<PAGE> 1
As filed with the Securities and Exchange Commission on June 17, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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REGISTRATION STATEMENT
ON FORM S-4
UNDER
THE SECURITIES ACT OF 1933
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BENTON OIL AND GAS COMPANY
(Exact name of Registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
Delaware 1311 77-0196707
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code) Identification No.)
incorporation or
organization)
</TABLE>
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, CEO
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
(614) 462-5400
(614) 464-2634 (fax)
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed Maximum
Title of Each Class Maximum Offering Aggregate Amount of
of Securities to be Amount to be Price Per Offering Registration
Registered Registered Note(1) Price(1) Fee
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11 5/8% Senior Notes due
2003........................ $125,000,000 100% $125,000,000 $43,104
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</TABLE>
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(1) Estimated solely for the purpose of computing the registration fee, pursuant
to Rule 457(f)
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
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING THE
LOCATION OF INFORMATION REQUIRED BY PART I OF FORM S-4.
<TABLE>
<CAPTION>
ITEM
NO. CAPTION LOCATION IN PROSPECTUS
----- ---------------------------------------------------- -------------------------------------
<S><C> <C> <C>
Item 1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Facing Page of Registration
Statement; Outside Front Cover Page
of Prospectus
Item 2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Available Information; Incorporation
of Certain Documents by Reference
Item 3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................... Outside Front Cover Page of
Prospectus; Summary; Risk Factors;
Selected Consolidated Financial Data;
The Exchange Offer; Incorporation of
Certain Documents by Reference
Item 4. Terms of the Transaction............................ Summary; The Exchange Offer;
Description of the New Notes;
Description of the Old Notes
Item 5. Pro Forma Financial Information..................... *
Item 6. Material Contracts with the Company Being
Acquired............................................ *
Item 7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters....... *
Item 8. Interests of Named Experts and Counsel.............. *
Item 9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
Item 10. Information with Respect to S-3 Registrants......... Summary; Capitalization; Selected
Consolidated Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management;
Available Information; Incorporation
of Certain Documents by Reference;
Consolidated Financial Statements
Item 11. Incorporation of Certain Information by Reference... Incorporation of Certain Documents by
Reference
Item 12. Information with Respect to S-2 or S-3
Registrants......................................... *
Item 13. Incorporation of Certain Information by Reference... *
Item 14. Information with Respect to Registrant Other than
S-2 or S-3 Registrants.............................. *
Item 15. Information with Respect to S-3 Companies........... *
Item 16. Information with Respect to S-2 or S-3 Companies.... *
Item 17. Information with Respect to Companies other than S-2
or S-3 Companies.................................... *
Item 18. Information if Proxies, Consents or Authorizations
are to be Solicited................................. *
Item 19. Information if Proxies, Consents of Authorizations
are not to be Solicited or in an Exchange Offer..... The Exchange Offer
</TABLE>
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* Omitted because the item is inapplicable or the answer is negative.
<PAGE> 3
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.
SUBJECT TO COMPLETION
DATED JUNE 17, 1996
BENTON OIL AND GAS COMPANY
OFFER TO EXCHANGE ITS 11 5/8% SENIOR NOTES DUE 2003
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 FOR ANY AND ALL OF
ITS OUTSTANDING 11 5/8% SENIOR NOTES DUE 2003
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1996, UNLESS EXTENDED.
Benton Oil and Gas Company, a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (as the same may be amended or supplemented from time to time, the
"Prospectus") and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange up to $125 million aggregate
principal amount of its 11 5/8% Senior Notes due 2003 (the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for a like principal amount of its
outstanding 11 5/8% Senior Notes due 2003 (the "Old Notes"), of which $125
million aggregate principal amount is outstanding.
The terms of the New Notes are identical in all material respects to the terms
of the Old Notes, except that (i) the New Notes have been registered under the
Securities Act and therefore will not be subject to certain restrictions on
transfer applicable to the Old Notes, will not contain certain legends relating
thereto and will not be entitled to registration rights, and (ii) the New Notes
will not provide for any increase in the interest rate thereon. In that regard,
the Old Notes provide that if (i) a registration statement relating to the
Exchange Offer is not filed with the Securities and Exchange Commission on or
prior to July 1, 1996, (ii) the registration statement for the Exchange Offer is
not declared effective on or prior to July 31, 1996, or (iii) the Exchange Offer
is not consummated or a registration statement with respect to resale of the Old
Notes is not declared effective on or prior to August 30, 1996, then additional
interest (in addition to the interest otherwise due on the Old Notes) will
accrue at an annual rate of 0.50% on the Old Notes from May 1, 1996. See
"Description of the Old Notes." The New Notes are being offered for exchange in
order to satisfy certain obligations of the Company under the Registration
Rights Agreement dated as of May 2, 1996 (the "Registration Rights Agreement")
between the Company and the Initial Purchaser (as defined herein) of the Old
Notes. The New Notes will be issued under the same Indenture (as defined herein)
as the Old Notes and the New Notes and the Old Notes will constitute a single
series of debt securities under the Indenture. In the event that the Exchange
Offer is consummated, any Old Notes which remain outstanding after consummation
of the Exchange Offer and the New Notes issued in the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding principal amount of Notes (as defined
herein) have taken certain actions or exercise certain rights under the
Indenture. The New Notes and the Old Notes are collectively referred to herein
as the "Notes" See "Description of the New Notes" and "Description of the Old
Notes."
Interest on the New Notes is payable semi-annually on May 1 and November 1 of
each year, (each, an "Interest Payment Date"), commencing on the first such date
following the original issuance date of the New Notes. The New Notes will mature
on May 1, 2003. The New Notes are not entitled to any sinking fund. The New
Notes will be redeemable at the option of the Company, in whole or in part, at
any time on or after May 1, 2000, at the redemption prices set forth herein,
together with accrued and unpaid interest to the redemption date. The Company
may also redeem at its option at any time prior to May 1, 1999 up to 25% of the
aggregate principal amount of the Notes then outstanding with the proceeds of
one or more public offerings of certain equity securities at a redemption price
equal to 111.625% of the principal amount of such Notes, plus accrued and unpaid
interest to the redemption date; provided that at least $93.75 million in
aggregate principal amount of Notes remains outstanding immediately after giving
effect to such redemption.
The New Notes will be senior unsecured obligations of the Company and will rank
senior in right of payment to all existing and future Subordinated Indebtedness
(as defined) and pari passu with all other Senior Indebtedness (as defined) of
the Company. The New Notes will be effectively subordinated to all liabilities
of the Company's subsidiaries and all secured indebtedness of the Company.
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN RISK FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES IN THE
EXCHANGE OFFER.
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 , 1996.
<PAGE> 4
(Cover page continued)
At March 31, 1996, $37.2 million of consolidated indebtedness and trade payables
would have been liabilities of the Company's subsidiaries or secured
indebtedness of the Company and ranked effectively senior to the Notes and the
Company would have had $6.4 million of outstanding indebtedness and trade
payables that would have ranked pari passu with the Notes. See "Capitalization"
and "Description of the New Notes -Ranking."
The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance of the Securities and Exchange
Commission (the "Commission") as set forth in certain interpretive letters
addressed to third parties in other transactions. However, the Company has not
sought its own interpretive letter and there can be no assurance that the staff
of the Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance, and subject to the two immediately following
sentences, the Company believes that the New Notes issued pursuant to this
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and that such holder
is not participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Notes. However, any holder of Old Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing New Notes, or any broker-dealer who purchased Old Notes from the
Company to resell pursuant to Rule 144A under the Securities Act ("Rule 144A")
or any other available exemption under the Securities Act, (a) will not be able
to rely on the interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in the above-mentioned interpretive letters,
(b) will not be permitted or entitled to tender such Old Notes in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Notes unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, if any broker-dealer holds Old
Notes acquired for its own account as a result of market-making or other trading
activities and exchanges such Old Notes for New Notes, then such broker-dealer
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such New Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in the
Exchange Offer will be required to represent that (i) it is not an "affiliate"
of the Company, (ii) any New Notes to be received by it are being acquired in
the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the staff of the
Division of Corporation Finance of the Commission in the interpretive letters
referred to above, the Company believes that broker-dealers who acquired Old
Notes for their own accounts, as a result of market-making activities or other
trading activities ("Participating Broker-Dealers") may fulfill their prospectus
delivery requirements with respect to the New Notes received upon exchange of
such Old Notes (other than Old Notes which represent an unsold allotment from
the original sale of the Old Notes) with a prospectus meeting the requirements
of the Securities Act, which may be the prospectus prepared for an exchange
offer so long as it contains a description of the plan of distribution with
respect to the resale of such New Notes. Accordingly, this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales of
New Notes received in exchange for Old Notes where such Old Notes were acquired
by such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such New Notes
for a period ending 180 days after the Expiration Date referred to below
(subject to extension under certain limited circumstances described below) or,
if earlier, when all such New Notes have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." Any Participating Broker-Dealer who
is an "affiliate" of the Company may not rely on such interpretive letters and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. See "The Exchange
Offer -- Resales of New Notes."
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of
2
<PAGE> 5
(Cover page continued)
New Notes pursuant to this Prospectus until the Company has amended or
supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Company gives such notice to suspend the
sale of the New Notes, it shall extend the 180-day period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Notes by the number of days during the period
from and including the date of the giving of such notice to and including the
date when Participating Broker-Dealers shall have received copies of the amended
or supplemented Prospectus necessary to permit resales of the New Notes or to
and including the date on which the Company has given notice that the sale of
New Notes may be resumed, as the case may be.
The New Notes will be a new issue of securities for which there currently is no
market. Although the Initial Purchaser has informed the Company that it
currently intends to make a market in the New Notes, it is not obligated to do
so, and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the New Notes. The Company currently does not intend to apply for
listing of the New Notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the same rights and will be subject to
the same limitations applicable thereto under the Indenture (except for those
rights which terminate upon consummation of the Exchange Offer). Following
consummation of the Exchange Offer, the holders of Old Notes will continue to be
subject to the existing restrictions upon transfer thereof and the Company will
have no further obligation to such holders to provide for registration under the
Securities Act of the Old Notes held by them. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Notes could be adversely affected. See "Summary -- Certain
Consequences of a Failure to Exchange Old Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Old Notes may be tendered for exchange on or prior to 5:00 p.m., New York City
time, on , 1996 (such time on such date being hereinafter called the
"Expiration Date"), unless the Exchange Offer is extended by the Company (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended). Tenders of Old Notes may be withdrawn at
any time on or prior to the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Company and to the terms and provisions of
the Registration Rights Agreement. Old Notes may be tendered in whole or in part
in a principal amount of $1,000 and integral multiples thereof. The Company has
agreed to pay all expenses of the Exchange Offer. See "The Exchange
Offer -- Fees and Expenses." Each New Note will bear interest from the most
recent date to which interest has been paid or duly provided for on the Old Note
surrendered in exchange for such New Note or, if no such interest has been paid
or duly provided for on such Old Note, from May 1, 1996. Holders of the Old
Notes whose Old Notes are accepted for exchange will not receive accrued
interest on such Old Notes for any period from and after the last Interest
Payment Date to which interest has been paid or duly provided for on such Old
Notes prior to the original issue date of the New Notes or, if no such interest
has been paid or duly provided for, will not receive any accrued interest on
such Old Notes, and will be deemed to have waived the right to receive any
interest on such Old Notes accrued from and after such Interest Payment Date or,
if no such interest has been paid or duly provided for, from and after May 1,
1996.
Any waiver, extension or termination of the Exchange Offer will be publicly
announced by the Company through a release to the Dow Jones News Service and as
otherwise required by applicable law or regulations.
This Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders of Old Notes as of , 1996.
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. No dealer-manager is being used in connection with this
Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
3
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
</TABLE>
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<CAPTION>
Page
<S> <C>
Summary 5
Risk Factors 16
Use of Proceeds 20
Capitalization 21
Selected Consolidated Financial Data 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 23
Business 30
Management 41
Exchange Offer 44
Withdrawal Rights 48
Description of Outstanding
Indebtedness 50
Description of the New Notes 52
Description of the Old Notes 71
Certain United States Federal Income
Tax Considerations 71
Plan of Distribution 72
Legal Matters 72
Experts 73
Available Information 73
Incorporation of Certain Documents by
Reference 73
Glossary 74
Index to Consolidated Financial
Statements F-1
</TABLE>
4
<PAGE> 7
SUMMARY
The following summary information is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere, or
incorporated by reference, in this Prospectus. Unless the context requires
otherwise, "Benton" or the "Company" refers to Benton Oil and Gas Company and
its subsidiaries. Capitalized terms in this summary under the caption "The
Exchange Offer" and "The New Notes" and not otherwise defined are defined under
the caption "Description of the New Notes -- Certain Definitions." See
"Glossary" for the definition of certain oil and gas terms used herein.
THE COMPANY
GENERAL
Benton Oil and Gas Company is an independent energy company which has been
engaged in the development and production of oil and gas properties since 1989.
Although originally active only in the United States, the Company has developed
significant interests in Venezuela and Russia, and recently sold substantially
all of its remaining United States oil and gas interests. The Company's
operations are conducted principally through its 80%-owned Venezuelan
subsidiary, Benton-Vinccler, C.A. ("Benton-Vinccler"), which operates in the
South Monagas Unit in Venezuela, and its 34%-owned Russian joint venture,
GEOILBENT, which operates in the North Gubkinskoye Field in Siberia, Russia.
As of December 31, 1995, the Company had total assets of $214.8 million ($234.9
million at March 31, 1996), total estimated proved reserves of 96,212 MBOE, and
a standardized measure of discounted future net cash flow, before income taxes,
for total proved reserves of $372.3 million. For the year ended December 31,
1995 and the three months ended March 31, 1996, the Company had total revenues
of $65.1 million and $32.9 million, respectively and net income of $10.6 million
and $6.3 million, respectively.
The Company has been successful in increasing reserves, production, revenues and
earnings during the last two years. From year-end 1993 through 1995, estimated
proved reserves increased from 42,785 MBOE to 96,212 MBOE, and net production
increased from a total of 519 MBOE in 1993 to 6,647 MBOE in 1995. As production
has increased over this period, average lifting costs per Bbl have declined from
$7.26 to $1.19 in Venezuela, and from $16.22 to $5.63 in Russia. Between 1993
and 1995, the Company's annual revenues increased from $7.5 million to $65.1
million. During the same period, the Company's EBITDA (as defined in the
Indenture) increased from $0.5 million to $32.4 million. See "--Summary
Consolidated Financial Information."
The following table summarizes the Company's financial operating data, proved
reserves and production activity in Venezuela and Russia for each of the three
years ended December 31:
<TABLE>
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VENEZUELA(1) RUSSIA(2)
--------------------------------- ---------------------------------
Dollars in thousands 1993 1994 1995 1993 1994 1995(3)
------- ------- ------- ------- ------- -------
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Oil and Gas Revenues $ 1,333 $21,472 $49,174 $ 324 $ 3,513 $6,016
Expenses(4) 1,394 8,806 17,876 558 3,670 4,276
------- ------- ------- ------- ------- -------
Results of Operations from Oil
and Gas Producing Activities $ (61) $12,666 $31,298 $ (234) $ (157) $1,740
======= ======= ======= ======= ======= ========
Proved Reserves (MBOE) 19,389 60,707 73,593 10,121 17,540 22,618
Average Daily Production (BOE) 440 6,902 14,949 77 806 1,345
</TABLE>
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(1) Includes 100% of the reserve information, production activity and financial
data, without deduction for minority interest. All Venezuelan reserves are
attributable to an operating service agreement between Benton-Vinccler and
Lagoven, S.A. ("Lagoven") an affiliate of the national oil company,
Petroleos de Venezuela, S.A. ("PdVSA"), under which all mineral rights are
owned by the Government of Venezuela. See "Business -- South Monagas Unit,
Venezuela" and "-- Reserves."
(2) 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 Indenture. Accordingly, for purposes
of the Indenture, the Company's Russian operations will be excluded from the
calculation of covenants and Oil and Gas Reserve Estimate, as defined. See
"Description of the New Notes -- Certain Covenants."
(3) The financial information related to Russia and included in the 1995
presentation contains information for the nine months ended September 30,
1995, the end of the fiscal period for GEOILBENT. See Note 15 to the
Company's Consolidated Financial Statements.
(4) Expenses include lease operating costs and production taxes and depletion.
5
<PAGE> 8
BUSINESS STRATEGY
The Company's business strategy is to identify and exploit new oil and gas
reserves in under-developed areas while seeking to minimize the associated risk
of such activities. Specifically, the Company endeavors to minimize risk by
employing the following strategies in its business activities: (i) seek new
reserves in areas of low geologic risk; (ii) use proven advanced technology in
both exploration and development to maximize recovery; (iii) establish a local
presence through joint venture partners and the use of local personnel; (iv)
commit capital in a phased manner to limit total commitments at any one time;
and (v) reduce foreign exchange risks through receipt of revenues in U.S.
currency.
- - SEEK NEW RESERVES IN AREAS OF LOW GEOLOGIC RISK. The Company has had
significant success in identifying under-developed reserves in the U.S. and
internationally. In particular, the Company has notable experience and expertise
in seeking and developing new reserves in countries where perceived potential
political and operating difficulties have sometimes discouraged other energy
companies from competing. As a result, the Company has established operations in
Venezuela and Russia which have significant reserves that have been acquired and
developed at relatively low costs. The Company is seeking similar opportunities
in other countries and areas which it believes have high potential.
- - USE OF PROVEN ADVANCED TECHNOLOGY IN BOTH EXPLORATION AND DEVELOPMENT. The
Company's use of 3-D seismic technology, in which a three dimensional image of
the earth's subsurface is created through the computer interpretation of seismic
data, combined with its experience in designing the seismic surveys and
interpreting and analyzing the resulting data, allow for a more detailed
understanding of the subsurface than do conventional surveys. Such technology
contributes significantly to field appraisal, development and production. The
3-D seismic information, in conjunction with subsurface geologic data from
previously drilled wells, is used by the Company's experienced in-house
technical team to identify previously undetected reserves. The 3-D seismic
information can also be used to guide drilling on a real-time basis, and has
been especially helpful in the horizontal drilling done in Venezuela in order to
take advantage of oil-trapping faults.
- - ESTABLISH A LOCAL PRESENCE THROUGH JOINT VENTURE PARTNERS AND THE USE OF LOCAL
PERSONNEL. The Company has sought to establish a local presence where it does
business to facilitate stronger relationships with local government and labor
through joint venture arrangements with local partners. Moreover, the Company
employs almost exclusively local personnel to run foreign operations both to
take advantage of local knowledge and experience and to minimize cost. These
efforts have created an expertise within Company management in forming effective
foreign partnerships and operating abroad. The Company believes that it has
gained access to new development opportunities as a result of its reputation as
a dependable partner.
- - COMMIT CAPITAL IN A PHASED MANNER TO LIMIT TOTAL COMMITMENTS AT ANY ONE
TIME. While the Company typically has agreed to a minimum capital expenditure or
development commitment at the outset of new projects, expenditures to fulfill
these commitments are phased over time. In addition, the Company seeks, where
possible, to use internally generated funds for further capital expenditures and
to invest in projects which provide the potential for an early return to the
Company.
- - REDUCE FOREIGN EXCHANGE RISKS. The Company seeks to reduce foreign currency
exchange risks by providing for the receipt of revenues by the Company in U.S.
dollars while most operating costs are incurred in local currency. Pursuant to
the operating agreement between the Company's Venezuelan subsidiary and the
state oil company, the operating fees earned by the Company are paid directly to
the Company's bank account in the U.S. in U.S. dollars. GEOILBENT receives
revenues from export sales in U.S. dollars paid to its account in Moscow. As the
Company expands internationally, it will seek to establish similar arrangements
for new operations.
THE VENEZUELAN OPERATIONS
South Monagas Unit
In July 1992, the Company and Venezolana de Inversiones y Construcciones
Clerico, C.A. ("Vinccler"), a Venezuelan construction and engineering company,
signed a 20-year operating service agreement with Lagoven to reactivate and
further develop the Uracoa, Tucupita and Bombal Fields, which are a part of the
South Monagas Unit. The oil and gas operations are conducted by Benton-Vinccler,
the Company's 80%-owned subsidiary. Under the terms of the operating service
agreement, Benton-Vinccler is a contractor for Lagoven and is responsible for
overall operations of the South Monagas Unit. Benton-Vinccler invoices Lagoven
each quarter based on Bbls of oil accepted by Lagoven during the quarter, using
quarterly adjusted contract service fees per Bbl, and receives payments from
Lagoven in U.S. dollars deposited directly into a U.S. bank account.
During March 1996, a total of approximately 50 wells were producing an average
of approximately 31.5 MBbls of oil per day in the Uracoa Field. Since 1992, 14
previously drilled wells have been reactivated and 42 new wells have been
drilled in the Uracoa Field, with 41, or 98%, completed and placed on
production. At December 31, 1995, proved reserves attributable to the Company's
Venezuelan operations were 73,593 MBOE, which represented approximately 76% of
the Company's proved reserves. During 1996, Benton-Vinccler plans to drill
approximately 7 vertical and 26 horizontal wells, 2 injection wells and one
6
<PAGE> 9
step-out well adjacent to the Uracoa Field at an anticipated cost of $40-45
million. In addition, Benton-Vinccler intends to expand the capacity of its
production facilities during 1996 at an anticipated cost of $21 million.
Before becoming inactive, Tucupita had been substantially developed and
produced; relatively few wells had been drilled at Uracoa and Bombal.
Benton-Vinccler intends to evaluate the potential of the Tucupita Field in 1996
by drilling a pilot oil well. Benton-Vinccler currently plans to reactivate and
develop the Bombal Field beginning in 1998.
Delta Centro Block
In January 1996, the Company and its bidding partners, Louisiana Land and
Exploration ("LL&E") and Norcen Energy Company ("Norcen"), were awarded the
right to explore and develop the Delta Centro Block in Venezuela. The Delta
Centro Block consists of approximately 2,100 square kilometers (526,000 acres)
located in the delta of the Orinoco River in the eastern part of Venezuela.
Although no significant exploratory activity has been conducted in the block,
PdVSA has estimated that the area may contain recoverable reserves of as much as
820 MMBbls, and may be capable of producing up to 160 MBbls of oil per day. The
general area of Venezuela in which the Delta Centro Block is located is known to
be a significant source of hydrocarbons, evidenced by the Orinoco tar sands to
the south and the recently discovered El Furrial light oil trend to the north.
The contract requires a minimum exploration work program consisting of
completing a 1,300 kilometer seismic survey and drilling three wells to depths
of 12,000 to 18,000 feet within five years. The Company will have a 30% interest
in the exploration venture, with LL&E and Norcen each owning a 35% interest,
with possible subsequent significant participation in development by an
affiliate of PdVSA. See "Business -- Delta Centro Block, Venezuela -- General."
THE RUSSIAN OPERATIONS
The Company operates in Russia through its 34% interest in the GEOILBENT joint
venture. The Company's partners in this venture are the local exploration
company, Purneftegasgeologia, and the local production company, Purneftegas,
each of which owns a 33% interest. GEOILBENT develops, produces and markets oil
from the North Gubkinskoye Field in the West Siberia region of Russia, located
approximately 2,000 miles northeast of Moscow. Before GEOILBENT commenced its
operations, North Gubkinskoye was one of the largest oil and gas fields in the
region not under commercial production.
Production from the field is delivered via the pipeline network owned by
Transneft, the state oil pipeline monopoly, to various points on the western
border of Russia. During 1995, the majority of GEOILBENT's crude sales were made
to purchasers in Germany. All export sales are paid in U.S. dollars directly
into GEOILBENT's account in Moscow. During March 1996, approximately 40 wells
were producing an average of approximately 8.4 MBbls of oil per day.
RECENT DEVELOPMENTS
On April 12, 1996, the Company sold to Shell Offshore Inc. ("Shell")
substantially all of its U.S. properties, including its interests in the West
Cote Blanche Bay, Rabbit Island and Belle Isle Fields in Louisiana, for a
purchase price of $35.4 million, with the sale effective as of December 31, 1995
(the "U.S. Property Sale"). The 1995 and 1996 consolidated financial data set
forth herein includes the results of operations from these properties. See Note
14 to the Company's Consolidated Financial Statements. Because the properties
were held for sale at December 31, 1995, the Company's reserve report excludes
all reserves attributable to these properties.
On April 22, 1996, the Venezuelan government announced the lifting of controls
on foreign exchange transactions, having announced the lifting of controls on
interest rates one week earlier. The Venezuelan government also announced a $1.4
billion preliminary loan accord with the International Monetary Fund. Although
these actions have led to the devaluation of the bolivar and a rise in interest
rates and are likely to lead to temporary increases in inflation, they are
generally viewed as likely to have a positive effect in the long term. Upon the
announcement, both the Venezuelan stock and bond markets showed strong gains and
it is expected that additional funds will be made available soon by the World
Bank and the Inter-American Development Bank.
7
<PAGE> 10
THE EXCHANGE OFFER
<TABLE>
<S> <C>
THE EXCHANGE OFFER........................... Up to $125 million aggregate principal amount of New
Notes are being offered in exchange for a like
aggregate principal amount of Old Notes. The Company
is making the Exchange Offer in order to satisfy its
obligations under the Registration Rights Agreement
relating to the Old Notes. For a description of the
procedures for tendering Old Notes, see "The Exchange
Offer -- Procedures for Tendering Old Notes."
EXPIRATION DATE.............................. 5:00 p.m., New York City time, on , 1996
(such time on such date being hereinafter called the
"Expiration Date") unless the Exchange Offer is
extended by the Company (in which case the term
"Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended). Any waiver,
extension or termination of the Exchange Offer will be
publicly announced by the Company through a release to
the Dow Jones News Service and as otherwise required
by applicable law or regulations. See "The Exchange
Offer -- Expiration Date; Extensions; Amendments."
CERTAIN CONDITIONS TO THE EXCHANGE OFFER..... The Exchange Offer is subject to certain conditions.
The Company reserves the right in its sole and
absolute discretion, subject to applicable law, at any
time and from time to time, (i) to delay the
acceptance of the Old Notes for exchange, (ii) to
terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to extend
the Expiration Date of the Exchange Offer and retain
all Old Notes tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Old Notes
to withdraw their tendered Old Notes, or (iv) to waive
any condition or otherwise amend the terms of the
Exchange Offer in any respect. See "The Exchange
Offer -- Expiration Date; Extensions; Amendments" and
"-- Certain Conditions to the Exchange Offer."
WITHDRAWAL RIGHTS............................ Tenders of Old Notes may be withdrawn at any time on
or prior to 5:00 p.m., New York City time on the
Expiration Date by delivering a written notice of such
withdrawal to the Exchange Agent in conformity with
certain procedures set forth below under "The Exchange
Offer -- Withdrawal Rights."
PROCEDURES FOR TENDERING OLD NOTES........... Tendering holders of Old Notes must complete and sign
a Letter of Transmittal in accordance with the
instructions contained therein and forward the same by
mail, facsimile or hand delivery, together with any
other required documents, to the Exchange Agent (as
defined below) at the address set forth herein by 5:00
p.m. New York City time on the Expiration Date, either
with the Old Notes to be tendered or in compliance
with the specified procedures for guaranteed delivery
of Old Notes. Certain brokers, dealers, commercial
banks, trust companies and other nominees may also
effect tenders by book-entry transfer. Holders of Old
Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish to
tender Old Notes pursuant to the Exchange Offer. See
"The Exchange Offer -- Procedures for Tendering Old
Notes." Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should only be sent to the
Exchange Agent. Questions regarding how to tender and
requests for information should be directed to the
Exchange Agent. See "The Exchange Offer -- Exchange
Agent."
</TABLE>
8
<PAGE> 11
<TABLE>
<S> <C>
GUARANTEED DELIVERY PROCEDURES............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes, a
Letter of Transmittal or any other document required
by the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Procedures for
Tendering Old Notes -- Guaranteed Delivery."
RESALES OF NEW NOTES......................... The Company is making the Exchange Offer in reliance
on the position of the staff of the Division of
Corporation Finance of the Commission as set forth in
certain interpretive letters addressed to third
parties in other transactions. However, the Company
has not sought its own interpretive letter and there
can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a
similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff
of the Division of Corporation Finance, and subject to
the two immediately following sentences, the Company
believes that New Notes issued pursuant to this
Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the
registration and prospectus delivery requirements of
the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's
business and that such holder is not participating,
and has no arrangement or understanding with any
person to participate, in a distribution (within the
meaning of the Securities Act) of such New Notes.
However, any holder of Old Notes who is an "affiliate"
of the Company or who intends to participate in the
Exchange Offer for the purpose of distributing the New
Notes, or any broker-dealer who purchased the Old
Notes from the Company to resell pursuant to Rule 144A
or any other available exemption under the Securities
Act, (a) will not be able to rely on the
interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in the
above-mentioned interpretive letters, (b) will not be
permitted or entitled to tender such Old Notes in the
Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of
the Securities Act in connection with any sale or
other transfer of such Old Notes unless such sale is
made pursuant to an exemption from such requirements.
In addition, as described below, if any broker-dealer
holds Old Notes acquired for its own account as a
result of market-making or other trading activities
and exchanges such Old Notes for New Notes, then such
broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with
any resales of such New Notes.
Each holder of Old Notes who wishes to exchange Old
Notes for New Notes in the Exchange Offer will be
required to represent that (i) it is not an
"affiliate" of the Company, (ii) any New Notes to be
received by it are being acquired in the ordinary
course of its business, (iii) it has no arrangement or
understanding with any person to participate in a
distribution (within the meaning of the Securities
Act) of such New Notes, and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and
does not intend to engage in, a distribution (within
the meaning of the Securities Act) of such New Notes.
Each broker-dealer that receives New
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C>
Notes for its own account pursuant to the Exchange
Offer must acknowledge that it acquired the Old Notes
for its own account as the result of market-making
activities or other trading activities and must agree
that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with
any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position
taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters
referred to above, the Company believes that
broker-dealers who acquired Old Notes for their own
accounts as a result of market-making activities or
other trading activities ("Participating
Broker-Dealers") may fulfill their prospectus delivery
requirements with respect to the New Notes received
upon exchange of such Old Notes with a prospectus
meeting the requirements of the Securities Act, which
may be the prospectus prepared for an exchange offer
so long as it contains a description of the plan of
distribution with respect to the resale of such New
Notes. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with
resales of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such
Participating Broker-Dealer for its own account as a
result of market-making or other trading activities.
Subject to certain provisions set forth in the
Registration Rights Agreement and to the limitations
described below under "The Exchange Offer -- Resale of
New Notes," the Company has agreed that this
Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating
Broker-Dealer in connection with resales of such New
Notes for a period ending 180 days after the
Expiration Date (subject to extension under certain
limited circumstances) or, if earlier, when all such
New Notes have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." Any
Participating Broker-Dealer who is an "affiliate" of
the Company may not rely on such interpretive letters
and must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. See "The
Exchange Offer -- Resales of New Notes."
ACCEPTANCE OF OLD NOTES AND Subject to the terms and conditions of the Exchange
DELIVERY OF NEW NOTES...................... Offer, including the reservation of certain rights by
the Company, the Company will accept for exchange any
and all Old Notes which are properly tendered in the
Exchange Offer, and not withdrawn, prior to 5:00 p.m.
New York City time, on the Expiration Date. Subject to
such terms and conditions, the New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer -- Acceptance for Exchange and Issuance
of New Notes."
EXCHANGE AGENT............................... The exchange agent with respect to the Exchange Offer
is First Trust of New York, National Association (the
"Exchange Agent"). The addresses, and telephone and
facsimile numbers of the Exchange Agent are set forth
in "The Exchange Offer -- Exchange Agent" and in the
Letter of Transmittal.
USE OF PROCEEDS.............................. The Company will not receive any cash proceeds from
the issuance of the New Notes offered hereby. See "Use
of Proceeds."
</TABLE>
10
<PAGE> 13
<TABLE>
<S> <C>
CERTAIN UNITED STATES FEDERAL INCOME TAX Holders of Old Notes should review the information set
CONSIDERATIONS............................. forth under "Certain United States Federal Income Tax
Considerations" prior to tendering Old Notes in the
Exchange Offer.
</TABLE>
THE NEW NOTES
<TABLE>
<S> <C>
SECURITIES OFFERED........................... Up to $125 million aggregate principal amount of the
Company's 11 5/8% Senior Notes due 2003 which have
been registered under the Securities Act. The New
Notes will be issued and the Old Notes were issued
under an Indenture dated as of May 2, 1996 (the
"Indenture") between the Company and First Trust of
New York, National Association (the "Trustee"). The
New Notes and any Old Notes which remain outstanding
after consummation of the Exchange Offer will
constitute a single series of debt securities under
the Indenture and, accordingly, will vote together as
a single class for purposes of determining whether
holders of the requisite percentage in outstanding
principal amount thereof have taken certain actions or
exercised certain rights under the Indenture. See
"Description of the New Notes -- General." The terms
of the New Notes are identical in all material
respects to the terms of the Old Notes, except that
(i) the New Notes have been registered under the
Securities Act and therefore are not subject to
certain restrictions on transfer applicable to the Old
Notes, will not contain legends relating thereto and
will not be entitled to registration rights or other
rights under the Registration Rights Agreement, and
(ii) the New Notes will not provide for any increase
in the interest rate thereon. See "The Exchange
Offer -- Purpose of the Exchange Offer," "Description
of the New Notes" and "Description of the Old Notes."
MATURITY DATE................................ May 1, 2003.
INTEREST PAYMENT DATES....................... May 1 and November 1, commencing on November 1, 1996.
OPTIONAL REDEMPTION.......................... The New Notes will be redeemable, at the Company's
option, in whole or in part, at any time on or after
May 1, 2000 at the redemption prices set forth herein
plus accrued and unpaid interest, if any, to the date
of redemption. The Company may also redeem at its
option at any time prior to May 1, 1999 up to 25% of
the aggregate principal amount of the New Notes and
Old Notes then outstanding with the proceeds of one or
more public offerings of certain equity securities at
a redemption price equal to 111.625% of the principal
amount of such New Notes and Old Notes, plus accrued
and unpaid interest to the redemption date; provided
that at least $93.75 million in aggregate principal
amount of New Notes and old Notes remains outstanding
immediately after giving effect to such redemption.
See "Description of the New Notes -- Optional
Redemption."
CHANGE IN CONTROL............................ Upon a Change in Control, each holder of the New Notes
may require the Company to repurchase such holder's
New Notes, in whole or in part, at a purchase price in
cash equal to 101% of the principal amount thereof,
plus accrued and unpaid interest. See "Description of
the New Notes -- Change in Control."
</TABLE>
11
<PAGE> 14
<TABLE>
<S> <C>
RANKING...................................... The New Notes will constitute senior unsecured debt
obligations of the Company and will rank senior in
right of payment to all existing and future
Subordinated Indebtedness and pari passu with all
other Senior Indebtedness. The New Notes will be
effectively subordinated to secured indebtedness of
the Company and all liabilities of the Company's
subsidiaries, except to the extent that the Company is
itself recognized as 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. At March 31, 1996,
after giving pro forma effect to the U.S. Property
Sale and the issuance of the Old Notes and the use of
proceeds received from each transaction as set forth
in "Capitalization," $37.2 million of consolidated
indebtedness and trade payables would have been
liabilities of the Company's subsidiaries or secured
indebtedness of the Company and ranked effectively
senior to the New Notes and the Company would have had
$6.4 million of outstanding indebtedness and trade
payables that would have ranked pari passu with the
New Notes. In addition, the Company could have
incurred up to $38.0 million of secured indebtedness
under its revolving letter of credit and loan facility
which would have ranked effectively senior to the New
Notes. See "Description of the New Notes -- Ranking."
CERTAIN COVENANTS............................ The Indenture 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 New
Notes are equally and ratably secured, and engage in
mergers and consolidations. The Indenture will also
limit the amount of indebtedness the Company's
Restricted Subsidiaries may assume or the amount of
indebtedness of the Company they may guarantee unless
such Restricted Subsidiaries simultaneously guarantee
the payment of the New Notes. See "Description of the
New Notes -- Certain Covenants."
USE OF PROCEEDS.............................. The Company will receive no proceeds from this
Exchange Offer.
ABSENCE OF MARKET FOR THE NEW NOTES.......... The New Notes will be a new issue of securities for
which there currently is no market. Although J.P.
Morgan Securities Inc., the initial purchaser of the
Old Notes (the "Initial Purchaser"), has informed the
Company that it currently intends to make a market in
the New Notes, it is not obligated to do so, and any
such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance
as to the development or liquidity of any market for
the New Notes. The Company currently does not intend
to apply for listing of the New Notes on any
securities exchange or for quotation through the
National Association of Securities Dealers Automated
Quotation System.
</TABLE>
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<PAGE> 15
CERTAIN CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES
The Old Notes have not been registered under the Securities Act or any state
securities laws and therefore may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the Securities Act
and any other applicable securities laws, or pursuant to an exemption therefrom
or in a transaction not subject thereto, and in each case in compliance with
certain other conditions and restrictions, including the Company's and the
Trustee's right in certain cases to require the delivery of opinions of counsel,
certifications and other information prior to any such transfer. Old Notes which
remain outstanding after consummation of the Exchange Offer will continue to
bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes registered
under the Securities Act or to any similar rights under the Registration Rights
Agreement. The Company currently does not intend to register under the
Securities Act any Old Notes which remain outstanding after consummation of the
Exchange Offer.
To the extent that Old Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Old Notes could be adversely affected. In
addition, although the Old Notes are eligible for trading in the Private
Offerings, Resale and Trading through Automatic Linkages ("PORTAL") market, to
the extent that Old Notes are tendered and accepted in connection with the
Exchange Offer, any trading market for Old Notes which remain outstanding after
the Exchange Offer could be adversely affected.
The New Notes and any Old Notes which remain outstanding after consummation of
the Exchange Offer will constitute a single series of debt securities under the
Indenture and, accordingly, will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding principal
amount thereof have taken certain actions or exercised certain rights under the
Indenture. See "Description of the New Notes -- General."
The Old Notes provide that, if the Exchange Offer is not consummated by August
31, 1996, the interest rate borne by the Old Notes will increase by 0.50% per
annum following August 31, 1996 until the Exchange Offer is consummated. See
"Description of the Old Notes." Following consummation of the Exchange Offer,
the Old Notes will not be entitled to any increase in the interest rate thereon.
The New Notes will not be entitled to any such increase in the interest rate
thereon.
13
<PAGE> 16
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary consolidated financial information for
the Company and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements, related notes and other financial data
included elsewhere herein or incorporated herein by reference.
<TABLE>
<CAPTION>
-----------------------
---------------------------------------
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31 MARCH 31
In thousands, except ratios 1993 1994 1995(1) 1995 1996(1)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Total revenues(2) $ 7,503 $34,705 $65,068 $12,661 $32,939
Lease operating costs and production
taxes(2) 5,110 9,531 10,703 2,246 4,073
Depletion, depreciation and
amortization(2) 2,633 10,298 17,411 3,145 7,733
General and administrative expense 2,631 5,242 9,411 1,668 3,647
Interest expense(2) 1,958 3,888 7,497 1,619 2,260
Litigation settlement and partnership
exchange expenses -- -- 1,673 -- 2,140
------- ------- ------- ------- -------
Income (loss) before income taxes and
minority interest (4,829) 5,746 18,373 3,983 13,086
Income tax expense -- 698 2,478 1,079 4,449
------- ------- ------- ------- -------
Income (loss) before minority interest (4,829) 5,048 15,895 2,904 8,637
Minority interest -- 2,094 5,304 863 2,327
------- ------- ------- ------- -------
Net income (loss) $(4,829) $ 2,954 $10,591 $ 2,041 $ 6,310
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
-----------------------
---------------------------------------
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31 MARCH 31
1993 1994 1995(1) 1995 1996(1)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(3) $ 598 $15,603 $32,396 $ 5,964 $20,512
Net cash provided by (used in) operating
activities (1,790) 13,463 32,349 5,389 15,776
Net cash provided by (used in) investing
activities (18,619) (55,078) (53,644) 3,584 (14,949)
Net cash provided by (used in) financing
activities 43,044 19,500 13,282 (1,956) 797
Capital expenditures 26,249 55,711 78,727 11,130 15,384
EBITDA/Interest Ratio(3)(4) 0.23 3.51 4.21 3.47 9.41
Ratio of earnings to fixed charges(5) -- 2.45 3.25 3.24 6.40
</TABLE>
<TABLE>
<CAPTION>
------------------------------
AT MARCH 31, 1996
ACTUAL PRO FORMA(6)
-------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital $ 2,726 $ 13,115
Total assets 234,893 222,183
Long-term obligations, net of current portion 46,050 33,442
Stockholders' equity(7) 117,996 117,895
</TABLE>
- ------------------------
(1) The financial information related to Russia and included in the year end
1995 presentation contains information for the nine months ended September
30, 1995, the end of the fiscal period for GEOILBENT. Similarly, the 1996
presentation contains information at, and for the three months ended
December 31, 1995. See Note 15 to the Company's Consolidated Financial
Statements.
(2) Assuming the U.S. Property Sale had occurred on January 1, 1995, pro forma
effects on the consolidated statement of operations for the year ended
December 31, 1995 would include reductions in oil and gas revenues, lease
operating costs and production taxes, depletion and interest expense of $7.4
million, $1.0 million, $4.0 million and $2.7 million, respectively. The pro
forma effects on the consolidated statement of operations for the three
months ended March 31, 1996 would include reductions in oil and gas
revenues, lease operating costs and production taxes, depletion and interest
expense of $4.1 million, $0.2 million, $1.4 million and $0.6 million,
respectively.
(3) EBITDA has been calculated as defined in the Indenture and has been included
solely to facilitate consideration of the covenants in the Indenture that
are based, in part, on EBITDA. See "Description of the New Notes -- Certain
Definitions." EBITDA is not intended to represent cash flow from operations
as defined by generally accepted accounting principles ("GAAP") and should
not be considered as an alternative to net income as an indicator of the
Company's operating performance or to cash flow as a measure of liquidity.
(4) EBITDA/Interest Ratio has been calculated as defined in the Indenture. See
"Description of the New Notes -- Certain Definitions."
(5) For purposes of determining the ratio of earnings to fixed charges,
"earnings" represents income (loss) 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 year ended December 31, 1993,
earnings were insufficient to cover fixed charges by $4.8 million. After
giving effect to the sale of the Old Notes, to the extent proceeds will be
used to retire presently outstanding indebtedness, the pro forma ratio of
earnings to fixed charges would have been 2.60 for the year ended December
31, 1995 and 6.03 for the three months ended March 31, 1996.
(6) Pro forma for the U.S. Property Sale, as if such sale had occurred on March
31, 1996.
(7) No cash dividends were paid during the periods presented.
14
<PAGE> 17
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, 1993, 1994 and 1995,
prepared by the Company and audited by Huddleston & Co., Inc., independent
petroleum engineers.
<TABLE>
<CAPTION>
---------------------------------------
YEARS ENDED DECEMBER 31
Dollars in thousands 1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
VENEZUELA(1):
Crude oil and condensate (MBbl) 19,389 60,707 73,593
Natural gas (Mmcf) -- -- --
Oil equivalent (MBOE) 19,389 60,707 73,593
RUSSIA:
Crude oil and condensate (MBbl) 10,121 17,540 22,618
Natural gas (Mmcf) -- -- --
Oil equivalent (MBOE) 10,121 17,540 22,618
UNITED STATES(2):
Crude oil and condensate (MBbl) 10,258 233 --
Natural gas (Mmcf) 18,099 16,077 6
Oil equivalent (MBOE) 13,275 2,913 1
TOTAL(1):
Crude oil and condensate (MBbl) 39,768 78,480 96,211
Natural gas (Mmcf) 18,099 16,077 6
Oil equivalent (MBOE) 42,785 81,160 96,212
Standardized measure of discounted future net cash flows before
provision for income taxes(1)(3) $ 131,413 $ 336,320 $ 372,293
</TABLE>
- ---------------
(1) Includes 100% of the reserve information, without deduction for minority
interest. 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.
(2) At December 31, 1995, substantially all of the Company's U.S. reserves and
acreage positions were held for sale pursuant to the U.S. Property Sale, and
accordingly all such reserves were excluded.
(3) 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.
15
<PAGE> 18
RISK FACTORS
Prospective purchasers of the New Notes should read this entire Prospectus
carefully. Ownership of the New Notes 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 New
Notes.
RISKS RELATED TO THE COMPANY
Risk from Substantial Concentration of Operations
The Company's cash flow-generating operations are substantially concentrated in
Venezuela. For 1995, the Company derived approximately 78% of its consolidated
oil and gas revenues and approximately 76% of its proved reserves from its
Venezuelan operations. If the Venezuelan operations are adversely effected, the
Company, due to its concentration in and reliance on the Venezuelan operations,
will experience an adverse impact on its financial condition and operations.
There are significant operating and economic risks associated with conducting
business in Venezuela. See "-- Risks Related to the Company -- Political and
Economic Risks of International Operations -- Venezuela."
Political and Economic Risks of International Operations -- General
Substantially all of the Company's oil and gas producing operations and
non-financial assets are in Venezuela and Russia and all operating income is
expected to be generated from these countries (absent any new investments). As a
result, the Company is subject to certain political, economic and other
uncertainties including risks of war, civil disturbance, expropriation,
nationalization, renegotiation or modification of existing contracts, taxation
policies, foreign exchange restrictions, international monetary fluctuations and
other hazards arising out of foreign governmental sovereignty over the Company's
operations.
Political and Economic Risks of International Operations -- Venezuela
The Company began to operate in Venezuela in 1992. For 1995, the Company derived
approximately 78% of its consolidated oil and gas revenues and approximately 76%
of its proved reserves from its Venezuelan operations. The petroleum industry in
Venezuela is highly regulated by the government with respect to such matters as
maximum daily production, methods of production and environmental matters, both
directly and indirectly through PdVSA. In addition, the timing and extent of the
Company's development activities are subject to the approval of Lagoven and the
Ministry of Energy and Mines. There can be no assurance that the government or
PdVSA will not impose significant new regulations regarding the petroleum
industry generally or that the development activities proposed by
Benton-Vinccler will receive the necessary approval. The Company also expects to
increase its exposure to Venezuela through the continued investment in
Benton-Vinccler and the Delta Centro consortium. While Benton-Vinccler has never
had a material dispute or payment interruption with Lagoven, PdVSA or the
Venezuelan government, the country of Venezuela has experienced significant
political and economic instability, high inflation, and shortages of foreign
currency.
Political and Economic Situation. In May 1993, the Venezuelan Senate voted to
authorize the impeachment of President Carlos Andres Perez. Subsequently, Rafael
Caldera was elected president and took office in February 1994. Upon assuming
the presidency, President Caldera was immediately faced with a solvency crisis
in the banking system which necessitated a government takeover of nine financial
institutions, including Banco Latino, one of the largest Venezuelan banks.
Consequently, the bolivar devalued sharply, inflation rose and gross domestic
product ("GDP") contracted. Though Venezuela experienced positive GDP growth for
1995, it was the first increase in three years, and the 1995 GDP figures did not
reflect the full effects of a currency devaluation at year end. Many independent
sources are predicting another GDP contraction in 1996. On April 22, 1996, the
Venezuelan government announced the lifting of controls on foreign exchange
transactions, having announced the lifting of controls on interest rates one
week earlier. The Venezuelan government also announced a $1.4 billion
preliminary loan accord with the International Monetary Fund. Although these
actions have led to the devaluation of the bolivar and a rise in interest rates
and are likely to lead to temporary increases in inflation, they are generally
viewed as likely to have a positive effect in the long term. There can be no
assurance, however, that such actions will be successful in resolving
Venezuela's economic difficulties.
Inflation and Currency Controls. Venezuela has experienced high levels of
inflation over the past decade. The consumer price inflation rate was
approximately 38% for calendar year 1993, 61% for 1994, and 60% for 1995. In
addition to increasing the Company's bolivar-denominated expenses with respect
to its Venezuelan operations, these high rates of inflation led the Venezuelan
government to devalue the bolivar by 41% on December 11, 1995. In July 1994, the
Venezuelan government imposed a program of currency exchange controls that was
lifted in April 1996. Pursuant to its agreement with Lagoven, Benton-Vinccler
receives its payments from Lagoven in U.S. dollars deposited directly into a
U.S. bank account. Although the lifting of currency controls is expected to lead
to increased economic stability in the long term, it is likely to lead to a
temporary rise in
16
<PAGE> 19
inflation in Venezuela. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Effects of Changing Prices, Foreign
Exchange Rates and Inflation."
Oil Production and OPEC. News reports speculate that Venezuela is currently
producing oil in excess of the output quota established by OPEC. While Venezuela
remains a member of OPEC and has yet to face any sanctions, there is a risk that
pressure from OPEC could cause Venezuela to cut oil production voluntarily to
comply with the established quotas or take action that could depress world oil
prices. Such compliance could require a significant reduction in Venezuelan oil
production and could have a material adverse impact on Benton-Vinccler.
Political and Economic Risks of International Operations -- Russia
Since the dissolution of the Soviet Union in 1991, Russia has experienced
periods of political unrest and instability, high inflation, wide currency
exchange rate swings, contractions in GDP, volatile tariff and taxation
policies, and the lack of a clear and stable legal and administrative
environment governing oil and gas licensing and operations. There can be no
assurance that any of these factors in addition to other factors may not persist
or worsen and therefore negatively effect the Company's operations in Russia.
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. Russia has recently announced
that effective in July 1996, oil export tariffs will be terminated in accordance
with an IMF loan condition. However, Russia has proposed that such tariffs be
replaced by an excise, pipeline or other tax on producers which may equal or
exceed the export tariff, but it is unclear how such other tax rates and regimes
will be set and administered. The legislative and regulatory environment in
Russia continues to be subject to frequent change and uncertainty.
The Company believes 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
development activities.
Properties Under Development
As of December 31, 1995, approximately 65% of the Company's proved reserves were
undeveloped and required development activities, consisting primarily of
development drilling and construction of production facilities. As a result, the
Company will require substantial capital expenditures to develop all of its
proved reserves. At December 31, 1995, the anticipated future development costs
for proved reserves in Venezuela and Russia were $76.4 million and $36.7
million, respectively. The Company does not currently have the capital to
develop all of these reserves, and if such capital does not otherwise become
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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity."
Engineers' Estimates of Reserves and Future Net Revenue
Estimates of economically recoverable oil and gas reserves and of future net
cash flows are based upon a number of variable factors and assumptions, all of
which are to some degree speculative and may vary considerably from actual
results. Therefore, actual production, revenues, taxes, and development and
operating expenditures may not occur as estimated. Future results of operations
of the Company will depend upon its ability to develop, produce and sell its oil
and gas reserves. The reserve data included herein are estimates only and are
subject to many uncertainties. Actual quantities of oil and gas may differ
considerably from the amounts set forth herein. In addition, different reserve
engineers may make different estimates of reserve quantities and cash flows
based upon the same available data. See "Business -- Reserves."
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 under-developed oil and gas fields and enhance
production and reserves by drilling replacement wells and drilling development
wells, or that the Company will have continuing success drilling productive
wells and acquiring under-developed properties at low finding costs.
17
<PAGE> 20
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. 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 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 under-developed 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. In accordance with
customary industry practice, the Company is not 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
prices also may reduce the amount of the Company's oil that is economic to
produce. In addition, the marketability of the Company's production depends upon
the availability and capacity of 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.
RISKS RELATED TO AN INVESTMENT IN THE NEW NOTES
Substantial Leverage
After giving effect to the sale of the Old Notes, the Company will require
substantial cash flow to meet its principal repayment and interest obligations
on the Notes. After giving effect to the sale of the Old Notes and the U.S.
Property Sale as if each had occurred on March 31, 1996, the Company and its
subsidiaries would have had total pro forma indebtedness of approximately $154.0
million at such date. The Company expects to use a substantial portion of the
proceeds from the sale of the Old Notes for development activities at its oil
and gas properties which the Company anticipates will increase oil and gas
production and cash
18
<PAGE> 21
flow to enable the Company to repay or refinance the Notes when due. However,
there can be no assurance that expenditure of such proceeds will result in
sufficient increased cash flow to repay or refinance the Notes 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 limit the amount of indebtedness the Company's Restricted
Subsidiaries may assume and the amount of indebtedness of the Company they may
guarantee 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 New
Notes."
Liquidity Needs; Ability to Repay Notes
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 New Notes."
Holding Company Structure
The New Notes will be and the Old Notes are 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 Notes, 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
Notes 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. Currently, the
Company only has one operating subsidiary, Benton-Vinccler, that may be expected
to make funds available to the Company to pay any amounts due pursuant to the
Notes.
Lack of a Public Market for the New Notes
The New Notes will be a new issue of securities, and the Company does not intend
to list them on any securities exchange. If the New Notes are traded after their
initial issuance, they may trade at a discount from their initial offering price
depending upon prevailing interest rates, the market for similar securities and
other factors. J. P. Morgan Securities Inc. has informed the Company that it
currently intends to make a market in the New Notes. However, it is not
obligated to do so, and any such market making may be discontinued at any time
without notice. See "Plan of Distribution." There can be no assurance that an
active trading market for the Notes will develop. See "Description of the New
Notes."
19
<PAGE> 22
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes in exchange for
Old Notes as described in this Prospectus, the Company will receive Old Notes in
like principal amount. The Old Notes surrendered in exchange for the New Notes
will be retired and cancelled. Accordingly, the issuance of the New Notes will
not result in any change in the indebtedness of the Company.
The net proceeds to the Company from the sale of the Old Notes was approximately
$120.8 million. The Company has used or intends to use such net proceeds: (i) to
prepay in full the $20.0 million aggregate principal amount of its outstanding
13% Senior Notes due 2007 and accrued interest thereon, with a prepayment
premium of approximately $7.4 million; (ii) to repay approximately $6.5 million
in trade financings; and (iii) for general corporate purposes, including the
Company's ongoing exploration and development programs. See "Business -- South
Monagas Unit, Venezuela -- Drilling and Development Activity," "-- Delta Centro
Block, Venezuela -- Drilling and Development Activity" and "-- North
Gubkinskoye, Russia -- Drilling and Development Activity."
20
<PAGE> 23
CAPITALIZATION
The following table sets forth the short-term indebtedness and capitalization of
the Company (i) as of March 31, 1996, (ii) pro forma to reflect the U.S.
Property Sale and the use of proceeds therefrom to repay certain long-term debt,
and (iii) pro forma, as adjusted to reflect the use of proceeds from the U.S.
Property Sale and the sale of the Old Notes and the use of proceeds as described
herein.
<TABLE>
<CAPTION>
---------------------------------------
AS OF MARCH 31, 1996
PRO FORMA,
AS
Dollars in thousands ACTUAL PRO FORMA ADJUSTED
-------- --------- ----------
<S> <C> <C> <C>
SHORT-TERM INDEBTEDNESS
Current maturities of long-term indebtedness $ 8,138 $ 8,138 $ 2,429
Short-term indebtedness 21,307 21,307 20,610
-------- -------- --------
Total short-term indebtedness $ 29,445 $ 29,445 $ 23,039
======== ======== ========
LONG-TERM INDEBTEDNESS(1)
Old Notes $ -- $ -- $125,000
13% Senior unsecured notes due 2002 15,000 -- --
13% Senior unsecured notes due 2007 20,000 27,392 (2) --
Revolving secured credit facility 5,000 -- --
8% Convertible Subordinated Debentures due 2002 4,252 4,252 4,252
Other 1,798 1,798 1,666
-------- -------- --------
Total long-term indebtedness 46,050 33,442 130,918
-------- -------- --------
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value; authorized 40,000,000 shares;
issued and outstanding 26,092,559 shares 261 261 261
Additional paid-in capital 105,745 105,745 105,745
Retained earnings 11,990 11,889 11,889
-------- -------- --------
Total stockholders' equity 117,996 117,895 117,895
-------- -------- --------
Total capitalization $164,046 $151,337 $248,813
======== ======== ========
</TABLE>
- ---------------
(1) See "Description of Outstanding Indebtedness."
(2) Includes approximately $7.4 million accrued as a prepayment premium incurred
upon consummation of the U.S. Property Sale. The calculation was based upon
prevailing interest rates on May 2, 1996, the date the prepayment premium
was paid.
21
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the Company for each of
the five years in the period ended December 31, 1995, are derived from the
Company's audited consolidated financial statements. The selected consolidated
financial data for the three months ended March 31, 1995 and 1996 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, 1996 are not necessarily indicative of the results that may be
expected for the entire fiscal year ending December 31, 1996. The consolidated
financial data below should be read in conjunction with the Company's
Consolidated Financial Statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained elsewhere herein or incorporated herein by reference.
<TABLE>
<CAPTION>
------------------
--------------------------------------------------------
Dollars in thousands, except THREE MONTHS ENDED
per share and ratio data YEARS ENDED DECEMBER 31 MARCH 31
1991(1) 1992 1993 1994 1995(2) 1995 1996(2)
--------- -------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Total revenues (3) $ 11,513 $ 8,622 $ 7,503 $ 34,705 $ 65,068 $ 12,661 $ 32,939
Lease operating costs and
production taxes (3) 4,209 4,414 5,110 9,531 10,703 2,246 4,073
Depletion, depreciation and
amortization (3) 3,058 3,041 2,633 10,298 17,411 3,145 7,733
General and administrative
expense 1,998 2,245 2,631 5,242 9,411 1,668 3,647
Interest expense (3) 1,736 1,831 1,958 3,888 7,497 1,619 2,260
Litigation settlement and
partnership exchange
expenses -- -- -- -- 1,673 -- 2,140
--------- -------- --------- --------- --------- -------- --------
Income (loss) before income
taxes and minority interest 512 (2,909) (4,829) 5,746 18,373 3,983 13,086
Income tax expense -- -- -- 698 2,478 1,079 4,449
--------- -------- --------- --------- --------- -------- --------
Income (loss) before minority
interest 512 (2,909) (4,829) 5,048 15,895 2,904 8,637
Minority interest -- -- -- 2,094 5,304 863 2,327
--------- -------- --------- --------- --------- -------- --------
Net income (loss) $ 512 $ (2,909) $ (4,829) $ 2,954 $ 10,591 $ 2,041 $ 6,310
======== ======= ======== ======== ======== ======= =======
Net income (loss) per common
share $ 0.04 $ (0.22) $ (0.26) $ 0.12 $ 0.40 $ 0.08 $ 0.22
======== ======= ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
--------------------
--------------------------------------------------------
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31 31
1991(1) 1992 1993 1994 1995(2) 1995 1996(2)
--------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (4) $ 5,974 $ 2,153 $ 598 $ 15,603 $ 32,396 $ 5,964 $ 20,512
Net cash provided by (used
in) operating activities 4,027 (648) (1,790) 13,463 32,349 5,389 15,776
Net cash provided by (used
in) investing activities (15,998) (10,944) (18,619) (55,078) (53,644) 3,584 (14,949)
Net cash provided by (used
in) financing activities 10,570 21,588 43,044 19,500 13,282 (1,956) 797
Capital expenditures 25,712 16,770 26,249 55,711 78,727 11,130 15,384
EBITDA/Interest Ratio (5) 3.60 1.48 0.23 3.51 4.21 3.47 9.41
Ratio of earnings to fixed
charges (6) 1.29 -- -- 2.45 3.25 3.24 6.40
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------- --------------------
AT DECEMBER 31 AT MARCH 31
1991(1) 1992 1993 1994 1995(2) 1995 1996(2)
--------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) $ (14,777) $ 10,486 $ 26,635 $ 21,785 $ (2,888) $ 13,479 $ 2,726
Total assets 49,386 68,217 108,635 162,561 214,750 166,525 234,893
Long-term obligations, net
of current portion 7,422 13,463 11,788 31,911 49,486 31,188 46,050
Stockholders' equity (7) 20,209 50,468 84,021 88,259 103,681 90,489 117,996
</TABLE>
- ---------------
(1) For the year ended December 31, 1991 the Company recorded income tax expense
of $174,000 and an extraordinary item for the utilization of loss
carryforward for the same amount.
(2) The financial information related to Russia and included in the year end
1995 presentation contains information at, and for the nine months ended,
September 30, 1995, the end of the fiscal period for GEOILBENT. See Note 15
to the Company's Consolidated Financial Statements. Similarly, the 1996
presentation contains information at, and for the three months ended
December 31, 1995.
(3) Assuming the U.S. Property Sale had occurred on January 1, 1995, pro forma
effects on the consolidated statement of operations for the year ended
December 31, 1995 would include reductions in oil and gas revenues, lease
operating costs and production taxes, depletion and interest expense of $7.4
million, $1.0 million, $4.0 million and $2.7 million respectively. The pro
forma effects on the consolidated statement of operations for the three
months ended March, 31, 1996 would include reductions in oil and gas
revenues, lease operating costs and production taxes, depletion and interest
expense of $4.1 million, $0.2 million, $1.4 million and $0.6 million,
respectively.
(4) EBITDA has been calculated as defined in the Indenture and has been included
solely to facilitate consideration of the covenants in the Indenture that
are based, in part, on EBITDA. See "Description of the New Notes -- Certain
Definitions." EBITDA is not intended to represent cash flow from operations
as defined by generally accepted accounting principles ("GAAP") and should
not be considered as an alternative to net income as an indicator of the
Company's operating performance or to cash flow as a measure of liquidity.
(5) EBITDA/Interest Ratio has been calculated as defined in the Indenture. See
"Description of the New Notes -- Certain Definitions."
(6) For purposes of determining the ratio of earnings to fixed charges,
"earnings" represents income (loss) 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, earnings were insufficient to cover fixed charges by $2.9 million
and $4.8 million, respectively. After giving effect to the sale of the Old
Notes, to the extent proceeds will be used to retire presently outstanding
indebtedness, the pro forma ratio of earnings to fixed charges would have
been 2.60 for the year ended December 31, 1995 and 6.03 for the three months
ended March 31, 1996.
(7) No cash dividends were paid during the periods presented.
22
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Principles of Consolidation and Accounting Methods
The Company has included the results of operations of Benton-Vinccler in its
consolidated statement of operations since January 1, 1994 and has reflected the
50% ownership interest of Vinccler during January and February 1994 and the 20%
ownership interest of Vinccler subsequent thereto as a minority interest. Prior
to 1994, Benton-Vinccler was proportionately consolidated based on the Company's
50% ownership interest. Beginning in 1995, GEOILBENT has been included in the
consolidated financial statements based on a fiscal period ending September 30.
Results of operations in Russia reflect the twelve months ended December 31,
1993 and 1994, the nine months ended September 30, 1995 for 1995 and the three
months ended December 31, 1995 for the first quarter of 1996. The Company's
investment in GEOILBENT is proportionately consolidated based on the Company's
ownership interest, and for oil and gas reserve information, the Company reports
its 34% share of the reserves attributable to GEOILBENT.
The Company follows the full-cost method of accounting for its investments in
oil and gas properties. The Company capitalizes all acquisition, exploration,
and development costs incurred. The Company accounts for its oil and gas
properties using cost centers on a country by country basis. Proceeds from sales
of oil and gas properties are credited to the full-cost pools. Capitalized costs
of oil and gas properties are amortized within the cost centers on an overall
unit-of-production method using proved oil and gas reserves as audited by
independent petroleum engineers. Costs amortized include all capitalized costs
(less accumulated amortization), the estimated future expenditures (based on
current costs) to be incurred in developing proved reserves, and estimated
dismantlement, restoration and abandonment costs. See Note 1 to the Company's
Consolidated Financial Statements.
The following discussion of the financial condition and results of operations
for March 31, 1996, December 31, 1995 and 1994 and for each of the years in the
three year period ended December 31, 1995 and the three months ended March 31,
1996 and 1995, respectively, should be read in conjunction with the Company's
Consolidated Financial Statements and related Notes thereto.
RESULTS OF OPERATIONS
The following table presents the Company's consolidated income statement items
as a percentage of total revenues:
<TABLE>
<CAPTION>
----------------
---------------------------
THREE MONTHS
YEARS ENDED DECEMBER 31 ENDED MARCH 31
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales 96.3% 92.0% 95.5% 95.4% 95.0%
Net Gain (Loss) on Exchange Rates (2.8) 4.2 1.6 1.0 3.4
Investment Earnings and Other 6.5 3.8 2.9 3.6 1.6
----- ----- ----- ----- -----
Total Revenues 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Lease Operating Costs and Production Taxes 68.1 27.4 16.4 17.7 12.4
Depletion, Depreciation and Amortization 35.1 29.7 26.8 24.8 23.5
General and Administrative 35.0 15.1 14.5 13.2 11.0
Interest 26.1 11.2 11.5 12.8 6.9
Litigation Settlement and Partnership
Exchange Expenses -- -- 2.6 -- 6.5
----- ----- ----- ----- -----
Total Expenses 164.3 83.4 71.8 68.5 60.3
----- ----- ----- ----- -----
Income (Loss) Before Income Taxes and
Minority Interest (64.3) 16.6 28.2 31.5 39.7
Income Tax Expense -- 2.0 3.8 8.6 13.5
Minority Interest -- 6.1 8.1 6.8 7.0
----- ----- ----- ----- -----
Net Income (Loss) (64.3)% 8.5% 16.3% 16.1% 19.2%
===== ===== ===== ===== =====
</TABLE>
23
<PAGE> 26
Three Months ended March 31, 1996 and 1995
The Company had revenues of $32.9 million for the three months ended March 31,
1996. Expenses incurred during the period consisted of lease operating costs and
production taxes of $4.1 million, depletion, depreciation and amortization
expense of $7.7 million, general and administrative expense of $3.7 million,
interest expense of $2.3 million, partnership exchange expense of $2.1 million,
income tax expense of $4.4 million and a minority interest of $2.3 million. Net
income for the period was $6.3 million or $0.22 per share.
By comparison, the Company had revenues of $12.7 million for the three months
ended March 31, 1995. Expenses incurred during the period consisted of lease
operating costs and production taxes of $2.2 million, depletion, depreciation
and amortization expense of $3.1 million, general and administrative expense of
$1.7 million, interest expense of $1.6 million, income tax expense of $1.1
million and a minority interest of $0.9 million. Net income for the period was
$2.0 million or $0.08 per share.
Revenues increased $20.2 million, or 159%, during the three months ended March
31, 1996 compared to the corresponding period of 1995 primarily due to increased
oil sales in Venezuela. Sales quantities for the three months ended March 31,
1996 from Venezuela and Russia were 2,623,444 and 223,397 Bbl, respectively,
compared to 1,062,093 and 118,864 Bbl, respectively, for the three months ended
March 31, 1995. Prices for crude oil averaged $9.63 per Bbl (pursuant to terms
of an operating service agreement) from Venezuela and $10.32 per Bbl from Russia
for the three months ended March 31, 1996 compared to $9.02 per Bbl from
Venezuela and $13.12 per Bbl from Russia for the corresponding period of 1995.
Domestic sales quantities for the three months ended March 31, 1996 were 5,163
Bbl of crude oil and condensate and 1,249,128 Mcf of natural gas compared to
32,317 Bbl of crude oil and condensate and 346,548 Mcf of natural gas for the
three months ended March 31, 1995. Domestic prices for crude oil and natural gas
averaged $19.94 per Bbl and $3.26 per Mcf during the three months ended March
31, 1996 compared to $17.10 per Bbl and $1.62 per Mcf during the corresponding
period of 1995. Revenues for the three months ended March 31, 1996 were reduced
by a loss of $0.4 million related to a commodity hedge agreement compared to a
loss of $0.2 million during the corresponding period of 1995. Revenues for the
three months ended March 31, 1996 were increased by a foreign exchange gain of
$1.1 million compared to a gain of $0.1 million during the corresponding period
of 1995.
Lease operating costs and production taxes increased $1.9 million, or 86%,
during the three months ended March 31, 1996 compared to the three months ended
March 31, 1995 primarily due to the growth of the Company's Venezuelan
operations, but decreased as a percentage of total revenues. Depletion,
depreciation and amortization increased $4.6 million, or 148%, during the three
months ended March 31, 1996 compared to the corresponding period of 1995
primarily due to the increased oil production in Venezuela, but decreased as a
percentage of total revenues. Depletion expense per barrel of oil equivalent
produced from Venezuela, Russia and the United States during the three months
ended March 31, 1996 was $2.09, $3.52 and $6.47, respectively, compared to
$1.99, $2.76 and $6.97, respectively, during the corresponding period of the
previous year. General and administrative expenses increased $2.0 million, or
118%, during the three months ended March 31, 1996 compared to the corresponding
period of 1995 primarily due to the implementation of certain consulting and
related arrangements among Benton-Vinccler, the Company and Vinccler, Venezuelan
municipal taxes (which are a function of growing oil revenues) and the Company's
increased corporate activity associated with the growth of the Company's
business; but decreased slightly as a percentage of total revenues. Interest
expense increased $0.7 million, or 44%, during the three months ended March 31,
1996 compared to the three months ended March 31, 1995 primarily due to
increased borrowing to fund operations in Venezuela and Russia, but decreased
substantially as a percentage of total revenues. The Company incurred
partnership exchange expenses of $2.1 million during the three months ended
March 31, 1996 as a result of the completion of an exchange offer resulting in
the liquidation of three limited partnerships. Income tax expense increased $3.3
million, or 300%, during the three months ended March 31, 1996 compared to the
corresponding period of 1995 due primarily to increases in profitability in
Venezuela, the United States and Russia. The net income attributable to the
minority interest increased $1.4 million, or 156%, for the three months ended
March 31, 1996 compared to the three months ended March 31, 1995 as a result of
the increased profitability of Benton-Vinccler's operations in Venezuela.
Years Ended December 31, 1995 and 1994
The Company had revenues of $65.1 million for the year ended December 31, 1995.
Expenses incurred during the period consisted of lease operating costs and
production taxes of $10.7 million, depletion, depreciation and amortization
expense of $17.4 million, general and administrative expense of $9.4 million,
interest expense of $7.5 million, litigation settlement expenses of $1.7
million, income tax expense of $2.5 million and a minority interest of $5.3
million. Net income for the period was $10.6 million or $0.40 per share.
By comparison, the Company had revenues of $34.7 million for the year ended
December 31, 1994. Expenses incurred during the period consisted of lease
operating costs and production taxes of $9.5 million, depletion, depreciation
and amortization
24
<PAGE> 27
expense of $10.3 million, general and administrative expense of $5.2 million,
interest expense of $3.9 million, income tax expense of $0.7 million and a
minority interest of $2.1 million. The net income for the period was $3.0
million or $0.12 per share.
Revenues increased $30.4 million, or 87%, during the year ended December 31,
1995 compared to the corresponding period of 1994 primarily due to increased oil
sales in Venezuela. Sales quantities for the year ended December 31, 1995 from
Venezuela and Russia were 5,456,473 and 490,960 Bbls, respectively, compared to
2,519,514 and 294,364 Bbls, respectively, for the year ended December 31, 1994.
Prices per Bbl for crude oil averaged $9.01 (pursuant to terms of an operating
service agreement) from Venezuela and $12.25 from Russia for the year ended
December 31, 1995 compared to $8.52 and $11.93 from Venezuela and Russia,
respectively, for the year ended December 31, 1994. Domestic sales quantities
for the year ended December 31, 1995 were 68,975 Bbls of crude oil and
condensate and 3,784,830 Mcf of natural gas compared to 225,954 Bbls of crude
oil and condensate and 2,061,892 Mcf of natural gas for the year ended December
31, 1994. Domestic prices for crude oil and natural gas averaged $15.79 per Bbl
and $1.77 per Mcf during the year ended December 31, 1995 compared to $14.46 per
Bbl and $1.79 per Mcf during the year ended December 31, 1994. Revenues for the
year ended December 31, 1995 were reduced by a loss of $0.7 million related to a
commodity hedge agreement compared to a loss of $0.3 million in 1994. Revenues
for the year ended December 31, 1995 were increased by a foreign exchange gain
of $1.0 million compared to a gain of $1.4 million in 1994.
Lease operating costs and production taxes increased $1.2 million, or 12%,
during the year ended December 31, 1995 compared to 1994 primarily due to the
growth of the Company's Venezuelan operations, partially offset by the sale of
certain of the Company's interests in the West Cote Blanche Bay Field.
Depletion, depreciation and amortization increased $7.1 million, or 69%, during
the year ended December 31, 1995 compared to the corresponding period in 1994
primarily due to the increased oil production in Venezuela. Depletion expense
per BOE produced from Venezuela, United States and Russia during the year ended
December 31, 1995 was $2.09, $5.98 and $3.08, respectively, compared to $1.98,
$7.46 and $2.85, respectively, during the previous year. The increase in general
and administrative expenses of $4.2 million, or 80%, during the year ended
December 31, 1995 compared to 1994 was primarily due to the Company's increased
corporate activity associated with the growth of the Company's business. The
Company incurred litigation settlement expenses of $1.7 million during the year
ended December 31, 1995 as a result of a settlement agreement reached with
investors in partnerships which were sponsored by a third party. See Note 5 to
the Company's Consolidated Financial Statements. Interest expense increased $3.6
million, or 93%, in 1995 compared to 1994 primarily due to increased borrowing
to fund operations in Venezuela and Russia. Income tax expense increased $1.8
million, or 255%, during the year ended December 31, 1995 compared to 1994
primarily due to increased income taxes in Venezuela and Russia. The net income
attributable to the minority interest increased $3.2 million, or 153%, for 1995
compared to 1994 as a result of the increased profitability of Benton-Vinccler's
operations in Venezuela.
Years Ended December 31, 1994 and 1993
The Company had revenues of $34.7 million for the year ended December 31, 1994.
Expenses incurred during the period consisted of lease operating costs and
production taxes of $9.5 million, depletion, depreciation and amortization
expense of $10.3 million, general and administrative expense of $5.2 million,
interest expense of $3.9 million, income tax expense of $0.7 million, and a
minority interest of $2.1 million. The net income for the period was $3.0
million or $0.12 per share.
By comparison, the Company had revenues of $7.5 million for the year ended
December 31, 1993. Expenses incurred during the period consisted of lease
operating costs and production taxes of $5.1 million, depletion, depreciation
and amortization expense of $2.6 million, general and administrative expense of
$2.6 million and interest expense of $2.0 million. The net loss for the period
was $4.8 million or $0.26 per share.
Revenues increased $27.2 million, or 362%, during the year ended December 31,
1994 compared to the corresponding period of 1993 primarily due to increased
revenues from Benton-Vinccler's operations in Venezuela, the Company's increased
ownership of Benton-Vinccler, the initiation of oil sales in Russia in late
1993, gain on exchange rates in Venezuela and Russia, gas sales from the #831
well in the West Cote Blanche Bay Field and increased investment earnings. The
increase was partially offset by lower oil sales from the West Cote Blanche Bay
Field, lower sales prices and the sale of the Company's interest in the Pershing
property in 1993. Sales quantities for the year ended December 31, 1994 from
Venezuela and Russia were 2,519,514 and 294,364 Bbls, respectively, compared to
160,425 and 28,263 Bbls, respectively, for the year ended December 31, 1993.
Prices per Bbl for crude oil averaged $8.52 (pursuant to terms of an operating
service agreement) from Venezuela and $11.93 from Russia for the year ended
December 31, 1994 compared to $8.31 and $11.46 from Venezuela and Russia,
respectively, for the year ended December 31, 1993. Domestic sales quantities
for the year ended December 31, 1994 were 225,954 Bbls of crude oil and
condensate and 2,061,892 Mcf of natural gas compared to 292,266 Bbls of crude
oil and condensate and 232,677 Mcf of natural gas for the year ended December
31, 1993. Domestic prices for crude oil and natural gas averaged $14.46 per Bbl
and $1.79 per Mcf during the year ended December 31, 1994 compared to $17.30 per
25
<PAGE> 28
Bbl and $2.19 per Mcf during the year ended December 31,1993. The Company has
realized net foreign exchange gains during 1994 primarily as a result of the
decline in the value of the Venezuelan bolivar and Russian rouble during periods
when Benton-Vinccler and GEOILBENT had substantial net monetary liabilities
denominated in bolivares and roubles.
Lease operating costs and production taxes increased $4.4 million, or 87%,
during the year ended December 31, 1994 compared to 1993 primarily due to the
growth of the Company's Venezuelan and Russian operations and were partially
offset by the sale of the Company's interest in certain property in 1993 and
reduced operating costs at the West Cote Blanche Bay Field. Depletion,
depreciation and amortization increased $7.7 million, or 291%, during the year
ended December 31, 1994 compared to 1993 primarily due to increased oil
production in Venezuela, gas sales from the #831 well in the West Cote Blanche
Bay Field and the initiation of oil production in Russia. Depletion expense per
BOE produced from the United States, Venezuela and Russia during the year ended
December 31, 1994 was $7.46, $1.98 and $2.85, respectively, compared to $6.47,
$1.43 and $3.51 during 1993. The increase in general and administrative expense
of $2.6 million, or 99%, in 1994 compared to 1993 was primarily due to the
growth of and the Company's increased ownership of Benton-Vinccler, the
commencement of operations in Russia and increased corporate activity associated
with the growth of the Company's business. Interest expense increased $1.9
million, or 99%, in 1994 compared to 1993 primarily due to increased borrowing
to fund operations in Venezuela and Russia.
The Company has included the results of operations of Benton-Vinccler in its
consolidated statement of income since January 1, 1994 and has reflected the 50%
ownership interest of Vinccler during January and February and the 20% ownership
interest of Vinccler thereafter as a minority interest. For the year ended
December 31, 1994, net income attributable to the minority interest was $2.1
million.
INTERNATIONAL OPERATIONS
The Company's costs of operations in Venezuela and Russia in 1993, 1994 and 1995
include certain fixed or minimum office, administrative, legal and personnel
related costs and certain start up costs, including short term facilities
rentals, organizational costs, contract services and consultants. Such costs are
expected to grow over time as operations increase. In the last two years such
costs have become less significant on a unit of production basis, but such costs
can be expected to fluctuate in the future based upon a number of factors. In
Venezuela, for the year ended December 31, 1993, the operating costs and general
and administrative expenses were $7.26 and $2.25 per Bbl, respectively. For the
year ended December 31, 1995 the operating costs and general and administrative
expenses for Venezuela decreased to $1.19 and $0.63 per Bbl, respectively. The
Company's Venezuelan operations grew considerably during 1994 and 1995, and are
expected to continue to grow, and its operating costs and general and
administrative expenses are expected to increase both in the aggregate and on a
per unit basis. In Russia, for the year ended December 31, 1993, the operating
costs and general and administrative expenses were $16.22 and $12.96 per Bbl,
respectively, decreasing to $5.63 and $1.16 per Bbl, respectively, for the year
ended December 31, 1995. The Company's Russian operations grew less
significantly than the Venezuelan operations during 1994 and 1995. Capital
expenditures through 1993 in both Venezuela and Russia focused on start-up
infrastructure items such as roads, pipelines, and facilities rather than
drilling. Beginning in 1994, a higher proportion of capital expenditures have
been and will continue to be spent on drilling and production activities. See
"Business -- South Monagas Unit, Venezuela -- Drilling and Development Activity"
and "-- North Gubkinskoye, Russia -- Drilling and Development Activity."
As a private contractor, Benton-Vinccler is subject to a statutory income tax
rate of 34%. However, Benton-Vinccler reported significantly lower effective tax
rates for 1994 and 1995 due to significant non-cash tax deductible expenses
resulting from devaluations in Venezuela when Benton-Vinccler had net monetary
liabilities in U.S. dollars. The Company cannot predict the timing or impact of
future devaluations in Venezuela. Any Company operations related to Delta Centro
will be subject to profit sharing, royalties and oil and gas industry taxation.
See "Offering Memorandum Summary -- Recent Developments" and "Business -- Delta
Centro Block, Venezuela."
GEOILBENT is subject to a statutory income tax rate of 35%. GEOILBENT has also
been subject to various other tax burdens, including an oil export tariff. The
export tariff was 30 ECU's per ton through 1995, although GEOILBENT obtained an
exemption from such tariff for 1995. The tariff was reduced to 20 ECU's per ton
in January 1996, and Russia has recently announced that effective July 1996, oil
export tariffs will be terminated. The Company anticipates that the tariff on
oil exporters may be replaced by an excise, pipeline or other tax levied on all
oil producers, but it is currently unclear how such other tax rates and regimes
will be set and administered.
EFFECTS OF CHANGING PRICES, FOREIGN EXCHANGE RATES AND INFLATION
The Company's results of operations and cash flow are affected by changing oil
and gas prices. However, the Company's Venezuelan revenues are based on a fee
adjusted quarterly by the percentage change of a basket of crude oil prices
instead of by
26
<PAGE> 29
absolute dollar changes, which dampens both any upward and downward effects of
changing prices on the Company's Venezuelan revenues and cash flows. If the
price of oil and gas increases, there could be an increase in the cost to the
Company for drilling and related services because of increased demand, as well
as an increase in revenues. Fluctuations in oil and gas prices may affect the
Company's total planned development activities and capital expenditure program.
Effective May 1, 1994, the Company entered into a commodity hedge agreement with
Morgan Guaranty Trust Company of New York ("Morgan Guaranty") designed to reduce
a portion of the Company's risk from oil price movements. Pursuant to the hedge
agreement, with respect to the period from May 1, 1994 through the end of 1996,
the Company will receive from Morgan Guaranty $16.82 per Bbl and the Company
will pay to Morgan Guaranty the average price per Bbl of West Texas Intermediate
Light Sweet Crude Oil ("WTI") determined in the manner set forth in the hedge
agreement. Such payments will be made with respect to production of 1,000 Bbls
of oil per day for 1994, 1,250 Bbls of oil per day for 1995, and 1,500 Bbls of
oil per day for 1996. During the quarter ended March 31, 1996, the average price
per Bbl of WTI was $19.57 and the Company's net exposure for the quarter was
$0.4 million. The Company's total exposure for the year ended December 31, 1995,
under the hedge agreement was $0.7 million. The Company's oil production is not
materially affected by seasonality. The returns under the hedge agreement are
affected by world-wide crude oil prices, which are subject to wide fluctuation
in response to a variety of factors that are beyond the control of the Company.
There are presently no restrictions on conversion of currency in either
Venezuela or Russia. However, from June 1994 through April 1996, Venezuela
implemented exchange controls which significantly limited the ability to convert
local currency into U.S. dollars. Because payments made to Benton-Vinccler are
made in U.S. dollars into its United States bank account, and Benton-Vinccler is
not subject to regulations requiring the conversion or repatriation of those
dollars back into the country, the exchange controls did not have a material
adverse effect on Benton-Vinccler or the Company.
Within the United States, inflation has had a minimal effect on the Company, but
is potentially an important factor in results of operations in Venezuela and
Russia. With respect to Benton-Vinccler and GEOILBENT, substantially all of the
sources of funds, including the proceeds from oil sales, the Company's
contributions and credit financings, are denominated in U.S. dollars, while
local transactions in Russia and Venezuela are conducted in local currency.
Following the announcement of Venezuela's preliminary loan accord with the IMF
and the lifting of exchange controls, inflation will likely rise temporarily in
Venezuela and could be expected to have an adverse effect on Benton-Vinccler.
During the year ended December 31, 1995 and the three months ended March 31,
1996, the Company realized net foreign exchange gains, primarily as a result of
the decline in the value of the Venezuelan bolivar during periods when
Benton-Vinccler had substantial net monetary liabilities denominated in
bolivares. During the year ended December 31, 1995, the Company's net foreign
exchange gains attributable to its Venezuelan operations were $1.0 million and
net foreign exchange losses attributable to its Russian operations were $0.1
million. During the three months ended March 31, 1996, the Company's net foreign
exchange gains attributable to its Venezuelan and Russian operations were $1.0
million and $0.1 million, respectively. However, there are many factors
affecting foreign exchange rates and resulting exchange gains and losses, many
of which are beyond the influence of the Company. The Company has recognized
significant exchange gains and losses in the past, resulting from fluctuations
in the relationship of the Venezuelan and Russian currencies to the U.S. dollar.
It is not possible to predict the extent to which the Company may be affected by
future changes in exchange rates and exchange controls.
CAPITAL RESOURCES AND LIQUIDITY
The oil and gas industry is a highly capital intensive business. The Company
requires capital principally to fund the following costs: (i) drilling and
completion costs of wells and the cost of production and transportation
facilities; (ii) geological, geophysical and seismic costs; and (iii)
acquisition of interests in oil and gas properties. The amount of available
capital will affect the scope of the Company's operations and the rate of its
growth.
27
<PAGE> 30
The net funds raised and/or used in each of the operating, investing and
financing activities for each of the years in the three year period ended
December 31, 1995 and the three months ended March 31, 1995 and 1996 are
summarized in the following table and discussed in further detail below:
<TABLE>
<CAPTION>
--------------------
---------------------------------
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31 MARCH 31
1993 1994 1995 1995 1996
--------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Dollars in thousands
Net cash provided by (used in) operating
activities $ (1,790) $ 13,462 $ 32,349 $ 5,388 $ 15,776
Net cash provided by (used in) investing
activities (18,619) (55,078) (53,644) 3,584 (14,949)
Net cash provided by (used in) financing
activities 43,044 19,500 13,282 (1,956) 797
--------- --------- --------- -------- ---------
Net increase (decrease) in cash $ 22,635 $ (22,116) $ (8,013) $ 7,016 $ 1,624
============ ============ ============
</TABLE>
At March 31, 1996, the Company had current assets of $64.2 million (including
$19.3 million and $2.0 million of cash restricted as collateral for loans to
Benton-Vinccler and GEOILBENT, respectively), and current liabilities of $61.5
million (including loans of $19.3 million and $0.6 million collateralized by
restricted cash), resulting in working capital of $2.7 million and a current
ratio of 1.04:1. This compares to the Company's working capital deficit of $2.9
million at December 31, 1995. The increase of $5.6 million was due primarily to
working capital generated from operations in excess of capital expenditures.
Cash Flow from Operating Activities
During the three months ended March 31, 1996 and the years ended December 31,
1995 and 1994, net cash provided by operating activities was approximately $15.8
million, $32.4 million and $13.5 million, respectively, and during 1993, net
cash used in operating activities was approximately $1.8 million. Cash flow from
operating activities increased by $18.9 million and $15.3 million in 1995 and
1994, respectively, over the prior year, and $10.4 million during the three
months ended March 31, 1996 compared to the corresponding period of the prior
year, due primarily to increased oil and gas production in Venezuela.
Cash Flow from Investing Activities
During the three months ended March 31, 1996, the Company had drilling and
production related capital expenditures of approximately $17.4 million, of which
$12.0 million was attributable to the development of the South Monagas Unit in
Venezuela, $1.8 million related to the development of the North Gubkinskoye
Field in Russia, $1.7 million related to drilling activity in the West Cote
Blanche Bay, Rabbit Island and Belle Isle Fields in Louisiana, and $1.9 million
was attributable to other projects. During 1995, 1994 and 1993, the Company had
drilling and production related capital expenditures of approximately $68.3
million, $39.6 million and $26.2 million, respectively. Of the 1995
expenditures, $49.0 million was attributable to the development of the South
Monagas Unit in Venezuela, $12.4 million related to the development of the North
Gubkinskoye Field in Russia, $6.0 million related to drilling activity in the
West Cote Blanche Bay, Rabbit Island and Belle Isle Fields in Louisiana, and
$0.9 million was attributable to other projects. The Company also sold certain
oil and gas properties for net proceeds of approximately $1.3 million, $15.4
million, $5.8 million and $7.8 million during the three months ended March 31,
1996 and the years ended December 31, 1995, 1994 and 1993, respectively.
In April 1996, the Company sold to Shell all of its interests in the West Cote
Blanche Bay, Rabbit Island and Belle Isle Fields for a purchase price of $35.4
million. Proceeds of the sale will be used to repay debt as described below and
for working capital purposes in Venezuela and other international activities.
Cash Flow from Financing Activities
In May 1996, the Company issued $125 million in aggregate principal amount of
Old Notes. A portion of the proceeds therefrom was used to repay certain long
term indebtedness and the remainder will be used for repayment of certain short
term obligations and for capital expenditure and working capital purposes.
On June 30, 1995, the Company issued $20 million in senior unsecured notes due
June 30, 2007, with interest at 13% per annum, payable semi-annually on June 30
and December 31. Annual principal payments of $4 million are due on June 30 of
each year beginning on June 30, 2003. Early payment of the notes would result in
a substantial prepayment premium. The note agreement contains financial
covenants including a minimum ratio of current assets to current liabilities and
a maximum ratio of funded liabilities to net worth and to 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. Additionally, in connection with the issuance of the notes, the Company
issued warrants entitling the holder to purchase 125,000 shares of common stock
at $17.09 per share, subject to adjustment in certain circumstances, that are
exercisable on or before June 30, 2007. The
28
<PAGE> 31
Company prepaid these senior unsecured notes from the proceeds of the sale of
the Old Notes and paid a prepayment premium of approximately $7.4 million. The
holders of the senior notes provided consent to the sale of the U.S. properties
and such consent requires payment of the notes on or before June 30, 1996.
On September 30, 1994, the Company issued $15 million in senior unsecured notes
due September 30, 2002, with interest at 13% per annum. The note agreement
contained financial covenants and provided for limitations on sales of assets.
Upon consummation of the U.S. Property Sale, the Company prepaid the outstanding
principal and accrued interest on these senior notes, with a prepayment premium
of approximately $3.2 million.
On December 27, 1994, the Company entered into a revolving secured credit
facility with a commercial bank. Under the terms of the credit agreement, the
Company could borrow up to $15 million, with the initial available principal
limited to $10 million. The credit facility was secured by the U.S. properties.
The Company repaid the principal outstanding of approximately $5 million, with
accrued interest, and made a payment for the net profits interest of $1.8
million upon closing the U.S. Property Sale.
In February 1994, the Company and Benton-Vinccler entered into a six month loan
arrangement with Morgan Guaranty to repay commercial paper and for working
capital requirements, which has subsequently been renewed on a monthly basis.
Under such arrangement, Benton-Vinccler may borrow up to $25 million, of which
$10 million 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
December 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.
In October 1995, the Company and GEOILBENT entered into a loan arrangement with
Morgan Guaranty for working capital requirements. Under such arrangement,
GEOILBENT may borrow up to $10 million on a revolving basis. Borrowings under
this loan arrangement are secured by cash collateral in the form of a time
deposit by the Company. The loan arrangement contains no restrictive covenants
and no financial ratio requirements. The principal amount of such loan
outstanding at December 31, 1995 was $0.6 million.
On May 30, 1996, the Company entered into a Credit Agreement with Morgan
Guaranty. The Credit Agreement provides for the issuance of a letter of credit
in the amount of $18,000,000 to be used to secure the Company's performance
under its agreements related to the development of the Delta Centro Block in
Venezuela. The letter of credit will be secured by cash collateral in the form
of a time deposit from the Company. Morgan Guaranty will receive an arrangement
fee and will receive a fee of .25% per annum computed on the daily average
maximum available amount of the letter of credit. In addition, the Credit
Agreement provides for a $20,000,000 unsecured revolving credit facility which
must be repaid on or before March 14, 1998. Borrowings under such facility
accrue interest at per annum rate equal to the sum of the Euro-Dollar margin
plus the Adjusted London Interbank Offered Rate for such interest period. The
Euro-Dollar margin will be 3% until September 14, 1997 and 3.75% per annum
thereafter. The revolving credit facility is secured by a guarantee by the
Company's subsidiary Benton-Vinccler, C.A. and a security interest in all
payments made to Benton-Vinccler, C.A. under its Service Agreement with Fagoven,
S.A. The Credit Agreement contains covenants and restrictions that are
substantially the same as those provided in the Indenture.
The Company expects 1996 capital expenditures to be approximately $100 million,
including $12 million in expenditures for Russia (net to the Company's interest)
which is dependent on proposed EBRD or other financing, which may or may not be
obtained. See "Business -- North Gubkinskoye, Russia -- Drilling and Development
Activity." Funding is expected to come from the proceeds from the sale of the
Old Notes, cash flow from operations, sales of property interests, or project
and trade financing sources. There can be no assurance that such financing will
become available under terms and conditions acceptable to the Company, which may
result in reduced capital expenditures in the Company's principal areas of
operations.
29
<PAGE> 32
BUSINESS
INFORMATION INCORPORATED BY REFERENCE IN THIS PROSPECTUS
The following documents filed with the Commission by the Company are hereby
incorporated by reference in this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended on Form 10-K/A dated June 14, 1996.
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996.
(c) All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the Expiration
Date.
GENERAL
The Company is an independent energy company which has been engaged in the
development and production of oil and gas properties since 1989. Although
originally active only in the United States, the Company has developed
significant interests in Venezuela and Russia, and recently sold substantially
all of its remaining United States oil and gas interests. The Company's
operations are conducted principally through its 80%-owned Venezuelan
subsidiary, Benton-Vinccler which operates in the South Monagas Unit in
Venezuela, and its 34%-owned Russian joint venture, GEOILBENT, which operates in
the North Gubkinskoye Field in Siberia, Russia.
As of December 31, 1995, the Company had total assets of $214.8 million ($234.9
million at March 31, 1996), total estimated proved reserves of 96,212 MBOE, and
a standardized measure of discounted future net cash flow, before income taxes,
for total proved reserves of $372.3 million. For the year ended December 31,
1995 and the three months ended March 31, 1996, the Company had total revenues
of $65.1 million and $32.9 million, respectively and net income of $10.6 million
and $6.3 million, respectively.
The Company has been successful in increasing reserves, production, revenues and
earnings during the last two years. From year end 1993 through 1995, estimated
proved reserves increased from 42,785 MBOE to 96,212 MBOE and net production
increased from a total of 519 MBOE in 1993 to 6,647 MBOE in 1995. As production
has increased over this period, average lifting costs per Bbl have declined from
$7.26 to $1.19 in Venezuela, and from $16.22 to $5.63 in Russia. Over the same
period, earnings per share have increased from a loss of $0.26 per share in 1993
to income of $0.40 per share for the year ended December 31, 1995.
The Company was incorporated in Delaware in September 1988 and its principal
executive offices are located at 1145 Eugenia Place, Suite 200, Carpinteria,
California 93013, and its telephone number is (805) 566-5600.
BUSINESS STRATEGY
The Company's business strategy is to identify and exploit new oil and gas
reserves in under-developed areas while seeking to minimize the associated risk
of such activities. Specifically, the Company endeavors to minimize risk by
employing the following strategies in its business activities: (i) seek new
reserves in areas of low geologic risk; (ii) use proven advanced technology in
both exploration and development to maximize recovery; (iii) establish a local
presence through joint venture partners and the use of local personnel; (iv)
commit capital in a phased manner to limit total commitments at any one time;
and (v) reduce foreign exchange risks through receipt of revenues in U.S.
currency.
- - SEEK NEW RESERVES IN AREAS OF LOW GEOLOGIC RISK. The Company has had
significant success in identifying under-developed reserves in the U.S. and
internationally. In particular, the Company has notable experience and expertise
in seeking and developing new reserves in countries where perceived potential
political and operating difficulties have sometimes discouraged other energy
companies from competing. As a result, the Company has established operations in
Venezuela and Russia which have significant reserves that have been acquired and
developed at relatively low costs. The Company is seeking similar opportunities
in other countries and areas which it believes have high potential.
- - USE OF PROVEN ADVANCED TECHNOLOGY IN BOTH EXPLORATION AND DEVELOPMENT. The
Company's use of 3-D seismic technology, in which a three dimensional image of
the earth's subsurface is created through the computer interpretation of seismic
data, combined with its experience in designing the seismic surveys and
interpreting and analyzing the resulting data, allow for a more detailed
understanding of the subsurface than do conventional surveys. Such technology
contributes significantly to field appraisal, development and production. The
3-D seismic information, in conjunction with subsurface geologic data from
previously drilled wells, is used by the Company's experienced in-house
technical team to identify previously undetected reserves. The 3-D seismic
information can also be used to guide drilling on a real-time basis, and has
been especially helpful in the horizontal drilling done in Venezuela in order to
take advantage of oil-trapping faults.
- - ESTABLISH A LOCAL PRESENCE THROUGH JOINT VENTURE PARTNERS AND THE USE OF LOCAL
PERSONNEL. The Company has sought to establish a local presence where it does
business to facilitate stronger relationships with local government and labor
30
<PAGE> 33
through joint venture arrangements with local partners. Moreover, the Company
employs almost exclusively local personnel to run foreign operations both to
take advantage of local knowledge and experience and to minimize cost. These
efforts have created an expertise within Company management in forming effective
foreign partnerships and operating abroad. The Company believes that it has
gained access to new development opportunities as a result of its reputation as
a dependable partner.
- - COMMIT CAPITAL IN A PHASED MANNER TO LIMIT TOTAL COMMITMENTS AT ANY ONE
TIME. While the Company typically has agreed to a minimum capital expenditure or
development commitment at the outset of new projects, expenditures to fulfill
these commitments are phased over time. In addition, the Company seeks, where
possible, to use internally generated funds for further capital expenditures and
to invest in projects which provide the potential for an early return to the
Company.
- - REDUCE FOREIGN EXCHANGE RISKS. The Company seeks to reduce foreign currency
exchange risks by providing for the receipt of revenues by the Company in U.S.
dollars while most operating costs are incurred in local currency. Pursuant to
the operating agreement between Benton-Vinccler and Lagoven, the operating fees
earned by the Company are paid directly to the Company's bank account in the
U.S. in U.S. dollars. GEOILBENT receives revenues from export sales in U.S.
dollars paid to its account in Moscow. As the Company expands internationally,
it will seek to establish similar arrangements for new operations.
PRINCIPAL AREAS OF ACTIVITY
The following table summarizes the Company's proved reserves, drilling and
production activity, and financial operating data by principal geographic area
at and for each of the years ended December 31:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
VENEZUELA(1) RUSSIA UNITED STATES
--------------------------- ------------------------- -------------------------
Dollars in thousands 1993 1994 1995 1993 1994 1995(2) 1993 1994 1995(3)
------- -------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RESERVE INFORMATION:
Proved Reserves (MBOE) 19,389 60,707 73,593 10,121 17,540 22,618 13,275 2,913 1
Discounted Future Net Cash Flows
Before Income Taxes $72,206 $268,830 $286,916 $24,237 $48,833 $85,361 $34,970 $18,657 $ 16
Standardized Measure of Future Net
Cash Flows $50,958 $172,703 $206,545 $19,512 $32,398 $55,434 $32,046 $18,286 $ 16
DRILLING AND PRODUCTION ACTIVITY:
Gross Wells Drilled 5 11 19 4 9 25 9 5 5
Average Daily Production (BOE) 440 6,902 14,949 77 806 1,345 907 1,561 1,917
FINANCIAL DATA:
Oil and Gas Revenues $ 1,333 $ 21,472 $ 49,174 $ 324 $ 3,513 $ 6,016 $ 5,565 $ 7,287 $ 7,683
Expenses:
Lease Operating Costs and
Production Taxes 1,165 3,808 6,483 458 2,832 2,764 3,487 2,891 1,456
Depletion 229 4,998 11,393 99 838 1,512 2,142 4,248 4,188
------- -------- -------- ------- ------- ------- ------- ------- -------
Total Expenses 1,394 8,806 17,876 557 3,670 4,276 5,629 7,139 5,644
------- -------- -------- ------- ------- ------- ------- ------- -------
Results of Operations from
Oil and Gas Producing
Activities $ (61) $ 12,666 $ 31,298 $ (233) $ (157) $ 1,740 $ (64) $ 148 $ 2,039
======== ========= ========= ======== ======== ======== ======== ======== ========
</TABLE>
- ------------------------
(1) Includes 100% of the reserve information, drilling and production activity
and financial data, without deduction for minority interest. 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. See "-- South Monagas Unit, Venezuela" and
"-- Reserves."
(2) The financial information for Russia for the 1995 presentation includes
information for the nine months ended September 30, 1995, the end of the
fiscal period for GEOILBENT. Results of operations in Russia reflect the
twelve months ended December 31, 1993 and 1994 and the nine months ended
September 30, 1995.
(3) In April 1996, the Company sold substantially all its U.S. reserves and
related acreage positions. See "-- Other Properties." The 1995 Reserve
Information excludes the reserves which were sold.
SOUTH MONAGAS UNIT, VENEZUELA
General
In July 1992, the Company and Vinccler, a Venezuelan construction and
engineering company, signed a 20-year operating service agreement with Lagoven,
an affiliate of the national oil company, PdVSA, to reactivate and further
develop the Uracoa, Tucupita and Bombal Fields, which are a part of the South
Monagas Unit (the "Unit"). At that time, the Company was one of three foreign
companies ultimately awarded an operating service agreement to reactivate
existing fields by PdVSA, and was the first U.S. company since 1976 to be
granted such an oil field development contract in Venezuela.
The oil and gas operations in the Unit are conducted by Benton-Vinccler, the
Company's 80%-owned subsidiary. The remaining 20% of the outstanding capital
stock of Benton-Vinccler is owned by Vinccler. The Company, through its majority
ownership of
31
<PAGE> 34
stock in Benton-Vinccler, makes all operational and corporate decisions related
to Benton-Vinccler, subject to certain super-majority provisions of
Benton-Vinccler's charter documents related to mergers, consolidations, sales of
substantially all of its corporate assets, change of business and similar major
corporate events. Vinccler has an extensive operating history in Venezuela. It
provided the Company with initial financial assistance and continues to provide
ongoing assistance with construction services and governmental and labor
relations.
Under the terms of the operating service agreement, Benton-Vinccler is a
contractor for Lagoven and is responsible for overall operations of the South
Monagas Unit, including all necessary investments to reactivate and develop the
fields comprising the Unit. The Venezuelan government maintains full ownership
of all hydrocarbons in the fields. In addition, Lagoven maintains full ownership
of equipment and capital infrastructure following its installation.
Benton-Vinccler invoices Lagoven each quarter based on Bbls of oil accepted by
Lagoven during the quarter, using quarterly adjusted contract service fees per
Bbl, and receives its payments from Lagoven in U.S. dollars deposited directly
into a U.S. bank account. The operating service agreement provides for
Benton-Vinccler to receive an operating fee for each Bbl of crude oil delivered
and a capital recovery fee for certain of its capital expenditures, provided
that such operating fee and capital recovery fee cannot exceed the maximum total
fee per Bbl set forth in the agreement. The operating fee is subject to periodic
adjustments to reflect changes in the special energy index of the U.S. Consumer
Price Index, and the maximum total fee is subject to periodic adjustments to
reflect changes in the average of certain world crude oil prices. Since
commencement of operations, the adjusted maximum total fee has been cumulatively
less than the adjusted operating fee, resulting in no capital recovery fee. The
Company cannot predict the extent to which future maximum total fee adjustments
will provide for capital recovery components in the fees it receives, and has
recorded no income or asset for capital recovery fees.
Under the terms of the operating service agreement, Benton-Vinccler was
obligated to make certain capital and operating expenditures prior to December
31, 1995. Benton-Vinccler has satisfied all such obligations under the operating
service agreement and no further capital commitments are contractually required.
However, in order to expand operations, the Company will need to continue to
make capital expenditures. See "-- South Monagas Unit, Venezuela -- Drilling and
Development Activity."
Since 1992, when Venezuela solicited initial calls for indications of interest
related to the reactivation and further development of certain fields in
Venezuela, the country has continued to invite foreign assistance in Venezuelan
oil and gas exploration, development and production. Management believes that
Venezuela continues to provide potential business opportunities for the Company.
See "-- Delta Centro Block, Venezuela."
Location and Geology
The Unit is located in the southeastern part of the state of Monagas in eastern
Venezuela. The Unit is approximately 51 miles long and eight miles wide and
consists of 157,843 acres, of which the fields comprise approximately one-half.
At December 31, 1995, proved reserves attributable to the Company's Venezuelan
operations were 73,593 MBOE, which represented approximately 76% of the
Company's proved reserves. Benton-Vinccler is currently developing the Oficina
sands in the Uracoa Field, which contain 92.4% of the Unit's proved reserves.
The associated natural gas which is produced is currently being reinjected into
the field, as no ready market exists for the natural gas.
Drilling and Development Activity
Uracoa Field. Benton-Vinccler has been developing the Uracoa Field since 1992.
During May 1996, approximately 63 wells were producing an average of
approximately 33.6 MBbls of oil per day in the Uracoa Field. The following table
sets forth Uracoa drilling activity and production information for each of the
quarters presented:
<TABLE>
<CAPTION>
----------------------------------------------------------
WELLS DRILLED AVERAGE DAILY
VERTICAL HORIZONTAL PRODUCTION FROM FIELD (BBLS)
------------- ---------- ----------------------------
<S> <C> <C> <C>
1994:
First Quarter 5 0 3,400
Second Quarter 0 0 6,700
Third Quarter 3 0 7,200
Fourth Quarter 0 3 10,200
1995:
First Quarter 1 1 11,800
Second Quarter 1 2 11,300
Third Quarter 3 2 15,800
Fourth Quarter 1 8 20,800
1996:
First Quarter 1 9 29,000
</TABLE>
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<PAGE> 35
Benton-Vinccler contracts with third parties for drilling and completion of
wells. Currently, Helmerich & Payne International Drilling Co. and Exeter
Drilling Co. are performing drilling services for Benton-Vinccler under
contract. The Company's technical personnel identify drilling locations, specify
the drilling program and equipment to be used and monitor the drilling
activities. To date, 14 previously drilled wells have been reactivated and 46
new wells have been drilled in the Uracoa Field using modern drilling and
completion techniques that had not previously been utilized on the field, with
45, or 98%, completed and placed on production. Two drilling rigs are currently
working in the field. In the Company's recent experience, each vertical deviated
well, drilled to an average depth of 5,600 feet, has been drilled in
approximately 10 days and completed in approximately 6 days, and each horizontal
well, drilled to an average depth of 6,500 feet, has been drilled in 20 days and
completed in 3 days. Benton-Vinccler plans to drill approximately 7 vertical and
26 horizontal wells, 2 injection wells and one step-out well adjacent to the
Uracoa Field during 1996, at an anticipated cost of $40-45 million.
In December 1993, Benton-Vinccler commenced drilling the first horizontal well
in the Uracoa Field. Since the completion of this well, the Company has
successfully integrated modern technology and modern drilling and completion
techniques to improve the ultimate recovery. The Company has conducted a 3-D
seismic survey and interpreted the seismic data over the Uracoa Field. As a
horizontal well is drilled, information regarding formations encountered by the
drill bit is transmitted to the Company. Geologists, engineers and geophysicists
at the Company can determine the location of the drill bit by comparing the
information about the formations being drilled with the 3-D seismic data. The
Company then directs the movement of the drill bit to more accurately direct the
well to the expected reservoir. The Company intends to continue this method of
horizontal drilling in the development of the field.
Once oil is produced in the Uracoa Field, it is transported to production
facilities, which were designed in the United States and installed by
Benton-Vinccler. These production facilities are of the type commonly used in
heavy oil production in the United States, but not previously used extensively
in Venezuela to process crude oil of similar gravity or quality. The current
production facilities are capable of processing 30-35 MBbls of oil per day.
Benton-Vinccler intends to expand the capacity of the production facilities in
1996 to a total capacity of 40-45 MBbls of oil per day. The Company anticipates
capital expenditures of $21 million during 1996 to complete such expansion.
Tucupita and Bombal Fields. Before becoming inactive, only Tucupita had been
substantially developed and produced; relatively few wells had been drilled at
Uracoa and Bombal. Benton-Vinccler has completed a 67-square mile 3-D seismic
survey over portions of the Unit and is currently interpreting the data. Based
on the interpretations of the seismic data, Benton-Vinccler may drill one or
more wells to extend the boundaries of the three known fields or to confirm the
existence of additional fields previously undetected in the area. Further
analysis of the Unit indicates that significant reserves may remain in the
Tucupita Field. Benton-Vinccler intends to evaluate the potential of the
Tucupita Field in 1996 by drilling one oil well, and will expand existing
production facilities in such field. Based on the performance of this pilot oil
well, and if the Company's assumptions prove to be correct, the production
facilities will be further expanded, and a pipeline to the Uracoa Field will be
installed. The pipeline will also be used for production from the Bombal Field
when it is developed. Benton-Vinccler currently plans to begin to reactivate and
develop the Bombal Field beginning later in 1996. During 1996, the Company
expects capital expenditures of $5-7 million for drilling and construction of
facilities in the Tucupita and Bombal Fields.
Customers and Market Information
Oil produced in Venezuela is delivered to Lagoven under the terms of an
operating service agreement for an operating service fee. Benton-Vinccler has
constructed a 25-mile oil pipeline from its oil processing facilities at Uracoa
to Lagoven's storage facility, which is the custody transfer point. The service
agreement specifies that the oil stream may contain no more than 1% base
sediment and water, and quality measurements are conducted both at
Benton-Vinccler's facilities and at Lagoven's storage facility. A continuous
flow measuring unit is installed at Benton-Vinccler's facility, so that quantity
is monitored constantly. Lagoven provides Benton-Vinccler with a daily
acknowledgment regarding the amount of oil accepted the previous day, which is
reconciled to Benton-Vinccler's measurement. At the end of each quarter,
Benton-Vinccler prepares an invoice to Lagoven for that quarter's deliveries.
Lagoven pays the invoice at the end of the second month after the end of the
quarter. Invoice amounts and payments are denominated in U.S. dollars. Payments
are wire transferred into Benton-Vinccler's account in New York.
Employees; Community Relations
Benton-Vinccler seeks to employ nationals rather than bring expatriates into the
country. Presently, there are five full-time expatriates working with
Benton-Vinccler and 121 local employees. Benton-Vinccler also conducts ongoing
community relations programs, providing medical care, training, equipment and
supplies, and support for local schools, in both states in which the South
Monagas Unit falls.
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<PAGE> 36
DELTA CENTRO BLOCK, VENEZUELA
General
In January 1996, the Company and its bidding partners, LL&E and Norcen, were
awarded the right to explore and develop the Delta Centro Block in Venezuela.
The contract requires a minimum exploration work program consisting of
completing a 1,300 kilometer seismic survey and drilling three wells to depths
of 12,000 to 18,000 feet within five years. PdVSA estimates that this minimum
exploration work program will cost $60 million, and will require that the
Company, LL&E and Norcen each post a performance surety bond or standby letter
of credit for its pro rata share of the estimated work commitment expenditures.
The Company will have a 30% interest in the exploration venture, with LL&E and
Norcen each owning a 35% interest. Under the proposed terms of the operating
agreement, which establishes the management company for the project, LL&E will
be the operator of the field and therefore the Company will not be able to
exercise control of the operations of the venture. It is currently proposed that
Corporacion Venezolana del Petroleo, S.A. ("CVP"), an affiliate of the national
oil company, will have a 35% interest in the management company, which will
dilute the voting power of the partners on a pro rata basis.
If areas within the block are deemed to be commercially viable, then the group
has the right to enter into further agreements with CVP to develop those areas
during the next 20-25 years. CVP would participate in the revenues and costs
with an interest between 1-35%, at CVP's discretion. Any oil and gas produced by
the Delta Centro consortium will be sold at market prices and will be subject to
the oil and gas taxation regime in Venezuela and to the terms of a profit
sharing agreement with PdVSA. Under the current oil and gas tax law, a royalty
of up to 16.67% will be paid to the state. Under the contract bid terms, 41% of
the pre-tax income will be shared with PdVSA for the period during which the
first $1 billion of revenues is produced; thereafter, the profit sharing amount
may increase to up to 50% according to a formula based on return on assets.
Currently, the statutory income tax rate for oil and gas enterprises is 66.7%.
Royalties and shared profits are currently deductible for tax purposes.
Location and Geology
The Delta Centro block consists of approximately 2,100 square kilometers
(526,000 acres) located in the delta of the Orinoco River in the eastern part of
Venezuela. Although no significant exploratory activity has been conducted on
the block, PdVSA has estimated that the area may contain recoverable reserves of
as much as 820 MMBbls, and may be capable of producing up to 160 MBbls of oil
per day. The general area of Venezuela in which the Delta Centro Block is
located is known to be a significant source of hydrocarbons, evidenced by the
Orinoco tar sands to the south and the recently discovered El Furrial light oil
trend to the north. Based on its geological studies of the basins in this area,
the Company's technical staff believes that hydrocarbons have essentially
migrated over time from the deeper Maturin basin area of Venezuela southward
toward the shallower Orinoco tar belt area. If so, then potential trapping
structures and/or faults in the path of the migrating oil would serve as traps
for the migrating oil and have the opportunity to be filled to their spill
points. Delta Centro is directly in line with this migration path, making it an
attractive exploration area. The area is mostly swampy in nature, with terrain
ranging from forest in the north to savannah in the south. The marshlands in the
block are similar to the transition zone areas in the Gulf of Mexico in which
the Company has significant experience in seismic and drilling operations.
Drilling and Development Activity
The venture intends to conduct a 3-D seismic survey over the southwestern
portion of the Delta Centro Block beginning in 1996, at an expected total cost
to the Company of approximately $6-7 million, of which $2 million is expected to
be spent in 1996. Following the initial interpretation of the seismic data, the
venture intends to drill an initial exploration well during 1997, at a cost to
the Company of approximately $1.5-2 million. Seismic and drilling programs
during 1998-2000 will be based on the results of the 1996-1997 activity.
OVERVIEW OF VENEZUELAN OIL AND GAS INDUSTRY
Oil and gas is a vital industry in Venezuela, currently representing 25% of the
economy. Estimates by the Economist Intelligence Unit indicate that the oil
sector grew 6.0% in 1995 and 4.6% in 1994. Oil, gas and petroleum product
exports for 1995 reached $13.3 billion, accounting for almost 73% of total
exports. In addition, such estimates indicate that PdVSA expects oil and gas
product exports to total approximately $15.6 billion in 1996.
PdVSA is one of the largest oil companies in the world based on several factors,
including reserves, production capacity and product sales. At the end of 1995,
PdVSA's proved crude oil reserves were approximately 64 BBbls, more reserves
than any other company or country in the Western hemisphere. PdVSA is seeking to
double its current production capacity over the next ten years, with private
investment as a key source of capital to achieve such growth.
In 1992, Venezuela initiated a field re-activation program, which was an
important first step for the reentrance of private investment to the oil and gas
sector. Service contracts for 15 underdeveloped units were awarded, nine of
which currently produce
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<PAGE> 37
a total of 100 MBbls per day. Benton-Vinccler currently provides approximately
30% of this total production. In the beginning of 1996, Venezuela opened the oil
and gas sector for profit sharing contracts. Ten areas were offered for auction
at the end of January, marking the first time that exploration and production
rights had been officially offered to the private sector since the
nationalization of the oil industry in 1976. The Delta Centro consortium was one
of the successful bidders.
NORTH GUBKINSKOYE, RUSSIA
General
In December 1991, the joint venture agreement forming GEOILBENT among the
Company (34% interest) and two Russian partners, Purneftegasgeologia and
Purneftegas (each having a 33% interest), was registered with the Ministry of
Finance of the USSR. In November 1993, the agreement was registered with the
Russian Agency for International Cooperation and Development. Although GEOILBENT
may only take action through the unanimous vote of the partners, the Company
believes that it has developed a good relationship with its partners and has not
experienced any disagreement with its partners on major operational matters. Mr.
A.E. Benton, Chief Executive Officer of the Company, serves as Chairman of the
Board of GEOILBENT.
Location and Geology
GEOILBENT develops, produces and markets crude oil from the North Gubkinskoye
Field in the West Siberia region of Russia, located approximately 2,000 miles
northeast of Moscow. The field, which covers an area approximately 15 miles long
and 4 miles wide, has been delineated with over 60 exploratory wells (which
tested 26 separate reservoirs) and is surrounded by large proven fields. Before
commencement of GEOILBENT's operations, North Gubkinskoye was one of the largest
oil and gas fields in the region not under commercial production. The field is a
large anticlinal structure with multiple pay sands. The development to date has
focused on the BP 8, 9, 10, 11 and 12 reservoirs. The natural gas which is
produced is currently being flared in accordance with environmental regulations.
Drilling and Development Activity
GEOILBENT commenced initial operations in the field during the third quarter of
1992 with the construction of a 37-mile oil pipeline and installation of
temporary production facilities. During May 1996, approximately 38 wells were
producing an average of approximately 6.4 MBbls of oil per day. The following
table sets forth drilling activity and production information for each of the
quarters presented:
<TABLE>
<CAPTION>
---------------------------------------
AVERAGE DAILY
PRODUCTION FROM FIELD
WELLS DRILLED (BBLS)
------------- ---------------------------
<S> <C> <C>
1994:
First Quarter 1 1,000
Second Quarter 1 2,400
Third Quarter 2 2,200
Fourth Quarter 5 4,900
1995:
First Quarter 4 4,300
Second Quarter 1 5,600
Third Quarter 9 7,800
Fourth Quarter 11 7,900
1996:
First Quarter 4 8,500
</TABLE>
GEOILBENT contracts with third parties for drilling and completion of wells.
Supervised by a joint American and Russian management team, GEOILBENT identifies
drilling locations, then uses Russian drilling rigs, upgraded by certain western
technology and materials including shaker screens, monitoring equipment and
drilling and completion fluids, to drill and complete a well. To date, 12
previously drilled wells have been reactivated and 38 wells have been drilled in
the field, with 37, or 97%, completed and placed on production. Four drilling
rigs are currently working on pads in the field, and once all wells on the pad
have been drilled, each such well will be tested for completion. Each well is
drilled to an average depth of approximately 10,000 feet measured depth and
8,000 feet true depth.
Once oil is produced from the North Gubkinskoye Field, it is transported to
production facilities constructed and owned by GEOILBENT. Oil is then
transferred to GEOILBENT's 37-mile pipeline which transports the oil from the
North Gubkinskoye Field south to the main Russian oil pipeline network.
35
<PAGE> 38
The current production facilities are operating at or near capacity and would
need to be expanded to accommodate any increased production. Subject to
obtaining financing, GEOILBENT has a 1996 capital expenditure budget of
approximately $35 million, of which $21 million would be used to drill
approximately 36 wells in the North Gubkinskoye Field and $14 million for
construction of production facilities. Although no assurance can be given that
such financing will be obtained, GEOILBENT and the Company continues discussions
with the European Bank for Reconstruction and Development ("EBRD") for a
proposed credit facility, which would be non-recourse to the Company, to be used
for development of the North Gubkinskoye Field, including the production
facility expansion. If EBRD or other financing is not completed, minimal capital
expenditures are anticipated and production from the field is expected to
experience a natural decline.
Customers and Market Information
GEOILBENT's 37-mile pipeline runs from the field to the main pipeline in the
area where GEOILBENT transfers the oil to Transneft, the state oil pipeline
monopoly. Transneft can transport the oil to the western border of Russia. All
oil production is for export and all oil sales are handled by trading companies
such as Russoil or NAFTA Moscow. During 1995, most of GEOILBENT's crude sales
were made to purchasers in Germany. All sales have been paid in U.S. dollars
into GEOILBENT's account in Moscow.
Employees; Community and Country Relations
Having access to the oilfield labor base in West Siberia, GEOILBENT employs
Russian nationals almost exclusively. Presently, there are three full-time
expatriates working with GEOILBENT and over 200 local employees. The Company
conducts an ongoing community relations program in Russia, providing medical
care, training, equipment and supplies in towns in which GEOILBENT personnel
reside and also for the nomadic indigenous population which resides in the area
of oilfield operations.
Alternatives for Natural Gas Reserves
The Company and GEOILBENT estimate that substantial recoverable associated gas
and condensate reserves exist in the North Gubkinskoye Field. In addition, there
are substantial non-associated natural gas reserves in the field. Currently,
there exists no ready market for these reserves, and therefore there are no
plans to produce these gas and condensate reserves. Associated gas and
condensate are flared in allowable amounts under permits with the Ministry of
Fuel and Energy. If no market develops for the gas and condensate, then over
time GEOILBENT plans to begin reinjecting them back into the reservoirs.
GEOILBENT currently has no rights to develop the gas caps in the field. However,
GEOILBENT has recently entered into discussions with Gazprom, the state natural
gas monopoly, for development and production of the solution gas, which is
estimated by the Company to be 550-600 Bcf. Implementation of such a development
plan would include construction of processing facilities and of a natural gas
pipeline from the field area to the main transmission pipeline. Feasibility
studies are currently in process and anticipated to be completed by year end
1996. Further development, subject to approval of all parties, will depend upon
available financing.
Importance of Russian Oil and Gas Industry
Although estimates vary widely, it is believed that a substantial amount of oil
and natural gas reserves are located in Russia. In 1994 and 1995, energy and
fuels (including primarily oil, oil products, natural gas, and hard coal)
accounted for approximately 45% and 41%, respectively, of total Russian exports,
as reported by the Economist Intelligence Unit. These fuel and energy exports
are important sources of hard currency. In the last several years, the Russian
oil and gas industry has attracted a notable amount of foreign investment,
including that of the Company.
OTHER PROPERTIES
Prior to 1996, the Company had successfully pursued acquisition and joint
venture opportunities in the United States as major oil and gas companies
continued to consolidate operations and focus exploration and development
activities outside the United States. Substantially all of the Company's
domestic activities were located in the Louisiana Gulf Coast at the West Cote
Blanche Bay, Rabbit Island and Belle Isle Fields. The Company entered into
agreements with Texaco, Inc. ("Texaco") and Oryx Energy Company ("Oryx") to
produce the fields by using 3-D seismic technology integrated with subsurface
geologic data from previously drilled wells. In addition, the Company entered
into certain agreements with Tenneco Ventures Corporation ("Tenneco") whereby
Tenneco purchased certain interests in the Company's operations in the three
fields and was given the right to participate as a 50% partner in certain of the
Company's future activities in the Gulf Coast for the next five years.
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 for an aggregate
purchase price of $20 million. Of this aggregate purchase price, the Company
received $14.9 million.
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<PAGE> 39
On April 12, 1996, the Company sold to Shell all of its interests in the West
Cote Blanche Bay, Rabbit Island and Belle Isle Fields, effective December 31,
1995, for a purchase price of $35.4 million. Because the properties were held
for sale, the Company's reserve report excludes all reserves attributable to
these properties.
At December 31, 1995, the Company had proved reserves of 1 MBOE in the Scott
Field in Louisiana.
EVALUATION OF ADDITIONAL OPPORTUNITIES
The Company continues to evaluate and pursue additional international
opportunities which fit within the Company's business strategy. The Company is
currently evaluating certain development and/or acquisition opportunities, but
it is not presently known whether, or on what terms, such evaluations will
result in future agreements or acquisitions.
RESERVES
The following table sets forth information regarding estimates of proved
reserves at December 31, 1995 prepared by the Company and audited by Huddleston
& Co., Inc., independent petroleum engineers:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
CRUDE OIL AND CONDENSATE (MBBL) NATURAL GAS (MMCF)
-------------------------------------- -------------------------------------
DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL
--------- ----------- ------ --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Venezuela(1) 30,032 43,561 73,593 -- -- --
Russia(2) 3,475 19,143 22,618 -- -- --
United States(3) -- -- -- 6 -- 6
- - -
------ ------ ------
Total 33,507 62,704 96,211 6 0 6
====== ====== ====== = = =
</TABLE>
- ---------------
(1) Includes 100% of the reserve information, without deduction for minority
interest. 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. See "-- South Monagas Unit,
Venezuela."
(2) Although the Company estimates that there are substantial natural gas
reserves in the North Gubkinskoye Field, no natural gas reserves have been
recorded because of a lack of a ready market.
(3) The Company has entered into an agreement to sell substantially all of its
U.S. reserves and acreage positions. See "-- Other Properties." The table
excludes the reserves to be sold.
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 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 65%
of the Company's total proved reserves were non-producing as of December 31,
1995. 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 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, availability and capacity of
gathering systems and pipelines, 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.
37
<PAGE> 40
PRODUCTION, PRICES AND LIFTING COST SUMMARY
The following table sets forth by country net production, average sales prices
and average lifting costs of the Company for the three months ended march 31,
1995 and 1996 and the years ended December 31, 1993, 1994 and 1995:
<TABLE>
<CAPTION>
--------------------------------------------------------
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31 MARCH 31
1993 1994 1995 1995 1996
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
VENEZUELA
Net Crude Oil Production (Bbl) 160,425 2,519,514 5,456,473 1,062,093 2,623,444
Average Crude Oil Sales Price ($ per Bbl) $8.31 $8.52 $9.01 $9.02 $9.63
Average Lifting Costs ($ per Bbl) 7.26 1.51 1.19 1.22 .88
RUSSIA (1)
Net Crude Oil Production (Bbl) 28,263 294,364 490,960 118,864 223,397
Average Crude Oil Sales Price ($ per Bbl) $11.46 $11.93 $12.25 $13.12 $10.32
Average Lifting Costs ($ per Bbl) 16.22 9.62 5.63 2.93 6.72
UNITED STATES
Net Production:
Crude oil and condensate (Bbl) 292,266 225,954 68,975 32,317 5,163
Natural Gas (Mcf) 232,677 2,061,892 3,784,830 346,548 1,249,128
Average Sales Price:
Crude oil and condensate ($ per Bbl) $17.30 $14.46 $15.79 $17.10 $19.94
Natural Gas ($ per Mcf) 2.19 1.79 1.77 1.62 3.26
Average Lifting Costs ($ per BOE) 10.53 5.08 2.08 6.73 1.20
</TABLE>
- ---------------
(1) The December 31, 1995 presentation includes information for the nine months
ended September 30, 1995, the end of the fiscal period for GEOILBENT.
Similarly, the 1996 presentation includes information for the three months
ended December 31, 1995.
REGULATION
General
The Company's operations are affected by political developments and laws and
regulations in the areas in which it operates. In particular, oil and gas
production operations and economics are affected by price controls, tax and
other laws relating to the petroleum industry, by changes in such laws and by
changing administrative regulations and the interpretations and application of
such rules and regulations. In addition, various federal, state, local and
international laws and regulations covering the discharge of materials into the
environment, the disposal of oil and gas wastes, or otherwise relating to the
protection of the environment, may affect the Company's operations and costs.
Oil and gas industry legislation and agency regulation is periodically changed
for a variety of political, economic, environmental and other reasons. Numerous
governmental departments and agencies issue rules and regulations binding on the
oil and gas industry, some of which carry substantial penalties for the failure
to comply. The regulatory burden on the oil and gas industry increases the
Company's cost of doing business.
Venezuela
Venezuela requires environmental and other permits for certain operations
conducted in oil field development, such as site construction, drilling, and
seismic activities. As a contractor to Lagoven, Benton-Vinccler submits capital
and operating budgets to Lagoven for approval. Capital expenditures to comply
with Venezuelan environmental regulations relating to the reinjection of gas in
the field and water disposal are expected to approximate $7.8 million in 1996
and $14.4 million in 1997, respectively. Benton-Vinccler also submits requests
for permits for drilling, seismic and operating activities to Lagoven, which
then obtains such permits from the Ministry of Energy and Mines and Ministry of
Environment, as required. Benton-Vinccler is also subject to income, municipal
and value added taxes, and must file certain monthly and annual compliance
reports to SENIAT (the national tax administration) and to various
municipalities.
Russia
GEOILBENT submits annual production and development plans, which include
information necessary for permits and approvals for its planned drilling,
seismic and operating activities, to local and regional governments and to the
Ministry of Fuel and Energy, Committee of Geology and Ministry of Economy.
GEOILBENT also submits annual production targets and quarterly export
nominations for oil pipeline transportation capacity to the Ministry of Fuel and
Energy. GEOILBENT is subject to customs, value added, and municipal and income
taxes. Various municipalities and regional tax inspectorates are involved in the
assessment and collection of these taxes. GEOILBENT must file operating and
financial compliance reports with several bodies,
38
<PAGE> 41
including the Ministries of Fuel and Energy, Committee of Geology, Committee for
Technical Mining Monitoring, the Ministry of Ecology, and the State Customs
Committee.
DRILLING, ACQUISITION AND FINDING COSTS
During the years ended December 31, 1993, 1994 and 1995, the Company spent
approximately $26 million, $53 million, and $74 million, respectively, for
acquisitions of leases and producing properties, development and exploratory
drilling, production facilities and additional development activities such as
workovers and recompletions.
The Company has drilled or participated in the drilling of wells as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------
YEARS ENDED DECEMBER 31
1993 1994 1995
----------------- ----------------- -----------------
GROSS NET GROSS NET GROSS NET
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
WELLS DRILLED:
Exploratory:
Crude oil 1 .435 -- -- 3 1.020
Natural gas -- -- 2 .875 3 .970
Dry holes 2 .869 2 .869 1 .375
Development:(1)(2)(3)
Crude oil 13 5.693 20 11.860 41 22.680
Natural Gas -- -- 1 .435 1 .220
Dry Holes 2 .840 -- -- 1 .800
--- ------ --- ------ --- ------
TOTAL 18 7.837 25 14.039 50 26.065
=== ====== === ====== === ======
AVERAGE DEPTH OF WELLS (FEET) 5,100 7,266 7,847
PRODUCING WELLS (4):
Crude Oil 106 42.942 112 46.796 77 44.701
Natural Gas 6 1.271 4 .822 8 2.024
</TABLE>
- ---------------
(1) In addition to the activities set forth in the table, at the West Cote
Blanche Bay Field during the year ended December 31, 1994, the Company
participated in the successful recompletion of 13 gross (4.247 net) oil
wells and one gross (.327 net) gas well. During the year ended December 31,
1993, the Company participated in the recompletion of 13 gross (5.650 net)
oil wells, of which 11 gross (4.781 net) were completed as producers, and
one gross (.435 net) gas well, which was completed as a producer. In March
1995, the Company sold certain of its interests in the field, a result of
which was to substantially eliminate the Company's future participation in
recompletion and redrilling activities and in April 1996, the Company sold
the remainder of its interests in the field. See "-- Other Properties."
(2) In addition to the activities set forth in the table, the Company
participated in the successful recompletion of five gross (4.0 net) oil
wells in Venezuela during the year ended December 31, 1994. The Company
participated in the successful reactivation of nine gross (4.5 net) oil
wells in Venezuela during the year ended December 31, 1993.
(3) In addition to the activities set forth in the table, the Company
participated in the successful reactivation of one gross (.34 net) oil well
in Russia during the year ended December 31, 1995. The Company participated
in the successful reactivation of six gross (2.04 net) oil wells in Russia
during the year ended December 31, 1994. The Company participated in the
successful reactivation of four gross (1.36 net) oil wells in Russia during
the year ended December 31, 1993.
(4) The information related to producing wells reflects wells the Company
drilled, wells the Company participated in drilling and producing wells the
Company acquired.
At December 31, 1995, the Company was participating in the drilling of 2 wells
in Venezuela, and 4 wells in Russia.
All of the Company's drilling activities are conducted on a contract basis with
independent drilling contractors. The Company does not own any drilling
equipment.
From commencement of operations through December 31, 1995, the Company added,
net of production and property sales, approximately 96,180 MBOE of proved
reserves through purchases of reserves-in-place, discoveries of oil and natural
gas reserves, extensions of existing producing fields and revisions of
previously estimated reserves. The Company's finding and development costs for
its proved reserves from inception to December 31, 1995 were $1.75 per BOE. The
Company's estimate of future development costs for its undeveloped proved
reserves at December 31, 1995 was $1.80 per BOE. The estimated future
development costs are based upon the Company's anticipated cost of developing
its non-producing proved reserves, which costs are calculated using historical
costs for similar activities.
39
<PAGE> 42
ACREAGE
The following table summarizes the developed and undeveloped acreage owned,
leased or under concession as of December 31, 1995. See "-- Other Properties."
<TABLE>
<CAPTION>
----------------------------------------------
DEVELOPED UNDEVELOPED
GROSS NET GROSS NET
------ ------ ------- -------
<S> <C> <C> <C> <C>
Venezuela 7,480 5,984 150,363 120,290
Russia 16,080 5,467 149,680 50,891
United States(1) 5,002 1,689 10,000 6,862
------ ------ ------- -------
Total 28,562 13,140 310,043 178,043
====== ====== ======= =======
</TABLE>
- ---------------
(1) The Company sold substantially all of its U.S. reserves and related acreage
positions. The table excludes the acreage sold. See "-- Other Properties."
COMPETITION
The Company encounters strong competition from major oil and gas companies and
independent operators in acquiring properties and leases for exploration for
crude oil and natural gas. The principal competitive factors in the acquisition
of such oil and gas properties include the staff and data necessary to identify,
investigate and purchase such leases, and the financial resources necessary to
acquire and develop such leases. Many of the Company's competitors have
financial resources, staffs and facilities substantially greater than those of
the Company.
EMPLOYEES AND CONSULTANTS
At December 31, 1995, the Company had 43 employees and one independent
consultant. Benton-Vinccler had 109 employees and GEOILBENT had 220 employees.
TITLE TO DEVELOPED AND UNDEVELOPED ACREAGE
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. With regard to Russian acreage, GEOILBENT has
obtained certain documentation from appropriate regulatory bodies in Russia
which the Company believes is adequate to establish GEOILBENT's right to
develop, produce and market oil and gas from the North Gubkinskoye Field in
Russia.
At the time of acquisition of undeveloped acreage in the United States, the
Company conducted a limited title investigation. A title opinion from a
qualified law firm was obtained prior to drilling any given U.S. prospect. Title
to presently producing properties had been investigated by a qualified law firm
prior to purchase. The Company believes its method of investigating the title to
these domestic properties was consistent with general practices in the oil and
gas industry and was designed to enable the Company to acquire title which was
generally considered to be acceptable in the oil and gas industry.
LEGAL PROCEEDINGS
On June 13, 1994, Charles Agnew and other limited partners in several limited
partnerships formed by the Company brought an action in the Superior Court of
California, County of Ventura, against the Company for alleged actions and
omissions of the Company in operating the partnerships and alleged
misrepresentations made by the Company in selling the limited partnership
interests. The claimants seek an unspecified amount of actual and punitive
damages. On May 17, 1995, the Company agreed to a binding arbitration proceeding
with respect to such claims, which is currently in the discovery stage. The
Company will be forced to spend time and financial resources to defend or
resolve these matters. In January 1996, the Company acquired all of the
interests in three of the limited partnerships which are the subject of the
arbitration, in exchange for shares of, and warrants to purchase shares of, the
Company's common stock. In the arbitration proceeding, if any liability is found
to exist, the arbitrator will determine the amount of any damages, and may
consider all distributions made to the partners, including the consideration
received in the exchange offer, in determining the extent of damages, if any.
However, there can be no assurance that an arbitrator will consider such factors
in his or her determination of damages if the allegations are found to be true
and damages are awarded.
The Company is also subject to ordinary litigation that is incidental to its
business.
40
<PAGE> 43
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to the directors and executive officers of the Company
is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- -------------------------------------
<S> <C> <C>
A.E. Benton 53 Chairman of the Board, Chief
Executive Officer and Director
Michael B. Wray 60 President, Chief Financial Officer
and Director
William H. Gumma 47 Senior Vice President -- Operations,
Managing Director of Benton-Vinccler
and Director
David H. Pratt 46 Vice President -- International
Finance
Joseph C. White 64 Vice President -- Operations
Clarence Cottman, III 40 Vice President -- Business
Development
E. Sven Hagen 38 Vice President -- Exploration and
Development
Gregory S. Grabar 41 Vice President -- Corporate
Development and Administration
Chris C. Hickok 38 Vice President -- Controller and
Chief Accounting Officer
Bruce M. McIntyre 67 Director
Richard W. Fetzner 66 Director
Garrett A. Garrettson 52 Director
</TABLE>
A.E. BENTON
A.E. Benton, founder of the Company, was first elected Chief Executive Officer
and Chairman of the Board of the Company in September 1988. He has served as
director of the Company since September 1988. From 1986 to October 1988, Mr.
Benton was employed as president and director of Benton Petroleum Company. From
1981 to 1986, Mr. Benton was employed by May Petroleum, Inc., becoming its
senior vice president of exploration. From 1979 to 1981, Mr. Benton was employed
by TransOcean Oil Company and, upon TransOcean's acquisition by Mobil Oil
Corporation, he was employed by another subsidiary of Mobil Oil Corporation as
manager of geophysics. He was employed from 1968 to 1979 by Amoco Oil Company in
various positions, including director of applied geophysical research. Mr.
Benton has a B.S. degree in geophysics from California State University. Mr.
Benton serves as a director of First Seismic Corporation.
MICHAEL B. WRAY
Michael B. Wray was first elected President and Chief Financial Officer of the
Company in January, 1996. He has served as director of the Company since
November 1988. From January 1994 to December 1995, Mr. Wray served as a
consultant to the Company. From January 1992 until July 1993, Mr. Wray served as
vice president -- finance and administration of Del Mar Operating, Inc. From
1985 through 1991, Mr. Wray was an independent financial consultant to oil and
gas exploration and production companies. From 1979 to 1985, Mr. Wray served as
a senior financial officer of Guardian Oil Company, Huffco Petroleum Corporation
and May Petroleum, Inc. Prior to that time, Mr. Wray worked for over 15 years in
New York as an investment banker, security analyst and officer in various
investment firms including Donaldson, Lufkin & Jenrette, Inc., Drexel & Co. and
L.F. Rothschild & Co. Mr. Wray began his career as an attorney with Morgan,
Lewis & Bockius in Philadelphia. Mr. Wray holds a B.A. degree from Amherst
College and a law degree from Columbia Law School.
WILLIAM H. GUMMA
William H. Gumma was first elected Vice President -- Gulf Coast Operations in
August 1989 and was elected Senior Vice President -- Operations of the Company
in September 1990. In December 1995, Mr. Gumma was elected Managing Director of
41
<PAGE> 44
Benton-Vinccler. In September 1994, Mr. Gumma was appointed a director of the
Company to fill a vacancy on the Board of Directors. From 1988 to 1989, Mr.
Gumma was chief geophysicist-international for Maxus Energy Corp. (formerly
Diamond Shamrock, Inc.), where he directed geophysical exploration in Europe,
South America and North Africa. From 1986 to 1988, Mr. Gumma served as vice
president of exploration for BHP Petroleum, Inc. From 1983 to 1986, Mr. Gumma
served as chief geophysicist and later as Gulf Coast exploration manager for May
Petroleum, Inc. From 1980 to 1983, Mr. Gumma served as chief geophysicist for
Spectrum Oil and Gas Company. From 1978 to 1980, he was district geophysicist
for Inexco Oil Company. From 1972 to 1978, Mr. Gumma was employed by Amoco Oil
Company in various positions. Mr. Gumma received his B.S. from the Colorado
School of Mines and his M.S. in geophysics from Oregon State University.
DAVID H. PRATT
David H. Pratt was first elected Vice President -- International Finance in
January, 1996. From April 1989 to December 1995, Mr. Pratt served as Vice
President -- Finance, Chief Financial Officer and Treasurer of the Company. From
1987 to 1989, Mr. Pratt was a consultant in the accounting services and systems
industry. From 1982 to 1987, Mr. Pratt was employed by May Petroleum, Inc.,
becoming assistant treasurer. He also served as budget and planning manager, and
managed corporate and partnership investor relations and other administrative
areas. From 1974 to 1982, Mr. Pratt was employed by Arthur Andersen & Co. and he
became a Certified Public Accountant in 1975. Mr. Pratt holds B.S. and M.B.A.
degrees from Texas Christian University.
JOSEPH C. WHITE
Joseph C. White was elected Vice President -- Operations of the Company in
February 1993. Previously, Mr. White was president of J.C. White and Associates,
Inc., an independent consulting firm that prepared the Company's independent
reserve reports from 1988 through 1992. Mr. White was employed by Texaco for 30
years in a variety of engineering and management positions. In 1968, he was
appointed assistant to the vice president for Latin America and Trinidad in
Texaco's New York City executive office and in 1971 was appointed assistant to
the senior vice president for Texaco's worldwide producing operations. In 1972,
he was appointed assistant division manager to Texaco's Denver Division in
Colorado. In this position, he was responsible for all engineering and
operational matters for Texaco's operations in the Rocky Mountain area.
CLARENCE COTTMAN, III
Clarence Cottman, III was first appointed Land Manager in June 1989, was elected
Vice President -- Land of the Company in September 1990 and was elected Vice
President -- Business Development in July 1993. Mr. Cottman, a Certified
Petroleum Landman, was previously employed by Oryx Energy Company (formerly Sun
Exploration and Production Company) from June 1982 to May 1989. Mr. Cottman had
held a variety of exploration and production land positions in Oryx's Dallas,
Houston, and Denver offices. Most recently, he was district landman for Oryx in
Ventura, California, and responsible for all land activity on the West Coast.
Mr. Cottman holds a B.A. degree from Rochester Institute of Technology and an
M.B.A. from the University of Rhode Island. Mr. Cottman is the son-in-law of
Richard W. Fetzner.
E. SVEN HAGEN
E. Sven Hagen was first appointed Gulf Coast Geologist in March 1990 and was
elected Vice President -- Exploration and Development in July 1995. From March
1987 to February 1990, Mr. Hagen was employed by Shell Oil Company as an
exploration geologist responsible for the technical evaluation of the oil and
gas potential of West Africa salt basins including Angola, Congo, Gabon and
Namibia. From December 1985 to February 1987, Mr. Hagen was employed by Standard
Oil Production Company as an Exploration Geologist. Mr. Hagen holds a B.A.
degree in geology from the University of California at Santa Barbara and a Ph.D.
in geology from the University of Wyoming.
GREGORY S. GRABAR
Gregory S. Grabar was first elected Vice President -- Corporate Development and
Administration in April 1993 and was first appointed Manager of Administration
in October 1990. From 1989 to 1990, Mr. Grabar was in the corporate finance
department of Citicorp Real Estate, Inc. From 1988 to 1989, Mr. Grabar was a
consultant in the accounting services industry. From 1981 to 1988, Mr. Grabar
was a vice president in the corporate finance department at Bateman Eichler,
Hill Richards, Inc., a Kemper Securities Inc. company. From 1977 to 1981, Mr.
Grabar was in both the audit and tax departments of Arthur Andersen & Co. and
became a Certified Public Accountant. Mr. Grabar graduated cum laude from
California State University with a B.A. in business administration and received
his M.B.A. from the University of California at Los Angeles.
42
<PAGE> 45
CHRIS C. HICKOK
Chris C. Hickok was first appointed Controller in November 1991 and was elected
Vice President -- Controller and Chief Accounting Officer in January 1995. From
March 1979 to September 1991, Mr. Hickok was employed by Mission Resources, Inc.
and held various positions in the accounting and finance department including
financial analyst, assistant controller and controller. Mr. Hickok holds a B.S.
degree in business administration from California State University at Hayward
and is a Certified Management Accountant.
BRUCE M. MCINTYRE
Bruce M. McIntyre has served as director of the Company since November 1988. Mr.
McIntyre is a private investor and a consultant in the oil and gas industry, in
which he has been involved since 1952. He also serves in a management capacity
with several small, private companies in the energy field. He currently serves
as a director of MSC Corp., a private company which manages oil wells in
Illinois. From 1981 to 1984, Mr. McIntyre served as president of Rocky Mountain
Exploration Company, ultimately negotiating its merger into Carmel Energy, Inc.,
on whose board of directors he served until March 1986. Prior to that time, Mr.
McIntyre held various management positions with C&K Petroleum, Inc. (now ENSTAR
Petroleum, Inc.), Jenney Oil Company and Sinclair Oil & Gas Company. Mr.
McIntyre is a graduate of Harvard College and the Harvard University Graduate
School of Business Administration.
RICHARD W. FETZNER
Richard W. Fetzner has served as director of the Company since May 1990. Since
1989, Dr. Fetzner has been an associate professor of business administration at
California Lutheran University in Thousand Oaks, California. From 1984 to 1989,
Dr. Fetzner served in various academic capacities at the University of Singapore
and California Lutheran University and was a consultant to the World Bank. From
1979 to 1984, Dr. Fetzner served as group vice president of Sun Company, Inc.
and president of Sun Exploration and Production Company in Dallas, Texas. From
1958 to 1979, he served in various management and professional positions with
Sun Oil Company and its subsidiaries including president of Sun International,
Inc. and Sun Marine Transport, Inc. Dr. Fetzner holds a B.A. from Augustana
College, an M.S. in geology from the University of Wisconsin, a Ph.D. in geology
and economics from the University of Wisconsin and an M.B.A. from Drexel
University. Dr. Fetzner is the father-in-law of Clarence Cottman, III, an
officer of the Company.
GARRETT A. GARRETTSON
Garrett A. Garrettson has served as director of the Company since January 1996.
In 1995, Mr. Garrettson was elected as chairman, chief executive officer and
president of Contract Recording Technology, Inc. In addition, since 1993 he has
served as president and chief executive officer of Censtor Corporation. From
1986 to 1989, Mr. Garrettson served as vice president of Imprimis Technology.
Prior to that time, after serving in the United States Navy and Naval Reserves,
Mr. Garrettson held various positions with Hewlett Packard Company, including
laboratory director, department manager, project manager, and research engineer.
Mr. Garrettson graduated from Stanford University with a B.S. and M.S. in
engineering physics, and a Ph.D. in mechanical engineering.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company entered into the
Registration Rights Agreement with the Initial Purchaser, pursuant to which the
Company agreed to use its best efforts to file with the Commission a
registration statement with respect to the exchange of the Old Notes for debt
securities with terms identical in all material respects to the terms of the Old
Notes, except that (i) the New Notes have been registered under the Securities
Act and therefore will not be subject to certain restrictions on transfer
applicable to the Old Notes, will not contain certain legends relating thereto
and will not be entitled to registration and other rights under the Registration
Rights Agreement, and (ii) the New Notes will not provide for any increase in
the interest rate thereon. In that regard, the Old Notes provide, among other
things, that, if the Exchange Offer is not consummated by August 31, 1996, the
interest rate borne by the Old Notes following August 31, 1996 will increase by
0.50% per annum until the Exchange Offer is consummated. Upon consummation of
the Exchange Offer, holders of Old Notes will not be entitled to any increase in
the rate of interest thereon or any further registration rights under the
Registration Rights Agreement. See "Summary -- Certain Consequences of a Failure
to Exchange Old Notes" and "Description of the Old Notes."
The Exchange Offer is not being made to, nor will the Company accept tenders for
exchange from, holders of Old Notes in any jurisdiction in which the Exchange
Offer or the acceptance thereof would not be in compliance with the securities
or blue sky laws of such jurisdiction.
TERMS OF THE EXCHANGE
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $125 million aggregate principal amount of New Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to the
Expiration Date (as defined below) and not properly withdrawn in accordance with
the procedures described below. The Company will issue, promptly after the
Expiration Date, an aggregate principal amount of up to $125 million of New
Notes in exchange for a like principal amount of outstanding Old Notes tendered
and accepted in connection with the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered. As of the date of this Prospectus $125 million aggregate
principal amount of Old Notes is outstanding.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for
exchange or are tendered but not accepted in connection with the Exchange Offer
will remain outstanding and be entitled to the benefits of the Indenture, but
will not be entitled to any further registration rights under the Registration
Rights Agreement.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof promptly after the Expiration Date.
Holders who tender Old Notes in connection with the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes in connection with the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See " -- Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS
OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER AFTER
READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR
ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on ,
1996 unless the Exchange Offer is extended by the Company (in which case the
term "Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended).
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<PAGE> 47
The Company expressly reserves the right in its sole and absolute discretion,
subject to applicable law, at any time and from time to time, (i) to delay the
acceptance of the Old Notes for exchange, (ii) to terminate the Exchange Offer
(whether or not any Old Notes have theretofore been accepted for exchange) if
the Company determines, in its sole and absolute discretion, that any of the
events or conditions referred to under "-- Certain Conditions to the Exchange
Offer" have occurred or exist or have not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer and retain all Old Notes tendered pursuant
to the Exchange Offer, subject, however, to the right of holders of Old Notes to
withdraw their tendered Old Notes as described under "-- Withdrawal Rights," and
(iv) to waive any condition or otherwise amend the terms of the Exchange Offer
in any respect. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, or if the Company waives a material
condition of the Exchange Offer, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the Old Notes, and the Company will extend the Exchange
Offer to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company may choose to make any public announcement and
subject to applicable law, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to the Dow Jones News Service.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the Company
will exchange, and will issue to the Exchange Agent, New Notes for Old Notes
validly tendered and not withdrawn (pursuant to the withdrawal rights described
under "-- Withdrawal Rights") promptly after the Expiration Date.
In all cases, delivery of New Notes in exchange for Old Notes tendered and
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at The Depositary Trust Company ("DTC"), (ii) the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and (iii) any other documents required by the Letter of
Transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-entry
transfer of Old Notes into the Exchange Agent's account at DTC.
Subject to the terms and conditions of the Exchange Offer, the Company will be
deemed to have accepted for exchange, and thereby exchanged, Old Notes validly
tendered and not withdrawn as, if and when the Company gives oral or written
notice to the Exchange Agent of the Company's acceptance of such Old Notes for
exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent
for the Company for the purpose of receiving tenders of Old Notes, Letters of
Transmittal and related documents, and as agent for tendering holders for the
purpose of receiving Old Notes, Letters of Transmittal and related documents and
transmitting New Notes to validly tendering holders. Such exchange will be made
promptly after the Expiration Date. If for any reason whatsoever, acceptance for
exchange or the exchange of any Old Notes tendered pursuant to the Exchange
Offer is delayed (whether before or after the Company's acceptance for exchange
of Old Notes) or the Company extends the Exchange Offer or is unable to accept
for exchange or exchange Old Notes tendered pursuant to the Exchange Offer,
then, without prejudice to the Company's rights set forth herein, the Exchange
Agent may, nevertheless, on behalf of the Company and subject to Rule 14e-1(c)
under the Exchange Act, retain tendered Old Notes and such Old Notes may not be
withdrawn except to the extent tendering holders are entitled to withdrawal
rights as described under "-- Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Old Notes will warrant and
agree in the Letter of Transmittal that it has full power and authority to
tender, exchange, sell, assign and transfer Old Notes, that the Company will
acquire good, marketable and unencumbered title to the tendered Old Notes, free
and clear of all liens, restrictions, charges and encumbrances, and the Old
Notes tendered for exchange are not subject to any adverse claims or proxies.
The holder also will warrant and agree that it will, upon request, execute and
deliver any additional documents deemed by the Company or the Exchange Agent to
be necessary or desirable to complete the exchange, sale, assignment, and
transfer of the Old Notes tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OLD NOTES
Valid Tender. Except as set forth below, in order for Old Notes to be validly
tendered pursuant to the Exchange Offer, a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and
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<PAGE> 48
any other required documents, must be received by the Exchange Agent at one of
its addresses set forth under "-- Exchange Agent," and either (i) tendered Old
Notes must be received by the Exchange Agent, or (ii) such Old Notes must be
tendered pursuant to the procedures for book-entry transfer set forth below and
a book-entry confirmation must be received by the Exchange Agent, in each case
on or prior to the Expiration Date, or (iii) the guaranteed delivery procedures
set forth below must be complied with.
If less than all of the Old Notes are tendered, a tendering holder should fill
in the amount of Old Notes being tendered in the appropriate box on the Letter
of Transmittal. The entire amount of Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY
INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Exchange Agent will establish an account with respect
to the Old Notes at DTC for purposes of the Exchange Offer within two business
days after the date of this Prospectus. Any financial institution that is a
participant in DTC's book-entry transfer facility system may make a book-entry
delivery of the Old Notes by causing DTC to transfer such Old Notes into the
Exchange Agent's account at DTC in accordance with DTC's procedures for
transfers. However, although delivery of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, must in any
case be delivered to and received by the Exchange Agent at its address set forth
under "-- Exchange Agent" on or prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Old Notes need not be endorsed and
signature guarantees on the Letter of Transmittal are unnecessary unless (a) a
certificate for the Old Notes is registered in a name other than that of the
person surrendering the certificate or (b) such registered holder completes the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
in the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Old Notes must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the Letter of
Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Notes pursuant to the
Exchange Offer and the certificates for such Old Notes are not immediately
available or time will not permit all required documents to reach the Exchange
Agent on or before the Expiration Date, or the procedures for book-entry
transfer cannot be completed on a timely basis, such Old Notes may nevertheless
be tendered, provided that all of the following guaranteed delivery procedures
are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is received by
the Exchange Agent, as provided below, on or prior to the Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing all tendered
Old Notes, in proper form for transfer, together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by
facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Notes in
exchange for Old Notes tendered and accepted for exchange pursuant to the
Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Old Notes,
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<PAGE> 49
or of a book-entry confirmation with respect to such Old Notes, and a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees and any other documents required
by the Letter of Transmittal. Accordingly, the delivery of New Notes might not
be made to all tendering holders at the same time, and will depend upon when Old
Notes, book-entry confirmations with respect to Old Notes and other required
documents are received by the Exchange Agent.
The Company's acceptance for exchange of Old Notes tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering holder and the Company upon the terms and subject to the conditions of
the Exchange Offer.
Determination of Validity. All questions as to the form of documents, validity,
eligibility (including time of receipt) and acceptance for exchange of any
tendered Old Notes will be determined by the Company, in its sole discretion,
whose determination shall be final and binding on all parties. The Company
reserves the absolute right, in its sole and absolute discretion, to reject any
and all tenders determined by it not to be in proper form or the acceptance of
which, or exchange for, may, in the view of counsel to the Company, be unlawful.
The Company also reserves the absolute right, subject to applicable law, to
waive any of the conditions of the Exchange Offer as set forth under "-- Certain
Conditions to the Exchange Offer" or any condition or irregularity in any tender
of Old Notes of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. No tender of Old Notes will be deemed to have been validly made
until all irregularities with respect to such tender have been cured or waived.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in tenders or incur any liability for failure to give any
such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or any
other document required by the Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and unless waived by the Company, proper
evidence satisfactory to the Company, in its sole discretion, of such person's
authority to so act must be submitted.
A beneficial owner of Old Notes that are held by or registered in the name of a
broker, dealer, commercial bank, trust company or other nominee or custodian is
urged to contact such entity promptly if such beneficial holder wishes to
participate in the Exchange Offer.
RESALES OF NEW NOTES
The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance of the Commission as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, the Company has not sought its own interpretive letter and there can be
no assurance that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the Exchange Offer
as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Division of Corporation Finance, and subject
to the two immediately following sentences, the Company believes that New Notes
issued pursuant to this Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and that
such holder is not participating, and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Notes. However, any holder of Old Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing New Notes, or any broker-dealer who purchased
Old Notes from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Notes in the Exchange Offer and (c)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old Notes
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Old Notes acquired for
its own account as a result of market-making or other trading activities and
exchanges such Old Notes for New Notes, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in the
Exchange Offer will be required to represent that (i) it is not an "affiliate"
of the Company, (ii) any New Notes to be received by it are being acquired in
the ordinary course
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of its business, (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
New Notes, and (iv) if such holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a distribution (within the meaning
of the Securities Act) of such New Notes. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it acquired the Old Notes for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation Finance
of the Commission in the interpretive letters referred to above, the Company
believes that broker-dealers who acquired Old Notes for their own accounts as a
result of market-making activities or other trading activities ("Participating
Broker-Dealers") may fulfill their prospectus delivery requirements with respect
to the New Notes received upon exchange of such Old Notes (other than Old Notes
which represent an unsold allotment from the original sale of the Old Notes)
with a prospectus meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such New
Notes. Accordingly, this Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer during the period
referred to below in connection with resales of New Notes received in exchange
for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or other trading
activities.
Subject to certain provisions set forth in the Registration Rights Agreement,
the Company has agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such New Notes for a period ending 180 days after the
Expiration Date (subject to extension under certain limited circumstances
described below) or, if earlier, when all such New Notes have been disposed of
by such Participating Broker-Dealer. See "Plan of Distribution." Any
Participating Broker-Dealer who is an "affiliate" of the Company may not rely on
such interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of New
Notes pursuant to this Prospectus until the Company has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Company gives such notice to suspend the
sale of the New Notes, it shall extend the 180-day period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Notes by the number of days during the period
from and including the date of the giving of such notice to and including the
date when Participating Broker-Dealers shall have received copies of the amended
or supplemented Prospectus necessary to permit resales of the New Notes or to
and including the date on which the Company has given notice that the sale of
New Notes may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn at
any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "-- Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old Notes to be withdrawn, and (if certificates for such Old
Notes have been tendered) the name of the registered holder of the Old Notes as
set forth on the Old Notes, if different from that of the person who tendered
such Old Notes. If Old Notes have been delivered or otherwise identified to the
Exchange Agent, then prior to the physical release of such Old Notes, the
tendering holder must submit the serial numbers shown on the particular Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "-- Procedures
for Tendering Old Notes," the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of Old Notes, in
which case a notice of withdrawal will be effective if delivered to the Exchange
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Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of
tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not
be deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under "-- Procedures for
Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof promptly after
withdrawal.
INTEREST ON THE NEW NOTES
Each New Note will bear interest at the rate of 11 5/8% per annum from the most
recent date to which interest has been paid or duly provided for on the Old Note
surrendered in exchange for such New Note or, if no interest has been paid or
duly provided for on such Old Note, from May 1, 1996. Interest on the New Notes
will be payable semiannually on May 1 and November 1 of each year, commencing on
the first such date following the original issuance date of the New Notes.
Holders of Old Notes whose Old Notes are accepted for exchange will not receive
accrued interest on such Old Notes for any period from and after the last
Interest Payment Date to which interest has been paid or duly provided for on
such Old Notes prior to the original issue date of the New Notes or, if no such
interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and will be deemed to have waived the right to
receive any interest on such Old Notes accrued from and after such Interest
Payment Date or, if no such interest has been paid or duly provided for, from
and after May 1, 1996.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension of
the Exchange Offer, the Company will not be required to accept for exchange, or
to exchange, any Old Notes for any New Notes, and, as described below, may
terminate the Exchange Offer (whether or not any Old Notes have theretofore been
accepted for exchange) or may waive any conditions to or amend the Exchange
Offer, if any of the following conditions have occurred or exists or have not
been satisfied:
(a) the Exchange Offer, or the making of any exchange by a holder, violates any
applicable law or any applicable interpretation of the staff of the Commission;
(b) any action or proceeding shall have been instituted or threatened in any
court or by or before any governmental agency or body with respect to the
Exchange Offer which, in the Company's judgment, would reasonably be expected to
impair the ability of the Company to proceed with the Exchange Offer;
(c) any law, statute, rule or regulation shall have been adopted or enacted
which, in the Company's judgment, would reasonably be expected to impair the
ability of the Company to proceed with the Exchange Offer;
(d) a banking moratorium shall have been declared by United States federal or
California or New York state authorities which, in the Company's judgment, would
reasonably be expected to impair the ability of the Company to proceed with the
Exchange Offer;
(e) trading on the New York Stock Exchange or generally in the United States
over-the-counter market shall have been suspended by order of the Commission or
any other governmental authority which, in the Company's judgment, would
reasonably be expected to impair the ability of the Company to proceed with the
Exchange Offer; or
(f) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration Statement
or proceedings shall have been initiated or, to the knowledge of the Company,
threatened for that purpose.
If the Company determines in its sole and absolute discretion that any of the
foregoing events or conditions has occurred or exists or has not been satisfied,
the Company may, subject to applicable law, terminate the Exchange Offer
(whether or not any Old Notes have theretofore been accepted for exchange) or
may waive any such condition or otherwise amend the terms of the Exchange Offer
in any respect. If such waiver or amendment constitutes a material change to the
Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered holders of the
Old Notes, and the Company will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
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EXCHANGE AGENT
First Trust Company of New York, National Association, has been appointed as
Exchange Agent for the Exchange Offer. Delivery of the Letters of Transmittal
and any other required documents, questions, requests for assistance, and
requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent as follows:
By Mail:
First Trust National Association
P.O. Box 64485
St. Paul, Minnesota 55164-9549
Attn: Specialized Finance
By Overnight Delivery or Hand:
First Trust of New York, National Association
100 Wall Street
New York, New York 10005
Attn: Cathy Donohue
To Confirm by Telephone or for Information:
(612) 244-1197
Attn: Phyliss Meath
Facsimile Transmissions:
(612) 244-1145
Delivery to other than one of the above addresses or facsimile numbers will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket expenses
in connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Notes, and in handling or tendering for their
customers.
Holders who tender their Old Notes for exchange will not be obligated to pay any
transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
The Company will not make any payment to brokers, dealers or others soliciting
acceptances of the Exchange Offer.
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.
CREDIT AGREEMENT
On May 30, 1996, the Company entered into a Credit Agreement with Morgan
Guaranty. The Credit Agreement provides for the issuance of a letter of credit
in the amount of $18,000,000 to be used to secure the Company's performance
under its agreements related to the development of the Delta Centro Block in
Venezuela. The letter of credit will be secured by cash collateral in the form
of a time deposit from the Company. Morgan Guaranty will receive an arrangement
fee and will receive a fee of .25% per annum computed on the daily average
maximum available amount of the letter of credit. In addition, the Credit
Agreement provides for a $20,000,000 unsecured revolving credit facility which
must be repaid on or before March 14, 1998. Borrowings under such facility
accrue interest at per annum rate equal to the sum of the Euro-Dollar margin
plus the Adjusted London Interbank Offered Rate for such interest period. The
Euro-Dollar margin will be 3% until September 14, 1997 and 3.75% per annum
thereafter. The revolving credit facility is secured by a guarantee by the
Company's subsidiary Benton-Vinccler, C.A. and a security interest in all
payments made to Benton-Vinccler, C.A. under its Service Agreement with Fagoven,
S.A. The Credit Agreement contains covenants and restrictions that are
substantially the same as those provided in the Indenture.
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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, 1996 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. 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.
In October 1995, the Company and GEOILBENT entered into a loan arrangement with
Morgan Guaranty for working capital requirements. Under such arrangement,
GEOILBENT may borrow up to $10 million on a revolving basis. Borrowings under
this loan arrangement are secured by cash collateral in the form of a time
deposit by the Company. The loan arrangement contains no restrictive covenants
and no financial ratio requirements. The principal amount of such loan
outstanding at March 31, 1996 was $2.1 million.
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 Debentures 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. On May 18, 1996 the Company called all of its outstanding
Debentures at a redemption price of 103% of the principal amount, together with
accrued interest. Prior to July 23, 1996, holders may elect to convert their
Debentures into Common Stock. As of June 4, 1996, approximately 55.4% of the
outstanding Debentures have been converted into Common Stock, resulting in the
issuance of 263,283 shares of the Company's Common Stock. 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 redemption 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. At March 31, 1996, the aggregate principal amount
outstanding was $4.3 million.
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DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were issued and the New Notes are to be issued pursuant to an
Indenture (the "Indenture") between the Company and First Trust of New York,
National Association, as trustee (the "Trustee") dated as of May 2, 1996. The
terms of the New Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The Old Notes and New Notes are subject to all such
terms, and holders of Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. A copy of the Indenture will be made
available to holders upon request. The following summary of certain provisions
of the Indenture does not purport to be complete and is qualified in its
entirety by reference to the Indenture including the definitions therein of
certain terms used below. The definitions of certain terms used in the following
summary are set forth below under "-- Certain Definitions" or are otherwise
defined in the Indenture.
The Old Notes and the New Notes will constitute a single series of debt
securities under the Indenture. If the Exchange Offer is consummated, holders of
the Old Notes who do not exchange their Old Notes for New Notes will vote
together with the holders of New Notes for all relevant purposes under the
Indenture. In that regard, the Indenture requires that certain actions by the
holders thereunder (including acceleration following an Event of Default) must
be taken, and certain rights must be exercised, by specified minimum percentages
of the aggregate principal amount of the outstanding debt securities. In
determining whether holders of the requisite percentage in principal amount have
given any notice, consent or waiver or taken any other action permitted under
the Indenture, any Old Notes which remain outstanding after the Exchange Offer
will be aggregated with the New Notes and the holders of such Old Notes and New
Notes will vote together as a single series for all such purposes. Accordingly,
all references herein to specified percentages in aggregate principal amount of
the outstanding Notes shall be deemed to mean, at any time after the Exchange
Offer is consummated, such percentage in aggregate principal amount of the Old
Notes and New Notes then outstanding.
The New Notes and the Old Notes are sometimes referred to as, collectively, the
"Notes" and, individually, a "Note."
The New Notes will mature on May 1, 2003, will be limited to $125 million
aggregate principal amount at maturity and will be unsecured senior debt
obligations of the Company. The principal amount at maturity of each New Note
will be $1,000 or any integral multiple thereof. The New Notes will be presented
for registration of transfer or exchange at the office of the registrar, which
initially will be the Trustee. No service charge will be made for any
registration of transfer or exchange of a New Note. However, the Company may
require payment by a holder of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of such transfer
or exchange.
Interest on the New Notes will be payable semi-annually on May 1 and November 1
to holders of record on the close of business on the immediately preceding April
15 and October 15. Interest on the New Notes will accrue at the rate of 11 5/8%
per annum from the most recent date to which interest has been paid or duly
provided for on the Old Note surrendered in exchange for such New Note or, if no
interest has been paid or duly provided for on such Old Note, from May 1, 1996,
payable semianually on May 1 and November 1 of each year (each, an "Interest
Payment Date"), commencing with the fist Interest Payment Date occurring after
the date of original issuance of such New Note, to the person in whose name such
New Note is registered at the close of business on the April 15 or October 15
next preceding such Interest Payment Date. Any overdue principal, premium, if
any, or interest will bear interest, to the extent lawful, at 13 5/8% per annum.
Interest will be computed on a basis of a 360-day year consisting of twelve
30-day months. Principal and interest will be payable at the office or agency of
the Company maintained for that purpose within the City and State of New York
or, at the option of the Company, payment of interest may be made by check
mailed to the holders of the New Notes. The New Notes will not provide for any
increase in the interest rate thereon. For a discussion fo the circumstances
under which the interest rate on the Old Notes may be temporarily increased, see
"Description of the Old Notes."
RANKING
The New Notes will be senior unsecured debt obligations of the Company and will
rank senior in right of payment to all existing and future Subordinated
Indebtedness and pari passu with all other Senior Indebtedness.
The New Notes are obligations exclusively of the Company. Because the Company's
operations are conducted almost entirely through its Subsidiaries and joint
ventures, the cash flow and the consequent ability of the Company to service its
debt, including the New Notes and the Old Notes, are dependent upon the earnings
of the Company's Subsidiaries and joint ventures and the distribution of those
earnings to the Company. The Subsidiaries and joint ventures are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts due pursuant to the Notes or to make funds available therefor,
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<PAGE> 55
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 and joint ventures may be subject to statutory or contractual
restrictions and subject to various business considerations. Currently, the
Company only has one operating subsidiary, Benton-Vinccler, that may be expected
to make funds available to the Company to pay any amounts due pursuant to the
Notes.
The New Notes will be effectively subordinated to secured indebtedness of the
Company and all liabilities of the Company's Subsidiaries, including trade
payables and the liquidation value of Preferred Stock, if any, except to the
extent that the Company is itself recognized as a creditor of 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 any indebtedness of such
Subsidiary senior to that held by the Company. At March 31, 1996, after giving
pro forma effect to the U.S. Property Sale and the issuance of the Old Notes and
the use of proceeds received from each such transaction, $37.2 million of
consolidated indebtedness and trade payables would have been liabilities of the
Company's subsidiaries or secured indebtedness of the Company and ranked
effectively senior to the Notes and the Company would have had $6.4 million of
outstanding indebtedness and trade payables that would have ranked pari passu
with the Notes. In addition, the Company could have incurred up to $38.0 million
of secured indebtedness under its revolving letter of credit and loan facility
which would have ranked effectively senior to the Notes.
OPTIONAL REDEMPTION
Commencing May 1, 2000, the New Notes will be subject to redemption at the
option of the Company, in whole or in part, at any time and from time to time,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed in percentages of the principal amount) set forth below plus accrued
and unpaid interest to the redemption date, if redeemed during the 12-month
period beginning on May 1 of the year indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000 105.813%
2001 102.906%
2002 100.000%
</TABLE>
No sinking fund is provided for the New Notes.
At any time before May 1, 1999, the Company may also redeem up to 25% of the
aggregate principal amount of Notes then outstanding with the proceeds of a
public offering of Capital Stock (other than Disqualified Stock and a public
offering pursuant to a registration statement on Form S-8) of the Company within
90 days of such public offering at a redemption price equal to 111.625% of the
principal amount of such Notes, plus accrued and unpaid interest to the
redemption date; provided that at least $93.75 million in aggregate principal
amount of Notes remain outstanding immediately after giving effect to such
redemption.
If less than all the Notes are to be redeemed, the particular Notes or portions
thereof to be redeemed shall be selected by the Trustee from the outstanding
Notes not previously called for redemption, either pro rata, by lot or by any
other method the Trustee shall deem fair and reasonable, and the aggregate
principal amount to be redeemed must be equal to $1,000 or any integral multiple
thereof.
CERTAIN COVENANTS
The Indenture contains 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.
GEOILBENT, which is only 34%-owned by the Company, does not qualify as a
Subsidiary as defined in the Indenture and, consequently, the Indenture does not
restrict the Incurrence of Indebtedness by GEOILBENT. However, Indebtedness of
the Company and its Restricted Subsidiaries includes Indebtedness of any other
person, including GEOILBENT, to the extent that such Indebtedness is guaranteed
by, or secured by the assets of, the Company or any of its Restricted
Subsidiaries and, as a result, the Incurrence of any such guaranteed or secured
Indebtedness by GEOILBENT will, to the extent of the amount so guaranteed or
secured, be subject to the provisions of the Indenture described under
"Limitation on Indebtedness." In the event of any liquidation of GEOILBENT, the
claims of GEOILBENT's creditors would have to be satisfied prior to the
Company's receiving any distributions with respect to its 34% ownership interest
in GEOILBENT.
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The Indenture contains, 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 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) the EBITDA/Interest Ratio would be
greater than 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 Notes, and
(iv) in the event such Indebtedness would be Incurred by a Restricted
Subsidiary, such Indebtedness would also qualify as Permitted Restricted
Subsidiary Indebtedness.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may
Incur Permitted Indebtedness if no Default or Event of Default under any other
provision of the Indenture 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 Indenture described above under "Limitation on
Indebtedness," and (ii) the aggregate amount expended for all Restricted
Payments (excluding any payments permitted by clauses (ii) through (ix) 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, 1996 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, 1996 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 (vi) or (vii) 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 (iv) of the immediately succeeding paragraph, plus
(d) $15,000,000.
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 dividend, distribution or other payment on or with respect to Capital
Stock of the Company
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to the extent payable solely in shares of Capital Stock of the Company, (vi) 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 Notes, the stated maturity of such new
Subordinated Indebtedness is later than the Stated Maturity of the Notes and the
new Subordinated Indebtedness is subordinated to the Notes to at least the
extent that the Subordinated Indebtedness being purchased, redeemed, acquired,
retired or defeased was subordinated to the Notes, (vii) any purchase,
redemption or other acquisition or retirement for value of any shares of 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, (viii) 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 Indenture described
below under "Disposition of Proceeds of Asset Sales," cash or Cash Equivalents
and (ix) payments or distributions pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the provisions of
the 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 $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 $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 (as
evidenced by a resolution of such Committee) which Committee shall be comprised
of Disinterested Directors, or (iv) any Permitted Investment or any Restricted
Payments not prohibited by the provisions of the 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 or direct or
indirect interests in 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 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 Indenture described above under
"Limitation on Indebtedness," (iv) within ten Business Days after the date of
such Asset Sale, any Publicly Traded Stock
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required by a board resolution to be sold for cash, is sold for cash, and (v)
the requirements set forth below are met. For purposes of the foregoing, in the
case of any required fair market value determination with respect to any Asset
Sale or Tangible Business 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 (x) 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 (y) invest such Net Cash Proceeds, or a portion thereof, in 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 (x) or
(y) 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 $25 million, the Company
shall so notify the Trustee in writing and shall offer to purchase from all
holders of the Notes (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 Notes that may be purchased out of the
Excess Proceeds, in accordance with the procedures set forth in the Indenture,
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 Asset Sale Offer Date.
To the extent that the aggregate amount of Notes 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 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 Notes shall
cease to exist; provided, further, that the Lien securing any Subordinated
Indebtedness shall be subordinated to the Lien securing the Notes to at least
the extent that such Subordinated Indebtedness is subordinated to the Notes.
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 Indenture, (b) any encumbrance or restriction with respect to any person
that is not a Restricted Subsidiary on the date of the 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 Notes 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 nonsubletting clauses in leases. Nothing contained in the provisions of the
Indenture 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 Indenture described
above under the "Limitation on Liens Securing Indebtedness."
Limitation on Guarantees. 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 Indenture providing for a guarantee of the payment
of the Notes 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
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subordinated to such Restricted Subsidiary's guarantee of the Notes to at least
the extent that such Subordinated Indebtedness is subordinated to the Notes; and
provided, further, that the provisions of the Indenture 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 (i) in existence on the date of the Indenture, (ii) to the
extent such Indebtedness of the Company could be Incurred by such Restricted
Subsidiary as Permitted Restricted Subsidiary Indebtedness, or (iii) that (x)
existed at the time such person became a Restricted Subsidiary of the Company
and (y) was not Incurred in connection with, or in contemplation of, such person
becoming a Restricted Subsidiary. Notwithstanding the foregoing, any such
guarantee of the Notes 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
If there shall have occurred a Change in Control, Notes 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 Indenture. 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 Indenture, 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 remains
outstanding under the Convertible Debenture Indenture, a Fundamental Change as
defined therein, (vi) 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, 51% of the outstanding Voting Stock of
Benton-Vinccler, and (vii) Benton-Vinccler sells, transfers or otherwise
disposes of a substantial part of its assets; provided that neither of the
events described in clause (vi) or (vii) 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 (vii) 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 Notes 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
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expenditure requirements and, therefore, the Company's ability to incur
additional Indebtedness to repurchase the Notes 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." The failure of the Company to repurchase all Notes
tendered will constitute an Event of Default.
The Change in Control provisions of the Indenture may make 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 Notes 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 Indenture and the Notes, (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) the Company could Incur, immediately prior to such
consolidation, merger, conveyance, sale, transfer, lease, exchange or other
disposition, and the successor would be able to Incur, after giving effect to
such consolidation, merger, conveyance, sale, transfer, lease, exchange or other
disposition, an additional $1.00 of Indebtedness (excluding Permitted
Indebtedness) pursuant to the provisions of the Indenture described above under
"Certain Covenants -- Limitation on Indebtedness."
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 Indenture with the same
effect as if such successor had been named as the Company in the Indenture; 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 Indenture and the
Notes.
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 New Notes,
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 holder of New Notes.
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,
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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.
"Affiliate Transaction" has the meaning provided under "Certain
Covenants -- Limitation on Transactions with Affiliates."
"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.
"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 Indenture 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 $10 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 Indenture, 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.
"Change in Control" has the meaning provided in "Change in Control."
"Commodity Swap Agreement" means any commodity swap agreement or other similar
agreement or arrangement.
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"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 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 includible 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 gains and losses or gains or losses attributable to Asset Sales.
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 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 Bank of New York.
"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.
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"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date on which the Notes mature.
"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.
"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 the 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."
"Excess Proceeds" has the meaning provided in "Certain Covenants -- Disposition
of Proceeds of Asset Sales."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"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 guarantee (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 for purposes of the provisions of the Indenture described under
"Certain Covenants -- Limitation on Indebtedness" 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 for purposes of the provisions of the Indenture described
under "Certain Covenants -- Limitation on Indebtedness" 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.
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"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 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 Agreements" 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
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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 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 and any
activity necessary, appropriate or incidental to the foregoing.
"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, C.A. 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, S.A. (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
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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.
"Permitted Company Secured Indebtedness" means secured Indebtedness of the
Company Incurred after the date of the Indenture (other than pursuant to clause
(xi) of the definition of Permitted Indebtedness) in an aggregate amount not to
exceed $20 million outstanding at any time less the aggregate amount of
Permitted Restricted Subsidiary Indebtedness outstanding at such time.
"Permitted GEOILBENT Indebtedness" means Indebtedness of GEOILBENT which is
non-recourse to the Company and its Restricted Subsidiaries except to the extent
of the pledge of equity interests in GEOILBENT.
"Permitted Indebtedness" means (i) the Old Notes and the New Notes; (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 $10 million or 4% 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 $20 million at any
time outstanding; (vii) (a) Indebtedness of Benton-Vinccler not in excess of $25
million in aggregate principal amount outstanding which is cash collateralized
and (b) Permitted Benton-Vinccler Indebtedness; (viii) Permitted GEOILBENT
Indebtedness; (ix)(a) one or more letters of credit having an aggregate face
amount not exceeding $18 million issued in support of performance obligations in
respect of the Delta Centro block in Venezuela and (b) 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; (x) 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; (xi) the Vinccler Notes; and (xii) 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 Notes 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 Notes at least to the extent that the
Subordinated Indebtedness being renewed, extended, refinanced, repurchased or
exchanged is subordinated to the Notes.
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"Permitted Investment" means investments and expenditures made in the ordinary
course of, and of a nature that is or shall have become customary in, the Oil
and Gas Business as means of actively exploiting, exploring for, acquiring,
developing, processing, gathering, marketing or transporting oil and gas through
agreements, transactions, interests or arrangements which permit a person to
share risks or costs, comply with regulatory requirements regarding local
ownership or satisfy other objectives customarily achieved through the conduct
of the Oil and Gas Business jointly with third parties, including, without
limitation, (i) ownership interests in oil and gas properties or gathering
systems and (ii) Investments and expenditures in the form of or pursuant to
operating agreements, processing agreements, farm-in agreements, farm-out
agreements, development agreements, area of mutual interest agreements,
unitization agreements, pooling arrangements, joint bidding agreements, service
contracts, joint venture agreements, partnership agreements (whether general or
limited), subscription agreements, stock purchase agreements and other similar
agreements with third parties (including Unrestricted Subsidiaries).
"Permitted 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 GEOILBENT Indebtedness,
limited to the non-recourse pledge of equity interests in GEOILBENT; (iv) any
Permitted Restricted Subsidiary Indebtedness; (v) any Permitted Company Secured
Indebtedness; (vi) Permitted Commodity Swap Agreements; (vii) reimbursement
obligations in respect of the letters of credit referred to in clause (ix)(a) of
the definition of Permitted Indebtedness; (viii) Indebtedness of Benton-Vinccler
referred to in clause (vii)(a) of the definition of Permitted Indebtedness,
limited to cash collateral; and (ix) 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 Notes to at least the extent that such Subordinated Indebtedness is
subordinated to the Notes, (b) in no event shall the Lien securing such other
Indebtedness be prior to the Lien securing the Notes and (c) if the Lien
securing the Notes ceases to exist, the Lien securing such other Indebtedness
shall also cease to exist.
"Permitted Restricted Subsidiary Indebtedness" means Indebtedness of any
Restricted Subsidiary (including Permitted Benton-Vinccler Indebtedness but
excluding Indebtedness of Benton-Vinccler referred to in clause (vii)(a) of the
definition of Permitted Indebtedness) Incurred after the date of the Indenture
(other than pursuant to clause (xii) of the definition of Permitted
Indebtedness) in an aggregate amount for all such Restricted Subsidiaries not to
exceed $20 million, 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 Nasdaq -- National Market.
"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 Indenture that by their terms or otherwise are or
may be required to be redeemed prior to the Stated Maturity of the Notes 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 Notes; provided that if the only event
that could require
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redemption of any such securities prior to the Stated Maturity of the Notes is a
change in control of the Company (defined in a manner substantially identical to
the definition of Change in Control in the Indenture) and such right of
redemption is expressly subordinated to the right of the holders of the Notes to
require repurchase of the Notes upon the occurrence of a Change in Control
pursuant to the terms of the Indenture, 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 Indenture, 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 payment, as the case may
be, of such Subordinated Indebtedness and (iv) any Investment by such person
other than any Investment in Cash Equivalents or any Permitted Investment.
"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
Subordinated Indebtedness.
"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 by its terms expressly subordinate
or junior in right of payment to the Notes.
"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 provisions described under the caption "Certain
Covenants -- Limitation on Indebtedness," (ii) the Company could make an
additional Restricted Payment of $1.00 pursuant
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to the Indenture provisions described in the first paragraph under the caption
"Limitation on Restricted Payments," (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 provisions described under the
caption "Certain Covenants -- Limitation on Indebtedness." 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 original 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.
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture with respect to the Notes if
any one of the following events occurs:
(a) default in the payment of any installment of interest on the Notes
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 Notes, the amount
payable upon the redemption of any Notes, Change in Control Purchase Price
or Asset Sale Offer Price when the same becomes due and payable as provided
under the Indenture, 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 Indenture (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 Notes a written notice
specifying such default or breach and stating that such notice is a "Notice
of Default" under the Indenture; 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
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(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 any 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 Notes (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 Notes 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 Notes 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 Notes 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 the Notes 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 Notes
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 Notes) and (b) the rescission would not conflict with any judgment
or decree and (c) all existing Events of Default, other than the nonpayment 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 Notes, by notice to the Trustee (and without notice to any other
holder) on behalf of the holders of all the Notes may waive any past default or
Event of Default under the Indenture with respect to such Notes 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 Notes or in respect of a covenant or provision that under the terms of
the Indenture cannot be modified or amended without the consent of the holder of
each outstanding Note 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 Indenture; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
In the Indenture, (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 Indenture 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 Indenture and
will suffer and permit the execution of every such power as though no such law
had been enacted.
DEFEASANCE; SATISFACTION AND DISCHARGE
The Indenture will provide that (i) the Company may be discharged from any and
all obligations in respect of the outstanding Notes 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 Indenture and the Notes 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 Notes. With respect to clause (ii), the
obligations under the Indenture 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
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Revenue Service a ruling or there has been a change in law, and based thereon
such Opinion of Counsel confirms that holders of the Notes will not recognize
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge 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 Notes 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.
The Indenture will cease to be of further effect (except as to surviving rights
of registration of transfer or exchange of Notes, substitution of apparently
mutilated, defaced, destroyed, lost or stolen Notes, rights of holders to
receive payments of principal and interest and rights of holders of Notes to
funds deposited with the Trustee) as to all outstanding Notes when either (i)
all such Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation, (ii) the Company has paid the principal of and
interest on all Notes outstanding under the Indenture as and when the same shall
have become due and payable, or (iii) all such Notes not theretofore delivered
to the Trustee for cancellation (a) have become due and payable, or (b) will
become due and payable within one year, or (c) are to be called for redemption
within one year, and (x) the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay the entire
indebtedness on such Notes not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest to the date of
deposit (if such Notes are then due and payable) or to the applicable maturity
or redemption date (as the case may be), (y) no default or Event of Default
shall have occurred or be continuing and (z) such deposit would not result in a
breach or violation of, or constitute a default under, the Indenture or any
other agreement or instrument to which the Company is a party or by which it is
bound, and the Company has paid all sums payable by it under the Indenture.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of New
York.
MODIFICATION OF INDENTURE
The Indenture contains provisions permitting the Company and the Trustee in
limited circumstances, and otherwise, with the consent of the holders of not
less than a majority in aggregate principal amount of Notes 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 Indenture or
any supplemental indenture or modifying in any manner the rights of the holders
of the Notes; provided that no such supplemental indenture shall (i) extend the
final maturity of any Note, 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 Notes or upon an Event of Default, or reduce the
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 Note so affected, or (ii) reduce the aforesaid
percentage of Notes, the consent of the holders of which is required for any
supplemental indenture, without the consent of the Holders of all Notes then
outstanding.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
THE GLOBAL NOTES
Upon the issuance of the Regulation S Global Note and the Restricted Global Note
(each a "Global Note" and together the "Global Notes"), DTC or its custodian
will credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Note to the accounts
of persons who have accounts with such depositary. Such accounts initially will
be designated by or on behalf of the Initial Purchaser. Ownership of beneficial
interests in a Global Note will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in a Global Note will be shown on, and the transfer of
that ownership will be effected only
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through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Qualified institutional buyers may hold their
interests in a Global Note directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system.
Investors may hold their interests in the Regulation S Global Note directly
through Cedel or Euroclear, if they are participants in such systems, or
indirectly through organizations that are participants in such system. Beginning
40 days after the later of the commencement of the offering and the Closing Date
(but not earlier), investors may also hold such interests through organizations
other than Cedel or Euroclear that are participants in the DTC system. Cedel and
Euroclear will hold interests in the Regulation S Global Note on behalf of their
participants through DTC.
So long as DTC, or its nominee, is the registered owner of holder of a Global
Note, DTC or such nominee, as the case may be, will be considered the sole owner
or holder of the Notes represented by such Global Note for all purposes under
the Indenture and the Notes. No beneficial owner of an interest in a Global Note
will be able to transfer that interest except in accordance with the procedures
provided for under "Notice to Investors," as well as DTC's applicable
procedures, and, if applicable, those of Euroclear and Cedel.
Payments of the principal of, and interest on, the Global Notes will be made to
DTC or its nominee, as the case may be, as the registered owner thereof. None of
the Company, the Trustee or any Paying Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the name of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way in
accordance with DTC rules and will be settled in same-day funds. If a holder
requires physical delivery of a Certificated Note for any reason, including to
sell Notes to persons in states which require such delivery of such Notes or to
pledge such Notes, such holder must transfer its interest in the Global Note in
accordance with the normal procedures of DTC and the procedures set forth in
"Transfer Restrictions." Transfers between participants in Euroclear and Cedel
will be effected in the ordinary way in accordance with their respective rules
and operating procedures.
DTC has advised the Company that it will take any action permitted to be taken
by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
accounts the DTC interests in the Global Notes is credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default (as defined below) under the Notes, DTC will exchange the
Global Notes for Certificated Notes, which it will distribute to its
participants and which, if representing interests in the Restricted Global Note
or the Temporary Regulation S Global Note, will be legended as set forth under
the heading "Notice to Investors."
DTC has advised the Company as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly ("indirect participants").
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures in
order to facilitate transfers of interests in the Global Notes among
participants of DTC, Euroclear and Cedel, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
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CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary for the
Global Notes and a successor depositary is not appointed by the Company within
90 days, the Company will issue Certificated Notes in exchange for the Global
Notes which, in the case of Notes issued in exchange for the Restricted Global
Note will bear the legend referred to under the heading "Notice to Investors."
DESCRIPTION OF THE OLD NOTES
The terms of the Old Notes are identical in all material respects to the New
Notes, except that (i) the Old Notes have not been registered under the
Securities Act, are subject to certain restrictions on transfer, contain certain
legends relating thereto and are entitled to certain registration rights under
the Registration Rights Agreement (which rights will terminate upon consummation
of the Exchange Offer); and (ii) the New Notes will not provide for any increase
in the interest rate thereon. In that regard, the Old Notes provide that, in the
event that the Exchange Offer is not consummated or a shelf registration
statement (the "Shelf Registration Statement") with respect to the resale of the
Old Notes is not declared effective on or prior to August 31, 1996, or if the
Exchange Offer is not consummated on or prior to August 31, 1996, the interest
rate on the Old Notes will increase by 0.50% per annum until the Exchange Offer
is consummated. Upon the consummation of the Exchange Offer or the effectiveness
of a Shelf Registration Statement, as the case may be, after August 31, 1996,
the interest rate on any Old Notes which remain outstanding will be reduced,
from the date of such consummation or effectiveness, as the case may be, to
11 5/8% per annum and the Old Notes will not thereafter be entitled to any
increase in the interest rate thereon. The New Notes are not entitled to any
such increase in the interest rate thereon. In addition, the Old Notes and the
New Notes will constitute a single series of debt securities under the
Indenture. See "Description of the New Notes -- General." Accordingly, holders
of Old Notes should review the information set forth under "Summary -- Certain
Consequences of a Failure to Exchange Old Notes" and "Description of the New
Notes."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States Federal income tax
considerations to holders of the New Notes who are subject to U.S. net income
tax with respect to the New Notes ("U.S. persons") and who will hold the New
Notes as capital assets. There can be no assurance that the U.S. Internal
Revenue Service (the "IRS") will take a similar view of the purchase, ownership
or disposition of the New Notes. This discussion is based upon the provisions of
the Internal Revenue Code of 1986, as amended, and regulations, rulings and
judicial decisions now in effect, all of which are subject to change. It does
not include any description of the tax laws of any state, local or foreign
governments or any estate or gift tax considerations that may be applicable to
the New Notes or holders thereof. It does not discuss all aspects of U.S.
Federal income taxation that may be relevant to a particular investor in light
of his particular investment circumstances or to certain types of investors
subject to special treatment under the U.S. Federal income tax laws (for
example, dealers in securities or currencies, S corporations, life insurance
companies, tax-exempt organizations, taxpayers subject to the alternative
minimum tax and non-U.S. persons) and also does not discuss New Notes held as a
hedge against currency risks or as part of a straddle with other investments or
as part of a "synthetic security" or other integrated investment (including a
"conversion transaction") comprised of a New Note and one or more other
investments, or situations in which the functional currency of the holders is
not the U.S. dollar.
Holders of Old Notes contemplating acceptance of the Exchange Offer should
consult their own tax advisors with respect to their particular circumstances
and with respect to the effects of state, local or foreign tax laws to which
they may be subject.
EXCHANGE OF NOTES
The exchange of Old Notes for New Notes should not be a taxable event to holders
for federal income tax purposes. The exchange of Old Notes for the New Notes
pursuant to the Exchange Offer should not be treated as an "exchange" for
federal income tax purposes because the New Notes should not be considered to
differ materially in kind or extent from the Old Notes. If, however, the
exchange of the Old Notes for the New Notes were treated as an exchange for
federal income tax purposes, such exchange should constitute a recapitalization
for federal income tax purposes. Accordingly, a holder should have the same
adjusted basis and holding period in the New Notes as it had in the Old Notes
immediately before the exchange.
INTEREST ON THE NEW NOTES
A holder of a New Note will be required to report as ordinary interest income
for U.S. Federal income tax purposes interest earned on the New Note in
accordance with the holder's method of tax accounting.
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DISPOSITION OF NEW NOTES
A holder's tax basis for a New Note generally will be the holder's purchase
price for the Old Note. Upon the sale, exchange, redemption, retirement or other
disposition of a New Note, a holder will recognize gain or loss equal to the
difference (if any) between the amount realized and the holder's tax basis in
the New Note. Such gain or loss will be long-term capital gain or loss if the
New Note has been held for more than one year (including the period the Old Note
was held) and otherwise will be short-term capital gain or loss (with certain
exceptions to the characterization as capital gain if the New Note was acquired
at a market discount).
BACKUP WITHHOLDING
A holder of a New Note may be subject to backup withholding at the rate of 31%
with respect to interest paid on the New Note and proceeds from the sale,
exchange, redemption or retirement of the New Note, unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates that fact or (b) provides a correct taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. A holder
of a New Note who does not provide the Company with his correct taxpayer
identification number may be subject to penalties imposed by the IRS.
A holder of a New Note who is not a U.S. person will generally be exempt from
backup withholding and information reporting requirements, but may be required
to comply with certification and identification procedures in order to obtain an
exemption from backup withholding and information reporting.
Any amount paid as backup withholding will be creditable against the holder's
U.S. Federal income tax liability.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in connection
with the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by Participating
Broker-Dealers during the period referred to below in connection with resales of
New Notes received in exchange for Old Notes if such Old Notes were acquired by
such Participating Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities. The Company has agreed
that this Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with resales of such
New Notes for a period ending 180 days after the Expiration Date (subject to
extension under certain limited circumstances described herein) or, if earlier,
when all such New Notes have been disposed of by such Participating
Broker-Dealer. See "The Exchange Offer -- Resales of New Notes."
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. New Notes received by broker-dealers for their own
accounts in connection with the Exchange Offer may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account in connection with the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that request such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer other than commissions or concessions of any brokers or dealers
and will indemnify the holders of Old Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the Notes will be passed upon for the Company by
Emens, Kegler, Brown, Hill & Ritter, Co., L.P.A., Columbus, Ohio.
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EXPERTS
The financial statements incorporated in this registration statement by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 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 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 with respect to proved
oil and gas reserves of the Company at December 31, 1994 and 1995, to the extent
stated herein, was estimated by the Company and audited by Huddleston & Co.,
Inc., independent petroleum engineers, and is included herein on the authority
of such firm as experts in petroleum engineering.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the Commission
pursuant to 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, 1995, as amended on Form 10-K/A filed on June
14, 1996; and (ii) the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
termination of the offering of the Notes shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement or document so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document,
copies of which are available from the Company as described below, each such
statement qualified in all respects by such reference.
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.
73
<PAGE> 76
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 related to acquisitions,
exploration and development costs (reduced by proceeds for 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 nonproducing
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.
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.
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 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.
74
<PAGE> 77
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 FUTURE NET CASH FLOWS. The "Standardized Measure of
Future Net Cash Flows" is a method of determining the present value of Proved
Reserves. The future net revenues from Proved Reserves are estimated assuming
that oil and gas prices and production costs remain constant. The resulting
stream of revenues 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 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.
75
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[BENTON OIL AND GAS COMPANY LOGO]
<PAGE> 79
PART II
ITEM 20. 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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<S> <C> <C>
4.1 Indenture dated as of May 2, 1996 by and between the Company and First Trust Company of
New York, National Association.
5.1 Opinion of Emens, Kegler, Brown, Hill & Ritter Co., LPA as to the legality of the
securities being registered.
11.1 Statement regarding computation of per share earnings (incorporated by reference to
Exhibit 11.1 to the Company's 10-K for the year ended December 31, 1995 and to Exhibit
11.1 to the Company's Form 10-Q for the quarter ended March 31, 1996).
12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Emens, Kegler, Brown, Hill & Ritter Co., LPA. (Included in Exhibit 5.1)
23.3 Consent of Huddleston & Co., Inc.
24.1 Power of Attorney (included on signature page).
25.1 Statement of eligibility of Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement.
99.4 Form of Letter to Record Holders.
99.5 Form of Letter to Beneficial Holders.
</TABLE>
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(b) Financial Statement Schedules.
All schedules have been omitted because the required information is not
significant or included in the financial statements or the notes thereto, or is
not applicable.
ITEM 22. UNDERTAKINGS.
a. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1993;
(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, represents 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;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
b. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans' 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.
c. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
d. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
e. 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 foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, offer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Carpinteria, State of California, on the 14th day of June, 1996.
BENTON OIL AND GAS COMPANY
By: /s/ A. E. BENTON
----------------------------------------
A. E. Benton, Chief Executive Officer
Each person whose signature appears below appoints A.E. Benton, Gregory S.
Grabar, David H. Pratt, Jack A. Bjerke and Amy M. Shepherd, and all five of
them, any of whom may act without the joinder of the others, as his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him, and in his stead, in any capacities to sign any and all
amendments, including post-effective amendments to this Registration Statement,
and to file the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed on June 14, 1996 by the following persons
in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
/s/ A. E. BENTON Chief Executive Officer and Director
- ---------------------------------------------
A.E. Benton
/s/ MICHAEL B. WRAY Principal Financial Officer and Director
- ---------------------------------------------
Michael B. Wray
/s/ CHRIS C. HICKOK Principal Accounting Officer
- ---------------------------------------------
Chris C. Hickok
/s/ GARRET A. GARRETSON Director
- ---------------------------------------------
Garret A. Garretson
/s/ WILLIAM H. GUMMA Director
- ---------------------------------------------
William H. Gumma
/s/ RICHARD W. FETZNER Director
- ---------------------------------------------
Richard W. Fetzner
/s/ BRUCE M. MCINTYRE Director
- ---------------------------------------------
Bruce M. McIntyre
</TABLE>
<PAGE> 1
Exhibit 4.1
========================================================
BENTON OIL AND GAS COMPANY
AND
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION, Trustee
Indenture
Dated as of May 2, 1996
----------
$125,000,000
11 5/8% Senior Notes Due 2003
========================================================
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CROSS-REFERENCE TABLE
---------------------
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ ------------------
<S> <C>
Sec.310(a)(1) .................................................... 5.9
(a)(2) ..................................................... 5.9
(b) ........................................................ 5.10
Sec.312(a) ....................................................... 3.6
Sec.313(c) ....................................................... 3.7; 10.4
Sec.314(a) ....................................................... 3.19;10.4
(a)(4) ..................................................... 3 5; 10.4
(c)(1) ..................................................... 10.5
(c)(2) ..................................................... 10.5
(e) ........................................................ 10.5
Sec.315(b) ....................................................... 5.6; 10.4
Sec.316(a)(1)(A) ................................................. 4.8
(a)(1)(B) .................................................. 4.9
(b) ........................................................ 4.9; 7.2
Sec.317(a)(1) .................................................... 4.2
(a)(2) ..................................................... 4.2
Sec.318(a) ....................................................... 10.7
(c) ........................................................ 10.7
</TABLE>
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TABLE OF CONTENTS
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PARTIES ........................................................................ 1
RECITALS
Authorization of Indenture................................................................ 1
Form of Face of Security.................................................................. 1
Form of Reverse of Security............................................................... 3
Form of Trustee's Certificate of Authentication........................................... 8
Form of Transfer Notice................................................................... 8
Compliance with Legal Requirements........................................................ 11
Purpose of and Consideration for Indenture................................................ 11
ARTICLE ONE
DEFINITIONS.
SECTION 1.1. Certain Terms Defined............................................................... 11
Acquired Indebtedness............................................................... 11
Affiliate........................................................................... 11
Affiliate Transaction............................................................... 12
Agent Members....................................................................... 12
amount.............................................................................. 12
Asset Acquisition................................................................... 12
Asset Disposition................................................................... 12
Asset Sale.......................................................................... 12
Asset Sale Offer Price.............................................................. 13
Average Life........................................................................ 13
Benton-Vinccler..................................................................... 13
Board of Directors.................................................................. 13
Business Day........................................................................ 13
Capital Stock....................................................................... 13
Capitalized Lease Obligation........................................................ 13
Cash Equivalents.................................................................... 14
Change in Control................................................................... 14
Closing Date........................................................................ 15
Commission.......................................................................... 15
Commodity Swap Agreement............................................................ 15
Company............................................................................. 15
Consolidated Interest Expense....................................................... 16
Consolidated Net Income............................................................. 16
Consolidated Net Worth.............................................................. 17
Continuing Directors................................................................ 17
Convertible Debenture Indenture..................................................... 17
Corporate Trust Office.............................................................. 18
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Currency Agreement...................................................... 18
Default................................................................. 18
Depositary.............................................................. 18
Disinterested Director.................................................. 18
Disqualified Stock...................................................... 18
EBITDA.................................................................. 18
EBITDA/Interest Ratio................................................... 19
Event of Default........................................................ 19
Excess Proceeds......................................................... 19
Exchange Act............................................................ 19
Exchange Offer.......................................................... 19
Exchange Offer Registration Statement................................... 20
Exchange Securities..................................................... 20
GAAP.................................................................... 20
Global Securities....................................................... 20
guarantee............................................................... 20
Holder, holder of securities,
Securityholder........................................................ 20
Incur................................................................... 20
Indebtedness............................................................ 21
Indenture............................................................... 22
Independent Financial Advisor........................................... 22
Independent Petroleum Engineers......................................... 22
Interest Rate Agreement................................................. 22
Interest Record Date.................................................... 23
Investment.............................................................. 23
Lien.................................................................... 23
Material Subsidiary..................................................... 23
Net Cash Proceeds....................................................... 23
Net Proceeds............................................................ 24
Non-Recourse Indebtedness............................................... 24
Non-U.S. Person......................................................... 24
Officers' Certificate................................................... 24
Offshore Global Securities.............................................. 25
Offshore Physical Securities............................................ 25
Offshore Securities Exchange Date....................................... 25
Oil and Gas Business.................................................... 25
Oil and Gas Reserve Estimate............................................ 25
Opinion of Counsel...................................................... 26
Original Issue Date..................................................... 27
outstanding............................................................. 27
Performance Letter of Credit............................................ 27
Permanent Offshore Global Security...................................... 28
Permitted Benton-Vinccler
Indebtedness.......................................................... 28
Permitted Commodity Swap Agreements..................................... 28
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Permitted Company Secured
Indebtedness.......................................................... 28
Permitted Indebtedness.................................................. 28
Permitted Investment.................................................... 30
Permitted Liens......................................................... 30
Permitted Restricted Subsidiary
Indebtedness.......................................................... 31
person.................................................................. 31
Physical Securities..................................................... 31
Preferred Stock......................................................... 32
principal............................................................... 32
Private Placement Legend................................................ 32
Public Equity Offering.................................................. 32
Publicly Traded Stock................................................... 32
Redeemable Stock........................................................ 32
Reference Period........................................................ 33
Registrar............................................................... 33
Registration............................................................ 33
Registration Rights Agreement........................................... 33
Regulation S............................................................ 33
Repaid Investment....................................................... 33
Responsible Officer..................................................... 34
Restricted Payment...................................................... 34
Restricted Subsidiary................................................... 34
Restricted Subsidiary Investment........................................ 34
Rule 144A............................................................... 35
Securities Act.......................................................... 34
Security or Securities.................................................. 34
Security Register....................................................... 35
Senior Indebtedness..................................................... 35
Shelf Registration Statement............................................ 35
Stated Maturity......................................................... 35
Subordinated Indebtedness............................................... 35
Subsidiary.............................................................. 35
Temporary Offshore Global Security...................................... 36
Trustee................................................................. 36
Trust Indenture Act of 1939............................................. 36
U.S. Global Security.................................................... 36
U.S. Person............................................................. 36
U.S. Physical Securities. . ............................................ 36
Unrestricted Subsidiary................................................. 36
Vinccler Notes. . ...................................................... 37
Voting Stock............................................................ 37
Wholly Owned Subsidiary................................................. 37
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ARTICLE TWO
ISSUE, EXECUTION, FORM AND
REGISTRATION OF SECURITIES.
SECTION 2.1. Authentication and Delivery of
Securities........................................................................ 37
SECTION 2.2. Execution of Securities............................................................. 38
SECTION 2.3. Certificate of Authentication....................................................... 38
SECTION 2.4. Form, Denomination and Date of
Securities; Payments of Interest.................................................. 38
SECTION 2.5. Restrictive Legends................................................................. 40
SECTION 2.6. Registration, Transfer and Exchange................................................. 42
SECTION 2.7. Book-Entry Provisions for Global
Securities........................................................................ 44
SECTION 2.8. Special Transfer Provisions......................................................... 46
SECTION 2.9. Mutilated, Defaced, Destroyed, Lost
and Stolen Securities............................................................. 50
SECTION 2.10. Cancellation of Securities;
Destruction Thereof............................................................... 52
SECTION 2.11. Temporary Securities................................................................ 52
SECTION 2.12. CUSIP and CINS Numbers.............................................................. 52
ARTICLE THREE
COVENANTS OF THE COMPANY AND THE TRUSTEE.
SECTION 3.1. Payment of Principal and Interest................................................... 53
SECTION 3.2. Offices for Payments, etc........................................................... 53
SECTION 3.3. Appointment to Fill a Vacancy in
Office of Trustee................................................................. 54
SECTION 3.4. Paying Agents....................................................................... 54
SECTION 3.5. Certificates to Trustee............................................................. 55
SECTION 3.6. Securityholders' Lists.............................................................. 55
SECTION 3.7. Reports by the Trustee.............................................................. 56
SECTION 3.8. Limitation on Indebtedness.......................................................... 56
SECTION 3.9. Limitation on Indebtedness of
Unrestricted Subsidiaries......................................................... 57
SECTION 3.10. Limitation on Restricted Payments................................................... 57
SECTION 3.11. Limitation on Transactions with
Affiliates........................................................................ 59
SECTION 3.12. Disposition of Proceeds of
Asset Sales....................................................................... 60
SECTION 3.13. Limitation on Liens Securing
Indebtedness...................................................................... 64
SECTION 3.14. Limitation on Conduct of Business................................................... 64
SECTION 3.15. Limitation on Dividends and Other
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Payment Restrictions Affecting
Restricted Subsidiaries........................................................... 64
SECTION 3.16. Limitation on Guarantees............................................................ 65
SECTION 3.17. Change in Control................................................................... 66
SECTION 3.18. Provision of Financial Information.................................................. 68
SECTION 3.19. Waiver of Stay, Extension or
Usury Laws........................................................................ 68
ARTICLE FOUR
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT.
SECTION 4.1. Event of Default Defined; Acceleration
of Maturity; Waiver of Default................................................... 69
SECTION 4.2. Collection of Indebtedness by Trustee;
Trustee May Prove Debt........................................................... 72
SECTION 4.3. Application of Proceeds............................................................. 75
SECTION 4.4. Suits for Enforcement............................................................... 76
SECTION 4.5. Restoration of Rights on Abandonment
of Proceedings................................................................... 76
SECTION 4.6. Limitations on Suits by
Securityholders.................................................................. 76
SECTION 4.7. Powers and Remedies Cumulative;
Delay or Omission Not Waiver of
Default.......................................................................... 77
SECTION 4.8. Control by Securityholders.......................................................... 77
SECTION 4.9. Waiver of Past Defaults............................................................. 78
ARTICLE FIVE
CONCERNING THE TRUSTEE.
SECTION 5.1. Duties and Responsibilities of the
Trustee; During Default; Prior to
Default.......................................................................... 79
SECTION 5.2. Certain Rights of the Trustee....................................................... 80
SECTION 5.3. Trustee Not Responsible for Recitals,
Disposition of Securities or
Application of Proceeds Thereof.................................................. 82
SECTION 5.4. Trustee and Agents May Hold
Securities; Collections, etc..................................................... 82
SECTION 5.5. Moneys Held by Trustee.............................................................. 82
SECTION 5.6. Notice of Default................................................................... 82
SECTION 5.7. Compensation and Indemnification
of Trustee and Its Prior Claim................................................... 83
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SECTION 5.8. Right of Trustee to Rely on
Officers' Certificate, etc........................................................ 83
SECTION 5.9. Persons Eligible for Appointment
as Trustee........................................................................ 84
SECTION 5.10. Resignation and Removal; Appointment
of Successor Trustee.............................................................. 84
SECTION 5.11. Acceptance of Appointment by
Successor Trustee................................................................. 85
SECTION 5.12. Merger, Conversion, Consolidation
or Succession to Business of
Trustee........................................................................... 86
SECTION 5.13. Preferential Collection of Claims................................................... 87
ARTICLE SIX
CONCERNING THE SECURITYHOLDERS.
SECTION 6.1. Evidence of Action Taken by
Securityholders................................................................... 87
SECTION 6.2. Proof of Execution of Instruments and
of Holding of Securities; Record Date............................................. 88
SECTION 6.3. Securities Owned by Company Deemed Not
Outstanding....................................................................... 88
SECTION 6.4. Right of Revocation of Action Taken................................................. 89
ARTICLE SEVEN
SUPPLEMENTAL INDENTURES.
SECTION 7.1. Supplemental Indentures Without
Consent of Securityholders........................................................ 89
SECTION 7.2. Supplemental Indentures With Consent
of Securityholders................................................................ 91
SECTION 7.3. Effect of Supplemental Indenture.................................................... 92
SECTION 7.4. Documents to Be Given to Trustee.................................................... 92
SECTION 7.5. Notation on Securities in Respect of
Supplemental Indentures........................................................... 92
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OR CONVEYANCE.
SECTION 8.1. When Issuer May Merge, Etc.......................................................... 93
SECTION 8.2. Successor Corporation Substituted................................................... 93
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SECTION 8.3. Opinion of Counsel to Trustee....................................................... 94
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS.
SECTION 9.1. Satisfaction and Discharge of
Indenture......................................................................... 94
SECTION 9.2. Application by Trustee of Funds
Deposited for Payment of Securities............................................... 95
SECTION 9.3. Repayment of Moneys Held by Paying
Agent............................................................................. 95
SECTION 9.4. Return of Moneys Held By Trustee and
Paying Agent Unclaimed for Three
Years............................................................................. 95
ARTICLE TEN
MISCELLANEOUS PROVISIONS.
SECTION 10.1. Incorporators, Stockholders, Officers
and Directors of Company Exempt from
Individual Liability.............................................................. 96
SECTION 10.2. Provisions of Indenture for the Sole
Benefit of Parties and Security-
holders........................................................................... 96
SECTION 10.3. Successors and Assigns of Company
Bound by Indenture................................................................ 96
SECTION 10.4. Notices and Demands on Company,
Trustee and Securityholders....................................................... 96
SECTION 10.5. Officers' Certificates and Opinions
of Counsel; Statements to Be Con-
tained Therein.................................................................... 97
SECTION 10.6. Payments Due on Saturdays, Sundays
and Holidays...................................................................... 99
SECTION 10.7. Conflict of Any Provision of
Indenture with Trust Indenture
Act of 1939....................................................................... 99
SECTION 10.8. New York Law to Govern.............................................................. 99
SECTION 10.9. Counterparts........................................................................ 99
SECTION 10.10. Effect of Headings.................................................................. 99
</TABLE>
vii
<PAGE> 10
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ELEVEN
REDEMPTION OF SECURITIES.
SECTION 11.1. Right of Optional Redemption; Prices................................................ 99
SECTION 11.2. Notice of Redemption; Partial
Redemptions....................................................................... 100
SECTION 11.3. Payment of Securities Called for
Redemption........................................................................ 101
SECTION 11.4. Exclusion of Certain Securities from
Eligibility for Selection for
Redemption........................................................................ 102
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE.
SECTION 12.1. Company's Option to Effect
Defeasance or Covenant Defeasance................................................. 102
SECTION 12.2. Defeasance and Discharge............................................................ 102
SECTION 12.3. Covenant Defeasance................................................................. 103
SECTION 12.4. Conditions to Defeasance or
Covenant Defeasance............................................................... 103
SECTION 12.5. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions.................................................... 106
SECTION 12.6. Reinstatement....................................................................... 106
TESTIMONIUM ..................................................................................
SIGNATURES .................................................................................. 107
ACKNOWLEDGMENTS....................................................................................
EXHIBIT A. Form of Certificate to be Delivered in
Connection with Transfers to Non-QIB
Accredited Investors.............................................................. A-1
EXHIBIT B. Form of Certificate to be Delivered in
Connection with Transfers Pursuant to
Regulation S...................................................................... B-1
</TABLE>
viii
<PAGE> 11
THIS INDENTURE, dated as of May 2, 1996 between Benton Oil and
Gas Company, a Delaware corporation (the "Company"), and First Trust of New
York, National Association (the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Company has duly authorized the issue of its 11
5/8% Senior Notes Due 2003 (the "Securities") and, to provide, among other
things, for the authentication, delivery and administration thereof, the Company
has duly authorized the execution and delivery of this Indenture; and
WHEREAS, the Securities and the Trustee's certificate of
authentication shall be in substantially the following form:
[FORM OF FACE OF SECURITY]
No. $
[CUSIP][CINS]
Benton Oil and Gas Company
11 5/8% Senior Note Due 2003
Benton Oil and Gas Company, a Delaware corporation (the
"Company"), for value received hereby promises to pay to or
registered assigns the principal sum of Dollars at the Company's
office or agency for said purpose in the City of New York, on May 1, 2003, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
interest, semi-annually on May 1 and November 1 (each an "Interest Payment
Date") of each year, commencing with November 1, 1996, on said principal sum in
like coin or currency at the rate per annum set forth above at said office or
agency from the most recent Interest Payment Date to which interest on the
Securities has been paid or duly provided for, unless the date hereof is a date
to which interest on the Securities has been paid or duly provided for, in which
case from the date of this Security. Notwithstanding the foregoing, if the date
hereof is after April 15 or October 15 (each an "Interest Record Date"), as the
case may be, and before the immediately following Interest Payment Date, this
Security shall bear interest from such Interest Payment Date provided, that if
the Company shall default in the payment of interest due on such
<PAGE> 12
Interest Payment Date then this Security shall bear interest from the next
preceding Interest Payment Date to which interest on the Securities has been
paid or duly provided for. The interest so payable on any Interest Payment Date
will, except as otherwise provided in the Indenture referred to on the reverse
hereof, be paid to the person in whose name this Security is registered at the
close of business on the Interest Record Date preceding such Interest Payment
Date whether or not such day is a business day; provided that interest may be
paid, at the option of the Company, by mailing a check therefor payable to the
registered holder entitled thereto at such holder's last address as it appears
on the Security register or by wire transfer, in immediately available funds, to
such bank or other entity in the continental United States as shall be
designated by such holder and shall have appropriate facilities for such
purpose.
Interest, other than default interest, on the Securities will
be computed on the basis of a 360-day year consisting of twelve 30-day months.
Reference is made to the further provisions set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Security shall not be valid or obligatory until the
certificate of authentication hereon shall have been duly signed by the Trustee
acting under the Indenture.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
Dated:
[Seal]
BENTON OIL AND GAS COMPANY
By: __________________________
Name:
Title:
By: __________________________
Name:
Title:
2
<PAGE> 13
[FORM OF REVERSE OF SECURITY]
Benton Oil and Gas Company
11 5/8% Senior Note Due 2003
This Security is one of a duly authorized issue of debt
securities of the Company, limited to the aggregate principal amount of
$125,000,000 (except as otherwise provided in the Indenture mentioned below),
issued or to be issued pursuant to an indenture dated as of May 2, 1996 (the
"Indenture"), duly executed and delivered by the Company to First Trust of New
York, National Association, as Trustee (herein called the "Trustee"). Reference
is hereby made to the Indenture and all indentures supplemental thereto for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Securities.
This Security will bear interest until final maturity at a
rate per annum shown above, except as provided in the next paragraph. The
Company will pay interest on overdue principal of, premium, if any, and to the
extent lawful, interest on overdue installments of interest, at a 13 5/8% rate
per annum based on a year of 360 days and actual days elapsed.
[In the event that (i) the Exchange Offer Registration
Statement (as defined in the Indenture) relating to the Exchange Offer (as
defined in the Indenture) is not filed with the Commission (as defined in the
Indenture) on or prior to the date that is 60 days after the Closing Date (as
defined in the Indenture), (ii) the Exchange Offer Registration Statement is not
declared effective on or prior to the date that is 90 days after the Closing
Date, or (iii) the Exchange Offer is not consummated or a Shelf Registration
Statement (as defined in the Indenture) with respect to resale of this Security
is not declared effective on or prior to the date that is 120 days after the
Closing Date, then additional interest (in addition to the interest otherwise
due hereon) ("Additional Interest") will accrue at an annual rate of 0.50%
hereon from May 1, 1996 until the Registration Date, payable in cash
semiannually, in arrears, on each May 1 and November 1, commencing November 1,
1996. "Registration Date" means the earlier of the date on which this Security
is exchanged pursuant to the Exchange Offer (or could be so exchanged) or
3
<PAGE> 14
the date on which there shall otherwise be an effective Registration of this
Security.](1)
[There shall also be payable in respect of this Security all
Additional Interest that may have accrued on the Security for which this
Security was exchanged (as defined in such Security) pursuant to the Exchange
Offer or otherwise pursuant to a Registration of such Security, such Additional
Interest to be payable in accordance with the terms of such Security.](2)
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal of all the Securities may
be declared due and payable, in the manner and with the effect, and subject to
the conditions, provided in the Indenture. The Indenture provides that in
certain events such declaration and its consequences may be waived by the
holders of a majority in aggregate principal amount of the Securities then
outstanding and that, prior to any such declaration, such holders may waive any
past default under the Indenture and its consequences except a default in the
payment of principal of or premium, if any, or interest on any of the
Securities. Any such consent or waiver by the holder of this Security (unless
revoked as provided in the Indenture) shall be conclusive and binding upon such
holder and upon all future holders and owners of this Security and any Security
which may be issued in exchange or substitution herefor, whether or not any
notation thereof is made upon this Security or such other Securities.
The Indenture permits the Company and the Trustee, with the
consent of the holders of not less than a majority in aggregate principal amount
of the Securities at the time outstanding, evidenced as in the Indenture
provided, to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or
of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities; provided that no such supplemental indenture shall
(a) extend the final Maturity of any Security, 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 the redemption hereof or upon the occurrence of
an Event of Default, or reduce the Change in Control Purchase Price, as defined
in the Indenture, or the
- --------
1 To be included in Securities not Exchange Securities.
2 To be included in Exchange Securities.
4
<PAGE> 15
Asset Sale Offer Price, as defined in the Indenture, or impair or affect the
rights of any Securityholder to institute suit for the payment thereof without
the consent of the holder of each Security so affected; or (b) reduce the
aforesaid percentage of Securities, the consent of the holders of which is
required for any such supplemental indenture, without the consent of the holders
of all Securities then outstanding.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Security at the place, times, and rate,
and in the currency, herein prescribed.
The Securities are issuable only as registered Securities
without coupons in denominations of $1,000 and any multiple of $1,000.
At the office or agency of the Company referred to on the face
hereof and in the manner and subject to the limitations provided in the
Indenture, Securities may be exchanged for a like aggregate principal amount of
Securities of other authorized denominations.
Upon due presentment for registration of transfer of this
Security at the above-mentioned office or agency of the Company, a new Security
or Securities of authorized denominations, for a like aggregate principal
amount, will be issued to the transferee as provided in the Indenture. No
service charge shall be made for any such transfer, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto.
The Securities may be redeemed at the option of the Company as
a whole, or from time to time in part, on any date on or after May 1, 2000, upon
mailing a notice of such redemption not less than 30 nor more than 60 days prior
to the date fixed for redemption to the holders of Securities to be redeemed,
all as provided in the Indenture, at the following redemption prices (expressed
in percentages of the principal amount) together in each case with accrued
interest to the date fixed for redemption:
5
<PAGE> 16
If redeemed during the twelve-month period beginning May 1,
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C> <C>
2000............................................................... 105.813%
2001............................................................... 102.906%
2002............................................................... 100.000%
</TABLE>
provided that if the date fixed for redemption is an Interest Payment Date, then
the interest payable on such date shall be paid to the holder of record on the
next preceding Interest Record Date.
In addition, at any time prior to May 1, 1999, the Company may
redeem up to 25% of the aggregate principal amount of the Securities then
outstanding with the proceeds of a Public Equity Offering within 90 days of such
offering at a redemption price equal to 111.625% of the principal amount of such
Securities, plus accrued and unpaid interest to the redemption date; provided
that if the date fixed for redemption is an Interest Payment Date, then the
interest payable on such date shall be paid to the holder of record on the next
preceding Interest Record Date; and provided further, that at least $93.75
million in aggregate principal amount of Securities remain outstanding
immediately after giving effect to such redemption.
Subject to payment by the Company of a sum sufficient to pay
the amount due on redemption, interest on this Security (or portion hereof if
this Security is redeemed in part) shall cease to accrue upon the date duly
fixed for redemption of this Security (or portion hereof if this Security is
redeemed in part).
Upon a Change in Control (as defined in the Indenture), any
holder of Securities will have the right to cause the Company to purchase the
Securities of such holder, in whole or in part in integral multiples of
aggregate principal amount of $1,000, at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to any
Change in Control Purchase Date, as provided in, and subject to the terms of the
Indenture.
The Company, the Trustee, and any authorized agent of the
Company or the Trustee, may deem and treat the registered holder hereof as the
absolute owner of this Security (whether or not this Security shall be overdue
and notwithstanding any notation of ownership or other writing hereon made by
anyone other than the Company or the Trustee or any authorized agent of the
Company or the Trustee), for
6
<PAGE> 17
the purpose of receiving payment of, or on account of, the principal hereof and
premium, if any, and, subject to the provisions on the face hereof, interest
hereon and for all other purposes, and neither the Company nor the Trustee nor
any authorized agent of the Company or the Trustee shall be affected by any
notice to the contrary.
No recourse shall be had for the payment of the principal of
or premium, if any, or the interest on this Security, for any claim based
hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture or any indenture supplemental thereto, against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released.
The Indenture is hereby incorporated by the reference and to
the extent of any variance between the provisions hereof and the Indenture, the
Indenture shall control.
7
<PAGE> 18
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the
within-mentioned Indenture.
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION,
as Trustee
By:__________________________
Authorized Officer
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
________________________________________________________________________________
Please print or typewrite name and address including zip
code of assignee
________________________________________________________________________________
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing ____________________ attorney to transfer said Security on the
books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL SECURITIES OTHER THAN EXCHANGE SECURITIES,
PERMANENT OFFSHORE GLOBAL SECURITIES AND
OFFSHORE PHYSICAL SECURITIES]
In connection with any transfer of this Security occurring
prior to the date which is the earlier of (i) the date of an effective
Registration or (ii) three years after the later of the original issuance of
this Security or the last date on which this Security was held by the Company or
an Affiliate of the Company, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
8
<PAGE> 19
[Check One]
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
--
[ ] (b) this Security is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Security and
the Indenture.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Security in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer or
registration set forth herein and in Section 2.8 of the Indenture shall have
been satisfied.
Date: ___________ __________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of
the within-mentioned instrument in
every particular, without
alteration or any change
whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated: ___________ __________________________________
NOTICE: To be executed by an
executive officer
9
<PAGE> 20
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 3.12 or Section 3.17 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 3.12 or Section 3.17 of the Indenture, state the
amount: maturity): $______________.
Date: ________________
Your Signature: ____________________________________________
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee: __________________________
10
<PAGE> 21
AND WHEREAS, all things necessary to make the Securities, when
executed by the Company and authenticated and delivered by the Trustee as in the
Indenture provided, the valid, binding and legal obligations of the Company, and
to constitute these presents a valid indenture and agreement according to its
terms, have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the
Securities by the Holders thereof, the Company and the Trustee mutually covenant
and agree for the equal and proportionate benefit of the respective Holders from
time to time of the Securities as follows:
ARTICLE ONE
DEFINITIONS.
------------
SECTION 1.1 CERTAIN TERMS DEFINED. The following terms (except
as otherwise expressly provided or unless the context otherwise clearly
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section. All other
terms used in this Indenture which are defined in the Trust Indenture Act of
1939 or the definitions of which in the Securities Act of 1933 are referred to
in the Trust Indenture Act of 1939 (except as herein otherwise expressly
provided or unless the context otherwise clearly requires), shall have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture. All accounting terms
used herein and not expressly defined shall have the meanings given to them in
accordance with GAAP (whether or not such is indicated herein). The words
"HEREIN", "HEREOF" and "HEREUNDER" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other
subdivision. The terms defined in this Article include the plural as well as the
singular.
"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
11
<PAGE> 22
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.
"AFFILIATE TRANSACTION" has the meaning provided in Section
3.11.
"AGENT MEMBERS" has the meaning provided in Section 2.7(a).
"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.
"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),
12
<PAGE> 23
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 Article Eight, (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 $10 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).
"ASSET SALE OFFER PRICE" has the meaning provided in Section
3.12.
"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.
"BENTON-VINCCLER" means Benton-Vinccler, C.A.
"BOARD OF DIRECTORS" means the Board of Directors of the
Company or any authorized committee of such Board.
"BUSINESS DAY" means a day which in the city (or in any of the
cities, if more than one) where amounts are payable in respect of the
Securities, as specified on the face of the form of Security recited above, is
neither a legal holiday nor a day on which banking institutions are authorized
by law or regulation to close.
"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 this Indenture, 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
13
<PAGE> 24
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 of the Company 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.
"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 remains outstanding under the Convertible
Debenture Indenture, a Fundamental
14
<PAGE> 25
Change as defined therein, (vi) 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, 51% of the outstanding Voting
Stock of Benton-Vinccler, and (vii) Benton-Vinccler, sells, transfers or
otherwise disposes of a substantial part of its assets; provided that neither of
the events described in clause (vi) or (vii) 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 (vii) of this
definition, 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.
"CLOSING DATE" shall mean May 2, 1996.
"COMMISSION" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act.
"COMMODITY SWAP AGREEMENT" means any commodity swap agreement
or other similar agreement or arrangement.
"COMPANY" means (except as otherwise provided in Article Five)
Benton Oil and Gas Company, a Delaware corporation, and, subject to Article
Eight, its successors and assigns.
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"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 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 this Indenture (and
in such case, except to the extent includible pursuant to the foregoing clause
(i)
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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 gains and losses or gains or losses attributable to Asset Sales.
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 this Indenture, any director elected after the date
hereof 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 Bank of New York.
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"CORPORATE TRUST OFFICE" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular time,
be principally administered, which office is, at the date as of which this
Indenture is dated, located at 100 Wall Street, Suite 1600, New York, New York
10005.
"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.
"DEPOSITARY" shall mean The Depository Trust Company, its
nominees, and their respective successors.
"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.
"DISQUALIFIED STOCK" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the date on which the Securities mature.
"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" means any event or condition specified as
such in Section 4.1 which shall have continued for the period of time, if any,
therein designated.
"EXCESS PROCEEDS" has the meaning provided in Section 3.12.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
it may be amended and any successor act thereto.
"EXCHANGE OFFER" shall mean the exchange offer by the Company
of Exchange Securities for Securities pursuant to the Registration Rights
Agreement.
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"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean a
registration statement relating to an Exchange Offer on an appropriate form and
all amendments and supplements to such registration statement, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"EXCHANGE SECURITIES" means any securities of the Company to
be offered to Securityholders in exchange for Securities pursuant to the
Exchange Offer or otherwise pursuant to a Registration of Securities containing
terms identical to the Securities for which they are exchanged (except that (i)
interest thereon shall accrue from the last date on which interest was paid on
the Securities or, if no such interest has been paid, from the date of issuance
of the Securities and (ii) the Exchange Securities will contain the alternative
third paragraph appearing on the reverse of the Securities in the form recited
above and will not contain terms with respect to transfer restrictions.
"GAAP" means, with respect to any determination to be made
pursuant to the terms of this Indenture, such accounting principles as are
generally accepted in the United States at the time of such determination.
"GLOBAL SECURITIES" has the meaning provided in Section 2.4.
"GUARANTEE" means, as applied to any obligation, (i) a
guarantee (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.
"HOLDER", "HOLDER OF SECURITIES", "SECURITYHOLDER" or other
similar terms means the registered holder of any Security.
"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
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<PAGE> 31
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 for purposes
of the provisions of this Indenture described in Section 3.8 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 for purposes of the provisions of this Indenture
described in Section 3.8 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
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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 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.
"INDENTURE" means this instrument as originally executed and
delivered or, if amended or supplemented as herein provided, as so amended or
supplemented.
"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.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"INTEREST PAYMENT DATE" means each semiannual interest payment
date on May 1 and November 1 of each year, commencing November 1, 1996.
"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.
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"INTEREST RECORD DATE" for the Interest payable on any
Interest Payment Date (except a date for payment of defaulted interest) means
the April 15 or October 15 (whether or not a Business Day) as the case may be,
next preceding such Interest Payment Date.
"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
23
<PAGE> 34
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 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.
"NON-U.S. PERSON" means a person who is not a U.S. person, as
defined in Regulation S.
"OFFICERS' CERTIFICATE" means a certificate signed by the
Chairman of the Board of Directors or the President or any Vice President
(whether or not designated by a number or numbers or a word or words added
before or after the
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title "Vice President") and by the Treasurer or the Secretary or any Assistant
Secretary of the Company and delivered to the Trustee. Each such certificate
shall comply with Section 314 of the Trust Indenture Act of 1939 and include the
statements provided for in Section 10.5.
"OFFSHORE GLOBAL SECURITIES" has the meaning provided in
Section 2.4.
"OFFSHORE PHYSICAL SECURITIES" has the meaning provided in
Section 2.4.
"OFFSHORE SECURITIES EXCHANGE DATE" has the meaning provided
in Section 2.4.
"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 and any activity necessary, appropriate or incidental to the
foregoing.
"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
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<PAGE> 36
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, S.A. (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.
"OPINION OF COUNSEL" means an opinion in writing signed by
legal counsel who may be an employee of or counsel to the Company or who may be
other counsel satisfactory to the Trustee. Each such opinion shall comply with
Section 314 of the Trust Indenture Act and include the statements provided for
in Section 10.5, and such others as may reasonably be requested by the Trustee,
if and to the extent required hereby.
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"ORIGINAL ISSUE DATE" of any Security (or portion thereof)
means the earlier of (i) the date of such Security or (ii) the date of any
Security (or portion thereof) for which such Security was issued (directly or
indirectly) on registration of transfer, exchange or substitution.
"OUTSTANDING", when used with reference to Securities, shall,
subject to the provisions of Section 6.4 and Article XII, mean, as of any
particular time, all Securities authenticated and delivered by the Trustee under
this Indenture, except
(a) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or
redemption of which moneys in the necessary amount shall have been
deposited in trust with the Trustee or with any paying agent (other
than the Company) or shall have been set aside, segregated and held in
trust by the Company (if the Company shall act as its own paying
agent), provided that if such Securities are to be redeemed prior to
the maturity thereof, notice of such redemption shall have been given
as herein provided, or provision satisfactory to the Trustee shall have
been made for giving such notice; and
(c) Securities in substitution for which other Securities
shall have been authenticated and delivered, or which shall have been
paid, pursuant to the terms of Section 2.9 (unless proof satisfactory
to the Trustee and the Company is presented that any of such Securities
is held by a person in whose hands such Security is a legal, valid and
binding obligation of the Company).
"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.
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"PERMANENT OFFSHORE GLOBAL SECURITY" has the meaning provided
in Section 2.4.
"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.
"PERMITTED COMPANY SECURED INDEBTEDNESS" means secured
Indebtedness of the Company Incurred after the date of this Indenture (other
than pursuant to clause (xi) of the definition of Permitted Indebtedness) in an
aggregate amount not to exceed $20 million outstanding at any time less the
aggregate amount of Permitted Restricted Subsidiary Indebtedness outstanding at
such time.
"PERMITTED GEOILBENT INDEBTEDNESS" means Indebtedness of
GEOILBENT which is non-recourse to the Company and its Restricted Subsidiaries
except to the extent of the pledge of equity interests in GEOILBENT.
"PERMITTED INDEBTEDNESS" means (i) the Securities; (ii)
Indebtedness of the Company (other than the Vinccler Notes) and its Restricted
Subsidiaries (other than Benton-Vinccler) outstanding on the date of this
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 $10 million or 4% 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
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not to exceed $20 million at any time outstanding; (vii) (a) Indebtedness of
Benton-Vinccler not in excess of $25 million in aggregate principal amount
outstanding which is cash collateralized and (b) Permitted Benton-Vinccler
Indebtedness; (viii) Permitted GEOILBENT Indebtedness; (ix)(a) one or more
letters of credit having an aggregate face amount not exceeding $18 million
issued in support of performance obligations in respect of the Delta Centro
block in Venezuela and (b) 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; (x) 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; (xi)
the Vinccler Notes; and (xii) 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 Securities and a stated
maturity later than the Stated Maturity of the Securities 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
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Securities at least to the extent that the Subordinated Indebtedness being
renewed, extended, refinanced, repurchased or exchanged is subordinated to the
Securities.
"PERMITTED INVESTMENT" means investments and expenditures made
in the ordinary course of, and of a nature that is or shall have become
customary in, the Oil and Gas Business as means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, marketing or
transporting oil and gas through agreements, transactions, interests or
arrangements which permit a person to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy other objectives
customarily achieved through the conduct of the Oil and Gas Business jointly
with third parties, including, without limitation, (i) ownership interests in
oil and gas properties or gathering systems and (ii) Investments and
expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties (including Unrestricted Subsidiaries).
"PERMITTED 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 this Indenture and any renewals, extensions,
refinancings or exchanges of such Indebtedness permitted under this 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 GEOILBENT
Indebtedness, limited to the non-recourse pledge of equity interests in
GEOILBENT; (iv) any Permitted Restricted Subsidiary Indebtedness; (v) any
Permitted Company Secured Indebtedness; (vi) any Permitted Commodity Swap
Agreements; (vii) reimbursement obligations in respect of the letters of credit
referred to in clause (ix)(a) of the definition of Permitted Indebtedness;
(viii) Indebtedness of Benton-Vinccler referred to in clause (vii)(a) of the
definition of Permitted Indebtedness, limited to cash collateral; and (ix) any
other Indebtedness of the Company or any Restricted Subsidiary required by its
terms to be secured in the event that the Securities are required to be secured
pursuant to the terms of this Indenture; provided that (a) if such other
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Indebtedness is Subordinated Indebtedness, the Lien securing such other
Indebtedness shall be subordinated to the Lien securing the Securities to at
least the extent that such Subordinated Indebtedness is subordinated to the
Securities, (b) in no event shall the Lien securing such other Indebtedness be
prior to the Lien securing the Securities and (c) if the Lien securing the
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 (including Permitted Benton-Vinccler
Indebtedness but excluding Indebtedness of Benton-Vinccler referred to in clause
(vii)(a) of the definition of Permitted Indebtedness) Incurred after the date of
this Indenture (other than pursuant to clause (xii) of the definition of
Permitted Indebtedness) in an aggregate amount for all such Restricted
Subsidiaries not to exceed $20 million, 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, limited liability company,
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.
"PHYSICAL SECURITIES" has the meaning provided in
Section 2.4.
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"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 this 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.
"PRINCIPAL" wherever used with reference to the Securities or
any Security or any portion thereof, shall be deemed to include "and premium, if
any".
"PRIVATE PLACEMENT LEGEND" means the legend initially set
forth on the Securities in the form set forth in Section 2.5(a).
"PUBLIC EQUITY OFFERING" means an underwritten primary public
offering of Capital Stock of the Company pursuant to an effective registration
statement under the Securities Act, other than an offering of Disqualified Stock
or an offering pursuant to a registration statement on Form S-8.
"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 NASDAQ-National Market.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"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 this Indenture that by their terms or
otherwise are or may be required to be redeemed prior to the Stated Maturity of
the 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 Securities;
provided that if the only event that could require redemption of any such
securities prior to the Stated Maturity of the Securities is a change in control
of the Company (defined in a manner substantially identical to the definition of
Change in Control in this Indenture) and such right of redemption is expressly
subordinated to the right of the holders of the
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<PAGE> 43
Securities to require repurchase of the Securities upon the occurrence of a
Change in Control pursuant to the terms of this Indenture, 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 this Indenture, the four full fiscal quarters
for which financial information is available immediately preceding any date upon
which such determination is to be made.
"REGISTRAR" has the meaning provided in Section 2.6.
"REGISTRATION" means a registered exchange offer for the
Securities by the Company or other registration of the Securities under the
Securities Act pursuant to and in accordance with the terms of the Registration
Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of May 2, 1996, between the Company and J.P. Morgan
Securities Inc., and certain permitted assigns specified therein.
"REGISTRATION STATEMENT" means the Registration Statement
pursuant to and as defined in the Registration Rights Agreement.
"REGULATION S" means Regulation S under the Securities Act.
"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 this 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 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
this 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.
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"RESPONSIBLE OFFICER" when used with respect to the Trustee
means the chairman of the board of directors, any vice chairman of the board of
directors, the chairman of the trust committee, the chairman of the executive
committee, any vice chairman of the executive committee, the president, any vice
president (whether or not designated by numbers or words added before or after
the title "vice president"), the cashier, the secretary, the treasurer, any
trust officer, any assistant trust officer, any assistant vice president, any
assistant cashier, any assistant secretary, any assistant treasurer, or any
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"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 payment, as the
case may be, of such Subordinated Indebtedness and (iv) any Investment by such
person other than any Investment in Cash Equivalents or any Permitted
Investment.
"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 this 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
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<PAGE> 45
Restricted Subsidiary in accordance with GAAP at the time such Investment was
made.
"RULE 144A" means Rule 144A under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as it may
be amended and any successor act thereto.
"SECURITY" or "SECURITIES" means any Security or Securities,
as the case may be, authenticated and delivered under this Indenture. For all
purposes of this Indenture, the term "Securities" shall include any Exchange
Securities to be issued and exchanged for any Securities pursuant to the
Registration Rights Agreement and this Indenture and, for purposes of this
Indenture, all Securities and Exchange Securities shall vote together as one
series of Securities under this Indenture.
"SECURITY REGISTER" has the meaning provided in Section 2.6.
"SENIOR INDEBTEDNESS" means any Indebtedness of the Company
(whether outstanding on the date hereof or hereinafter incurred), unless such
Indebtedness is Subordinated Indebtedness.
"SHELF REGISTRATION STATEMENT" shall mean a Shelf Registration
Statement of the Company pursuant to and as defined in the Registration Rights
Agreement.
"STATED MATURITY," when used with respect to any Security,
means the date specified in such Security as the fixed date on which the
principal of such Security 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 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.
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"TEMPORARY OFFSHORE GLOBAL SECURITY" has the meaning provided
in Section 2.4.
"TRUSTEE" means the entity identified as "Trustee" in the
first paragraph hereof and, subject to the provisions of Article Five, shall
also include any successor trustee.
"TRUST INDENTURE ACT OF 1939" means the Trust Indenture Act of
1939, as amended, as in force at the date as of which this Indenture was
originally executed, and "TIA", when used in respect of an indenture
supplemental hereto, means such Act as in force at the time such indenture
supplemental hereto becomes effective.
"U.S. GLOBAL SECURITY" has the meaning provided in Section
2.4.
"U.S. PERSON" has the meaning provided in Section 2.5.
"U.S. PHYSICAL SECURITIES" has the meaning provided in Section
2.4.
"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 Section 3.8 of this Indenture, (ii) the Company could make an
additional Restricted Payment of $1.00 pursuant to the first paragraph of
Section 3.10 of this 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
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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 Section 3.8 of this 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.
"VINCCLER NOTES" means the promissory notes in an aggregate
original principal amount equal to $10 million issued to Vinccler, C.A. 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.
ARTICLE TWO
ISSUE, EXECUTION, FORM AND
REGISTRATION OF SECURITIES.
---------------------------
SECTION 2.1 AUTHENTICATION AND DELIVERY OF SECURITIES. Upon
the execution and delivery of this Indenture, or from time to time thereafter,
Securities (including Exchange Securities) in an aggregate principal amount not
in excess of the amount specified in the form of Security hereinabove recited
(except as otherwise provided in Section 2.9) may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Securities to or upon the written order of the
Company, signed by both (a) its Chairman of the Board of Directors, or any Vice
Chairman of the Board of Directors, or its President or any Vice
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President (whether or not designated by a number or numbers or a word or words
added before or after the title "Vice President") and (b) by its Treasurer or
any Assistant Treasurer without any further action by the Company.
SECTION 2.2 EXECUTION OF SECURITIES. The Securities shall be
signed on behalf of the Company by both (a) its Chairman of the Board of
Directors or any Vice Chairman of the Board of Directors or its President or any
Vice President (whether or not designated by a number or numbers or a word or
words added before or after the title "Vice President") and (b) by its Treasurer
or any Assistant Treasurer or its Secretary or any Assistant Secretary, under
its corporate seal which may, but need not, be attested. Such signatures may be
the manual or facsimile signatures of the present or any future such officers.
The seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Securities.
Typographical and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or enforceability of
any Security which has been duly authenticated and delivered by the Trustee.
In case any officer of the Company who shall have signed any
of the Securities shall cease to be such officer before the Security so signed
shall be authenticated and delivered by the Trustee or disposed of by the
Company, such Security nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Security had not ceased to be
such officer of the Company; and any Security may be signed on behalf of the
Company by such persons as, at the actual date of the execution of such
Security, shall be the proper officers of the Company, although at the date of
the execution and delivery of this Indenture any such person was not such
officer.
SECTION 2.3 CERTIFICATE OF AUTHENTICATION. Only such
Securities as shall bear thereon a certificate of authentication substantially
in the form hereinabove recited, executed by the Trustee by manual signature of
one of its authorized officers, shall be entitled to the benefits of this
Indenture or be valid or obligatory for any purpose. Such certificate by the
Trustee upon any Security executed by the Company shall be conclusive evidence
that the Security so authenticated has been duly authenticated and delivered
hereunder and that the Holder is entitled to the benefits of this Indenture.
SECTION 2.4 FORM, DENOMINATION AND DATE OF SECURITIES;
PAYMENTS OF INTEREST. The Securities and the
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Trustee's certificates of authentication shall be substantially in the form
recited above; provided that Exchange Securities (i) shall contain the
alternative third paragraph appearing on the reverse of the Securities in the
form recited above and (ii) shall not contain terms with respect to transfer
restrictions. The Securities shall be issuable in denominations provided for in
the form of Security recited above. The Securities shall be numbered, lettered,
or otherwise distinguished in such manner or in accordance with such plans as
the officers of the Company executing the same may determine with the approval
of the Trustee.
Any of the Securities may be issued with appropriate
insertions, omissions, substitutions and variations, and may have imprinted or
otherwise reproduced thereon such legend or legends, not inconsistent with the
provisions of this Indenture, as may be required to comply with any law or with
any rules or regulations pursuant thereto, including those required by Section
2.5, or with the rules of any securities market in which the Securities are
admitted to trading, or to conform to general usage.
Each Security shall be dated the date of its authentication,
shall bear interest from the applicable date and shall be payable on the dates
specified on the face of the form of Security recited above.
Securities offered and sold in reliance on Section 4(2) and
Rule 144A shall be issued initially in the form of a single permanent global
Security in registered form, substantially in the form hereinabove recited (the
"U.S. GLOBAL SECURITY"), deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
herein provided. The aggregate principal amount of the U.S. Global Security may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued initially in the form of a single
temporary global Security in registered form substantially in the form
hereinabove recited (the "TEMPORARY OFFSHORE GLOBAL SECURITY") deposited with
the Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as provided herein. At any time on and after June
12, 1996 (the "OFFSHORE SECURITIES EXCHANGE DATE"), a single permanent global
Security in registered form substantially in the form hereinabove recited
without the Private
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<PAGE> 50
Placement Legend (the "PERMANENT OFFSHORE GLOBAL SECURITY"; and together with
the Temporary Offshore Global Security, the "OFFSHORE GLOBAL SECURITIES") duly
executed by the Company and authenticated by the Trustee as provided herein
shall be deposited with the Trustee, as custodian for the Depositary, and the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of the Temporary Offshore Global Security in an amount equal to
the principal amount of the beneficial interest in the Temporary Offshore Global
Security transferred.
Securities offered and sold in reliance on Regulation D under
the Securities Act shall be issued in the form of permanent certificated
Securities in registered form in substantially the form hereinabove recited (the
"U.S. PHYSICAL SECURITIES"). Securities issued pursuant to Section 2.7 in
exchange for interests in the Offshore Global Security following the Offshore
Securities Exchange Date shall be in the form of permanent certificated
Securities in registered form substantially in the form hereinabove recited (the
"OFFSHORE PHYSICAL SECURITIES").
The Offshore Physical Securities and U.S. Physical Securities
are sometimes collectively herein referred to as the "PHYSICAL SECURITIES". The
U.S. Global Security and the Offshore Global Security are sometimes referred to
herein as the "GLOBAL SECURITIES".
The person in whose name any Security is registered at the
close of business on any Interest Record Date with respect to any Interest
Payment Date shall be entitled to receive the interest, if any, payable on such
Interest Payment Date notwithstanding any transfer or exchange of such Security
subsequent to the Interest Record Date and prior to such Interest Payment Date,
except if and to the extent the Company shall default in the payment of the
interest due on such Interest Payment Date, in which case such defaulted
interest, plus (to the extent lawful) any interest payable on the defaulted
interest, shall be paid to the persons in whose names outstanding Securities are
registered at the close of business on a subsequent record date (which shall be
not less than five business days prior to the date of such payment) established
by notice given by mail by or on behalf of the Company to the holders of
Securities not less than 15 days preceding such subsequent record date.
SECTION 2.5 RESTRICTIVE LEGENDS. (a) Unless and until a
Security is exchanged for an Exchange Security in connection with an effective
Registration pursuant to the Registration Rights Agreement, the U.S. Global
Security,
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Temporary Offshore Global Security and each U.S. Physical Security shall bear
the following legend on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MANY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT, WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF SECURITIES OF LESS THAN $250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL
ISSUANCE OF THE SECURITY, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE
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TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION",
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
(b) Each Global Security, whether or not an Exchange Security,
shall also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.8 OF THE INDENTURE.
SECTION 2.6 REGISTRATION, TRANSFER AND EXCHANGE. The
Securities are issuable only in registered form. The
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Company will keep at each office or agency to be maintained for the purpose as
provided in Section 3.2 (the "Registrar") a register or registers (the "Security
Register(s)") in which, subject to such reasonable regulations as it may
prescribe, it will register, and will register the transfer of, Securities as in
this Article provided. Such Security Register shall be in written form in the
English language or in any other form capable of being converted into such form
within a reasonable time. At all reasonable times such Security Register or
Security Registers shall be open for inspection by the Trustee.
Upon due presentation for registration of transfer of any
Security at each such office or agency, the Company shall execute and the
Trustee shall authenticate and deliver in the name of the transferee or
transferees a new Security or Securities in authorized denominations for a like
aggregate principal amount.
A Holder may transfer a Security only by written application
to the Registrar stating the name of the proposed transferee and otherwise
complying with the terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Registrar in the
Security Register. Prior to the registration of any transfer by a Holder as
provided herein, the Company, the Trustee, and any agent of the Company shall
treat the person in whose name the Security is registered as the owner thereof
for all purposes whether or not the Security shall be overdue, and neither the
Company, the Trustee, nor any such agent shall be affected by notice to the
contrary. Furthermore, any Holder of a Global Security shall, by acceptance of
such Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book entry system maintained by
the Holder of such Global Security (or its agent) and that ownership of a
beneficial interest in the Security shall be required to be reflected in a book
entry. When Securities are presented to the Registrar or a co-Registrar with a
request to register the transfer or to exchange them for an equal principal
amount of Securities of other authorized denominations (including an exchange of
Securities for Exchange Securities), the Registrar shall register the transfer
or make the exchange as requested if the requirements for such transactions set
forth herein are met; provided that no exchanges of Securities for Exchange
Securities shall occur until a Registration Statement shall have been declared
effective by the Commission and that any Securities that are exchanged for
Exchange Securities shall be cancelled by the Trustee. To permit registrations
of
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transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's request.
The Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
exchange or registration of transfer of Securities (other than any such transfer
taxes or other similar governmental charge payable upon exchanges pursuant to
Section 2.11, 7.5 or 11.2). No service charge to any Holder shall be made for
any such transaction.
The Company shall not be required to exchange or register a
transfer of (a) any Securities for a period of 15 days next preceding the first
mailing of notice of redemption of Securities to be redeemed, or (b) any
Securities selected, called or being called for redemption except, in the case
of any Security where public notice has been given that such Security is to be
redeemed in part, the portion thereof not so to be redeemed.
All Securities issued upon any transfer or exchange of
Securities shall be valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
SECTION 2.7. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES. (a)
The U.S. Global Security and Offshore Global Security initially shall (i) be
registered in the name of the Depositary for such Global Securities or the
nominee of such Depositary, (ii) be delivered to the Trustee as custodian for
such Depositary and (iii) bear legends as set forth in Section 2.5.
Members of, or participants in, the Depositary ("AGENT
MEMBERS") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under the Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee, from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a holder of any
Security.
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(b) Transfers of a Global Security shall be limited to
transfers of such Global Security in whole, but not in part, to the Depositary,
its successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the rules and procedures
of the Depositary and the provisions of Section 2.8. In addition, U.S. Physical
Securities and Offshore Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in the U.S. Global
Security or the Offshore Global Security, respectively, if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the U.S. Global Security or the Offshore Global Security, as the case may
be, and a successor depositary is not appointed by the Company within 90 days of
such notice or (ii) an Event of Default of which the Trustee has actual notice
has occurred and is continuing and the Registrar has received a request from the
Depositary to issue such Physical Securities.
(c) Any beneficial interest in one of the Global Securities
that is transferred to a person who takes delivery in the form of an interest in
the other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Security for as long as it remains such an interest.
(d) In connection with any transfer of a portion of the
beneficial interests in the U.S. Global Security to beneficial owners pursuant
to paragraph (b) of this Section and Section 2.8(a)(ii), the Registrar shall
reflect on its books and records the date and a decrease in the principal amount
of the U.S. Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one or
more U.S. Physical Securities of like tenor and amount.
(e) In connection with the transfer of the entire U.S. Global
Security or Offshore Global Security to beneficial owners pursuant to paragraph
(b) of this Section, the U.S. Global Security or Offshore Global Security, as
the case may be, shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the U.S. Global Security or Offshore Global
Security, as the case may be, an equal
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aggregate principal amount of U.S. Physical Securities or Offshore Physical
Securities, as the case may be, of authorized denominations.
(f) Any U.S. Physical Security delivered in exchange for an
interest in the U.S. Global Security pursuant to paragraph (b) or (d) of this
Section shall, except as otherwise provided by paragraph (f) of Section 2.8,
bear the legend regarding transfer restrictions applicable to the U.S. Physical
Security set forth in Section 2.5.
(g) Any Offshore Physical Security delivered in exchange for
an interest in the Offshore Global Security pursuant to paragraph (b) of this
Section shall, except as otherwise provided by paragraph (f) of Section 2.8,
bear the legend regarding transfer restrictions applicable to the Offshore
Physical Security set forth in Section 2.5.
(h) The registered holder of a Global Security may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Securities.
SECTION 2.8. SPECIAL TRANSFER PROVISIONS. Unless and until a
Security is exchanged for an Exchange Security in connection with an effective
Registration pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS.
The following provisions shall apply with respect to the registration of any
proposed transfer of a Security to any Institutional Accredited Investor which
is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Security,
whether or not such Security bears the Private Placement Legend, if (x)
the requested transfer is at least three years after the Original Issue
Date of the Securities or (y) the proposed transferee has delivered to
the Registrar (A) a certificate substantially in the form of Exhibit A
hereto and (B) if the principal amount of the Securities being
transferred is less than $250,000 at the time of such transfer, an
opinion of counsel acceptable to the Company that such transfer is in
compliance with the Securities Act.
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(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S.
Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred and
the Company shall execute, and the Trustee shall authenticate and
deliver, one or more U.S. Physical Certificates of like tenor and
amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply
with respect to the registration of any proposed transfer of a U.S. Physical
Security or an interest in the U.S. Global Security to a QIB (excluding Non-U.S.
Persons):
(i) If the Security to be transferred consists of (x) U.S.
Physical Securities, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Security stating, or has otherwise advised
the Company and the Registrar in writing, that the sale has been made
in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Security stating,
or has otherwise advised the Company and the Registrar in writing, that
it is purchasing the Security for its own account or an account with
respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A or (y) an interest in
the U.S. Global Security, the transfer of such interest may be effected
only through the book entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the
Security to be transferred consists of U.S. Physical Securities, upon
receipt by the Registrar of the documents referred to in clause (i) and
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall
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reflect on its books and records the date and an increase in the
principal amount of the U.S. Global Security in an amount equal to the
principal amount of the U.S. Physical Securities to be transferred and
the Trustee shall cancel the U.S. Physical Security so transferred.
(c) TRANSFERS OF INTERESTS IN THE TEMPORARY OFFSHORE GLOBAL
SECURITY. The following provisions shall apply with respect to registration of
any proposed transfer of interests in the Temporary Offshore Global Security:
(i) The Registrar shall register the transfer of any Security
(x) if the proposed transferee is a Non-U.S. Person and the proposed
transferor has delivered to the Registrar a certificate substantially
in the form of Exhibit B hereto or (y) if the proposed transferee is a
QIB and the proposed transferor has checked the box provided for on the
form of Security stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Security stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Security for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance of Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Registrar of the documents referred to in clause (i)(y)
above and instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of the
U.S. Global Security, in an amount equal to the principal amount of the
Temporary Offshore Global Security to be transferred, and the Trustee
shall decrease the amount of the Temporary Offshore Global Security in
a like amount.
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(d) TRANSFERS OF INTERESTS IN THE PERMANENT OFFSHORE GLOBAL
SECURITY OR OFFSHORE PHYSICAL SECURITIES TO U.S. PERSONS. The following
provisions shall apply with respect to any transfer of interests in the
Permanent Offshore Global Security or Offshore Physical Securities to U.S.
Persons: The Registrar shall register the transfer of any such Security without
requiring any additional certification.
(e) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following
provisions shall apply with respect to any transfer of a Security to a Non-U.S.
Person:
(i) Prior to June 12, 1996, the Registrar shall register any
proposed transfer of a Security to a Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit B hereto from the
proposed transferor.
(ii) On and after June 12, 1996, the Registrar shall register
any proposed transfer to any Non-U.S. Person if the Security to be
transferred is a U.S. Physical Security or an interest in the U.S.
Global Security, upon receipt of a certificate substantially in the
form of Exhibit B from the proposed transferor.
(iii)(a) If the proposed transferor is an Agent Member holding
a beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (ii) and
(y) instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S.
Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred, and
(b) if the proposed transferee is an Agent Member, upon receipt by the
Registrar of instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of the
Offshore Global Security in an amount equal to the principal amount of
the U.S. Physical Securities or the U.S. Global Security, as the case
may be, to be transferred, and the Trustee shall cancel the Physical
Security, if any, so transferred or decrease the amount of the U.S.
Global Security, as the case may be.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the
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Private Placement Legend, the Registrar shall deliver Securities that do not
bear the Private Placement Legend. Upon the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless either (i) the
circumstances contemplated by the fifth paragraph of Section 2.4 or paragraphs
(a)(i)(x) or (e)(ii) of this Section 2.8 exists or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the provisions of
the Securities Act.
(g) GENERAL. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture. The Registrar shall not register a transfer of any
Security unless such transfer complies with the restrictions on transfer of such
Security set forth in this Indenture. In connection with any transfer of
Securities, each Holder agrees by its acceptance of the Securities to furnish
the Registrar or the Company such certifications, legal opinions or other
information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; provided that
the Registrar shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.7 or this Section
2.8. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
SECTION 2.9 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN
SECURITIES. In case any temporary or definitive Security shall become mutilated,
defaced or be apparently destroyed, lost or stolen, the Company in its
discretion may execute, and upon the written request of any officer of the
Company, the Trustee shall authenticate and deliver, a new Security, bearing a
number not contemporaneously outstanding, in exchange and substitution for the
mutilated
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or defaced Security, or in lieu of and substitution for the Security so
apparently destroyed, lost or stolen. In every case the applicant for a
substitute Security shall furnish to the Company and to the Trustee and any
agent of the Company or the Trustee such security or indemnity as may be
required by them to indemnify and defend and to save each of them harmless and,
in every case of destruction, loss or theft evidence to their satisfaction of
the apparent destruction, loss or theft of such Security and of the ownership
thereof.
Upon the issuance of any substitute Security, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith. In case any Security
which has matured or is about to mature, or has been called for redemption in
full, shall become mutilated or defaced or be apparently destroyed, lost or
stolen, the Company may, instead of issuing a substitute Security, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated or defaced Security), if the applicant for such payment shall
furnish to the Company and to the Trustee and any agent of the Company or the
Trustee such security or indemnity as any of them may require to save each of
them harmless from all risks, however remote, and, in every case of apparent
destruction, loss or theft, the applicant shall also furnish to the Company and
the Trustee and any agent of the Company or the Trustee evidence to their
satisfaction of the apparent destruction, loss or theft of such Security and of
the ownership thereof.
Every substitute Security issued pursuant to the provisions of
this Section by virtue of the fact that any Security is apparently destroyed,
lost or stolen shall constitute an additional contractual obligation of the
Company, whether or not the apparently destroyed, lost or stolen Security shall
be at any time enforceable by anyone and shall be entitled to all the benefits
of (but shall be subject to all the limitations of rights set forth in) this
Indenture equally and proportionately with any and all other Securities duly
authenticated and delivered hereunder. All Securities shall be held and owned
upon the express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, defaced, or apparently destroyed, lost or stolen Securities and shall
preclude any and all other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with
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respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
SECTION 2.10 CANCELLATION OF SECURITIES; DESTRUCTION THEREOF.
All Securities surrendered for payment, redemption, registration of transfer or
exchange, if surrendered to the Company or any agent of the Company or the
Trustee, shall be delivered to the Trustee for cancellation or, if surrendered
to the Trustee, shall be cancelled by it; and no Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture. The Trustee shall destroy cancelled Securities held by it and deliver
a certificate of destruction to the Company. If the Company shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Securities unless and until
the same are delivered to the Trustee for cancellation.
SECTION 2.11 TEMPORARY SECURITIES. Pending the preparation of
definitive Securities, the Company may execute and the Trustee shall
authenticate and deliver temporary Securities (printed, lithographed,
typewritten or otherwise reproduced, in each case in form satisfactory to the
Trustee). Temporary Securities shall be issuable as registered Securities
without coupons, of any authorized denomination, and substantially in the form
of the definitive Securities but with such omissions, insertions and variations
as may be appropriate for temporary Securities, all as may be determined by the
Company with the concurrence of the Trustee. Temporary Securities may contain
such reference to any provisions of this Indenture as may be appropriate. Every
temporary Security shall be executed by the Company and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Securities. Without unreasonable delay the
Company shall execute and shall furnish definitive Securities and thereupon
temporary Securities may be surrendered in exchange therefor without charge at
each office or agency to be maintained by the Company for the purpose pursuant
to Section 3.2, and the Trustee shall authenticate and deliver in exchange for
such temporary Securities a like aggregate principal amount of definitive
Securities of authorized denominations. Until so exchanged the temporary
Securities shall be entitled to the same benefits under this Indenture as
definitive Securities.
Section 2.12. CUSIP AND CINS NUMBERS. The Company in issuing
the Securities may use "CUSIP" and "CINS" numbers (if then generally in use),
and the Trustee shall use CUSIP numbers or CINS numbers, as the case may be, in
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notices of redemption or exchange as a convenience to Holders; provided that any
such notice shall state that no representation is made as the correctness of
such numbers either as printed on the Securities or as contained in any notice
of redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Securities.
ARTICLE THREE
COVENANTS
OF
THE COMPANY AND THE TRUSTEE.
----------------------------
SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of, and interest on, each of the Securities at the place or
places, at the respective times and in the manner provided in the Securities.
Each installment of interest on the Securities may be paid by mailing checks for
such interest payable to or upon the written order of the holders of Securities
entitled thereto as they shall appear on the registry books of the Company, or
by wire transfer to such holders in immediately available funds, to such bank or
other entity in the continental United States as shall be designated by such
holders and shall have appropriate facilities for such purpose, or in accordance
with the standard operating procedures of the Depositary.
SECTION 3.2 OFFICES FOR PAYMENTS, ETC. So long as any of the
Securities remain outstanding, the Company will maintain in the City of New
York, the following: (a) an office or agency where the Securities may be
presented for payment, (b) an office or agency where the Securities may be
presented for registration of transfer and for exchange as in this Indenture
provided and (c) an office or agency where notices and demands to or upon the
Company in respect of the Securities or of this Indenture may be served. The
Company will give to the Trustee written notice of the location of any such
office or agency and of any change of location thereof. The Company hereby
initially designates the Corporate Trust Office of the Trustee as the office or
agency for each such purpose. In case the Company shall fail to maintain any
such office or agency or shall fail to give such notice of the location or of
any change in the location thereof, presentations and demands may be made and
notices may be served at the Corporate Trust Office.
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SECTION 3.3 APPOINTMENT TO FILL A VACANCY IN OFFICE OF
TRUSTEE. The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 5.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.4 PAYING AGENTS. Whenever the Company shall appoint
a paying agent other than the Trustee, it will cause such paying agent to
execute and deliver to the Trustee an instrument in which such agent shall agree
with the Trustee, subject to the provisions of this Section,
(a) that it will hold all sums received by it as such agent
for the payment of the principal of or interest on the Securities
(whether such sums have been paid to it by the Company or by any other
obligor on the Securities) in trust for the benefit of the holders of
the Securities or of the Trustee,
(b) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Securities) to make any payment
of the principal of or interest on the Securities when the same shall
be due and payable, and
(c) pay any such sums so held in trust by it to the Trustee
upon the Trustee's written request at any time during the continuance
of the failure referred to in clause (b) above.
The Company will, prior to each due date of the principal of
or interest on the Securities, deposit with the paying agent a sum sufficient to
pay such principal or interest, and (unless such paying agent is the Trustee)
the Company will promptly notify the Trustee of any failure to take such action.
If the Company shall act as its own paying agent, it will, on
or before each due date of the principal of or interest on the Securities, set
aside, segregate and hold in trust for the benefit of the holders of the
Securities a sum sufficient to pay such principal or interest so becoming due.
The Company will promptly notify the Trustee of any failure to take such action.
Anything in this Section to the contrary notwithstanding, the
Company may at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder,
as required by this Section, such
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sums to be held by the Trustee upon the trusts herein contained.
Anything in this Section to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section are subject to the
provisions of Sections 9.3 and 9.4.
SECTION 3.5 CERTIFICATES TO TRUSTEE. (a) The Company will
deliver to the Trustee within 90 days after the end of each fiscal year of the
Company a brief certificate (which need not comply with Section 10.5) from the
principal executive, financial or accounting officer of the Company as to his or
her knowledge of the Company's compliance with all conditions and covenants
under this Indenture (such compliance to be determined without regard to any
period of grace or requirement of notice provided under this Indenture).
(b) The Company will deliver to the Trustee, as soon as
possible and in any event within 10 days after the Company becomes aware or
should reasonably become aware of the occurrence of an Event of Default or a
Default, an Officers' Certificate setting forth the details of such Event of
Default or Default, and the action which the Company proposes to take with
respect thereto.
(c) The Company will deliver to the Trustee within 90 days
after the end of each fiscal year of the Company a written statement by the
Company's independent public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the
Securities as they relate to accounting matters, and (ii) whether, in connection
with their audit examination, any Default has come to their attention and, if
such a Default has come to their attention, specifying the nature and period of
the existence thereof.
SECTION 3.6 SECURITYHOLDERS' LISTS. If and so long as the
Trustee shall not be the Registrar, the Company will furnish or cause to be
furnished to the Trustee a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of the Securities pursuant to
Section 312 of the Trust Indenture Act (a) semi-annually not more than 15 days
after each Interest Record Date as of such Interest Record Date, and (b) at such
other times as the Trustee may request in writing, within thirty days after
receipt by the Company of any such request as of a date not more than 15 days
prior to the time such information is furnished.
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SECTION 3.7 REPORTS BY THE TRUSTEE. Any Trustee's report
required under Section 313(a) of the Trust Indenture Act of 1939 shall be
transmitted within 45 days of each April 15, commencing with April 15, 1997, and
shall be dated as of a date convenient to the Trustee no more than 60 nor less
than 45 days prior thereto.
SECTION 3.8 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 this 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) the
EBITDA/Interest Ratio would be greater than 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 Securities and a stated maturity later than the Stated
Maturity of the 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.
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.
Prior to the Incurrence of any Indebtedness by the Company or
any Restricted Subsidiary other than Permitted Indebtedness, the Company shall
file an Officers' Certificate with the Trustee setting forth the date such
Indebtedness is proposed to be Incurred and the EBITDA/Interest Ratio.
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.
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SECTION 3.9 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.
SECTION 3.10 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 Section 3.8 of this
Indenture and (ii) the aggregate amount expended for all Restricted Payments
(excluding any payments permitted by clauses (ii) through (ix) 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 which resolution shall promptly be
filed with the Trustee for its records) 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, 1996 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, 1996 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 (vi) or (vii) 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 (iv) of the immediately succeeding
paragraph, plus
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(d) $15,000,000.
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 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, (vi) 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 Securities, the stated maturity of such new Subordinated
Indebtedness is later than the Stated Maturity of the Securities and the new
Subordinated Indebtedness is subordinated to the Securities to at least the
extent that the Subordinated Indebtedness being purchased, redeemed, acquired,
retired or defeased was subordinated to the Securities, (vii) any purchase,
redemption or other acquisition or retirement for value of any shares of 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, (viii) 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 Section 3.12 of this
Indenture, cash or Cash Equivalents and (ix) payments or distributions pursuant
to
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or in connection with a consolidation, merger or transfer of assets that
complies with the provisions of Article Eight; 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.
SECTION 3.11 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 $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 which resolution shall promptly be filed with the
Trustee) and (b) with respect to any Affiliate Transaction involving aggregate
payments equal to or greater than $5 million, the Company shall have obtained a
written opinion of an Independent Financial Advisor stating that the terms of
such Affiliate Transaction are fair to the Company or the Subsidiary, as the
case may be, from a financial point of view which opinion shall promptly be
filed with the Trustee.
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 (as
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evidenced by a resolution of such Committee which resolution shall promptly be
filed with the Trustee) which Committee shall be comprised of Disinterested
Directors, or (iv) any Permitted Investment or any Restricted Payments not
prohibited by the provisions of Section 3.10.
SECTION 3.12 DISPOSITION OF PROCEEDS OF ASSET SALES. (a) 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
(which resolution shall promptly be filed with the Trustee), 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 or direct or indirect interests in 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 this Indenture
including, but not limited to, the provisions of Section 3.11, (iii) unless
prior to the date of such Asset Sale the Board of Directors has made a
determination, as evidenced by a board resolution (which resolution shall
promptly be filed with the Trustee), 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
Section 3.8 of this Indenture, (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) the requirements set forth below are
met. For purposes of the foregoing, in the case of any required fair market
value determination with respect to any Asset Sale or Tangible Business
Properties or Publicly Traded Stock acquired in connection with such Asset Sale
having a fair market value in excess of $5 million, such determination
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shall be made by the Board of Directors as evidenced by a board resolution which
resolution shall promptly be filed with the Trustee.
Subject to clause (iii) above, within twelve months of any
Asset Sale, the Company shall either (x) 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 (y) invest such Net Cash Proceeds, or a portion
thereof, in 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 (x) or (y) above shall constitute "Excess Proceeds."
(b) If the aggregate amount of Excess Proceeds, together with
any remaining Excess Proceeds from any prior Asset Sale, equals or exceeds $25
million, the Company shall so notify the Trustee in writing and shall offer to
purchase from all holders of the 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 Securities that
may be purchased out of the Excess Proceeds, in accordance with the procedures
set forth in this Section, at an offer price in cash (the "Asset Sale Offer
Price") in an amount equal to 100% of the principal amount thereof plus accrued
and unpaid interest, if any, to any Asset Sale Offer Date; provided that any
semi-annual payment of interest becoming due on the Asset Sale Offer Date shall
be payable to the holders of such Securities registered as such on the relevant
Interest Record Date subject to the terms and provisions of Section 2.4 hereof.
(c) Promptly, and in any event within 30 days after the date
upon which the Company becomes obligated to make an Asset Sale Offer, the
Company shall be obligated to deliver to the Trustee and send, by first-class
mail, postage prepaid to each Holder, a written notice stating:
(1) that the Company is obligated to make an Asset Sale Offer;
(2) the Asset Sale Offer Date, which shall be not less than 30
nor more than 60 days after such notice;
(3) the aggregate principal amount of the outstanding
Securities offered to be purchased by the
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Company pursuant to the Asset Sale Offer (the "Purchase Amount");
(4) the Asset Sale Offer Price;
(5) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion
of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount;
(6) the place or places where Securities are to be surrendered
for tender pursuant to the Asset Sale Offer;
(7) that interest on any Security not tendered or tendered but
not purchased by the Company pursuant to the Asset Sale Offer will
continue to accrue;
(8) that on the Asset Sale Offer Date the Asset Sale Offer
Price will become due and payable upon each Security accepted for
payment pursuant to the Asset Sale Offer and that interest thereon
shall cease to accrue on and after the Asset Sale Offer Date;
(9) that each Holder electing to tender a Security pursuant to
the Asset Sale Offer will be required to surrender such Security at the
place or places specified in the Asset Sale Offer prior to the close of
business on the Asset Sale Offer Date (such Security being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company
and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any
portion of the Securities tendered if the Company (or its paying agent)
receives, not later than the close of business on the Asset Sale Offer
Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Security the Holder
tendered, the certificate number of the Security the Holder tendered
and a statement that such Holder is withdrawing all or a portion of his
tender;
(11) that (a) if Securities in an aggregate principal amount
less than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Asset Sale Offer, the Company shall purchase
all
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such Securities and (b) if Securities in an aggregate principal amount
in excess of the Purchase Amount are tendered and not withdrawn
pursuant to the Asset Sale Offer, the Company shall purchase Securities
having an aggregate principal amount equal to the Purchase Amount on a
pro rata basis (with such adjustments as may be deemed appropriate so
that only Securities in denominations of $1,000 or integral multiples
thereof shall be purchased); and
(12) that in case of any Holder whose Security is purchased
only in part, the Company shall execute, and the Trustee shall
authenticate and deliver to the holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in an aggregate principal amount equal to and
in exchange for the unpurchased portion of the Security so tendered.
Such notice shall also contain information concerning the business of the
Company which the Company in good faith believes will enable such Holders to
make an informed decision (which at a minimum will include (A) the most recently
filed Annual Report on Form 10-K (including audited consolidated financial
statements) of the Company, the most recent subsequently filed Quarterly Report
on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent
to such Quarterly Report, other than Current Reports describing other asset
dispositions otherwise described in the offering materials relating to the
Securities (or corresponding successor reports or reports otherwise required to
be delivered to Holders if the Company is no longer filing reports pursuant to
the Exchange Act), (B) a description of material developments in the Company's
business subsequent to the date of the latest of such Reports and (C) if
material, appropriate pro forma financial information and all instructions and
materials necessary to tender Securities pursuant to the Asset Sale Offer.
(d) On the Asset Sale Offer Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Asset Sale
Offer, (ii) deposit with the Trustee money sufficient to pay the purchase price
of all Securities or portions thereof so tendered and (iii) deliver or cause to
be delivered to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof tendered to the Company.
The Trustee shall promptly mail to the holders of Securities so accepted payment
in an amount equal to the Asset Sale Offer Price, and promptly authenticate and
mail to such Holders a new Security in a principal amount equal to any
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unpurchased portion of the Security surrendered. The Company will publicly
announce the results of the Asset Sale Offer on or as soon as practicable after
the Asset Sale Offer Date.
(e) To the extent that the aggregate amount of 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.
(f) 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 an
Asset Sale Offer. In the event of any conflict between such tender offer rules
and the provisions set forth in this Indenture, such tender offer rules shall
control.
SECTION 3.13 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 this
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 Securities 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 Securities shall cease to exist; provided,
further, that the Lien securing any Subordinated Indebtedness shall be
subordinated to the Lien securing the Securities to at least the extent that
such Subordinated Indebtedness is subordinated to the Securities.
SECTION 3.14 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.
SECTION 3.15 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
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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
this Indenture, (b) any encumbrance or restriction with respect to any person
that is not a Restricted Subsidiary on the date of this 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 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 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 Section 3.13 of this Indenture.
SECTION 3.16 LIMITATION ON GUARANTEES. 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 this Indenture providing for a
guarantee of the payment of the 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 Securities to at least the extent that
such Subordinated Indebtedness is subordinated to the Securities; and provided,
further, that the provisions of this paragraph shall not be applicable to any
guarantee, assumption or other liability with respect to the payment of any
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Indebtedness of the Company by any Restricted Subsidiary (i) in existence on the
date of this Indenture, (ii) to the extent such Indebtedness of the Company
could be Incurred by such Restricted Subsidiary as Permitted Restricted
Subsidiary Indebtedness, or (iii) that (x) existed at the time such person
became a Restricted Subsidiary of the Company and (y) was not Incurred in
connection with, or in contemplation of, such person becoming a Restricted
Subsidiary. Notwithstanding the foregoing, any such guarantee of the 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.
SECTION 3.17 CHANGE IN CONTROL. (a) If there shall have
occurred a Change in Control, 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 referred to
below is given to Holders or such later date identified by the Company 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; provided that any semi-annual payment of
interest becoming due on the Change in Control Purchase Date shall be payable to
the holders of such Securities registered as such on the relevant Interest
Record Date subject to the terms and provisions of Section 2.4 hereof.
(b) Within 15 days following any Change in Control, the Issuer
shall send, by first-class mail, postage prepaid, a Change in Control Notice to
each Holder with a copy to the Trustee stating:
(1) that a Change in Control has occurred and that
such Holder has the right to require the Company to repurchase
such Holder's Securities at the Change in Control Purchase
Price;
(2) the circumstance and relevant facts regarding
such Change in Control (including information with respect to
pro forma historical income, cash flow and capitalization
after giving effect to such Change in Control);
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(3) the Change in Control Purchase Date;
(4) that the Holder may tender all or any portion of
the Securities registered in the name of such Holder and that
any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount;
(5) the place or places where Securities are to be
surrendered for tender;
(6) that interest on any Security not tendered will
continue to accrue;
(7) that on the Change in Control Purchase Date the
Change in Control Purchase Price will become due and payable
upon each Security accepted for payment and that interest
thereon shall cease to accrue on and after the Purchase Date;
(8) that each Holder electing to tender a Security
will be required to surrender such Security at the place or
places specified in the Change in Control Notice prior to the
close of business on the Change in Control Purchase Date (such
Security being, if the Company or the Trustee so requires,
duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or his attorney duly
authorized in writing);
(9) that Holders will be entitled to withdraw all or
any portion of Securities tendered if the Company (or its
paying agent) receives, not later than the close of business
on the Change in Control Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security the Holder
tendered, the certificate number of the Security the Holder
tendered and a statement that such Holder is withdrawing all
or a portion of his tender; and
(10) that Holders which elect to have their
Securities purchased only in part will be issued new
Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered.
(c) On the Change in Control Purchase Date, the Company shall
(i) accept for payment Securities or portions
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thereof tendered pursuant to the Change in Control Notice, (ii) deposit with the
Trustee money sufficient to pay the purchase price of all Securities or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof tendered to the Company. The Trustee shall
promptly mail to the holders of Securities so accepted payment in an amount
equal to the Change in Control Purchase Price, and promptly authenticate and
mail to such Holders a new Security in a principal amount equal to any
unpurchased portion of the Security surrendered. The Company will publicly
announce the results of the Change in Control offer on or as soon as practicable
after the Change in Control Purchase Date.
(d) 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 this Indenture, such tender offer rules
shall control.
SECTION 3.18 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 shall 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 shall also in any event (a) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, without cost to such Holders, and
(ii) file with the Trustee copies of the annual reports, quarterly reports and
other documents which the Company would have been required to file with the
Commission pursuant to Section 13(a) or 15(d) (or any successor provision) of
the Exchange Act if the Company were required to be subject to such Sections and
(b) 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 Holder.
SECTION 3.19. WAIVER OF STAY, EXTENSION OR USURY LAWS. The
Company covenants (to the extent that it may
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lawfully do so) that it will not (i) 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 or any usury law or other law that would prohibit or forgive the
Company from paying all or any portion of the principal of or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture and the Company will expressly waive all benefit or advantage of any
such law and (ii) hinder, delay or impede the execution of any power granted to
the Trustee under this Indenture and will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE FOUR
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT.
--------------------
SECTION 4.1 EVENT OF DEFAULT DEFINED; ACCELERATION OF
MATURITY; WAIVER OF DEFAULT. In case one or more of the following Events of
Default (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing, that
is to say:
(a) default in the payment of any installment of interest upon
any of the Securities as and when the same shall become due and
payable, and continuance of such default for a period of 30 days; or
(b) default in the payment of all or any part of the principal
of any of the Securities, the amount payable upon the redemption of any
Securities, the Change in Control Purchase Price or the Asset Sale
Offer Price as and when the same shall become due and payable under
this Indenture whether at Stated Maturity, upon any redemption, by
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 this Indenture (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
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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 Securities a written notice specifying such
default or breach and stating that such notice is a "Notice of Default"
under this Indenture; 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 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
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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 any 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 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;
then, and in each and every such case, unless the principal of all of the
Securities shall have already become due and payable (and other than as
specified in clauses (f) and (g) above), either the Trustee or the holders of at
least 25% in aggregate principal amount of the Securities then outstanding
hereunder, by notice in writing to the Company (and to the Trustee if given by
Securityholders), may, and the Trustee at the request of such holders shall,
declare the entire principal of all the Securities and the interest accrued
thereon to be due and payable immediately, and upon any such declaration the
same shall become immediately 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 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. This
provision, however, is subject to the condition that if, at any time after the
principal of the Securities shall have been so declared due and payable, and
before any judgment or decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, (a) the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay (i) all matured installments of
interest upon all the Securities and the principal of any and all Securities
which shall have become due otherwise than by acceleration (with interest upon
such principal and, to the extent that payment
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of such interest is enforceable under applicable law, on overdue installments of
interest, at the same rate as the rate of interest specified in the Securities,
to the date of such payment or deposit) and (ii) such amount as shall be
sufficient to cover reasonable compensation to the Trustee and each predecessor
Trustee, their respective agents, attorneys and counsel, and all other expenses
and liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee except as a result of negligence or bad faith, (b) the
rescission would not conflict with any judgment or decree and (c) any and all
Events of Default under this Indenture, other than the non-payment of the
principal of Securities which shall have become due by acceleration, shall have
been cured, waived or otherwise remedied as provided herein--then and in every
such case the holders of a majority in aggregate principal amount of the
Securities then outstanding, by written notice to the Company and to the
Trustee, may waive all defaults and rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent Default or shall impair any right consequent
thereon.
SECTION 4.2 COLLECTION OF INDEBTEDNESS BY TRUSTEE; TRUSTEE MAY
PROVE DEBT. The Company covenants that (a) in case default shall be made in the
payment of any instalment of interest on any of the Securities when such
interest shall have become due and payable, and such default shall have
continued for a period of 30 days or (b) in case default shall be made in the
payment of all or any part of the principal of any of the Securities, the amount
payable upon the redemption of any securities, the Change in Control Purchase
Price or the Asset Sale Offer Price when the same shall have become due and
payable, whether upon maturity, upon any redemption, by declaration, when due
for purchase or otherwise--then upon demand of the Trustee, the Company will pay
to the Trustee for the benefit of the holders of the Securities the whole amount
that then shall have become due and payable on all such Securities for principal
or interest, as the case may be (with interest to the date of such payment upon
the overdue principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest at the
same rate as the rate of interest specified in the Securities); and in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to the Trustee and
each predecessor Trustee, their respective agents, attorneys and counsel, and
any expenses and liabilities incurred, and all advances made, by the Trustee and
each
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predecessor Trustee except as a result of its negligence or bad faith.
Until such demand is made by the Trustee, the Company may pay
the principal of and interest on the Securities to the Holders, whether or not
the Securities be overdue.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any action or proceedings at
law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceedings to judgment or final decree, and may
enforce any such judgment or final decree against the Company or other obligor
upon the Securities and collect in the manner provided by law out of the
property of the Company or other obligor upon the Securities, wherever situated,
the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings relative to the
Company or any other obligor upon the Securities under Title 11 of the United
States Code or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Company or its property or such other
obligor, or in case of any other comparable judicial proceedings relative to the
Company or other obligor upon the Securities, or to the creditors or property of
the Company or such other obligor, the Trustee, irrespective of whether the
principal of the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the
Securities, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and
each predecessor Trustee, and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee, except as a result of negligence or bad faith) and of
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the Securityholders allowed in any judicial proceedings relative to the
Company or other obligor upon the Securities, or to the creditors or
property of the Company or such other obligor,
(b) if permitted by applicable law and regulations and
evidenced by an opinion of counsel, to vote on behalf of the holders of
the Securities in any election of a trustee or a standby trustee in
arrangement, reorganization, liquidation or other bankruptcy or
insolvency proceedings or person performing similar functions in
comparable proceedings, and
(c) to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Securityholders and
of the Trustee on their behalf; and any trustee, receiver, or
liquidator, custodian or other similar official is hereby authorized by
each of the Securityholders to make payments to the Trustee, and, in
the event that the Trustee shall consent to the making of payments
directly to the Securityholders, to pay to the Trustee such amounts as
shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar person.
All rights of action and of asserting claims under this
Indenture, or under any of the Securities, may be enforced by the Trustee
without the possession of any of the Securities or the production thereof on any
trial or other proceedings relative thereto, and any such action or proceedings
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Trustee, each predecessor
Trustee and their respective agents and
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attorneys, shall be for the ratable benefit of the holders of the Securities.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party) the Trustee shall be held to represent all
the holders of the Securities, and it shall not be necessary to make any holders
of the Securities parties to any such proceedings.
SECTION 4.3 APPLICATION OF PROCEEDS. Any moneys collected by
the Trustee pursuant to this Article shall be applied in the following order at
the date or dates fixed by the Trustee and, in case of the distribution of such
moneys on account of principal or interest, upon presentation of the several
Securities and stamping (or otherwise noting) thereon the payment, or issuing
Securities in reduced principal amounts in exchange for the presented Securities
if only partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses, including
reasonable compensation to the Trustee and each predecessor Trustee and
their respective agents and attorneys and of all expenses and
liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee except as a result of negligence or bad faith;
SECOND: In case the principal of the Securities shall not have
become and be then due and payable, to the payment of interest in
default in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue installments of interest at
the same rate as the rate of interest specified in the Securities, such
payments to be made ratably to the persons entitled thereto, without
discrimination or preference;
THIRD: In case the principal of the Securities shall have
become and shall be then due and payable, to the payment of the whole
amount then owing and unpaid upon all the Securities for principal and
interest, with interest upon the overdue principal, and (to the extent
that such interest has been collected by the Trustee) upon overdue
installments of interest at the same rate as the rate of interest
specified in the Securities; and in case such moneys shall be
insufficient to pay in full the whole amount so due and
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unpaid upon the Securities, then to the payment of such principal and
interest, without preference or priority of principal over interest, or
of interest over principal, or of any instalment of interest over any
other instalment of interest, or of any Security over any other
Security, ratably to the aggregate of such principal and accrued and
unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the
Company or any other person lawfully entitled thereto.
SECTION 4.4 SUITS FOR ENFORCEMENT. In case an Event of Default
has occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
SECTION 4.5 RESTORATION OF RIGHTS ON ABANDONMENT OF
PROCEEDINGS. In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to the Trustee, then and
in every such case the Company and the Trustee shall be restored respectively to
their former positions and rights hereunder, and all rights, remedies and powers
of the Company, the Trustee and the Securityholders shall continue as though no
such proceedings had been taken.
SECTION 4.6 LIMITATIONS ON SUITS BY SECURITYHOLDERS. No holder
of any Security shall have any right by virtue or by availing of any provision
of this Indenture to institute any action or proceeding at law or in equity or
in bankruptcy or otherwise upon or under or with respect to this Indenture, or
for the appointment of a trustee, receiver, liquidator, custodian or other
similar official or for any other remedy hereunder, unless such Holder
previously shall have given to the Trustee written notice of default and of the
continuance thereof, as hereinbefore provided, and unless also the holders of
not less than 25% in aggregate principal amount of the Securities then
outstanding shall have made written request upon the Trustee to institute such
action or proceedings in its own name as trustee hereunder and shall have
offered to
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the Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby and the Trustee for
60 days after its receipt of such notice, request and offer of indemnity shall
have failed to institute any such action or proceedings and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 4.8; it being understood and intended, and being expressly
covenanted by the taker and holder of every Security with every other taker and
Holder and the Trustee, that no one or more holders of Securities shall have any
right in any manner whatever by virtue or by availing of any provision of this
Indenture to affect, disturb or prejudice the rights of any other holder of
Securities, or to obtain or seek to obtain priority over or preference to any
other such Holder or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities. For the protection and enforcement of the provisions of
this Section, each and every Securityholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
SECTION 4.7 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION
NOT WAIVER OF DEFAULT. Except as provided in Section 2.9, no right or remedy
herein conferred upon or reserved to the Trustee or to the Securityholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any holder of any of
the Securities to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to Section 4.6, every power and remedy given
by this Indenture or by law to the Trustee or to the Securityholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Securityholders.
SECTION 4.8 CONTROL BY SECURITYHOLDERS. The holders of a
majority in aggregate principal amount of the Securities at the time outstanding
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or
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exercising any trust or power conferred on the Trustee by this Indenture;
provided that such direction shall not be otherwise than in accordance with law
and the provisions of this Indenture and provided further that (subject to the
provisions of Section 5.1) the Trustee shall have the right to decline to follow
any such direction if the Trustee, being advised by counsel, shall determine
that the action or proceeding so directed may not lawfully be taken or if the
Trustee in good faith by its board of directors, the executive committee, or a
trust committee of directors or Responsible Officers of the Trustee shall
determine that the action or proceedings so directed would involve the Trustee
in personal liability or if the Trustee in good faith shall so determine that
the actions or forebearances specified in or pursuant to such direction shall be
unduly prejudicial to the interests of holders of the Securities not joining in
the giving of said direction, it being understood that (subject to Section 5.1)
the Trustee shall have no duty to ascertain whether or not such actions or
forebearances are unduly prejudicial to such Holders.
Nothing in this Indenture shall impair the right of the
Trustee in its discretion to take any action deemed proper by the Trustee and
which is not inconsistent with such direction by Securityholders.
SECTION 4.9 WAIVER OF PAST DEFAULTS. Prior to the declaration
of the maturity of the Securities as provided in Section 4.1, the holders of a
majority in aggregate principal amount of the Securities at the time outstanding
may by notice to the Trustee (and without notice to any other Holder) on behalf
of the holders of all the Securities waive any past default or Event of Default
hereunder and its consequences, except (i) an Event of Default described in
section 4.1(b) or (ii) a default in the payment of interest on any Securities or
in respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the holder of each outstanding Security affected. In the
case of any such waiver, the Company, the Trustee and the holders of the
Securities shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
Upon any such waiver, such default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured, and not to have occurred
for every purpose of this Indenture; but no such waiver shall
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extend to any subsequent or other default or Event of Default or impair any
right consequent thereto.
ARTICLE FIVE
CONCERNING THE TRUSTEE.
-----------------------
SECTION 5.1 DUTIES AND RESPONSIBILITIES OF THE TRUSTEE; DURING
DEFAULT; PRIOR TO DEFAULT. The Trustee, prior to the occurrence of an Event of
Default and after the curing or waiving of all Events of Default which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default has
occurred (which has not been cured or waived) the Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own wilful misconduct, except that
(a) prior to the occurrence of an Event of Default of which
the Trustee has actual notice and after the curing or waiving of all
such Events of Default which may have occurred:
(i) the duties and obligations of the Trustee shall
be determined solely by the express provisions of this
Indenture, and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any statements, certificates or opinions
furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such statements,
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same
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to determine whether or not they conform to the requirements
of this Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the holders of not less than a majority in principal
amount of the Securities at the time outstanding relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there shall be reasonable ground for
believing that the repayment of such funds or adequate indemnity against such
liability is not reasonably assured to it.
This Section 5.1 is in furtherance of and subject to Sections
315 and 316 of the Trust Indenture Act of 1939.
SECTION 5.2 CERTAIN RIGHTS OF THE TRUSTEE. In furtherance of
and subject to the Trust Indenture Act of 1939, and subject to Section 5.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate or
any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, note, coupon, security or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors
may be evidenced to the Trustee by a copy
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thereof certified by the secretary or an assistant secretary of the
Company;
(c) the Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be
taken by it hereunder in good faith and in accordance with such advice
or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Indenture at the request,
order or direction of any of the Securityholders pursuant to the
provisions of this Indenture, unless such Securityholders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred therein or
thereby;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this
Indenture;
(f) prior to the occurrence of an Event of Default hereunder,
of which the Trustee has actual notice, and after the curing or waiving
of all Events of Default, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, appraisal, bond, debenture, note, coupon,
security, or other paper or document unless requested in writing so to
do by the holders of not less than a majority in aggregate principal
amount of the Securities then outstanding; provided that, if the
payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this
Indenture, the Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding; the reasonable
expenses of every such examination shall be paid by the Company or, if
paid by the Trustee or any predecessor trustee, shall be repaid by the
Company upon demand; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either
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directly or by or through agents or attorneys not regularly in its
employ and the Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent or attorney appointed with due
care by it hereunder.
SECTION 5.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITION
OF SECURITIES OR APPLICATION OF PROCEEDS THEREOF. The recitals contained herein
and in the Securities, except the Trustee's certificates of authentication,
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee shall not be accountable for the use or application by
the Company of any of the Securities or of the proceeds thereof.
SECTION 5.4 TRUSTEE AND AGENTS MAY HOLD SECURITIES;
COLLECTIONS, ETC. The Trustee or any agent of the Company or the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
with the same rights it would have if it were not the Trustee or such agent and
may otherwise deal with the Company and receive, collect, hold and retain
collections from the Company with the same rights it would have if it were not
the Trustee or such agent.
SECTION 5.5 MONEYS HELD BY TRUSTEE. Subject to the provisions
of Section 9.4 hereof, all moneys received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Neither the Trustee nor any agent of
the Company or the Trustee shall be under any liability for interest on any
moneys received by it hereunder.
SECTION 5.6 NOTICE OF DEFAULT. If any Default or any Event of
Default occurs and is continuing and if such Default or Event of Default is
actually known to the Trustee, the Trustee shall mail to each Holder in the
manner and to the extent provided in Trust Indenture Act Section 313(c) notice
of the Default or Event of Default within 45 days after it occurs, unless such
Default or Event of Default has been cured; provided, however, that, except in
the case of a default in the payment of the principal of, premium, if any, or
interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of
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the Trustee in good faith determine that the withholding of such notice is in
the interest of the Holders.
SECTION 5.7 COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND
ITS PRIOR CLAIM. The Company covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) and the Company covenants and
agrees to pay or reimburse the Trustee and each predecessor Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by or on behalf of it in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all agents and other persons not regularly in its employ) except
any such expense, disbursement or advance as may arise from its negligence or
bad faith. The Company also covenants to indemnify the Trustee and each
predecessor Trustee for, and to hold it harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of this Indenture or the
trusts hereunder and its duties hereunder, including the costs and expenses of
defending itself against or investigating any claim of liability in the
premises. The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder and shall survive the
satisfaction and discharge of this Indenture. Such additional indebtedness shall
be a senior claim to that of the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the holders of particular Securities, and the Securities are hereby subordinated
to such senior claim.
SECTION 5.8 RIGHT OF TRUSTEE TO RELY ON OFFICERS' CERTIFICATE,
ETC. Subject to Sections 5.1 and 5.2, whenever in the administration of the
trusts of this Indenture the Trustee shall deem it necessary or desirable that a
matter be proved or established prior to taking or suffering or omitting any
action hereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may, in the absence of negligence or bad faith
on the part of the Trustee, be deemed to be conclusively proved and established
by an Officers' Certificate delivered to the Trustee, and such certificate, in
the absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered
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or omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 5.9 PERSONS ELIGIBLE FOR APPOINTMENT AS TRUSTEE. The
Trustee hereunder shall at all times be a corporation having a combined capital
and surplus of at least $100,000,000, and which is eligible in accordance with
the provisions of Section 310(a) of the Trust Indenture Act of 1939. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of a Federal, State or District of Columbia supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
SECTION 5.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR
TRUSTEE. (a) The Trustee may at any time resign by giving written notice of
resignation to the Company and by mailing notice thereof by first-class mail to
holders of Securities at their last addresses as they shall appear on the
Security register. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee by written instrument in duplicate,
executed by authority of the Board of Directors, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
trustee. If no successor trustee shall have been so appointed and have accepted
appointment within 30 days after the mailing of such notice of resignation, the
resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Securityholder who has been a bona
fide holder of a Security or Securities for at least six months may, on behalf
of himself and all others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act of 1939, after written
request therefor by the Company or by any Securityholder who has been a
bona fide holder of a Security or Securities for at least six months;
or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 5.9 and shall
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fail to resign after written request therefor by the Company or by any
such Securityholder; or
(iii) the Trustee shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or a receiver or liquidator of the
Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Company, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to Section 315(e) of the Trust Indenture Act of 1939, any Securityholder
who has been a bona fide holder of a Security or Securities for at least six
months may on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor trustee.
(c) The holders of a majority in aggregate principal amount of
the Securities at the time outstanding may at any time remove the Trustee and
appoint a successor trustee by delivering to the Trustee so removed, to the
successor trustee so appointed and to the Company the evidence provided for in
Section 6.1 of the action in that regard taken by the Securityholders.
(d) Any resignation or removal of the Trustee and any
appointment of a successor trustee pursuant to any of the provisions of this
Section 5.10 shall become effective upon acceptance of appointment by the
successor trustee as provided in Section 5.11.
SECTION 5.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE.
Any successor trustee appointed as provided in Section 5.10 shall execute and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written
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request of the Company or of the successor trustee, upon payment of its charges
then unpaid, the trustee ceasing to act shall, subject to Section 9.4, pay over
to the successor trustee all moneys at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 5.7.
Upon acceptance of appointment by a successor trustee as
provided in this Section 5.11, the Company shall mail notice thereof by
first-class mail to the holders of Securities at their last addresses as they
shall appear in the Security register. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
5.10. If the Company fails to mail such notice within 10 days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.
SECTION 5.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS OF TRUSTEE. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or to which the Trustee's assets
may be sold, or any corporation resulting from any merger, conversion,
consolidation or sale to which the Trustee shall be a party or by which the
Trustee's property may be bound, or any corporation succeeding to the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation shall be eligible under the provisions of Section
5.9, without the execution or filing of any paper or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture any of the Securities shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and deliver
such Securities so authenticated; and, in case at that time any of the
Securities shall not have been authenticated, any successor to the Trustee may
authenticate
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such Securities either in the name of any predecessor hereunder or in the name
of the successor Trustee; and in all such cases such certificate shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have; provided, that the right to
adopt the certificate of authentication of any predecessor Trustee or to
authenticate Securities in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
SECTION 5.13 PREFERENTIAL COLLECTION OF CLAIMS. Reference is
made to Section 311 of the Trust Indenture Act. For purposes of Section 311(b)
(4) and (6) of such Act, the following terms shall mean:
(a) "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after delivery of
the goods or securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand; and
(b) "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or incurred
by the Company for the purpose of financing the purchase, processing,
manufacturing, shipment, storage or sale of goods, wares or merchandise and
which is secured by documents evidencing title to, possession of, or a lien
upon, the goods, wares or merchandise or the receivables or proceeds arising
from the sale of the goods, wares or merchandise previously constituting the
security, provided the security is received by the Trustee simultaneously with
the creation of the creditor relationship with the Company arising from the
making, drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation.
ARTICLE SIX
CONCERNING THE SECURITYHOLDERS.
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SECTION 6.1 EVIDENCE OF ACTION TAKEN BY SECURITYHOLDERS. Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by Securityholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Securityholders in person or by agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or
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instruments are delivered to the Trustee. Proof of execution of any instrument
or of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Sections 5.1 and 5.2) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Article.
SECTION 6.2 PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING
OF SECURITIES; RECORD DATE. Subject to Sections 5.1 and 5.2, the execution of
any instrument by a Securityholder or his agent or proxy may be proved in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Securities shall be proved by the Security register or by a
certificate of the Registrar thereof. The Company may set a record date for
purposes of determining the identity of holders of Securities entitled to vote
or consent to any action referred to in Section 6.1, which record date may be
set at any time or from time to time by notice to the Trustee, for any date or
dates (in the case of any adjournment or resolicitation) not more than 60 days
nor less than five days prior to the proposed date of such vote or consent, and
thereafter, notwithstanding any other provisions hereof, only holders of
Securities of record on such record date shall be entitled to so vote or give
such consent or to withdraw such vote or consent.
SECTION 6.3 SECURITIES OWNED BY COMPANY DEEMED NOT
OUTSTANDING. In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Indenture, Securities which are owned by the Company or any
other obligor on the Securities or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Securities shall be disregarded and deemed
not to be outstanding for the purpose of any such determination, except that for
the purpose of determining whether the Trustee shall be protected in relying on
any such direction, consent or waiver only Securities which the Trustee actually
knows are so owned shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Securities and that the pledgee is not the Company or any other obligor
upon the Securities or any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
other obligor on the Securities. In case of a dispute as to such right, the
advice of counsel shall be
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full protection in respect of any decision made by the Trustee in accordance
with such advice. Upon request of the Trustee, the Company shall furnish to the
Trustee promptly an Officers' Certificate listing and identifying all
Securities, if any, known by the Company to be owned or held by or for the
account of any of the above-described persons; and, subject to Sections 5.1 and
5.2, the Trustee shall be entitled to accept such Officers' Certificate as
conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed therein are outstanding for the purpose of any such
determination.
SECTION 6.4 RIGHT OF REVOCATION OF ACTION TAKEN. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
6.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Securities specified in this Indenture in connection
with such action, any holder of a Security the serial number of which is shown
by the evidence to be included among the serial numbers of the Securities the
Holders of which have consented to such action may, by filing written notice at
the Corporate Trust Office and upon proof of holding as provided in this
Article, revoke such action so far as concerns such Security. Except as
aforesaid any such action taken by the holder of any Security shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Security and of any Securities issued in exchange or substitution
therefor, irrespective of whether or not any notation in regard thereto is made
upon any such Security. Any action taken by the holders of the percentage in
aggregate principal amount of the Securities specified in this Indenture in
connection with such action shall be conclusively binding upon the Company, the
Trustee and the holders of all the Securities.
ARTICLE SEVEN
SUPPLEMENTAL INDENTURES.
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SECTION 7.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
SECURITYHOLDERS. The Company, when authorized by a resolution of its Board of
Directors, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto for one or more of the following
purposes:
(a) to convey, transfer, assign, mortgage or pledge to the
Trustee as security for the Securities any property or assets;
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(b) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article Eight;
(c) to add to the covenants of the Company such further
covenants, restrictions, conditions or provisions as its Board of
Directors and the Trustee shall consider to be for the protection of
the holders of Securities, and to make the occurrence, or the
occurrence and continuance, of a default in any such additional
covenants, restrictions, conditions or provisions an Event of Default
permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, that in
respect of any such additional covenant, restriction, condition or
provision such supplemental indenture may provide for a particular
period of grace after default (which period may be shorter or longer
than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such an Event of Default or may limit the
remedies available to the Trustee upon such an Event of Default or may
limit the right of the holders of a majority in aggregate principal
amount of the Securities to waive such an Event of Default;
(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may
be defective or inconsistent with any other provision contained herein
or in any supplemental indenture; or to make such other provisions in
regard to matters or questions arising under this Indenture or under
any supplemental indenture as the Board of Directors may deem (i)
necessary or desirable and (ii) not to adversely affect the interests
of the holders of the Securities; and
(e) to provide for the issuance under this Indenture of
Securities in coupon form (including Securities registrable as to
principal only) and to provide for exchangeability of such Securities
with Securities issued hereunder in fully registered form, and to make
all appropriate changes for such purpose.
The Trustee is hereby authorized to join in the execution of
any such supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder,
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but the Trustee shall not be obligated to enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of
this Section may be executed without the consent of the holders of any of the
Securities at the time outstanding, notwithstanding any of the provisions of
Section 7.2.
SECTION 7.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF
SECURITYHOLDERS. With the consent (evidenced as provided in Article Six) of the
holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding, the Company, when authorized by a resolution
of its Board of Directors, and the Trustee may, from time to time and at any
time, enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the holders of the Securities; provided, that no such
supplemental indenture shall (a) extend the Stated Maturity of any Security, 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 thereof
or upon the occurrence of an Event of Default, or reduce the Change in Control
Purchase Price or the Asset Sale Offer Price, or impair or affect the right of
any Securityholder to institute suit for the payment thereof without the consent
of the holder of each Security so affected, or (b) reduce the aforesaid
percentage of Securities, the consent of the Holders of which is required for
any such supplemental indenture, without the consent of the holders of all
Securities then outstanding.
Upon the request of the Company, accompanied by a copy of a
resolution of the Board of Directors certified by the Secretary or an Assistant
Secretary of the Company authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
Securityholders and other documents, if any, required by Section 6.1 the Trustee
shall join with the Company in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such supplemental
indenture.
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It shall not be necessary for the consent of the
Securityholders under this Section to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of this Section, the
Company shall mail a notice thereof by first-class mail, postage prepaid, to the
holders of Securities at their addresses as they shall appear on the registry
books of the Company, setting forth in general terms the substance of such
supplemental indenture. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
SECTION 7.3 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Securities shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
SECTION 7.4 DOCUMENTS TO BE GIVEN TO TRUSTEE; COMPLIANCE WITH
TIA. The Trustee, subject to the provisions of Sections 5.1 and 5.2, may receive
an Officers' Certificate and an Opinion of Counsel as conclusive evidence that
any such supplemental indenture complies with the applicable provisions of this
Indenture. Every such supplemental indenture shall comply with the TIA.
SECTION 7.5 NOTATION ON SECURITIES IN RESPECT OF SUPPLEMENTAL
INDENTURES. Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article may bear a
notation approved by the Trustee as to form (but not as to substance) as to any
matter provided for by such supplemental indenture or as to any action taken at
any such meeting. If the Company or the Trustee shall so determine, new
Securities so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any modification of this Indenture contained in any such
supplemental indenture may be prepared by the Company, authenticated by
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the Trustee and delivered in exchange for the Securities then outstanding.
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OR CONVEYANCE.
------------------------------------------
SECTION 8.1 WHEN ISSUER MAY MERGE, ETC. The Company may not,
without the consent of the holders of all Securities then outstanding,
consolidate with, merge into or convey, sell, transfer, lease, exchange or
otherwise dispose of all of its assets and properties (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions), 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 this Indenture and the 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) the Company could Incur, immediately prior to such
consolidation, merger, conveyance, sale, transfer, lease, exchange or other
disposition, and the successor would be able to Incur, after giving effect to
such consolidation, merger, conveyance, sale, transfer, lease, exchange or other
disposition, an additional $1.00 of Indebtedness (excluding Permitted
Indebtedness) pursuant to the provisions of Section 3.8 of this Indenture.
SECTION 8.2 SUCCESSOR CORPORATION SUBSTITUTED. 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 this Indenture with the same effect as if such
successor had been named as the Company in this Indenture; and thereafter,
except in the case of a conveyance, sale,
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transfer, lease, exchange or other disposition of properties to another person,
the predecessor person shall be released from all obligations and covenants
under this Indenture and the Securities.
SECTION 8.3 OPINION OF COUNSEL TO TRUSTEE. The Trustee,
subject to the provisions of Sections 5.1 and 5.2, may receive an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, conveyance,
sale, transfer, lease, exchange or other disposition complies with the
applicable provisions of this Indenture.
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS.
-----------------
SECTION 9.1 SATISFACTION AND DISCHARGE OF INDENTURE. If at any
time (a) the Company shall have paid or caused to be paid the principal of and
interest on all the Securities outstanding hereunder, as and when the same shall
have become due and payable, or (b) the Company shall have delivered to the
Trustee for cancellation all Securities theretofore authenticated (other than
any Securities which shall have been destroyed, lost or stolen and which shall
have been replaced or paid as provided in Section 2.9) or (c) (i) all such
Securities not theretofore delivered to the Trustee for cancellation (x) shall
have become due and payable, (y) are by their terms to become due and payable
within one year or (z) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption,
(ii) the Company shall have irrevocably deposited or caused to be deposited with
the Trustee as trust funds the entire amount in cash (other than moneys repaid
by the Trustee or any paying agent to the Company in accordance with Section
9.4) sufficient to pay at maturity or upon redemption all such Securities not
theretofore delivered to the Trustee for cancellation, including principal and
interest due or to become due to such date of maturity as the case may be, (iii)
no Default or Event of Default shall have occurred or be continuing on the date
of such deposit and (iv) such deposit shall not result in a breach or violation
of, or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound, and if, in
any such case, the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect (except as to (i) rights of registration of transfer and
exchange, (ii) substitution of
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apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii)
rights of Holders to receive payments of principal thereof and interest thereon,
(iv) the rights, obligations and immunities of the Trustee hereunder, and (v)
the rights of the Securityholders as beneficiaries hereof with respect to the
property so deposited with the Trustee payable to all or any of them), and the
Trustee, on demand of the Company accompanied by an Officers' Certificate and an
Opinion of Counsel and at the cost and expense of the Company, shall execute
proper instruments acknowledging such satisfaction of and discharging this
Indenture. The Company agrees to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred and to compensate the Trustee for
any services thereafter reasonably and properly rendered by the Trustee in
connection with this Indenture or the Securities.
SECTION 9.2 APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR
PAYMENT OF SECURITIES. Subject to Section 9.4, all moneys deposited with the
Trustee pursuant to Section 9.1 shall be held in trust and applied by it to the
payment, either directly or through any paying agent (including the Company
acting as its own paying agent), to the holders of the particular Securities for
the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal and interest;
but such money need not be segregated from other funds except to the extent
required by law.
SECTION 9.3 REPAYMENT OF MONEYS HELD BY PAYING AGENT. In
connection with the satisfaction and discharge of this Indenture all moneys then
held by any paying agent under the provisions of this Indenture shall, upon
demand of the Company, be repaid to it or paid to the Trustee and thereupon such
paying agent shall be released from all further liability with respect to such
moneys.
SECTION 9.4 RETURN OF MONEYS HELD BY TRUSTEE AND PAYING AGENT
UNCLAIMED FOR THREE YEARS. Any moneys deposited with or paid to the Trustee or
any paying agent for the payment of the principal of or interest on any Security
and not applied but remaining unclaimed for three years after the date upon
which such principal or interest shall have become due and payable, shall, upon
the written request of the Company and unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property law, be
repaid to the Company by the Trustee or such paying agent, and the holder of
such Security shall, unless otherwise required by mandatory provisions of
applicable escheat or abandoned or unclaimed
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property laws, thereafter look only to the Company for any payment which such
Holder may be entitled to collect, and all liability of the Trustee or any
paying agent with respect to such moneys shall thereupon cease.
ARTICLE TEN
MISCELLANEOUS PROVISIONS.
-------------------------
SECTION 10.1 INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS OF COMPANY EXEMPT FROM INDIVIDUAL LIABILITY. No recourse under or upon
any obligation, covenant or agreement contained in this Indenture, or in any
Security, or because of any indebtedness evidenced thereby, shall be had against
any incorporator, as such or against any past, present or future stockholder,
officer or director, as such, of the Company or of any successor, either
directly or through the Company or any successor, under any rule of law, statute
or constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance of the Securities by the holders thereof
and as part of the consideration for the issue of the Securities.
SECTION 10.2 PROVISIONS OF INDENTURE FOR THE SOLE BENEFIT OF
PARTIES AND SECURITYHOLDERS. Nothing in this Indenture or in the Securities,
expressed or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and their successors and the holders
of the Securities, any legal or equitable right, remedy or claim under this
Indenture or under any covenant or provision herein contained, all such
covenants and provisions being for the sole benefit of the parties hereto and
their successors and of the holders of the Securities.
SECTION 10.3 SUCCESSORS AND ASSIGNS OF COMPANY BOUND BY
INDENTURE. All the covenants, stipulations, promises and agreements in this
Indenture contained by or in behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 10.4 NOTICES AND DEMANDS ON COMPANY, TRUSTEE AND
SECURITYHOLDERS. Any notice or demand which by any provision of this Indenture
is required or permitted to be given or served by the Trustee or by the holders
of Securities to or on the Company may be given or served by being deposited
postage prepaid, first-class mail (except as otherwise specifically provided
herein) addressed (until
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another address of the Company is filed by the Company with the Trustee) to
Benton Oil and Gas Company, 1145 Eugenia Place, Suite 200, Carpinteria, CA
93013. Any notice, direction, request or demand by the Company or any
Securityholder to or upon the Trustee shall be deemed to have been sufficiently
given or made, for all purposes, if given or made at the Corporate Trust Office.
Where this Indenture provides for notice to Holders, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder entitled
thereto, at his last address as it appears in the Security register. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. The Trustee
may waive notice to it of any provision herein, and such waiver shall be deemed
to be for its convenience and discretion. Waivers of notice by Holders shall be
filed with the Trustee, but such filing shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in
regular mail service, it shall be impracticable to mail notice to the Company
and Securityholders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
SECTION 10.5 OFFICERS' CERTIFICATES AND OPINIONS OF COUNSEL;
STATEMENTS TO BE CONTAINED THEREIN. Upon any application or demand by the
Company to the Trustee to take any action under any of the provisions of this
Indenture, the Company shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent provided for in this Indenture relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent have been
complied with, except that in the case of any such application or demand as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or demand, no
additional certificate or opinion need be furnished.
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Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (a) a statement that the person
making such certificate or opinion has read such covenant or condition, (b) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based, (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with and (d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the
Company may be based, insofar as it relates to legal matters, upon a certificate
or opinion of or representations by counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon which
his certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of counsel may be based, insofar as it
relates to factual matters or information which is in the possession of the
Company, upon the certificate, statement or opinion of or representations by an
officer or officers of the Company, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the
Company or of counsel may be based, insofar as it relates to accounting matters,
upon a certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with the Trustee shall contain a statement that such firm is
independent.
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SECTION 10.6 PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS.
If the date of maturity of interest on or principal of the Securities or the
date fixed for redemption of any Security shall not be a Business Day, then
payment of interest or principal need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period after such date.
SECTION 10.7 CONFLICT OF ANY PROVISION OF INDENTURE WITH TRUST
INDENTURE ACT OF 1939. If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with another provision included in this Indenture
by operation of Sections 310 to 317, inclusive, of the Trust Indenture Act of
1939 (an "incorporated provision"), such incorporated provision shall control.
SECTION 10.8 NEW YORK LAW TO GOVERN. This Indenture and each
Security shall be deemed to be a contract under the laws of the State of New
York, and for all purposes shall be construed in accordance with the laws of
said State, except as may otherwise be required by mandatory provisions of law.
SECTION 10.9 COUNTERPARTS. This Indenture may be executed in
any number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 10.10 EFFECT OF HEADINGS. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES.
-------------------------
SECTION 11.1 RIGHT OF OPTIONAL REDEMPTION; PRICES. On or after
May 1, 2000, the Company at its option may, at any time, redeem all, or from
time to time any part of, the Securities upon payment of the optional redemption
prices set forth in the form of Security hereinabove recited, together with
accrued and unpaid interest to the date fixed for redemption.
In addition, at any time prior to May 1, 1999, the Company may
redeem up to 25% of the aggregate principal
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amount of the Securities then outstanding with the proceeds of a Public Equity
Offering within 90 days of such offering at a redemption price equal to 111.625%
of the principal amount of such Securities plus accrued and unpaid interest to
the redemption date; provided that at least $93.75 million in aggregate
principal amount of Securities remain outstanding immediately after giving
effect to such redemption.
SECTION 11.2 NOTICE OF REDEMPTION; PARTIAL REDEMPTIONS. Notice
of redemption to the holders of Securities to be redeemed as a whole or in part
shall be given by mailing notice of such redemption by first class mail, postage
prepaid, at least 30 days and not more than 60 days prior to the date fixed for
redemption to such holders of Securities at their last addresses as they shall
appear upon the registry books. Any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the Holder receives the notice. Failure to give notice by mail, or any defect in
the notice to the holder of any Security designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Security.
The notice of redemption to each such Holder shall specify the
principal amount of each Security held by such Holder to be redeemed, the date
fixed for redemption, the redemption price, the place or places of payment, that
payment will be made upon presentation and surrender of such Securities, that
interest accrued to the date fixed for redemption will be paid as specified in
said notice and that on and after said date interest thereon or on the portions
thereof to be redeemed will cease to accrue. In case any Security is to be
redeemed in part only the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that on and after the
date fixed for redemption, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will be
issued.
The notice of redemption of Securities to be redeemed at the
option of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
At least one business day prior to the redemption date
specified in the notice of redemption given as provided in this Section, the
Company will deposit with the Trustee or with one or more paying agents (or, if
the Company is acting as its own paying agent, set aside, segregate and
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hold in trust as provided in Section 3.4) an amount of money sufficient to
redeem on the redemption date all the Securities so called for redemption at the
appropriate redemption price, together with accrued interest to the date fixed
for redemption. If less than all the outstanding Securities are to be redeemed
the Company will deliver to the Trustee at least 70 days prior to the date fixed
for redemption an Officers' Certificate stating the aggregate principal amount
of Securities to be redeemed.
If less than all the Securities are to be redeemed, the
Trustee shall select, either pro rata, by lot or by any other method it shall
deem fair and reasonable, Securities to be redeemed in whole or in part.
Securities may be redeemed in part in multiples of $1,000 only. The Trustee
shall promptly notify the Company in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed. For all purposes of this Indenture,
unless the context otherwise requires, all provisions relating to the redemption
of Securities shall relate, in the case of any Security redeemed or to be
redeemed only in part, to the portion of the principal amount of such Security
which has been or is to be redeemed.
SECTION 11.3 PAYMENT OF SECURITIES CALLED FOR REDEMPTION. If
notice of redemption has been given as above provided, the Securities or
portions of Securities specified in such notice shall become due and payable on
the date and at the place stated in such notice at the applicable redemption
price, together with interest accrued to the date fixed for redemption, and on
and after said date (unless the Company shall default in the payment of such
Securities at the redemption price, together with interest accrued to said date)
interest on the Securities or portions of Securities so called for redemption
shall cease to accrue and, except as provided in Sections 5.5 and 9.4, such
Securities shall cease from and after the date fixed for redemption to be
entitled to any benefit or security under this Indenture, and the Holders
thereof shall have no right in respect of such Securities except the right to
receive the redemption price thereof and unpaid interest to the date fixed for
redemption. On presentation and surrender of such Securities at a place of
payment specified in said notice, said Securities or the specified portions
thereof shall be paid and redeemed by the Company at the applicable redemption
price, together with interest accrued thereon to the date fixed for redemption;
provided that any semi-annual payment of interest becoming due on the date fixed
for redemption shall be payable to the holders of such Securities registered as
such on the relevant Interest
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Record Date subject to the terms and provisions of Section 2.4 hereof.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate borne
by the Security.
Upon presentation of any Security redeemed in part only, the
Company shall execute and the Trustee shall authenticate and deliver to or on
the order of the Holder thereof, at the expense of the Company, a new Security
or Securities, of authorized denominations, in principal amount equal to the
unredeemed portion of the Security so presented.
SECTION 11.4 EXCLUSION OF CERTAIN SECURITIES FROM ELIGIBILITY
FOR SELECTION FOR REDEMPTION. Securities shall be excluded from eligibility for
selection for redemption if they are identified by registration and certificate
number in a written statement signed by an authorized officer of the Company and
delivered to the Trustee at least 40 days prior to the last date on which notice
of redemption may be given as being owned of record and beneficially by, and not
pledged or hypothecated by either (a) the Company or (b) an entity specifically
identified in such written statement as directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
----------------------------------
SECTION 12.1 COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE. The Company may at its option by resolution of the Board of
Directors, at any time, elect to have either Section 12.2 or Section 12.3
applied to the outstanding Securities upon compliance with the conditions set
forth below in this Article Twelve.
SECTION 12.2 DEFEASANCE AND DISCHARGE. Upon the Company's
exercise of the option provided in Section 12.1 in respect of this Section, the
Company shall be deemed to have been discharged from its obligations with
respect to the outstanding Securities on the date the conditions set forth in
Section 12.4 are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by the outstanding Securities and
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to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of holders of such Securities to
receive, solely from the trust fund described in Section 12.4 and as more fully
set forth in such Section, payments in respect of the principal of and interest
on such Securities when such payments are due, (B) the Company's obligations
with respect to such Securities under Sections 2.1, 2.2, 2.5, 2.6, 2.7, 2.8,
2.9, 2.11, 3.1, 3.2, 3.4 and 12.5 and with respect to the Trustee under Sections
5.7 and 5.11, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Twelve. Subject to compliance with this
Article Twelve, the Company may exercise its option under this Section 12.2
notwithstanding the prior exercise of its option under Section 12.3.
SECTION 12.3 COVENANT DEFEASANCE. Upon the Company's exercise
of the option provided in Section 12.1 in respect of this Section, (i) the
Company shall be released from its obligations under Sections 3.8 through 3.17,
inclusive, and clauses (iv) and (v) of Section 8.1, and (ii) the occurrence of
any event specified in Section 4.1(c) (with respect to Clauses (iv) or (v) of
Section 8.1 or with respect to any of Sections 3.8 through 3.17), in Section
4.1(d) and in Section 4.1(e) shall neither be deemed to be a default nor
susceptible of becoming an Event of Default on and after the date the conditions
set forth in Section 12.4 are satisfied (hereinafter, "covenant defeasance").
For this purpose, such covenant defeasance means that the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such Section or clause, whether directly or
indirectly by reason of any reference elsewhere herein to any such Section or
clause or by reason of any reference in any such Section or clause to any other
provision herein or in any other document, but the remainder of this Indenture
and such Securities shall be unaffected thereby.
SECTION 12.4 CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to defeasance pursuant to Section 12.2, or
covenant defeasance pursuant to Section 12.3, of the then outstanding
Securities:
(a) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose
of making the following
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payments, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of such Securities, (i) money in an
amount, or (ii) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide, not later than one day before the due date of
any payment, money in an amount, or (iii) a combination thereof,
sufficient, in the written opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge (without
consideration of the reinvestment of such interest and after payment of
all federal, state and local taxes or other charges and assessments in
respect thereof) and which shall be applied by the Trustee to pay and
discharge, the principal of and each instalment of interest on the
Securities on the maturity date of such principal or instalment of
interest or on such redemption date as shall have been irrevocably
designated to the Trustee under arrangements satisfactory to the
Trustee all in accordance with the terms of this Indenture and of such
Securities. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of
America for the payment of which its full faith and credit is pledged
or (y) obligations of a person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
(b) As a condition to defeasance under Section 12.2, the
Company shall have delivered to the Trustee
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an Opinion of Counsel stating that (x) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling,
or (y) since the date of this Indenture there has been a change in the
applicable Federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the holders of the
outstanding 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.
(c) As a condition to covenant defeasance under Section 12.3,
the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the holders of the outstanding Securities will not
recognize gain or loss for Federal income tax purposes as a result of
such deposit and covenant 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 covenant defeasance had
not occurred.
(d) The Company shall have delivered to the Trustee an
Officers' Certificate to the effect that the Securities, if then listed
on any securities exchange, will not be delisted as a result of such
deposit and defeasance or covenant defeasance, as applicable.
(e) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest for purposes of the Trust
Indenture Act with respect to any securities of the Company.
(f) No Event of Default described in Section 4.01(f) or
4.01(g) shall have occurred at any time during the period ending on the
123rd day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period).
(g) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(h) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent to
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defeasance or covenant defeasance as applicable, have been complied
with.
(i) The Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that (i) such defeasance or covenant
defeasance will not cause the Trustee or the trust arising from such
deposit to be subject to the Investment Company Act of 1940, as amended
and (ii) the holders of the Securities will have a valid perfected
first-priority security interest in the trust funds.
SECTION 12.5 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS
TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions
of Section 9.4, all money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 12.4 in respect
of the Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any paying agent (including the Company
acting as its own paying agent) as the Trustee may determine, to the holders of
such Securities, of all sums due and to become due thereon in respect of
principal and interest, but such money need not be segregated from other funds
except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 12.4 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the holders of the outstanding Securities.
Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the written request of the Company any money or U.S. Government
Obligations held by it as provided in Section 12.4 which, in the written opinion
of a nationally recognized firm of independent public accountants to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent defeasance or covenant defeasance.
SECTION 12.6. REINSTATEMENT. If the Trustee or the paying
agent is unable to apply any money in accordance with Section 12.5 by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the Company's
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obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to this Article Twelve
until such time as the Trustee or paying agent is permitted to apply all such
money in accordance with Section 12.5; provided that if the Company makes any
payment of principal of or interest on any Security following the reinstatement
of its obligations, the Company shall be subrogated to the rights of the holders
of such Securities to receive such payment from the money held by the Trustee or
the paying agent.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of May 2, 1996.
BENTON OIL AND GAS COMPANY,
as Issuer
By ____________________________
David H. Pratt
Vice President
[CORPORATE SEAL]
Attest:
By ____________________________
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION,
as Trustee
By ____________________________
Teresita Glasgow
Trust Officer
[CORPORATE SEAL]
Attest:
By ____________________________
<PAGE> 119
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On the 2nd day of May, 1996, before me personally came DAVID
H. PRATT, to me known, who, being by me duly sworn, did depose and say that he
is a Vice President of Benton Oil and Gas Company, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
__________________________
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On the 2nd day of May, 1996, before me personally came
TERESITA GLASGOW, to me known, who, being by me duly sworn, did depose and say
that she is Trust Officer of First Trust of New York, National Association, one
of the corporations described in and which executed the foregoing instrument;
that she knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that she signed her name thereto by
like authority.
__________________________
<PAGE> 120
EXHIBIT A
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
______, ____
First Trust of New York, National Association
100 Wall Street, Suite 1600
New York, NY 10005
Attention: Corporate Trust Department
Re: Benton Oil and Gas Company (the "Company")
11 5/8% Senior Notes due 2003 (the "Securities")
------------------------------------------------
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Securities, we confirm that:
1. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth in the
Indenture dated as of May 2, 1996, relating to the Securities (the "Indenture")
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
2. We understand that the offer and sale of the Securities
have not been registered under the Securities Act, and that the Securities may
not be offered or sold except as permitted in the following sentence. We agree,
on our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Securities within three years
after the original issuance of the Securities, we will do so only (A) to the
Company or any subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein), (C) to
an institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes to you a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the Notes (the form
of which letter can be obtained from the Issuer or the Trustee) and, if such
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transfer is in respect of an aggregate principal amount of Notes of less than
$250,000, an opinion of counsel acceptable to the Company that such transfer is
in compliance with the Securities Act, (D) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant
to the exemption from registration provided by Rule 144 under the Securities
Act, or (F) pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing any of the
Securities from us a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
3. We understand that, on any proposed resale of any
Securities, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonable require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Securities purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official injury
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: _____________________
Authorized Signature
A-2
<PAGE> 122
EXHIBIT B
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
______, ____
First Trust of New York, National Association
100 Wall Street, Suite 1600
New York, NY 10005
Attention: Corporate Trust Department
Re: Benton Oil and Gas Company (the "Company")
11 5/8% Senior Notes due 2003 (the "Securities")
------------------------------------------------
Dear Sirs:
In connection with our proposed sale of U.S.$________
aggregate principal amount of the Securities, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in
the United States;
(2) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with
B-1
<PAGE> 123
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: _____________________
Authorized Signature
B-2
<PAGE> 1
EXHIBIT 5.1
[Emens, Kegler, Brown, Hill & Ritter Co., L.P.A. Letterhead]
June 14, 1996
Benton Oil and Gas Company
1145 Eugenia Place, Suite 200
Carpinteria, California 93013
Re: Exchange Offer
Dear Sirs:
We have acted as counsel to Benton Oil and Gas Company, a Delaware
corporation (the "Company"), in connection with the filing by the Company with
the Securities and Exchange Commission of a registration statement (the
"Registration Statement") on Form S-4 under the Securities Act of 1933, as
amended (the "Securities Act"). The Registration Statement relates to the
proposed issuance of up to $125,000,000 aggregate principal amount of the
Company's 11-5/8% Senior Notes due 2003 (the "New Notes") registered under the
Securities Act in exchange for up to $125,000,000 aggregate principal amount of
the Company's outstanding 11-5/8% Senior Notes due 2003 (the "Old Notes"). The
New Notes are issuable under an Indenture dated as of May 2, 1996 (the
"Indenture") between the Company and First Trust of New York, National
Association (the "Trustee").
As counsel to the Company, we have examined and relied upon originals
or copies, certified or otherwise identified to our satisfaction, of such
documents, certificates, corporate records and other instruments as we have
deemed necessary or advisable for the purpose of this opinion. In our
examination, we have assumed the authenticity of all documents submitted to us
as originals, the genuineness of all signatures thereon, the legal capacity of
natural persons executing such documents and the conformity to original
documents of all documents submitted to us as certified or photostatic copies.
Based upon the foregoing, and subject to the assumptions and
limitations set forth herein, we are of the opinion that, when (i) appropriate
action is taken by the Company to authorize the
<PAGE> 2
Benton Oil and Gas Company
June 14, 1996
Page 2
issuance and to establish, in accordance with the Indenture, the form and terms
of the New Notes, and (ii) the New Notes are duly executed under the Company's
corporate seal, attested, issued and delivered by duly authorized officers of
the Company and authenticated by the Trustee, all in accordance with such
Company action and the terms of the Indenture, against surrender and
cancellation of a like principal amount of Old Notes, the New Notes will
constitute valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as enforcement thereof may
be subject to or limited by bankruptcy, insolvency, fraudulent transfer,
fraudulent conveyance, reorganization, moratorium, arrangement or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles.
To the extent relevant to the opinions set forth above, we have assumed
that the Trustee is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization; that the Trustee is duly
qualified to engage in the activities contemplated by the Indenture and is
qualified and eligible under the terms of the Indenture to act as trustee
thereunder; that the Indenture was duly authorized, executed and delivered by
the Trustee; that the Indenture is a valid and binding obligation of the
Trustee; that the Trustee is in compliance, generally with respect to acting as
a trustee under the Indenture, with all applicable laws and regulations; and
that the Trustee has the requisite organizational and legal power and authority
to perform its obligations under the Indenture.
We are members of the bar of the State of Ohio and the foregoing
opinion is limited to matters arising under the laws of the State of Ohio and
the General Corporation Law of the State of Delaware, and we express no opinion
with respect to matters arising under the laws of any other jurisdiction.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and any amendments thereto.
Very truly yours,
EMENS, KEGLER, BROWN, HILL & RITTER CO., L.P.A.
By: /s/ Jack A. Bjerke
------------------------------------
Jack A. Bjerke,
Vice President
9008.39/#62217
<PAGE> 1
Exhibit 12.1
BENTON OIL AND GAS COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31 March 31
------------------------------------------------ -----------------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes, minority
interest and extraordinary items $ 512 ($2,909) ($4,829) $5,746 $18,373 $3,983 $13,056
Add (deduct):
Portion of rents representative of the
interest factor 23 73 77 84 654 163 163
interest expense 1,736 1,831 1,958 3,888 7,496 1,619 2,260
----- ----- ----- ----- ----- ----- -----
Earnings as adjusted $2,271 ($1,005) ($2,794) $9,718 $26,523 $5,765 $15,509
====== ======= ======= ====== ======= ====== =======
Fixed Charges:
interest expense $1,736 $1,831 $1,958 $3,888 $ 7,496 $1,619 $ 2,260
Portion of rents representative of the
interest factor 23 73 77 84 654 163 163
-- -- -- -- --- --- ---
Total fixed charges $1,759 $1,904 $2,035 $3,972 $8,150 $1,782 $ 2,423
====== ======= ======= ====== ====== ====== =======
Ratio of earnings to fixed charges (1) 1.29 -- -- 2.45 3.25 3.24 6.40
---- ---- ---- ---- ---- ---- ----
<FN>
(1) The ratio of earnings to fixed charges has been computed based upon net
earnings (loss) before income taxes, minority interest, extraordinary
items and fixed charges. Fixed charges consist of interest expense and
one-third of rental expense (the portion deemed representative of the
interest factor). Earnings before income taxes and fixed charges were
insufficient to cover fixed charges for the years ended December 31, 1992
and 1993 by $2.9 million and $4.8 million, respectively.
</TABLE>
page 1
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Benton Oil and Gas Company on Form S-4 of our report dated March 20, 1996,
appearing in the Annual Report on Form 10-K of Benton Oil and Gas Company for
the year ended December 31, 1995, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
Deloitte & Touche LLP
Los Angeles, California
June 17, 1996
<PAGE> 1
EXHIBIT 23.3
[HUDDLESTON LETTERHEAD]
CONSENT OF INDEPENDENT PETROLEUM ENGINEER
Gentlemen:
Huddleston & Co., Inc. hereby consents to the use of its name, use of its audit
report, and reference to it regarding its audit of the Benton Oil and Gas
Company reserve reports, prepared by Benton Oil and Gas Company, dated
January 24, 1996, in the Form S-4 Registration Statement of Benton Oil and Gas
Company registering the offer to exchange an aggregate of $125 million of
11-5/8% Senior Notes due 2003, for the $125 million aggregate principal amount
of outstanding 11-5/8% Senior Notes due 2003.
HUDDLESTON & CO., INC.
By: /s/ Peter D. Huddleston
--------------------------------------------
Peter D. Huddleston, P.E., President
Date: June 14, 1996
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------
FORM T - 1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
-----------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305 (b) (2) _________
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
13-3781471
(I. R. S. Employer
Identification No.)
100 Wall Street, New York, NY 10005
(Address of principal executive offices) (Zip Code)
-----------------
FOR INFORMATION, CONTACT:
Dennis J. Calabrese, President
First Trust of New York, National Association
100 Wall Street, 16th Floor
New York, NY 10005
Telephone: (212) 361-2506
-----------------
BENTON OIL AND GAS COMPANY
(Exact name of obligor as specified in its charter)
Delaware 77-0196707
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
1145 Eugenia Place
Suite 200
Capinteria, California 93013
(Address of principal executive offices) (Zip Code)
-----------------
11 5/8% SENIOR NOTES DUE 2003
<PAGE> 2
Item 1. GENERAL INFORMATION.
Furnish the following information as to the trustee - -
(a) Name and address of each examining or supervising authority to which
it is subject.
Name Address
---- -------
Comptroller of the Currency Washington, D. C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Item 16. LIST OF EXHIBITS.
Exhibit 1. Articles of Association of First Trust of New York, National
Association, incorporated herein by reference to Exhibit 1 of
Form T-1, Registration No. 33-83774.
Exhibit 2. Certificate of Authority to Commence Business for First Trust of
New York, National Association, incorporated herein by reference
to Exhibit 2 of Form T-1, Registration No. 33-83774.
Exhibit 3. Authorization of the Trustee to exercise corporate trust powers
for First Trust of New York, National Association, incorporated
herein by reference to Exhibit 3 of Form T-1, Registration
No. 33-83774.
Exhibit 4. By-Laws of First Trust of New York, National Association,
Incorporated herein by reference to Exhibit 4 of Form T-1,
Registration No. 33-55851.
Exhibit 5. Not applicable.
Exhibit 6. Consent of First Trust of New York, National Association,
required by Section 321(b) of the Act, incorporated herein by
reference to Exhibit 6 of Form T-1, Registration No. 33-83774.
<PAGE> 3
Exhibit 7. Report of Condition of First Trust of New York, National
Association, as of the close of business on March 31, 1996,
published pursuant to law or the requirements of its supervising
or examining authority.
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, as amended, the trustee, First Trust of New York, National Association, a
national banking association organized and existing under the laws of the United
States, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in the City of New York, and
State of New York, on the 13th day of June, 1996.
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By: /s/ David K. Leverich
----------------------
David K. Leverich
Vice President
<PAGE> 4
Exhibit 7
FIRST TRUST OF NEW YORK, N. A.
STATEMENT OF FINANCIAL CONDITION
AS OF 03/31/96
($000'S)
<TABLE>
<CAPTION>
03/31/96
--------
ASSETS
<S> <C>
Cash and Due From Depository Institutions $ 23,596
Federal Reserve Stock 3,600
Fixed Assets 764
Intangible Assets 84,233
Other Assets 9,068
--------
TOTAL ASSETS $121,261
========
LIABILITIES
Other Liabilities 2,553
--------
TOTAL LIABILITIES 2,553
EQUITY
Common and Preferred Stock 1,000
Surplus 120,932
Undivided Profits (3,224)
--------
TOTAL EQUITY CAPITAL 118,708
TOTAL LIABILITIES AND EQUITY CAPITAL $121,261
========
</TABLE>
================================================================================
To the best of the undersigned's determination, as of this date the above
financial information is true and correct.
First Trust of New York, N. A.
By: /s/ David K. Leverich
----------------------
Vice President
Date: June 13, 1996
<PAGE> 1
LETTER OF TRANSMITTAL
BENTON OIL AND GAS COMPANY
OFFER TO EXCHANGE ITS
11 5/8% SENIOR NOTES DUE 2003
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
11 5/8% SENIOR NOTES DUE 2003
PURSUANT TO THE PROSPECTUS
DATED , 1996
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1996, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
By Mail: By Overnight Delivery or Hand:
First Trust National Association First Trust of New York,
P.O. Box 64485 National Association
St. Paul, Minnesota 55164-9549 100 Wall Street
Attn: Specialized Finance New York, New York 10005
Attn: Cathy Donohue
To Confirm by Telephone
or for Information: Facsimile Transmissions:
(612) 244-1197 (612) 244-1145
Attn: Phyliss Meath
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Notes (as
defined below) either if Old Notes are to be forwarded herewith or if tenders of
Old Notes are to be made by book-entry transfer to an account maintained by
First Trust of New York, National Association (the "Exchange Agent") at The
Depository Trust Company ("DTC") pursuant to the procedures set forth in "The
Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such Old
Notes are not immediately available or who cannot deliver their Certificates and
all other required documents to the Exchange Agent on or prior to the Expiration
Date (as defined in the Prospectus) or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus. SEE INSTRUCTION
1. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
<PAGE> 2
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF OLD NOTES TENDERED
- ---------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) OLD NOTES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF OLD NOTES
CERTIFICATE PRINCIPAL AMOUNT TENDERED (IF LESS
NUMBER(S) OF OLD NOTES* THAN ALL)**
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
TOTAL AMOUNT
TENDERED
</TABLE>
- --------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Old Notes may be tendered in whole or in part in denominations of $1,000 and
integral multiples thereof. All Old Notes held shall be deemed tendered
unless a lesser number is specified in this column.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution
DTC Account Number
Transaction Code Number
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution
DTC Account Number
Transaction Code Number
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Benton Oil and Gas Company, a Delaware
corporation (the "Company"), the above described aggregate principal amount of
the Company's 11 5/8% Senior Notes due 2003 (the "Old Notes") in exchange for a
like aggregate principal amount of the Company's 11 5/8% Senior Notes due 2003
(the "New Notes") which have been registered under the Securities Act of 1933
(the "Securities Act"), upon the terms and subject to the conditions set forth
in the Prospectus dated , 1996 (as the same may be amended or
supplemented from time to time, the "Prospectus"), receipt of which is
acknowledged, and in this Letter of Transmittal (which, together with the
Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Company, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY,
AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION
RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if Certificates are submitted for more Old Notes than are
tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering holder, promptly following the expiration
or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer -- Procedures for Tendering
Old Notes" in the Prospectus and in the instructions hereto will, upon the
Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Old Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions," please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED
ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED
HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE
RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A
BROKER-DEALER, THE
<PAGE> 4
UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION
(WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD
NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A
HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT
WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF
CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES,
THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR
(B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL
DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING
THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW
NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH
BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE
MEANING OF THE SECURITIES ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) IN
CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES, WHERE
SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR
A PERIOD ENDING 180 DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER
CERTAIN LIMITED CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN
ALL SUCH NEW NOTES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER. IN
THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING
BROKER-DEALER"), BY TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE
OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT
CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL
RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE
THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE
REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE
SALE OF NEW NOTES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED OR
SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS
FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING
BROKER-DEALER OR THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY
BE RESUMED, AS THE CASE MAY BE. IF THE COMPANY GIVES SUCH NOTICE TO SUSPEND THE
SALE OF THE NEW NOTES, IT SHALL EXTEND THE 180-DAY PERIOD REFERRED TO ABOVE
DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN
CONNECTION WITH THE RESALE OF NEW NOTES BY THE NUMBER OF DAYS DURING THE PERIOD
FROM AND INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO AND INCLUDING THE
DATE WHEN PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE
SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO PERMIT RESALES OF THE NEW NOTES
OR TO AND INCLUDING THE DATE ON WHICH THE COMPANY HAS GIVEN NOTICE THAT THE SALE
OF NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last Interest Payment Date to which interest has been paid or duly provided for
on such Old Notes prior to the original issue date of the New Notes or, if no
such interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and the undersigned waives the right to receive any
interest on such Old Notes accrued from and after such Interest Payment Date or,
if no such interest has been paid or duly provided for, from and after May 1,
1996.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
<PAGE> 5
- --------------------------------------------------------------------------------
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s)
on Certificate(s) for the Old Notes hereby tendered or on a security
position listing, or by any person(s) authorized to become the registered
holder(s) by endorsements and documents transmitted herewith (including
such opinions of counsel, certifications and other information as may be
required by the Company or the Trustee for the Old Notes to comply with
the restrictions on transfer applicable to the Old Notes). If signature is
by an attorney-in-fact, executor, administrator, trustee, guardian,
officer of a corporation or another acting in a fiduciary capacity or
representative capacity, please set forth the signer's full title. See
Instruction 5.
--------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Date , 1996
Name(s)
--------------------------------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
Authorized Signature
Name
--------------------------------------------------------------------------
(PLEASE PRINT)
Date , 1996
Capacity or Title
Name of Firm
Address
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- --------------------------------------------------------------------------------
<PAGE> 6
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be complete ONLY if the New Notes are to be issued in the name of
someone other than the registered holder of the Old Notes whose name(s)
appear(s) above.
Issue New Notes to:
Name
(PLEASE PRINT)
Address
(INCLUDE ZIP CODE)
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes are to be sent to someone other than the
registered holder of the Old Notes whose name(s) appear(s) above, or to such
registered holder(s) at an address other than that shown above.
Mail New Notes to:
Name
(PLEASE PRINT)
Address
(INCLUDE ZIP CODE)
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
SEE IMPORTANT INSTRUCTIONS ON REVERSE SIDE
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus. Certificates, or
timely confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC, as well as this Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at one of its addresses set forth herein on or
prior to the Expiration Date. Old Notes may be tendered in whole or in part in
the principal amount of $1,000 and integral multiples of $1,000.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the Expiration Date or (iii) who cannot complete the procedures for delivery
by book-entry transfer on a timely basis, may tender their Old Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures
for Tendering Old Notes" in the Prospectus. Pursuant to such procedures: (i)
such tender must be made by or through an Eligible Institution (as defined
below); (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Company, must be
received by the Exchange Agent on or prior to the Expiration Date; and (iii) the
Certificates (or a book-entry confirmation (as defined in the Prospectus))
representing all tendered Old Notes, in proper form for transfer, together with
a Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
within five New York Stock Exchange, Inc. trading days after the date of
execution of such Notice of Guaranteed Delivery, all as provided in "The
Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of
the Old Notes) of Old Notes tendered herewith, unless such holder(s) has
completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in the principal amount of $1,000 and integral multiples thereof,
provided that if any Old Notes are tendered for exchange in part, the untendered
principal amount thereof must be $250,000 or any integral multiple of $1,000 in
excess thereof. If less than all the Old Notes evidenced by any Certificate
submitted are to be tendered, fill in the principal amount of Old Notes which
are to be tendered in the box entitled "Principal Amount of Old Notes Tendered
(if less than all)." In such case, new Certificate(s) for the remainder of the
Old Notes that were evidenced by your old Certificate(s) will only be sent to
the holder of the Old Note, promptly after the
<PAGE> 8
Expiration Date. All Old Notes represented by Certificates delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to be
effective on or prior to that time, a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth above or in the Prospectus on
or prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old Notes to be withdrawn, and (if Certificates for Old
Notes have been tendered) the name of the registered holder of the Old Notes as
set forth on the Certificate for the Old Notes, if different from that of the
person who tendered such Old Notes. If Certificates for the Old Notes have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Certificates for the Old Notes, the tendering holder
must submit the serial numbers shown on the particular.
Certificates for the Old Notes to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Old Notes tendered for the account of an Eligible Institution. If
Old Notes have been tendered pursuant to the procedures for book-entry transfer
set forth in "The Exchange Offer -- Procedures for Tendering Old Notes," the
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawal of Old Notes, in which case a notice of
withdrawal will be effective if delivered to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old
Notes may not be rescinded. Old Notes properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer -- Procedures
for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and must submit proper evidence
satisfactory to the Company, in its sole discretion, of such persons' authority
to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or
separate bond power(s) are required unless New Notes are to be issued in the
name of a person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Trustee for the Old Notes may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance of which, or exchange for, may, in the view of
counsel to the Company, be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer -- Certain
Conditions to the Exchange Offer" or any conditions or irregularity in any
tender of Old Notes of any particular holder whether or not similar conditions
or irregularities are waived in the case of other holders.
<PAGE> 9
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Old Notes will be deemed to have been validly
made until all irregularities with respect to such tender have been cured or
waived. Neither the Company, any affiliates or assigns of the Company, the
Exchange Agent, nor any other person shall be under any duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is required
to provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the holder or other payee to a $50 penalty. In addition, payments to
such holders or other payees with respect to Old Notes exchanged pursuant to the
Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF)
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE> 10
TO BE COMPLETED BY ALL
TENDERING SECURITYHOLDERS
(SEE INSTRUCTION 9)
PAYER'S NAME: FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT
Form W-9 AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number or
Employer Identification
Number
Department of the Treasury Part 2
Internal Revenue Service Awaiting TIN //
</TABLE>
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the number
shown on this form is my correct taxpayer identification number (or I am waiting
for a number to be issued to me), (2) I am not subject to backup withholding
either because (i) I am exempt from backup withholding, (ii) I have not been
notified by the Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or
(iii) the IRS has notified me that I am no longer subject to backup withholding,
and (3) any other information provided on this form is true and correct.
<TABLE>
<S> <C>
Payer's Request for Taxpayer SIGNATURE
Identification Number (TIN)
and Certification DATE
</TABLE>
You must cross out item (iii) in Part (2) above if you have been notified by the
IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the New Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
<TABLE>
<S> <C>
Signature Date
- -------------------------------------------------- ---------------------------------------------
</TABLE>
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
11 5/8% SENIOR NOTES DUE 2003
OF
BENTON OIL AND GAS COMPANY
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (I)
certificates for the Company's (as defined below) 11 5/8% Senior Notes due 2003
(the "Old Notes") are not immediately available, (ii) Old Notes, the Letter of
Transmittal and all other required documents cannot be delivered to First Trust
of New York, National Association (the "Exchange Agent") on or prior to the
Expiration Date (as defined in the Prospectus referred to below) or (iii) the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand, overnight
courier or mail, or transmitted by facsimile transmission, to the Exchange
Agent. See "The Exchange Offer -- Procedures for Tendering Old Notes" in the
Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
BY MAIL: BY OVERNIGHT DELIVERY OR HAND:
First Trust National Association First Trust of New York,
P.O. Box 64485 National Association
St. Paul, Minnesota 55164-9549 100 Wall Street
Attn: Specialized Finance New York, New York 10005
Attn: Cathy Donohue
</TABLE>
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(612) 244-1197
Attn: Phyllis Meath
FACSIMILE TRANSMISSIONS:
(612) 244-1145
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF
A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE
MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER
OF TRANSMITTAL.
<PAGE> 2
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Old Notes
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of such Old Notes to the Exchange Agent's account at The Depository
Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set
forth in the Prospectus, in either case together with one or more properly
completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and
any other required documents within five business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of Transmittal
and the Old Notes tendered hereby to the Exchange Agent within the time period
set forth above and that failure to do so could result in a financial loss to
the undersigned.
<TABLE>
<S> <C>
Name of
Firm: ------------------------------------------- -------------------------------------------------
(Authorized Signature)
Address: ---------------------------------------- Title: ------------------------------------------
- ------------------------------------------------- Name: -------------------------------------------
(Zip Code) (Please type or print)
Area Code and
Telephone
Number: ----------------------------------------- Date: -------------------------------------------
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL
SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A
PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.
<PAGE> 1
[FORM OF EXCHANGE AGENCY AGREEMENT]
, 1996
First Trust of New York, National Association
100 Wall Street
New York, NY 10005
Ladies and Gentlemen:
Pursuant to the provision of the Offer (the "Exchange Offer") for all of Benton
Oil and Gas Company (the "Company") outstanding 11 5/8% Notes due 2003 (the
"Initial Notes") in exchange for 11 5/8% Senior Notes due 2003 (the "Exchange
Notes"), all of the Company's issued and outstanding Initial Notes accepted for
tender of exchange (the "Exchange") prior to 5:00 p.m. New York time on ,
1996, unless extended, for the Company's Exchange Notes will be exchanged
pursuant to the terms and conditions of the Exchange Offer. The Exchange Offer
is being made pursuant to a prospectus (the "Prospectus") included in the
Company's registration statement on Form S-4 (File No. 33- ) (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"SEC"). The term "Expiration Date" shall mean the date on which the Exchange
Offer, as it may be extended, shall expire. Upon receipt and execution of this
letter and confirmation of the arrangements herein set forth, First Trust of New
York, National Association will act as the Exchange Agent for the Exchange (the
"Exchange Agent"). A copy of the Prospectus is attached hereto as Exhibit A.
A copy of the form of the letter of transmittal, including the related notice of
guaranteed delivery (the "Letters of Transmittal"), to be used by the holders of
the Initial Notes (the "Holders") to surrender their Initial Notes in order to
receive the Exchange Notes pursuant to the Exchange is attached hereto as
Exhibit B.
The Company hereby appoints you to act as Exchange Agent in connection with the
Exchange. In carrying out your duties as Exchange Agent, you are to act in
accordance with the following:
1. You are to mail the Prospectus and the Letters of Transmittal to all of the
Holders on the day that you are notified by the Company that the Registration
Statement has become effective under the Securities Act of 1933, as amended, and
to make subsequent mailings thereof to persons who become Holders prior to the
Expiration Date as may from time to time be requested by the Company.
2. You are to examine the Letters of Transmittal and the Initial Notes and other
documents delivered or mailed to you, by or for the Holders, prior to the
Exchange Date, to ascertain whether (i) the Letters of Transmittal are properly
executed and completed in accordance with the instructions set forth therein,
(ii) the Initial Notes are in proper form for transfer, and (iii) all other
documents submitted to you are in proper form. In each case where a Letter of
Transmittal or other document has been improperly executed or completed or, for
any other reason, is not in proper form, or some other irregularity exists, you
are authorized to endeavor to take such action as you consider appropriate to
notify the tenderer of such irregularity and as to the appropriate means of
resolving the same. Determination of questions as to the proper completion or
execution of the Letters of Transmittal, or as to the proper form for transfer
of the Initial Notes or as to any other irregularity in connection with the
submission of Letters of Transmittal and/or Initial Notes and other documents in
connection with the Exchange, shall be made by you together with officers of, or
counsel for, the Company and with representatives of the Company at their
written instructions or oral direction confirmed by facsimile. Any determination
made by the Company on such questions shall be final and binding. As Exchange
Agent, you are entitled to rely on any determination by the Company as described
above and shall be fully protected and indemnified in such reliance.
3. Tender of the Initial Notes may be made only as set forth in the Letter of
Transmittal. Notwithstanding the foregoing, tenders which the Company shall
approve in writing as having been properly tendered shall be considered to be
properly tendered. Letters of Transmittal shall be recorded by you as to the
date and time of receipt and shall be preserved and retained by you. Exchange
Notes are to be issued in exchange for the Initial Notes pursuant to the
Exchange only (i) against deposit with you of the Initial Notes, together with
executed Letters of Transmittal and any other documents required by the Exchange
Offer on each business day from the execution hereof up to the Expiration Date
or (ii) in the event the holder is a participant in the Depository Trust Company
("DTC") system, by the utilization of DTC's Automated Tender Offer Program
("ATOP") and any evidence required by the Exchange Offer on each business day
from the execution hereof up to the Expiration Date.
4. Upon the oral or written request of the Company (with written confirmation of
such oral request thereafter), you will transmit by telephone, and promptly
thereafter confirm in writing to (i) Michael B. Wray, President and Chief
Financial Officer (telephone (805) 566-5600) and (ii) Jack A. Bjerke, Emens,
Kegler, Brown, Hill & Ritter Co., L.P.A., counsel to the Company (telephone
(614) 462-5400) or such other persons as the Company may reasonably request, the
aggregate number of the Initial Notes tendered to you and the number of the
Notes properly tendered that day. Furthermore, you shall transmit copies of all
Agents Messages (as defined in the Letter of Transmittal) received in connection
with ATOP to the aforementioned persons as they are
<PAGE> 2
received. In addition, you will also inform the aforementioned persons, upon
oral request made from time to time (with written confirmation of such request
thereafter) prior to the Expiration Date, of such information as they or any of
them may reasonably request.
5. Upon the terms and subject to the conditions of the Exchange Offer, delivery
of Exchange Notes to be issued in exchange for accepted Initial Notes will be
made by you promptly after acceptance of the tendered Initial Notes.
6. If any Holder shall report to you that his/her failure to surrender Initial
Notes registered in his/her name is due to the loss, misplacement or destruction
of a certificate or certificates, you shall request such Holder (i) to furnish
to the Exchange Agent an affidavit of loss and, if required by the Company, a
corporate bond of indemnity in an amount and evidenced by such certificate or
certificates of a surety, as may be satisfactory to you and the Company, and
(ii) to execute and deliver an agreement to indemnify the Company and you in
such form as is acceptable to you and the Company. The obligees to be named in
each such indemnity bond shall include the Company and you. You shall report to
the Company the names of all Holders who claim that their Initial Notes have
been lost, misplaced or destroyed and the principal amount of such Initial
Notes.
7. As soon as practicable after you mail or deliver to an Initial Holder the
Exchange Notes that such Holder may be entitled to receive, you shall arrange
for cancellation of the Initial Notes submitted to you or returned by DTC in
connection with ATOP. Such Notes shall be forwarded to First Trust of New York,
National Association, as trustee (the "Trustee") under the Indenture dated as of
May 2, 1996 governing the Initial Notes, for cancellation and retirement as you
are instructed by the Company (or a representative designated by the Company).
8. For your services as the Exchange Agent hereunder, the Company shall pay you
in accordance with the schedule of fees attached hereto as Exhibit C. The
Company also will reimburse you for your reasonable out-of-pocket expenses
(including but not limited to counsel fees not previously paid to you as set
forth in Exhibit C) in connection with your services promptly after submission
to the Company of itemized statements.
9. As the Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those specifically set forth
herein or in the Exhibits attached hereto or as may be subsequently requested in
writing of you by the Company and agreed to by you in writing with respect to
the Exchange;
(b) will be regarded as making no representations and having no responsibilities
as to the validity, accuracy, sufficiency, value or genuineness of any of the
Company's Holder record information, any Initial Notes deposited with you
hereunder or any Exchange Notes, any Letters of Transmittal or other documents
prepared by the Company in connection with the Exchange Offer or any signatures
or endorsements other than your own, and will not be required to and will bake
no representations as to the validity, value or genuineness of the Exchange
Offer;
(c) shall not be obligated to take any legal action hereunder which might in
your judgment involve any expenses or liability unless you shall have been
furnished with an indemnity reasonably satisfactory to you;
(d) may rely on and shall be fully protected and indemnified as provided in
paragraph 10 hereof in acting in reliance upon any certificate, instrument,
opinion, notice, letter, telegram, facsimile or other document or security
delivered to you and reasonably believed by you to be genuine and to have been
signed by the proper party or parties;
(e) may rely on and shall be fully protected and indemnified as provided in
paragraph 10 hereof in acting upon the written or oral instructions with respect
to any matter relating to your acting as Exchange Agent specifically covered by
this Agreement or supplementing or qualifying any such action of officer or
agent or such other person or persons as may be designated or whom you
reasonably believe has been designated by the Company;
(f) may consult with counsel satisfactory to you, including counsel for the
Company, and the opinion or advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by you hereunder in good faith and in accordance with the opinion or advice of
such counsel;
(g) shall not at any time advise any person as to the wisdom of the Exchange or
to the market value or decline or appreciation in market value of any Initial
Notes or Exchange Notes; and
(h) shall not be liable for anything which you may do or refrain from doing in
connection with this letter except for your gross negligence, willful misconduct
or bad faith.
10. The Company covenants and agrees to indemnify and hold harmless First Trust
of New York, National Association and its officers, directors, employees,
agents, and affiliates (collectively, the "Indemnified Parties" and each an
"Indemnified Party") and hold each Indemnified Party harmless against any loss,
liability or reasonable expense of any nature (including reasonable legal and
other fees and expenses) incurred in connection with the administration of the
duties of the Indemnified Parties hereunder; provided, however, that no
Indemnified Party shall be indemnified against any such loss, liability or
expense arising out of such party's gross negligence or bad faith. In no case
shall the Company be liable under this indemnity with respect to any claim
against
<PAGE> 3
any Indemnified Party unless the Company shall be notified by such Indemnified
Party by letter, or by cable, telex or telecopier confirmed by letter, of the
written assertion of a claim against such Indemnified Party, or of any action
commenced against such Indemnified Party, promptly after but in any event within
10 days of the date such Indemnified Party shall have received any such written
assertion of a claim or shall have been served with a summons, or other legal
process, giving information as to the nature and basis of the claim, but failure
so to notify the Company shall not relieve the Company of any liability which it
may have otherwise than on account of this Agreement or hereunder except such
liability which is a direct result of such Indemnified Party's failure to notify
promptly. The Company shall be entitled to participate at its own expense in the
defense against any such claim or legal action. If such Indemnified Party in
such notice so directs, the Company shall assume the defense of any suit brought
to enforce any such claim. If such Indemnified Party does not so direct the
Company but elects not to defend any such claim or legal action or if such
Indemnified Party has elected to defend any such claim or legal action but is
not, in the reasonable judgment of the Company, diligently pursuing such
defense, then the Company may elect to assume the defense of any suit brought to
enforce any such claim. In the event the Company assumes the defense, the
Company shall not be liable for any fees and expenses thereafter incurred by
such Indemnified Party's counsel, except for any reasonable fees and expenses of
such Indemnified Party's counsel incurred in representing such Indemnified Party
that are necessary and appropriate as a result of the need to have separate
representation because of a conflict of interest between such Indemnified Party
and the Company: You shall not enter into a settlement or other compromise with
respect to any indemnified loss, liability or expense without the prior written
consent of the Company, which shall not be unreasonably withheld or delayed if
not adverse to the Company's interests.
11. This Agreement and your appointment as the Exchange Agent shall be construed
and enforced in accordance with the laws of the State of New York and shall
inure to the benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of the parties hereto. This Agreement may not
be modified orally. Any inconsistency between this Agreement and the Letter of
Transmittal, as they may from time to time be supplemented or amended, shall be
resolved in favor of the latter, except with respect to the duties, liabilities
and indemnification of you as Exchange Agent.
BENTON OIL AND GAS COMPANY
By:
Title:
<PAGE> 1
OFFER TO EXCHANGE
11 5/8% SENIOR NOTES DUE 2003
FOR ANY AND ALL OUTSTANDING
11 5/8% SENIOR NOTES DUE 2003
OF
BENTON OIL AND GAS COMPANY
To Our Clients:
We are enclosing herewith a Prospectus, dated ______________ , 1996, of Benton
Oil and Gas Company (the "Company"), a Delaware corporation, and a related
Letter of Transmittal (which together constitute the "Exchange Offer") relating
to the offer by the Company to exchange its 11 5/8% Senior Notes due 2003 (the
"New Notes"), pursuant to an offering registered under the Securities Act of
1933, as amended (the "Securities Act"), for a like principal amount of its
issued and outstanding 11 5/8% Senior Notes due 2003 (the "Old Notes") upon the
terms and subject to the conditions set forth in the Exchange Offer.
Please note that the Offer will expire at 5:00 p.m., New York City time, on
______________ , 1996, unless extended.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
We are the holder of record and/or participant in the book-entry transfer
facility of Old Notes held by us for your account. A tender of such Old Notes
can be made only by us as the record holder and/or participant in the book-entry
transfer facility and pursuant to your instructions. The Letter of Transmittal
is furnished to you for your information only and cannot be used by you to
tender Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the Old
Notes held by us for your account pursuant to the terms and conditions of the
Exchange Offer. We also request that you confirm that we may on your behalf make
the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will represent
to the Company that (i) the holder is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act of 1933, as amended, (ii) any
New Notes to be received by the holder are being acquired in the ordinary course
of its business, (iii) the holder has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of New Notes to be received in the Exchange Offer, and (iv) if the holder
is not a broker-dealer, the holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of such New
Notes. If the tendering holder is a broker-dealer (whether or not it is also an
"affiliate") that will receive New Notes for its own account in exchange for Old
Notes, we will represent on behalf of such broker-dealer that the Old Notes to
be exchanged for the New Notes were acquired by it as a result of
marketing-making activities or other trading activities, and acknowledge on
behalf of such broker-dealer that it will deliver a prospectus meeting the
requirements of the Act in connection with any resale of such New Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Act in connection with any resale of such New Notes, such
broker-dealer is not deemed to admit that it is an "underwriter" within the
meaning of the Act.
Very truly yours,
<PAGE> 2
INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER PARTICIPANT FROM OWNER
OF
BENTON OIL AND GAS COMPANY
11 5/8% SENIOR NOTES DUE 2003
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
______________ , 1996 (the "Prospectus") of Benton Oil and Gas Company, a
Delaware corporation (the "Company"), and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account of the
undersigned is (fill in amount):
$ ______________ of the 11 5/8% Senior Notes due 2003.
With respect to the Exchange Offer, the undersigned hereby instructs you (check
appropriate box):
/ / To TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered, (if any):
$ ______________ of the 11 5/8% Senior Notes due 2003.
/ / NOT to TENDER any Old Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized to make, on
behalf of the undersigned (and the undersigned, by its signature below, hereby
makes to you), the representation and warranties contained in the Letter of
Transmittal that are to be made with respect to the undersigned as a beneficial
owner, including but not limited to the representations, that (i) the holder is
not an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act of 1933, as amended, (ii) any New Notes to be received by the
holder are being acquired in the ordinary course of its business, (iii) the
holder has no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of New Notes to be
received in the Exchange Offer, and (iv) if the holder is not a broker-dealer,
the holder is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such New Notes. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
New Notes for its own account in exchange for Old Notes, it represents that such
Old Notes were acquired as a result of market-making activities or other trading
activities, and it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 3
SIGN HERE
Name of beneficial owner(s):
Signature(s):
Name(s) (please print):
Address:
Telephone Number:
Taxpayer identification or Social Security Number:
Date:
<PAGE> 1
OFFER TO EXCHANGE
11 5/8% SENIOR NOTES DUE 2003
FOR ANY AND ALL OUTSTANDING
11 5/8% SENIOR NOTES DUE 2003
OF
BENTON OIL AND GAS COMPANY
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer by
Benton Oil and Gas Company (the "Company"), a Delaware corporation, to exchange
its 11 5/8% Senior Notes due 2003 (the "New Notes"), pursuant to an offering
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of its issued and outstanding 11 5/8% Senior Notes
due 2003 (the "Old Notes") upon the terms and subject to the conditions set
forth in the Company's Prospectus, dated ______________ , 1996, and the
related Letter of Transmittal (which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated ______________ , 1996;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder and/or Book-Entry Transfer participant from
Owner; and
5. Letter which may be sent to your clients for whose account you hold Old Notes
in your name or in the name of your nominee, to accompany the instruction
form referred to above, for obtaining such client's instruction with regard
to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the Offer will
expire 5:00 p.m., New York City time, on ______________ , 1996, unless
extended.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will represent
to the Company that (i) the holder is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act of 1933, as amended, (ii) any
New Notes to be received by the holder are being acquired in the ordinary course
of its business, (iii) the holder has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of New Notes to be received in the Exchange Offer, and (iv) if the holder
is not a broker-dealer, the holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of such New
Notes. If the tendering holder is a broker-dealer that will receive New Notes
for its own account in exchange for Old Notes, you will represent on behalf of
such broker-dealer that the Old Notes to be exchanged for the New Notes were
acquired by it as a result of market-making activities or other trading
activities, and acknowledge on behalf of such broker-dealer that it will deliver
a prospectus meeting the requirements of the Act in connection with any resale
of such New Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Act in connection with any resale of
such New Notes, such broker-dealer is not deemed to admit that it is an
"underwriter" within the meaning of the Act.
The enclosed Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner contains an authorization by the beneficial owners of the
Old Notes for you to make the foregoing representations.
<PAGE> 2
The Company will not pay any fee or commission to any broker or dealer or to any
other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Offer. The Company will pay
or cause to be paid any transfer taxes payable on the transfer of Old Notes to
it, except as otherwise provided in Instruction of the enclosed Letter of
Transmittal.
Additional copies of the enclosed material may be obtained from the undersigned.
Very truly yours,
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF BENTON OIL AND GAS COMPANY OR FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR
BEHALF IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH
AND THE STATEMENTS CONTAINED THEREIN.
