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As filed with the Securities and Exchange Commission on July 10, 1995
Registration No. 33-79494
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 3
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BENTON OIL AND GAS COMPANY
(Exact name of Registrant as specified in its charter)
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Delaware 1311 77-0196707
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code) Identification No.)
incorporation or
organization)
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1145 Eugenia Place
Suite 200
Carpinteria, California 93013
(805) 566-5600
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
A. E. Benton, President
1145 Eugenia Place
Suite 200
Carpinteria, California 93013
(805) 566-5600
(Address, including zip code, and telephone number, including area code,
of agent for service)
with copies to:
Jack A. Bjerke
Emens, Kegler, Brown
Hill & Ritter Co., L.P.A.
65 East State Street, Suite 1800
Columbus, Ohio 43215
------------------------
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement, as
determined by the Registrant.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. /X/
------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the Registration Statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
PROSPECTUS
SUBJECT TO COMPLETION
JULY 10, 1995
[BENTON OIL LOGO HERE]
BENTON OIL AND GAS COMPANY
DEBT SECURITIES
Benton Oil and Gas Company (the "Company") may offer, from time to time, Debt
Securities ("Debt Securities"), which may be either senior debt securities
("Senior Securities") or subordinated debt securities ("Subordinated
Securities"), consisting of debentures, notes or other unsecured evidences of
indebtedness in one or more series at an aggregate initial offering price not to
exceed $50,000,000 at prices and on terms to be determined at the time of sale.
All specified terms of the offering and sale of Debt Securities will be set
forth in one or more supplements to this Prospectus ("Prospectus Supplement"),
including the title, aggregate principal amount, whether such Debt Securities
are senior or subordinate, denominations, maturity, rate, if any, of interest
(which may be fixed or variable) or method of calculation thereof, and time of
payment of any interest, any terms for redemption at the option of the Company
or the holder, any terms for sinking fund payments, any conversion or exchange
rights, any listing on a securities exchange and the initial public offering
price and any other terms in connection with the offering and sale of such Debt
Securities. The Senior Securities will rank equally with all other unsecured
Senior Indebtedness (as defined) of the Company. The Subordinated Securities
will be subordinated to all existing and future Senior Indebtedness (as defined)
of the Company. The Debt Securities will be effectively subordinated to all
liabilities of the Company's subsidiaries, including trade payables. As of March
31, 1995, the aggregate amount of outstanding obligations of the Company's
subsidiaries that would have ranked senior to the Debt Securities was
approximately $33.9 million. As of March 31, 1995, the principal amount of
indebtedness of the Company that would have ranked pari passu with the Debt
Securities was approximately $15.0 million; and the principal amount of the
Company's secured indebtedness that would have effectively ranked senior to the
Debt Securities was $5.0 million. On June 30, 1995, the Company issued $20
million of senior unsecured notes due 2007 which would rank pari passu with the
Debt Securities.
The Company may sell Debt Securities to or through underwriters, and also may
sell Debt Securities directly to other purchasers or through agents. The
Prospectus Supplement will set forth the names of any underwriters or agents
involved in the sale of the Debt Securities in respect of which this Prospectus
is being delivered, the amounts, if any, to be purchased by underwriters and the
compensation, if any, of such underwriters or agents. See "Plan of
Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1995
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No person has been authorized to give any information or make any representation
other than those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or by any underwriter, agent or dealer. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Debt
Securities in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof.
Table of Contents
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Page
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Page
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Incorporation of Certain Information by
Reference................................. 2
Prospectus Summary.......................... 3
Risk Factors................................ 11
The Company................................. 16
Use of Proceeds............................. 16
Description of Outstanding Indebtedness..... 17
Description of Debt Securities.............. 18
Plan of Distribution........................ 36
Legal Matters............................... 36
Experts..................................... 36
Available Information....................... 37
Glossary.................................... 38
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Incorporation of Certain Information by Reference
The following documents, heretofore filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), are hereby incorporated by reference,
except as superseded or modified herein (i) the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, as amended by Forms 10-K/A;
(ii) the Company's quarterly report on Form 10-Q for the quarter ended March 31,
1995; (iii) the Company's Current Report on Form 8-K filed April 17, 1995; (iv)
the Company's Current Report on Form 8-K filed May 31, 1995; and (v) the
Company's Registration Statement on Form 8-A filed on May 19, 1995.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering shall be deemed to be incorporated by reference in
this Prospectus and shall be part hereof from the date of filing of such
document. Any statement contained in the documents incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Prospectus.
The Company undertakes to provide, without charge, to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon written
or oral request of such person, a copy of any and all of the documents or
information referred to above that has been or may be incorporated by reference
in this Prospectus (excluding exhibits to such documents unless such exhibits
are specifically incorporated by reference). Requests should be directed to
Benton Oil and Gas Company, 1145 Eugenia Place, Suite 200, Carpinteria,
California 93013 (the principal executive offices of the Company), telephone
(805) 566-5600, Attn: Corporate Secretary.
2
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Prospectus Summary
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and Consolidated Financial
Statements and related notes thereto appearing elsewhere in this Prospectus or
incorporated herein by reference. See the Glossary included elsewhere in this
Prospectus for definitions of certain oil and gas terms. Unless the context
otherwise requires or as otherwise specified herein, all references to the
"Company" refer to Benton Oil and Gas Company and its subsidiaries.
The Company
Benton Oil and Gas Company is primarily engaged in the development and
production of oil and gas properties. The Company's operations are focused in
the eastern region of Venezuela, the Gulf Coast region of Louisiana and the West
Siberia region of Russia. At December 31, 1994, the Company's proved reserves of
81.2 MMBOE consisted of 78.5 MMBbl of oil and 16.1 Bcf of natural gas. The
Company's proved reserves, net of production, have increased from 14.8 MMBOE at
December 31, 1990 to 81.2 MMBOE through purchases of reserves-in-place, awards
of development contracts, the acquisition of an additional equity interest in
the Company's Venezuelan subsidiaries, discoveries of oil and natural gas
reserves, extensions of existing producing fields and revisions of previously
estimated reserves. The standardized measure of discounted future net cash
flows, before provision for income taxes, relating to the Company's proved
reserves at December 31, 1994 was approximately $336.3 million. See "Business
- -- Reserves."
Business Strategy
The Company's business strategy is to operate in niche markets where it can
further develop existing oil and gas fields and seek new reserves in areas of
low geologic risk. The Company implements this strategy through the in-house
design and interpretation of 3-D seismic surveys, combined with well
recompletions and exploration and development drilling. The Company believes
that because of its concentration on 3-D seismic technology and the training and
qualifications of its management and technical team, the Company has gained
access to projects it otherwise would not have enjoyed and has a competitive
advantage in finding and developing reserves on an economic basis. The Company's
finding costs for its Proved Reserves from inception to December 31, 1994 were
$1.35 per BOE. The Company's estimate of future development costs for its
non-producing Proved Reserves at December 31, 1994 was $1.23 per BOE, which the
Company believes continues to give it a competitive advantage in finding and
developing reserves.
In the U.S., the Company integrates 3-D seismic technology with subsurface
geologic data from previously drilled wells. This geophysical evaluation enables
the Company to identify previously undetected reserves in existing fields.
Internationally, the Company seeks participation in projects with significant
reserve potential in areas with low geologic risk and known proved reserves
where, in certain situations, the Company can add value by employing modern
exploration, drilling, completion and production techniques. The Company has
formed ventures with local foreign partners in an effort to reduce risk, control
costs, and facilitate local transactions. The Company continues to evaluate
joint venture opportunities with domestic and foreign partners to implement its
business strategy.
Venezuelan Operations
Approximately 75% of the Company's Proved Reserves are located in eastern
Venezuela in the Uracoa, Bombal and Tucupita Fields in the South Monagas Unit.
The Company, together with a Venezuelan construction and engineering company,
Venezolana de Inversiones y Construcciones Clerico, C.A. ("Vinccler"), entered
into an operating service agreement with Lagoven, S.A. ("Lagoven"), an affiliate
of the national oil company, Petroleos de Venezuela, S.A. ("PDVSA") to
reactivate and further develop the three Venezuelan oil fields. The Company was
the first U.S. company to be awarded an oil field development and production
contract in Venezuela since that country's oil field reactivation program was
announced in 1991. Under the terms of the contract, Benton-Vinccler, C.A., the
Company's 80% owned subsidiary ("Benton-Vinccler"), is a contractor for Lagoven.
Benton-Vinccler receives an operating fee in U.S. dollars for each Bbl of crude
oil produced (subject to periodic adjustments to reflect changes in the special
energy index of the U.S. Consumer Price Index) and will be reimbursed in U.S.
dollars for its capital expenditures, provided such operating fee and capital
recovery fee cannot exceed the maximum dollar amount per Bbl set forth in the
agreement (which amount will be periodically adjusted to reflect changes in the
average of certain world crude oil prices). For the year ended December 31,
1994, the average operating fee received by Benton-Vinccler pursuant to the
operating services agreement was $8.52 per Bbl. The Venezuelan government
maintains full ownership of all hydrocarbons in the Fields. Production levels
have steadily increased during 1994, due largely to the use of modern drilling,
completion and production techniques, from an average
3
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daily production of 3,400 Bbl of oil during the first quarter of 1994 to 6,700
Bbl of oil during the second quarter of 1994 to 7,200 Bbl of oil during the
third quarter of 1994 to 10,200 Bbl of oil during the fourth quarter of 1994.
Currently, 33 wells in the Field are producing an aggregate of approximately
12,500 Bbl of oil per day. Benton-Vinccler intends to completely develop the
Uracoa Field by drilling approximately 90 wells and intends to subsequently
reactivate the Bombal Field.
United States Operations
Approximately 4% of the Company's Proved Reserves are located in the United
States. Substantially all of the Company's domestic activities are located in
the Louisiana Gulf Coast at the West Cote Blanche Bay, Rabbit Island and Belle
Isle Fields. The Company has successfully pursued acquisition and joint venture
opportunities in the United States, which have become more readily available as
major oil and gas companies continue to consolidate operations and focus
exploration and development activities outside the United States. The Company
has formed joint ventures with Texaco, Inc. ("Texaco") and Oryx Energy Company
("Oryx") in the Gulf Coast, in which the Company conducts a 3-D seismic survey
and/or development program in exchange for an interest in a field or project
area or the right to drill future wells as a working interest partner.
The Company, Texaco and Oryx are currently producing from and further developing
the fields by using 3-D seismic technology integrated with subsurface geologic
data from previously drilled wells. The Company has identified multiple pay
zones, including lower risk shallow and medium depth prospects and selected
higher risk exploratory prospects, in all three fields. In addition, the Company
entered into certain agreements with Tenneco Ventures Corporation ("Tenneco")
relating to certain present and future exploration and development activities in
the Gulf Coast. This relationship will facilitate increased flexibility and
diversification in the Company's operations in the region.
Russian Operations
Approximately 22% of the Company's Proved Reserves are located in the North
Gubkinskoye Field in the West Siberia region of Russia. The Company's Russian
operations are conducted through GEOILBENT, Ltd. ("GEOILBENT"), a joint venture
comprised of the Company (34%), Purneftegas (33%), and Purneftegasgeologia
(33%). The Company's partners are the Russian state agencies which control
exploration, delineation, and development of oil and gas fields in this part of
the Western Siberian Basin. The joint venture, which has been registered with
the Ministry of Finance of the Russian Republic, develops, produces and markets
oil and condensate from the North Gubkinskoye Field. This Field, which has been
delineated and tested, is surrounded by other large proven fields, a number of
which are now being developed by major international oil and gas companies. In
1993, GEOILBENT completed the construction of a 37 mile crude oil pipeline from
the North Gubkinskoye Field to the Russian oil pipeline network and commenced a
multi-well drilling program in the Field. The ultimate development of the Field
is expected to involve several phases and the drilling of more than 350 wells.
Production from the Field commenced during the third quarter of 1993 and the
Field is currently producing approximately 4,500 Bbl of oil per day. GEOILBENT
commenced exporting oil during the fourth quarter of 1993 and its production is
being sold for U.S. dollars.
Recent Events
In March 1995, the Company and its affiliates and Tenneco sold to WRT Energy
Corporation a 43.75% working interest in the shallower depths (above
approximately 10,575 feet) in the West Cote Blanche Bay Field in Louisiana for
an aggregate purchase price of $20 million. Of this aggregate purchase price,
the Company received $14.9 million.
On June 30, 1995, the Company issued $20 million in 13% senior unsecured notes
due June 30, 2007. Interest is payable semi-annually on June 30 and December 30,
beginning December 30, 1995. Annual principal payments of $4 million are due on
June 30 of each year, beginning June 30, 2003. See "Description of Outstanding
Indebtedness."
4
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Summary of Terms
Securities Offered............ An aggregate of $50 million principal amount of
Senior Securities and/or Subordinated Securities.
Maturity Date................. .
Interest Payment Dates........ The Debt Securities will bear interest at the
rate per annum set forth in the Prospectus
Supplement related to the Offered Debt
Securities, payable semi-annually on such dates
as set forth in the Prospectus Supplement.
Indenture..................... The Company's Senior Indenture related to the
Senior Securities, dated on such date and with
such Trustee as set forth in the Prospectus
Supplement related to the Senior Securities. The
Company's Subordinated Indenture related to the
Subordinated Securities, dated on such date and
with such Trustee as set forth in the Prospectus
Supplement related to the Subordinated
Securities.
Optional Redemption........... The Senior Securities and the Subordinated
Securities will be redeemable, at the Company's
option, in whole or in part, at any time after
such date and at the redemption prices set forth
in the Prospectus Supplement related to the
Offered Debt Securities, plus accrued and unpaid
interest, if any, to the date of redemption.
Change in Control............. Upon a Change in Control, each holder of Senior
Securities or Subordinated Securities may require
the Company to repurchase each such holder's Debt
Securities at a purchase price in cash equal to
101% of their principal amount plus accrued and
unpaid interest, if any, to such repurchase date,
and the failure of the Company to repurchase such
holder's Debt Securities will constitute an Event
of Default. In the event of a Change in Control,
the Company may not be in a financial position to
pay the repurchase price of the Debt Securities.
At December 31, 1994, the Company had total
revenues of $34,704,806, and income of
$2,954,161. There can be no assurance that at
upon a Change in Control, the Company will have
access to cash or financing in order to pay the
repurchase price. In addition, similar Change in
Control provisions are contained in the Company's
8% Convertible Subordinated Debentures due May 1,
2002 and the 8% Convertible Notes due October 1,
2001, with a total aggregate principal amount
outstanding at December 31, 1994 of $11,090,000.
See "Description of Outstanding Indebtedness."
Pursuant to the terms of the Indentures, the
Notes and Debentures will be subordinated to both
the Senior Securities and the Subordinated
Securities. The Company's Senior Unsecured Notes
and Credit Facility each contain restrictions on
the Company's ability to redeem or repay
indebtedness. Upon a Change in Control, the
Company would be required to repay the
outstanding principal amount of these Senior
Indebtedness obligations (an aggregate of $20
million outstanding at December 31, 1994) before
repurchasing the Senior Securities and the
Subordinated Securities, or negotiate with the
holders of these debt instruments to permit the
repurchase. The Company's ability to repurchase
the debt Securities will be dependent upon the
availability of cash and other financing sources
to consummate such a repurchase. There can be no
assurance that the Company will have the
financial position to negotiate with the holders
of the Senior Indebtedness or pay the outstanding
indebtedness and repurchase the Senior Securities
and Subordinated Securities in the event of a
Change in Control. See "Description of
Outstanding Indebtedness."
A Change in Control is defined in the Indentures
to include the sale of all or substantially all
of the assets of the Company, and, in certain
circumstances, the sale of a substantial part of
the assets of Benton-Vinccler. The sale of all or
substantially
5
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all of the assets of the Company is not defined
in the Indentures and there is no ascertainable
established meaning of such phrase under the laws
of the state governing the Indenture. This
uncertainty of when the Company has sold
"substantially all of the assets of the Company
could have the effect of sales of assets by the
Company without the Trustee and/or the Company
interpreting such sale as a sale of substantially
all of the assets, and therefore no repurchase of
the Debt Securities. A sale by the Company of a
significant portion of its revenue producing
assets could limit the Company's ability to
service the Debt Securities and/or repay the Debt
Securities at their Stated Maturity. The sale of
a substantial part of the assets of
Benton-Vinccler is defined as the sale or series
of sales which either (i) exceed (based on the
book value of all assets sold during the twelve
month period) 25% of the net tangible assets of
Benton-Vinccler as of the end of its most
recently completed full fiscal quarter for which
financial information is available, or (ii)
contributed more than 25% of the net income of
Benton-Vinccler during its most recently
completed four full fiscal quarters for which
financial information is available. See
"Description of Debt Securities -- Change in
Control."
Ranking of Senior
Securities.................... The Senior Securities will constitute senior
unsecured debt obligations of the Company and
will rank senior in right of payment to all
existing and future Subordinated Indebtedness,
pari passu with all unsecured Senior
Indebtedness, and effectively subordinated to all
secured Senior Indebtedness. The Senior
Securities will be effectively subordinated to
all liabilities of the Company's subsidiaries,
except to the extent that the Company is itself a
creditor to such subsidiary, in which case the
claims of the Company would still be subordinate
to any security interest in the assets of such
subsidiary, and indebtedness of such subsidiary
senior to that held by the Company. As of March
31, 1995, the aggregate amount of the outstanding
obligations of the Company's subsidiaries that
would have ranked effectively senior to the
Senior Securities was approximately $33.9
million. The aggregate amount of the outstanding
secured obligations of the Company that would
have ranked effectively senior to the Senior
Securities was approximately $5.0 million. The
principal amount of the Company's indebtedness
that would have ranked pari passu with the Senior
Securities was approximately $15.0 million. See
"Description of Outstanding Indebtedness."
Ranking of Subordinated
Securities.................... The Subordinated Securities will constitute
subordinated unsecured debt obligations of the
Company and will be subordinated in right of
payment to the prior payment in full of all
Senior Indebtedness, whether now outstanding or
incurred in the future. The Subordinated
Securities will also be effectively subordinated
to all liabilities, including trade payables and
capitalized lease obligations, if any, of the
Company's subsidiaries. The Subordinated
Securities will rank pari passu with all
Subordinated Indebtedness of the Company incurred
in the future, unless such Subordinated
Indebtedness specifies that it shall rank junior
to the Subordinated Securities. As of March 31,
1995, the aggregate amount of the outstanding
obligations of the Company's subsidiaries that
would have ranked effectively senior to the
Senior Securities was approximately $33.9
million. The aggregate amount of the outstanding
obligations of the Company that would have ranked
effectively senior to the Subordinated Securities
was approximately $5.0 million. The principal
amount of the Company's indebtedness that would
have ranked pari passu with the Subordinated
Securities was approximately $15.0 million. The
Subordinated Indenture limits the amount of other
unsecured indebtedness or securities which may be
issued by the Company, to the extent that the
Company and its Restricted Subsidiaries must be
in compliance with certain ratio requirements to
incur additional indebtedness. See "Description
of Outstanding Indebtedness" and "Description of
the Debt Securities -- Subordination."
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Certain Covenants............. The Senior Indenture and the Subordinated
Indenture each contains certain covenants that,
among other restrictions, limit the ability of
the Company and its Restricted Subsidiaries to
incur additional indebtedness, pay dividends and
make certain investments, engage in transactions
with its affiliates, sell assets, incur or suffer
to exist certain liens securing indebtedness
unless the Debt Securities are equally and
ratably secured, and engage in mergers and
consolidations. The Indentures limit the ability
of the Company and its Restricted Subsidiaries to
incur future indebtedness unless after giving
effect to the indebtedness, the ratio of
Indebtedness of the Company and its Restricted
Subsidiaries to Oil and Gas Reserve Estimate of
the company and its Restricted Subsidiary would
be no greater than 50%, and the EBITDA/Interest
Ratio would be greater than 2.0 to 1.0 prior to
June 1, 1995, 2.5 to 1.0 on or after June 1, 1995
and prior to June 1, 1996, and 3.0 to 1.0 on or
after June 1, 1996, and such indebtedness would
have an average life greater than the average
life of the Debt Securities and a stated maturity
later than the Stated Maturity of the Debt
Securities. In addition, the Indentures prohibit
the Company and its Restricted Subsidiaries from
creating or making liens to secure indebtedness,
without making provision for all of the Debt
Securities to be equally and ratably secured with
the indebtedness so secured. Thus, the provisions
of the Senior Indenture restricts the Company
from incurring additional Senior Indebtedness,
and restrict the amount of indebtedness that can
be incurred which is equal or subordinated to the
Senior Securities. The Subordinated Indenture
does not restrict the amount of Senior
Indebtedness that can be incurred by the Company
and its Restricted subsidiaries, provided that
the Company and its Restricted Subsidiaries are
in compliance with the ratios set forth above.
See "Description of Debt Securities -- Certain
Covenants" and "-- Subordination." The Senior
Indenture and the Subordinated Indentures will
also prohibit the Company's Restricted
Subsidiaries from assuming or guaranteeing
indebtedness of the Company unless such
Restricted Subsidiaries simultaneously guarantee
the payment of the Debt Securities. GEOILBENT is
not a Restricted Subsidiary pursuant to the
definition contained in the Indentures, and
therefore is not subject to the covenants which
would limit its ability to incur future
indebtedness, provided the Company or a
Restricted subsidiary is not guaranteeing such
indebtedness. See "Description of the Debt
Securities -- Certain Covenants."
Use of Proceeds............... Except as otherwise described in the accompanying
Prospectus Supplement, the net proceeds from any
sale of Debt Securities will be used for general
corporate purposes, which may include refinancing
of indebtedness, acquisitions, capital
expenditures including developmental activities
in the Company's oil and gas properties, working
capital and repurchases or redemption of
securities.
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Summary Oil and Gas Reserve Information
The following sets forth summary information with respect to the estimates of
the Company's proved oil and gas reserves at December 31, 1994, 1993 and 1992,
prepared by the Company and audited by Huddleston & Co., Inc., independent
petroleum engineers.
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YEARS ENDED DECEMBER 31
Dollars in thousands 1994(1)(2) 1993 1992
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VENEZUELA(3):
Crude oil and condensate (MBbl) 60,707 19,389 8,966
Natural gas (MMcf) -- -- --
Oil equivalent (MBOE) 60,707 19,389 8,966
UNITED STATES:
Crude oil and condensate (MBbl) 233 10,258 13,194
Natural gas (MMcf) 16,077 18,099 19,455
Oil equivalent (MBOE) 2,913 13,275 16,437
RUSSIA:
Crude oil and condensate (MBbl) 17,540 10,121 8,133
Natural gas (MMcf) -- -- --
Oil equivalent (MBOE) 17,540 10,121 8,133
TOTAL(3):
Crude oil and condensate (MBbl) 78,480 39,768 30,293
Natural gas (MMcf) 16,077 18,099 19,455
Oil equivalent (MBOE) 81,160 42,785 33,536
Standardized measure of discounted future net cash
flows, before provision for income taxes(3)(4) $ 336,320 $ 131,413 $ 141,810
</TABLE>
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(1) Based on the Company's December 31, 1994 reserve report, of which 98% of the
reserves were audited by Huddleston & Co., Inc., independent petroleum
engineers.
(2) In November 1994, the Company sold to Tenneco a 10.8% working interest in
the West Cote Blanche Bay Field, which represented 24.9% of the Company's 43.3%
working interest in the Field. In March 1995, the Company and its affiliates and
Tenneco sold to WRT Energy Corporation a 43.75% working interest in the
shallower depths (above approximately 10,575 feet) in the West Cote Blanche Bay
Field. The reserves attributable to this sale are not included in the reserve
information.
(3) All Venezuelan reserves are attributable to an operating service agreement
between Benton-Vinccler and Lagoven under which all mineral rights are owned by
the Government of Venezuela.
(4) The Company values its reserves as of December 31 of each year, based on oil
and natural gas prices as of that date. Market prices for both oil and natural
gas are subject to a significant degree of variation both in domestic and
international markets, and this variation will affect the calculation of future
net cash flows reported by the Company at any specific date.
8
<PAGE> 10
Summary Consolidated Financial and Operating Data
The summary consolidated financial information set forth below should be read in
conjunction with the Consolidated Financial Statements of the Company and
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference into this
Prospectus. The summary consolidated financial data for the three months ended
March 31, 1995 and 1994 are derived from the Company's unaudited consolidated
financial statements. In the opinion of management, such unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of the consolidated
financial condition and results of operations as of and for the periods
presented. Operating results for the three months ended March 31, 1995 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending December 31, 1995.
<TABLE>
<CAPTION>
------------------------------------------------------------------
In thousands, except per share THREE MONTHS ENDED
amounts, ratios YEARS ENDED DECEMBER 31 MARCH 31
and operating data 1994(1) 1993(1) 1992 1995 1994(1)
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues $ 34,705 $ 7,504 $ 8,622 $ 12,661 $ 3,682
Lease operating costs and
production taxes 9,531 5,110 4,414 2,246 1,766
Depletion, depreciation and
amortization 10,298 2,633 3,041 3,145 1,173
General and administrative expense 5,242 2,632 2,245 1,669 1,142
Interest expense 3,888 1,958 1,831 1,618 680
--------- --------- --------- ---------- ---------
Income (loss) before income taxes
and minority interest 5,746 (4,829) (2,909) 3,983 (1,079)
Income tax expense 698 -- -- 1,079 --
--------- --------- --------- ---------- ---------
Income (loss) before minority
interest 5,048 (4,829) (2,909) 2,904 (1,079)
Minority interest 2,094 -- -- 863 63
--------- --------- --------- ---------- ---------
Net income (loss) $ 2,954 $ (4,829) $ (2,909) $ 2,041 $ (1,142)
========= ======== ======== ========== ========
Net income (loss) per common share $ 0.12 $ (0.26) $ (0.22) $ 0.08 $ (0.05)
========= ======== ======== ========== ========
Weighted average common shares
outstanding(2) 24,851 18,609 12,981 26,037 24,737
Ratio of earnings to fixed
charges(3) 1.92x -- -- 2.90x --
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31 MARCH 31
1994(1) 1993(1) 1992 1995 1994
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net Production:
Crude oil and condensate (Bbl) 3,039,832 480,954 376,022 1,213,274 396,418
Natural gas (Mcf) 2,061,892 232,677 831,637 346,548 77,843
Oil equivalent (BOE) 3,383,481 519,734 514,628 1,271,032 409,392
Average U.S. sales price:
Crude oil and condensate ($ per
Bbl) $14.46 $17.30 $18.17 $17.10 $13.71
Natural gas ($ per Mcf) 1.79 2.19 1.66 1.62 2.25
Average U.S. lifting cost ($ per
BOE) 4.04 8.72 6.98 5.72 6.45
Average Venezuela sales price:
Crude oil and condensate ($ per
Bbl) 8.52 8.31 -- 9.02 7.08
Average Venezuela lifting cost ($
per BOE) 1.51 7.26 -- 1.22 3.24
Average Company finding cost ($
per BOE) 1.35 1.73 1.69 -- --
Estimated Company future
development cost ($ per BOE) 1.23 2.04 2.53 -- --
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
-----------------------------------------------------------------
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31 MARCH 31
1994(1) 1993(1) 1992 1995 1994(1)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OTHER DATA(4):
Capital Expenditures $ 53,456 $ 25,953 $ 16,753 $ 13,182 $ 21,935
EBITDA(5) 17,775 (202) 2,108 7,891 695
Consolidated Interest Expense(6) 3,888 1,958 1,831 1,618 681
EBITDA/Interest Ratio(7) 4.57x -- 1.15x 4.89x 1.02x
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
In thousands, except ratios AT MARCH 31, 1995
<S> <C>
BALANCE SHEET AND OTHER DATA(1)(4):
Working capital $ 13,479
Total assets 166,525
Long term debt, net of current portion 31,188
Stockholders' equity 90,489
Ratio of Indebtedness to Oil and Gas Reserve Estimate(8) 0.13x
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
AT DECEMBER 31, 1994
<S> <C>
OTHER DATA(4):
Oil and Gas Reserve Estimate(9) $ 287,487
</TABLE>
- ---------------
(1) The financial and operating data for the year ended December 31, 1994
include 100% of the operating results of Benton-Vinccler and reflect the 50%
ownership interest of Vinccler for January and February and the 20% ownership
interest of Vinccler for the rest of the year as a minority interest. Prior to
1994, the financial and operating data included Benton-Vinccler on a
proportionate consolidation basis reflecting the Company's 50% ownership
interest in the joint venture which preceded Benton-Vinccler.
(2) The weighted average common shares include shares which may be issuable upon
exercise of outstanding stock options and warrants; however, they are not
included in the computation for the years ended December 31, 1993 and 1992 and
the three months ended March 31, 1994, since their effect would be to reduce the
net loss per share, and for the year ended December 31, 1994, because their
effect would result in dilution of less than 3%.
(3) For the purpose of computing the ratios, "earnings" represents income (loss)
from operations before income taxes plus fixed charges exclusive of capitalized
interest, and "fixed charges" consists of interest, whether expensed or
capitalized, amortization of debt expense and an estimated portion of rent
expense representing interest costs. As a result of the losses incurred by the
Company for the years ended December 31, 1992 and 1993 and the three months
ended March 31, 1994, earnings did not cover fixed charges by $2,909,000,
$4,829,000 and $1,142,000, respectively.
(4) The Company's Russian operations are conducted through GEOILBENT, which is
only 34% owned by the Company and, consequently, does not qualify as a
Restricted Subsidiary as defined in the Senior Indenture. Accordingly, for
purposes of the Indentures, the Company's Russian operations will be excluded
from the calculation of EBITDA (except to the extent of any distributions
received by the Company from GEOILBENT), Consolidated Interest Expense,
EBITDA/Interest Ratio, Oil and Gas Reserve Estimate and Indebtedness. See
"Description of the Debt Securities -- Certain Covenants."
(5) EBITDA has been calculated as defined in the Indentures and has been
included solely to facilitate consideration of the covenants in the Senior
Indenture that are based, in part, on EBITDA. EBITDA (as defined in the
Indentures) should not be construed as an alternative to operating income or to
cash flows from operating activities (as determined in accordance with generally
accepted accounting principles), as an indicator of the Company's operating
performance or as a measure of liquidity. See "Description of the Debt
Securities -- Certain Definitions."
(6) Consolidated Interest Expense has been calculated as defined in the
Indentures. See "Description of the Debt Securities -- Certain Definitions."
(7) EBITDA/Interest Ratio has been calculated as defined in the Indentures. See
"Description of the Debt Securities -- Certain Definitions."
(8) Pursuant to the Indentures, indebtedness of the Company or any Restricted
Subsidiary that is secured by a deposit of cash or cash equivalents by the
Company and indebtedness of GEOILBENT are excluded from Indebtedness for the
purpose of calculating the ratio of Indebtedness to Oil and Gas Reserve
Estimate. Consequently, Benton-Vinccler's bank loan in an amount equal to $19.3
million at March 31, 1995, which is secured by a time deposit of the Company,
and the Company's share of GEOILBENT's indebtedness which totalled $3.0 million
at March 31, 1995, have been excluded from Indebtedness for the purpose of
calculating the ratio of Indebtedness to Oil and Gas Reserve Estimate.
(9) The Oil and Gas Reserve Estimate has been calculated as defined in the
Indentures. See "Description of the Debt Securities -- Certain Definitions."
10
<PAGE> 12
Risk Factors
Prospective purchasers of the Debt Securities should read this entire Prospectus
carefully. Ownership of the Debt Securities involves certain risks. In addition
to the other information contained in this Prospectus, investors should
carefully consider the following factors in connection with an investment in the
Debt Securities.
RISKS RELATED TO THE COMPANY
Losses from Operations
The historical financial data for the Company reflect net losses of $2,909,335,
$4,828,590 and $1,142,126 for the years ended December 31, 1992 and 1993 and the
three months ended March 31, 1994, respectively, and income of $2,954,161 and
$2,041,108 for the year ended December 31, 1994 and the three months ended March
31, 1995, respectively. The Company had total revenues of $8,622,109, $7,503,796
and $34,704,806 for the years ended December 31, 1992, 1993 and 1994,
respectively and $3,682,173 and $12,661,166 for the three months ended March 31,
1994 and 1995, respectively. The decreased revenues for the year ended December
31, 1993 compared to the year ended December 31, 1992 was due in part to the
sale by the Company of certain non-strategic oil and gas properties. During
1993, the Company made a significant amount of capital expenditures for
infra-structure, such as roads, pipelines and 3-D seismic surveys. Such
expenditures did not increase production from the Company's oil and gas
properties. However, the Company believes that with this infra-structure
complete, the Company will focus its capital expenditures on development of its
oil and gas properties, which the Company expects to continue the trend of
increased revenues from year ended December 31, 1993 to December 31, 1994. As
the Company's revenues increase, the Company expects continued improvement to
its profitability. The Company's ability to maintain its financing arrangements,
produce its oil and gas reserves and service its debt obligations would be
adversely affected by a lack of profitability. Any improvement in profitability
of the Company will be dependent upon improvement in the development of
reserves, revenues from the sale of oil and gas reserves and oil and gas
pricing, and there can be no assurance that such improvement will occur.
Foreign Operations
For 1994, the Company derived approximately 78% of its consolidated oil and gas
revenues and approximately 96% of its Proved Reserves from its foreign
operations in Venezuela and Russia. The Company's Venezuelan and Russian
operations are subject to political, economic and other uncertainties inherent
in the development of foreign properties including, without limitation, risks of
war, revolution, expropriation, cancellation, renegotiation or modification of
existing contracts, export and transportation regulations and tariffs, taxation
and royalty policies, foreign exchange restrictions, adverse changes in currency
value, international monetary fluctuations, environmental controls and other
hazards arising out of foreign government sovereignty over certain areas in
which the Company plans to conduct operations.
The Company's operations have not been materially adversely affected to date by
political instability or the recent banking crisis in Venezuela. Similarly, to
date, the Company's operations have not been materially adversely affected by
the recent political or economic instability in Russia. However, there can be no
assurance that the Company's operations will not be materially adversely
affected by political or economic instability or burdensome taxation in the
future. The Company currently carries no insurance against political
instability. However, the Company has applied for insurance to cover the risk of
currency repatriation and inconvertibility, expropriation and interference with
operations for its Venezuelan operations with the Overseas Private Investment
Corporation ("OPIC"), an agency of the United States government. There can be no
assurance that the Company will be able to obtain this insurance or if it can be
obtained, at a reasonable cost.
The Company has limited experience in conducting oil and gas operations in
Venezuela and Russia. The Company formed ventures with local partners in
Venezuela and Russia in an attempt to reduce some of the risks associated with
conducting operations in such countries and to facilitate local transactions.
The Company may encounter unforeseen difficulties in Venezuela and Russia,
including problems related to production and deliverability of oil and gas, and
any such difficulties could have a material adverse effect on the Company.
Furthermore, the timing and extent of the Company's development activities in
Venezuela are subject to the approval of Lagoven and the Ministry of Energy and
Mines. There can be no assurance that the development activities proposed by
Benton-Vinccler will receive the necessary approval. In addition, pursuant to
the Articles of Incorporation/By-Laws of Benton-Vinccler, the consent of both
the Company and Vinccler is a prerequisite to certain corporate transactions and
other matters relating to Benton-Vinccler, including, without limitation, any
sale of corporate assets, any assignment or sub-contracting of the operating
service agreement with Lagoven, any change in Benton-Vinccler's corporate
capital, duration or corporate purpose, any merger between Benton-Vinccler
11
<PAGE> 13
and another company as well as certain amendments to Benton-Vinccler's Articles
of Incorporation/By-Laws. There can be no assurance that the Company and
Vinccler will agree upon any such proposed transactions or matters.
In addition to the factors discussed above, Russia has established an export
tariff on all oil produced in and exported from Russia which, as imposed, has
the effect of reducing the potential profits to the Company and could render its
proved reserves attributable to Russia uneconomic. However, the Russian
Federation has issued or drafted various decrees and legislation under which
certain oil and gas joint ventures, including GEOILBENT, are eligible for relief
from such oil export tariff until such time as they have recovered certain of
their expenditures. GEOILBENT has received a waiver from the export tariff for
1995, and expects to apply for renewal of such waiver for 1996 and 1997.
However, there can be no assurance that any such renewals can be obtained.
Furthermore, after the waiver for 1995 was issued to GEOILBENT, a new Russian
law came into force which repeals all taxes and customs benefits previously
granted to participants in foreign economic activities, except for those granted
pursuant to certain federal laws, including the law "On Customs Tariffs." While
it is not clear whether the repeal applies to GEOILBENT's waiver for 1995,
GEOILBENT believes that its waiver should be regarded as granted pursuant to the
law "On Customs Tariffs." The legislative and regulatory environment in Russia
continues to be subject to frequent change and uncertainty.
The Company will not receive distributions from GEOILBENT until it has expended
its capital requirements under the terms of the joint venture agreement. To
date, the Company has spent approximately $20.1 million of the $25.8 million it
has committed to spend by the end of 1995. However, in 1994 oil and gas
production in Russia was adversely affected by volatility of net wellhead oil
prices and the oil export tariff. If these conditions continue, the Company
believes that the joint venture agreement may be modified to reduce that amount
or to extend the due date of its obligation and modify other terms. The Company
believes that after it has satisfied such capital commitments, it will not
receive any significant distributions from GEOILBENT for several years because
substantially all of the money received by GEOILBENT from the North Gubkinskoye
Field will be reinvested to fund future development activities.
Properties Under Development
As of December 31, 1994, approximately 79% of the Company's Proved Reserves were
undeveloped and required development activities consisting primarily of
recompletions, drilling of replacement wells and other development drilling. In
addition, approximately 3% of the Company's Proved Reserves were proved
developed behind-pipe or shut-in, requiring additional development work. As a
result, the Company will require substantial capital expenditures to develop all
of its proved reserves. At December 31, 1994, the anticipated future development
costs for proved reserves in the United States, Venezuela and Russia were $2.0
million, $79.5 million and $25.4 million, respectively. The Company will not
have the capital to develop all of these reserves after the offering of the
Securities. The Company expects to finance these future development costs
through the offering of the Securities, cash flow from operations and
non-recourse project financing. If such capital is not available, the Company
will either enter into joint ventures to develop the projects, which will result
in the Company retaining a smaller interest, or not develop the reserves. There
can be no certainty regarding the commercial feasibility of developing these
reserves, the availability of financing, or the timing or costs associated
therewith. If such capital is available, there can be no assurance that the
Company will be able to develop and produce sufficient reserves to recover the
costs expended and operate the wells profitably. In addition, the Company may
not be able to control the development activities in fields either operated by
industry partners or in which development activities are subject to approval by
its partners. If the Company and its industry partners are not able to meet the
financial and development obligations in these fields, the interests in the
affected properties may be sold, farmed out or forfeited.
Engineers' Estimates of Reserves and Future Net Revenue
This Prospectus contains estimates of the Company's oil and gas reserves and the
future net revenues therefrom which have been prepared by the Company and
audited by Huddleston & Co., Inc., independent petroleum engineers. Estimates of
commercially recoverable oil and gas reserves and of the future net cash flows
derived therefrom are based upon a number of variable factors and assumptions,
such as historical production from the subject properties, comparison with other
producing properties, the assumed effects of regulation by governmental agencies
and assumptions concerning future operating costs, severance and excise taxes,
export tariffs, abandonment costs, development costs and workover and remedial
costs, all of which may vary considerably from actual results. All such
estimates are to some degree speculative, and various classifications of
reserves are only attempts to define the degree of speculation involved. For
these reasons, estimates of the commercially recoverable reserves of oil and
natural gas attributable to any particular property or group of properties, the
classification, cost and risk of recovering such reserves and estimates of the
future net cash flows expected therefrom, prepared by different engineers or by
the same engineers at different times, may vary substantially. The difficulty of
making precise estimates is accentuated by the fact that 82% of the Company's
total
12
<PAGE> 14
Proved Reserves were non-producing as of December 31, 1994. Therefore, the
Company's actual production, revenues, severance and excise taxes, export
tariffs, development expenditures, workover and remedial expenditures,
abandonment expenditures and operating expenditures with respect to its reserves
will likely vary from such estimates, and such variances may be material.
In addition, actual future net cash flows will be affected by factors such as
actual production, supply and demand for oil and natural gas, availability and
capacity of gas gathering systems and pipelines, curtailments in consumption by
natural gas purchasers, changes in governmental regulations or taxation and the
impact of inflation on costs. The timing of actual future net revenue from
proved reserves, and thus their actual present value, can be affected by the
timing of the incurrence of expenditures in connection with development of oil
and gas properties. The 10% discount factor, which is required by the Commission
to be used to calculate present value for reporting purposes, is not necessarily
the most appropriate discount factor based on interest rates in effect from time
to time and risks associated with the oil and gas industry. Discounted present
value, no matter what discount rate is used, is materially affected by
assumptions as to the amount and timing of future production, which may and
often do prove to be inaccurate.
Development of Additional Reserves
The Company's future success may also depend upon its ability to find or acquire
additional oil and gas reserves that are economically recoverable. Except to the
extent that the Company conducts successful exploration or development
activities or acquires properties containing proved reserves, the proved
reserves of the Company will generally decline as reserves are produced. There
can be no assurance that the Company will be able to discover additional
commercial quantities of oil and gas, or that the Company will be able to
continue to acquire interests in underdeveloped oil and gas fields and enhance
production and reserves by conducting workovers and recompletions, drilling
replacement wells and drilling development wells, or that the Company will have
continuing success drilling productive wells and acquiring underdeveloped
properties at low finding costs.
Financing the Company's Growth
The Company has satisfied a portion of its capital needs through public and
private equity and debt placements of its securities and private placements of
interests in oil and gas limited partnerships and joint ventures. Since 1991,
the Company has not offered a significant amount of securities in private
placements and does not anticipate privately placing any limited partnership
interests in the future. These private placements were not registered under the
Securities Act of 1933, as amended (the "Securities Act") in reliance on the
"private offering" exemption contained in Section 4(2) of the Securities Act and
Rule 506 promulgated under the Securities Act. The availability of this
exemption is dependent upon a number of factors, including the information
furnished to investors, their investment experience, the method of placing the
securities, and the possible integration of several offerings. For the most
part, these placements have been made to "accredited investors" as that term is
defined under Rule 501(e) of the Securities Act. The Company has taken steps to
ensure that it has complied with the various federal and state requirements with
respect to these placements. However, there can be no assurance that an investor
or group of investors would not assert a claim for rescission or damages under
the Securities Act or similar laws or, with respect to the joint ventures,
partnerships or other private placements claiming that the placements were not
offered properly, the investors were misled or that the partnerships or joint
ventures were not operated properly, which claims could have an adverse effect
on the Company.
Retention and Attraction of Key Personnel
The Company depends to a large extent on the abilities and continued
participation of certain key employees, the loss of whose services could have a
material adverse effect on the Company's business. In an effort to minimize the
risk, the Company has entered into employment agreements with certain key
employees, and has purchased a $5.0 million key-man life insurance policy on the
life of A.E. Benton. Furthermore, as a result of the Company's recent growth,
the Company currently is seeking additional accounting and operating personnel.
There can be no assurance that the Company will be able to attract and retain
such personnel on acceptable terms and the failure to do so could have a
material adverse effect on the Company.
RISKS RELATED TO AN INVESTMENT IN THE DEBT SECURITIES
Substantial Leverage
The Company could incur substantial indebtedness in the Offering if the Debt
Securities are offered hereby. If the Company offers and sells a substantial
principal amount of Debt Securities hereunder, the Company will require
substantial cash flow to meet its principal repayment and interest obligations
on the Debt Securities. After giving effect to the Offering, assuming the sale
of $50
13
<PAGE> 15
million principal amount of Debt Securities, as if it had occurred on March 31,
1995, the Company would have had total pro forma indebtedness of approximately
$109.7 million at such date. The Company expects to use a substantial portion of
the proceeds of any sale of the Debt Securities for development activities at
its oil and gas properties which the Company anticipates will increase oil and
gas production and cash flow to enable the Company to repay or refinance the
Debt Securities when due. However, there can be no assurance that expenditure of
the proceeds of the offering of the Debt Securities hereunder will result in
sufficient increased cash flow to repay or refinance the Debt Securities when
due. In addition, the Indenture will impose significant operating and financial
restrictions on the Company. Such restrictions will affect, and in many respects
limit or prohibit, among other things, the ability of the Company and its
Restricted Subsidiaries to incur additional indebtedness, pay dividends and make
certain investments, engage in transactions with affiliates, sell assets, incur
or suffer to exist certain liens securing indebtedness unless the Notes are
equally and ratably secured, and engage in mergers or consolidations. The
Indenture will also prohibit the Company's Restricted Subsidiaries from assuming
or guaranteeing indebtedness of the Company unless such Restricted Subsidiaries
simultaneously guarantee the payment of the Notes. The leveraged position of the
Company and the restrictive covenants contained in the Indenture could
significantly limit the ability of the Company to respond to changing business
or economic conditions or to respond to substantial declines in operating
results. See "Description of the Debt Securities."
Liquidity Needs; Ability to Repay Debt Securities
The Company may from time to time fund a portion of its working capital needs
and capital expenditure requirements from external financing. In addition, the
Company expects that in order to repay the principal amount of the Notes or to
purchase the Notes upon the occurrence of a Change in Control, it may be
required to seek additional financing or engage in asset sales or in similar
transactions. There can be no assurance that sufficient funds for any of the
foregoing purposes would be available to the Company at the time they were
required. See "Description of the Debt Securities."
Holding Company Structure
The Debt Securities will be obligations exclusively of the Company. Because the
Company's operations are conducted almost entirely through its subsidiaries, the
cash flow and the consequent ability of the Company to service its debt,
including the Debt Securities, are dependent upon the earnings of the Company's
subsidiaries and the distribution of those earnings to the Company. The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Debt Securities
or to make funds available therefore, whether by dividends, loans or other
payments. In addition, the payment of dividends and the making of loans and
advances to the Company by its subsidiaries may be subject to statutory or
contractual restrictions and are contingent upon the earnings of those
subsidiaries and subject to various business considerations.
Lack of a Public Market for the Debt Securities
The Debt Securities will be a new issue of securities, and the Company does not
intend to list them on any securities exchange. If the Debt Securities are
traded after their initial issuance, they may trade at a discount from their
initial public offering price depending upon prevailing interest rates, the
market for similar securities and other factors. No assurance can be given that
any market for the Debt Securities will develop, or, if any such market
develops, as to the liquidity of such market.
RISKS RELATED TO THE OIL AND GAS INDUSTRY
Risk of Oil and Gas Operations
The Company's operations are subject to all of the risks normally incident to
the operation and development of oil and gas properties and the drilling of oil
and gas wells, including encountering unexpected formations or pressures,
blowouts, cratering and fires, and, in horizontal wellbores, the increased risk
of mechanical failure and collapsed holes, the occurrence of any of which could
result in personal injuries, loss of life, environmental damage and other damage
to the properties of the Company or others. In addition, because the Company
acquires interests in underdeveloped oil and gas fields that have been operated
by others for many years, the Company may be liable for any damage or pollution
caused by any prior operations of such oil and gas fields. Moreover, offshore
operations are subject to a variety of operating risks peculiar to the marine
environment -- such as hurricanes or other adverse weather conditions -- to more
extensive governmental regulation, including certain regulations that may, in
certain circumstances, impose absolute liability for environmental damage, and
to interruption or termination of business activities by government authorities
based upon environmental or other considerations. In accordance with customary
industry practice, the Company is not
14
<PAGE> 16
fully insured against these risks, nor are all such risks insurable.
Accordingly, there can be no assurance that such insurance as the Company does
maintain will be adequate to cover any losses or exposure for liability.
Current Oil and Gas Industry Conditions
Historically, the markets for oil and natural gas have been volatile and are
likely to continue to be volatile in the future. Prices for oil and natural gas
are subject to wide fluctuation in response to relatively minor changes in
supply of and demand for oil and natural gas, market uncertainty and a variety
of additional factors that are beyond the control of the Company. These factors
include political conditions in the Middle East, the foreign supply of oil and
natural gas, the price of foreign imports, the level of consumer product demand,
weather conditions, domestic and foreign government regulations, the price and
availability of alternative fuels and overall economic conditions. Lower oil and
natural gas prices also may reduce the amount of the Company's oil and natural
gas that is economic to produce. In addition, the marketability of the Company's
production depends upon the availability and capacity of gas gathering systems
and pipelines.
Government Regulation; Environmental Risks
The Company's business is regulated by certain federal, state, local and foreign
laws and regulations relating to the development, production, marketing and
transmission of oil and gas, as well as environmental and safety matters. There
can be no assurance that laws and regulations enacted in the future will not
adversely affect the Company's exploration for, or the production and marketing
of, oil and gas.
Oil and gas operations are subject to extensive foreign, federal, state and
local laws regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment. Numerous governmental
departments issue rules and regulations to implement and enforce such laws which
are often difficult and costly to comply with and which carry substantial
penalties for failure to comply. The regulatory burden on the oil and gas
industry increases its cost of doing business and consequently affects its
profitability. These laws, rules and regulations affect the operations of the
Company. Compliance with environmental requirements generally could have a
material adverse effect upon the capital expenditures, earnings or competitive
position of the Company.
Competition
The oil and gas exploration and production business is highly competitive. A
large number of companies and individuals engage in the drilling for oil and
gas, and there is a high degree of competition for desirable oil and gas
properties suitable for drilling and for materials and third-party services
essential for their exploration and development. Many of the Company's
competitors have greater financial and other resources than does the Company.
Ratio of Earnings to Fixed Charges
Set forth below is the ratio of earnings to fixed charges for each of the years
in the five year period ended December 31, 1994 and for the three months ended
March 31, 1995 and 1994. This information should be read in conjunction with the
Consolidated Financial Statements of the Company and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
------------------
----------------------------------------------- THREE MONTHS ENDED
YEARS ENDED DECEMBER 31 MARCH 31
1994 1993 1992 1991 1990 1995 1994
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges... 1.92x (1) (1) 1.29x 1.47x 2.90x (1)
</TABLE>
- ---------------
(1) For the purposes of computing the ratios, "earnings" represents income
(loss) from operations before income taxes plus fixed charges exclusive of
capitalized interest, and "fixed charges" consists of interest, whether
expensed or capitalized, amortization of debt expense and an estimated
portion of rent expense representing interest costs. As a result of the
losses incurred by the Company for the years ended December 31, 1993 and
1992 and the three months ended March 31, 1994, earnings did not cover fixed
charges by $4,829,000, $2,909,000 and $1,142,000, respectively.
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The Company
The Company is primarily engaged in the development and production of oil and
gas properties. The Company's operations are focused in the eastern region of
Venezuela, the Gulf Coast region of Louisiana and the West Siberia region of
Russia. At December 31, 1994, the Company's proved reserves of 81.2 MMBOE
consisted of 78.5 MMBbl of oil and 16.1 Bcf of natural gas. The Company's proved
reserves, net of production, have increased from 14.8 MMBOE at December 31, 1990
to 81.2 MMBOE through purchases of reserves-in-place, awards of development
contracts, discoveries of oil and natural gas reserves, extensions of existing
producing fields and revisions of previously estimated reserves. The
standardized measure of discounted future net cash flows, before provision for
income taxes, relating to the Company's proved reserves at December 31, 1994 was
approximately $336.3 million.
The Company was incorporated in Delaware in September 1988 and operates
principally through its wholly-owned subsidiary Benton Oil and Gas Company of
Louisiana in Louisiana and its 80% owned subsidiary Benton-Vinccler in
Venezuela. Currently, both Benton Oil and Gas Company of Louisiana and
Benton-Vinccler qualify as Restricted Subsidiaries as defined in the Indentures.
The Company's Russian operations are conducted through GEOILBENT, which is only
34% owned by the Company and, consequently, does not qualify as a Restricted
Subsidiary as defined in the Senior Indenture. Accordingly, for purposes of the
Indentures, the Company's Russian operations will be excluded from the
calculation of EBITDA (except to the extent of any distributions received by the
Company from GEOILBENT), Consolidated Interest Expense, EBITDA/Interest Ratio,
Oil and Gas Reserve Estimate and Indebtedness. See "Description of the Debt
Securities -- Certain Covenants." The Company's principal executive offices are
located at 1145 Eugenia Place, Suite 200, Carpinteria, California 93013, and its
telephone number is (805) 566-5600.
______________________________________________
BENTON OIL
AND GAS COMPANY . . . . . . .
______________________________________________ .
| | .
| | .
| | .
80% 100% 34%
Owned Subsidiary Owned Subsidiary Owned Joint Venture
| | .
| | .
| | .
_______________________ ______________________ . . . . . . . . . . .
Benton-Vinccler, C.A. Benton Oil and Gas GEOILBENT, Ltd.
Company of Louisiana Joint Venture
_______________________ ______________________ . . . . . . . . . . .
Use of Proceeds
Except as otherwise described in the accompanying Prospectus Supplement, the net
proceeds from any sale of Debt Securities will be used for general corporate
purposes, which may include refinancing of indebtedness, acquisitions, capital
expenditures including developmental activities in the Company's oil and gas
properties, working capital and repurchases or redemption of securities.
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Description of Outstanding Indebtedness
The summaries contained herein of certain provisions of the indebtedness of the
Company do not purport to be complete and, except in the case of the short term
debt, are qualified in their entirety by the provisions of the various
agreements and indentures related thereto which are filed as exhibits hereto or
incorporated by reference herein.
Senior Unsecured Notes due 2002
On September 30, 1994, the Company issued $15 million in senior unsecured notes
due September 30, 2002, with interest at 13% per annum. Interest is payable
semi-annually on March 30 and September 30 beginning March 30, 1995. Annual
principal payments of $3 million are due on September 30 of each year beginning
on September 30, 1998. Early payment of the notes could result in a substantial
prepayment penalty. The note agreement contains financial covenants including a
minimum ratio of current assets to liabilities and a maximum ratio of
liabilities to net worth or domestic oil and gas reserves. The note agreement
also provides for limitations on liens, additional indebtedness, certain capital
expenditures, dividends, sales of assets and mergers.
Senior Unsecured Notes due 2007
On June 30, 1995, the Company issued $20 million in senior unsecured notes due
June 30, 2007, with interest at 13% per annum. Interest is payable semi-annually
on June 30 and December 30, beginning December 30, 1995. Annual principal
payments of $4 million are due on June 30, beginning on June 30, 2003. Early
payment of the notes could result in a substantial prepayment penalty. The note
agreement contains financial covenants including a minimum ratio of current
assets to liabilities and a maximum ratio of liabilities to net worth or
domestic oil and gas reserves. The note agreement also provides for limitations
on liens, additional indebtedness, certain capital expenditures, dividends,
sales of assets and margins.
Credit Facility
On December 27, 1994, the Company entered into a revolving secured credit
facility. Under the credit agreement, the Company may borrow up to $15 million,
with the initial available principal limited to $10 million, on a revolving
basis for two years, at which time the facility shall represent a term loan due
December 31, 1999. Borrowings under the credit agreement are secured by
mortgages on the Company's U.S. properties. Interest on borrowings under the
credit agreement accrues, at the borrower's option, at either a fixed rate or a
floating rate. The borrower also has the option to change or continue the type
of interest rate borne by the loan. Floating rate borrowings accrue interest at
the higher of the prime rate (announced by Christiania Bank og Kreditkasse in
New York) plus 3%, or the Federal Funds Rate plus 5%, and may be prepaid at any
time without penalty. Fixed rate borrowings (Eurodollar loans) accrue interest
at the rate of interest at which deposits of dollars are available to the lender
in the interbank eurocurrency market plus 4.5% and may be repaid on the last day
of an interest period without penalty, or at the option of the borrower upon
payment of a make-whole premium.
The credit agreement contains financial covenants including a minimum ratio of
current assets to liabilities and maximum ratio of liabilities to net worth or
domestic oil and gas reserves. The credit agreement also provides for
limitations on liens, dividends, sales of assets and mergers.
At March 31, 1995, the principal amount of such loan outstanding was $5.0
million.
Short Term Debt
The Company, through Benton-Vinccler, has entered into a six month loan
arrangement with Morgan Guaranty which has subsequently been renewed on a
monthly basis. Under such arrangement, Benton-Vinccler may borrow up to $25
million, $10 million of which may be borrowed on a revolving basis. Borrowings
under this loan arrangement are secured by cash collateral in the form of a time
deposit from the Company. The loan arrangement contains no restrictive covenants
and no financial ratio requirements. The principal amount of such loan
outstanding at March 31, 1995 was $19.3 million. Benton-Vinccler can borrow an
additional $5.7 million under the loan arrangement if the Company provides a
time deposit to secure such additional borrowings.
Interest on borrowings under the loan facility accrues, at the borrower's
option, at either a fixed rate or a floating rate. The borrower also has the
option to change or continue the type of interest rate borne by the loan.
Floating rate borrowings (domestic loans) accrue interest at the higher of
Morgan Guaranty's prime rate or the sum of .50% plus the Federal Funds Rate and
may be prepaid at any time without penalty. Fixed rate borrowings (Eurodollar
loans) accrue interest at an adjusted LIBOR rate plus a margin of .75%. A
Eurodollar loan may not be repaid at the Company's option on a date other than
the last day of an interest period.
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Events of default include failure to pay principal and interest when due,
failure to pay principal or interest on any other indebtedness of
Benton-Vinccler or any of its subsidiaries when due or upon acceleration thereof
and insolvency of Benton-Vinccler or any subsidiary thereof.
8% Convertible Subordinated Notes due October 1, 2001
In October 1991, the Company issued $4,662,000 principal amount of privately
placed 8% Convertible Subordinated Notes due October 1, 2001, convertible into
Common Stock at the option of the noteholder at any time prior to maturity at
85.259 shares per $1,000 principal amount of Notes, subject to adjustments in
certain events, with interest payments due April 1 and October 1. At the
Company's option, it may redeem the Notes in whole or in part at any time after
October 1, 1993 at 105% of the principal amount plus accrued interest declining
1% annually to the principal amount on October 1, 1998. The Notes provide that
the holders can redeem their Notes following a change of control (as defined) of
the Company.
The Note Agreement does not contain any restrictions on the payment of
dividends, the repurchase of securities of the Company or any financial
covenants, nor does the Note Agreement require the Company to maintain any
sinking fund or reserves for repayment of the Notes. The Note Agreement does not
limit senior indebtedness or any other indebtedness secured or unsecured.
Events of default include failure to pay principal and interest when due, breach
of covenants, failure to pay principal of or interest on or any material
indebtedness of the Company when due or upon acceleration thereof and bankruptcy
or insolvency of the Company.
8% Convertible Subordinated Debentures Due May 1, 2002
In May 1992, the Company issued $6,428,000 principal amount of publicly offered
8% Convertible Subordinated Debenture due May 1, 2002, convertible into Common
Stock at the option of the holder at any time prior to maturity at 101.157
shares per $1,000 principal amount of Debentures with interest payments due May
1 and November 1. At the Company's option, it may redeem the Debentures in whole
or in part at any time on or after May 1, 1994 at 105% of the principal amount
plus accrued interest, declining 1% annually to the principal amount on May 1,
1999. The Debentures also provide that the holders can redeem their Debentures
following a change of control (as defined) of the Company. The Company may, at
its option pay the repurchase price in cash or shares of its Common Stock.
The Indenture does not contain any restrictions on the payment of dividends, the
repurchase of any securities of the Company or any financial covenants nor does
the Indenture require any sinking fund or reserves for payment of the
Debentures. The Indenture does not contain any limitation on senior indebtedness
or any other indebtedness, secured or unsecured.
Events of default include failure to pay principal and interest when due, breach
of covenants, failure to pay principal of or interest on or any material
indebtedness of the Company when due or upon acceleration thereof and bankruptcy
or insolvency of the Company.
Description of Debt Securities
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate ("Offered Debt Securities"). The particular terms of the Offered Debt
Securities and the extent to which such general provisions may apply will be
described in a Prospectus Supplement relating to such Offered Debt Securities.
The Debt Securities will be general unsecured obligations of the Company and
will constitute either senior debt securities or subordinated debt securities.
The Debt Securities that will be senior debt securities ("Senior Debt
Securities") will be issued under a Senior Indenture ("Senior Indenture")
between the Company and a trustee, the form of which is filed as an exhibit to
the Registration Statement. Debt Securities that will be subordinated debt
securities ("Subordinated Debt Securities") will be issued under a Subordinated
Indenture (collectively with the Senior Indenture, the "Indentures") between the
Company and a trustee, the form of which is filed as an exhibit to the
Registration Statement. The terms of the Debt Securities will be governed by the
provisions of the Indentures as well as those terms made a part of the
Indentures by the Trust Indenture Act of 1939, as amended. The following summary
of certain provisions of the Indentures does not purport to be complete and such
summary is subject to, and is qualified in its entirety by reference to, all of
the provisions of the Indentures. Capitalized terms used herein and not
otherwise defined shall have the meanings given to them in the Indentures.
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<PAGE> 20
General
The Indentures do not limit the aggregate principal amount of Debt Securities
which can be issued thereunder and provide that Debt Securities may be issued
from time to time thereunder in one or more series, each in an aggregate
principal amount authorized by the Company prior to issuance. The Subordinated
Indenture and the Senior Indenture limit the amount of indebtedness which the
Company may Incur.
Reference is made to the Prospectus Supplement for the following terms of the
Offered Debt Securities: (a) the title and aggregate principal amount of the
Offered Debt Securities; (b) the date or dates on which the Offered Debt
Securities will mature; (c) the rate or rates (which may be fixed or variable)
per annum, if any, at which the Offered Debt Securities will bear interest or
the method of determining such rate or rates; (d) the date or dates from which
such interest, if any, will accrue and the date or dates at which such interest,
if any, will be payable; (e) the terms for redemption or early payment, if any,
including any mandatory or optional sinking fund or analogous provision; (f) the
terms for conversion or exchange, if any, of the Offered Debt Securities; (g)
the classification as Senior Debt Securities or Subordinated Debt Securities;
(h) whether such Offered Debt Securities will be issued in fully registered form
or in bearer form or any combination thereof; (i) if other than U.S. dollars,
the currency, currencies or currency unit or units in which such Offered Debt
Securities will be denominated and in which the principal of and premium and
interest, if any, on such Offered Debt Securities will be payable; (j) whether,
and the terms and conditions on which, the Company or a Holder may elect that,
or the other circumstances under which, payment of principal of or premium or
interest, if any, on such Offered Debt Securities is to be made in a currency or
currencies or currency unit or units other than that in which such Offered Debt
Securities are denominated; (k) information with respect to book-entry
procedures, if any; and (l) any other specific terms of the Offered Debt
Securities. Reference is also made to the Prospectus Supplement for information
with respect to any additional covenants that may be included in the terms of
the Offered Debt Securities.
No service charge will be made for any registration of transfer or exchange of
the Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit or if the principal of or premium or interest, if any, on any of
the Offered Debt Securities is payable in any foreign currency or currency unit,
the restrictions, elections, tax consequences, specific terms and other
information with respect to such Offered Debt Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement
relating thereto.
Certain Covenants
The Indentures contain a number of covenants which restrict the ability of the
Company and its Restricted Subsidiaries to engage in certain activities. For
purposes of such covenants and the related definitions, the term Company shall
mean Benton Oil and Gas Company only, and shall not refer to any Subsidiary or
Affiliate of Benton Oil and Gas Company. In addition, whenever such covenants or
related definitions require any calculation of the income, interest expense,
discounted future net revenues attributable to proved oil and gas reserves or
other financial data of the Company or any Restricted Subsidiary, such
calculation shall, except to the extent that such covenants or definitions
provide to the contrary, exclude the income, interest expense, discounted future
net revenues attributable to proved oil and gas reserves or other financial data
of any Unrestricted Subsidiary or Affiliate of the Company (including GEOILBENT)
or such Restricted Subsidiary, as the case may be.
The Indentures contain, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any of
its Restricted Subsidiaries to, Incur any Indebtedness (including any Acquired
Indebtedness) unless (i) no Default or Event of Default under the Senior
Indenture shall have occurred and be continuing at the time or as a consequence
of the Incurrence of such Indebtedness, (ii) after giving effect thereto
(including, in connection with any acquisition being financed through the
Incurrence of such Indebtedness, any Acquired Indebtedness and any proved oil
and gas reserves being acquired in connection therewith) (a) the ratio expressed
as a percentage of (1) the Indebtedness of the Company and its Restricted
Subsidiaries (excluding any Indebtedness to the extent such Indebtedness is
secured by a deposit of cash or Cash Equivalents by the Company) to (2) the Oil
and Gas Reserve Estimate of the Company and its Restricted Subsidiaries would
not be greater than 50% and (b) the EBITDA/Interest Ratio would be greater than
(1) prior to June 1, 1995, 2.0 to 1.0, (2) on or after June 1, 1995 and prior to
June 1, 1996, 2.5 to 1.0 and (3) on or after June 1, 1996, 3.0 to 1.0, (iii) in
the event such Indebtedness would be Incurred by the Company but would not be
Permitted Company Secured Indebtedness, such Indebtedness would have an Average
Life greater than the Average Life of the Notes and a stated maturity later than
the Stated Maturity of the Senior Debt Securities and (iv) in the event such
Indebtedness would be Incurred by a Restricted Subsidiary, such Indebtedness
would also qualify as Permitted Restricted Subsidiary Indebtedness.
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<PAGE> 21
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may
Incur Permitted Indebtedness if no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the Incurrence of
such Indebtedness.
For purposes of calculating the amount of any Indebtedness of the Company and
its Restricted Subsidiaries, (i) any Indebtedness of a Restricted Subsidiary
that is fully and unconditionally guaranteed by the Company or secured by a
deposit of cash or Cash Equivalents of the Company shall be deemed to be
Indebtedness of such Restricted Subsidiary and (ii) the Vinccler Notes shall be
deemed to be Indebtedness of the Company.
Limitation on Indebtedness of Unrestricted Subsidiaries. The Company will not
permit any Unrestricted Subsidiary to Incur any Indebtedness (including Acquired
Indebtedness) other than Non-Recourse Indebtedness.
Limitation on Restricted Payments. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment, if at the time of such Restricted Payment or after giving
effect to such Restricted Payment (i) the Company would not be able to Incur at
least $1.00 of additional Indebtedness (excluding Permitted Indebtedness)
pursuant to the provisions of the Indentures described above under "Limitation
on Indebtedness" and (ii) the aggregate amount expended for all Restricted
Payments (excluding any payments permitted by clauses (ii) through (viii) and
(x) of the immediately succeeding paragraph) (the amount of any such Restricted
Payment, if other than cash, as determined by the Board of Directors, whose
determination shall be evidenced by a board resolution) exceeds the sum of:
(a) 50% of the aggregate Consolidated Net Income of the Company and its
Restricted Subsidiaries (or, if such aggregate Consolidated Net Income
shall be a loss, minus 100% of such loss) accrued for the period (taken as
one accounting period) beginning on July 1, 1994 and ending on the last day
of the Company's last fiscal quarter ending prior to the date of such
proposed Restricted Payment, plus
(b) 100% of the aggregate Net Proceeds received by the Company after June
30, 1994 from the issuance and sale (other than to a Subsidiary of the
Company) of (1) Capital Stock (including options, warrants or other rights
to acquire Capital Stock) other than any such Capital Stock convertible
into or exchangeable for (whether at the option of the Company or the
holder thereof) a security other than Capital Stock and other than any such
Capital Stock issued for any purpose specified in clauses (vii) or (viii)
of the succeeding paragraph and (2) Indebtedness convertible into or
exchangeable for Capital Stock but only to the extent such Indebtedness has
been converted or exchanged, plus
(c) the aggregate amount of any Repaid Investments and Restricted
Subsidiary Investments but only to the extent such amount did not otherwise
increase the amount available for Restricted Payments pursuant to (a) above
or clause (v) of the immediately succeeding paragraph.
The foregoing provisions shall not be violated by reason of (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at the
date of declaration such payment would comply with the foregoing provision, (ii)
any Investment in the Company by any Restricted Subsidiary and any Investment in
any Restricted Subsidiary or any person which concurrently with such Investment
becomes a Restricted Subsidiary by the Company or another Restricted Subsidiary,
(iii) any dividend payable to the Company by any Restricted Subsidiary or to any
Restricted Subsidiary by another Restricted Subsidiary, (iv) any dividend
payable to a holder (other than the Company or another Restricted Subsidiary) of
Capital Stock (other than Preferred Stock) of a Restricted Subsidiary; provided
that such dividend is paid concurrently with the payment of a dividend by such
Restricted Subsidiary to the Company or another Restricted Subsidiary and the
amount of such dividend does not exceed such holder's pro rata share (based on
such holder's percentage ownership of the outstanding Capital Stock (other than
Preferred Stock) of such Restricted Subsidiary) of the aggregate amount of the
dividend payable to all holders of Capital Stock of such Restricted Subsidiary,
(v) any Investment in a person that is not a Restricted Subsidiary not to exceed
in the aggregate for all such Investments the greater of 8.5% of the Oil and Gas
Reserve Estimate or $20 million; provided that to the extent that any such
Investment subsequently qualifies as a Repaid Investment or a Restricted
Subsidiary Investment, the amount of Investments otherwise permitted under this
clause (v) shall be increased by such Repaid Investment or Restricted Subsidiary
Investment, (vi) any dividend, distribution or other payment on or with respect
to Capital Stock of the Company to the extent payable solely in shares of
Capital Stock of the Company, (vii) any purchase, redemption or other
acquisition or retirement for value or any defeasance of any Subordinated
Indebtedness, in exchange for, by conversion into or from the Net Proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Company) of
Capital Stock of the Company or new Subordinated Indebtedness; provided the
Average Life of such new Subordinated Indebtedness is greater than the Average
Life of the Debt Securities, the stated maturity of such new Subordinated
Indebtedness is later than the Stated Maturity of the Debt Securities and the
new Subordinated Indebtedness is subordinated to the Debt Securities to at least
the extent that the Subordinated Indebtedness being purchased, redeemed,
acquired, retired or defeased was subordinated to the Debt Securities, (viii)
any purchase, redemption or other acquisition or retirement for value of any
shares of
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Capital Stock of the Company in exchange for, by conversion into or from the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of Capital Stock of the Company, (ix) any Investment in a person that
represents the portion of the consideration for an Asset Sale that is not, and
is not required to be pursuant to the provisions of the Senior Indenture
described below under "Disposition of Proceeds of Asset Sales," cash or Cash
Equivalents and (x) payments or distributions pursuant to or in connection with
a consolidation, merger or transfer of assets that complies with the provisions
of the Senior Indenture described below under "Consolidation, Merger,
Conveyance, Transfer or Lease"; provided that, in the case of any of the
foregoing, no Default or Event of Default has occurred and is continuing or
shall occur as a consequence thereof.
Limitation on Transactions with Affiliates. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, enter into any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) (such a transaction
or series of related transactions, an "Affiliate Transaction") with (i) any
Affiliate of the Company or any Subsidiary or (ii) any officer, director or
employee of the Company or any Subsidiary or any Affiliate thereof unless (i)
such Affiliate Transaction is on terms that are no less favorable to the Company
or such Subsidiary, as the case may be, than those that would have been
available in a comparable arm's-length transaction with an unaffiliated third
party and (ii) (a) with respect to any Affiliate Transaction involving aggregate
payments equal to or in excess of $1 million (or, in the case of any loan or
advance to any officer, director or employee of the Company or its Restricted
Subsidiaries, $100,000), but less than $2.5 million, such Affiliate Transaction
shall have received the approval of a majority of the Disinterested Directors
(as evidenced by a board resolution of such Disinterested Directors) and (b)
with respect to any Affiliate Transaction involving aggregate payments equal to
or greater than $2.5 million, the Company shall have obtained a written opinion
of an Independent Financial Advisor stating that the terms of such Affiliate
Transaction is fair to the Company or the Subsidiary, as the case may be, from a
financial point of view.
The foregoing limitations shall not apply to (i) any transaction between the
Company and any Restricted Subsidiary or between Restricted Subsidiaries, (ii)
the payment of reasonable and customary regular fees to directors of the Company
who are not employees of the Company, (iii) any employment contract to which any
officer, director or employee is a party or stock option plan or grant of any
option thereunder to any officer, director or employee; provided that any such
agreement or arrangement (or series of related agreements or arrangements)
involving aggregate payments (or in the case of any option grant, with an
aggregate exercise price) equal to or in excess of $100,000 shall have received
the approval of the Compensation Committee of the Board of Directors which
Committee shall be comprised of Disinterested Directors (as evidenced by a
resolution of such Committee), or (iv) any Restricted Payments not prohibited by
the provisions of the Senior Indenture described above under "Limitation on
Restricted Payments."
Disposition of Proceeds of Asset Sales. The Company will not, and will not
permit any Restricted Subsidiary to, make any Asset Sale unless (i) such Asset
Sale is for not less than the fair market value of the properties and assets
sold, (ii) at least 85% of the consideration (not including the assumption of
any Indebtedness of the Company or any Restricted Subsidiary (other than
Subordinated Indebtedness)) consists of cash, Cash Equivalents or Publicly
Traded Stock (so long as prior to such Asset Sale the Board of Directors has
made a determination as evidenced by a board resolution, to sell such Publicly
Traded Stock for cash within ten Business Days after the date of such Asset Sale
and such Publicly Traded Stock does not constitute more than 30% of such 85%),
except (a) in the case of an Asset Sale involving oil and gas properties, the
consideration may consist solely or in part of tangible properties to be used in
the Company's or its Restricted Subsidiaries' Oil and Gas Business ("Tangible
Business Properties") having a fair market value at least equal to the fair
market value of the assets exchanged and (b) the Company and its Restricted
Subsidiaries may enter into farm-out transactions consistent with industry
standards and otherwise in accordance with the terms of the Senior Indenture
including, but not limited to, the provisions described above under "Limitation
on Transactions with Affiliates" above, (iii) unless prior to the date of such
Asset Sale the Board of Directors has made a determination, as evidenced by a
board resolution, to use all of the Net Cash Proceeds of such Asset Sale that
consist of cash and Cash Equivalents to permanently repay or prepay Senior
Indebtedness or Indebtedness of a Restricted Subsidiary within thirty days after
the date of such Asset Sale, the Company could Incur an additional $1.00 of
Indebtedness (other than Permitted Indebtedness) pursuant to the provisions of
the Senior Indenture described above under "Limitation on Indebtedness," (iv)
within ten Business Days after the date of such Asset Sale, any Publicly Traded
Stock required by a board resolution to be sold for cash, is sold for cash and
(v) as otherwise set forth below. For purposes of the foregoing, in the case of
any required fair market value determination with respect to any Asset Sale or
oil and gas properties or Publicly Traded Stock acquired in connection with such
Asset Sale having a fair market value in excess of $5 million, such
determination shall be made by the Board of Directors as evidenced by a board
resolution.
Subject to clause (iii) above, within twelve months of any Asset Sale, the
Company shall either (i) apply or cause the application of an amount equal to
the Net Cash Proceeds of such Asset Sale, or a portion thereof, to the permanent
repayment or prepayment of Senior Indebtedness or Indebtedness of any Restricted
Subsidiary or (ii) invest such Net Cash Proceeds, or a portion thereof, in
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<PAGE> 23
the acquisition or development of Tangible Business Properties. The amount of
such Net Cash Proceeds not applied, used or invested as set forth in clause (i)
or (ii) above shall constitute "Excess Proceeds."
If the aggregate amount of Excess Proceeds, together with any remaining Excess
Proceeds from any prior Asset Sale, equals or exceeds $10 million, the Company
shall so notify the Trustee in writing and shall offer to purchase from all
holders of the Senior Debt Securities (an "Asset Sale Offer"), and shall
purchase from holders accepting such Asset Sale Offer on the date fixed for such
Asset Sale Offer (the "Asset Sale Offer Date"), the maximum amount (expressed in
integral multiples of aggregate principal amount of $1,000) of Debt Securities
that may be purchased out of the Excess Proceeds, in accordance with the
procedures set forth in the Indentures, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest,
if any. To the extent that the aggregate amount of Debt Securities tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds relating
thereto (such shortfall constituting a "Deficiency"), then the Company may use
such Deficiency, or a portion thereof, for general corporate purposes. Upon
completion of an Asset Sale Offer, the amount of Excess Proceeds shall be reset
at zero.
Limitation on Liens Securing Indebtedness. The Company will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien of any kind upon any of their respective assets or properties now owned
or acquired after the date of the Senior Indenture, or any income or profits
therefrom, securing any Indebtedness of the Company or any Restricted Subsidiary
(other than Permitted Liens) without making provision for all of the Notes to be
equally and ratably secured with (or prior to) such Indebtedness, provided,
however that if such Lien securing such Indebtedness ceases to exist, such equal
and ratable (or prior) Lien for the benefit of the holders of the Debt
Securities shall cease to exist; provided, further, that the Lien securing any
Subordinated Indebtedness shall be subordinated to the Lien securing the Debt
Securities to at least the extent that such Subordinated Indebtedness is
subordinated to the Debt Securities.
Limitation on Conduct of Business. The Company will operate and will cause its
Restricted Subsidiaries to be operated in a manner such that their business
activities will be the Oil and Gas Business.
Limitation on Dividends and other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on Capital Stock
of any Restricted Subsidiary or any Redeemable Stock of any Restricted
Subsidiary owned by the Company or any Restricted Subsidiary, (ii) pay any
Indebtedness owed to the Company or any Restricted Subsidiary, (iii) make any
Investment in the Company or any Restricted Subsidiary or (iv) transfer any of
its property or assets to the Company or any Restricted Subsidiary, except (a)
any encumbrance or restriction pursuant to an agreement in effect on the date of
the Senior Indenture, (b) any encumbrance or restriction with respect to any
person that is not a Restricted Subsidiary on the date of the Senior Indenture,
in existence at the time such person becomes a Restricted Subsidiary and not
created in connection with, or in contemplation of, such person becoming a
Restricted Subsidiary so long as such encumbrance or restriction is not
applicable to any person or the property or assets of any person other than the
person becoming a Restricted Subsidiary, (c) any encumbrance or restriction
pursuant to any agreement that extends, refinances, renews or replaces any
agreement containing any encumbrance or restriction described in the foregoing
clauses (a) and (b), provided, however, that the terms and conditions of any
such encumbrance or restriction are not less favorable to the holders of the
Debt Securities than those contained in the agreement evidencing the restriction
or encumbrance so extended, refinanced, renewed or replaced, (d) any encumbrance
or restriction arising under law and (e) any restriction arising under customary
non-assignment and non-subletting clauses in leases. Nothing contained in the
provisions of the Indentures described in this paragraph shall prevent the
Company or any Restricted Subsidiary from entering into any agreement permitting
the incurrence of Liens otherwise permitted under the provisions of the
Indentures described above under the "Limitation on Liens Securing
Indebtedness."
Limitation on Guaranties. The Company will not permit any Restricted
Subsidiary, directly or indirectly, to assume, guarantee or in any other manner
become liable with respect to the payment of any Indebtedness of the Company
unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Senior Indenture providing for a guarantee of the
payment of the Senior Debt Securities by such Restricted Subsidiary; provided,
however, in the case of such Restricted Subsidiary's assumption, guarantee, or
other liability with respect to Subordinated Indebtedness, such guarantee,
assumption or other liability shall be subordinated to such Restricted
Subsidiary's guarantee of the Notes to at least the extent that such
Subordinated Indebtedness is subordinated to the Debt Securities; and provided,
further, that the provisions of the Indentures described in this paragraph shall
not be applicable to any guarantee, assumption or other liability with respect
to the payment of any Indebtedness of the Company by any Restricted Subsidiary
in existence on the date of the Senior Indenture or that (i) existed at the time
such person became a
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Restricted Subsidiary of the Company and (ii) was not incurred in connection
with, or in contemplation of, such person becoming a Restricted Subsidiary.
Notwithstanding the foregoing, any such guarantee of the Debt Securities by a
Restricted Subsidiary shall provide by its terms that it shall be automatically
and unconditionally released and discharged upon the release or discharge of
such guarantee of such Indebtedness, other than a release or discharge by, or as
a result of, any payment under such guarantee by such Restricted Subsidiary.
Change in Control
The Indentures provide that if there shall have occurred a Change in Control,
Debt Securities shall be purchased by the Company, at the option of the holder
thereof, in whole or in part in integral multiples of aggregate principal amount
of $1,000, on a date that is not earlier than 45 days nor later than 60 days
from the date the Change in Control Notice is given to holders or such later
date as may be necessary for the Company to comply with requirements under the
Exchange Act (such date or such later date, being the "Change in Control
Purchase Date"), at a purchase price in cash (the "Change in Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to any Change in Control Purchase Date, subject to
satisfaction by or on behalf of the holder of the requirements established
pursuant to the Indentures. The Company shall comply with any applicable tender
offer rules then in effect, including Section 14(e) of the Exchange Act and Rule
14e-1 promulgated thereunder (or any successor provisions), in connection with a
Change in Control offer. In the event of any conflict between such tender offer
rules and the provisions set forth in the Indentures, such tender offer rules
shall control.
"Change in Control" of the Company means the occurrence of any of the following:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) (or any
successor provisions) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 (or any successor provisions) under the
Exchange Act) of 50% or more of the total voting power of the Voting Stock of
the Company; (ii) there shall be consummated any consolidation or merger of the
Company (a) in which the Company is not the continuing or surviving corporation
or (b) pursuant to which the outstanding Voting Stock of the Company would be
converted into cash, securities or other property, in each case other than a
consolidation or merger of the Company in which (1) the outstanding Voting Stock
of the Company is changed into or exchanged for Voting Stock of the continuing
or surviving corporation and (2) the holders of the Company's Voting Stock
immediately prior to the consolidation or merger own, directly or indirectly, at
least a majority of the Voting Stock of the continuing or surviving corporation
immediately after the consolidation or merger, (iii) the Company sells,
transfers or otherwise disposes of all or substantially all of its assets, (iv)
the cessation of Continuing Directors for any reason to constitute a majority of
the Board of Directors then in office, (v) so long as any Indebtedness issued
pursuant to the Convertible Note Agreement remains outstanding, a Change in
Control as defined therein, (vi) so long as any Indebtedness remains outstanding
under the Convertible Debenture Indenture, a Fundamental Change as defined
therein, (vii) the Company ceases to own on a fully diluted basis, directly or
indirectly through one or more Restricted Subsidiaries that are Wholly Owned
Subsidiaries of the Company, 80% of the outstanding Voting Stock of
Benton-Vinccler, and (viii) Benton-Vinccler sells, transfers or otherwise
disposes of a substantial part of its assets; provided that neither of the
events described in clause (vii) or (viii) will constitute a "Change in Control"
if (x) during the four full fiscal quarters ended immediately prior to the
occurrence of such event, the EBITDA of the Company and its Restricted
Subsidiaries attributable to Benton-Vinccler as a percentage of the EBITDA of
the Company and its Restricted Subsidiaries, was less than 20% and (y)
immediately prior to such event, the Oil and Gas Reserve Estimate of the Company
and its Restricted Subsidiaries attributable to Benton-Vinccler as a percentage
of the Oil and Gas Reserve Estimate of the Company and its Restricted
Subsidiaries, is less than 20%.
In connection with clause (viii) of the preceding paragraph, a sale, transfer or
other disposition of assets of Benton-Vinccler shall be deemed to be a sale,
transfer or other disposition of a "substantial part" of the assets of
Benton-Vinccler if such assets, when added to all other assets of
Benton-Vinccler sold, transferred or otherwise disposed of (other than the
disposition of hydrocarbons or other mineral products in the ordinary course of
business) during the immediately preceding twelve months either (i) exceed
(based on the book value of all assets so sold, transferred or otherwise
disposed of during such twelve months) 25% of the net tangible assets of
Benton-Vinccler as of the end of its most recently completed full fiscal quarter
for which financial information is available determined in accordance with GAAP
or (ii) contributed more than 25% of the net income of Benton-Vinccler during
its most recently completed four full fiscal quarters for which financial
information is available determined in accordance with GAAP.
The Company's ability to repurchase the Debt Securities will be dependent upon
the availability of cash and other financing sources to consummate such a
repurchase. The Company currently expects to incur additional Indebtedness to
finance its capital expenditure requirements and, therefore, the Company's
ability to incur additional Indebtedness to repurchase the Debt Securities may
be adversely affected by what might then be a higher debt to equity ratio. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity."
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The Change in Control provisions of the Indentures may make it more difficult or
discourage a takeover of the Company and the removal of incumbent management.
The Change in Control provision is not the result of management's knowledge of
any specific effort to accumulate shares of Common Stock or to obtain control of
the Company by means of a merger, tender offer, solicitation or otherwise, nor
is it part of a plan by management to adopt an anti-takeover provision.
Consolidation, Merger, Conveyance, Transfer or Lease
The Company may not, without the consent of the holders of all Debt Securities
then outstanding, consolidate with, merge into or convey, sell, transfer, lease,
exchange or otherwise dispose of all of its assets and properties substantially
as an entirety to, any other person unless (i) the successor is a corporation or
partnership organized under the laws of the United States or any political
subdivision thereof or therein, (ii) the successor assumes all obligations of
the Company under the Indentures and the Debt Securities, (iii) after giving
effect to such consolidation, merger, conveyance, sale, transfer, lease,
exchange or other disposition, no Default or Event of Default, shall have
occurred and be continuing, (iv) the successor would have a pro forma
Consolidated Net Worth after giving effect to such consolidation, merger,
conveyance, sale, transfer, lease, exchange or other disposition and prior to
any purchase accounting adjustments at least equal to the Consolidated Net Worth
of the Company prior to such consolidation, merger, conveyance, sale, transfer,
lease, exchange or other disposition and (v) certain other conditions are met.
Upon any consolidation or merger or any conveyance, sale, transfer, lease,
exchange or other disposition of the properties and assets of the Company
substantially as an entirety to any person in accordance with the provisions
described above, the successor formed by such consolidation or into which the
Company is merged or to which such conveyance, sale, transfer, lease, exchange
or other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indentures with the
same effect as if such successor had been named as the Company in the
Indentures; and thereafter, except in the case of a conveyance, sale, transfer,
lease, exchange or other disposition of properties to another person, the
predecessor person shall be released from all obligations and covenants under
the Indentures and the Debt Securities.
Provision of Financial Information
To the extent permitted under the Exchange Act, whether or not the Company is
required to comply with Section 13(a) or 15(d) (or any successor provision) of
the Exchange Act, the Company will file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13(a) or 15(d) (or any
successor provision) if the Company were so required, such documents to be filed
with the Commission on or prior to the respective dates (the "Required Filing
Dates") by which the Company would have been required to file such documents if
the Company were so required. The Company will also in any event (i) within 15
days of each Required Filing Date transmit by mail to all holders of Debt
Securities, without cost to such holders, copies of the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13(a) or 15(d) (or any
successor provision) and (ii) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request supply copies of such documents to any prospective holder of Debt
Securities.
Certain Definitions
"Acquired Indebtedness" means, with respect to any person, Indebtedness of such
person (i) existing at the time such person becomes a Restricted Subsidiary or
(ii) assumed in connection with the acquisition of assets from another person,
including Indebtedness Incurred in connection with, or in contemplation of, such
person becoming a Restricted Subsidiary or such acquisition, as the case may be.
"Affiliate" means, with respect to any person, any other person directly or
indirectly controlling, controlled by, or under common control with, such
person, or any other person that owns, directly or indirectly, 5% or more of
such person's Voting Stock or any Affiliate of any such 5% or more owner. For
the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as applied to any person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such person, whether through the ownership of Voting Stock, by contract or
otherwise.
"Amount" means, (i) with respect to any Indebtedness outstanding at any time
other than Preferred Stock, the principal amount thereof; provided that the
amount of any such Indebtedness outstanding at any time that was issued at a
price less than the principal amount thereof shall equal the amount of the
liability in respect thereof at such time determined in accordance with GAAP and
(ii) with respect to any Indebtedness outstanding at any time that is Preferred
Stock, the aggregate liquidation value thereof at such time.
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<PAGE> 26
"Asset Acquisition" means (i) an Investment by the Company or any Restricted
Subsidiary in any other person pursuant to which such person shall become a
Restricted Subsidiary of the Company or any Restricted Subsidiary or shall be
merged into or consolidated with the Company or any Restricted Subsidiary or
(ii) an acquisition by the Company or any Restricted Subsidiary of the assets of
any person other than the Company or any Restricted Subsidiary that constitute
substantially all of a division or line of business of such person.
"Asset Disposition" means the sale or other disposition by the Company or any
Restricted Subsidiary (other than to the Company or another Restricted
Subsidiary) of (i) all or substantially all of the Capital Stock of any
Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any Restricted
Subsidiary.
"Asset Sale" means any conveyance, transfer, lease or other disposition
(including, without limitation, by way of any merger, consolidation or other
similar transaction), directly or indirectly, in one or a series of related
transactions, of any Capital Stock or Redeemable Stock of any Restricted
Subsidiary (other than the sale and issuance of directors' qualifying shares) or
any other properties or assets of the Company or any Restricted Subsidiary
(other than any such conveyance, transfer, lease or other disposition (i) that
is permitted under the provisions of the Indentures described under
"Consolidation, Merger, Conveyance, Transfer or Lease" above, (ii) that involves
any transfer of Capital Stock, Redeemable Stock or other property or assets of a
Restricted Subsidiary to the Company or any other Restricted Subsidiaries or of
the Company to a Restricted Subsidiary, (iii) of (1) hydrocarbon or other
mineral products or (2) other assets in an amount not to exceed $2.5 million in
any twelve month period, in each case in the ordinary course of business or (iv)
that involves the abandonment of any lease of non-producing acreage).
"Average Life" means, as of any date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (a) the sum of the product of
(i) the number of years from such date of determination to the date of each
successive scheduled principal payment of such Indebtedness and (ii) the amount
of such principal payment by (b) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of such Board.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
such person's capital stock or partnership interests whether now outstanding or
issued after the date of the Indentures, except Redeemable Stock.
"Capitalized Lease Obligation" means, with respect to any person, any obligation
relating to any property (whether real, personal or mixed) of that person as
lessee which, in conformity with GAAP, is required to be accounted for as a
capital lease for financial reporting purposes, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with a
maturity of 180 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof), (ii) repurchase obligations for investments of the
type described in clause (i) for which delivery of the investment is made
against payment, (iii) demand or time deposits, bankers' acceptances and
certificates of deposit or acceptances with a maturity of 180 days or less of
any financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$300,000,000, and (iv) commercial paper with a maturity of 180 days or less
issued by a corporation (except any Affiliate or Subsidiary of the Company)
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by Standard & Poor's Corporation and at least
P-1 by Moody's Investors Service, Inc.
"Commodity Swap Agreement" means any commodity swap agreement or other similar
agreement or arrangement.
"Consolidated Interest Expense" means, for any period, the aggregate amount
(without duplication) of (i) interest expense in accordance with GAAP
(including, in accordance with the following sentence, interest attributable to
Capitalized Lease Obligations and the undischarged balance of production
payments) during such period in respect of all Indebtedness of the Company and
its Restricted Subsidiaries (including (a) amortization of original issue
discount on any Indebtedness, (b) the interest portion of all deferred payment
obligations, calculated in accordance with GAAP, and (c) all commissions,
discounts and other fees and charges owed with respect to bankers' acceptance
financings and Currency Agreements, Interest Rate Agreements and Commodity Swap
Agreements, in each case to the extent attributable to such period), and (ii)
dividend requirements of the Company and its Restricted Subsidiaries with
respect to Redeemable Stock and with respect to all other Preferred Stock of any
Restricted Subsidiaries (in each case whether in cash or otherwise (except
dividends payable solely in shares of Capital Stock of the Company or any
Restricted Subsidiary)) paid, declared, accrued or accumulated during such
period, in each case to the extent attributable to such period and excluding
items eliminated in consolidation. For purposes of this definition, (a) interest
with respect to a Capitalized
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<PAGE> 27
Lease Obligation or a production payment shall be deemed to accrue at an
interest rate reasonably determined by the Company to be the rate of interest
implicit in such Capitalized Lease Obligation or production payment in
accordance with GAAP and (b) interest expense attributable to any Indebtedness
represented by the guarantee by the Company or a Restricted Subsidiary of an
obligation of another person shall be deemed to be the interest expense
attributable to the Indebtedness guaranteed.
"Consolidated Net Income" means, for any period, the aggregate net income (or
loss) of the Company and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP; provided that the
following items shall be excluded from Consolidated Net Income (without
duplication): (i) the net income of any person in which the Company or any of
its Restricted Subsidiaries has an interest (which interest does not cause the
net income of such person to be consolidated with the net income of the Company
in accordance with GAAP) except to the extent of the amount of dividends or
distributions actually paid to the Company or its Restricted Subsidiaries by
such person in such period; (ii) solely for the purposes of calculating the
amount of Restricted Payments that may be made pursuant to the Indenture (and in
such case, except to the extent includable pursuant to the foregoing clause (i)
above), the net income (or loss) of any person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such person are acquired by the Company or any of its
Restricted Subsidiaries, (iii) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation and (iv) all
extraordinary and non-recurring gains and losses or gains or losses attributable
to asset sales not in the ordinary course of business (including any sale of
Capital Stock of a Restricted Subsidiary). If the Consolidated Net Income for
any fiscal quarter of the Company includes a ceiling limitation writedown (a
"Writedown Quarter") in accordance with the full cost accounting method rules of
the Commission (such a writedown, an "Actual Writedown") but such Actual
Writedown would have been less or would not have been required had such ceiling
limitation been calculated using oil and gas prices in effect on the last day of
either of the two fiscal quarters of the Company immediately succeeding such
Writedown Quarter (such Actual Writedown, as so recalculated, a "Hypothetical
Writedown"), then Consolidated Net Income for such Writedown Quarter shall be
increased by the amount by which such Actual Writedown exceeds such Hypothetical
Writedown; provided that in no event shall any such increase singly, or in the
case of any such increases for both quarters immediately succeeding such
Writedown Quarter, in the aggregate, exceed the amount of such Actual
Writedown).
"Consolidated Net Worth" means, with respect to any person, as at any date of
determination, the consolidated stockholders' equity (or like balance sheet
designation) of such person as determined in accordance with GAAP.
"Continuing Directors" means any member of the Board of Directors on the date of
the Indenture, any director elected after the date thereof in any annual meeting
of the stockholders upon the recommendation of the Board of Directors and any
other member of the Board of Directors who is elected to succeed a Continuing
Director by a majority of Continuing Directors who are then members of the Board
of Directors.
"Convertible Debenture Indenture" means the Indenture dated as of May 15, 1992
between the Company and Meridian Trust Company of California.
"Convertible Note Agreement" means the Note Agreement dated as of October 1,
1991 between the Company and the purchasers listed therein.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or both
would be, an Event of Default.
"Disinterested Director" means, with respect to an Affiliate Transaction, a
member of the Board of Directors who has no direct or indirect financial
interest, and whose employer has no direct or indirect financial interest, in
such Affiliate Transaction.
"EBITDA" means, for any period, without duplication, Consolidated Net Income for
such period, increased (to the extent deducted in determining Consolidated Net
Income) by the sum of (i) Consolidated Interest Expense, (ii) income taxes
(other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or gains or losses attributable
to asset sales not in the ordinary course of business), (iii) depreciation and
depletion expense, (iv) amortization expense and (v) all other non-cash items
reducing Consolidated Net Income less all non-cash items increasing Consolidated
Net Income (other than, in each case, minority interests which shall, in all
cases, be excluded from the calculation of EBITDA) all as determined on a
consolidated basis for the Company and its Restricted Subsidiaries in conformity
with GAAP.
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"EBITDA/Interest Ratio" means the ratio of (i) EBITDA for the Reference Period
immediately prior to the date of the transaction giving rise to the need to
calculate the EBITDA/Interest Ratio (the "Transaction Date") to (ii)
Consolidated Interest Expense for such Reference Period. In making the foregoing
calculation, (a) pro forma effect shall be given to (1) any Indebtedness
Incurred subsequent to the end of such Reference Period, (2) any Indebtedness
Incurred during such Reference Period to the extent such Indebtedness is
outstanding on the Transaction Date and (3) any Indebtedness to be Incurred on
the Transaction Date, in each case as if such Indebtedness had been Incurred on
the first day of such Reference Period and after giving effect to the
application of the proceeds thereof; (b) Consolidated Interest Expense
attributable to interest or dividends on any Indebtedness (whether existing or
being Incurred) computed on a pro forma basis and bearing a floating interest or
dividend rate shall be computed as if the rate in effect on the date of
computation (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months) had been the applicable rate for the entire period; (c) there shall
be excluded from Consolidated Interest Expense any Consolidated Interest Expense
related to any amount of Indebtedness that was outstanding during such Reference
Period or thereafter but that is not outstanding or is to be repaid on the
Transaction Date, except for Consolidated Interest Expense accrued (as adjusted
pursuant to clause (b)) during such Reference Period under a revolving credit or
similar arrangement to the extent of the commitment thereunder (or under any
successor revolving credit or similar arrangement) on the Transaction Date; and
(d) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions
that occur during such Reference Period or thereafter and on or prior to the
Transaction Date as if they had occurred on the first day of such Reference
Period.
"Event of Default" has the meaning provided in "Events of Default."
"GAAP" means, with respect to any determination pursuant to the terms of the
Indenture, such accounting principles as are generally accepted in the United
States at the time of such determination.
"Guarantee" means, as applied to any obligation, (i) a guaranty (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of any part or all of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"Incur" means with respect to any Indebtedness, to incur, create, issue, assume,
guarantee or otherwise become liable for or with respect to or extend the
maturity of or become responsible for, the payment of, contingently or
otherwise, such Indebtedness; provided that neither the accrual of interest
(whether such interest is payable in cash or kind) nor the accretion of original
issue discount shall be considered an Incurrence of Indebtedness; provided
further that (i) in the case of any Indebtedness of the Company to any
Restricted Subsidiary, such Indebtedness shall be deemed to have been Incurred
by the Company at the time such Indebtedness is sold, transferred or otherwise
disposed of by such Restricted Subsidiary or such Restricted Subsidiary is
designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted
Subsidiary, (ii) in the case of any Indebtedness of a Restricted Subsidiary to
the Company or another Restricted Subsidiary, such Indebtedness shall be deemed
to have been Incurred by such Restricted Subsidiary at the time such
Indebtedness is sold, transferred or otherwise disposed of by the Company or
such other Restricted Subsidiary or the Restricted Subsidiary holding such
Indebtedness is designated as an Unrestricted Subsidiary or otherwise ceases to
be a Restricted Subsidiary and (iii) any Indebtedness of an Unrestricted
Subsidiary that ceases to be Non-Recourse Indebtedness shall be deemed to have
been Incurred by such Unrestricted Subsidiary at the time of such cessation.
"Indebtedness" means, without duplication, with respect to any person, (i) all
obligations of such person (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such person or only to a
portion thereof), (b) evidenced by bonds, notes, debentures or similar
instruments, (c) representing the balance deferred and unpaid of the purchase
price of any property or services (excluding accounts payable or other
obligations arising in the ordinary course of business), (d) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (e) for
the payment of money relating to a Capitalized Lease Obligation, or (f)
evidenced by a letter of credit or reimbursement obligation of such person with
respect to any letter of credit (regardless of whether such reimbursement
obligation is to the issuer of the letter of credit or another person); (ii) all
net obligations of such person under Interest Rate Agreements, Commodity Swap
Agreements and Currency Agreements; (iii) the undischarged balance of any
production payments as to which such person is obligated or its property is
dedicated; (iv) all liabilities of others of the kind described in the preceding
clause (i), (ii) or (iii) that such person has guaranteed or that are otherwise
its legal liability; (v) Indebtedness (as otherwise defined in this definition)
of others secured by a Lien on any asset of such person, whether or not such
Indebtedness is assumed by such person (provided that if the obligations so
secured have not been assumed in full by such person or are not otherwise such
person's legal liability in full, then such obligations shall be deemed to be in
an amount equal to the greater of (a) the lesser of (1) the full amount of such
obligations and (2) the fair market value of such
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<PAGE> 29
asset, as determined in good faith by the board of directors of such person,
which determination shall be evidenced by a board resolution, and (b) the amount
of obligations as have been assumed by such person or which are otherwise such
person's legal liability); and (vi) the liquidation preference and any mandatory
redemption payment obligations in respect of (a) all Redeemable Stock of such
person and its Subsidiaries and (b) all Preferred Stock of such Subsidiaries.
"Independent Financial Advisor" means a nationally recognized investment banking
firm (i) which does not (and whose directors, officers, employees and Affiliates
do not) have a direct or indirect material financial interest in the Company and
(ii) which, in the sole judgment of the Board of Directors, is otherwise
independent and qualified to perform the task for which such firm is being
engaged.
"Independent Petroleum Engineers" means, with respect to any person, a
nationally recognized petroleum engineering firm (i) which does not (and whose
directors, officers, employees and Affiliates do not) have a direct or indirect
material financial interest in such person and (ii) which, in the sole judgment
of the board of directors of such person, is otherwise independent and qualified
to perform the task for which such firm is being engaged.
"Interest Rate Agreement" means any interest rate swap agreement, interest rate
collar agreement or other similar agreement or arrangement designed to protect
the Company or any of its Restricted Subsidiaries against fluctuations in
interest rates.
"Investment" means, with respect to any person, any investment in another
person, whether by means of a share purchase, capital contribution, loan,
advance (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the balance sheet of such person) or
similar credit extension constituting Indebtedness of such other person and any
guarantee of obligations of any other person.
"Lien" means any mortgage, lien, security interest, charge or encumbrance of any
kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest).
"Material Subsidiary" means, at the time of determination, any Restricted
Subsidiary that, together with its Subsidiaries, (i) accounted for more than 5%
of (a) the revenues of the Company and its Restricted Subsidiaries, on a
consolidated basis, or (b) EBITDA, in each case for the most recently completed
fiscal year of the Company for which financial information is available or (ii)
owned more than 5% of the assets of the Company and its Restricted Subsidiaries,
on a consolidated basis, as at the end of such fiscal year, all as shown on or
derived from the consolidated financial statements of the Company for such
fiscal year.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof
in the form of cash or Cash Equivalents (including proceeds from the sale of
Publicly Traded Stock and payments in respect of deferred payment obligations
when received in the form of cash or Cash Equivalents), net of (i) brokerage
commissions and other reasonable fees and expenses (including fees and expenses
of counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all taxes payable as a result of such Asset Sale, (iii) payments made to
retire Indebtedness where payment of such Indebtedness is required in connection
with such Asset Sale, (iv) obligations and expenses incurred in connection with
the repatriation to the United States of any proceeds of such Asset Sale, (v) in
the case of any Asset Sale made by a Restricted Subsidiary, any dividend or
distribution of a portion of the proceeds of such Asset Sale to a holder (other
than the Company or another Restricted Subsidiary) of Capital Stock (other than
Preferred Stock) of such Restricted Subsidiary; provided that such dividend is
paid or distribution is made concurrently with the payment of a dividend or
making of a distribution of a portion of such proceeds by such Restricted
Subsidiary to the Company or another Restricted Subsidiary and the amount of
such dividend or distribution does not exceed such holder's pro rata share
(based on such holder's percentage ownership of the outstanding Capital Stock
(other than Preferred Stock) of such Restricted Subsidiary) of the aggregate
amount of the proceeds of such Asset Sale being dividended or distributed and
(vi) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"Net Proceeds" means, in the case of any sale by the Company of Capital Stock,
the aggregate net cash proceeds received by the Company, after payment of
expenses, commissions, discounts and any other transaction costs incurred in
connection therewith.
"Non-Recourse Indebtedness" means, with respect to any Unrestricted Subsidiary,
Indebtedness of such Unrestricted Subsidiary as to which (i) neither the Company
nor any Restricted Subsidiary (a) provides credit support including any
undertaking, agreement or instrument which would constitute Indebtedness or (b)
is directly or indirectly liable for such Indebtedness and (ii) no default
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with respect to such Indebtedness (including any rights which the holders
thereof may have to take enforcement action against such Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Company or any Restricted Subsidiary to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Oil and Gas Business" means the exploration for and the development,
acquisition, production, processing, marketing, storage and transportation of
hydrocarbons and other related energy and natural resources businesses.
"Oil and Gas Reserve Estimate" means, as of any date of determination, the
estimated discounted future net revenues attributable to proved oil and gas
reserves of the Company and its Restricted Subsidiaries calculated in accordance
with the Commission's guidelines (before any state or federal income taxes) as
set forth in the most recently prepared reserve report of the Company and its
Restricted Subsidiaries that has been audited by Independent Petroleum Engineers
(which report shall be prepared as of a date no earlier than the end of the most
recently completed fiscal year of the Company for which financial information is
available) (the "Audited Report"), decreased, in the case of clause (i) below,
and increased or decreased, as appropriate, in the case of clauses (ii) and
(iii) below, by the Company's petroleum engineers to reflect, as of such date of
determination, the estimated discounted future net revenues attributable to (i)
the ownership interest of any holder (other than the Company or another
Restricted Subsidiary) of Capital Stock (other than Preferred Stock) of any
Restricted Subsidiary (based on such holder's percentage ownership of such
Capital Stock as of such date of determination), but only to the extent such
ownership interest is not otherwise deducted from the discounted future net
revenues of the Company and its Restricted Subsidiaries set forth in the Audited
Report, (ii) proved oil and gas reserves acquired or disposed of since the date
of the Audited Report and (iii) increases or decreases in proved oil and gas
reserves of the Company and its Restricted Subsidiaries due to exploration,
development or exploitation activities or changes in geological conditions since
the date of the Audited Report; provided that such adjustments are calculated in
accordance with the Commission's guidelines by the Company's petroleum engineers
utilizing the prices utilized in, and on a basis otherwise consistent with, the
Audited Report. Notwithstanding the foregoing, (1) if the estimated discounted
future net revenues from any proved oil and gas reserves acquired since the date
of the Audited Report have been audited by Independent Petroleum Engineers and a
report with respect thereto as of a date no earlier than the end of the most
recently completed fiscal year of the person from whom such reserves were
acquired has been prepared, such report (or, if a more recent audited reserve
report is available, the most recent of such reports) shall be utilized for
purposes of calculating the adjustment to discounted future net revenues of such
person attributable to such acquired reserves, (2) if the estimated discounted
future net revenues of the Company and its Restricted Subsidiaries, as adjusted
pursuant to clauses (ii) and (iii) of the preceding sentence (excluding any
adjustments calculated pursuant to clause (1) of this sentence) would vary by
more than 10% from the discounted future net revenues of the Company and its
Restricted Subsidiaries set forth in the Audited Report, such adjustments shall
be audited by Independent Petroleum Engineers and (3) so long as Benton-Vinccler
is a Restricted Subsidiary, for purposes of calculating the Oil and Gas Reserve
Estimate of the Company and its Restricted Subsidiaries attributable to
Benton-Vinccler as of any date of determination, the proportionate share of the
Company and its Restricted Subsidiaries (based on their percentage ownership
interest of Benton-Vinccler as of such date of determination) of the estimated
discounted future net revenues attributable to the proved oil and gas reserves
subject to the operating service agreement dated as of July 31, 1992 with
Lagoven (as amended or supplemented from time to time and including any
successor agreements or arrangements) shall be included in such Oil and Gas
Reserve Estimate on the same basis as such net revenues would be included if
such proved oil and gas reserves were owned by Benton-Vinccler.
"Performance Letter of Credit" means, with respect to any person, a letter of
credit or bond to secure the performance in any country of any obligations of
such person under any contract entered into in the ordinary course of such
person's Oil and Gas Business; provided that the provision of any such letter of
credit or bond is required by local law or, in the case of any such letter of
credit or bond securing the performance of obligations outside the United
States, is customarily required in connection with contracts relating to the Oil
and Gas Business in such country and, in either case, such letter of credit or
bond requires that any payment thereunder by the issuer thereof be immediately
repaid by such person.
"Permitted Benton-Vinccler Indebtedness" means Indebtedness of Benton-Vinccler
in an aggregate amount not to exceed $25 million at any time outstanding.
"Permitted Commodity Swap Agreements" means Commodity Swap Agreements entered
into in order to protect the Company or its Restricted Subsidiaries against
fluctuations in oil or gas prices with respect to their current or good faith
estimated future oil and gas production irrespective of whether such production
is owned by the Company or a Restricted Subsidiary or is produced by the Company
or a Restricted Subsidiary pursuant to an arrangement under which the Company or
a Restricted Subsidiary acts as a contractor for a third party that owns such
production.
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"Permitted Company Secured Indebtedness" means secured Indebtedness of the
Company Incurred after the date of the Indentures (other than pursuant to clause
(xi) of the definition of Permitted Indebtedness) in an aggregate amount not to
exceed the greater of $10 million or 4% of the Oil and Gas Reserve Estimate, in
each case outstanding at any time less the aggregate amount of Permitted
Restricted Subsidiary Indebtedness outstanding at such time.
"Permitted Indebtedness" means (i) the Debt Securities; (ii) Indebtedness of the
Company (other than the Vinccler Notes) and its Restricted Subsidiaries (other
than Benton-Vinccler) outstanding on the date of the Indenture; (iii)
obligations of the Company and its Restricted Subsidiaries pursuant to Interest
Rate Agreements, Currency Agreements and Permitted Commodity Swap Agreements and
compensation payable thereunder; (iv) Indebtedness of the Company to a
Restricted Subsidiary or of a Restricted Subsidiary to the Company or another
Restricted Subsidiary (but only so long as such Indebtedness is held or owned by
the Company or a Restricted Subsidiary); (v) Indebtedness of the Company
Incurred for the purpose of financing the working capital requirements of the
Company or any Restricted Subsidiary in an aggregate amount not to exceed the
greater of $5 million or 3% of the Oil and Gas Reserve Estimate, in each case at
any time outstanding; (vi) Indebtedness (excluding Acquired Indebtedness) of the
Company in addition to Indebtedness permitted by clauses (i) through (v) in an
aggregate amount not to exceed $5 million at any time outstanding; (vii)
Permitted Benton-Vinccler Indebtedness; (viii) Performance Letters of Credit
with respect to which the account party is the Company or any Restricted
Subsidiary; provided that the reimbursement obligation of the Company or such
Restricted Subsidiary thereunder is unsecured; (ix) unsecured obligations of the
Company or any Restricted Subsidiary to reimburse any other person for all or a
portion of such other person's reimbursement obligations with respect to any
Performance Letter of Credit; provided that such Performance Letter of Credit
secures the performance of obligations of the Company or a Restricted Subsidiary
(in addition to any performance obligations of such other person which such
Performance Letter of Credit may secure) under any contract entered into by the
Company or such Restricted Subsidiary in the ordinary course of its Oil and Gas
Business; (x) the Vinccler Notes; and (xi) Indebtedness of the Company or any
Restricted Subsidiary the proceeds of which are used to renew, extend, refinance
or repurchase, or Indebtedness of the Company or any Restricted Subsidiary
exchanged for, Indebtedness permitted by clause (i) or (ii) above so long as (a)
the aggregate amount of such new Indebtedness (or, if such new Indebtedness will
be issued at a price less than the principal amount thereof, the aggregate issue
price thereof) would not be greater than the sum of the aggregate amount of the
Indebtedness being renewed, extended, refinanced, repurchased or exchanged and
any premium, accrued interest expense, commissions and other transaction costs
incurred in connection with such renewal, extension, refinancing, repurchase or
exchange (but only if such costs are of a kind and in an amount that would
customarily be incurred in connection with such types of transactions), (b) if
the Indebtedness being renewed, extended, refinanced, repurchased or exchanged
is Indebtedness of the Company, such new Indebtedness would be Indebtedness of
the Company and, unless the Indebtedness being renewed, extended, refinanced,
repurchased or exchanged is fully secured, such new Indebtedness would have an
Average Life greater than the Average Life of the Senior Debt Securities and a
stated maturity later than the Stated Maturity of the Notes and (c) such new
Indebtedness would be Subordinated Indebtedness if the Indebtedness renewed,
extended, refinanced, repurchased or exchanged is Subordinated Indebtedness and
such new Subordinated Indebtedness would be subordinated to the Senior Debt
Securities at least to the extent that the Subordinated Indebtedness being
renewed, extended, refinanced, repurchased or exchanged is subordinated to the
Senior Debt Securities.
"Permitted Liens" means Liens upon any real or tangible personal property
securing (i) any Indebtedness of the Company or any Restricted Subsidiary
existing on the date of the Indenture and any renewals, extensions, refinancings
or exchanges of such Indebtedness permitted under the Indenture; provided that
any such Lien securing any renewed, extended, refinanced or exchanged
Indebtedness shall only attach to the property that secured such Indebtedness
prior to such renewal, extension, refinancing or exchange; (ii) any Permitted
Benton-Vinccler Indebtedness; (iii) any Permitted Restricted Subsidiary
Indebtedness; (iv) any Permitted Company Secured Indebtedness; (v) Permitted
Commodity Swap Agreements; and (vi) any other Indebtedness of the Company or any
Restricted Subsidiary required by its terms to be secured in the event that the
Notes are required to be secured pursuant to the terms of the Indenture;
provided that (a) if such other Indebtedness is Subordinated Indebtedness, the
Lien securing such other Indebtedness shall be subordinated to the Lien securing
the Senior Debt Securities to at least the extent that such Subordinated
Indebtedness is subordinated to the Senior Debt Securities, (b) in no event
shall the Lien securing such other Indebtedness be prior to the Lien securing
the Senior Debt Securities and (c) if the Lien securing the Senior Debt
Securities ceases to exist, the Lien securing such other Indebtedness shall also
cease to exist.
"Permitted Restricted Subsidiary Indebtedness" means Indebtedness of any
Restricted Subsidiary (excluding Permitted Benton-Vinccler Indebtedness)
Incurred after the date of the Indentures (other than pursuant to clause (xi) of
the definition of Permitted Indebtedness) in an aggregate amount for all such
Restricted Subsidiaries not to exceed the greater of $10 million or 4% of the
Oil
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and Gas Reserve Estimate, in each case outstanding at any time less the
aggregate amount of Permitted Company Secured Indebtedness outstanding at such
time.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof; provided that the term
joint venture shall not include any contractual arrangement between the Company
or any Restricted Subsidiary and one or more third parties pursuant to which the
Company or such Restricted Subsidiary and such third party or parties agree to
share the costs and benefits of exploring and developing oil and gas properties
so long as (i) the interest of the Company or such Restricted Subsidiary in such
properties and the hydrocarbons or other mineral products derived therefrom is
owned directly by the Company or such Restricted Subsidiary, (ii) such
contractual arrangement does not grant any Lien on the Company's or such
Restricted Subsidiary's ownership interest in such properties or products
derived therefrom or permit such third party or parties to restrict in any
manner the ability of the Company or such Restricted Subsidiary to use,
transfer, sell or otherwise dispose of such ownership interest (excluding, in
each case, any agreement to sell such products to such third party or parties so
long as such agreement was negotiated on an arm's-length basis) and (iii) no
independent legal entity is created by such contractual arrangement.
"Preferred Stock" means, with respect to any person, Capital Stock or Redeemable
Stock of such person of any class or classes (however designated) whether now
outstanding or issued after the date of the Indenture, that ranks prior, as to
the payment of dividends or as to the distribution of assets upon any voluntary
or involuntary liquidation of such person, to any other class of Capital Stock
of such person and includes, without limitation, all classes and series of
preferred or preference stock.
"Publicly Traded Stock" means, with respect to any person, Voting Stock of such
person which is registered under Section 12 of the Exchange Act and which is
actively traded on the New York Stock Exchange or American Stock Exchange or in
the National Association of Securities Dealers Automated Quotation System
(National Market System).
"Redeemable Stock" means, with respect to any person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
such person's capital stock or partnership interests whether now outstanding or
issued after the date of the Indentures that by their terms or otherwise are or
may be required to be redeemed prior to the Stated Maturity of the Debt
Securities or are redeemable at the option of the holder thereof (including,
without limitation, upon the happening of any specified event or with the
passage of time) at any time prior to the Stated Maturity of the Debt
Securities; provided that if the only event that could require redemption of any
such securities prior to the Stated Maturity of the Debt Securities is a change
in control of the Company (defined in a manner substantially identical to the
definition of Change in Control in the Indentures) and such right of redemption
is expressly subordinated to the right of the holders of the Debt Securities to
require repurchase of the Debt Securities upon the occurrence of a Change in
Control pursuant to the terms of the Indentures, then such securities shall not
be deemed to be Redeemable Stock.
"Reference Period" means, with respect to any determination to be made pursuant
to the terms of the Indentures, the four full fiscal quarters for which
financial information is available immediately preceding any date upon which
such determination is to be made.
"Repaid Investment" means (i) the amount of any Investment in a person (which is
a Restricted Payment) made by the Company or a Restricted Subsidiary after the
date of the Indenture (a) to the extent such amount has been unconditionally
repaid in cash to the Company or such Restricted Subsidiary (including any such
repayment in the form of a dividend but excluding any payments of interest) or
(b) to the extent of the net proceeds received in cash or Cash Equivalents from
the sale thereof and (ii) the amount of any Indebtedness of a person guaranteed
by the Company or a Restricted Subsidiary after the date of the Indenture (which
guarantee is a Restricted Payment) to the extent such amount has been
unconditionally released from such guarantee; provided that in each case such
amount shall not exceed the amount of such Investment as recorded on the books
of the Company or such Restricted Subsidiary in accordance with GAAP at the time
such Investment was made.
"Restricted Payment" means, with respect to any person, (i) the declaration or
payment of any dividend or other distribution in respect of Capital Stock or
Redeemable Stock of such person or any Subsidiary of such person, (ii) any
payment on account of the purchase, redemption or other acquisition or
retirement for value of Capital Stock or Redeemable Stock of such person or any
Subsidiary of such person (including options, warrants or other rights to
acquire such Capital Stock or Redeemable Stock), (iii) any payment on account of
the purchase, redemption or other acquisition or retirement for value of, or any
payment in respect of any amendment of the terms of, or any defeasance of, any
Subordinated Indebtedness, directly or indirectly, by such person or a
Subsidiary of such person prior to the scheduled maturity, any scheduled
repayment of principal or any scheduled sinking fund
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payment, as the case may be, of such Subordinated Indebtedness and (iv) any
Investment by such person other than any Investment in Cash Equivalents.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary; provided that so long as Benton-Vinccler is a direct or
indirect Subsidiary of the Company it shall remain a Restricted Subsidiary.
"Restricted Subsidiary Investment" means, with respect to any person that
becomes a Restricted Subsidiary, the amount of any Investment in such person
(which is a Restricted Payment) made by the Company or a Restricted Subsidiary
after the date of the Indenture but prior to the time such person becomes a
Restricted Subsidiary; provided that such amount shall not exceed the amount of
such Investment as recorded on the books of the Company or such Restricted
Subsidiary in accordance with GAAP at the time such Investment was made.
"Senior Indebtedness" means any Indebtedness of the Company (whether outstanding
on the date hereof or hereinafter incurred), unless such Indebtedness is
subordinate or junior in right of payment to the Debt Securities.
"Stated Maturity," when used with respect to any Note, means the date specified
in such Note as the fixed date on which the principal of such Note is due and
payable.
"Subordinated Indebtedness" means any Indebtedness (whether outstanding on the
date hereof or hereinafter incurred) which is subordinate or junior in right of
payment to the Debt Securities.
"Subsidiary" of any person means (i) a corporation a majority of whose Voting
Stock is at the time, directly or indirectly, owned by such person, by one or
more Subsidiaries of such person or by such person and one or more Subsidiaries
of such person or (ii) any other person (other than a corporation) in which such
person, directly or indirectly, at the date of determination thereof, has (x) at
least a majority ownership interest or (y) the power to elect or direct the
election of a majority of the directors or other governing body of such person.
"'Unrestricted Subsidiary" means (i) any Subsidiary of the Company or of a
Restricted Subsidiary (other than Benton-Vinccler) that is designated as an
Unrestricted Subsidiary by a resolution adopted by the Board of Directors in
accordance with the requirements of the following sentence and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Company may designate any
Subsidiary of the Company or of a Restricted Subsidiary (excluding any
Restricted Subsidiary that had been designated as an Unrestricted Subsidiary
prior to its designation as a Restricted Subsidiary but including a newly
acquired or newly formed Subsidiary of the Company or any Restricted Subsidiary)
to be an Unrestricted Subsidiary by a resolution of the Board of Directors, if
immediately after giving effect to such designation, (i) the Company could Incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the Indenture, (ii) the Company could make an additional Restricted
Payment of $1.00 pursuant to the Indenture, (iii) such Subsidiary does not own
or hold any Capital Stock or Redeemable Stock of, or any Lien on any property
of, the Company or any Restricted Subsidiary and (iv) such Subsidiary is not
liable, directly or indirectly, with respect to any Indebtedness other than
Non-Recourse Indebtedness. The Board of Directors may designate any Unrestricted
Subsidiary (excluding any Unrestricted Subsidiary that had been a Restricted
Subsidiary prior to its designation as an Unrestricted Subsidiary) to be a
Restricted Subsidiary; provided that, immediately after giving effect to such
designation, the Company could Incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the Indenture. Upon any such
designation by the Board of Directors, the Company shall promptly file with the
Trustee a copy of a board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing. As of the date of the Indenture, the Company has no Unrestricted
Subsidiaries.
"Vinccler Notes" means the promissory notes in an aggregate principal amount
equal to $10 million issued to Vinccler by the Company and guaranteed by
Benton-Vinccler.
"'Voting Stock" means, with respect to any person, securities of any class or
classes of Capital Stock in such person entitling the holders thereof (whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency) to vote in the election of members of the board of
directors or other governing body of such person but not including Capital Stock
having the right to vote thereon solely upon the happening of a contingency
unless and until such contingency has occurred, and then only so long as such
Capital Stock has voting rights with respect thereto.
"Wholly Owned Subsidiary" means, with respect to any person, any Subsidiary of
such person if all of the Capital Stock (excluding Preferred Stock) in such
Subsidiary (other than any director's qualifying shares) is owned directly or
indirectly by such person.
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Events of Default
An Event of Default will occur under the Indentures with respect to the Debt
Securities if any one of the following events occurs:
(a) default in the payment of any installment of interest on the Debt Securities
as and when the same becomes due and payable, and the continuance of such
default for 30 days; or
(b) default in the payment of the principal of the Debt Securities, the amount
payable upon the redemption of any Debt Securities, the Change in Control
Purchase Price or the Asset Sale Offer Price when the same becomes due and
payable as provided under the Indentures, whether at Stated Maturity, upon
redemption, upon declaration of acceleration, when due for purchase by the
Company or otherwise; or
(c) default in the performance or breach of any covenant or agreement of the
Company under the Indentures (other than a default in the performance or breach
of a covenant or agreement that is specifically dealt with elsewhere herein) and
continuance of such default or breach for a period of 30 days after there has
been given, by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the holders of at least 25% in principal amount
of the outstanding Debt Securities a written notice specifying such default or
breach and stating that such notice is a "Notice of Default" under the
Indentures; or
(d) default in the payment of any principal, premium, if any, or interest when
due or after the expiration of any applicable grace period in respect of any
Indebtedness of the Company or any Restricted Subsidiary (including, without
limitation, reimbursement obligations with respect to Performance Letters of
Credit) having an outstanding principal amount (or with an outstanding
reimbursement obligation) of $2.5 million or more individually or in the
aggregate or the acceleration of the maturity of any such Indebtedness; or
(e) one or more final judgments or orders rendered against the Company or any
Restricted Subsidiary which require the payment in money, either individually or
in an aggregate amount, of more than $500,000 shall remain unsatisfied or
unstayed for 30 consecutive days after any such judgment or order becomes final
and nonappealable; or
(f) the entry of a decree or order by a court having jurisdiction in the
premises (i) for relief in respect of the Company or any Material Subsidiary in
an involuntary case or proceeding under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or (ii) adjudging the Company or
any such Material Subsidiary as bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company or any such Material Subsidiary under any such law, or (iii) appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or any such Material Subsidiary or of any
substantial part of any of their properties, or ordering the winding up or
liquidation of any of their affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(g) the institution by the Company or any Material Subsidiary of a voluntary
case or proceeding under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Company or any Material
Subsidiary to the entry of a decree or order for relief in respect of the
Company or such Material Subsidiary in any involuntary case or proceeding under
any such law or to the institution of bankruptcy or insolvency proceedings
against the Company or such Material Subsidiary, or the filing by the Company or
any Material Subsidiary of a petition or answer or consent seeking
reorganization or relief under any such law, or the consent by the Company or
any Material Subsidiary to the filing of any such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of any of the Company or such Material
Subsidiary or any substantial part of any of their properties, or the making by
the Company or any Material Subsidiary of an assignment for the benefit of
creditors, or the admission by the Company or any Material Subsidiary in writing
of an inability to pay any of their debts generally as they become due or the
taking of corporate action by the Company or any Material Subsidiary in
furtherance of any such action.
If an Event of Default with respect to the Offered Debt Securities (other than
as specified in clauses (f) and (g) above) occurs and is continuing, either the
Trustee or the holders of at least 25% in aggregate principal amount of the
Offered Debt Securities then outstanding, by written notice to the Company (and
to the Trustee if such notice is given by holders) may, and the Trustee at the
request of such holders shall, declare the Debt Securities and the accrued
interest thereon to be immediately due and payable, as specified below. Upon a
declaration of acceleration, such amount shall be due and payable immediately
after receipt by the Company of such written notice. If an Event of Default
specified in clause (f) or (g) above occurs and is continuing, then the Debt
Securities and the accrued interest thereon shall become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any holder. At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of
33
<PAGE> 35
the Debt Securities outstanding, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if (a) the
Company has paid or deposited with the Trustee a sum sufficient to pay (i) all
sums paid or advanced by the Trustee and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and (ii) the
amounts payable in respect of any Debt Securities which have become due
otherwise than by such declaration of acceleration and overdue interest thereon
(to the extent of such overdue interest at the rate borne by the Debt
Securities), (b) the rescission would not conflict with any judgment or decree
and (c) all existing Events of Default, other than the non-payment of the
principal amount of the Notes which have become due solely by such declaration
of acceleration, have been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereon provided in the
following paragraph.
The holders of not less than a majority in aggregate principal amount of the
outstanding Debt Securities, by notice to the Trustee (and without notice to any
other holder) on behalf of the holders of all the Debt Securities may waive any
past Default under the Indentures with respect to such Debt Securities and its
consequences, except (i) an Event of Default described in clause (b) of the
first paragraph under this section or (ii) a default in the payment of interest
on any Debt Securities or in respect of a covenant or provision that under the
terms of the Indentures cannot be modified or amended without the consent of the
holder of each outstanding Debt Securities affected thereby. Upon any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of the
Indentures; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereto.
In the Indentures, (i) the Company will covenant that (to the extent that it may
lawfully do so) it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of the Indentures and the Company will expressly
waive (to the extent that it may lawfully do so) all benefit or advantage of any
such law and (ii) the Company will covenant that it will not hinder, delay or
impede the execution of any power granted to the Trustee under the Indentures
and will suffer and permit the execution of every such power as though no such
law had been enacted.
Defeasance
The Indentures will provide that (i) the Company may be discharged from any and
all obligations in respect of the outstanding Debt Securities or (ii) the
Company may omit to comply with certain restrictive covenants and that such
omission shall not be deemed to be an Event of Default under the Indentures and
the Debt Securities in the case of either clause (i) or (ii) upon irrevocable
deposit with the Trustee, in trust, of money and/or U.S. government obligations
which will provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent certified accountants to pay the principal of and
each installment of interest, if any, on the outstanding Debt Securities. With
respect to clause (ii), the obligations under the Indentures other than with
respect to such covenants and the Events of Default other than the Event of
Default relating to such covenants shall remain in full force and effect. Such
trust may only be established if, among other things (a) with respect to clause
(i), the Company has delivered to the Trustee an Opinion of Counsel stating that
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or there has been a change in law, and based thereon
such Opinion of Counsel confirms that holders of the Debt Securities will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge had not occurred or, with respect
to clause (ii), the Company has delivered to the Trustee an Opinion of Counsel
to the effect that the holders of the Debt Securities will not recognize gain or
loss for federal income tax purposes as a result of such deposit and defeasance
and will be subject to federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and defeasance
had not occurred; (b) no Event of Default or Default shall have occurred or be
continuing; (c) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that such deposit shall not cause the Trustee or the trust so
created to be subject to the Investment Company Act of 1940, as amended; and (d)
certain other customary conditions precedent are satisfied.
Modification of Indenture
The Indentures contain provisions permitting the Company and the Trustee, with
the consent of the holders of not less than a majority in aggregate principal
amount of Debt Securities at the time outstanding, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating any
of the provisions of the Indentures or any supplemental indenture or modifying
in any manner the rights of the holders of the Debt Securities; provided that no
such supplemental indenture shall (i) extend the final maturity of any Debt
Securities, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or reduce any amount payable on
redemption of any Debt Securities or upon an Event of Default, or reduce the
34
<PAGE> 36
Change in Control Purchase Price of the Asset Sale Offer Price, or impair or
affect the right of any holder to institute suit for the payment thereof without
the consent of the holder of each Debt Securities so affected, or (ii) reduce
the aforesaid percentage of Debt Securities, the consent of the holders of which
is required for any supplemental indenture, without the consent of the Holders
of all Debt Securities then outstanding.
The Trustee
Each Indenture contains certain limitations on the right of the Trustee, as a
creditor of the Company, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. The Trustee is permitted to engage in other transactions,
except that, if it acquires any conflicting interest (as defined), it must
eliminate such conflict or resign.
The Trustee has made loans to the Company and its subsidiaries and affiliates
from time to time in the ordinary course of business and at prevailing interest
rates under agreements with commercial bank groups. In addition, the Trustee
serves as a depositary of funds of, and performs other services for, the Company
and its trustee under two other indentures pursuant to which several outstanding
series of the Company's debentures have been issued.
Subordination
The payment of the principal of and premium, if any, and interest on the
Subordinated Debt Securities is, to the extent set forth in the Subordinated
Indenture, subordinated in right of payment to the prior payment in full of all
Senior Indebtedness, whether now outstanding or incurred in the future. Upon any
payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding up, assignment for the benefit of creditors or
marshalling of assets and liabilities or any bankruptcy, insolvency,
receivership, liquidation, reorganization or similar proceedings of the Company,
the holders of all Senior Indebtedness will first be entitled to receive any
payment in full of all amounts due or to become due thereon before the Holders
of the Subordinated Debt Securities will be entitled to receive any payment
(other than any payment in the form of Permitted Junior Securities) on account
of the principal of or premium, if any, or interest on the Subordinated Debt
Securities.
No payment (other than any payment in the form of Permitted Junior Securities)
on account of principal of and premium, if any, or interest on the Subordinated
Debt Securities may be made if a Payment Event of Default shall have occurred
and be continuing. In addition, no payment (other than any payment in the form
of Permitted Junior Securities) on account of principal of or premium, if any,
or interest on the Subordinated Debt Securities may be made if a Non-payment
Event of Default shall have occurred and be continuing, for the period (a
"Payment Blockage Period") commencing on receipt of notice of such event of
default by the Trustee from holders of at least a majority in principal amount
of any Designated Senior Indebtedness (or any other trustee or other
representative therefor) and ending on the earlier of (i) the date such
Non-payment Event of Default has been cured or waived or has ceased to exist or
any acceleration of such Designated Senior Indebtedness has been rescinded or
annulled or such Designated Senior Indebtedness shall have been discharged and
(ii) the date 176 days after such receipt of notice. Any number of such notices
may be given; provided, however, that, during any 360-day period, the aggregate
Payment Blockage Periods shall not exceed 176 days and there shall be a period
of at least 184 consecutive days when no Payment Blockage Period is in effect.
No default, existing or continuing when a Payment Blockage Period begins may be
the basis for any subsequent Payment Blockage Period unless such default has
been cured for a period of at least 90 consecutive days. In the event that,
notwithstanding the restrictions described in the preceding sentences, the
Company makes any payment to the Trustee or a Holder of Subordinated Debt
Securities prohibited by any such restriction, with such Trustee or Holder, as
the case may be, knowing of such contravention before receipt thereof, then such
payment will be required to be paid over and delivered forthwith to the Company
to the extent necessary to pay in full all such Senior Indebtedness.
The subordination rights of holders of Senior Indebtedness will not be
prejudiced or impaired by any acts or failures to act by the Company or by any
such holder. The subordination of the Subordinated Debt Securities set forth
above will not prevent the occurrence of any Event of Default under the
Subordinated Indenture. Furthermore, the subordination of the Subordinated Debt
Securities as set forth above will not impair, as between the Company, the
Holders of the Subordinated Debt Securities and creditors of the Company other
than holders of Senior Indebtedness, the obligations of the Company to make
payments on the Subordinated Debt Securities in accordance with their terms. In
certain circumstances, as set forth in the Indenture, the Holders of
Subordinated Debt Securities will be subrogated to certain rights of the holders
of Senior Indebtedness upon payment in full of all Senior Indebtedness.
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<PAGE> 37
By reason of such subordination, in the event of insolvency of the Company, the
holders of Senior Indebtedness (as well as other creditors of the Company who
are holders of indebtedness that is not subordinated to the Senior Indebtedness)
may recover more, ratably, than the Holders of the Subordinated Debt Securities.
The Subordinated Debt Securities will also be effectively subordinated to all
liabilities, including trade payables and capitalized lease obligations, if any,
of the Company's subsidiaries. Any right of the Company to receive the assets of
any of its subsidiaries upon their liquidation or reorganization (and the
consequent right of the Holders of the Subordinated Debt Securities to
participate in those assets) will be subject to the prior payment of claims of
that subsidiary's creditors (including trade creditors), except to the extent
that the Company is itself a creditor of such subsidiary, in which case the
claims of the Company would still be subject to the prior payment of claims
secured by security interests in the assets of such subsidiary and any other
indebtedness of such subsidiary senior to that held by the Company.
Subordinated Debt Securities are issued under the Subordinated Indenture, the
aggregate principal amount of Senior Indebtedness outstanding as of a recent
date will be set forth in the Prospectus Supplement. The Subordinated Indenture
does not restrict the amount of Senior Indebtedness that the Company may incur,
provided that the Company complies with the ratio requirements set forth
therein.
Plan of Distribution
The Company may offer Debt Securities to or through underwriters, through agents
or directly to other purchasers.
The distribution of Debt Securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such market prices
or at negotiated prices.
In connection with the sale of Debt Securities, underwriters or agents may
receive compensation from the Company or from purchasers in the form of
discounts, concessions or commissions. Underwriters, agents and dealers
participating in the distribution of the Debt Securities may be deemed to be
underwriters within the meaning of the Securities Act.
Pursuant to agreements which may be entered into between the Company and any
underwriters or agents named in the Prospectus Supplement, such underwriters or
agents may be entitled to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as agents for the Company to solicit offers
by certain institutional investors to purchase Debt Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but shall in all cases be
subject to the approval of the Company. The obligations of the purchaser under
any such contract will not be subject to any conditions except (i) the
investment in the Debt Securities by the institution shall not at the time of
delivery be prohibited by the laws of any jurisdiction in the United States to
which such institution is subject, and (ii) if a portion of the Debt Securities
is being sold to underwriters, the Company shall have sold to such underwriters
the Debt Securities not sold for delayed delivery. Underwriters and such other
persons will not have any responsibility in respect of the validity or
performance of such contracts.
All Debt Securities offered will be a new issue of securities with no
established trading market. Any underwriters to whom such Debt Securities are
sold by the Company for public offering and sale may make a market in such Debt
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 or the trading markets for any Debt Securities.
Certain of the underwriters or agents and their associates may be customers of,
engage in transactions with and perform services for the Company in the ordinary
course of business.
The specific terms and manner of sale of the Debt Securities in respect of which
this Prospectus is being delivered are set forth or summarized in the Prospectus
Supplement.
Legal Matters
The validity of the issuance of the Debt Securities offered will be passed upon
for the Company by Emens, Kegler, Brown, Hill & Ritter, Co., L.P.A., Columbus,
Ohio. Certain legal matters related to the Debt Securities offered will be
passed upon for the underwriters or agents, if any, by a law firm named in the
Prospectus Supplement relating to a particular issue of Debt Securities.
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<PAGE> 38
Experts
The financial statements of the Company as of December 31, 1993 and 1994 and for
each of the three years in the period ended December 31, 1994 incorporated into
this Prospectus by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated by reference in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The information appearing herein or incorporated herein by reference with
respect to proved oil and gas reserves of the Company at December 31, 1993 and
1994, to the extent stated herein or incorporated herein by reference, was
estimated by the Company and audited by Huddleston & Co., Inc., independent
petroleum engineers, and is included herein or incorporated herein by reference
on the authority of such firm as experts in petroleum engineering.
Available Information
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports and other information with the
Commission. Reports, proxy statements and other information statements filed by
the Company with the Commission pursuant to the informational requirements of
the Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission, at Room 1024, Judiciary Plaza Building, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the following regional offices of the
Commission: 7 World Trade Center, New York, New York 10048 and 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661. Copies of such material may be
obtained at prescribed rates from the Public Reference Section of the Commission
at Room 1024, Judiciary Plaza Building, 450 Fifth Street, N.W., Washington, D.C.
20549.
The Company has filed with the Commission a Registration Statement on Form S-3
(the "Registration Statement") under the Securities Act with respect to the
Securities. This Prospectus, filed as part of the Registration Statement, does
not contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Securities, reference is made to
the Registration Statement and to the exhibits and schedules thereto, which may
be inspected at the Commission's offices without charge or copies of which may
be obtained from the Commission upon payment of the prescribed fees. Statements
made in the Prospectus as to the contents of any contract, agreement or document
referred to are not necessarily complete, and in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, and each such statement is qualified in its entirety by
such reference.
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<PAGE> 39
Glossary
When the following terms are used in the text they have the meanings indicated.
Mcf. "Mcf" means thousand cubic feet. "MMcf" means million cubic feet. "Bcf"
means billion cubic feet. "Tcf" means trillion cubic feet.
Bbl. "Bbl" means barrel. "MBbl" means thousand barrels. "MMBbl" means million
barrels. "BBbl" means billion barrels.
BOE. "BOE" means barrels of oil equivalent, which are determined using the
ratio of one barrel of crude oil, condensate or natural gas liquids to six Mcf
of natural gas so that six Mcf of natural gas is referred to as one barrel of
oil equivalent or "BOE." "MBOE" means thousands of barrels of oil equivalent.
"MMBOE" means millions of barrels of oil equivalent.
Capital Expenditures. "Capital Expenditures" means costs associated with
exploratory and development drilling (including exploratory dry holes);
leasehold acquisitions; seismic data acquisitions; geological, geophysical and
land-related overhead expenditures; delay rentals; producing property
acquisitions; and other miscellaneous capital expenditures.
Completion Costs. "Completion Costs" means, as to any well, all those costs
incurred after the decision to complete the well as a producing well. Generally,
these costs include all costs, liabilities and expenses, whether tangible or
intangible, necessary to complete a well and bring it into production, including
installation of service equipment, tanks, and other materials necessary to
enable the well to deliver production.
Development Well. A "Development Well" is a well drilled as an additional well
to the same reservoir as other producing wells on a lease, or drilled on an
offset lease not more than one location away from a well producing from the same
reservoir.
Exploratory Well. An "Exploratory Well" is a well drilled in search of a new
and as yet undiscovered pool of oil or gas, or to extend the known limits of a
field under development.
Finding Cost. "Finding Cost," expressed in dollars per BOE, is calculated by
dividing the amount of total capital expenditures incurred related to
acquisitions, exploration and development costs (reduced by proceeds from any
sale of oil and gas properties) by the amount of total net reserves added or
reduced as a result of property acquisitions and sales, drilling activities and
reserve revisions during the same period.
Future Development Cost. "Future Development Cost" of proved non-producing
reserves, expressed in dollars per BOE, is calculated by dividing the amount of
future capital expenditures related to development properties by the amount of
total proved non-producing reserves associated with such activities.
Gross Acres or Wells. "Gross Acres or Wells" are the total acres or wells, as
the case may be, in which an entity has an interest, either directly or through
an affiliate.
Lifting Costs. "Lifting Costs" are the expenses of lifting oil from a producing
formation to the surface, consisting of the costs incurred to operate and
maintain wells and related equipment and facilities, including labor costs,
repair and maintenance, supplies, insurance, production, severance and windfall
profit taxes.
MMBtu. "MMBtu" means one million British thermal units. A British thermal unit
is the amount of heat needed to raise the temperature of one pound of water one
degree Fahrenheit.
Net Acres or Wells. A party's "Net Acres" or "Net Wells" are calculated by
multiplying the number of gross acres or gross wells in which that party has an
interest by the fractional interest of the party in each such acre or well.
Oil and Gas Lease. An "Oil and Gas Lease" is an agreement whereby the grantee
receives for a period of time the full or partial interest in oil and gas
properties, oil and gas mineral rights, fee rights, or other rights of the
grantor granting the grantee the right to drill for, produce and sell oil and
gas upon payment of rentals, bonuses and/or royalties. Oil and Gas Leases are
generally acquired from private landowners and federal and state governments.
Producing Properties or Reserves. "Producing Reserves" are Proved Developed
Reserves expected to be produced from existing completion intervals now open for
production in existing wells. "Producing Properties" are properties to which
Producing Reserves have been assigned by an independent petroleum engineer.
Proved Developed Behind-Pipe Reserves. "Proved Developed Behind-Pipe Reserves"
are reserves contained in geological formations through which an existing well
has been drilled but from which the well has not yet produced. The reserves are
said to be "behind pipe" because the oil and gas are sealed out of the well bore
by the casing leading to the existing completion interval.
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<PAGE> 40
Behind-Pipe Reserves are classified as Proved Developed only if the cost of
completing the well for production of such reserves is relatively small compared
to the cost of a new well.
Proved Developed Reserves. "Proved Developed Reserves" are Proved Reserves
which can be expected to be recovered through existing wells with existing
equipment and operating methods.
Proved Reserves. "Proved Reserves" are the estimated quantities of crude oil,
natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known oil and gas reservoirs under existing economic and operating conditions,
that is, on the basis of prices and costs as of the date the estimate is made
and any price changes provided for by existing conditions.
Proved Undeveloped Reserves. "Proved Undeveloped Reserves" are Proved Reserves
which can be expected to be recovered from new wells on undrilled acreage, or
from existing wells where a relatively major expenditure is required for
recompletion.
Reserves. "Reserves" means crude oil and natural gas, condensate and natural
gas liquids, which are net of leasehold burdens, are stated on a net revenue
interest basis, and are found to be commercially recoverable.
Royalty Interest. A "Royalty Interest" is an interest in an oil and gas
property entitling the owner to a share of oil and gas production (or the
proceeds of the sale thereof) free of the costs of production.
Standardized Measure of Discounted Future Net Cash Flows, Before Provision for
Income Taxes. The "Standardized measure of discounted future net cash flows,
before provision for income taxes" is a method of determining the present value
of Proved Reserves. Future net revenues from Proved Reserves are estimated
assuming that oil and gas prices and production and development costs remain
constant. The resulting stream of revenues, before provision for income taxes,
is then discounted at the rate of 10% per year to obtain a present value.
3-D Seismic. "3-D Seismic" is the method by which a three dimensional image of
the earth's subsurface is created through the interpretation of aerially
collected seismic data. 3-D surveys allow for a more detailed understanding of
the subsurface than do conventional surveys and contribute significantly to
field appraisal, development and production.
Undeveloped Acreage. "Undeveloped Acreage" is oil and gas acreage (including,
in applicable instances, rights in one or more horizons which may be penetrated
by existing wellbores, but which have not been tested) to which Proved Reserves
have not been assigned by independent petroleum engineers.
Working Interest. A "Working Interest" is the operating interest under an Oil
and Gas Lease which gives the owner the right to drill, produce and conduct
operating activities on the property and a share of production, subject to all
royalties, overriding royalties and other burdens and to all costs of
exploration, development and operations and all risks in connection therewith.
In this Prospectus, natural gas volumes are stated at the legal pressure base of
the state or area in which the reserves are located at 60 degrees Fahrenheit.
39
<PAGE> 41
[BENTON OIL AND GAS COMPANY LOGO]
<PAGE> 42
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered (other than underwriting
discounts) are estimated to be as follows:
<TABLE>
<S> <C>
SEC filing fee $ 17,858
NASD filing fee 5,500
Printing and engraving 150,000
Accounting fees and expenses 175,000
Legal fees and expenses 210,000
Blue Sky filing fees 20,000
Rating Agency fees 70,000
Trustee fees 15,000
Miscellaneous 81,642
--------
Total $745,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under provisions of the Certificate of Incorporation and Bylaws of the Company,
each person who is or was a director or officer of the Company shall be
indemnified by the Company as a matter of right to the full extent permitted or
authorized by law. The effects of the Certificate of Incorporation, Bylaws and
General Corporation Law of Delaware may be summarized as follows:
(a) Under Delaware law, to the extent that such a person is successful
on the merits in defense of a suit or proceeding brought against him by
reason of the fact that he is a director or officer of the Company, he
shall be indemnified against expenses (including attorneys' fees)
reasonably incurred in connection with such action.
(b) If unsuccessful in defense of a third-party civil suit or a criminal
suit, or if such a suit is settled, such a person shall be indemnified
under such law against both (1) expenses (including attorneys' fees) and
(2) judgments, fines and amounts paid in settlement if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company, and with respect to any criminal action,
had no reasonable cause to believe his conduct was unlawful.
(c) If unsuccessful in defense of a suit brought by or in the right of
the Company, or if such suit is settled, such a person shall be indemnified
under such law only against expenses (including attorneys' fees) incurred
in the defense or settlement of such suit if he acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company except that if such a person is adjudged to be
liable in a suit in the performance of his duty to the Company, he cannot
be made whole even for expenses unless the court determines that he is
fairly and reasonably entitled to indemnity for such expenses.
(d) The Company may not indemnify a person in respect of a proceeding
described in (b) or (c) above unless it is determined that indemnification
is permissible because the person has met the prescribed standard of
conduct by any one of the following: (i) the Board of Directors, by a
majority vote of a quorum consisting of directors not at the time parties
to the proceeding, (ii) if a quorum of directors not parties to the
proceeding cannot be obtained, or, if obtainable but the quorum so directs,
by independent legal counsel selected by the Board of Directors or the
committee thereof; or (iii) by the stockholders.
The Underwriting Agreement filed as Exhibit 1.1 hereto also contains certain
provisions pursuant to which officers, directors and controlling persons of the
Company may be entitled to be indemnified by the underwriters named therein.
II-1
<PAGE> 43
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement (for debt securities).*
4.1 Form of Indenture with respect to Senior Indebtedness.****
4.2 Form of Indenture with respect to Subordinated Indebtedness.****
5.1 Opinion of Emens, Kegler, Brown, Hill & Ritter Co., L.P.A. regarding validity of the
Securities.*
12.1 Statement of Computation of Earnings Per Share. (Incorporated by reference to Exhibit
11.1 to the Company's Form 10-K for the year ended December 31, 1994 and Exhibit 11.1 to
the Company's Form 10-Q for the quarter end March 31, 1995)
12.2 Statement of Computation of Ratio of Earnings to Fixed Charges.**
23.1 Consent of Deloitte & Touche LLP. (Included on page II-5)**
23.2 Consents of Emens, Kegler, Brown, Hill & Ritter Co., L.P.A.****
23.3 Consent of J.C. White and Associates, Inc.***
23.4 Consent of Huddleston & Co., Inc.***
24.1 Power of Attorney. (Included on Signature Page)***
24.2 Power of Attorney of the Company.***
25.1 Statement of Eligibility and Qualifications on Form T-1 relating to Senior Indenture and
Subordinated Indenture.*
99.1 Form of Indenture dated May, 1992 between the Company and Meridian Trust Company of
California. (Incorporated by reference to Exhibit 4.3 to the Company's S-1 Registration
Statement No. 33-46077).
99.2 Note Agreement related to the 8% Convertible Subordinated Notes between the Company and
the Purchasers thereof (Incorporated by reference to Exhibit 10.20 to the Company's S-1
Registration Statement No. 33-43662).
99.3 Purchase Agreement between the Company and Venezolana de Inversiones Y Construcciones
Clerico, C.A. dated March 4, 1994.***
99.4 Note Agreement dated September 30, 1994 between the Company and the Purchasers thereof
related to the 13% Senior Notes due September 30, 2002 (Incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994).
99.5 Credit Agreement dated December 27, 1994 among the Company, Benton Oil and Gas Company of
Louisiana, New York Gas Fund I and Christiania Bank og Kreditkasse.***
99.6 Agreements and Promissory Notes between the Company and Morgan Guaranty Trust Company
related to loans to Benton-Vinccler not to exceed $10 million dated February 10, 1994 and
February 24, 1994.***
99.7 Agreement No. 0094372 Concerning the Transportation of the GEOILBENT, LTD.'s Crude Oil
from Russia for Export dated January 27, 1994.***
99.8 Purchase and Sale Agreement by and among Benton Oil and Gas Company of Louisiana and
Tesla Resources, Inc. related to the West Cote Blanche Bay Field, Louisiana dated as of
March 31, 1995 (Incorporated by reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K filed on April 17, 1995)
99.9 Purchase and Sale Agreement by and among Benton Oil and Gas Company of Louisiana, Tenneco
Gas Production Corporation and Tenneco Ventures Corporation related to the West Cote
Blanche Bay Field, Louisiana dated as of November 29, 1994 (Incorporated by reference to
Exhibit 2.2 to the Company's Current Report on Form 8-K filed on April 17, 1995)
99.10 Note Agreement dated June 30, 1995 between the Company and the Purchasers thereof related
to the 13% Senior Notes due June 30, 2007.**
</TABLE>
- ---------------
*To be filed as an exhibit to Form 8-K or as an exhibit to a post-effective
amendment to this Registration Statement in reference to the specific
offering of Securities, if any, to which it relates.
**Filed herewith.
***Filed as exhibit to original filing of Registration Statement No. 33-79494.
****Filed as exhibit to amendment no. 1 to this Registration No. 33-79494.
(b) Financial Statement Schedules
All schedules have been omitted because the required information is not
significant, or is included in the financial statements or the notes thereto or
is not applicable.
II-2
<PAGE> 44
ITEM 17. UNDERTAKING
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that are incorporated by reference
in the Registration Statement.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by the controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430a and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes if securities are to be offered
pursuant to competitive bidding (1) to use its best efforts to distribute prior
to the opening of bids, to prospective bidders, underwriters and dealers, a
reasonable number of copies of a prospectus which at that time meets the
requirements of section 10(a) of the Securities Act, and relating to the
securities offered at competitive bidding, as contained in this Registration
Statement, together with any supplements thereto, and (2) to file an amendment
to this Registration Statement reflecting the results of bidding, terms of the
reoffering and related matters to the extent required by the applicable form,
not later than the first use, authorized by the issuer after the opening of
bids, of a prospectus relating to the securities offered at competitive bidding,
unless no further public offering of such securities by the issuer and no
reoffering of such securities by the purchasers is proposed to be made.
(f) The undersigned Registrant hereby undertakes to file applications for the
purpose of determining the eligibility of the Senior Trustee and the
Subordinated Trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Trust Indenture Act.
II-3
<PAGE> 45
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 46
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 3 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Carpinteria, State of
California, on the 7th day of July, 1995.
BENTON OIL AND GAS COMPANY
/s/ A. E. BENTON
By:
A. E. Benton, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed on July 7, 1995 by
the following persons in the capacities indicated:
<TABLE>
<S> <C>
/s/ A. E. BENTON President, Chief Executive Officer and Director
A. E. Benton
/s/ DAVID H. PRATT Vice President -- Finance, Principal Financial Officer
David H. Pratt
/s/ CHRIS C. HICKOK Vice President -- Controller; Principal Accounting Officer
Chris C. Hickok
/s/ BRUCE M. MCINTYRE Director
Bruce M. McIntyre
/s/ MICHAEL B. WRAY Director
Michael B. Wray
/s/ WILLIAM H. GUMMA Director
William H. Gumma
/s/ RICHARD W. FETZNER Director
Richard W. Fetzner
</TABLE>
II-5
<PAGE> 47
Independent Auditors' Consent
We consent to the incorporation by reference into this Amendment No. 3 to the
Registration Statement of Benton Oil and Gas Company (No. 33-79494) on Form S-3
of our report dated March 31, 1995, appearing in the annual report on Form 10-K
of Benton Oil and Gas Company for the year ended December 31, 1994, and to the
reference to our firm under the caption "Experts" in the Prospectus which forms
a part of this Registration Statement.
DELOITTE & TOUCHE LLP
Los Angeles, California
July 7, 1995
II-6
<PAGE> 1
EXHIBIT 12.2
BENTON OIL AND GAS COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- --------------------
1994 1993 1992 1991 1990 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes
and extraordinary items.......... $ 3,652 $ (4,829) $ (2,909) $ 512 $ 159 $ 3,120 $ (1,142)
Add (deduct):
Portion of rent expense
representing interest costs... 84 77 73 23 22 21 21
Interest expense................. 3,688 1,958 1,831 1,736 318 1,618 680
-------- -------- -------- -------- -------- -------- --------
Earnings as adjusted............. $ 7,624 $ (2,794) $ (1,005) $ 2,271 $ 499 $ 4,759 $ (441)
======= ======= ======= ======= ======= ======= =======
Fixed charges:
Interest expense................. $ 3,888 $ 1,958 $ 1,831 $ 1,736 $ 318 $ 1,618 $ 680
Portion of rent expense
representing interest costs... 84 77 73 23 22 21 21
-------- -------- -------- -------- -------- -------- --------
Total fixed charges.............. $ 3,972 $ 2,035 $ 1,904 $ 1,759 $ 340 $ 1,639 $ 701
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges
(1).............................. 1.92x -- -- 1.29x 1.47x 2.90x --
======= ======= ======= ======= ======= ======= =======
<FN>
- ---------------
(1) For the purpose of computing the ratios, "earnings" represents income (loss)
from operations before income taxes and extraordinary items plus fixed
charges exclusive of capitalized interest, and "fixed charges" consists of
interest whether expensed or capitalized, amortization of debt expense and
an estimated portion of rent expense representing interest costs. As a
result of losses incurred by the Company for the years ended December 31,
1993 and 1992 and the three months ended March 31, 1994, earnings did not
cover fixed charges by $4,829,000, $2,909,000 and $1,142,000, respectively.
</TABLE>
<PAGE> 1
Exhibit 99.10
================================================================================
BENTON OIL AND GAS COMPANY
13% SENIOR NOTES DUE JUNE 30, 2007
________________________________________________________________________________
NOTE AGREEMENT
PPN: 083288 A@ 9 (NOTE)
PPN: 083288 2@ 8 (WARRANT)
________________________________________________________________________________
Dated as of June 30, 1995
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
1. AUTHORIZATION AND RANKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1A. AUTHORIZATION OF ISSUE OF NOTES AND WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1B. RANKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
2. PURCHASE AND SALE OF NOTES; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
2A. PURCHASE AND SALE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
2B. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
3. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
3A. WARRANTS AND REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
3B. OPINION OF COMPANY COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
3C. OPINION OF PURCHASERS' SPECIAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
3D. REPRESENTATIONS AND WARRANTIES; COMPLIANCE; NO DEFAULT . . . . . . . . . . . . . . . . . . . . . . -2-
3E. PURCHASE PERMITTED BY APPLICABLE LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
3F. PRIVATE PLACEMENT NUMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
3G. PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
3H. CONSENT OF OTHER PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
3I. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
4. PREPAYMENT AND SCHEDULED REPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
4A. OPTIONAL PREPAYMENT WITH MAKE WHOLE AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
4B. REQUIRED PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
4C. NOTICE OF OPTIONAL PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
4D. SCHEDULED REPAYMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
4E. PREPAYMENT UPON CHANGE OF CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
4F. PAYMENTS PRO RATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
4G. RETIREMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
4H. MAKE WHOLE AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
5A. FINANCIAL AND OTHER REPORTING BY THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
5B. INFORMATION REQUIRED BY RULE 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
5C. INSPECTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
5D. CORPORATE EXISTENCE, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
5E. PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
5F. COMPLIANCE WITH LAWS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
5G. MAINTENANCE OF PROPERTIES AND LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
5H. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
5I. SCOPE OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
5J. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
5K. ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
5L. MAINTENANCE OF BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
5M. PAYMENT OF TRADE PAYABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
6A. FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
6A(1). CURRENT RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
6A(2). FUNDED DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
6B. RESTRICTED PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
6C. LIENS AND OTHER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
6C(1). LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
6C(2). LOANS, ADVANCES AND INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
6C(3). SALE OF STOCK AND DEBT OF SUBSIDIARIES-13-
6C(4). MERGER AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6C(5). SUBSIDIARY DIVIDEND AND OTHER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . -14-
6C(6). TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
6C(7). SALE AND LEASEBACK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
6C(8). DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
6D. COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
7A. ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
7B. RESCISSION OF ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
7C. NOTICE OF ACCELERATION OR RESCISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
7D. OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
8. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
8A. ORGANIZATION, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
8B. STOCK OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
8C. BUSINESS; FINANCIAL STATEMENTS; NO CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
8D. ACTIONS PENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
8E. TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
8F. AFFILIATES AND INVESTMENTS IN OTHERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
8G. TAX RETURNS AND PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
8H. CONFLICTING AGREEMENTS AND OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
8I. OFFERING OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
8J. REGULATION G, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
8K. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
8L. GOVERNMENTAL AND OTHER CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
8M. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
8N. LABOR RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
8O. FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
8P. DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
8Q. STATUS UNDER CERTAIN FEDERAL STATUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
9. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
10. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
10A. MAKE WHOLE AMOUNT TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
10B. OTHER TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
11A. PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
11A.(1) PAYMENTS IN RESPECT OF NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
11A.(2) NO DEDUCTION OR SET-OFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
11B. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
11C. CONSENT TO AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
11D. PERSONS DEEMED OWNERS; PARTICIPATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
11E. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . -36-
11F. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
11G. DISCLOSURE TO OTHER PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
11H. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
11I. DESCRIPTIVE HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
11J. SOLICITATION OF NOTEHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
11K. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
11L. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11M. CONSENT TO JURISDICTION AND SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11N. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11O. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES . . . . . . . . . . . . . . . . . . . -38-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
11O(1). REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11O(2). TRANSFER AND EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11O(3). REPLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11P. COMPLIANCE BY SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11Q. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11R. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11S. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
11T. CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
</TABLE>
SCHEDULES AND EXHIBITS
PURCHASER SCHEDULE
<TABLE>
<S> <C> <C>
EXHIBIT A - Form of Note
EXHIBIT B - Form of Warrant
EXHIBIT C - Wiring Instructions
EXHIBIT D - Registration Rights Agreement
EXHIBIT E - Form of Opinion of Counsel to the Company
EXHIBIT F - Form of Officers' Certificate
SCHEDULE 5J - Use of Proceeds
SCHEDULE 5H - Insurance Exceptions
SCHEDULE 6C(1) - Existing Liens
SCHEDULE 6D - Existing Debt
SCHEDULE 8A - Foreign Qualifications
SCHEDULE 8B - Stock Ownership
SCHEDULE 8D - Litigation
SCHEDULE 8E - Affiliates and Investments in Others
SCHEDULE 8J - ERISA Matters
</TABLE>
-iii-
<PAGE> 5
BENTON OIL AND GAS COMPANY
1145 Eugenia Place
Carpinteria, California 93013
As of June 30, 1995
To: The Purchasers Listed on the
Purchasers Schedule Attached
Gentlemen:
The undersigned, Benton Oil and Gas Company, a Delaware corporation
(the "COMPANY"), agrees with you as follows:
1. AUTHORIZATION AND RANKING.
1A. AUTHORIZATION OF ISSUE OF NOTES AND WARRANTS.
The Company will authorize the issue and sale of its Senior Notes, in the
aggregate principal amount of $20,000,000, to be dated the date of issue, to
mature June 30, 2007, to bear interest on the unpaid principal balance from the
date of issue until the principal shall have become due and payable at the rate
of 13% per annum, payable semi- annually in arrears, and to bear interest on
overdue principal, overdue premium and, to the extent permitted by law, overdue
interest at the rate of 15% per annum, and to be substantially in the form of
EXHIBIT A and will authorize the issue of warrants (collectively, the
"WARRANTS") to be dated the date of issue, entitling the holder to purchase
125,000 shares of the Common Stock of the Company, par value $.01 per share
(the "COMMON STOCK") substantially in the form of EXHIBIT B. The notes issued
pursuant to this Agreement and any notes which may be issued hereunder in
substitution or exchange for such notes are collectively referred to as the
"NOTES".
1B. RANKING. The Notes will constitute the
direct senior obligations of the Company and will rank not less than pari passu
in priority of payment with all other outstanding Debt of the Company, present
or future, except for Debt which is preferred as a result of being secured (to
the extent not prohibited by PARAGRAPH 6C(1) and then only to the extent of
such security).
2. PURCHASE AND SALE OF NOTES; CLOSING.
2A. PURCHASE AND SALE OF NOTES. Subject to the
terms and conditions of this Agreement, the Company shall sell to each of you
(individually a "PURCHASER" and collectively, the "PURCHASERS"), and each
Purchaser shall purchase from the Company, Notes of the respective principal
amounts, or aggregate principal amount, set forth after such Purchaser's name
in the PURCHASERS SCHEDULE at a price equal to 100% of such principal amount,
registered in such Purchaser's name or that of the Purchasers' nominee or
nominees specified in the PURCHASERS SCHEDULE.
2B. CLOSING. The purchase and sale of the Notes
shall take place at the offices of Sullivan & Worcester ("SPECIAL COUNSEL"),
One Post Office Square, Boston, Massachusetts 02109, at a closing (the
"CLOSING") to be held on June 30, 1995 or on such other date as the Purchasers
and the Company may agree (the "CLOSING DATE"). At the Closing, the Company
will deliver to each Purchaser the Notes or Note to be purchased by it, against
payment of the purchase price therefor by transfer of immediately available
funds in accordance with the wiring instructions stated on EXHIBIT C.
3. CONDITIONS OF CLOSING. The Purchasers'
obligation to purchase and pay for the Notes is subject to the fulfillment to
their satisfaction or their written waiver, on or before the Closing Date, of
the following conditions:
<PAGE> 6
3A. WARRANTS AND REGISTRATION RIGHTS AGREEMENT.
The Company shall have executed and delivered the Warrants for the respective
amounts of Common Stock set forth after each Purchaser's name in the Purchasers
Schedule and a Registration Rights Agreement providing for registration of the
resale by the Purchasers of the shares of Common Stock issuable upon exercise
of the Warrants substantially in the form of EXHIBIT D (the "REGISTRATION
RIGHTS AGREEMENT").
3B. OPINION OF COMPANY COUNSEL. The Purchasers
shall have received opinions from Emens, Kegler, Brown, Hill & Ritter Co.,
L.P.A., Baker & McKenzie and Simon, Peragine, Smith & Redfearn, L.L.R., each
dated the Closing Date, addressed to the Purchasers and in form and substance
satisfactory to them covering the matters set forth in EXHIBIT E. To the
extent that the opinion referred to in this PARAGRAPH 3B is rendered in
reliance upon the opinion of any other counsel, the Purchasers shall have
received a copy of the opinion of such other counsel, dated the Closing Date
and addressed to them, or a letter from such other counsel, dated the Closing
Date and addressed to them, authorizing them to rely on such other counsel's
opinion.
3C. OPINION OF PURCHASERS' SPECIAL COUNSEL. The
Purchasers shall have received from their Special Counsel an opinion
satisfactory to them as to such matters incident to the transactions
contemplated by this Agreement as they may reasonably request.
3D. REPRESENTATIONS AND WARRANTIES; COMPLIANCE;
NO DEFAULT. The representations and warranties contained in PARAGRAPH 8 shall
be true on and as of the Closing Date both immediately before and after giving
effect to the consummation of the transactions contemplated by this Agreement;
no Default or no Event of Default shall have occurred or be continuing as of
the Closing Date both immediately before and after giving effect to the
consummation of the transactions contemplated by this Agreement; the Company
shall have performed and complied with all agreements and conditions contained
in this Agreement required to be performed or complied with by it on or prior
to the Closing; and the Company shall have delivered to the Purchasers an
Officers' Certificate in the form of EXHIBIT F, dated the Closing Date,
certifying as to the matters set forth in this PARAGRAPH 3D and the other
matters set forth therein.
3E. PURCHASE PERMITTED BY APPLICABLE LAWS. The
offering, issuance, purchase and sale of, and payment for, the Notes and the
offering and issuance of the Warrants on the Closing Date on the terms and
conditions of this Agreement (including the use of the proceeds of the Notes by
the Company) shall be permitted by the laws and regulations of each
jurisdiction to which a Purchaser is subject, without recourse to provisions
(such as Section 1405(a)(8) of the New York Insurance Law) permitting limited
investments by life insurance companies without restriction as to the character
of the particular investment, shall not violate any applicable law or
governmental regulation (including, without limitation, section 5 of the
Securities Act or Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System) and shall not subject any Purchaser to any tax,
penalty, liability or other condition adverse to it under or pursuant to any
applicable law or governmental regulation, and the Purchasers shall have
received such certificates or other evidence as to matters of fact as they may
reasonably request to enable them to determine whether such purchase is so
permitted.
3F. PRIVATE PLACEMENT NUMBERS. Private Placement
Numbers shall have been assigned to the Notes and Warrants by Standard & Poor's
CUSIP Service Bureau.
3G. PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
satisfactory in substance and form to the Purchasers and their Special Counsel,
and the Purchasers shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
-2-
<PAGE> 7
3H. CONSENT OF OTHER PERSONS. The Company shall
have received the written consent of all Persons whose consent is necessary for
the transactions contemplated by this Agreement satisfactory in form and
substance to the Purchasers.
3I. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS.
The Purchasers shall have received written evidence satisfactory to them that
CT Corporation has been irrevocably appointed, and has accepted such
appointment, by the Company as its agent for service of process in the
Commonwealth of Massachusetts.
4. PREPAYMENT AND SCHEDULED REPAYMENT. The
Notes may be prepaid only under the circumstances set forth in PARAGRAPH 4A and
shall be repaid in accordance with PARAGRAPH 4B and 4E or upon any acceleration
of final maturity as provided in PARAGRAPH 7A.
4A. OPTIONAL PREPAYMENT WITH MAKE WHOLE AMOUNT.
The Company shall have the privilege at any time of prepaying the Notes at any
time or from time to time in whole or in part (in minimum amounts of $1,000,000
or larger amounts which are integral multiples of $500,000), at 100% of the
principal amount so prepaid, plus interest accrued thereon to the Settlement
Date and the Make Whole Amount.
4B. REQUIRED PREPAYMENT. At the option of any
Holder, on any exercise of its Warrants, an aggregate principal amount of its
Notes equal to the exercise price of such concurrently exercised Warrants shall
be prepaid, without the Make Whole Amount.
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company
shall give each Holder to be prepaid in whole or in part pursuant to PARAGRAPH
4A irrevocable written notice of such prepayment at least 30 days and not more
than 60 days prior to the Settlement Date, (i) specifying the Settlement Date
and the Called Principal of the Notes held by each such Holder, (ii) stating
that such prepayment is to be made pursuant to PARAGRAPH 4A and (iii) providing
an estimate of the Make Whole Amount payable on the Called Principal of such
Holder's Notes (calculated as if the date of such notice were the date of
prepayment) setting forth the date of such computation. Upon the giving of
such notice, the Called Principal as specified in such notice, together with
interest thereon to the Settlement Date and the Make Whole Amount shall become
due and payable on the Settlement Date. On the date which is 2 Business Days
prior to the Settlement Date, the Company shall deliver to the Holder of each
Note being prepaid an Officers' Certificate setting forth in detail the
calculations used in determining whether a Make Whole Amount is payable on such
prepayment and the amount of such Make Whole Amount.
4D. SCHEDULED REPAYMENT OF NOTES. The Company
shall, on each June 30, beginning June 30, 2003, repay $4,000,000 of the
aggregate principal amount of the Notes, each at 100% of the principal amount
so paid plus interest accrued thereon to the date of repayment. On June 30,
2007, all remaining principal and accrued interest then outstanding under the
Notes shall be repaid in full.
4E. PREPAYMENT UPON CHANGE OF CONTROL. The
Company shall give written notice (a "CHANGE OF CONTROL NOTICE") to each Holder
not less than 30 nor more than 60 days prior to the occurrence of any event
which may result in a Change of Control, or if the Company does not have
knowledge that such an event is to occur until less than 30 days prior thereto,
or until after the occurrence thereof, then as promptly as practicable, but in
no event more than 5 days, after the Company first acquires knowledge that such
an event is to occur or has occurred. The Change of Control Notice shall
identify the event, the reason why such event may result in or has resulted in
a Change of Control and the Persons involved, and shall include such financial
and other information as is available to the Company or which may be obtained
by the Company with reasonable effort that would be reasonably necessary for a
Holder to make an informed decision as to whether to elect to require
prepayment of its Notes under this PARAGRAPH 4E and shall set forth the
proposed effective date for, or if the Change of Control has occurred, the
actual date of, such Change of
-3-
<PAGE> 8
Control. Any Holder may, by giving written notice to the Company of such
election (an "ELECTION NOTICE") not later than 5 Business Days prior to the
effective date of such Change of Control, if the Change of Control Notice is
given at least 30 days prior to such effective date, and otherwise not later
than 30 days after the Change of Control Notice is given, require the Company
to prepay all of its Notes at 100% of the principal amount thereof plus
interest accrued thereon to the Settlement Date and the Make Whole Amount.
Once given, any Election Notice may be revoked by notice, given any time up to
the close of business on the last date an Election Notice could have been given
with respect to the Change of Control Notice. If the proposed terms of a
proposed Change of Control change substantially, or if any other event which
may result in a Change of Control may or has occurred, the Company shall give
each Holder a revised Change of Control Notice and each Holder shall then have
another opportunity to elect to require prepayment of its Notes by delivering
to the Company a new Election Notice or to revoke, by written notice to the
Company, any prior Election Notice, not later than 30 days following the date
such revised Change of Control Notice is given. The prepayment of a Holder's
Notes pursuant to this PARAGRAPH 4E shall occur on the later of (a) the
effective date of such Change of Control or (b) 3 Business Days following the
date such Holder's Election Notice is given. Notwithstanding the foregoing, no
prepayment shall be required pursuant to this PARAGRAPH 4E unless the Change of
Control occurs or has occurred.
On the date which is 2 Business Days prior to the Settlement Date of a
prepayment under this PARAGRAPH 4E, the Company shall deliver to the Holder of
each Note being prepaid an Officers' Certificate stating whether a Make Whole
Amount is payable in connection with such prepayment and setting forth in
detail the calculations used in making such determination.
If the Company fails to give a Change of Control Notice and a Change
of Control occurs or fails to give a proper Change of Control Notice as to a
Change of Control which has occurred, any Holder may at any time after the
occurrence of such Change of Control, without waiver of any right on the part
of the Holder to accelerate its Notes pursuant to PARAGRAPH 7A, require the
Company, on demand pursuant to this PARAGRAPH 4E, to prepay all of such
Holder's Notes at 100% of the principal amount thereof plus accrued interest to
the Settlement Date and the Make Whole Amount.
4F. PAYMENTS PRO RATA. Upon any partial
prepayment of the Notes pursuant to PARAGRAPH 4A and any scheduled repayment of
the Notes pursuant to PARAGRAPH 4D, the principal amount so repaid plus the
interest accrued thereon and the Make Whole Amount, shall be allocated among
the Holders in proportion to the respective outstanding principal amounts of
the Notes held by them. All payments made to the Holders on account of the
Notes shall be applied first to incurred and unpaid Expenses, then to accrued
interest (including accrued interest on interest and on the Make Whole Amount),
then to the Make Whole Amount, and then to principal. All prepayment(s) of the
Notes pursuant to PARAGRAPH 4A shall be applied to the obligations of the
Company to make the scheduled repayments of principal required in PARAGRAPH 4D
in inverse order of maturity.
4G. RETIREMENT OF NOTES. The Company shall not,
and shall not permit any Affiliate to, prepay or otherwise retire in whole or
in part prior to their stated maturity (other than by prepayment pursuant to
PARAGRAPH 4A or 4E, scheduled repayment pursuant to PARAGRAPH 4D or as required
pursuant to PARAGRAPH 7A), or purchase or otherwise acquire, directly or
indirectly, any Note held by any Holder unless the Company or such Affiliate
shall have offered to prepay or otherwise retire or purchase or otherwise
acquire, as the case may be, the same proportion of the aggregate principal
amount of any Note held by each other Holder at the time outstanding upon the
same terms and conditions. Any such offer shall provide each Holder with
sufficient information to enable it to make an informed decision with respect
to such offer, and shall remain open for at least 10 Business Days. If the
Required Holders accept such offer, the Company shall promptly notify the
remaining Holders of such fact and the expiration date for the acceptance by
Holders such offer shall be extended by the number of days necessary to give
each such Holder at least 10 Business Days from its receipt of such notice to
accept such offer. No Note so prepaid, repaid or otherwise
-4-
<PAGE> 9
retired or purchased or otherwise acquired by the Company or any of its
Affiliates shall thereafter be reissued or deemed to be outstanding for any
purpose under this Agreement.
4H. MAKE WHOLE AMOUNT. The Company acknowledges
that the Make Whole Amount due at any optional or required prepayment of the
Notes (including any prepayment required pursuant to any provision of this
PARAGRAPH 4 or PARAGRAPH 7A) has been negotiated with the Purchasers to provide
a bargained for rate of return on the Notes and is not a penalty.
5. AFFIRMATIVE COVENANTS.
5A. FINANCIAL AND OTHER REPORTING BY THE COMPANY.
The Company will deliver to each Holder and to any prospective Transferee of a
Note designated by any Holder in writing to the Company:
(i) as soon as practicable and in any
event not more than 46 days after the end of each
quarterly period in each fiscal year of the Company
(except the fourth quarter), the consolidated (and,
upon the request of any Holder, consolidating)
balance sheet of the Company and its Subsidiaries as
at the end of such quarterly period and, (except in
the case of the first quarter), for the fiscal year
to date and the related consolidated (and, upon the
request of any Holder, consolidating) statements of
income and retained earnings and of cash flows of the
Company and its Subsidiaries for such period(s)
setting forth, in each case in comparative form,
figures for the corresponding period(s) in the
preceding fiscal year of the Company, all in
reasonable detail and in accordance with GAAP and
certified by the chief accounting officer or chief
financial officer of the Company as fairly presenting
the financial condition of the Company and its
Subsidiaries as at the dates indicated and the
results of their operations and cash flows, in each
case for the periods indicated, in conformity with
GAAP (except as disclosed in the certificate of such
chief accounting officer or chief financial officer
with any changes in accounting policies discussed in
reasonable detail), subject to changes resulting from
year-end adjustments not material in scope or amount;
(ii) as soon as practicable and in any
event not more than 91 days after the end of each
fiscal year of the Company, a balance sheet of the
Company and its Subsidiaries as of the end of such
year and the related consolidated and consolidating
statements of income and retained earnings and of
cash flows of the Company and its Subsidiaries for
such year, and setting forth in each case, in
comparative form, corresponding figures for the
preceding fiscal year of the Company, all in
reasonable detail and in accordance with GAAP and (a)
in the case of such consolidated financial
statements, accompanied by a report thereon of
Deloitte & Touche or another Approved Auditor, which
report shall be without limitations as to the scope
of the audit and shall state that such financial
statements present fairly the financial condition of
the Company and its Subsidiaries as at the dates
indicated and the results of their operations and
cash flows for the periods indicated in conformity
with GAAP (except as otherwise specified in such
report) and that the audit by such accountants in
connection with such financial statements has been
made in accordance with generally accepted auditing
standards and provides a reasonable basis for such
opinion and (b) in the case of such consolidating
financial statements, certified by the chief
accounting officer or chief financial officer of the
Company as presenting fairly in all material respects
the information contained therein in accordance with
GAAP, with a copy of each consolidated balance sheet,
related consolidated statement of income and retained
earnings and of cash flows and related report of the
Approved Auditor to the NAIC Securities Valuation
Office at 195 Broadway, New York, New York 10007;
(iii) together with each delivery of
financial statements of the Company and its
Subsidiaries pursuant to SUBPARAGRAPHS (I) AND (II)
of this PARAGRAPH 5A, a certificate of the chief
accounting officer or chief financial officer of the
Company (a) stating that the signer
-5-
<PAGE> 10
has reviewed the terms of this Agreement and
the Notes and has made, or caused to be made under
the signer's supervision, a review in reasonable
detail of the transactions and condition of the
Company and its Subsidiaries during the fiscal period
covered by such financial statements and that such
review has not disclosed the existence during or at
the end of such fiscal period, and that to the best
of his knowledge after reasonable investigation the
signer has no knowledge of the existence as at the
date of such certificate, of any condition or event
which constitutes a Default or Event of Default or,
if any such condition or event existed or exists,
specifying the nature and period of existence thereof
and what action the Company has taken or is taking or
proposes to take with respect thereto and (b)
demonstrating (with computations in reasonable
detail) compliance by the Company and its
Subsidiaries with the provisions of PARAGRAPHS 6A,
6B, 6C or 6D, (c) analyzing the principal changes in
the results of operations of the Company and its
Subsidiaries for such fiscal year or fiscal quarter
from the results of operations of the Company and its
Subsidiaries for the immediately preceding fiscal
year or fiscal quarter; and (d) if not specified in
the accompanying financial statements, specifying the
aggregate amount of interest paid or accrued by the
Company and its Subsidiaries and the aggregate amount
of depreciation, depletion and amortization charged
on the books of the Company and its Subsidiaries
(except in the case of the Officers' Certificate
delivered with the financial statements being
delivered pursuant to SUBPARAGRAPHS (I) and (II) of
this PARAGRAPH 5A, only if not specified in such
financial statements);
(iv) together with each delivery of
financial statements pursuant to SUBPARAGRAPH (II) of
this PARAGRAPH 5A, a certificate by the Company's
Approved Auditor stating (a) that their audit
examination has included a review of the terms of
this Agreement and the Notes as they relate to
accounting matters and that such review is sufficient
to enable them to make the statement referred to in
CLAUSE (C) of this SUBPARAGRAPH (IV), (b) whether, in
the course of their audit examination, there has been
disclosed the existence during the fiscal year
covered by such financial statements (and whether
they have knowledge of the existence as of the date
of such accountants' certificate) of any condition or
event which constitutes a Default or Event of Default
under PARAGRAPHS 6A, 6B, 6C or 6D, and if during
their audit examination there has been disclosed (or
if they have knowledge of) such a condition or event,
specifying the nature and period of existence thereof
(it being understood, however, that such accountants
shall not be liable to any Person by reason of their
failure to obtain knowledge of any Default or Event
of Default which would not be disclosed in the course
of an audit conducted in accordance with generally
accepted auditing standards), and (c) that based on
their annual examination nothing came to their
attention in the course of their examination which
causes them to believe that the information contained
in the certificate of the Company's chief financial
officer delivered therewith pursuant to SUBPARAGRAPH
(III) of this PARAGRAPH 5A is not correct or that the
matters set forth in such certificate are not stated
in accordance with the terms of this Agreement;
(v) as soon as practicable and in any
event not more than 90 days after the end of each
fiscal year of the Company, a report as to the
estimated discounted future net revenues attributable
to proved oil and gas reserves of the Company and its
Subsidiaries calculated in accordance with all
applicable SEC, FASB and SPE requirements, standards
and guidelines (before any state or federal income
taxes) of the end of the year audited by Independent
Petroleum Engineers (the "AUDITED REPORT");
(vi) promptly after receipt thereof by
the Company, copies of all material reports submitted
to the Company by independent public accountants and
consultants in connection with each annual, interim
or special audit of the books of the Company or any
of its Subsidiaries;
-6-
<PAGE> 11
(vii) promptly after any Senior Officer
of the Company obtains knowledge (a) that a condition
or event exists that constitutes a Default or Event
of Default, (b) that any Holder has given any notice
or taken any other action with respect to a claimed
Default or Event of Default under this Agreement, (c)
of any condition or event peculiar to the Company or
any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect, (d) that
any Person has given any notice to the Company or any
of its Subsidiaries or taken any other action with
respect to a claimed default or event or condition of
the type referred to in SUBPARAGRAPH (III) of
PARAGRAPH 7A, (e) of the institution of any
litigation involving claims against the Company or
any of its Subsidiaries equal to or greater than
$250,000 with respect to any single cause of action
or $500,000 in the aggregate, (f) of the assertion by
any Person of a claim for breach or violation of any
Environmental Law or for damages resulting from such
breach or violation against the Company, (g) of the
assertion of any claim by any Person seeking
injunctive relief against the Company or any of its
Subsidiaries which would have a Material Adverse
Effect, or (h) the occurrence of any default or event
of default under any other agreement, instrument or
note evidencing or pursuant to which any Debt other
than that represented by the Notes, the outstanding
principal amount of which exceeds $1,000,000, has
been issued by the Company or any Subsidiary, an
Officers' Certificate specifying the nature and
period of existence of any such condition or event,
or specifying the notice given or action taken by
such Holder or Person and the nature of such claimed
Default, Event of Default, event or condition, and
what action the Company has taken, is taking or
proposes to take in connection therewith (provided
nothing in this SUBPARAGRAPH (VII) shall require the
Company to disclose in such Officers' Certificate any
information not otherwise known or discoverable by an
opposing party in the event litigation or another
proceeding has been or is instituted against the
Company or a Subsidiary in connection with any such
event, condition or claimed Default if discovery of
such information by such opposing party could
materially prejudice any rights or defenses of the
Company or such Subsidiary with respect thereto);
(viii) promptly, and in any event within
5 days after any Senior Officer becomes aware of any
of the following, a written notice setting forth the
nature thereof and the action, if any, that the
Company or any ERISA Affiliate proposes to take with
respect thereto:
(a) with respect to any Plan, any reportable event,
as defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof;
or
(b) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceeding
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan; or
(c) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;
(ix) promptly after transmission
thereof, copies of all such financial statements,
proxy statements, notices and reports as it shall
send or make available to public
-7-
<PAGE> 12
debtholders or stockholders and copies of all
registration statements (without exhibits) and all
reports which it files with the SEC or any stock
exchange.
(x) promptly after transmission thereof,
copies of all such financial statements, notices,
certificates and reports as it shall send to any
other lender or group of lenders if the aggregate
amount of Debt outstanding by the Company and its
Subsidiaries to such lenders or group of lenders
exceeds $ 5,000,000;
(xi) promptly after receipt thereof,
copies of any reports, statements and notices it may
receive in accordance with Section 13(d) or 14(d) of
the Exchange Act and the rules and regulations
promulgated thereunder by the SEC or the rules and
regulations of any stock exchange; and
(xii) with reasonable promptness, such
other information and data with respect to the
Company and its Subsidiaries as from time to time may
be reasonably requested by any Holder.
5B. INFORMATION REQUIRED BY RULE 144A. The
Company will, upon the request of any Holder, provide such Holder, and any
Qualified Institutional Buyer designated by such Holder, such financial and
other information as such Holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A in
connection with a resale or proposed resale of a Note.
5C. INSPECTION OF PROPERTY. Each of the Company
and its Subsidiaries will permit any Holder and any Person designated by any
Holder, at such Holder's expense (unless such inspection shall be made during
the continuance of a Default or after the occurrence of an Event of Default, in
which event the reasonable expense of such inspection shall be borne by the
Company), to visit and inspect any of the properties of the Company or its
Subsidiaries, to examine the corporate books and financial records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
to discuss their affairs, finances and accounts with the principal officers of
the Company or any of its Subsidiaries and (prior to the occurrence and
continuance of a Default or Event of Default, upon consent of the Company
(which consent shall not be unreasonably withheld), and during the continuance
of a Default or after the occurrence of an Event of Default without the consent
of the Company), its independent public accountants (and by this provision the
Company authorizes such accountants to discuss with any Person so designated
its affairs, finances and accounts), and, with respect to the corporate
records, any counsel generally representing the Company or such Subsidiary in
respect of such matters, all at such reasonable times and as often as such
Holder may reasonably request.
5D. CORPORATE EXISTENCE, ETC. Each of the
Company and its Subsidiaries will at all times preserve and keep in full force
and effect its corporate existence, and rights and franchises material to its
business, and qualify and maintain its qualification to do business and good
standing in any jurisdiction where the failure to do so individually or in the
aggregate would have a Material Adverse Effect.
5E. PAYMENT OF TAXES AND CLAIMS.
(i) The Company and each of its Subsidiaries
will file all Tax returns required to be filed in
any jurisdiction and pay any Taxes shown to be due
and payable on such returns and all other Taxes
imposed upon them or any of their properties or
assets or in respect of any of their franchises,
business, income, sales and services, or profits
when the same become due and payable, but in any
event before any penalty or interest accrues
thereon, and all claims (including, without
limitation, claims for labor, services, materials
and supplies) for sums which have become due and
payable and which by law have or might become a Lien
upon any of their properties or assets, provided
that no such Tax or claim
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<PAGE> 13
need be paid if (i) it is being contested in good
faith by appropriate proceedings promptly initiated
and diligently conducted and if such reserves or
other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor and
(ii) the failure to pay such Tax or claim would not,
if such contest were adversely determined, have a
Material Adverse Effect.
(ii) The Company will not consent to or
permit the filing of or be a party to any
consolidated income tax return on behalf of itself or
any of its Subsidiaries with any Person (other than a
consolidated return that includes solely the Company
and its Subsidiaries); provided any of the Company's
Venezuelan Subsidiaries may obtain the benefit of tax
losses incurred by third parties against its
Venezuelan income if such arrangement (i) is in
accordance with applicable law and customary practice
in Venezuela and (ii) does not cause the Company or
any of its Subsidiaries to become directly or
indirectly liable on or for any Debt of or tax
imposed on such third party.
5F. COMPLIANCE WITH LAWS, ETC. Each of the
Company and its Subsidiaries will comply with the requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority
(including, without limitation, the Occupational Safety and Health Act of 1970,
as amended, ERISA and all Environmental Laws), the violation of which would
either individually or in the aggregate have a Material Adverse Effect and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failure to obtain or
maintain in effect such licenses, permits, franchises and other governmental
authorizations would not, individually and in the aggregate, have a Material
Adverse Effect.
5G. MAINTENANCE OF PROPERTIES AND LEASES. Each
of the Company and its Subsidiaries will maintain, in good repair and working
order and condition (other than ordinary wear and tear) all properties used or
useful in their respective businesses, and from time to time make or cause to
be made all appropriate repairs, renewals, replacements, additions and
improvements thereof as needed and comply in all material respects with the
provisions of all leases or licenses under which it leases or licenses any such
properties.
5H. INSURANCE. Except as set forth in SCHEDULE
5H, each of the Company and its Subsidiaries will maintain, with financially
sound and reputable insurers, rated at least A or A+ by A.M. Best, insurance
with respect to its properties and business of such type and in such forms and
amounts and against such risks as is reasonable and prudent in the
circumstances and in any event as are customarily insured against by Persons of
like size and established reputation engaged in the same or similar business
and similarly situated.
5I. SCOPE OF BUSINESS. Each of the Company and
its Subsidiaries will engage only in the Oil and Gas Business.
5J. USE OF PROCEEDS. Each of the Company and its
Subsidiaries will use the proceeds of the sale of the Notes only as designated
on SCHEDULE 5J and not for any purpose which would violate any applicable law
or governmental regulation or which is otherwise prohibited under PARAGRAPH 8I.
5K. ENVIRONMENTAL COMPLIANCE. Each of the
Company and its Subsidiaries will (i) obtain and maintain, all permits,
licenses, and other authorizations that are required under all Environmental
Laws, and (ii) comply with all terms and conditions of all such permits,
licenses, and authorizations and with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables contained in all Environmental Laws or in any regulation, ordinance,
code, plan, order, decree, judgment, injunction, notice, or demand letter
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<PAGE> 14
issued, entered, promulgated, or approved thereunder, except to the extent that
failure so to do does not have a Material Adverse Effect and (iii) operate all
property owned or leased by it such that no claim or obligation, including a
clean-up obligation, which would have a Material Adverse Effect, shall arise
under any Environmental Law, and if any claim is made against the Company or
any of its Subsidiaries or any such obligation shall arise (regardless of
whether such claim or obligation would have a Material Adverse Effect) under
any Environmental Law, the Company or such Subsidiary at its own cost and
expense, timely satisfy such claim or obligation; provided to the extent the
Company or a Subsidiary has, pursuant to an Operating Agreement, delegated the
operation of oil and gas properties to a third party (an "OPERATOR"), the
Company shall be required with respect to such properties to directly take only
such actions to ensure compliance with this PARAGRAPH 5K as are permitted to it
by such Operating Agreement but shall otherwise use its best efforts to ensure
that the Operator takes all such actions necessary to ensure compliance with
this PARAGRAPH 5K.
5L. MAINTENANCE OF BOOKS AND RECORDS. Each of
the Company and its Subsidiaries will do the following: (i) keep proper records
and books of account with respect to its business activities in which proper
entries are made in the ordinary course of all dealings or transactions of or
in relation to its business and affairs; (ii) set up on its books adequate
reserves with respect to all Taxes, assessments, charges, levies and claims;
and (iii) set up on its books reserves against doubtful accounts receivable,
advances and all other proper reserves (including reserves for depreciation,
obsolescence or amortization of its property). All determinations pursuant to
this PARAGRAPH 5L shall be made in accordance with, or as required by, GAAP
reflecting all of the Company's and its Subsidiaries' financial transactions.
Notwithstanding the foregoing, the Company and its Subsidiaries may make
adjustments and changes in the manner in which their books and records are
kept; provided, that:
(a) all such adjustments and changes shall be required or
permitted by GAAP but need not conform with the prior
accounting practice of the Company, such Subsidiary or any
predecessor of the Company;
(b) each Holder shall be given written notice of all such changes
or adjustments with the financial statements required by
PARAGRAPH 5A(i) for the quarter in which such change occurred
and a year-end listing and description of all such changes and
adjustments and the effect thereof by the Approved Auditor
which provided the financial statements required by PARAGRAPH
5A(ii); and
(c) the financial covenants and ratios set forth in PARAGRAPH 6A
shall continue to be calculated without regard to such
adjustments or changes unless and until each Holder has
consented thereto.
5.1M. PAYMENT OF TRADE PAYABLES. Each of the
Company and its Subsidiaries will pay all Trade Payables promptly in accordance
with their terms.
6. NEGATIVE COVENANTS.
6A. FINANCIAL COVENANTS. The Company will not:
6A(1). CURRENT RATIO. Permit its Current Ratio,
calculated as of the last day of any fiscal quarter, to be less than 1.1 to
1.0.
6A(2). FUNDED DEBT. Permit its Consolidated Funded Debt
calculated (i) as of the last day of any fiscal quarter to exceed 60% of Net
Worth as of such day and (ii) as of the last day of June and December in each
year to exceed the sum of (x) 100% of the Oil and Gas Reserve Estimate
attributable to proven oil and gas reserves in the United States, (y) working
capital to the extent held in unrestricted cash in commercial banks which are
members of the Federal Reserve System
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<PAGE> 15
and are chartered under the laws of the United States of America or any state
thereof or the District of Columbia, and (z) 10% of the Oil and Gas Reserve
Estimate attributable to proved oil and gas reserves in Venezuela through 1998,
provided in the case of the reserves in Venezuela, there is no payment default
under the Lagoven Operating Agreement.
6B. RESTRICTED PAYMENTS. The Company and its
Subsidiaries will not make or declare any Restricted Payments other than:
(i) any Restricted Payment by a
Subsidiary to the Company or to another Subsidiary,
if for the purpose of enabling the receiving
Subsidiary to make a Restricted Payment to the
Company;
(ii) any dividend payable to a holder
(other than the Company or another Subsidiary) of
capital stock (other than Preferred Stock) of a
Subsidiary; provided that such dividend is paid
concurrently with the payment of a dividend by such
Subsidiary to the Company or another Subsidiary and
the amount of such dividend does not exceed such
holder's pro rata share (based on such holder's
percentage ownership of the outstanding capital stock
of such Subsidiary) of the aggregate amount of the
dividend payable to all holders of capital stock of
such Subsidiary;
(iii) any dividend, distribution or
other payment on or with respect to capital stock of
the Company to the extent payable solely in shares of
common stock of the Company; and
(iv) payments due on, and in accordance
with the terms of, the Benton-Vinccler Promissory
Notes.
6C. LIENS AND OTHER RESTRICTIONS. The Company
and its Subsidiaries will not:
6C(1). LIENS. Create, assume or suffer to exist any Lien
on their respective properties or assets, whether now owned or hereafter
acquired or upon any income or profits therefrom or proceeds of dispositions
thereof, or transfer any property for the purpose of subjecting the same to the
payment of obligations in priority to the payment of their general creditors
except for:
(i) Liens on property acquired
constructed or improved after the Closing Date;
provided, however, that each such Lien (a) is
confined solely to the property so acquired,
improvements thereto and proceeds thereof, (b)
secures only the purchase price for or cost of
construction or improvements of such property and the
Debt secured by such Lien does not exceed 80% of the
purchase price or cost of construction or
improvement, (c) the Debt secured by such Lien is
incurred at the time of the acquisition or within 90
days following the date of acquisition, and (d) the
Debt secured thereby would otherwise be permitted by
PARAGRAPH 6C(8);
(ii) Liens representing any renewal,
refunding or extension of any Lien permitted by
CLAUSE (I) of this PARAGRAPH 6C(1) provided that the
principal amount secured and then outstanding is not
increased, the Lien is not extended to other property
and the Debt secured thereby would be permitted under
PARAGRAPH 6C(8);
(iii) Liens, and other charges
incidental to the conduct of their business, or the
ownership of their property (including charges for
Taxes or otherwise arising by operation of law,
mechanics', operators', carriers', workers',
repairmen's, warehousers' or other similar liens),
which are not incurred in connection with the
borrowing of money or the securing of Debt, provided
in each case the obligation secured is not overdue or
is being contested in good faith by appropriate
actions or procedures promptly instituted and
diligently conducted
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<PAGE> 16
and such reserves as shall be required by GAAP
shall have been made therefor and which in the
aggregate do not have a Material Adverse Effect;
(iv) Liens existing as of this date
described on SCHEDULE 6C(1) securing Debt described
in PARAGRAPH 6C(8)(II) and any Liens securing the
Debt represented by the Notes;
(v) deposits or pledges to secure
worker's compensation, unemployment insurance, old
age benefits or other social security obligations or
retirement benefits;
(vi) Liens arising out of deposits in
connection with, or to secure the performance of,
bids, tenders, trade contracts not for the payment of
money or leases, or to secure statutory obligations
or surety or appeal bonds, performance bonds or other
pledges or deposits for purposes of like nature in
the ordinary course of business;
(vii) Liens arising under Title IV of
ERISA which would not have a Material Adverse Effect;
(viii) survey exceptions or
encumbrances, easements or reservations, or rights of
others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as
to the use of real properties, which are necessary
for the conduct of the activities of the Company and
its Subsidiaries or which customarily exist on
properties of Persons engaged in similar activities
and similarly situated and which do not in any event
have a Material Adverse Effect or materially impair
their use in the operation of the business of the
Company or such Subsidiary;
(ix) Liens on inventory, accounts
receivable and/or oil and gas properties securing
Working Capital Facilities;
(x) Liens on the assets of the Russian
Joint Venture incurred in connection with project
financing; and
(xi) Cash deposits or pledges not
exceeding $500,000 in the aggregate securing the
H&P Letter of Credit.
6C(2). LOANS, ADVANCES AND INVESTMENTS. Make or permit
to remain outstanding any loan or advance to, or extend credit to, or own,
purchase or acquire any stock, obligations or securities of, or any other
interest in (including without limitation any equity interest in any
partnership, association, joint venture or other organization, whether or not a
legal entity), or make any capital contribution to any Person (collectively,
"INVESTMENTS"), except that each may:
(i) make Investments received in
settlement of debts (created in the ordinary course
of business) owing to it provided any such investment
is in the form of stock of a class publicly traded on
a national securities exchange and represents less
than 5% of the equity interest or the voting rights
in the issuer of such stock;
(ii) make Investments in securities
issued or directly and fully and unconditionally
guaranteed or insured by the United States of America
or any agency thereof backed by the full faith and
credit of the United States of America and maturing
within one (1) year from the date of acquisition;
demand deposits in banks in the ordinary course of
business (not for investment purposes); time
deposits, or certificates of deposit denominated in
United States dollars maturing within one (1) year
from the date of acquisition issued by commercial
banks which are members of the Federal Reserve System
and chartered under the laws of the United States of
America or any state or the District of Columbia,
whose short-term securities are rated at least A-1
(or then existing equivalent) by Standard & Poor's
Corporation and at least P-1 (or then existing
equivalent) by Moody's Investors Service, Inc.
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<PAGE> 17
and having capital and surplus in excess of
$100,000,000; tax exempt auction rate securities and
municipal preferred stock, in each case with a reset
of not more than 35 days and rated at least AA (or
then existing equivalent) by Standard & Poor's
Corporation; and prime commercial paper maturing not
more than 270 days from the date of acquisition,
having as at any date a rating of at least A-1 (or
the existing equivalent) from Standard & Poor's
Corporation or at least P-1 (or then existing
equivalent) from Moody's Investors Service, Inc. and
issued by a corporation organized in any state of the
United States of America or the District of Columbia;
(iii) endorse negotiable instruments for
collection and own its accounts receivable in the
ordinary course of business;
(iv) permit to remain outstanding any
Investments in any Subsidiary outstanding as of the
date of this Agreement;
(v) make Investments in the Russian
Joint Venture provided the aggregate of all such
Investments made by the Company and its Subsidiaries,
excluding Investments made solely with the proceeds
of Non-Recourse Debt payable solely from the assets
of the Russian Joint Venture, (i) through December
31, 1995, whether made prior to or after the Closing
Date, shall not exceed $26,000,000; (ii) during the
period from the Closing Date and through December 31,
1995, shall not exceed $8,757,380 and (iii) after
December 31, 1995, shall not exceed an aggregate
amount equal to 10% of the positive Consolidated Cash
Flow for the period commencing on January 1, 1996
through the fiscal quarter of the Company then most
recently ended taken as a single accounting period;
and
(vi) permit to remain outstanding loans
outstanding as of the date of this Agreement to the
Company's officers and directors provided the
aggregate principal amount of all such loans on the
Closing Date does not exceed $1,000,000 and as of
April 30, 1996, the aggregate principal amount
outstanding on such loans does not exceed $100,000;
and
(vii) enter into any Operating Agreement,
so long as (a) the interest of the Company or such
Subsidiary in the oil and gas properties which are
the subject of the operating agreement and the
hydrocarbons or other mineral products derived
therefrom are owned directly by the Company or such
Subsidiary, (b) the Operating Agreement does not
grant any Lien on the Company's or such Subsidiary's
ownership interest in such properties or products
derived therefrom or permit any third party to
restrict in any manner the ability of the Company or
such Subsidiary to use, transfer, sell or otherwise
dispose of its ownership interest (excluding, in each
case, any agreement to sell such products to a third
party or parties so long as such agreement was
negotiated on an arm's-length basis) and (c) no
independent legal entity is created by the Operating
Agreement.
6C(3). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Either
directly or indirectly by the issuance of rights, options for or securities
convertible into or exchangeable for such shares, issue, sell or otherwise
dispose of, or part with control of, any shares of capital stock (other than
directors' qualifying shares) or Debt of any Subsidiary, except for (i) the
issuance, sale or other disposition of shares of such capital stock or Debt to
the Company or another Wholly-Owned Subsidiary, and (ii) the issuance of Debt
otherwise permitted under PARAGRAPH 6C(8).
6C(4). MERGER AND SALE OF ASSETS. Merge or consolidate
with any other Person or sell, lease or transfer or otherwise dispose of their
respective assets to any Person or Persons, except, that
(i) any Subsidiary of the Company may
merge or consolidate with or sell, lease, transfer or
otherwise dispose of all or any of its assets to the
Company or a Wholly-Owned Subsidiary of the Company
(provided, that the Company or such Wholly-Owned
Subsidiary
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<PAGE> 18
shall be the continuing or surviving
corporation and the acquiring or surviving entity is
a corporation organized under the laws of, and having
its principal place of business in, a state of the
United States of America or the District of
Columbia);
(ii) the Company may merge or consolidate
with any other corporation provided that (a) the
Company shall be the continuing or surviving
corporation; and (b) immediately after giving effect
to such transaction, (x) were the Company to incur an
additional $1.00 of Debt, no Default or Event of
Default would result therefrom and (z) no Default or
Event of Default exists immediately before or
immediately after such merger or consolidation or
would otherwise reasonably be anticipated to result
therefrom;
(iii) the Company or any of its
Subsidiaries may sell, transfer or otherwise dispose
of some or all of their respective properties or
assets (other than Debt or capital stock of a
Subsidiary) for fair and adequate consideration (a
"DISPOSITION"); provided, however, that immediately
after giving effect to any such Disposition, the
aggregate book value, as reflected on the most recent
consolidated balance sheet of the Company and its
Subsidiaries furnished to the Holders pursuant to
PARAGRAPH 5A(I) or 5A(II), as the case may be, of
all such properties and assets so sold by the Company
and its Subsidiaries ("ASSETS SOLD") during the
immediately preceding 36 month period, less the
aggregate amount of Qualifying Reinvestments then
made by the Company and its Subsidiaries during such
36 month period, does not exceed 25% of Total Assets
at the end of the fiscal quarter of the Company
immediately preceding such Disposition and the
aggregate book value of all Assets Sold, less the
aggregate amount of Qualifying Reinvestments then
made by the Company and its Subsidiaries since the
Closing Date does not exceed 30% of Total Assets at
the end of the fiscal quarter of the Company
immediately preceding such Disposition; and
(iv) the Company and its Subsidiaries may
sell inventory in the ordinary course of business and
dispose of fully depreciated, obsolete Fixed Assets
for salvage or scrap.
For purposes of SUBPARAGRAPH (IV) of this PARAGRAPH 6C(4), a "QUALIFYING
REINVESTMENT" is the use of proceeds of Assets Sold to purchase not more than
90 days prior to or more than 180 days after the date of such Disposition (x)
tangible, depreciable assets or equipment or real property or depreciable
improvements thereon usable in any business conducted by the Company or the
Person owning the Assets Sold, or (y) either (1) purchase all of the
outstanding capital stock or other equity interests of a Person which is
immediately after such purchase a Subsidiary and is engaged in any business
conducted by the Company or the Person owning the Assets Sold, or (2) purchase
all or substantially all of the assets and business of a Person which is
engaged in any business conducted by the Company or the Person owning the
Assets Sold or to fund seismic, geological and geophysical studies, drilling,
completion and similar activities reasonably expected to create an interest in
oil and gas properties for the Company or the Person owning the Assets Sold.
6C(5). SUBSIDIARY DIVIDEND AND OTHER RESTRICTIONS.
Create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to (i) pay
dividends or make any other distributions on capital stock of any Subsidiary
owned by the Company or any other Subsidiary, (ii) pay any Debt owed to the
Company or any other Subsidiary, (iii) make any Investment in the Company or
any Subsidiary or (iv) transfer any of its property or assets to the Company or
any other Subsidiary, except (a) any other encumbrance or restriction pursuant
to this Agreement or any other agreement in effect on the date of this
Agreement and set forth in SCHEDULE 6C(5), (b) any encumbrance or restriction
arising under law or any instrument granting a Lien permitted under PARAGRAPH
6C(1)(ix) and (c) any restriction arising under customary non-assignment and
non-subletting clauses in leases.
6C(6). TRANSACTIONS WITH AFFILIATES. Directly or
indirectly, engage in any transaction (including, without limitation, the
purchase, sale or exchange of assets or the payment of salary, bonuses and
other compensation for services rendered) with any present or former
stockholder,
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<PAGE> 19
officer or Affiliate (other than the Company or another Wholly-Owned
Subsidiary), or to any successor, assign, Affiliate or transferee thereof,
except in the ordinary course of business pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon
commercially reasonable terms which are no less favorable to the Company or
such Subsidiary than those which might be obtained at arms' length between
unaffiliated parties.
6C(7). SALE AND LEASEBACK. Enter into any Sale and
Leaseback Transaction, unless the obligation incurred and evidenced by such
leasing arrangement would be a Capitalized Lease Obligation permitted to be
incurred by PARAGRAPH 6C(8).
6C(8). DEBT. Create, incur, assume or otherwise become
or remain directly or indirectly liable with respect to any Debt or issue or
permit the issuance of any Preferred Stock constituting Debt of the Company or
a Subsidiary, except:
(i) the Debt represented by the Notes;
(ii) Debt existing as of the date of
this Agreement and described in SCHEDULE 6D and any
Debt which is a renewal or refunding of such Debt
provided the principal amount then outstanding is not
increased and the date of any scheduled payment
thereunder is not extended;
(iii) Preferred Stock issued and
outstanding as of the date of this Agreement provided
the terms of such Preferred Stock are not amended
after the Closing Date;
(iv) the Working Capital Facilities;
(v) the H&P Letter of Credit; other
Performance Letters of Credit with respect to which
the account party is the Company or any Subsidiary,
if the reimbursement obligation of the Company or
such Subsidiary thereunder is unsecured; and
unsecured obligations of the Company or any
Subsidiary to reimburse any other Person for all or a
portion of such other Person's obligations with
respect to any Performance Letter of Credit which
secures the performance of obligations of the Company
or a Subsidiary (in addition to any performance
obligations of such other Person which such
Performance Letter of Credit may secure) under any
contract entered into by the Company or any
Subsidiary in the ordinary course of its Oil and Gas
Businessprovided that the aggregate amount of Debt
outstanding pursuant to this CLAUSE (v) shall not at
any time exceed $50,000,000;
(vi) Debt of the Company if the
aggregate amount of such Debt does not exceed at any
time the aggregate amount of Lagoven Receivables to
become due and payable within the next forty-five
days and is secured solely by the Lagoven Receivables
and at the time of incurrence of such Debt, all
Lagoven Receivables due and payable on or prior to
such date have been paid in full; and
(vii) other Debt of the Company (including
the issuance of Preferred Stock constituting Debt) if
such other Debt is unsecured and is junior to or
ranks pari passu with the Debt represented by the
Notes;
provided, at the time of incurrence or issuance thereof and after giving effect
thereto and the retirement of any Debt to be retired substantially currently
therewith, (a) in the case of Debt incurred pursuant to CLAUSES (iv), (v), (vi)
OR (vii), no Event of Default or Default exists or would otherwise reasonably
be anticipated to result from such transaction and (b) in the case of Debt
incurred pursuant to CLAUSES (iv), (vi) OR (vii), the financial tests set forth
in PARAGRAPH 6A, calculated on the basis of the most recently available
financial information, would be satisfied on a pro forma basis.
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<PAGE> 20
6D. COMPLIANCE WITH ERISA. The Company covenants
that it will not, and will not permit any Related Person to:
(i) engage in any transaction in
connection with which the Company or any Related
Person could be subject to either a civil penalty
assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code, terminate or
withdraw from any Plan (other than a Multiemployer
Plan) in a manner, or take any other action with
respect to any such Plan (including, without
limitation, a substantial cessation of business
operations or an amendment of a Plan within the
meaning of Section 4041(e) of ERISA), which could
result in any liability of the Company of any Related
Person to the PBGC, to a Plan, to a Plan participant,
to the Department of Labor or to a trustee appointed
under Section 4042(b) or (c) of ERISA), incur any
liability to the PBGC or a Plan on account of a
withdrawal from or a termination of a Plan under
Section 4063 or 4064 of ERISA, incur any liability
for post-retirement benefits under any and all
welfare benefit plans (as defined in Section 3(1) of
ERISA), fail to make full payment when due of all
amounts which, under the provisions of any Plan or
applicable law, the Company or any Related Person is
required to pay as contributions thereto, or permit
to exist any accumulated funding deficiency, whether
or not waived, with respect to any Plan (other than a
Multiemployer Plan);
(ii) at any time permit the termination
of any defined benefit pension plan intended to be
qualified under Section 401(a) and Section 501(a) of
the Code unless such plan is funded so that the value
of all benefit liabilities upon the termination date
does not exceed the then current value of all assets
in such plan; or
(iii) if the Company or any Related
Person becomes obligated under a Multiemployer Plan,
permit the aggregate complete or partial withdrawal
liability under Title IV of ERISA with respect to
Multiemployer Plans incurred by the Company or any
Related Person or the aggregate liability under Title
IV of ERISA incurred by the Company or any Related
Person to exceed any amount the payment of which
would have a Material Adverse Effect.
For the purposes of SUBPARAGRAPH (iii) of this PARAGRAPH 6D, the amount of the
withdrawal liability of the Company and the Related Persons at any date shall
be the aggregate present value of the amount claimed to have been incurred less
any portion thereof as to which the Company reasonably believes, after
appropriate consideration of possible adjustments arising under subtitle E of
Title IV of ERISA, it and its Related Persons will have no liability, provided
that the Company shall obtain promptly written advice from independent
actuarial consultants supporting such determination. The Company agrees that
it will (x) once in each calendar year, beginning in 1993, request and obtain a
current statement of withdrawal liability from each Multiemployer Plan to which
the Company or any Related Person is or has been obligated to contribute and
(y) transmit a copy of such statement to each Holder, within 15 days after the
Company receives the same. As used in this PARAGRAPH 6D, the term "accumulated
funding deficiency" has the meaning specified in section 302 of ERISA and
section 412 of the Code, the terms "present value" and "current value" have the
meanings specified in section 3 of ERISA, the term "benefit liabilities" has
the meaning specified in section 4001(a)(16) of ERISA and the term "amount of
unfunded liabilities" has the meaning specified in section 4001(18) of ERISA.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events
shall occur or conditions shall exist and be continuing for any reason
whatsoever, and whether such occurrence or condition shall be voluntary or
involuntary or come about or be effected by operation of law or otherwise (any
such occurrence or condition and continuance shall constitute an "EVENT OF
DEFAULT"):
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(i) the Company defaults in the payment of any
principal or the Make Whole Amount of, any Note when
the same becomes due, whether by the terms thereof or
otherwise as provided by the terms of this Agreement;
or
(ii) the Company defaults in the payment
of any interest on any Note when the same shall
become due, either by the terms thereof or otherwise
as provided by the terms of this Agreement and such
default continues for 3 days thereafter; or
(iii) the Company or any Subsidiary
defaults (whether as primary obligor or guarantor or
surety) in any payment of principal of, premium, if
any, or interest on any Debt other than that
evidenced by the Notes beyond any period of grace
provided with respect thereto, the outstanding
principal amount of which Debt exceeds $1,000,000 in
the aggregate, or fails to perform or observe any
other agreement, term or condition contained in any
agreement under which any such Debt is created (or if
any other event thereunder or under any such
agreement shall occur and be continuing), and the
effect of such default or other event is to cause, or
to permit the holder or holders of such Debt (or a
trustee on behalf of such holder or holders) to
cause, such Debt to become due or to be required to
be repurchased prior to any stated maturity; or
(iv) any representation or warranty made
by the Company in the Transaction Documents, or in
any writing furnished in connection with or pursuant
to this Agreement shall be false, incorrect or
misleading in any material respect; or
(v) the Company or any Subsidiary fails
to perform or observe any covenant contained in
PARAGRAPH 5D, 6A, 6B or 6C; or
(vi) the Company or any Subsidiary fails
to perform or observe any other agreement, term or
condition of any of the Transaction Documents and
such failure shall not be remedied within 30 days of
such failure; or
(vii) the Company or any Subsidiary
voluntarily or involuntarily suspends or discontinues
operations (other than temporary shutdowns in
accordance with customary business practices); or
liquidates all or substantially all of its assets; or
is generally not paying, or admits in writing that it
is not able to pay, its debts as such debts become
due or otherwise becomes insolvent; or files, or
consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction; or makes an
assignment for the benefit of its creditors; or
consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with
respect to it or with respect to any substantial part
of its property; or takes corporate action for the
purpose of any of the foregoing; or
(viii) a petition for relief or
reorganization or arrangement or any other petition
in bankruptcy, for liquidation, dissolution or
winding up of the Company or any Subsidiary or to
take advantage of any bankruptcy or insolvency law of
any jurisdiction is filed against the Company or any
Subsidiary without the consent or other acquiescence
of the Company or such Subsidiary and such petition
is not dismissed within 30 days; or
(ix) a Governmental Authority enters an
order appointing, without consent by the Company or
any Subsidiary, a custodian, receiver, trustee or
other officer with similar powers with respect to it
or with respect to any substantial part of its
property, or constituting an order for relief or
approving a petition for relief or reorganization or
any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of
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<PAGE> 22
the Company or any Subsidiary, and such order remains
unstayed and in effect for 30 days; or
(x) a final judgment or judgments for
the payment of money in which the aggregate amount of
such judgment or of all such judgments exceeds
$250,000 (net of insurance proceeds, if any) is
rendered against the Company or any Subsidiary and
within 10 days thereof such judgment or judgments are
not discharged or execution thereof stayed pending
appeal, or within 10 days after the expiration of any
such stay, such judgment or judgments are not
discharged; or
(xi) if (i) any Plan shall fail to
satisfy the minimum funding standards of ERISA or the
Code for any year or part thereof or a waiver of such
standards or extension of any amortization period is
sought or granted under Section 412 of the Code, (ii)
a notice of intent to terminate any Plan shall have
been or is reasonably expected to be filed with the
PBGC or the PBGC shall have instituted proceedings
under ERISA Section 4041 to terminate or appoint a
trustee to administer any Plan or the PBGC shall have
notified the Company or any ERISA Affiliate that a
Plan may become a subject of any such proceedings,
(iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of Section
4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed
$100,000, (iv) the Company or any ERISA Affiliate
shall have incurred or be reasonably expected to
incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans, (v) the
Company or any ERISA Affiliate withdraws from any
Multiemployer Plan, or (vi) the Company or any
Subsidiary establishes or amends any employee welfare
benefit plan that provides post-employment welfare
benefits in a manner that would increase the
liability of the Company or any Subsidiary
thereunder; and any such event or events described in
clauses (i) through (vi) above, either individually
or together with any other such event or events,
could reasonably be expected to have a Material
Adverse Effect. As used in this CLAUSE (xi), the
terms "employee benefit plan" and "employee welfare
benefit plan" shall have the respective meanings
assigned to such terms in Section 3 of ERISA; or
(xii) the report of the Approved Auditor
with respect to any of the audited consolidated
financial statements of the Company and its
Subsidiaries furnished pursuant to PARAGRAPH 5A(ii)
for any fiscal year shall state that such financial
statements do not present a true and fair view of the
Company's and its Subsidiaries state of affairs and
profit (or loss) as of the close of such fiscal year
on a consolidated basis, or shall contain any
Impermissible Qualification;
then (a) if such occurrence or continuance is an Event of Default specified in
SUBPARAGRAPH (vii), (viii) OR (ix) of this PARAGRAPH 7A, each Note at the time
outstanding shall automatically become due and payable at 100% of the principal
amount thereof together with all interest accrued thereon and together with the
Make Whole Amount, without presentment, demand, protest or notice of any kind,
all of which are expressly waived by the Company; (b) if such occurrence or
continuance is an Event of Default specified in SUBPARAGRAPH (i) OR (ii) of
this PARAGRAPH 7A, at the option of any Holder, each Note held by such Holder
at the time outstanding shall become immediately due and payable at 100% of the
principal amount thereof together with all interest accrued thereon and
together with the Make Whole Amount, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Company; and (c) if
such occurrence or continuance is any other Event of Default, the Required
Holder(s) may at its or their option declare each Note to be, and each Note
shall thereupon be and become, immediately due and payable at 100% of the
principal amount thereof together with all interest accrued thereon and
together with the Make Whole Amount, with respect to each Note, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company.
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<PAGE> 23
7B. RESCISSION OF ACCELERATION. At any time
after any Note shall have been declared immediately due and payable pursuant to
CLAUSE (B) or (C) of the last paragraph of PARAGRAPH 7A, the Required Holder(s)
may, by written notice to the Company, rescind and annul such declaration and
its consequences if (i) the Company shall have paid all interest, principal and
Make Whole Amount payable on the Notes, which have become due otherwise than by
reason of such declaration, and interest on any overdue interest, principal and
Make Whole Amount, if any, at the amount specified in this Agreement, (ii) the
Company shall not have paid any amounts which have become due solely by reason
of such declaration, (iii) all Events of Default and Defaults, other than
non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to PARAGRAPH 11C, and
(iv) no judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Notes or this Agreement solely by reason of such
declaration. No such rescission or annulment shall extend to or affect any
subsequent Event of Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION.
Whenever any Note shall be declared immediately due and payable pursuant to
PARAGRAPH 7A, or any such declaration under CLAUSE (B) or (C) of PARAGRAPH 7A
shall be rescinded and annulled pursuant to PARAGRAPH 7B, the Company shall
forthwith give written notice thereof to each other Holder at the time
outstanding; provided the failure to give such notice shall not affect the
validity of any such declaration, recision or annulment.
7D. OTHER REMEDIES. If any one or more Defaults
or Events of Default shall occur and be continuing, irrespective of whether any
Notes have become or have been declared immediately due and payable, any Holder
may proceed to protect and enforce its rights under the Transaction Document by
exercising such remedies as are available to such Holder in respect thereof
under applicable law, either by suit in equity or by action at law or by any
other appropriate proceeding, whether for specific performance of any covenant
or other agreement contained in a Transaction Document or in aid of the
exercise of any power granted in a Transaction Document, in such order as the
Holder may determine in its sole discretion. No remedy conferred in a
Transaction Document upon any Holder is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise. No course of dealing or failure
or delay by any Holder in exercising any right, power or remedy under a
Transaction Document or any other document executed in connection therewith
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or remedy preclude any other right or remedy hereunder or
thereunder.
8. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants that:
8A. ORGANIZATION, ETC. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, each of its Subsidiaries is duly organized and
validly existing and in good standing under the laws of the jurisdiction of its
incorporation as set forth in SCHEDULE 8A and each of the Company and its
Subsidiaries has all requisite the corporate power and authority to own,
operate and lease its property and to carry on its business as now being
conducted and to execute, deliver and perform each Transaction Document and
issue and sell the Notes. The Company and each of its Subsidiaries is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the failure to be so would, individually
or in the aggregate, have a Material Adverse Effect. SCHEDULE 8A sets forth
each jurisdiction in which the Company or any of its Subsidiaries is qualified
or authorized to do business as a foreign corporation. Each Transaction
Document has been duly authorized by all necessary corporate action on the part
of the Company, has been duly executed and delivered by authorized officers of
the Company and are the legal, valid and binding obligations of the Company,
and, subject to bankruptcy, insolvency, reorganization, moratorium and other
laws affecting the enforcement or priority of creditors' rights generally, now
or hereafter in effect, and subject to the
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<PAGE> 24
provision that equitable remedies shall be within the discretion of the court
having jurisdiction to exercise the same, are enforceable in accordance with
their respective terms.
8B. STOCK OWNERSHIP. All of the outstanding
capital stock of the Company is validly issued, fully paid and non- assessable.
Except as set forth in SCHEDULE 8B, no Person or group of Persons (including
all directors and executive officers as a group) owns beneficially or of record
more than 5% of the Voting Stock of the Company. There are no Subsidiaries of
the Company other than those listed in SCHEDULE 8A. All of the outstanding
capital stock of each of the Subsidiaries is validly issued and, except as set
forth in SCHEDULE 8B, fully paid and non-assessable, and is 100% owned directly
by the Company or, if not, is owned by the Persons and in the amounts listed on
SCHEDULE 8B, which Persons collectively, with the Company, own 100% of the
issued and outstanding shares of capital stock of each such Subsidiary, and all
such capital stock owned by the Company or any other Subsidiary is owned free
and clear of any Lien of any kind and the Company or such other Subsidiary has
the right, subject only to limitations imposed by applicable law to receive
dividends and distributions on such capital stock. Except as set forth in
SCHEDULE 8B, the Company and its Subsidiaries do not have outstanding any
rights, options, warrants or other agreements which would require them to issue
any additional shares of their capital stock.
8C. BUSINESS; FINANCIAL STATEMENTS; NO CHANGES.
The Company has furnished the Purchasers with the audited consolidated balance
sheets of the Company and its Subsidiaries as of December 31 in each of the
years 1993 and 1994 and the related consolidated statements of operations and
stockholders' equity for the periods of twelve months ended on each such date
and with the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of March 31, 1995 and the related consolidated statements of
operations and stockholders' equity for the three months ended on such date.
The financial statements referred to in this PARAGRAPH 8C, including any
related schedules and/or notes (the "FINANCIAL STATEMENTS"), are true and
correct in all material respects, have been prepared in accordance with GAAP
and show all liabilities of the Company and its Subsidiaries required to be
shown therein in accordance with such principles. The balance sheets included
in the Financial Statements fairly present the condition of the Company and its
Subsidiaries on a consolidated basis as at the dates thereof, and the
statements of operations and stockholders' equity included in the Financial
Statements fairly present the results of the operations and the stockholders'
equity of the Company and its Subsidiaries on a consolidated basis for the
periods indicated. Since December 31, 1994, there have been no developments or
changes affecting the business, assets, liabilities, condition (financial or
otherwise) of the Company or any of its Subsidiaries which has had or, could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
8D. ACTIONS PENDING. Except as set forth on
SCHEDULE 8D, there are no actions, suits, investigations or proceedings pending
or, to the knowledge of the Company threatened, against the Company or any of
its Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, by or before any court, arbitrator or administrative or
governmental body other than those which individually and in the aggregate do
not and will not, in the future have a Material Adverse Effect.
8E. TITLE TO PROPERTIES. Each of the Company and
its Subsidiaries has good and marketable title to its real properties (other
than properties which it leases) and good title to all of its other properties
and assets, including the properties and assets reflected in the balance sheet
as of December 31, 1994 included in the Financial Statements (other than
properties and assets disposed of since such date in the ordinary course of
business), subject to no Lien of any kind except Liens permitted by PARAGRAPH
6C(1). The Company and each of its Subsidiaries enjoys peaceful and
undisturbed possession under all leases necessary in any material respect for
the conduct of their respective businesses as now conducted and all such leases
are valid and subsisting and are in full force and effect. The Company and
each of its Subsidiaries owns or has the right to use (under agreements or
licenses which are in full force and effect) all patents, copyrights,
trademarks, trade
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names, service marks or other intellectual or industrial property rights
necessary for the Company or such Subsidiary to conduct its business now
conducted without any known conflict with the rights of others.
8F. AFFILIATES AND INVESTMENTS IN OTHERS. Except
as set forth on SCHEDULE 8F, the Company and its Subsidiaries have no
Affiliates and do not own any stock or securities or have any beneficial or
equity interest in any Person other than ownership of stock or securities of a
Person of a class publicly traded on a national securities exchange
representing not more than 5% of the total combined voting power of all classes
of Voting Stock of such Person or more than 5% of beneficial or equity interest
in such Person.
8G. TAX RETURNS AND PAYMENTS. Each of the
Company and its Subsidiaries has filed all Federal, State, local and foreign
income tax returns, franchise tax returns, real and personal property tax
returns and other tax returns required by law to be filed by or on its behalf
of or with respect to its properties or assets, and all Taxes, assessments and
other governmental charges imposed upon any of the Company and any of its
properties, assets, income or franchises which are due and payable have been
paid, other than those presently payable without penalty or interest and those
presently being contested in good faith by appropriate proceedings diligently
conducted and for which such reserves or other appropriate provisions, if any,
as may be required by GAAP have been made. The changes, accruals and reserves
on the books of the Company and its Subsidiaries in respect of any Taxes for
all periods are adequate and the Company knows of no unpaid assessment for
additional Taxes for any period or any basis for any such assessment for which
adequate provision has not been made in its accounts. No charges or Taxes will
be imposed by the State of Texas or any other Governmental Authority on the
execution, delivery or enforcement of the Transaction Documents and the issue
and sale of the Notes and the Warrants or any transfer of the Notes or the
Warrants.
8H. CONFLICTING AGREEMENTS AND OTHER MATTERS.
Neither the Company nor any Subsidiary is in violation of any term of its
charter or by-laws, or in violation of breach of any term of any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which it is subject, the
consequences of which violation or breach are reasonably likely to have a
Material Adverse Effect. Neither the Company nor any Subsidiary is a party to
any contract or agreement or subject to any charter or other corporate
restriction which has a Material Adverse Effect. The execution and delivery of
the Transaction Documents, and the offering, issuance and sale of the Notes and
the Warrants, and fulfillment of and compliance with the terms and provisions
of the Transaction Documents, do not and will not conflict with the provisions
of, or constitute a default under, or result in any violation of, or result in
the creation of any Lien upon any of the properties or assets of the Company or
any of its Subsidiaries pursuant to, the charter or by-laws of the Company or
any of its Subsidiaries, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which the Company or any of its
Subsidiaries is subject. Neither the Company nor any of its Subsidiaries is a
party to, or otherwise subject to any provision contained in, any instrument
evidencing Debt, any agreement relating thereto or any other contract or
agreement (including its charter) which limits the amount of, or otherwise
imposes restrictions on the incurring of the Debt of the Company to be
evidenced by the Notes which has not been waived or otherwise complied with in
connection with the issuance of the Notes.
8I. OFFERING OF NOTES AND WARRANTS. Neither the
Company nor any agent acting on its behalf has, directly or indirectly, offered
the Notes or the Warrants or any similar security of the Company for sale to,
or solicited any offers to buy the Notes or the Warrants or any similar
security of the Company from, or otherwise approached or negotiated with
respect thereto with, any Person other than the Purchasers, and neither the
Company nor any agent acting on its behalf has taken or will take any action
which would subject the issuance or sale of the Notes or the Warrants to the
provisions of Section 5 of the Securities Act or to the registration provisions
of any securities or Blue Sky law of any applicable jurisdiction. Upon
issuance of the Notes and the Warrants, neither
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<PAGE> 26
the Notes nor the Warrants will be of the same class as securities of the
Company listed on a national securities exchange registered under Section 6 of
the Exchange Act or quoted in a U.S. automated inter-dealer quotation system,
within the meaning of Rule 144A.
8J. REGULATION G, ETC. None of the proceeds of
the sale of the Notes will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying any margin
stock within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System (12 CFR Part 207) or for the purpose of maintaining,
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any stock that is currently a margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the meaning
of such Regulation G or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of such Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of such Board (12 CFR 220). Margin stock does not
constitute more than 10% of the value of the assets of the Company or any
Subsidiary, and neither the Company nor any Subsidiary has any present
intention that margin stock will constitute more than 10% of the value of its
or the Consolidated Group's assets. As used in this Section, the terms "margin
stock" and "purpose of buying or carrying" shall have the meanings assigned to
them in said Regulation G.
8K. ERISA.
(i) The Company and each ERISA Affiliate
has operated and administered each Plan operated and
administered by it in compliance with all applicable
laws except for such instances of noncompliance as
have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has
incurred any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or
condition has occurred or exists that could
reasonably be expected to result in the incurrence of
any such liability by the Company any ERISA
Affiliate, or in the imposition of any Lien on any of
the rights, properties or assets of the Company or
any ERISA Affiliate, in either case pursuant to Title
I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the
Code, other than such liabilities or Liens as
individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect.
(ii) The present value of the
aggregate benefit liabilities under each of the Plans
(other than Multiemployer Plans), determined as of
the end of such Plan's most recently ended plan year
on the basis of the actuarial assumptions specified
for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the
aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term
"benefit liabilities" has the meaning specified in
section 4001 of ERISA and the terms "current value"
and "present value" have the meaning specified in
Section 3 of ERISA.
(iii) The Company and its ERISA
Affiliates have not incurred withdrawal liabilities
(and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in
respect of Multiemployer Plans that individually or
in the aggregate could reasonably be expected to have
a Material Adverse Effect.
(iv) The expected postretirement
benefit obligation (determined as of the last day of
the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board
Statement No. 106, without regard to liabilities
attributable to continuation coverage mandated by
section 498B of the Code) of the Consolidated Group
could not reasonably be expected to have a Material
Adverse Effect.
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<PAGE> 27
(v) The execution and delivery of the
Transaction Documents, the issuance and sale of the
Notes and Warrants will not result in a "prohibited
transaction" which is subject to the prohibitions of
Section 406 of ERISA or in connection with which a
Tax could be imposed pursuant to Section
4975(c)(1)(A)-(D) of the Code. The representation in
the preceding sentence is made in reliance upon and
subject to (i) the accuracy of the Purchasers'
representations in PARAGRAPH 9(II) as to the source
of the funds to be used to pay the purchase price of
the Securities and (ii) the assumption, made solely
for the purpose of making such representation, that
Department of Labor Interpretive Bulletin 75-2 with
respect to prohibited transactions remains valid in
the circumstances of the transactions contemplated
herein.
8L. GOVERNMENTAL AND OTHER CONSENTS. Neither the
nature of the Company nor any of its Subsidiaries, nor any of their businesses
or properties, nor any relationship between the Company or any Subsidiary and
any other Person, nor any circumstance in connection with the execution and
delivery of any Transaction Document, or the offering, issuance, sale or
delivery of the Notes or the Warrants is such as to require any authorization,
consent, approval, exemption or any action by or notice to or filing with any
Governmental Authority or any other Person (other than the Company's Board of
Directors) in connection with the execution and delivery of the Transaction
Documents and the offering, issuance, sale or delivery of the Notes and the
Warrants (other than any filing required in connection with an exemption from
the registration requirements of any federal or state securities laws) or
fulfillment of or compliance with the terms and provisions of the Transaction
Documents.
8M. ENVIRONMENTAL MATTERS. Neither the Company
nor any Subsidiary has any knowledge of any claim or has received any notice of
any claim, and no proceeding has been instituted raising any claim, against of
them or any of their respective real properties now or formerly owned, leased
or operate by any of them or other assets, alleging any damage to the
environment or violation of any Environment Laws, except, in each case, such as
could not reasonably be expected to result in a Material Adverse Effect.
Except as otherwise disclosed in SCHEDULE 8M:
(i) neither the Company nor any
Subsidiary has knowledge of any facts which would
give rise to any claim, public or private, of
violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any
way related to real properties now or formerly owned,
leased or operated by any of them or to other assets
or their use, except, in each case, such as could not
reasonably be expected to result in a Material
Adverse Effect;
(ii) neither the Company nor any
Subsidiary has stored any Hazardous Materials on real
properties now or formerly owned, leased or operated
by any of them in a manner contrary to any
Environmental Laws or has disposed of any Hazardous
Materials in a manner contrary to any Environmental
Laws, in each case in any manner that could
reasonably be expected to result in a Material
Adverse Effect; and
(iii) all buildings on all real
properties now owned, leased or operated by any
Member are in compliance with applicable
Environmental Laws, except where failure to comply
could not reasonably be expected to result in a
Material Adverse Effect.
8N. LABOR RELATIONS. There is not now pending,
or to the knowledge of the Company, threatened, any strike, work stoppage, work
slow down, or material grievance or other material dispute between the Company
or any of its Subsidiaries and any bargaining unit or significant number of its
respective employees. The Company is not aware of any existing or imminent
labor disturbance by the employees of any of the principal suppliers,
contractors or customers of the Company or any of its Subsidiaries that would
result, individually or in the aggregate, in a Material Adverse Effect.
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<PAGE> 28
8O. FINANCIAL CONDITION. After giving effect to
the transactions contemplated hereby, (i) the aggregate present fair saleable
value of the assets of the Company will be greater than the amount that will be
required to pay the probable liabilities of the Company on its debts, including
contingent liabilities, as they become absolute and mature; (ii) the Company
has (and has no reason to believe that it will not have) sufficient capital for
the conduct of its business; and (iii) the Company does not intend to incur,
and does not believe it has incurred, debts beyond its ability to pay as they
mature.
8P. DISCLOSURE. No Transaction Document nor any
other document, certificate or statement furnished to the Purchaser by or on
behalf of the Company in connection herewith contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein in light of the circumstances under
which they were made not misleading.
8Q. STATUS UNDER CERTAIN FEDERAL STATUTES. The
Company is not (a) an "investment company" or a company "controlled" by an
"investment company" or an "open-end investment company" or a "unit investment
trust" or a "face-amount certificate company", within the meaning of the
Investment Company Act of 1940, as amended, (b) a "holding company" or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended, or (c) a
"carrier", as defined in section 11,301(a)(1) of Title 49 of the United States
Code and subject to the provisions of such Title. The Company is not a
"national of any designated foreign country", within the meaning of the Foreign
Assets Control Regulations or the Cuban Assets Control Regulations of the
United States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as
amended, or any regulations or rulings issued thereunder. Neither the sale of
the Notes nor the use of such proceeds by the Company violates any statute,
regulation or executive order restricting loans to or investments in or the
export of assets to foreign countries or entities doing business therein.
9. REPRESENTATIONS OF THE PURCHASER. Each
Purchaser represents that:
(i) It is purchasing its Notes for its own
account or for one or more separate accounts
maintained by it or for the account of one or more
pension or trust funds, in each case for investment
and not with a view to the distribution thereof or
with any present intention of distributing or selling
any of the Notes, provided that the disposition of
the Purchaser's property shall at all times be within
its control. The Company acknowledges that a sale of
all or a portion of a Note by a Purchaser to one or
more Qualified Institutional Buyers in compliance
with Rule 144A would not be a breach of this
representation.
(ii) With respect to each source of funds
to be used by it to pay the purchase price of its
Notes (respectively, the "SOURCE"), at least one of
the following statements is accurate as of the
Closing Date:
(iii) The Source is assets of an insurance
company general account and not assets of an
insurance company separate account and the purchase
will be exempt under the provisions of the proposed
Prohibited Transaction Class Exemption published by
the Department of Labor in the Federal Register on
August 22, 1994 (59 FR 43134, August 22, 1994);
(iv) The Source is a "governmental plan"
as defined in Title I, Section 3(32) of ERISA;
(v) The Source is either (i) an
insurance company pooled separate account and the
purchase is exempt in accordance with Prohibited
Transaction Exemption ("PTE") 90-1
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(issued January 29, 1990), or (ii) a bank collective investment fund,
in which case the purchase is exempt in accordance with PTE 91-38
(issued July 21, 1991);
(vi) The Source is an "investment fund" managed by
a "qualified professional asset manager" or "QPAM" (as defined in Part
V of PTE 84-14, issued March 13, 1984) which QPAM has been identified
in writing, and the purchase is exempt under PTE 84-14, provided that
no other party to the transactions described in this Agreement and no
"affiliate" of such other party (as defined in Section V(c) of PTE
84-14) has at this time, and has not exercised at any time during the
immediately preceding year, the authority to appoint or terminate said
QPAM as manager of the assets of any plan identified in writing
pursuant to this PARAGRAPH (D) or to negotiate the terms of said
QPAM's management agreement on behalf of any such identified plans; or
(vii) The Source is one or more
plans or a separate account or trust fund comprised of one or more
plans each of which has been identified in writing pursuant to this
PARAGRAPH (E).
As used in this PARAGRAPH 9, the terms "plan" and "plans" have the meaning
assigned to such terms in Title I, Section 3(3) of ERISA.
10. DEFINITIONS. For the purposes of this
Agreement, the following terms shall have the respective meanings specified
with respect thereto:
10A. MAKE WHOLE AMOUNT TERMS.
"AVERAGE REMAINING LIFE" means the number of years (calculated to the
nearest one-twelfth year) obtained by dividing the Called Principal into the
sum of the products obtained by multiplying (i) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (ii) the
number of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to PARAGRAPH 4A or 4E or is declared
to be immediately due and payable pursuant to PARAGRAPH 7A.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments from
their respective scheduled due dates, in accordance with accepted financial
practice and at a discount factor (applied on a semi-annual basis) equal to
the Discount Rate with respect to such Called Principal.
"DISCOUNT RATE" means, with respect to the Called Principal of any
Note, the yield to maturity of the Called Principal implied by (a) the yield
reported as of 10:00 A.M. (New York City time) on the date which is two
Business Days prior to the Settlement Date with respect to such Called
Principal, on the display designated as "Page 5" on the Telerate Service (or
such other display as may replace Page 5 of the Telerate Service) for actively
traded U.S. Treasury securities having a maturity equal to the Average
Remaining Life of such Called Principal as of such Settlement Date, or (b) if
such yields shall not be reported as of such time or the yields reported as of
such time shall not be ascertainable, the Treasury Constant Maturity Series
yields reported, for the latest day for which such yields shall have been so
reported as of the Business Day next preceding the Settlement Date with respect
to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or
any comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Average Remaining Life of
such Called Principal as of such Settlement Date plus, in either case, (c) 75
basis points. Such implied yield shall be determined, if necessary, by (x)
converting U.S. Treasury Securities quotations to bond-equivalent
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yields in accordance with accepted financial practice and (y) interpolating
linearly between (1) the actively traded U.S. Treasury security with the
duration closest to and greater than the Average Remaining Life and (2) the
actively traded U.S. Treasury security with the duration closest to and less
than the Average Remaining Life.
"MAKE WHOLE AMOUNT" means, with respect to a Note, the amount equal to
the excess, if any, of (x) the Discounted Value over (y) the sum of (i) such
Called Principal plus (ii) interest accrued and unpaid thereon as of and due on
the Settlement Date with respect to such Called Principal. The Make Whole
Amount shall in no event be less than zero.
"REMAINING LIFE" means, with respect to the Called Principal of any
Note, the number of years (calculated to nearest one-twelfth year) which would
have elapsed between the Settlement Date with respect to such Called Principal
and the scheduled due date of the first principal payment against which the
Called Principal is applied pursuant to PARAGRAPH 4E.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest that
would be due after the Settlement Date with respect to such Called Principal if
no payment of Called Principal were made prior to its scheduled due date,
provided that if such Settlement Date is not a date on which interest payments
are scheduled to be made under the terms of this Agreement, then the amount of
the next succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on such
Settlement Date.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
PARAGRAPH 4A or 4E or is declared to be immediately due and payable pursuant to
PARAGRAPH 7A.
10B. OTHER TERMS.
"AFFILIATE" means as to any Person, any other Person directly or
indirectly (i) controlling, controlled by, or under direct common control with,
such Person or (ii) owning 5% or more of the beneficial interest or Voting
Stock of such Person as well as, in the case of an individual, such
individual's spouse, issue, parents, siblings and issue of siblings (in each
case by blood, adoption or marriage). A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" has the meaning specified in PARAGRAPH 11C.
"APPROVED AUDITOR" means Deloitte & Touche or Arthur Andersen & Co.,
Coopers & Lybrand, Ernst & Young, KPMG Peat Marwick or Price Waterhouse.
"ASSETS SOLD" has the meaning specified in PARAGRAPH 6C(4)(iv).
"AUDITED REPORT" has the meaning specified in PARAGRAPH 5A(v).
"BENTON-VINCCLER PROMISSORY NOTES" means the Company's promissory
notes dated February 24, 1994 in the aggregate original principal amount of
$10,000,000 issued in the name of Benton-Vinccler C.A.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which commercial banks in Boston, Massachusetts are required or authorized
to be closed.
"CAPITALIZED LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by such Person which would, in
accordance with GAAP, be required to be
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<PAGE> 31
classified and accounted for as a capitalized lease on a balance sheet of
such Person, other than, in the case of the Company, any such lease under which
the Company is the lessor.
"CAPITALIZED LEASE OBLIGATION" means any rental obligation under a
Capitalized Lease taken at the amount thereof accounted for as indebtedness
(net of interest expense) in accordance with GAAP.
"CHANGE IN CONTROL" means the occurrence of any of the following: (i)
any "person" (as such term is used in Sections 13(d) and 14(d) (or any
successor provisions) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 (or any successor provisions) under the
Exchange Act) of 50% or more of the total voting power of the Voting Stock of
the Company; (ii) there shall be consummated any consolidation or merger of the
Company (a) in which the Company is not the continuing or surviving corporation
or (b) pursuant to which the outstanding Voting Stock of the Company would be
converted into cash, securities or other property, in each case other than a
consolidation or merger of the Company in which (1) the outstanding Voting
Stock of the Company is changed into or exchanged for Voting Stock of the
continuing or surviving corporation and (2) the holders of the Company's Voting
Stock immediately prior to the consolidation or merger own, directly or
indirectly, at least a majority of the Voting Stock of the continuing or
surviving corporation immediately after the consolidation or merger, (iii) the
Company sells, transfers or otherwise disposes of all or substantially all of
its assets, (iv) the cessation of Continuing Directors for any reason to
constitute a majority of the Board of Directors then in office, (v) so long as
any Debt issued pursuant to the Convertible Note Agreement remains outstanding,
a Change in Control as defined therein, (vi) so long as any Debt remains
outstanding under the Convertible Debenture Indenture, a Fundamental Change as
defined therein, (vii) the Company ceases to own on a fully diluted basis,
directly or indirectly through one or more Wholly-Owned Subsidiaries of the
Company, 80% of the outstanding Voting Stock of Benton-Vinccler, C.A.
"CLOSING" and "CLOSING DATE" have the meanings specified in PARAGRAPH
2B.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time and the rules and regulations promulgated thereunder as from time to
time in effect.
"COMPANY" has the meaning specified in the first paragraph of this
Agreement.
"CONSOLIDATED CASH FLOW" means for any period the net cash provided by
operating activities for such period as determined in accordance with GAAP.
"CONSOLIDATED FUNDED DEBT" means on any date as of which the amount
thereof is to be determined, the Funded Debt of the Company and its
Subsidiaries on a consolidated basis determined in accordance with GAAP.
"CONSOLIDATED GROUP" means the Company and its Subsidiaries taken as a
whole.
"CONSOLIDATED NET INCOME" means on any date as of which the amount
thereof is to be determined, the Net Income of the Company and its Subsidiaries
on a consolidated basis determined in accordance with GAAP.
"CONSOLIDATED TOTAL CAPITALIZATION" means on any date as of which the
amount thereof is to be determined, the sum of (i) Consolidated Debt and (ii)
Net Worth.
"CONTINUING DIRECTORS" means any member of the Board of Directors on
the date of this Agreement, any director elected after the date hereof in any
annual meeting of the stockholders upon the recommendation of the then current
Board of Directors and any other member of the Board of Directors who is
elected to succeed a Continuing Director by a majority of Continuing Directors
who are then members of the Board of Directors.
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<PAGE> 32
"CONVERTIBLE DEBENTURE INDENTURE" means the Indenture dated as of May
15, 1992 between the Company and Meridian Trust Company of California.
"CONVERTIBLE NOTE AGREEMENT" means the Note Agreement dated as of
October 1, 1991 between the Company and the purchasers listed therein.
"CURRENT RATIO" means on any date as of which the amount thereof is to
be determined, the ratio of the current assets of the Company and its
Subsidiaries on a consolidated basis determined in accordance with GAAP to the
current liabilities of the Company and its Subsidiaries on a consolidated basis
determined in accordance with GAAP.
"DEBT" means, as applied to any Person without duplication, (i)
obligations of such Person for borrowed money, (ii) obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations of such Person to pay the deferred purchase price of property or
services, (iv) Capitalized Lease Obligations of such Person, (v) obligations of
such Person to purchase securities or other property that arise out of or in
connection with the sale of the same or substantially similar securities or
property, (vi) obligations of such Person to reimburse any other Person in
respect of amounts paid under a letter of credit or similar instrument, (vii)
obligations with respect to interest rate and currency swaps and similar
obligations requiring such Person to make payments, whether periodically or
upon the happening of a contingency, except that if any agreement relating to
such obligations provides for the netting of amounts payable by and to such
Person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case, the amount of
such obligations shall be the net amount thereof, (viii) any obligations
secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) a Lien on any asset of such Person,
whether or not such obligation is assumed by such Person, (ix) any recourse
obligations of such Person in connection with a sale of receivables, (x)
obligations of such Person to make payment for any products, materials or
supplies or for any transportation or services regardless of the non-delivery
or non-furnishing thereof, (xi) Guaranties by such Person of Debt of others,
(xii) any outstanding Preferred Stock of a Subsidiary of such Person (other
than Preferred Stock owned beneficially and of record by such Person) and any
outstanding Redeemable Preferred Stock of such Person and (xiii) any other
items (excluding Trade Payables and, other than obligations described in CLAUSE
(X) of this paragraph, items of contingency reserves or reserves for deferred
income Taxes or other reserves to the extent such reserves do not represent an
obligation) which in accordance with GAAP would be shown on the liabilities
side of the balance sheet of such Person.
"DEFAULT" means any occurrence or condition which with the giving of
notice or the passage of time, or both, would be an Event of Default.
"DISPOSITION" has the meaning specified in PARAGRAPH 6C(4)(iv).
"ELIGIBLE CAPITAL STOCK" means any class or series of capital stock of
the Company other than Redeemable Preferred Stock.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder
as from time to time in effect.
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"ERISA AFFILIATE", for Plan purposes, means, with respect to any
Person, any trade or business, whether or not incorporated, which, is treated
as a single employer together with such person under Section 414 of the Code.
"EVENT OF DEFAULT" has the meaning specified in PARAGRAPH 7A.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPENSES" has the meaning specified in PARAGRAPH 11B.
"FASB" means the Financial Accounting Standards Board and any other
successor organization.
"FINANCIAL STATEMENTS" has the meaning specified in PARAGRAPH 8C.
"FIXED ASSETS" means all assets of the Company which are classified as
"property, plant and equipment" on its balance sheet in accordance with GAAP.
"FUNDED DEBT" means, as applied to any Person, on any date as of which
the amount thereof is to be determined (i) all Debt of such Person, maturing
more than one year from the creation thereof or which is renewable or
extendable beyond one year from such date; and (ii) all Debt of such Person
which remains outstanding beyond one year from the date of its creation or
incurrence provided, however, in the case of the Company, Funded Debt will
exclude the Debt represented by the Benton-Vinccler Promissory Notes and H&P
Letter of Credit.
"GAAP" means accounting principles generally accepted in the United
States applied on a consistent basis throughout the relevant periods.
"GOVERNMENTAL AUTHORITY" means (a) the governments of (i) the United
States of America and (ii) any state or other jurisdiction in which the Company
or any Subsidiary is organized or conducts all or any part of its business, or
which asserts jurisdiction over any properties of the Company or any
Subsidiary, and (b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
governments.
"GUARANTY", as applied to any Person, means any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including,
without limitation, any such obligation directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business) or discounted or sold with recourse by such Person, or in respect of
which such Person is otherwise directly or indirectly liable, including,
without limitation, any such obligation in effect guaranteed by such Person
through any agreement (contingent or otherwise) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to advance to or
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain the working capital, equity capital, net worth, solvency or any
balance sheet or other financial condition of the obligor of such obligation,
or to make payment for any securities, products, materials or supplies or for
any transportation or services regardless of the non-delivery or nonfurnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of
any Guaranty shall be equal to the amount of the obligation guaranteed.
"HAZARDOUS MATERIALS" means any substance: (a) the presence of which
requires notification, investigation, monitoring or remediation under any
Environmental Law; (b) which is defined as a "hazardous waste", "hazardous
material", "hazardous substance" or "toxic substance" under any
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<PAGE> 34
Environmental Law, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and any other applicable federal, state or local statutes or
ordinances and the regulations promulgated thereunder; or (c) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
natural gas, natural gas liquids, liquefied natural gas or synthetic gas,
asbestos or polychlorinated biphenyls.
"H&P LETTER OF CREDIT" means the Irrevocable Standby Letter of Credit
No. 30303 issued by Christiana Bank, New York Branch on June 15, 1995 in favor
of Helmerich & Payne de Venezuela, C.S. or Helmerich & Payne International
Drilling Co. for a sum not exceeding $500,000.
"HOLDER" means any Person at the time shown as the holder of a Note on
the register referenced in PARAGRAPH 110.
"IMPERMISSIBLE QUALIFICATION" means, with respect to the opinion or
report of the Approved Auditor as to any financial statements supplied under
PARAGRAPH 5A, any qualification or exception to such opinion or certification
which is of a "going concern" or similar nature; indicates that the scope of
the examination of matters relevant to such financial statements was limited to
an extent not consistent with generally accepted auditing standards; or
relates to the treatment or classification of any item in such financial
statements and, as a condition to its removal, would require an adjustment to
such item of which the effect would be to cause the Company to be in Default of
one or more of its obligations under PARAGRAPH 6A.
"INDEPENDENT PETROLEUM ENGINEERS" means any nationally recognized
petroleum engineering firm (i) which does not (and whose directors, officers,
employees and Affiliates do not) have a direct or indirect material financial
interest in the Company and (ii) which is otherwise independent and qualified
to perform the task for which such firm is being engaged.
"INSTITUTIONAL INVESTOR" means (a) any Purchaser, (b) any Holder of
more than 10% of the aggregate principal amount of the Notes then outstanding,
and (c) any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any insurance
company, any broker or dealer, or any other similar financial institution or
entity, regardless of legal form.
"INTEREST EXPENSE" means for any period, the aggregate interest
charges (including without limitation that portion of any obligation under
Capitalized Leases allocable to interest expense) on any Debt for such period
(without regard to any limitation on the payment thereof) as determined in
accordance with GAAP.
"LAGOVEN OPERATING AGREEMENT" means the Operating Service Agreement
dated as of July 31, 1992 between Lagoven, S.A., the Company and Vinccler, C.A.
and assigned by the Company and Vinccler, C.A. to Benton-Vinccler, C.A.
pursuant to an assignment dated March 8, 1994 and effective as of January 1,
1994 and consented to by Lagoven, S.A.
"LAGOVEN RECEIVABLES" means the operating fee and capital recovery fee
owed to Benton-Vinccler, C.A. under the Lagoven Operating Agreement to the
extent that all actions required to have been taken by Benton-Vinccler, C.A.
and conditions required to have been satisfied as a precondition to the payment
of such fee(s) have been taken or fulfilled and none of the Company or any
Subsidiary have any reason to believe that such fees will not be paid when due
under the terms of such Operating Service Agreement.
"LIEN" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, court decision or contract, and
including, without limitation, any mortgage, pledge, security interest,
encumbrance, lien, purchase option, call or right, or charge of any kind
(including any agreement to give or permit any of the foregoing), any
conditional sale or other title retention
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<PAGE> 35
agreement, any Capitalized Lease, and the filing of or agreement to give or
permit the filing on its behalf of any financing statement under the Uniform
Commercial Code or personal property security legislation of any jurisdiction.
"MATERIAL ADVERSE EFFECT" means, (i) any material adverse effect on
the Company's business, assets, liabilities, financial condition, results of
operations or business prospects, (ii) any material adverse effect on such the
Consolidated Group's business, assets, liabilities, financial condition,
results of operations or business prospects on, where appropriate, a
consolidated basis in accordance with GAAP, and (iii) any adverse effect,
WHETHER OR NOT MATERIAL, on the binding nature, validity or enforceability of
any Transaction Document as the obligation of the Company or any material
adverse effect on the ability of the Company to perform its obligations under
any Transaction Document.
"MULTIEMPLOYER PLAN" means any plan which is a "multiemployer plan" as
such term is defined in section 4001(a)(3) of ERISA.
"NET INCOME" means, with respect to any period, gross revenues of a
Person less all operating and non-operating expenses of such Person including
all charges of a proper character (including current and deferred Taxes on
income, provision for Taxes on unremitted foreign earnings which are included
in gross revenues, amortization, depreciation, current additions to reserves
and any distributions to shareholders to satisfy their tax liabilities on the
earnings of the Company during any period in which the Company has an effective
election under Section 1362 of the Code to be an "S corporation" ), but not
including in gross revenues any gains (net of expenses and Taxes applicable
thereto) in excess of losses resulting from the sale, conversion or other
disposition of assets (other than inventory and used equipment in the ordinary
course of such Person's business), any earnings or losses attributable to any
other Person, any gains arising from transactions of a non- recurring and
material nature, any gains arising from the sale or discontinuation of
operations, any gains resulting from the write-up of assets, any equity of the
Company in the unremitted earnings of any other corporation or any earnings of
any Person acquired by such Person through purchase, merger or consolidation or
otherwise, earned prior to acquisition, all determined in accordance with GAAP.
"NET WORTH" means as of the date which it is to be determined, the
total stockholders' equity of the Company determined in accordance with GAAP.
"NON-RECOURSE DEBT" means any Debt as to which (i) neither the Company
nor any Subsidiary (a) provides credit support including any undertaking,
agreement or instrument which would constitute Debt of the Company or such
Subsidiary or (b) is directly or indirectly liable for such Debt and (ii) no
default with respect to such Debt (including any rights which the holders
thereof may have to take enforcement action against any security for such Debt)
would permit (upon notice, lapse of time or both) any holder of any other Debt
of the Company or any Subsidiary to declare a default on such other Debt or
cause the payment thereof to be accelerated or payable prior to its stated
maturity.
"NOTE" and "NOTES" have the meaning specified in PARAGRAPH 1A.
"OFFICERS' CERTIFICATE" means a certificate signed in the name of the
Company by any two Senior Officers of the Company.
"OIL AND GAS BUSINESS" means the exploration for and the development,
acquisition, production, processing, marketing, storage and transportation of
hydrocarbons and other related energy and natural resources businesses within
the United States of America, the Russian Federation, Kazakhstan, Colombia,
Venezuela, Canada, Ecuador, India, Mexico and Peru.
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<PAGE> 36
"OIL AND GAS ESTIMATE" means as of any date of determination, the
estimated discounted future net revenues attributable to proved oil and gas
reserves of the Company and its Subsidiaries in the United States as set forth
in the most recent Audited Report required to have been delivered pursuant to
PARAGRAPH 5A(V), decreased, in the case of clause (i) below, and increased or
decreased, as appropriate, in the case of clauses (ii) and (iii) below, by the
Company's petroleum engineers to reflect, as of such date of determination, the
estimated discounted future net revenues attributable to (i) the ownership
interest of any holder (other than the Company or another Subsidiary) of
capital stock (other than Preferred Stock) of any Subsidiary (based on such
holder's percentage ownership of such capital stock as of such date of
determination), but only to the extent such ownership interest is not otherwise
deducted from the discounted future net revenues of the Company and its
Subsidiaries set forth in such Audited Report, (ii) proved oil and gas reserves
acquired or disposed of since the date of such Audited Report and (iii)
increases or decreases in proved oil and gas reserves of the Company and its
Subsidiaries due to exploration, development or exploitation activities or
changes in geological conditions since the date of such Audited Report;
provided that such adjustments are calculated in accordance with the
Commission's guidelines by the Company's petroleum engineers utilizing the
prices utilized in, and on a basis otherwise consistent with, such Audited
Report. Notwithstanding the foregoing, (1) if the estimated discounted future
net revenues from any proved oil and gas reserves acquired since the date of
such Audited Report have been audited by Independent Petroleum Engineers and a
report with respect thereto as of a date no earlier than the end of the most
recently completed fiscal year of the Person from whom such reserves were
acquired has been prepared, such report (or, if a more recent audited reserve
report is available, the most recent of such reports) shall be used for
purposes of calculating the adjustment to discounted future net revenues of
such Person attributable to such acquired reserves and (2) if the estimated
discounted future net revenues of the Company and its Subsidiaries, as adjusted
pursuant to clauses (ii) and (iii) of the preceding sentence (excluding any
adjustments calculated pursuant to clause (1) of this sentence) would vary by
more than 10% from the discounted future net revenues of the Company and its
Subsidiaries set forth in such Audited Report, such adjustments shall be
audited by Independent Petroleum Engineers.
"PBGC" means the Pension Benefit Guaranty Corporation or any other
governmental authority succeeding to any of its functions.
"OPERATING AGREEMENT" means any contractual arrangement between the
Company or any Subsidiary and one or more third parties pursuant to which the
Company or such Subsidiary and such third party or parties agree to share the
costs and benefits of exploring and developing oil and gas properties.
"PERSON" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, a government or
any department or agency thereof, and any other form of business organization
(whether or not a legal entity).
"PREFERRED STOCK" means any Redeemable Stock and any other class or
series of capital stock that has a priority as to the payment of any dividends
or distributions over the holders of common stock.
"PLAN" means an "employee pension benefit plan" (as defined in section
3(2) of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by the Company or any of its Related
Persons.
"PERFORMANCE LETTER OF CREDIT" means, with respect to any Person, a
letter of credit or bond to secure the performance in any country of any
obligations of such Person under any contract entered into in the ordinary
course of such Person's Oil and Gas Business; provided that the provision of
any such letter of credit or bond is required by local law or, in the case of
any such letter of credit or bond securing the performance of obligations
outside the Untied States, is customarily required in connection with contracts
relating to the Oil and Gas Business in such
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country and, in either case, such letter of credit or bond requires that any
payment thereunder by the issuer thereof be immediately repaid by such Person.
"PTE" has the meaning specified in SUBPARAGRAPH (d) of PARAGRAPH 9(v).
"PURCHASER" and "PURCHASERS" have the meaning specified in PARAGRAPH
2A.
"QUALIFIED INSTITUTIONAL BUYER" means a qualified institutional buyer
as defined in Rule 144A promulgated by the SEC under the Securities Act, as
from time to time in effect.
"QUALIFYING REINVESTMENTS" has the meaning specified in PARAGRAPH
6C(4).
"REDEEMABLE STOCK" means any class or series of capital stock which
has fixed payment obligations or is redeemable at the option of the holder
unless such fixed payment obligations or repurchase obligations on exercise of
such redemption option can be satisfied, at the election of the issuer, through
the issuance of shares of its common stock.
"REGISTRATION RIGHTS AGREEMENT" has the meaning specified in PARAGRAPH
3A.
"REQUIRED HOLDER(S)" means the Holder or Holders of at least a
majority of the aggregate principal amount of the Notes at the time
outstanding.
"RESTRICTED PAYMENTS" means, with respect to any Person, (i) the
declaration or payment of any dividend or other distribution in respect of
capital stock of such Person or any Subsidiary of such Person, (ii) any payment
on account of the purchase, redemption or other acquisition or retirement for
value of capital stock of such Person or any Subsidiary of such Person
(including, options, warrants or other rights to acquire such capital stock,
(iii) any payment on account of the purchase, redemption or other acquisition
or retirement for value of, or any payment in respect of any amendment of the
terms of, or any defeasance of, any Debt (whether outstanding on the date
hereof or hereinafter incurred) which is subordinate or junior in right of
payment to the Notes, directly or indirectly, by such Person or a Subsidiary of
such Person prior to the scheduled maturity, any scheduled repayment of
principal or any scheduled sinking fund payment, as the case may be, of such
Debt and (iv) any Investment by such Person other than any Investment permitted
by PARAGRAPH 6C(2).
"RULE 144A" means Rule 144A promulgated under the Securities Act, as
such rule may be amended from time to time and including any successor rule
thereto.
"RUSSIAN JOINT VENTURE" means Geoilbent Ltd., a joint venture for the
development, production and marketing of oil and condensate from the North
Gubkinskoye Field in the West Siberia Region of Russian, among the Company and
two Russian state agencies. The Company's interest in the joint venture is
34%.
"SALE AND LEASEBACK TRANSACTION" of a Person means any arrangement
whereby (a) property has been sold or transferred by such Person with the
intention on the part of such Person of taking back a lease of such property
pursuant to which the rental payments are calculated to amortize the purchase
price of such property substantially over the useful life of such property, and
(b) such property is in fact so leased by such Person.
"SEC" means the United States Securities and Exchange Commission, or
any governmental body or agency hereafter succeeding to the functions of such
Securities and Exchange Commission in the administration of the Securities Act
and/or the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time and the rules and regulations promulgated thereunder from time to
time in effect.
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"SENIOR OFFICER" means the President, Chief Executive Officer, any
Vice President, Chief Financial Officer, Treasurer, principal Accounting
Officer, Controller of the Company or any other person, whether or not an
officer, who performs similar functions, on behalf of the Company.
"SPE" means the Society of Petroleum Engineers and any successor
organization.
"SPECIAL COUNSEL" has the meaning specified in PARAGRAPH 2B.
"SUBSIDIARY" shall mean as to any Person (i) of which such Person
shall, at the time as of which any determination is being made, own, either
directly or indirectly through its other Subsidiaries, more than (x) 50% of the
total combined voting power of all classes of the Voting Stock and (y) 50% of
the beneficial interest and (ii) any partnership, association, joint venture or
other form of business organization, whether or not it constitutes a legal
entity which such Person shall, at the time the determination is being made,
own directly or indirectly through its other Subsidiaries, own more than 50% of
the equity interest at the time and which does not ordinarily take major
business actions without the prior approval of such Person. Unless the context
otherwise clearly requires any reference to a "Subsidiary" is a reference to a
Subsidiary of the Company.
"TAXES" means any and all present or future taxes, assessments,
stamps, duties, fees, levies, imposts, deductions, withholdings or other
governmental charges of any nature whatsoever and any liabilities with respect
thereto, including any surcharge, penalties, additions to tax, fines or
interest thereon, now or hereafter imposed, levied, collected, withheld or
assessed by any government or taxing authority of any country or political
subdivision of any country or any international taxing authority.
"TOTAL ASSETS" means on any date as of which the amount thereof is to
be determined the aggregate total assets of the Company and its Subsidiaries,
determined in accordance with GAAP.
"TRADE PAYABLES" means amounts payable by the Company or any of its
Subsidiaries to suppliers (not Affiliates) of goods and services incurred in
the ordinary course of business.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the
Registration Rights Agreement and the Warrants.
"TRANSFEREE" means any direct or indirect transferee of all or any
part of the Notes.
"VOTING STOCK" means any securities of any class of a Person whose
holders are entitled under ordinary circumstances to vote for the election of
directors of such Person (or Persons performing similar functions)
(irrespective of whether at the time securities of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
"WARRANTS" has the meaning specified in PARAGRAPH 1.
"WORKING CAPITAL FACILITIES" means Debt of the Company incurred for
the purpose of financing the working capital requirements of the Company or any
Subsidiary, including funds to be used for oil and gas development activities
on the Company's properties, in an aggregate amount at any time outstanding not
to exceed the greater of $20,000,000 million or 50% of the Oil and Gas Reserve
Estimate.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary of all of voting power of
all classes of the Voting Stock and all of the beneficial ownership of which is
owned directly or indirectly through one or more other Wholly-Owned
Subsidiaries, by the Company.
11. MISCELLANEOUS.
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11A. PAYMENTS.
11A.(1) PAYMENTS IN RESPECT OF NOTES. The Company agrees that, so
long as a Purchaser shall hold any Notes, all payments in respect of such
Notes, required by the terms thereof or otherwise by this Agreement, will be
made in compliance with the applicable terms thereof or hereof and by wire
transfer to such Purchaser of immediately available funds for credit to the
account or accounts as specified in the Purchasers Schedule for such Purchaser,
or such other account or accounts in the United States as such Purchaser may
designate in writing, notwithstanding any contrary provision in this Agreement
or the notes, with respect to the place of payment. Each Purchaser agrees
that, before disposing of any Note, it will make a notation thereon (or on a
schedule attached thereto) of all principal payments previously made and of the
date to which interest has been paid. The Company agrees to afford the
benefits of this PARAGRAPH 11A(1) to any Transferee which shall have made the
same agreement in writing as the Purchasers have made in this PARAGRAPH 11A(1).
11A.(2) NO DEDUCTION OR SET-OFF. The obligation of the Company to
pay principal, interest, Make Whole Amounts, and any other amounts under the
Transaction Documents shall be absolute and unconditional and shall not be
affected by any circumstances, including without limitation any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against a Purchaser or any Transferee for any reason whatsoever and all
payments shall be free of and without deduction for or on account of any
present or future Taxes, provided that, if the Company shall be required by law
to deduct or withhold any Taxes not imposed by the United States of America,
the District of Columbia or any state of the United States or any political
subdivision thereof ("FOREIGN TAXES") from or in respect of any payment or sum
payable to any Purchaser or Transferee, the payment or sum payable shall be
increased as may be necessary so that after making all required deductions or
withholdings, such Purchaser or Transferee receives (net of any United States
Tax credit or benefit as a result of the payment of such Taxes) an amount equal
to the sum it would have received if no deduction or withholding had been made,
and the Company shall pay the full amount deducted or withheld to the relevant
authority in accordance with applicable law. The Company shall indemnify each
Purchaser or Transferee, (net of any United States Tax credit or benefit
received and applied by such Purchaser or Transferee), in respect of any
present or future Foreign Taxes imposed or levied upon such Purchaser or
Transferee in respect of any payment received or receivable by it hereunder or
in respect of the Notes or Warrants, whether or not such Taxes were correctly
or legally asserted.
11B. EXPENSES. The Company agrees, whether or not
the transactions provided for hereby shall be consummated, to pay on demand,
and save each Purchaser and its Transferees harmless against liability for the
payment of, all out-of-pocket expenses arising in connection with such
transactions and in connection with any subsequent proposed modification of, or
proposed consent under the Transaction Documents, whether or not such
transactions are consummated or proposed modification shall be effected or
proposed consent granted ("EXPENSES"), including (i) all document production
and duplication charges and the reasonable fees and expenses of the Special
Counsel and its agents and of any other special counsel or other special
advisers engaged by the Purchasers in connection with the transactions
contemplated by this Agreement and with any subsequent proposed modification
of, or proposed consent, requested by the Company under the Transaction
Documents, whether or not such transactions are consummated or proposed
modification shall be effected or proposed consent granted, (ii) the costs of
obtaining the private placement numbers from Standard & Poor's Ratings Group
for the Notes and Warrants and (iii) the costs and expenses, including
reasonable attorneys' fees and the fees of any other special advisers, incurred
by the Purchasers or any of their Transferees in evaluating, monitoring or
enforcing any rights under the Transaction Documents or in responding to any
subpoena or other legal process issued in connection with the Transaction
Documents or the transactions provided for hereby or thereby or by reason of
the Purchasers or any Transferee having acquired any Note or Warrant, including
without limitation costs and expenses incurred in connection with any
bankruptcy or
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insolvency of the Company or any Subsidiary or in connection with any workout
or restructuring of the transactions. The obligations of the Company under
this PARAGRAPH 11B shall survive the transfer of any Note or portion thereof or
interest therein by a Purchaser or any Transferee and the payment of the
Notes.
11C. CONSENT TO AMENDMENTS. This Agreement may
not be amended, and the Company may not take any action herein prohibited, or
omit to perform any act herein required to be performed by it, without the
written consent of the Required Holder(s), except that no change to the
interest rate of, or the Make Whole Amount payable on, the Notes or the
mandatory repayment as provided in PARAGRAPH 4C or any change to this paragraph
shall be made without the written consent of all Holders. Each Holder at the
time or thereafter shall be bound by any consent authorized by this PARAGRAPH
11C, whether or not the Notes shall have been marked to indicate such consent,
but any Note issued thereafter may bear a notation referring to any such
consent. No course of dealing between the Company and any Holder nor any delay
in exercising any rights hereunder or under any Note shall operate as a waiver
of any rights of any Holder. As used herein the term "THIS AGREEMENT" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
11D. PERSONS DEEMED OWNERS; PARTICIPATIONS. The
Company may treat the Person at the time shown on the Note register referenced
in PARAGRAPH 11O in whose name any Note is issued as the owner and holder of
such Note for the purpose of receiving payment of principal of and the Make
Whole Amount, if any, and interest on such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and the Company shall
not be affected by notice to the contrary. Subject to the preceding sentence,
a Holder may from time to time grant participations in all or any part of its
Notes to any Person on such terms and conditions as may be determined by such
Holder in its sole and absolute discretion.
11E. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
ENTIRE AGREEMENT. All representations and warranties contained in this
Agreement or made in writing by or on behalf of the Company in connection
herewith shall survive the execution and delivery of this Agreement and the
Notes, the transfer by a Purchaser of any Note or portion thereof or interest
therein and the payment of the Notes and may be relied upon by any Transferee
as having been true and correct on the Closing Date, regardless of any
investigation made at any time by or on behalf of the Purchasers or any
Transferee. The Transaction Documents embody the entire agreement and
understanding between the Purchasers and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof and
thereof.
11F. SUCCESSORS AND ASSIGNS. All covenants and
other agreements in this Agreement contained by or on behalf of either of the
parties hereto shall bind and inure to the benefit of the respective successors
and assigns of the parties hereto (including, without limitation, any
Transferee) whether so expressed or not.
11G. DISCLOSURE TO OTHER PERSONS. The Purchaser
agrees to maintain in confidence and not disclose, and agrees to require any
Transferee to agree to maintain in confidence and not disclose, any
Confidential Information delivered to by it or its agents by or on behalf of
the Company or received by it or its agents from the Company or its agents
pursuant to the terms of this Agreement provided the Company acknowledges that
the Purchaser and any Transferee may deliver copies of any financial statements
and other documents delivered to the Purchaser or such Transferee and disclose
any other information disclosed to the Purchaser or such Transferee by or on
behalf of the Company in connection with or pursuant to this Agreement whether
or not Confidential Information, to (i) such Person's directors, officers,
employees, agents and professional consultants, (ii) any other Holder, (iii)
any Person to which the Purchaser or any Transferee offers to sell a Note or
Warrant or any part thereof, (iv) any Person from which the Purchaser or a
Transferee offers to purchase any security of the Company, (v) any Governmental
Authority and any other governmental authority having jurisdiction over a
Transferee if required by such authority, (vi) the
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National Association of Insurance Commissioners, any rating agency which
generally requires access to information about the Purchaser's or a
Transferee's investment portfolio or any similar organization, (vii) Standard &
Poor's Rating Group (in connection with obtaining a private placement number
for the Note) or (viii) any other Person to which such delivery or disclosure
may be necessary or appropriate (a) in compliance with any law, rule,
regulation or order applicable to the Purchaser or such Transferee, (b) in
response to any subpoena or other legal process, (c) in connection with any
litigation to which the Purchaser or such Transferee is a party or (d) in order
to protect the Purchaser's or such Transferee's investment in its Notes or
Warrants. For the purpose of this PARAGRAPH 11G, "CONFIDENTIAL INFORMATION"
means any information now or hereafter delivered to the Purchaser or such
Transferee by or on behalf of the Company or received by the Purchaser or such
Transferee from the Company or its agents in connection with the transactions
contemplated by or otherwise pursuant to the Transaction Documents which is
proprietary in nature and which was clearly marked or labeled when received by
the Purchaser or such Transferee as being confidential information of the
Company or its Subsidiaries, provided that such term does not include any
information (a) which was publicly known to the Purchaser or such Transferee
prior to the time of such disclosure or (b) which subsequently becomes publicly
known through no act or omission by or any Person acting on the Purchaser's or
such Transferee's behalf.
11H. NOTICES. All notices and other written
communications provided for hereunder shall be given in writing and sent by
overnight delivery service (with charges prepaid) or by facsimile transmission
with the original of such transmission being sent by overnight delivery service
(with charges prepaid) by the next succeeding Business Day and (i) if to a
Purchaser or its nominee, addressed to such Person at the address or fax number
specified for such communications to such Purchaser in the PURCHASERS SCHEDULE,
or at such other address or fax number as such Person shall have specified to
the Company in writing, (ii) if to any other Holder, addressed to such other
Holder at such address or fax number as is specified for such Holder in the
Note register referenced in PARAGRAPH 11O and (iii) if to the Company,
addressed to it at 1145 Eugenia Place, Carpinteria, California 93013,
Attention: President, or to Vice President-Finance, Fax No. 805- 566-5610 or at
such other address or fax number as the Company shall have specified to each
Holder in writing given in accordance with this PARAGRAPH 11H. Notice given in
accordance with this PARAGRAPH 11H shall be effective upon the earlier of the
date of delivery or the second Business Day at the place of delivery after
dispatch.
11I. DESCRIPTIVE HEADINGS. The descriptive
headings of the several paragraphs of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
11J. SOLICITATION OF NOTEHOLDERS. The Company
will not solicit, request or negotiate for or in respect to any proposed
amendment, waiver or consent in respect of any Transaction Document unless each
Holder, irrespective of the amount of the Notes then held by it, shall be
promptly notified thereof by the Company. The Company will provide each Holder
with sufficient information, sufficiently far in advance of the date a decision
is required, to enable such Holder to make an informed and considered decision
with respect to any such proposed amendment, waiver or consent. The Company
will deliver executed or true and correct copies of each such amendment, waiver
or consent effected to each Holder promptly following the date on which it is
executed and delivered by, or receives the consent or approval of, the
requisite Holders. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any Holder for any consent by such Holder in its
capacity as a Holder to any waiver or amendment of any of the terms of the
Notes or of this Agreement unless such remuneration is concurrently paid, on
the same terms, ratably to all Holders whether or not such Holder consented to
the waiver or amendment.
11K. REPRODUCTION OF DOCUMENTS. This Agreement,
the Notes, the Warrants, the Registration Rights Agreement and all related
documents, including (a) consents, waivers and modifications which may
subsequently be executed, (b) documents received by the Purchasers on the
purchase of the Notes (except the Notes themselves) and (c) financial
statements, certificates
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and other information previously or subsequently furnished to the Purchasers,
may be reproduced by the Purchasers by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process and the
Purchasers may destroy any original document so reproduced. The Company agrees
and stipulates that any such reproduction shall, to the extent permitted by
applicable law, be admissible in evidence as the original itself in any
judicial or administrative proceeding whether or not the original is in
existence and whether or not the reproduction was made by a Purchaser in the
regular course of business, and that any enlargement, facsimile or further
reproduction of the reproduction shall likewise be admissible in evidence.
11L. GOVERNING LAW. This Agreement shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the law of The Commonwealth of Massachusetts (without giving
effect to principles of conflicts of law).
11M. CONSENT TO JURISDICTION AND SERVICE. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY ABSOLUTELY AND
IRREVOCABLY CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF
THE COMMONWEALTH OF MASSACHUSETTS AND OF ANY FEDERAL COURT LOCATED IN SAID
JURISDICTION IN CONNECTION WITH ANY ACTIONS OR PROCEEDINGS BROUGHT AGAINST IT
BY ANY HOLDER ARISING OUT OF OR RELATING TO THE TRANSACTION DOCUMENTS AND
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY HEREBY
WAIVES AND AGREES NOT TO ASSERT IN ANY SUCH ACTION OR PROCEEDING, IN EACH CASE,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (A) IT IS
NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, (B) IT IS IMMUNE
FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION, ANY DOCTRINE OF SOVEREIGN
IMMUNITY OR OTHERWISE) WITH RESPECT TO IT OR ITS PROPERTY, (C) ANY SUCH SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, OR (D) NEITHER THIS
AGREEMENT NOR ANY NOTE MAY NOT BE ENFORCED IN OR BY ANY SUCH COURT. IN ANY
SUCH ACTION OR PROCEEDING, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE COMPANY HEREBY ABSOLUTELY AND IRREVOCABLY WAIVES PERSONAL IN HAND SERVICE
OF ANY SUMMONS, COMPLAINT, DECLARATION OR OTHER PROCESS AND HEREBY ABSOLUTELY
AND IRREVOCABLY AGREES THAT THE SERVICE MAY BE MADE BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO IT AT ITS ADDRESS SET FORTH IN OR
FURNISHED PURSUANT TO THE PROVISIONS OF THIS AGREEMENT, OR BY ANY OTHER MANNER
PROVIDED BY LAW. THE COMPANY HEREBY APPOINTS CT CORPORATION WITH OFFICES AS OF
THE DATE OF THIS AGREEMENT AT 2 OLIVER STREET, BOSTON, MASSACHUSETTS 02109 (OR
ANY OTHER CORPORATE AGENT WITH OFFICES WITHIN THE COMMONWEALTH OF MASSACHUSETTS
IF THE COMPANY HAS GIVEN EACH HOLDER PRIOR WRITTEN NOTICE OF THE NAME AND
ADDRESS OF SUCH NEW CORPORATE AGENT), AS ITS AGENT TO RECEIVE FOR AND ON ITS
BEHALF, SERVICES OF PROCESS IN THE COMMONWEALTH OF MASSACHUSETTS AND THE
FEDERAL COURTS LOCATED THEREIN IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THE TRANSACTION DOCUMENTS AND AGREES THAT SUCH SERVICE SHALL BE DEEMED
COMPLETED UPON THE DATE 10 DAYS AFTER DELIVERY TO SUCH AGENT WHETHER OR NOT
SUCH AGENT GIVES NOTICES THEREOF TO THE COMPANY. ANYTHING HEREINBEFORE TO THE
CONTRARY NOTWITHSTANDING, ANY HOLDER MAY SUE THE COMPANY IN ANY OTHER
APPROPRIATE JURISDICTION AND ANY PARTY MAY SUE ANY OTHER PARTY ON A JUDGMENT
RENDERED BY ANY COURT PURSUANT TO THE PROVISIONS OF THE FIRST SENTENCE OF THIS
PARAGRAPH 11M IN THE COURTS OF ANY COUNTRY, STATE OF THE UNITED STATES OR PLACE
WHERE SUCH OTHER PARTY OR ANY OF ITS PROPERTY OR ASSETS MAY BE FOUND OR IN ANY
OTHER APPROPRIATE JURISDICTION.
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11N. COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
11O. REGISTRATION, TRANSFER, EXCHANGE AND
REPLACEMENT OF NOTES.
11O(1). REGISTRATION. The Notes are to be issued and
are transferable in whole or in part as registered Notes without coupons in
denominations of at least $1,000,000, except as may be necessary to reflect any
principal amount less than $1,000,000 and may be exchanged for one or more
Notes of any authorized denomination and like aggregate outstanding principal
amount. The Company shall keep at the principal executive office of the
Company a register in which the Company shall record the registrations of the
Notes and the names and addresses of the Holders from time to time and all
transfers thereof. The Company shall provide any Holder who is an
Institutional Investor, promptly upon request, a complete and correct copy of
the names and addresses of the then Holders.
11O(2). TRANSFER AND EXCHANGE. Upon surrender of a Note
to the Company for registration of transfer or exchange endorsed or accompanied
by a written instrument of transfer duly executed by the registered Holder or
its attorney duly authorized in writing and accompanied by an address for
notices, the Company shall at its expense (except as provided below), execute
and deliver one or more replacement Notes of like tenor and of a like aggregate
amount, registered in the name of such Transferee or Transferees. Each new
Note will bear interest from the date to which interest shall have been paid on
the surrendered Note or the date of surrender if no interest shall have been
paid thereon.
11O(3). REPLACEMENT. Upon receipt of written notice
from a Holder of the loss, theft, destruction or mutilation of a Note and, in
the case of any such loss, theft or destruction, upon receipt of an
indemnification agreement of such Holder (and, in the case of a Holder which is
not a Qualified Institutional Buyer, with such security as may be reasonably
requested by the Company) satisfactory to the Company, or in the case of any
such mutilation upon surrender and cancellation of such Note, the Company will
make and deliver a new Note, at its expense, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Note, and each new Note will bear from the
date to which interest shall have been paid on such lost, stolen, destroyed or
mutilated Note or if no interest has been paid thereon, the date of such lost,
stolen, destroyed or mutilated Note.
11P. COMPLIANCE BY SUBSIDIARIES. The Company, as
a shareholder of its Subsidiaries, shall cause such meetings to be held, votes
to be cast, resolutions to be passed, by-laws to be made and confirmed,
documents to be executed and all other things and acts to be done to ensure
that, at all times, the provisions of this Agreement relating to the
Subsidiaries are complied with by such Subsidiaries, or in respect of any
provision which is not entirely within the control or power of the Company to
cause compliance therewith, the Company shall use its best efforts to cause
such compliance to occur.
11Q. SEVERABILITY. If any provision of this
Agreement shall be held or deemed to be, or shall in fact be, invalid,
inoperative, illegal or unenforceable as applied to any particular case in any
jurisdiction because of the conflicting of any provision with any constitution
or statute or rule of public policy or for any other reason, such circumstance
shall not have the effect of rendering the provision or provisions in question
invalid, inoperative, illegal or unenforceable in any other jurisdiction or in
any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative, illegal or unenforceable to
the extent that such other provisions are not themselves actually in conflict
with such constitution, statute or rule of public policy, but this Agreement
shall be reformed and construed in any such jurisdiction or case as if such
invalid, inoperative, illegal or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
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11R. TERMINATION. This Agreement and the rights
of the Holders and the obligations of the Company hereunder shall not terminate
until the each of the Notes including all principal, interest, including
interest on overdue interest and Make Whole Amount and all Expenses and all
other amounts owed to any Purchaser or any Holder pursuant to the terms of any
Transaction Document shall have been indefeasibly paid in full in United States
dollars.
11S. SUBSTITUTION OF PURCHASER. Each Purchaser
has the right to substitute any one of its Affiliates as the purchaser of the
Securities that it has agreed to purchase hereunder, by written notice to the
Company, which notice shall be signed by such Purchaser and its Affiliate,
shall contain such Affiliate's agreement to be bound by this Agreement and
shall contain a confirmation by such Affiliate of the accuracy with respect to
it of the representations set forth in PARAGRAPH 9. In the event that such
Affiliate is so substituted as a Purchaser hereunder and such Affiliate
thereafter transfers to the original Purchaser all of the Notes and Warrants
then held by such Affiliate, upon receipt by the Company of notice of such
transfer, such Purchaser shall have all the rights of a Holder.
11T. CONSTRUCTION. Each covenant contained herein
shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with
any one covenant shall not (absent such an express contrary provision) be
deemed to execute compliance with any other covenant. Where any provision
herein refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement executed
under seal, among you and the Company.
Very truly yours,
BENTON OIL AND GAS COMPANY
By:________________________
Title:
The foregoing Agreement is
hereby accepted as of the date
first above written.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:____________________________
Eugene X. Hodge, Jr.
Investment Officer
-40-
<PAGE> 45
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, AND
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, OR (B) IF SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE
RULES AND REGULATIONS IN EFFECT THEREUNDER AND ANY APPLICABLE STATE SECURITIES
LAWS.
BENTON OIL AND GAS COMPANY
13% Senior Note,
due June 30, 2007
PPN: 083288 A@ 9
No. S-__
June 30, 1995
$_______________
FOR VALUE RECEIVED, the undersigned, Benton Oil and Gas Company (the
"COMPANY"), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to_____________________________, or its
registered assigns ("HOLDER"), the principal sum of ______________ Million
Dollars ($___,000,000), with interest (computed on the basis of a 360-day year
of twelve 30-day months) on the principal amount from time to time unpaid and
not yet due at the rate of 13% per annum from the date hereof. Installments of
principal, in the amount of ___________ Million Dollars ($___,000,000) shall be
due and payable on June 30th, in each year beginning June 30, 2003 and interest
shall be due and payable semi annually in arrears each June 30th and December
30th of each calendar year with the first of such payments to be made on
December 30, 1995. Any overdue payments of principal, Make Whole Amount and,
to the extent permitted by applicable law, interest, shall bear interest at the
rate of 15% per annum, whether overdue by acceleration or otherwise. All
principal and interest shall in all events be paid in full on June 30, 2007.
This Note is one of the 13% Senior Notes due June 30, 2007 issued by
the Company in the aggregate original principal amount of $20,000,000 (the
"SENIOR NOTES") pursuant to a Note Agreement dated as of June 30, 1995 between
the Company and John Hancock Mutual Life Insurance Company (as amended from
time to time, the "AGREEMENT") . The Holder is entitled, equally and ratably
with holders of all other Senior Notes, to the benefits of the Agreement.
Payments of principal, Make Whole Amount and interest are to be made
at the place specified by the Purchaser in the Purchasers Schedule to the
Agreement or at such other place as the Holder shall designate to the Company
in writing, in lawful money of the United States of America. If any payment of
principal, Make Whole Amount or interest on or in respect of this Note becomes
due and payable on any day which is not a Business Day, the payment shall be
due and payable on the next preceding Business Day.
This Note is a registered note and upon surrender of this Note for
registration of transfer in accordance with the Agreement, a new Note for a
like principal amount will be issued to, and registered in the name of, the
Transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
<PAGE> 46
This Note may be declared or may otherwise become due and payable
prior to its expressed maturity in the events, on the terms, with the Make
Whole Amount and in the manner and amounts as provided in the Agreement.
This Note is not subject to prepayment or redemption at the option of
the Company prior to its expressed maturity except on the terms, with the Make
Whole Amount and in the manner and amounts as provided in the Agreement.
The Company and every maker, endorser and guarantor hereof or of the
indebtedness evidenced hereby (a) waives presentment, demand, notice (other
than notices expressly required by the Agreement), protest and all other
demands, notices and suretyship defenses generally, in connection with the
delivery, acceptance, performance, default or enforcement of or under this
note, and (b) agrees to pay, to the extent permitted by law, all costs and
expenses, including, without limitation, reasonable attorneys' fees, incurred
or paid by the Holder hereof in enforcing this note and any collateral or
security therefor on default, whether or not litigation is commenced.
This Note is delivered in Boston, Massachusetts under seal and is to
be interpreted under and governed by the laws of the Commonwealth of
Massachusetts, without regard to any laws or rules relating to principles of
conflicts of laws.
Capitalized terms used in this Note and not defined herein shall have
the meanings given therefor in the Agreement.
WITNESS: BENTON OIL AND GAS COMPANY
______________________________ By:___________________________
Title:
-2-
<PAGE> 47
PURCHASER SCHEDULE
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
Note No. S-1 - $11,500,000
Warrant No. S-1 for 71,875 Shares of Common Stock
1. All payments on account of the Note or other obligations in accordance
with the provisions thereof shall be made by bank wire transfer of
immediately available funds for credit, not later than 12 noon, Boston
time, to:
The First National Bank of Boston
ABA No. 011000390
100 Federal Street
Boston, Massachusetts 02110
Account of: John Hancock Mutual Life Insurance Company
Private Placement Collection Account
Account Number: 541-55417
On Order of: Benton Oil and Gas Company PPN: 083288 A@ 9
2. Contemporaneous with the above wire transfer, advice setting forth (1)
the full name, interest rate and maturity date of the Note or other
obligations; (2) allocation of payment between principal and interest
and any special payment; and (3) name and address of bank (or Trustee)
from which wire transfer was sent, shall be delivered or mailed to:
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
P. O. Box 111
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
3. All notices with respect to prepayments, both scheduled and
unscheduled, whether partial or in full, and notice of maturity shall
be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
P. O. Box 111
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
<PAGE> 48
PURCHASER SCHEDULE
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
Note No. S-1 - $11,500,000
Warrant No. S-1 for 71,875 Shares of Common Stock
(CONTINUED)
4. All other communications which shall include, but not be limited to,
financial statements and certificates of compliance with financial
covenants, shall be delivered or mailed to:
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
P. O. Box 111
Boston, Massachusetts 02117
Attention: Bond & Corporate Finance Department T-57
Fax No: 617-572-1065
5. All securities shall be registered in the name of John Hancock Mutual
Life Insurance Company.
6. Tax I.D. No. 04-1414660.
<PAGE> 49
PURCHASER SCHEDULE
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
Note No. S-2 - $8,500,000
Warrant No. S-2 for 53,125 Shares of Common Stock
1. All payments on account of the Note or other obligations in accordance
with the provisions thereof shall be made by bank wire transfer of
immediately available funds for credit, not later than 12 noon, Boston
time, to:
The First National Bank of Boston
ABA No. 011000390
100 Federal Street
Boston, Massachusetts 02110
Account of: John Hancock Mutual Life Insurance Company
Private Placement Collection Account
Account Number: 541-55417
On Order of: Benton Oil and Gas Company PPN: 083288 A@ 9
2. Contemporaneous with the above wire transfer, advice setting forth (1)
the full name, interest rate and maturity date of the Note or other
obligations; (2) allocation of payment between principal and interest
and any special payment; and (3) name and address of bank (or Trustee)
from which wire transfer was sent, shall be delivered or mailed to:
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
P. O. Box 111
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
3. All notices with respect to prepayments, both scheduled and
unscheduled, whether partial or in full, and notice of maturity shall
be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
P. O. Box 111
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
<PAGE> 50
PURCHASER SCHEDULE
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
Note No. S-2 - $8,500,000
Warrant No. S-2 for 53,125 Shares of Common Stock
(CONTINUED)
4. All other communications which shall include, but not be limited to,
financial statements and certificates of compliance with financial
covenants, shall be delivered or mailed to:
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
P. O. Box 111
Boston, Massachusetts 02117
Attention: Bond & Corporate Finance Department T-57
Fax No: 617-572-1065
5. All securities shall be registered in the name of John Hancock Mutual
Life Insurance Company.
6. Tax I.D. No. 04-1414660.
