
from time to time.
Securities may be sold directly by the Company or the Trust or through
agents designated by the Company or the Trust from time to time. Any agent
involved in the offer or sale of the Securities in respect of which this
Prospectus is delivered will be named, and any commissions payable by the
Company or the Trust to such agent will be set forth, in the Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company or the Trust will
authorize underwriters, dealers or agents to solicit offers from certain
specified institutions to purchase Securities from the Company or the Trust at
the public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject to any conditions set forth
in the Prospectus Supplement and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts. The underwriters and
other persons soliciting such contracts will have no responsibility for the
validity or performance of any such contracts.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company or the Trust to indemnification by the Company or the
Trust against certain civil liabilities, including liabilities under the
Securities Act of 1933, or to contribution by the Company or the Trust to
payments which they may be required to make. The terms and conditions of such
indemnification will be described in an applicable Prospectus Supplement.
Underwriters, dealers and agents may be customers of, engage in transactions
with, or perform services for, the Company or the Trust in the ordinary course
of business.
Each class or series of Securities will be a new issue of securities with no
established trading market, other than the Common Stock, which is listed on the
New York Stock Exchange. The Company may elect to list any other class or
series of Securities on any exchange, but it is not obligated to do so. Any
underwriters to whom Securities are sold by the Company or the Trust for public
offering and sale may make a market in such Securities, but such underwriters
will not be obligated to do so and may discontinue any market making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for any Securities.
Certain persons participating in any offering of Securities may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Securities offered. In connection with any such offering, the underwriters or
agents, as the case may be, may purchase and sell Securities in the open
market. These transactions may include overallotment and stabilizing
transactions and purchases to cover syndicate short positions created in
connection with the offering. Stabilizing transactions consist of certain bids
or purchases for the purpose of preventing or retarding a decline in the market
price of the Securities; and syndicate short positions involve the sale by the
underwriters or agents, as the case may be, of a greater number of Securities
than they are required to purchase from the Company or the Trust, as the case
may be, in the offering. The underwriters may also impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-
dealers for the Securities sold for their account may be reclaimed by the
syndicate if such Securities are repurchased by the syndicate in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Securities, which may be higher than the price
that might otherwise prevail in the open market, and if commenced, may be
discontinued at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise. For a description
of these activities, see "Plan of Distribution" or "Underwriting" in the
applicable Prospectus Supplement.
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LEGAL OPINIONS
Conner & Winters, A Professional Corporation, Tulsa, Oklahoma, as the
Company's counsel, will issue an opinion for the Company regarding the validity
of the Debt Securities, the Junior Subordinated Debt Securities, the shares of
Preferred Stock, the Depositary Shares, and the shares of Common Stock offered
by this Prospectus. Richards, Layton & Finger, P.A., Wilmington, Delaware, as
special Delaware counsel for the Company and the Trust, will issue an opinion
regarding the validity of the Preferred Securities offered by this Prospectus.
Certain legal matters concerning the Securities will be passed upon for the
underwriters, dealers, or agents, if any, by Cravath, Swaine & Moore, New York,
New York.
EXPERTS
The audited financial statements of the Company incorporated by reference in
this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect to such audited
financial statements, and are incorporated by reference in reliance upon the
authority of such firm as experts in giving such report.
The estimated reserve evaluations and related calculations of Netherland,
Sewell & Associates, Inc. for the United States, Argentina and Ecuador
incorporated by reference in this Prospectus have been incorporated by
reference in reliance upon the authority of such firm as experts in petroleum
engineering.
The estimated reserve evaluations and related calculations of DeGolyer and
MacNaughton for Bolivia incorporated by reference in this Prospectus have been
incorporated by reference in reliance upon the authority of such firm as
experts in petroleum engineering.
Any future audited financial statements and the reports with respect to such
audited financial statements of the Company's independent public accountants
also will be incorporated by reference in this Prospectus in reliance upon the
authority of that firm as experts in giving those reports to the extent such
firm has audited those financial statements and consented to the use of their
reports with respect to such audited financial statements.
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9,000,000 SHARES
VINTAGE PETROLEUM, INC.
COMMON STOCK
[LOGO OF VINTAGE PETROLEUM APPEARS HERE]
--------
PROSPECTUS SUPPLEMENT
JUNE 4, 1999
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SALOMON SMITH BARNEY
WARBURG DILLON READ LLC
MORGAN STANLEY DEAN WITTER
BANC OF AMERICA SECURITIES LLC
JEFFERIES & COMPANY, INC.
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