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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
Form 10-K
(Mark one)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ________ to ________
Commission file number 1-10509
___________________
SNYDER OIL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2306158
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
777 Main Street 76102
Fort Worth, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (817) 338-4043
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
---------------------------- ---------------------------
Common Stock New York Stock Exchange
$6.00 Convertible Exchangeable
Preferred Stock New York Stock Exchange
7% Convertible Subordinated Notes New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes / No
---- ----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Aggregate market value of the common stock held by
non-affiliates of the registrant
as of March 9, 1995. . . . . . . . . . . . $377,910,848
Number of shares of common stock outstanding
as of March 9, 1995. . . . . . . . . . . . . 30,240,567
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Report is incorporated by reference to the
Registrant's definitive Proxy Statement relating to its Annual
Meeting of Stockholders, which will be filed with the Commission no
later than April 30, 1995.
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SNYDER OIL CORPORATION
Annual Report on Form 10-K
December 31, 1994
PART I
ITEM 1. BUSINESS
General
Snyder Oil Corporation (the "Company") is engaged in the
acquisition and development of oil and gas properties primarily in
the Rocky Mountain and Gulf Coast regions of the United States. The
Company also gathers, transports, processes and markets natural gas
generally in proximity to its principal producing properties. Over
the past five years, revenues have increased from $84.3 million to
$262.3 million, net income rose from $3.2 million to $12.4 million
and net cash provided by operations grew from $22.5 million to $86.5
million. At December 31, 1994, the Company's net proved reserves
totalled 120.2 million barrels of oil equivalent("MMBOE"), having a
pretax present value at constant prices of $414.4 million.
Approximately 71% of the reserves were natural gas.
The Company's reserves are concentrated in five major producing
areas located in Colorado, Wyoming and Texas, which collectively
account for more than 86% of the present value of its reserves. The
Company owns properties in 15 states and the Gulf of Mexico,
including 5,269 gross (2,651 net) producing wells and nine gas
transportation and processing facilities. The Company operates more
than 2,600 wells which account for almost 90% of its developed
reserves. The Company also participates in several international
exploration and development projects through a wholly owned
subsidiary and its 29% owned Australian affiliate, Command Petroleum
Limited. At December 31, 1994, the Company held undeveloped acreage
totaling 1.4 million gross acres (962,000 net) domestically and 5.7
million gross acres (2.8 million net) internationally.
Over the past four years, the Company has pursued a balanced
strategy of development drilling and acquisitions, focusing on
enhancing operating efficiency and reducing capital costs through the
concentration of assets in selected geographic areas or "hubs."
Currently, the Company's primary emphasis is on development drilling
in several Rocky Mountain basins and in southeast Texas. Prior
to 1994, drilling was focused in the Wattenberg Field of the Denver-
Julesburg Basin ("DJ Basin") of Colorado where the Company has
drilled over 1,000 wells since 1991. This drilling increased the
Company's Wattenberg production more than sixfold, from an average of
2.6 MBOE per day in 1991 to 15.9 MBOE in 1994. Beginning in 1994,
a growing percentage of drilling expenditures was directed towards
developing a series of projects outside Wattenberg. To date,
projects have been successfully initiated in the Greater Green River,
Piceance and Uinta Basins of the Rocky Mountains and in the Giddings
Field of southeast Texas. In 1994, 370 wells were drilled in
Wattenberg. In late 1994, the Company curtailed drilling in
Wattenberg as the result of declining gas prices and disappointing
drilling results in certain outlying areas of the Field. Based on
current gas prices, the Company expects to drill less than 100 wells
in Wattenberg in 1995 and to concentrate on oil development and those
gas development projects which are less sensitive to low gas prices.
The experience gained in Wattenberg has assisted the Company in
developing other large scale drilling projects in the Rockies and the
Gulf Coast. By yearend 1994, these projects (including certain
fields in northern Wyoming acquired in late 1992) accounted for 60.7
MMBOE, or more than half, of the Company's proved reserves. In the
East Washakie and Deep Green River areas of the Washakie Basin of
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southern Wyoming (collectively, Greater Green River), the Company
drilled 39 wells during 1994 with production reaching 4,400 BOE per
day in December 1994. The Company operates 153 wells and holds a
significant inventory of potential drilling locations, including 102
locations classified as proved undeveloped at December 31, 1994.
The Western Slope Project incorporates portions of the Piceance Basin
of western Colorado and the Uinta Basin of Utah. In 1994, the
Company drilled 25 wells in the Piceance Basin with production
reaching nearly 2,000 BOE per day by yearend. A total of 9 wells
were drilled in late 1994 in the Uinta Basin with production
remaining modest at yearend. The Company operates 143 wells in these
two Basins and holds a significant inventory of potential drilling
locations, including 70 locations that were classified as proved
undeveloped at December 31, 1994. In the Giddings Field in
southeast Texas, the Company placed 23 horizontal oil wells on sales
during 1994, increasing its production to 3,600 BOE per day by
yearend. It also added to its inventory of potential locations in
the Field, including 20 locations that were classified as proved at
yearend 1994.
In view of the low current gas prices, the Company
plans to limit its 1995 development expenditures to $70 million.
This level of expenditure is expected to fund the drilling of up to
150 wells, 70 of which are planned for Wattenberg, 22 in the Greater
Green River area, 36 in the Western Slope Project and 20 in the
Giddings Field, where oil is the primary objective. Gas wells slated
for drilling in 1995 have been limited to those expected to yield a
high rate of return even at current prices or those which help
evaluate or hold material acreage positions. The Company intends to
continue to purchase acreage to establish new development projects
and to seek to acquire properties which strengthen its existing asset
base or secure a foothold in new geographic areas. The Company also
expects to be able to continue to pursue various international
projects at a limited capital cost. The overall objective is to
maintain a superior record of growth without taking undue financial
risk in the current adverse climate. Every effort is being made to
retain and enhance the Company's ability to accelerate drilling if
gas prices recover.
Development
General. Since 1990, development drilling has been the
Company's primary focus. The Company's existing properties have
extensive development drilling and enhancement potential, primarily
in the DJ Basin of Colorado, the Washakie and Green River Basins in
southern Wyoming, the Piceance and Uinta Basins in western Colorado
and Utah and in the Giddings Field in southeast Texas. The Company
designs its major drilling programs to reduce risk, create synergies
with its gas management operations and exploit the potential for
continuous cost improvement. Owing to the low current gas prices,
the Company expects to drill only 150 wells in 1995, including 70
wells in Wattenberg, as opposed to over 500 wells drilled during
1994, 370 of which were in Wattenberg. Emphasis will be placed on
drilling for oil, with over 40% of development expenditure slated for
development of projects, primarily in the Giddings Field and the
Uinta Basin., where oil is the primary objective.
In its large scale development projects, the Company attempts to
acquire and maintain a sizeable inventory of potential drilling
locations, many of which may not be economic at current cost and
price levels, but which may prove attractive if reservoir assumptions
are validated and well economics improve over the life of the project
through cost reductions or price increases.
Assuming no material changes in energy prices, the Company plans
to spend $70 million on development drilling in 1995. Such
expenditures totalled $90.6 million in 1993 and $156.9 million in
1994.
DJ Basin
Wattenberg Field. Wattenberg is the Company's largest base of
operations, representing approximately 45% of total proved reserves
at December 31, 1994. Over the past four years, a total of 1,037
wells have been drilled in Wattenberg, including 370 wells drilled in
1994. At yearend, the Company had interests in more than 1,800
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producing wells, of which it operated 1,500. Owing primarily to
depressed gas prices, the Company expects to drill less than 100
wells and to undertake 60 recompletions in Wattenberg in 1995. The
Company has numerous Wattenberg locations which would be attractive
to drill at higher gas prices. If gas prices increase, the Company
would expect to materially increase its drilling in the Field.
At yearend 1994, the net proved reserves attributed to the
Wattenberg properties were 12.2 million barrels of oil and 178.7 Bcf
of gas. Proved reserve quantities were significantly reduced by low
year-end gas prices (approximately $1.69 per Mcf) prevailing in
Wattenberg. The reserves were attributable to 1,847 producing wells,
63 wells in progress, 340 proved undeveloped locations and
approximately 323 proved behind pipe zones. The number of proved
undeveloped locations is sensitive to the prevailing level of gas
prices, and could increase significantly if prices return to historic
levels. The Company expects proved reserves to be assigned to
additional locations as drilling progresses.
The Codell formation, traditionally the primary objective of the
drilling, is a blanket siltstone formation that exists under much of
the Wattenberg acreage at depths of 6,700 to 7,500 feet. Codell
reserves generally have a high degree of predictability due to
uniform deposition and gradual transition from high to low gas/oil
ratio areas. The Company frequently dually completes the Niobrara
chalk formation, which lies immediately above the Codell, to enhance
drilling economics. The Codell/Niobrara wells produce most
prolifically in the first six to twelve months, after which
production declines to a fraction of initial rates. More than half
of a typical well's reserves are recovered in the first three years
of production. As a result, each well contributes significantly more
production in its first year than in subsequent years.
During 1994, the Company continued to expand its drilling
targets to include both deeper and shallower formations. The J sand
lies approximately 400 feet below the Codell. It is a low
permeability sandstone generally found to be productive throughout
the DJ Basin, with performance varying with porosity and thickness
and much greater variability outside the heart of the Wattenberg
Field. The Dakota formation lies approximately 150 feet below the J
sand. It is a low permeability sand occasionally naturally fractured
with less predictable commercial accumulations and varied performance
results. During 1994, the Company had some success in using 3-D
seismic technology for mapping the Dakota in the southern parts of
the Field. The Sussex formation is at average depths of 4,500 feet.
The Sussex sands were deposited in bars and exhibit variable
reservoir quality with a moderate degree of predictability.
Because the Codell, Niobrara and J formations are continuous
reservoirs over a large portion of the DJ Basin, the Company believes
that drilling, at least in the heart of the Wattenberg Field, is
relatively low risk. Of the 1,037 wells drilled between 1991 and
1994, only 15 were classified as dry holes, and most of these have
been in outlying areas of the Basin. Dry holes in the Basin cost an
average of $110,000 per well. The average cost of a completed well
approximated $204,000 in 1994.
In early 1994, an agreement was finalized with Union Pacific
Resource Company ("UPRC") under which the Company has the right for
up to six years to drill wells on UPRC's undeveloped acreage in the
Wattenberg area. As compensation, UPRC was granted warrants to
purchase two million shares of Common Stock. During 1994, the
Company drilled 77 wells on acreage committed under the venture. As
the result of disappointing drilling in certain outlying areas
covered by the venture, the Company paid UPRC $400,000 in early 1995
for an extension of the time period to drill the commitment wells and
released a portion of the outlying acreage committed to the venture.
The Company has undertaken to drill 55 wells during the last three
quarters of 1995, 85 wells from January 1, 1996 through February 28,
1997 and of 70 wells from March 1, 1997 through February 28,
1998. Thereafter, the Company can, at its option, extend the venture
for up to two additional years by committing to drill 150 wells per
year. There is no limit on the number of wells to drilled, and wells
in excess of the minimum reduce the number of wells required in the
following year by up to 50%. If the Company drills less than the
minimum number of wells, it is required to pay UPRC $20,000 per well
for the shortfall. On mineral acreage, UPRC retains a 15% royalty and
has the option to receive an additional 10% royalty after pay-out or
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to participate as a 50% working interest owner. On leasehold
acreage, UPRC does not have the right to participate but retains a
royalty that results in a total royalty burden of 25%.
Cheyenne. During 1994, 10 wells were placed on stream in a
shallow gas producing area on the northeast flank of the DJ Basin.
This project, known as the Cheyenne Project, began with the
acquisition of five shut-in gas wells in 1990 when the Company
determined that it could capitalize on new open access rules of the
Federal Energy Regulatory Commission ("FERC") by constructing a
gathering system to transport gas to a nearby interstate pipeline.
After acquiring almost 50,000 acres of leases in the area and selling
an approximate 27.5% interest to other parties on a promoted basis,
the Company has drilled 64 successful wells and eight dry holes in
the area and constructed a gathering system having a capacity of 10
MMcf per day to transport the gas to the interstate pipeline. The
Company currently operates 72 wells in this area that produce from
the Niobrara formation.
Greater Green River
East Washakie. Since the mid-1980's, the Company's properties
in the Barrel Springs Unit and the Blue Gap Field of southern
Wyoming, together with its gas gathering and transportation
facilities there, have been one of its most significant assets.
During 1994, the Company continued to develop fluvial Mesaverde sands
in the eastern Washakie Basin near these properties. Twenty-five
wells were completed in this area in 1994 at depths ranging from
7,500 to 11,000 feet, developing net proved reserves of 3.6 MMBOE.
Acquisitions, including the repurchase of a 50% net profits interest
in the Barrel Springs Unit,added another 6.6 MMBOE. By yearend, net
production of gas, which accounts for approximately 90% of the
reserves, had reached 21.4 MMcf per day, up from 9.2 MMcf per day one
year earlier. An environmental impact statement covering the
Company's southern and eastern lands was approved in October 1994,
allowing the drilling of up to 250 locations. Two additional
environmental impact statements covering the north and west areas
should be approved during 1995 and 1996., allowing up to 500
additional locations by the Company and other producers in these
areas. The Company expects to drill 16 wells in East Washakie during
1995.
The Company currently operates 130 wells in this area and
holds over 800 potential drilling locations, 101 of which were
classified as proved undeveloped at yearend 1994. The Company holds
interests in approximately 102,000 gross (78,000 net) undeveloped
acres in the Washakie Basin. This includes 36,000 gross (24,000 net)
undeveloped acres added during 1994.
Deep Green River. During 1994, the Company initiated a major
project to develop fluvial Lance sands in the deep portion of the
Green River Basin. The Company participated in five wells during the
fourth quarter of 1994, with encouraging results. Production
commenced in the fourth quarter and had reached 4.9 MMcf per day by
yearend. An eight well program is planned for 1995 in strategic
locations to earn acreage and further evaluate potential recoveries.
The Company holds interests in approximately 95,000 gross (79,000
net) undeveloped acres in this project. The Company believes that
there are in excess of 500 potential drilling locations on this
acreage. At the end of 1994, only four locations were classified as
proved undeveloped.
Western Slope
Development of the Western Slope Project, encompassing portions
of the Piceance Basin on the western slope of Colorado and the Uinta
Basin in northeastern Utah, continued during 1994. In the southeast
corner of the Piceance Basin, the 9,000 acre Grass Mesa Unit was
formed adjacent to the 53,000 acre Hunter Mesa Unit that the Company
operates. At yearend, the Company owned approximately 110,000 gross
(83,000 net) acres in this portion of the Piceance Basin. In the
Douglas Creek Arch area of the Piceance Basin, the Company holds an
additional 29,600 net acres. Subsequent to yearend, an agreement was
reached to sell most of this acreage at a profit. In the Uinta
Basin, the Company holds interests in approximately 104,000 gross
(85,000 net) acres. During 1995, the Company expects to reduce its
drilling program for gas reserves and to put greater emphasis on
drilling oil reserves in the Uinta Basin, with eight wells expected
in the Piceance Basin and, depending on further evaluation of
recently drilled wells, up to 25 wells planned in the Uinta Basin.
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During 1994, 25 new wells were drilled to test the Hunter Mesa
and Grass Mesa Units. Most of the wells were placed on production in
December, with the remaining wells being completed in early 1995. Net
production from the Hunter Mesa, Grass Mesa and Divide Creek Units
averaged 11.7 MMcf per day during December 1994, and had reached 16.2
MMcf per day by February 1995. During 1994, the Company acquired or
installed 33 miles of gathering lines. These lines provide access to
the Rocky Mountain Natural Gas System, which compliments the existing
connection to the Questar System. Although this affords greater
transportation capacity and flexibility, the extent to which the
Company will be able to continue to develop the Piceance Basin is in
part dependent on arranging additional gathering and transportation
at a reasonable cost. The Company is exploring options for gathering
and transporting future gas production, including the possibility of
constructing additional Company owned facilities.
Activities in the Uinta Basin during 1994 included the drilling
of three wells in the Southman Canyon Mesaverde gas project area, one
well in the Horseshoe 'B' gas project area and seven wells in the
Green River oil fairway project. Two of the Southman Canyon wells
were completed and the third Southman Canyon well and the Horseshoe 'B'
were completed in early 1995. Three of the Green River oil wells are
on production. Although production rates have not yet stabilized,
early tests are encouraging and, if sustained, could lead to a 20 to
25 well drilling program during 1995.
The Company believes there are up to 1,400 potentially drillable
locations on its holdings in the Piceance and Uinta Basins. Depths
of producing formations range form 3,000 to 9,000 feet, with
producing formations including the Uinta 'B', Green River, Wasatch,
Mesaverde and Dakota. At yearend 1994 there were 231 proved
producing wells, 23 proved non-producing zones and 66 proved
undeveloped locations. Proven reserves at yearend were 72.9 Bcf of
gas and 1.6 million barrels of oil.
Northern Wyoming
In 1992, the Company acquired four large producing fields from
Atlantic Richfield Company. At yearend 1994, proved reserves in
these fields totalled 16.2 MMBOE, including 10.9 million barrels of
oil and 31.6 Bcf of gas. The Pitchfork and Hamilton Dome fields
produce sour crude oil primarily from the Tensleep, Madison and
Phosphoria formations at depths of 2,500 to 4,000 feet. The Salt
Creek field produces sweet crude oil from the Wall Creek formation at
depths of 2,000 to 2,900 feet. The Riverton Dome field produces
primarily gas from the Frontier and Dakota tight sands formations at
8,000 to 10,000 feet with some sour crude oil production from the
Tensleep and Phosphoria. Production from this field is processed at
a Company-owned plant.
The Company operates the Hamilton Dome Field, located in the Big
Horn Basin, and the Riverton Dome Field, located in the Wind River
Basin. Since the acquisition, the Company has focused on enhancing
value through reducing operating expenses, waterflood optimization,
workovers and recompletions and limited additional drilling. In 1994
the Company initiated stepout drilling in the Riverton Dome Field,
where two successful wells were completed in the Frontier and Dakota
formations. A third well was completed early in 1995. One successful
Tensleep infill well was drilled in Hamilton Dome during late 1994.
Production from the Riverton Dome and Hamilton Dome Fields exceeded
levels projected at the time of the acquisition by 11% during 1994,
and is expected to exceed the originally projected amounts by 28%
during 1995. While production have been increased, the Company
has reduced its lease operating expenses in these fields
by approximately $400,000 per year.
The Company initiated two new exploitation projects in northern
Wyoming during 1995. In the Wind River Basin, the Company has
assembled approximately 73,000 net acres. Plans are to continue
leasing through mid-1995, with initial drilling expected in early
1996. In the Big Horn Basin, the Company had assembled
approximately 43,000 net acres through February 1995. Additional
leasing is expected to continue through the second half of 1995.
Initial drilling on the project is targeted for the fourth quarter of
1995.
Gulf Coast Area
In the Giddings Field in southeast Texas, the Company continued
expanding its horizontal drilling program. Horizontal drilling
entails risks in that the technology is still relatively new and
rapidly evolving, costs are relatively high (with dry hole costs
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ranging from $900,000 to $1.45 million for a new well and $350,000 to
$750,000 for a re-entry well) and high initial production, while
leading to high rates of return on successful wells, makes ultimate
recoveries difficult to predict. The Company's program has been
successful to date, and increasing emphasis is being placed on
horizontal drilling in Giddings. During 1994, the Company
drilled 33 wells in the Field and at yearend had placed 23 wells on
sales with nine wells in progress. One well was abandoned. Daily
net production averaged 3,600 BOE during December 1994, or nearly 10%
of total Company production, compared to 1,500 BOE a year earlier.
Proved reserves are 38% oil and 62% gas and exceeded 7.1 MMBOE
at yearend. Based on attractive economics of the program to date,
the Company acquired approximately 30,000 net undeveloped acres in
the Austin Chalk Trend, including the Giddings Field in 1994, and
plans to continue its horizontal drilling activity during 1995, with
plans to drill up to 20 wells and complete the nine wells in progress
at yearend. Oil is expected to be nearly 60% of production from the
locations to be drilled in 1995. Based on currently budgeted capital
expenditures, drilling in the Giddings Field will be the Company's
largest single project during 1995. The Company has 50 locations
classified as proved undeveloped, and believes that the total number
of potential drillable locations may ultimately be twice that number.
During 1994, the Company also acquired for $4.3 million working
interests in 10 producing wells in Brazos County which the Company
believes may have additional horizontal development potential.
The Company acquired overriding royalty interests in
approximately 250 producing wells and 330,000 net mineral acres,
primarily in north Louisiana, in 1994 for a price of $9.7 million.
The Company also entered into lease option agreements covering an
additional 373,000 net acres in north Louisiana. The transactions
also included access to over 5,000 miles of seismic data, which the
Company is currently reviewing to seek acquisition opportunities and
to develop exploitation and exploration prospects to drill or to
promote to industry partners. During 1994 the Company drilled 14
wells, 3 of which were placed on production and 11 of which were
abandoned, to test the shallow Wilcox formation. The cost of the
abandoned wells averaged approximately $60,000 per well. Several
formations are productive in the area, including the Wilcox, Hosston
and Cotton Valley trends, and the Company expects to develop
prospects covering one or more of these formations.
In late 1994, the Company acquired 51% of the common stock of
DelMar Petroleum, Inc., a closely-held company headquartered in
Houston, Texas, for $6.6 million. DelMar owns interests in and
operates 22 platforms in the Gulf of Mexico and manages investment
programs for institutional partners. During the last quarter or 1994,
DelMar acquired the interests of one of its institutional partners for
approximately $3.5 million and implemented a development program at
its Main Pass prospect. At yearend four wells had been completed and
were producing at an aggregate rate of 65 MMcf per day. DelMar's
interest in the Main Pass couples is currently less than 1%. The
Company believes its ownership position in DelMar will enable it to
expand its position in the Gulf of Mexico through acquisitions,
development and, to a much lesser extent, exploration. Such
expansion may be pursued through DelMar or directly.
Gas Management
General. The Company expanded its gas gathering and processing
capacity during 1994 with the construction of additional gathering
facilities and construction of the West Plant in Wattenberg. By
yearend, operated processing capacity had increased to more than 160
MMcf per day and gathering system capacity was increased to more than
250 MMcf per day. The gas management unit complements the Company's
development and acquisition activities by providing additional cash
flow and enhancing returns. The segment is also increasingly
profitable in its own right. During 1994, gross margin increased by
approximately 42% to $13.1 million. See "Customers and Marketing."
Colorado Facilities. The largest concentration of gas
facilities is in the Wattenberg area. These facilities include two
major gathering systems, the Enterprise system and Energy Pipeline,
the Roggen and West Plant processing plants, and a number of minor
facilities. By yearend 1994, plant capacity had reached 140 MMcf
per day, as the result of completion of the West Plant in late
October. During the fourth quarter of 1994, average throughput
reached 72 MMcf per day.
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The gas produced from most wells drilled on acreage acquired
from Amoco is dedicated for the life of the lease to Amoco's
Wattenberg gas processing plant. If Amoco were unable to process
Company production at its plant for any reason, including a shut-down
of the plant, it would have a short-term adverse impact on the
Company. The Wattenberg plants enable the Company to mitigate
the effects of any downtime at the Amoco plant.
At the Wattenberg plants, gas is processed to recover gas
liquids, primarily propane and a butane/gasoline mix, from gas
supplied by the Company and third parties. The liquids are then sold
separately from the residue gas. The liquids are marketed to local
and regional distributors and the residue gas is sold to utilities,
independent marketers and end users through an intrastate system and
the Colorado Interstate Gas ("CIG") pipeline. Two liquids lines
permit the direct sale of liquids products through either an Amoco
line to the major interchange at Conway, Kansas or to the Phillips
Petroleum line which connects the plants to the Phillips Powder River
liquids pipeline.
The Company's Wattenberg gathering systems include over 900
miles of pipeline that collect, compress and deliver gas from over
1,850 wells to the Wattenberg plants. During 1994, the Company
substantially increased the capacity of its gathering systems through
the expansion of existing facilities and the acquisition of new
facilities. Enterprise collects a portion of the Company's gas
produced from acreage acquired from Amoco and delivers it to the
Amoco Wattenberg plant. Enterprise includes 26 miles of 20" diameter
trunk and 29 miles of associated lateral gathering lines connecting
20 of the Company's existing central delivery points. As a result of
the completion of the second phase, the Enterprise system has the
capacity to deliver 75 MMcf per day to the Amoco Wattenberg plant.
The Company has negotiated a transportation arrangement with CIG
that, in conjunction with the gathering fees to be charged on the
Company's gathering systems, allows the delivery of gas to the Amoco
Wattenberg plant at a favorable rate. In addition to reducing the
Company's exposure to future escalation in gathering costs applicable
to the Company's production, Enterprise provides an enhanced degree
of operational control. Because the Enterprise system interconnects
with the Company's other Colorado facilities, the Company's plants
and other plants in the area can serve as a backup for processing a
portion of the Company's gas in the event of any curtailment at the
Amoco Wattenberg plant. While shut downs of Amoco's plant reduce the
Company's production, diversion of gas to the Company's plants and,
to a lesser degree, two other plants in the area, enabled the Company
to produce significant volumes that would have otherwise been
curtailed.
Subsequent to yearend 1994, the Company announced that it was
considering the sale of its Wattenberg gas facilities.
Wyoming Facilities. The Company operates two pipeline systems
in Wyoming that enhance its ability to market gas produced from its
properties in the Washakie Basin. Wyoming Gathering and Production
Company ("WYGAP") gathers gas produced from approximately 150
operated wells in the Barrel Springs Unit and the Blue Gap area. The
system has a capacity of 26 MMcf per day. Throughput averaged 14
MMcf and 19 MMcf per day during 1993 and 1994, respectively. WYGAP
delivers gas to Western Transmission Corporation ("Westrans"), a
Company-owned interstate pipeline system which operates under FERC
jurisdiction.
The Westrans system consists of a 26-mile main pipeline, a
smaller 9.2 mile line and related gathering facilities. The system
gathers and transports gas under open access transportation service
agreements on an interruptible basis. The main line extends from the
Washakie Basin area of Carbon County, Wyoming to connections with
Williams' and CIG's interstate pipelines in Sweetwater County,
Wyoming. Gas transported on Westrans also has access to California
markets through the Kern River Pipeline via interconnects with CIG
and Williams. Westrans is located near several other interstate
pipelines, providing the potential for additional interconnects that
offer alternative transportation routes to end markets. In addition
to the gas from WYGAP, which accounts for over 85% of its volumes,
Westrans transports volumes from other operated wells and third
parties. The capacity of Westrans is 65 MMcf per day. Daily
throughput averaged 15 MMcf during 1993 and 22 MMcf during 1994. As
the East Washakie project progresses, the Company expects to further
expand its gathering network in the area.
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Other Facilities. The Company expanded its gathering system in
southern Nebraska during 1994 to gather gas produced from newly
developed Cheyenne County properties for delivery to various markets
accessible through an interstate pipeline. The Cheyenne system
includes 14 miles of 4" to 6" trunkline and 10 miles of 3" lateral
gathering lines. During the fourth quarter of 1994, throughput
averaged over 4 MMcf per day of gas from 70 producing wells.
Included in the 1992 acquisition of Wyoming properties was a gas
processing plant in Fremont County, Wyoming. The plant has a 20 MMcf
per day capacity with current throughput of 7 MMcf per day from wells
in the Riverton Dome Field.
In conjunction with the growing level of acquisition and
development activity in the Western Slope Project, the Company is
actively exploring alternatives to gather and transport future gas
production, including the possible construction of a Company-owned
gathering and transportation line. Traditionally, the lack of
sufficient pipeline capacity has been a major deterrent to
development in the Piceance Basin. During 1994, the Company acquired
or installed 33 miles of pipeline systems in the area. These systems
provide access to the Rocky Mountain Natural Gas System, which
compliments the existing connection to the Questar System.
International Activities
The Company's strategy internationally is to develop projects
that have the potential for a major impact in the future. The
Company attempts to structure the projects to limit its financial
exposure and mitigate political risk by minimizing financial
commitments in the early phases of a project and seeking industry
partners and investors to fund the majority of the equity capital.
A wholly owned subsidiary of the Company, SOCO International, Inc.,
is the holding company for all international operations. Edward T.
Story, President of SOCO International holds an option to purchase
10% of the currently outstanding shares of SOCO International,
through April 1998.
Russian Joint Venture. Permtex, a joint drilling venture formed
in 1993 with Permneft, a Russian oil and gas company, officially
began operations in mid 1994. The venture was formed to develop
proven oil fields located in the Volga-Urals Basin of the Perm Region
of Russia, approximately 800 miles east of Moscow. Permtex holds
exploration and development rights to over 300,000 acres in the
Volga-Urals Basin, in a contract area containing four major and four
minor fields as well as other potential prospects. The Company
estimates that the four major fields could ultimately produce 115
million barrels of oil, of which approximately 30% was classified as
proved at yearend, with the remaining reserves expected to be
ultimately recovered through implementation of waterflood projects.
The joint venture utilizes primarily Russian personnel and equipment
and Western technology under joint Russian/American management.
The major fields were previously delineated through 45
previously drilled wells. Four of these wells were placed on
production during 1994 with production averaging 1,000 barrels per
day. Through the end of 1994, the venture produced approximately
80,000 barrels of oil. It is anticipated that 25 of the existing
wells will ultimately be placed on production, and that up to 400
additional development wells will be drilled over the next five to
ten years. An 18-mile pipeline extension linking the Logovskoye
field with refineries in Perm was completed in 1994 and a pump
station is now being installed. Upon completion of the pipeline and
approval by the state inspection committee, three new development
wells drilled during 1994 will be placed on production, which should
increase production by 1,000 barrels per day.
The venture successfully exported three shipments of oil
totalling 69,000 barrels of oil with payment in U.S. dollars during
1994. Also, the venture has received an exemption from excise taxes
and has applied for exemption from the export tariff, which is
currently equivalent to $4.00 per barrel (based on an exchange rate
of .75 European Currency Units per Dollar).
Based on currently expected rig availability in the area, the
venture plans to drill approximately 18 new wells during 1995. In
addition, several of the previously existing wells are scheduled to
be brought on stream through rework and perforation upon completion
of the pipeline pump station.
During 1994, Command, the Company's Australian affiliate,
Holland Sea Search NV ("HSSH"), a Dutch affiliate of Command, and
ITOCHU, a major Japanese trading company which has agreed to purchase
9
<PAGE>
<PAGE>
oil from the venture for export, purchased equity interests in
Permtex for aggregate contributions of $11.25 million, of which $8.5
million was received during 1994. As the result of these
contributions, the Company's interest in Permtex decreased from 37.5%
to 20.6%. The Company also received a commitment from the Overseas
Private Investment Corporation ("OPIC"), an agency of the United
States Government, to provide political risk insurance and up to $40
million in financing to fund Permtex's initial operations. Closing
on the OPIC financing, which would be guaranteed in certain respects
by the Company, is expected in late spring 1995 with drawings expected
to commence in mid-summer.
Command Petroleum Limited. In 1993, the Company purchased 42.8%
of the outstanding shares of Command for approximately $18.2 million.
Due to shares subsequently issued by Command in a series of
transactions, the Company's current interest in Command is 29%.
Command is an exploration and production company based in Sydney,
Australia and listed on the Australian Stock Exchange. At yearend
1994 Command had a market capitalization of $100 million, working capital of
$36 million and no debt. Command currently holds interests in more
than 14 exploration permits and production licenses primarily in the
Southwestern Pacific Rim including Australia and Papua New Guinea,
Tunisia, Yemen and India. Command also holds a 48% interest in
HSSH, a publicly traded Dutch exploration and production company
whose primary asset is an interest in the North Sea's Markham gas
field.
During 1994 Command and its industry partners signed a
production sharing contract with the government of India to develop
the Ravva Field in the Bay of Bengal. Command owns 22.5% of the
venture and is the operator for the project. Command, together with
HSSH, also purchased a 12.5% interest in Permtex, the Company's
Russian venture. In 1995, Command purchased the Company's concession
rights in Tunisia in return for Command stock and purchased a 10%
interest in the Company's Mongolian venture.
Mongolia. The Company further expanded its Mongolian venture
during 1994 and early 1995. In 1993, the Company entered into a
production sharing agreement with Mongol Petroleum Company, the
national oil company of Mongolia covering a block of 11,400 square
kilometers, or approximately 2.8 million gross acres, in the Tamtsag
Basin of northeastern Mongolia. In late 1994 an adjacent block was
acquired, increasing the Company's acreage to 5.3 million acres, in
exchange for a 1.25% overriding royalty interest in both blocks.
These concessions offset the Hailar Basin of China. The venture also
has applications for production sharing contracts pending as a co-
applicant with the Mongolian government for an additional five
million acres on two blocks adjacent to the venture's current blocks.
If these concessions are awarded, the venture's acreage would cover
the entire Tamtsag Basin in Mongolia.
During 1994, the venture continued its seismic acquisition program.
Seismic acquisition to date has identified the presence of large
structures which seem analogous to the Songliao Basin of China which
contains the Daqing field. The first well to test the acreage is
expected to begin drilling in the second quarter of 1995. In late
1994 a consortium was formed with PT BIP Energimas ("BIP"), the oil
and gas subsidiary of PT Bhuwanatala Indah Permai, a publicly listed
Indonesian company, whereby BIP acquired an interest in the venture
in exchange for committing to drill two 3,400 meter wells. Command
also acquired a 10% interest at yearend 1994. The Company's
interest in the venture is 49.5%, which will be reduced to 38% upon
completion of the required seismic program by one of the Company's
co-venturers.
Although the prospective potential of the previously unexplored
Tamtsag Basin has long been recognized, the lack of an outlet for
production has prevented exploration in the Basin. In early 1995,
the venture entered into an agreement with China National United Oil
Corporation ("CNUOC"), under which CNUOC agreed to purchase crude oil
produced by the venture at a mutually-agreed Mongolian/Chinese border
point at world market prices, less $2 per barrel. CNUOC is a joint
venture between China National Petroleum Corporation and SINOCHEM,
both state-owned entities.
Tunisia. In early 1995, the Company transferred its interests
in the Fejaj Permit area to Command, which already holds interests in
that country. In exchange for the transfer, the Company received
4.7 million shares of Command stock having a market value
approximating the Company's investment in Tunisia and will receive an
additional 4.7 million shares if a commercial discovery is made as
the result of the initial 4,000 meter drilling commitment.
Depending on Command's success in locating farmout partners to drill
10
<PAGE>
<PAGE>
the first well on the concession, the Company has agreed to pay up to
$750,000 of the costs incurred by Command in drilling such well.
<PAGE>
Production, Revenue and Price History
The following table sets forth information regarding net
production of crude oil and liquids and natural gas, revenues and
expenses attributable to such production and to natural gas
transportation, processing and marketing and certain price and cost
information for the five years ended December 31, 1994.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except price and per barrel expenses)
<S> <C> <C> <C> <C> <C>
Production
Oil (MBbl) 1,049 1,487 1,776 3,451 4,366
Gas (MMcf) 12,769 18,382 23,090 35,080 43,809
MBOE (a) 3,497 4,937 5,989 9,297 11,668
Revenues
Oil production $ 24,806 $ 30,667 $ 33,512 $ 53,174 $ 64,625
Gas production (b) 24,997 34,677 43,851 71,467 73,233
---------- ---------- ---------- ---------- ----------
Subtotal 49,803 65,344 77,363 124,641 137,858
---------- ---------- ---------- ---------- ----------
Transportation, processing
and marketing 29,442 21,459 38,611 94,839 107,247
Interest and other 5,058 (163) 2,996 9,372 17,223
---------- ---------- ---------- ---------- ----------
Total $ 84,303 $ 86,640 $118,970 $228,852 $262,328
========== ========== ========== ========== ==========
Operating expenses
Production $ 18,088 $ 24,882 $ 28,057 $ 44,901 $ 50,067
Transportation, processing
and marketing 24,103 14,202 30,469 85,640 94,177
Exploration 2,016 2,294 1,515 2,960 6,505
---------- ---------- ---------- ---------- ----------
$ 44,207 $ 41,378 $ 60,041 $133,501 $150,749
========== ========== ========== ========== ==========
Gross margin $ 40,096 $ 45,262 $ 58,929 $ 95,351 $111,579
========== ========== ========== ========== ==========
Production data
Average sales price (c)
Oil (Bbl) $ 23.65 $ 20.62 $ 18.87 $ 15.41 $ 14.80
Gas (Mcf) (a) (b) 1.69 1.68 1.74 1.94 1.67
BOE (a) 14.18 13.24 12.92 13.41 11.82
Average operating expense/BOE $ 5.17 $ 5.04 $ 4.68 $ 4.83 $ 4.29
<f/n>
_________________________
(a) Gas production is converted to oil equivalents at the rate of 6
Mcf per barrel, except for certain high priced gas which through
1992 was converted based on its price equivalency to the Company's
other gas. Average gas prices exclude this high priced gas
production.
(b) Sales of natural gas liquids are included in gas revenues.
(c) The Company estimates that its composite net wellhead prices at
December 31, 1994 were approximately $1.56 per Mcf of gas and
$15.25 per barrel of oil.
</TABLE>
11
<PAGE>
<PAGE>
Drilling Results
The following table sets forth information with respect to
wells drilled during the past three years. The information should
not be considered indicative of future performance, nor should it be
assumed that there is necessarily any correlation between the number
of productive wells drilled, quantities of reserves found or economic
value. Productive wells are those that produce commercial quantities
of hydrocarbons whether or not they produce a reasonable rate of
return.
<TABLE>
<CAPTION>
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
Development wells
Productive
Gross 241.0 382.0 466.0
Net 207.5 316.0 390.6
Dry
Gross 6.0 10.0 12.0
Net 2.7 5.5 11.1
Exploratory wells
Productive
Gross - 2.0 -
Net - 2.0 -
Dry
Gross - 6.0 13.0 (a)
Net - 3.3 10.5
<f/n>
_________________________
(a) Ten (8.75 net) of the dry holes were drilled to test shallow
formations in North Louisiana at an approximate cost of $60,000 per
well. See "Development - Gulf Coast Area."
</TABLE>
As of December 31, 1994, the Company had 92 gross (75.9 net)
development wells in progress. Between yearend and February 28,
1995, the Company spudded 28 wells. At that date 78 gross (73.0 net)
wells, including wells in progress at yearend, had been completed,
one well (1.0 net) had been abandoned and 52 gross (45.9 net)
development wells were in progress.
Field Operations
In its capacity as operator, the Company supervises day-to-day
field activities, generally employing a combination of its personnel
and contract pumpers. The Company maintains eight district field
offices and one division office.
As operator, the Company charges overhead fees to all working
interest owners according to the applicable operating agreements. As
of the end of 1992, 1993 and 1994, respectively, the Company operated
1,745, 2,176 and 2,634 wells. The Company received overhead
reimbursements for operations and drilling of $12.9 million,
$17.0 million and $23.9 million during 1992, 1993 and 1994,
respectively (including reimbursements attributable to the Company's
interest). The increase in reimbursements is attributable to the
increase in operated drilling and producing wells and contractual
escalations. Based on the time allocated to operations, these
reimbursements in aggregate generally have exceeded the costs of such
activities.
Customers and Marketing
The Company's oil and gas production is principally sold to end
users, marketers and other purchasers having access to pipeline
facilities near its properties. Where there is no access to
pipelines, crude oil is trucked to storage facilities. In 1993 and
1994, Amoco accounted for approximately 12% and 11% of revenues,
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<PAGE>
respectively. The marketing of oil and gas by the Company can be
affected by a number of factors that are beyond its control and whose
future effect cannot be accurately predicted. The Company does not
believe, however, that the loss of any of its customers would have a
material adverse effect on its operations.
Primarily due to reduced margins resulting from decreases
in the differential between Rocky Mountain gas prices and prices in
the Mid-Continent and Gulf Coast regions, the Company discontinued
third party marketing during the last half of 1994 and began to
concentrate its marketing efforts on maximizing value received for
equity gas. As a results, gross margins during 1994 from third party
marketing activities decreased from $1.2 million to $.6 million.
In June 1991, the Company entered into a contract to supply gas
to a cogeneration facility through August 2004. The contract calls
for the Company to supply 10,000 MMBtu per day. This plant, which
requires up to 24,500 MMBtu per day of gas, began operations in 1989
and is located at a manufacturing facility in Oklahoma City. The
effect of this contract depends on market prices for gas and the
local utility's choice of alternative sources of fuel to meet its
supply commitments. Gross margin generated from the contract was
approximately $1.5 million for both 1991 and 1992. Contractual
limitations resulted in a net loss of $267,000 from this contract
during 1993. During 1994, the gross margin was $.4 million.
During 1994, the Company began a program to manage risk
associated with gas prices in the Rocky Mountain region. Beginning
September 1, 1994, the Company entered into a ten-year 20,000 MMBtu
per day basis swap to lock in the differential between prices for
Rocky Mountain region gas as compared to gas prices in the Gulf Coast
market. The Company is continuing to develop an overall strategy to
manage the risk associated with volatile prices in markets for its
products.
Competition
The oil and gas industry is highly competitive in all its
phases. Competition is particularly intense with respect to the
acquisition of producing properties. There is also competition for
the acquisition of oil and gas leases, in the hiring of experienced
personnel and from other industries in supplying alternative sources
of energy.
Competitors in acquisitions, exploration, development and
production include the major oil companies in addition to numerous
independent oil companies, individual proprietors, drilling and
acquisition programs and others. Many of these competitors possess
financial and personnel resources substantially in excess of those
available to the Company. Such competitors may be able to pay more
for desirable leases and to evaluate, bid for and purchase a greater
number of properties than the financial or personnel resources of the
Company permit. The ability of the Company to increase reserves in
the future will be dependent on its ability to select and acquire
suitable producing properties and prospects for future exploration
and development.
Title to Properties
Title to the properties is subject to royalty, overriding
royalty, carried and other similar interests and contractual
arrangements customary in the oil and gas industry, to liens incident
to operating agreements and for current taxes not yet due and other
comparatively minor encumbrances. The majority of the value of the
Company's properties is mortgaged to secure borrowings under the bank
credit agreement.
As is customary in the oil and gas industry, only a perfunctory
investigation as to ownership is conducted at the time undeveloped
properties believed to be suitable for drilling are acquired. Prior
to the commencement of drilling on a tract, a detailed title
examination is conducted and curative work is performed with respect
to known significant defects.
Regulation
The Company's operations are affected by political developments
and federal and state laws and regulations. Oil and gas industry
legislation and administrative regulations are periodically changed
for a variety of political, economic and other reasons. Numerous
departments and agencies, federal, state, local and Indian, issue
13
<PAGE>
<PAGE>
rules and regulations binding on the oil and gas industry, some of
which carry substantial penalties for failure to comply. The
regulatory burden on the oil and gas industry increases the Company's
cost of doing business, decreases flexibility in the timing of
operations and may adversely affect the economics of capital
projects.
In the past, the federal government has regulated the prices at
which oil and gas could be sold. Prices of oil and gas sold by the
Company are not currently regulated. There can be no assurance,
however, that sales of the Company's production will not be subject
to federal regulation in the future.
The following discussion of various statutes, rules,
regulations or governmental orders to which the Company's operations
may be subject is necessarily brief and is not intended to be a
complete discussion thereof.
Federal Regulation of Natural Gas. Historically, the sale and
transportation of natural gas in interstate commerce have been
regulated under various federal and state laws including, but not
limited to, the Natural Gas Act of 1938, as amended ("NGA") and the
Natural Gas Policy Act of 1978 ("NGPA"), both of which are
administered by FERC. However, regulation of first sales, including
the certificate and abandonment requirements and price regulation,
was phased out during the late 1980's and all remaining wellhead
price ceilings terminated on January 1, 1993.
FERC continues to have jurisdiction over transportation and
sales other than first sales. Commencing in the mid-1980's, FERC
promulgated several orders designed to correct perceived market
distortions resulting from the traditional role of major interstate
pipeline companies as wholesalers of gas and to make gas markets more
competitive by removing transportation and other barriers to market
access. These orders have had and will continue to have a
significant influence on natural gas markets in the United States and
have, among other things, allowed non-pipeline companies, including
the Company, to market gas and fostered the development of a large
spot market for gas. These orders have gone through various
permutations, due in significant part to FERC's response to court
review of these orders. Parts of these orders remain subject to
judicial review, and the Company is unable to predict the impact on
its natural gas production and marketing operations of judicial
review of these orders.
In April 1992, FERC issued Order 636, a rule designed to
restructure the interstate natural gas transportation and marketing
system to remove various barriers and practices that have
historically limited non-pipeline gas sellers, including producers,
from effectively competing with pipelines. The restructuring process
required the "unbundling" of pipeline services (e.g., transportation,
sales and storage) so that producers, marketers and end users of
natural gas contract only for those services which they need and may
obtain each service from the most economical source. The 1993-1994
winter heating season was the first period during which FERC Order
636 procedures were operative. To date, as management of the Company
believes the Order 636 procedures have not had any significant effect
on the Company.
State Regulation of Transportation of Natural Gas. Some states
have adopted open-access transportation rules or policies requiring
intrastate pipelines or local distribution companies to transport
natural gas to the extent of available capacity. These rules or
policies, like federal rules, are designed to increase competition in
natural gas markets. The economic impact on the Company and gas
producers generally of these rules and policies is uncertain.
14
<PAGE>
<PAGE>
State Regulation of Drilling and Production. State regulatory
authorities have established rules and regulations requiring permits
for drilling, reclamation and plugging bonds and reports concerning
operations, among other matters. Most states in which the Company
operates also have statutes and regulations governing a number of
environmental and conservation matters, including the unitization or
pooling of oil and gas properties and establishment of maximum rates
of production from oil and gas wells. Some states also restrict
production to the market demand for oil and gas. Such statutes and
regulations may limit the rate at which oil and gas could otherwise
be produced from the Company's properties. Some states have enacted
statutes prescribing ceiling prices for gas sold within the state.
In Colorado surface owner groups have been active at both the
state and local levels, and there have been a number of city and
county governments who have either enacted new regulations or are
considering doing so. The incidence of such local regulation
increased following a decision of the Colorado Supreme Court which
held that local governments could not prohibit the conduct of
drilling activities which were the subject of permits issued by the
Colorado Oil and Gas Conservation Commission ("COGCC"), but that they
could limit those activities under their land use authority. Under
this decision, local municipalities and counties may take the
position that they have the authority to impose restrictions or
conditions on the conduct of such operations which could materially
increase the cost of such operations or even render them entirely
uneconomic. The Company is not able to predict which jurisdictions
may adopt such regulations, what form they may take, or the ultimate
effects of such enactments on its operations. In general, however,
these ordinances are aimed at increasing the involvement of local
governments in the permitting of oil and gas operations, requiring
additional restrictions or conditions on the conduct of operations,
to reduce the impact on the surrounding community and increasing
financial assurance requirements. Accordingly, the ordinances have
the potential to delay and increase the cost, or in some cases, to
prohibit entirely the conduct of drilling operations.
In response to the concerns of surface owners, during 1993 the
COGCC adopted, regulations for the DJ Basin governing notice to and
consultation with surface owners prior to the conduct of drilling
operations, imposing specific reclamation requirements on operators
upon the conclusion of operations and containing bonding requirements
for the protection of surface owners and enhanced financial assurance
requirements.
During 1994, the Colorado legislature enacted Senate Bill
940177, which gave additional authority to the COGCC to promote not
only the development of oil and gas, but also to consider the health,
safety and welfare of the public in its decision-making process.
There are currently in effect or proposed five rule making task
forces to study such matters as reclamation, well control procedures,
financial assurances and protection of water quality. Although
industry is a participant on the task forces, it is possible that
additional restrictions could be imposed that could add to the cost
of oil and gas operations in Colorado.
Environmental Regulations. Operations of the Company are
subject to numerous laws and regulations governing the discharge of
materials into the environment or otherwise relating to environmental
protection. These laws and regulations may require the acquisition of
a permit before drilling commences, prohibit drilling activities on
certain lands lying within wilderness and other protected areas and
impose substantial liabilities for pollution resulting from drilling
operations. Such laws and regulations also restrict air or other
pollution and disposal of wastes resulting from the operation of gas
processing plants, pipeline systems and other facilities owned
directly or indirectly by the Company.
In connection with its most significant acquisitions, the
Company has performed environmental assessments and found no material
environmental noncompliance or clean-up liabilities requiring action
in the near or intermediate future, although some matters identified
in the environmental assessments are subject to ongoing review. The
Company has assumed responsibility for some of the matters
identified. Some of the Company's properties, particularly larger
units that have been in operation for several decades, may require
significant costs for reclamation and restoration when operations
eventually cease. Environmental assessments have not been performed
on all of the Company's properties. To date, expenditures for
environmental control facilities and for remediation have not been
significant to the Company. The Company believes, however, that it
is reasonably likely that the trend toward stricter standards in
environmental legislation and regulations will continue. For
instance, efforts have been made in Congress to amend the Resource
Conservation and Recovery Act to reclassify oil and gas production
wastes as "hazardous waste," the effect of which would be to further
regulate the handling, transportation and disposal of such waste. If
such legislation were to pass, it could have a significant adverse
impact on the Company's operating costs, as well as the oil and gas
industry in general.
New initiatives regulating the disposal of oil and gas waste
are also pending in certain states, including states in which the
Company conducts operations, and these various initiatives could have
a similar impact on the Company. The COGCC has enacted rules
regarding the regulation of disposal of oil field waste. These rules
establish significant new permitting, record-keeping and compliance
procedures relating to the operation of pits, the disposal of
produced water, and the disposal and/or treatment of oil field waste,
including waste currently exempt from federal regulation. These
rules may require the addition of technical personnel to perform the
15
<PAGE>
<PAGE>
necessary record-keeping and compliance and may require the
termination of production from some of the Company's marginal wells,
for which the cost of compliance would exceed the value of remaining
production. In addition, as indicated above, the COGCC has enacted
regulations imposing specific reclamation requirements on operators
upon the conclusion of their operations. Management believes that
compliance with current applicable laws and regulations will not have
a material adverse impact on the Company.
During 1995, the COGCC has scheduled rulemaking proceedings to
consider, among other things, groundwater protection. It is expected
that unlined pits, including buried concrete tanks, will be a focus
of the proceedings. It is possible that the COGCC will prohibit new
unlined pits and may require closure of unlined pits and buried
concrete tanks in areas that are considered sensitive. The Company
estimates that it has approximately 400 sites in Wattenberg that
could be affected if the COGCC requires closure of unlined pits and
buried concrete tanks throughout the Wattenberg area. The Company is
unable to predict when and if the rules will be adopted and, if
adopted, the number of facilities that will be affected, the period
over which closure would be required or the procedures involved.
A number of states have recently established more stringent
environmental regulations to ensure compliance with federal
regulations, and have either proposed or are considering regulations
to implement the Federal Clean Air Act. These new regulations are
not expected to have a significant impact on the Company or its
operation. In the longer term, regulations under the Federal Clean
Air Act may increase the number and type of Company facilities that
require permits, which could increase the Company's cost of
operations and restrict its activities in certain areas.
Federal Leases. The Company conducts operations under federal
oil and gas leases. These operations must be conducted in accordance
with permits issued by the Bureau of Land Management ("BLM") and are
subject to a number of other regulatory restrictions. Multi-well
drilling projects on federal leases may require preparation of an
environmental assessment or environmental impact statement before
drilling may commence. Moreover, on certain federal leases, prior
approval of drill site locations must be obtained from the
Environmental Protection Agency.
Royalty Payments and Production Taxes. The federal government
and many states regulate the manner of calculating and payment of
royalties to the owners of mineral interests and production and
severance taxes to state and local entities. The regulations
governing these payments are complex and often provide for penalties
for late payments and underpayments. The BLM has assessed SOCO
approximately $660,000, including late payment penalties through
yearend 1994, for additional royalties for production from the Barrel
Springs Unit during 1986 through 1990, claiming that fees charged by
a Company-owned pipeline for transporting gas from the Unit
constitute fees for gathering, which are not deductible in computing
royalties, rather than fees for transportation. The State of Wyoming
has assessed the Company approximately $500,000, including late fees
and penalties, for additional severance tax, nearly all of which is
due to deduction of costs of transporting gas on Company-owned and
third party pipelines, for production from 1986 through 1989 from
Barrel Springs and other fields in southern Wyoming. The amount of
the assessment has been paid under protest. Additional county
production taxes would also be payable if the State is successful in
asserting its claim. The Company believes that the transportation
charges are properly deductible under applicable law and is
contesting both assessments.
In December 1994 the Supreme Court of Colorado held that post-
production costs incurred by working interest owners to make natural
gas "marketable" are not deductible in computing payments due owners
of royalty and overriding royalty owners if the instrument creating
the royalty is silent on the matter. This holding is contrary to
what had generally been regarded as industry custom in Colorado. The
decision was decided on a certification of a legal question from a
federal district court, and the court did not address a number of
crucial issues that could limit or expand significantly the effect of
the holding. As a result, the Company cannot currently predict the
effect of the decision on its operations.
16
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Officers
Listed below are the officers and a summary of their recent
business experience.
<TABLE>
<CAPTION>
Name Position
<S> <C>
John C. Snyder Chairman and Director
Thomas J. Edelman President and Director
John A. Fanning Executive Vice President and Director
Charles A. Brown Vice President - Emerging Assets
Steven M. Burr Vice President - Planning and Engineering
Peter E. Lorenzen Vice President - General Counsel
David M. Posner Vice President - Gas Management
James H. Shonsey Vice President - Finance
George Steel Vice President
Edward T. Story Vice President - International
Diana K. Ten Eyck Vice President - Investor Relations
Stephen G. Tillman Vice President - Greater Green River/DJ Basin
Rodney L. Waller Vice President - Special Projects
Richard A. Wollin Vice President - Gulf Coast
</TABLE>
John C. Snyder (53), a director and Chairman, founded the
Company's predecessor in 1978. From 1973 to 1977, Mr. Snyder was an
independent oil operator in Texas and Oklahoma. Previously, he was
a director and the Executive Vice President of May Petroleum Inc.
where he served from 1971 to 1973. Mr. Snyder was the first
president of Canadian-American Resources Fund, Inc., which he founded
in 1969. From 1964 to 1966, Mr. Snyder was employed by Humble Oil
and Refining Company (currently Exxon Co., USA) as a petroleum
engineer. Mr. Snyder received his Bachelor of Science Degree in
Petroleum Engineering from the University of Oklahoma and his Masters
Degree in Business Administration from the Harvard University
Graduate School of Business Administration. Mr. Snyder is a director
of the Community Enrichment Center, Inc., Fort Worth.
Thomas J. Edelman (44), a director and President, co-founded
the Company. Prior to joining the Company in 1981, he was a Vice
President of The First Boston Corporation. From 1975 through 1980,
Mr. Edelman was with Lehman Brothers Kuhn Loeb Incorporated. Mr.
Edelman received his Bachelor of Arts Degree from Princeton
University and his Masters Degree in Finance from the Harvard
University Graduate School of Business Administration. Mr. Edelman
is a director of Command Petroleum Limited, an affiliate of the
Company. In addition, Mr. Edelman serves as chairman of the board of
Lomak Petroleum, Inc. and as a director of Petroleum Heat & Power
Co., Inc., Wolverine Exploration Company, Enterra Corporation and
Star Gas Corporation.
John A. Fanning (55), a director and Executive Vice President,
joined the Company in 1987 and has been a director since 1982.
Between 1985 and 1987, Mr. Fanning was a private investor. He was a
director, President and Chief Executive Officer of The Western
Company of North America, which provides drilling and technical
services to the oil industry, until 1985. Mr. Fanning joined The
Western Company in 1968 and served in various capacities including
Director of Planning, Division Manager, President of Western
Petroleum Services and Executive Vice President. From 1965 through
1968, he was a Planning and Financial Analyst with The Cabot
Corporation. Mr. Fanning received his Bachelor of Science Degree in
Physics from Holy Cross College and his Masters Degree in Industrial
Management from Massachusetts Institute of Technology. Mr. Fanning
is a director of TNP Enterprises Inc, a public utility holding
company.
Charles A. Brown (48), Vice President - Emerging Assets, joined
the Company in 1987. He was a petroleum engineering consultant from
1986 to 1987. He served as President of CBW Services, Inc., a
petroleum engineering consulting firm, from 1979 to 1986 and was
employed by KN from 1971 to 1979 and Amerada Hess Corporation from
1969 to 1971. Mr. Brown received his Bachelor of Science Degree in
Petroleum Engineering from the Colorado School of Mines.
17
<PAGE>
<PAGE>
Steven M. Burr (38), Vice President - Planning and Engineering,
joined the Company in 1987. From 1982 to 1987, he was a Vice
President with the petroleum engineering consulting firm of
Netherland, Sewell & Associates, Inc. ("NSAI"). From 1978 to 1982,
Mr. Burr was employed by Exxon Company, U.S.A. in the Production
Department. Mr. Burr received his Bachelor of Science Degree in
Civil Engineering from Tulane University.
Peter E. Lorenzen (45), Vice President - General Counsel and
Secretary, joined the Company in 1991. From 1983 through 1991, he
was a shareholder in the Dallas law firm of Johnson & Gibbs, P.C.
Prior to that, Mr. Lorenzen was an associate with Cravath, Swaine &
Moore. Mr. Lorenzen received his law degree from New York University
School of Law and his Bachelor of Arts Degree from The Johns Hopkins
University.
David M. Posner (41), Vice President - Gas Management, joined
the Company in 1991. From 1980 to 1991, he held various positions
with Ladd Petroleum Corporation (a subsidiary of the General Electric
Company) including Vice President of Gas Gathering, Processing and
Marketing. Mr. Posner received his Bachelor of Arts from Brown
University and his Master of Science in Mineral Economics from the
Colorado School of Mines.
James H. Shonsey (43), Vice President - Finance, joined the
Company in 1991. From 1987 to 1991, Mr. Shonsey served in various
capacities including Director of Operations Accounting for Apache
Corporation. From 1976 to 1987 he held various positions with
Deloitte & Touche, Quantum Resources Corporation, Flare Energy
Corporation and Mizel Petro Resources, Inc. Mr. Shonsey received his
CPA certificate from the state of Colorado, his Bachelor of Science
Degree in Accounting from Regis University and his Master of Science
Degree in Accounting from the University of Denver.
George Steel (48), Vice President, joined the Company in 1994.
Previously, he was President of Halliburton Geophysical Services, a
leading worldwide provider of oil field services. From 1969 to 1989
Mr. Steel served the predecessor company of Halliburton Geophysical
in various international assignments. Mr. Steel is a B.Sc. graduate
of St. Andrews, Scotland.
Edward T. Story (51), Vice President - International of the
Company, joined the Company in 1991. From 1990 to 1991, Mr. Story
was Chairman of the Board of a jointly-owned Thai/US company, Thaitex
Petroleum Company. Mr. Story was co-founder, Vice Chairman of the
Board and Chief Financial Officer of Conquest Exploration Company
from 1981 to 1990. He served as Vice President Finance and Chief
Financial Officer of Superior Oil Company from 1979 to 1981. Mr.
Story held the positions of Exploration and Production Controller and
Refining Controller with Exxon U.S.A. from 1975 to 1979. He held
various positions in Esso Standard's international companies from
1966 to 1975. Mr. Story received a Bachelor of Science Degree in
Accounting from Trinity University, San Antonio, Texas and a Masters
of Business Administration from The University of Texas in Austin,
Texas. Mr. Story is a director of Command Petroleum Limited, an
affiliate of the Company. In addition, Mr. Story serves as a
director of Bank Texas, Inc., a bank holding company and Hi/Lo
Automotive, Inc., a distributor of automobile parts.
Diana K. Ten Eyck (48), Vice President - Investor Relations,
joined the Company in 1993. From 1990 to 1993, Ms. Ten Eyck held
various positions with Gerrity Oil & Gas Corporation, including
Director, Senior Vice President, Chief Operating Officer, Chief
Financial Officer, Chief Administrative Officer and Corporate
Secretary. From 1988 to 1990, Ms. Ten Eyck held various positions
with The Robert Gerrity Company including Director, Senior Vice
President, Chief Operating, Chief Financial Officer and Corporate
Secretary. Ms. Ten Eyck received a Bachelor of Arts Degree in
Mathematics from the University of Colorado at Boulder and a Ph.D. in
Mineral Economics from the Colorado School of Mines.
Stephen G. Tillman (48), Vice President - Greater Green
River/DJ Basin, joined the Company in 1994. Between 1990 and 1994,
Mr. Tillman was a private investor. He was Senior Vice President and
District Manager of TXO Production Corporation (Texas Oil & Gas
Corp.) in Denver between 1981 and 1990. Mr. Tillman joined Texas Oil
& Gas Corp. in 1974 and served in various capacities including
Petroleum Engineer, Drilling & Production Manager and District
Manager in Houston and in Wichita, Kansas. From 1968 through 1974,
18
<PAGE>
<PAGE>
he held various engineering positions with Texaco Inc. in Texas. Mr.
Tillman is a 1969 graduate of Texas A&M University with a Bachelor of
Science Degree in Petroleum Engineering.
Rodney L. Waller (45), Vice President - Special Projects,
joined the Company in 1977. Previously, Mr. Waller was employed by
Arthur Andersen & Co. Mr. Waller received his Bachelor of Arts
Degree from Harding University. Mr. Waller serves as a director of
Wolverine Exploration Company.
Richard A. Wollin (42), Vice President - Gulf Coast, joined the
Company in 1990. From 1983 to 1989, Mr. Wollin served in various
management capacities including Executive Vice President of Quinoco
Petroleum, Inc. with primary responsibility for acquisition,
divestiture and corporate finance activities. From 1976 to 1983, he
was employed in various capacities for The St. Paul Companies, Inc.,
including Senior Vice President of St. Paul Oil & Gas Corp. Mr.
Wollin received his Bachelor of Science Degree from St. Olaf College
and his law degree from the University of Minnesota Law School. Mr.
Wollin is a member of the Minnesota Bar Association.
19
<PAGE>
<PAGE>
ITEM 2. PROPERTIES
General
The Company's reserves are concentrated in several major
producing areas. These include the Wattenberg Field in Colorado,
northern and southern Wyoming, the Piceance and Uinta Basins in the
Western Slope of Colorado and Utah and, the Giddings area in
southeast Texas.
At December 31, 1994, the Company had interests in 5,269 gross
(2,651 net) producing oil and gas wells located in 15 states and in
the Gulf of Mexico. As of December 31, 1994, estimated proved
reserves totalled 120.2 MMBOE, including 35.0 million barrels of oil
and 511.3 Bcf of gas. In addition to its oil and gas reserves, the
Company holds interests in nine gas transportation and processing
facilities.
Proved Reserves
The following table sets forth estimated yearend proved
reserves for the three years ended December 31, 1994.
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
Crude oil and liquids (MBbl)
Developed 21,116 18,032 26,104
Undeveloped 11,086 13,898 8,873
--------- --------- ---------
Total 32,202 31,930 34,977
========= ========= =========
Natural gas (MMcf)
Developed 194,621 268,349 353,930
Undeveloped 93,037 161,740 157,321
---------- ---------- ---------
Total 287,658 430,089 511,251
========== ========== =========
Total MBOE 80,145 103,612 120,186
========== ========== =========
</TABLE>
The following table sets forth pretax future net revenues
from the production of proved reserves and the Pretax PW10% Value of
such revenues.
<TABLE>
<CAPTION>
(In thousand December 31, 1994
---------------------------------------------
Developed Undeveloped(a) Total
------------ --------------- ------------
<S> <C> <C> <C>
1995 $ 94,939 $(20,886) $ 74,053
1996 72,707 (1,752) 70,955
1997 58,712 12,983 71,695
Remainder 333,472 161,613 495,085
---------- ----------- ----------
Total $559,830 $151,958 $711,788
========== =========== ==========
Pretax PW10% Value $355,076 $ 59,291 $414,367(b)
========== =========== ==========
<f/n>
_________________________
(a) Net of estimated capital costs, including estimated costs of $55.9
during 1995.
(b) The after tax PW10% value of proved reserves totalled $361.7 million
at yearend 1994.
</TABLE>
The quantities and values in the preceding tables are based on
prices in effect at December 31, 1994, averaging $15.25 per barrel of
oil and $1.56 per Mcf of gas. Price reductions decrease reserve
values by lowering the future net revenues attributable to the
reserves and also by reducing the quantities of reserves that are
recoverable on an economic basis. Price increases have the opposite
effect. Any significant decline in prices of oil or gas could have a
material adverse effect on the Company's financial condition and
results of operations.
Proved developed reserves are proved reserves that are
expected to be recovered from existing wells with existing equipment
and operating methods. Proved undeveloped reserves are proved
reserves that are expected to be recovered from new wells drilled to
known reservoirs on undrilled acreage for which the existence and
recoverability of such reserves can be estimated with reasonable
certainty, or from existing wells where a relatively major
expenditure is required to establish production.
Future prices received for production and future production
costs may vary, perhaps significantly, from the prices and costs
assumed for purposes of these estimates. There can be no assurance
that the proved reserves will be developed within the periods
indicated or that prices and costs will remain constant. With respect
to certain properties that historically have experienced seasonal
curtailment, the reserve estimates assume that the seasonal pattern
of such curtailment will continue in the future. There can be no
assurance that actual production will equal the estimated amounts
used in the preparation of reserve projections.
20
<PAGE>
<PAGE>
The present values shown should not be construed as the
current market value of the reserves. The 10% discount factor used to
calculate present value, which is specified by the Securities and
Exchange Commission ("SEC"), is not necessarily the most appropriate
discount rate, and present value, no matter what discount rate is
used, is materially affected by assumptions as to timing of future
production, which may prove to be inaccurate. For properties operated
by the Company, expenses exclude the Company's share of overhead
charges. In addition, the calculation of estimated future net
revenues does not take into account the effect of various cash
outlays, including, among other things, general and administrative
costs and interest expense.
There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting future rates of
production and timing of development expenditures. The data in the
above tables represent estimates only. Oil and gas reserve
engineering must be recognized as a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in
an exact way, and estimates of other engineers might differ
materially from those shown above. The accuracy of any reserve
estimate is a function of the quality of available data and
engineering and geological interpretation and judgment. Results of
drilling, testing and production after the date of the estimate may
justify revisions. Accordingly, reserve estimates are often
materially different from the quantities of oil and gas that are
ultimately recovered.
Netherland, Sewell & Associates, Inc. ("NSAI"), independent
petroleum consultants, prepared estimates of or audited the Company's
proved reserves which collectively represent more than 80% of Pretax
PW10% Value as of December 31, 1994. Approximately 58% was estimated
independently by NSAI. No estimates of the Company's reserves
comparable to those included herein have been included in reports to
any federal agency other than the SEC.
Producing Wells
The following table sets forth certain information at December
31, 1994 relating to the producing wells in which the Company owned
a working interest. The Company also held royalty interests in 757
producing wells. Wells are classified as oil or gas wells according
to their predominant production stream.
<TABLE>
<CAPTION>
Average
Principle Gross Net Working
Product Stream Wells Wells Interest
-------------- ----- ----- --------
<C> <C> <C> <C>
Crude oil and liquids 3,109 1,590 51%
Natural gas 2,160 1,061 49%
----- -----
Total 5,269 2,651 50%
===== =====
</TABLE>
21<PAGE>
<PAGE>
Acreage
The following table sets forth certain information at December
31, 1994 relating to acreage held by the Company. Undeveloped
acreage is acreage held under lease, permit, contract, or option that
is not in a spacing unit for a producing well, including leasehold
interests identified for development or exploratory drilling.
<TABLE>
<CAPTION>
Gross Net
------------- ------------
<S> <C> <C>
Domestic
Developed (a) 529,000 234,000
=========== ==========
Undeveloped 1,354,000 962,000
=========== ==========
International (b)
Undeveloped
Russia 306,000 63,000
Mongolia 5,300,000 2,597,000
Thailand 150,000 150,000
---------- ----------
5,756,000 2,810,000
========== ==========
<f/n>
_________________________
(a) Developed acreage is acreage assigned to producing wells.
(b) Excludes 1,200,000 gross (1,140,000 net) acres in Tunisia that
were sold early in 1995.
</TABLE>
Significant Properties
Emphasis has been placed on establishing hubs in certain
producing basins. Interests in five producing areas accounted for
approximately 86% of Pretax PW10% Value at December 31, 1994. This
concentration of assets permits economic efficiencies in the
management of assets and permits identification of complementary
acquisition candidates. Summary information regarding reserve
concentrations of the five most significant properties are set forth
below. More detailed information is set forth under "Business -
Development."
<TABLE>
<CAPTION>
Proved Reserve Quantities
-------------------------
Producing Crude Oil Natural Pretax PW 10% Value
Wells & Liquids Gas Amount Percent
--------- --------- --------- -------- -------
(MBbl) (MMcf) (000)
<S> <C> <C> <C> <C> <C>
DJ Basin (CO, NE) 1,703 12,274 186,792 $192,385 46.4%
Greater Green River (WY) 170 1,567 132,745 56,046 13.5
Northern Wyoming (WY) 1,042 10,903 31,648 47,225 11.4
Western Slope (CO & UT) 231 1,562 72,863 31,682 7.7
Giddings Field (TX) 114 2,712 26,708 30,615 7.4
------- ------- ------- -------- ----
Subtotal 3,260 29,018 450,756 357,953 86.4
Other 2,009 5,959 60,495 56,414 13.6
------ ------- ------- -------- ----
Total 5,269 34,977 511,251 $414,367 100.0%
====== ======= ======= ======== ======
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries and affiliates are named
defendants in lawsuits and involved from time to time in governmental
proceedings, all arising in the ordinary course of business.
Although the outcome of these lawsuits and proceedings cannot be
predicted with certainty, management does not expect these matters to
have a material adverse effect on the financial position of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of security holders
during the fourth quarter of 1994.
22
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
The Company's stock is listed on the New York Stock Exchange and
trade under the symbol "SNY". The following table sets forth, for
1993 and 1994, the high and low sales prices for the Company's
securities for New York Stock Exchange composite transactions, as
reported by The Wall Street Journal.
<TABLE>
<CAPTION>
1993 1994
---------------------- ---------------------
High Low High Low
-------- -------- -------- --------
<S> <C> <C> <C> <C>
First Quarter $16-1/8 $10 $21-3/8 $17-1/2
Second Quarter 20-1/4 15 20-1/2 17-1/2
Third Quarter 23 16-5/8 19-3/4 17-1/8
Fourth Quarter 23 14-3/4 17-7/8 13-5/8
</TABLE>
On March 9, 1995, the closing price of the common stock
was $14. Dividends were paid at the rate of $.06 per share in the
first and second quarters of 1994. In the third quarter of 1994, the
quarterly dividend was increased to $.065 per share. Shares of
common stock receive dividends as, if and when declared by the Board
of Directors. The amount of future dividends will depend on debt
service requirements, dividend requirements on preferred stock,
capital expenditures and other factors. On December 31, 1994, there
were approximately 3,200 holders of record of the common stock and
30.2 million shares outstanding.
23
<PAGE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial and
operating information for each of the five years ended December 31,
1994. Share and per share amounts refer to common shares. The
following information should be read in conjunction with the
financial statements presented elsewhere herein.
<TABLE>
<CAPTION>
(In thousands, except per share data) As of or for the Year Ended December 31,
--------------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income Statement
Revenues $ 84,303 $ 86,640 $118,970 $228,852 $262,328
Income before extraordinary items 3,177 3,663 14,597 22,538 12,372
Per share .15 .14 .43 .58 .07
Net income 3,177 3,663 14,597 19,545 12,372
Per share .15 .14 .43 .45 .07
Dividends Per share .16 .20 .25(a) .22 .25
Average shares outstanding 20,620 22,839 22,722 23,096 23,704
Cash Flow
Net cash provided by operations $ 22,512 $ 37,738 $ 48,339 $ 68,728 $ 86,461
Capital expenditures 171,767(b) 48,385 130,803 167,161 279,288
Balance Sheet
Working capital $ 12,087 $ 17,259 $ 7,619 $ 491 $ 708
Oil and gas properties, net 174,199 182,957 271,995 362,126 557,519
Total assets 221,495 238,992 331,638 453,301 673,259
Senior debt 56,172 17,108 96,568(c) 114,952 234,857
Subordinated notes, net 25,000 25,000 18,750 - 83,650
Stockholders' equity 110,849 165,210 168,866 274,734 274,086
<f/n>
________________________
(a) Due to revised timing, five payments were made at the $.05
current quarterly rate in 1992.
(b) Includes $130.7 million related to the acquisition of a publicly
traded limited partnership managed by the Company.
(c) Includes $49.8 million paid in February 1993 for properties
acquired in December 1992.
</TABLE>
The following table sets forth unaudited summary financial
results on a quarterly basis for the two most recent years.
<TABLE>
<CAPTION>
(In thousands, except per share data) 1993 Quarters
-----------------------------------------
First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $44,367 $58,041 $61,317 $65,127
Gross margin 21,495 24,667 26,647 25,502
Depletion, depreciation and amortization 13,417 16,060 3,846 15,439
Income before extraordinary item 3,847 4,185 9,006 5,500
Per share (a) .12 .08 .27 .12
Net income 3,254 4,185 8,295 3,811
Per share (a) .09 .08 .24 .05
1994 Quarters
-----------------------------------------
First Second Third Fourth
-------- -------- -------- --------
Revenues $63,456 $64,578 $71,051 $63,243
Gross margin 28,248 28,153 30,002 31,681
Depletion, depreciation and amortization 19,391 18,164 18,742 20,256
Net income 4,578 3,663 2,261 1,870
Per share .08 .04 (.02) (.03)
<f/n>
________________________
(a) Quarters do not equal year-to-date totals due to rounding.
</TABLE>
24
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Effective December 31, 1994, the Company changed its method of
accounting for oil and gas properties from the full cost method to
the successful efforts method. The change was applied retroactively
and prior periods presented have been restated. The following
discussions of operating results are based on those restated amounts.
Comparison of 1994 results to 1993. Total revenues in 1994 rose 15%
to $262.3 million. The revenue increase was primarily the result of
a 26% growth in oil and gas production calculated in barrels of oil
equivalent ("BOE") and greater gas processing and transportation
throughput. The revenue rise was limited by a 12% decline in the
average price per BOE. This price decline reduced current year
revenues by $18.8 million. Net income for 1994 was $12.4 million,
compared to $19.5 million in 1993. In addition to the price decline,
the decrease resulted from increased expenses for exploration,
interest and depletion. Net income per common share was $.07 in
1994, compared to $.45 in 1993, as higher preferred dividends
compounded the effect of declining earnings. Due to conversion of
the 8% preferred stock at yearend 1994, preferred dividends will drop
44% in 1995.
The gross margin from production in 1994 increased 10% to $87.8
million, due to the rise in oil and gas production. The average
price received for oil production decreased 4% in 1994 to $14.80 per
barrel while gas prices dropped 14% to $1.67 per Mcf. Total
operating expenses increased 12% during 1994, however, operating
costs per BOE decreased to $4.29 from $4.83 in 1993. Of the 11%
decrease, almost half resulted from a reallocation of certain
internal overhead costs from operating expense to general and
administrative expense. The remainder of the expense per BOE
decrease was due to cost efficiencies gained with increasing
production in concentrated hub areas.
Average daily production during 1994 was 31,966 BOE, up 26% from
1993. By December 1994, average daily production had reached 12,351
barrels and 145.6 MMcf (36,618 BOE). The production increase
resulted from continued development activities and acquisitions. In
1994, the Company drilled and completed 466 wells. Of the wells
placed on production, 360 were in the DJ Basin of eastern Colorado,
34 in the Green River Basin of southern Wyoming, 23 in the Giddings
Field of southeast Texas and 20 in the Piceance Basin of western
Colorado. In the DJ Basin, an additional 90 wells were recompleted
to enhance production. The Company completed $44.7 million in
production acquisitions, the majority of which were for incremental
interests in wells in or around current hubs. The significant
decline in natural gas prices since mid-year resulted in the Company
curtailing its gas development plans for 1995. However, 1995
production is expected to grow by more than 15%, despite the reduced
capital budget.
The gross margin from gas processing, transportation and marketing
activities for 1994 increased 42% to $13.1 million from $9.2 million
in 1993. The increase was primarily attributable to a 45% ($3.7
million) rise in processing and transportation margins as a result of
the facilities expansion. In October 1994, operations began at a
newly constructed gas processing plant in the DJ Basin. The plant is
capable of processing 80 MMcf of gas per day and should add to
margins in 1995. During the fourth quarter of 1994, throughput at
the DJ Basin processing facilities averaged 72.0 MMcf per day
compared to a 1993 annual average of 47.9 MMcf. In the Green River
Basin, transportation throughput for fourth quarter 1994 averaged
27.1 MMcf per day compared to 15.3 MMcf for all of 1993. The growth
was a direct result of the development drilling in the area. The
marketing gross margin increased 16% to total $1.1 million in 1994.
However, late in 1994 margins narrowed due to the decrease in price
differentials available with the precipitous decline in spot market
gas prices. The Company has suspended its involvement in third party
marketing until the markets recover.
25
<PAGE>
<PAGE>
Other income for 1994 was $17.2 million, up $9.4 million from 1993.
The increase resulted from a $3.5 million gain from the sale of a
portion of the Company's interest in the Permtex joint venture in
Russia, a $3.1 million gain from the sale of equity securities by the
Company's Australian affiliate and $2.0 million in gains on sales of
properties. After these transactions, the Company's interests in
Command and Permtex were reduced to 29% and 21%, respectively.
General and administrative expenses, net of reimbursements, were
3.4% of revenues in 1994, compared to 3.0% of revenues in 1993. The
rise was due in part to the previously mentioned change in the
allocation of certain internal overhead costs. Interest and other
expense was $12.5 million in 1994 compared to $7.3 million in 1993.
The increase was the result of a rise in outstanding debt levels due
to capital project expenditures, as well as increasing interest
rates.
Depletion, depreciation and amortization expense for 1994 increased
30% ($17.8 million) from the prior year. Of the increase, $16.4
million was related to the 26% rise in oil and gas production, with
the remainder due to an increase in unevaluated property impairments
as provided under successful efforts.
The Company adopted FASB Statement No. 109, "Accounting for Income
Taxes," effective January 1, 1992. In 1993, the income tax provision
was reduced from the statutory rate of 35% to zero due to the
elimination of deferred taxes upon realization of tax basis in excess
of financial basis. In 1994, the income tax provision was reduced
from the statutory rate by $3.8 million from the realization of the
remaining excess tax basis.
Comparison of 1993 results to 1992. Total revenues rose 92% in 1993
to $228.9 million. Net income before extraordinary items increased
54% to reach $22.5 million in 1993. The increase was lead by a rapid
rise in production and assisted by an increase in gas processing and
transportation margins. After the effect of a $3.0 million 1993
extraordinary charge on early retirement of debt, earnings per
common share were $.45 in 1993, compared to $.43 in 1992.
The gross margin from production operations for 1993 increased 62%
to $79.7 million, which was primarily related to a growth in oil and
gas production. For the year ended December 31, 1993, average daily
production was 25,472 BOE, a 65% increase from 1992. The production
increase resulted primarily from acquisitions and continuing
development drilling in the DJ Basin of Colorado. The price received
per equivalent barrel decreased by 3% to $13.41. Total operating
expenses including production taxes increased 60% during 1993 although
the operating cost per BOE decreased to $4.83 from $4.99 in 1992.
Expense reductions gained from wells added in the DJ Basin,
where operating costs averaged $2.76 per BOE, were partially offset
by the late 1992 acquisition of Wyoming wells from ARCO where
operating costs averaged $7.45 per BOE.
The gross margin from gas processing, transportation and marketing
activities for 1993 increased 13% to $9.2 million from $8.1 million
in 1992. The increase was primarily attributable to a $2.2 million
(36%) rise in transportation and processing margins as a result of
additional DJ Basin production and the expansion of the related
facilities. Gas marketing margins for 1993 decreased by $1.1 million
due to reduced margins on the Oklahoma cogeneration supply contract,
which declined as a result of an imposed limitation of the contract
sales price and rising gas purchase costs. The margin reduction was
partially offset by a $667,000 (126%) rise in gas marketing margins
resulting from increased third party marketing.
Other income was $9.4 million during 1993, compared to $3.0 million
in 1992. The $6.4 million increase resulted from a $3.5 million gas
contract settlement received in April, a $1.7 million litigation
settlement and greater gains on the sales of securities. General and
administrative expenses, net of reimbursements, for 1993 represented
3.0% of revenues compared to 5.6% in 1992 as expenses were held
essentially flat while revenues grew 92%. Interest and other
expenses increased 28%, primarily as a result of a rise in
outstanding debt balances due to development expenditures and
acquisitions.
26
<PAGE>
<PAGE>
Depletion, depreciation and amortization during 1993 increased 87%
from the prior year, a $27.3 million rise. Of the increase, $22.5
million was a direct result of the 65% rise in equivalent production
between years, while $3.8 million was due to greater depreciation for
plants, pipelines and other equipment. The remaining increase was
the result of property impairments and a rise in the depletion rate
per equivalent barrel.
Development, Acquisition and Exploration
During 1994, the Company incurred $279.3 million in capital
expenditures; including $156.9 million for oil and gas development,
$70.3 million for acquisitions, $41.5 million for gas facility
expansion, $5.5 million for exploration and $5.1 million for field
and office equipment.
Of the total development expenditures, $90.3 million was
concentrated in the DJ Basin of Colorado. A total of 360 wells were
placed on production there in 1994 with 63 in progress at yearend.
Ten wells spudded during the year were plugged and abandoned. The
rate of drilling was lower than had been previously estimated as a
result of delays associated with permitting difficulties, the impact
of declining gas prices and disappointing results on certain outlying
Wattenberg acreage, including part of the lands under option from
Union Pacific Resources. With the continued declines in gas prices
subsequent to yearend 1994, the Company has reduced its DJ Basin
drilling plans for 1995 to less than 100 wells.
The Company expended $66.6 million for other development and
recompletion projects during 1994 as activity was expanded to other
projects. In the Green River Basin of southern Wyoming, 34 wells
were placed on sales with eight in progress at yearend. In the
horizontal drilling program in the Giddings Field of southeast Texas,
23 wells were placed on sales in 1994, with nine in progress at
yearend and one well abandoned. In the Piceance Basin of western
Colorado, 20 wells were placed on sales, with five wells in progress
at yearend and one well abandoned. The Uinta Basin development
program in northeast Utah is still in its early stages with two wells
placed on sales and seven wells in progress at yearend. Anticipated
drilling expenditures for 1995 will be limited to $70 million in the
absence of a rebound in the gas markets.
In 1994, the Company expended $70.3 million for domestic
acquisitions, of which $44.7 million was for producing properties and
$25.6 million for acreage. The most notable producing acquisitions
were $13.9 million for a 50% interest in properties the Company
operates in the Green River Basin, $6.6 million for properties in the
Piceance Basin, $5.0 million in the DJ Basin, $4.3 million in the
Giddings area of southeast Texas and $6.6 million for a controlling
interest in DelMar Petroleum, Inc., a company that owns and operates
properties in the Gulf of Mexico. In October 1994, the Company
closed a $9.7 million acquisition in northeast Louisiana of which
$3.0 million was proven and $6.7 million was for 330,000 net mineral
acres. The remaining producing interests were acquired mostly in
existing Company hub areas. The remaining unproved acreage was also
predominantly in or around our existing hubs.
The Company's gas gathering and processing facility operations
continue to grow with $41.5 million of capital expenditures in 1994.
The work was heavily concentrated in the Wattenberg area of the DJ
Basin. Construction of a new $21.3 million gas processing plant on
the west end of the Wattenberg Field began operations in October
1994. The project was financed with a capital lease. A total of
$8.7 million was expended to increase the Company's gathering systems
in the DJ Basin to add pipelines, feeder lines, an additional
compressor and new well connections for the continuing drilling
activity in the area. At the Roggen Wattenberg plant, $2.9 million
was expended to add a new de-ethanizer station, improve metering and
boost compression, among other projects. In the Piceance Basin in
western Colorado, a $5.0 million gathering system was constructed.
The other $3.6 million in expenditures were for system expansions in
the Washakie Basin, Nebraska and Utah. Subsequent to yearend 1994,
the Company announced that it is considering the sale of its
Wattenberg gas facilities to increase its financial flexibility.
27
<PAGE>
<PAGE>
Exploration costs for 1994 were $5.5 million, primarily for
geological and other studies on the newly acquired undeveloped
acreage. Only $213,000 was expended on international projects. In
Russia, commercial production began late in the year with pipeline
construction still in progress in the southernmost field in the
contract area. Three industry partners committed $11.25 million to
the joint venture to fully fund the western participants' anticipated
equity requirements, of which $8.5 million was received in 1994. In
June 1994, a commitment letter was executed with the Overseas Private
Investment Corporation ("OPIC") whereby OPIC will commit $40 million
to the Russian Permtex project. It is expected that the final OPIC
agreement and associated debt financing will be put in place during
the second quarter of 1995. In Mongolia and Tunisia, seismic
acquisition and processing continues. In January 1995, agreements
were reached whereby 100% of the Tunisia project was sold to Command
for stock and 10% of the Mongolia properties were sold for cash at
gains of $602,000 and $456,000, respectively. In Tunisia, the gain
recorded in 1995 could increase by up to $750,000 if a farm out on
certain of the acreage is completed. Additionally, an exploratory
well is planned and the Company will receive additional proceeds if
reserves are discovered. In Mongolia, the Company has a carried
interest in two exploratory wells.
Financial Condition and Capital Resources
At December 31, 1994, the Company had total assets of $673.2
million. Total capitalization was $595.8 million, of which 46% was
represented by stockholder's equity, 36% by senior debt, 17% by
subordinated debt and the remainder by deferred taxes. During 1994,
cash provided by operations was $86.5 million, an increase of 26%
over 1993. As of December 31, 1994, commitments for capital
expenditures totalled $9.9 million. The Company anticipates that
1995 expenditures for development drilling and gas facilities will
approximate $80 million. The level of these and other future
expenditures is largely discretionary, and the amount of funds
devoted to any particular activity may increase or decrease
significantly, depending on available opportunities and market
conditions. The Company plans to finance its ongoing development,
acquisition and exploration expenditures using internally generated
cash flow, asset sales proceeds and existing credit facilities. In
addition, joint ventures or future public and private offerings of
debt or equity securities may be utilized.
In 1994, the Company renegotiated its bank credit facility and
increased it to $500 million. The new facility is divided into a
$100 million short-term portion and a $400 million long-term portion
that expires on December 31, 1998. Management's policy is to renew
the facility on a regular basis. Credit availability is adjusted
semiannually to reflect changes in reserves and asset values. The
borrowing base was increased to $250 million in the fourth quarter of
1994. The majority of the borrowings currently bear interest at
LIBOR plus .75% with the remainder at prime. The Company also has
the option to select CD plus .75%. The margin on LIBOR or CD loans
will increase to 1% if the Company's consolidated senior debt becomes
greater than 80% of its tangible net worth. During 1994 the average
interest rate on the revolver was 5.5%. Financial covenants limit
debt, require maintenance of minimum working capital and restrict
certain payments, including stock repurchases, dividends and
contributions or advances to unrestricted subsidiaries. Such
restricted payments are limited by a formula that includes
underwriting proceeds, cash flow and other items. Based on such
limitations, more than $100 million was available for the payment of
dividends and other restricted payments as of December 31, 1994.
In May 1994, the Company issued $86.4 million of 7% Convertible
Subordinated Notes due 2001 in an underwritten public offering for
net proceeds of $83.6 million. The net proceeds of the offering were
used to repay a portion of the borrowings under the bank credit
facility.
In early 1994, the Company executed an agreement with Union Pacific
Resources Corporation ("UPRC") whereby the Company gained the right
to drill wells on UPRC's previously uncommitted acreage in the
Wattenberg area. The transaction significantly increased the
Company's inventory of undeveloped Wattenberg acreage. UPRC retained
a royalty and the right to participate as a 50% working interest
owner in each well, and received warrants to purchase two million
shares of Company stock. On February 8, 1995, the exercise prices
were reset to $21.60 per share and their expiration extended one
year. One million of the warrants expire in February 1998 and the
other million expire in February 1999. For financial reporting
purposes, the warrants were valued at $3.5 million, which was
recorded as an increase to oil and gas properties and capital in
28
<PAGE>
<PAGE>
excess of par value. In early 1995, the Company paid UPRC $400,000
for an extension of the time period to drill the commitment wells and
released a portion of the outlying acreage committed to the venture.
In 1992, an institutional investor agreed to contribute $7 million
to a partnership formed to monetize Section 29 tax credits to be
realized from the Company's properties, mainly in the DJ Basin. The
initial $3 million was contributed in 1992, an additional $3 million
contributed during 1993 and $1 million received in March 1994. In
June 1994, the arrangement was extended and an additional $1.8 million
was received. In early 1995, a second investor was added and the
limited partners committed to contribute an additional $5.0 million.
As a result, this transaction is anticipated to increase cash flow and
net income through 1996. A revenue increase of more than $.40 per Mcf
is realized on production generated from qualified Section 29 properties
in this partnership. The Company recognized $780,000, $3.8 million and
$3.0 million, respectively, of this revenue during 1992, 1993 and 1994.
The Company maintains a program to divest marginal properties and
assets which do not fit its long range plans. During 1993 and 1994,
the Company received $5.5 million and $2.8 million, respectively, in
proceeds from sales of properties. The 1993 proceeds included $4.0
million of cash receipts previously accrued for late 1992 sales.
Subsequent to yearend 1994, the Company announced that it is
considering the sale of its Wattenberg gas facilities and certain
non-strategic assets.
The Company believes that its capital resources are adequate to meet
the requirements of its business. However, future cash flows are
subject to a number of variables including the level of production
and oil and gas prices, and there can be no assurance that operations
and other capital resources will provide cash in sufficient amounts
to maintain planned levels of capital expenditures or that increased
capital expenditures will not be undertaken.
Inflation and Changes in Prices
While certain of its costs are affected by the general level of
inflation, factors unique to the petroleum industry result in
independent price fluctuations. Over the past five years,
significant fluctuations have occurred in oil and gas prices.
Although it is particularly difficult to estimate future prices of
oil and gas, price fluctuations have had, and will continue to have,
a material effect on the Company.
The following table indicates the average oil and gas prices
received over the last five years and highlights the price
fluctuations by quarter for 1993 and 1994. Average gas prices prior
to 1994 exclude Mississippi gas production sold under a high price
contract. During 1993, the Company renegotiated the gas contract and
received a substantial payment. As of January 1994, the Company
still receives a higher than market price for the Mississippi gas
sales, however the price is significantly below the previously
received average price of over $12.00 per Mcf. Average price
computations exclude contract settlements and other nonrecurring
items to provide comparability. Average prices per equivalent barrel
indicate the composite impact of changes in oil and gas prices.
Natural gas production is converted to oil equivalents at the rate of
6 Mcf per barrel.
29
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Average Prices
----------------------------------------
Crude Oil Per
and Natural Equivalent
Liquids Gas Barrel
------------- ---------- ------------
(Per Bbl) (Per Mcf)
<S> <C> <C> <C>
Annual
------
1989 $ 18.30 $ 1.65 $ 12.84
1990 23.65 1.69 15.61
1991 20.62 1.68 14.36
1992 18.87 1.74 13.76
1993 15.41 1.94 13.41
1994 14.80 1.67 11.82
Quarterly
---------
1993
----
First $ 16.62 $ 2.05 $ 14.25
Second 16.76 1.87 13.65
Third 14.78 1.85 12.73
Fourth 13.80 2.02 13.12
1994
----
First $ 12.02 $ 1.98 $ 11.93
Second 15.55 1.65 12.20
Third 16.21 1.53 11.83
Fourth 15.30 1.56 11.39
</TABLE>
In December 1994, the Company received an average of $14.87 per
barrel and $1.63 per Mcf for its production.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Reference is made to the Index to Financial Statements on
page 32 for financial statements and notes thereto. Quarterly
financial data is presented on page 24 of this Form 10-K.
Supplementary schedules have been omitted as not required or not
applicable because the information required to be presented is
included in the financial statements and related notes.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES.
None.
30
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants . . . . . . . . . . . . .32
Consolidated Balance Sheets as of December 31, 1993 and 1994 . . .33
Consolidated Statements of Operations for the years ended
December 31, 1992, 1993 and 1994 . . . . . . . . . . . . . .34
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1992, 1993 and 1994 . . . .35
Consolidated Statements of Cash Flows
for the years ended December 31, 1992, 1993 and 1994 . . . .36
Notes to Consolidated Financial Statements . . . . . . . . . . . .37
31
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Snyder Oil Corporation:
We have audited the accompanying consolidated balance sheets of
Snyder Oil Corporation (a Delaware corporation) and subsidiaries as
of December 31, 1993 and 1994, and the related consolidated
statements of operations, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Snyder
Oil Corporation and subsidiaries as of December 31, 1993 and 1994,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As explained in Note 2 to the financial statements, in 1994, the
Company changed its method of accounting for its oil and gas
properties from "full cost" to "successful efforts." All prior
period financial statements presented have been restated.
ARTHUR ANDERSEN LLP
Fort Worth, Texas,
March 3, 1995
32
<PAGE>
<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED BALANCE SHEETS (Notes 1 and 2)
(In thousands)
<CAPTION>
December 31,
-------------------------
1993 1994
---------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 10,913 $ 21,733
Accounts receivable 47,472 37,055
Inventory and other 3,407 13,651
---------- ----------
61,792 72,439
---------- ----------
Investments (Note 4) 29,383 43,301
---------- ----------
Oil and gas properties, successful efforts method (Note 5) 454,876 680,215
Accumulated depletion, depreciation and amortization (138,470) (207,976)
---------- ----------
316,406 472,239
---------- ----------
Gas processing and transportation facilities (Note 5) 60,015 106,622
Accumulated depreciation (14,295) (21,342)
---------- ----------
45,720 85,280
---------- ----------
$ 453,301 $ 673,259
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 38,047 $ 44,874
Accrued liabilities 23,239 25,112
Current portion of long term debt (Note 3) 15 1,745
---------- ----------
61,301 71,731
---------- ----------
Senior debt, net (Note 3) 114,952 216,034
Convertible subordinated notes (Note 3) - 83,650
Capital lease, net (Note 3) - 18,823
Deferred taxes and other (Notes 7 and 9) 2,314 3,211
Minority interest - 5,724
Commitments and contingencies (Note 10)
Stockholders' equity (Note 6)
Preferred stock, $.01 par, 10,000,000 shares authorized,
8% Convertible preferred stock, 1,186,005 and
-0- shares issued and outstanding 12 -
6% Convertible preferred stock, 1,035,000 shares
issued and outstanding 10 10
Common stock, $.01 par, 75,000,000 shares authorized,
23,259,658 and 30,209,197 issued 233 302
Capital in excess of par value 249,713 255,961
Retained earnings 25,308 20,959
Common stock held in treasury, 122,018 shares at cost - (2,288)
Foreign currency translation gain(loss) (542) 1,222
Unrealized loss on investments (Note 4) - (2,080)
---------- ----------
274,734 274,086
---------- ----------
$ 453,301 $ 673,259
========== ==========
<f/n> The accompanying notes are an integral part of these statements.
</TABLE>
33
<PAGE>
<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Notes 1 and 2)
(In thousands except per share data)
<CAPTION>
Year Ended December 31,
----------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues (Note 8)
Oil and gas sales $ 77,363 $124,641 $137,858
Gas processing, transportation and marketing 38,611 94,839 107,247
Other 2,996 9,372 17,223
--------- --------- ---------
118,970 228,852 262,328
Expenses
Direct operating 28,057 44,901 50,067
Cost of gas and transportation 30,469 85,640 94,177
Exploration 1,515 2,960 6,505
General and administrative 6,704 6,780 9,053
Interest and other 5,693 7,271 12,463
Depletion, depreciation and amortization 31,505 58,762 76,553
--------- --------- ---------
Income before taxes, minority interest
and extraordinary item 15,027 22,538 13,510
Provision for income taxes (Note 7)
Current 430 - -
Deferred - - 967
--------- --------- ---------
430 - 967
--------- --------- ---------
Minority interest (Note 2) - - (171)
--------- --------- ---------
Income before extraordinary item 14,597 22,538 12,372
Extraordinary item - early extinguishment
of debt (Note 3) - (2,993) -
--------- --------- ---------
Net income $ 14,597 $ 19,545 $ 12,372
========= ========= =========
Net income per common share (Note 6)
Before extraordinary item $ .43 $ .58 $ .07
Extraordinary item - (.13) -
--------- --------- ---------
Total $ .43 $ .45 $ .07
========= ========= =========
Weighted average shares outstanding (Note 6) 22,722 23,096 23,704
========= ========= =========
<f/n> The accompanying notes are an integral part of these statements.
</TABLE>
34
<PAGE>
<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (Notes 1, 2 and 6)
(In thousands)
<CAPTION>
Preferred Stock Common Stock Capital in
----------------- --------------- Excess of Retained
Shares Amount Shares Amount Par Value Earnings
------- ------- ------- ------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 1,200 $ 12 22,855 $ 228 $ 149,123 $ 25,333
Cumulative effect of
accounting change - - - - - (9,486)
Issuance of common - - 234 2 807 -
Repurchase of common - - (215) (1) (1,260) -
Dividends - - - - - (10,489)
Net income - - - - - 14,597
-------- -------- -------- ------ --------- ----------
Balance, December 31, 1992 1,200 12 22,874 229 148,670 19,955
Issuance of preferred 1,035 10 - - 99,315 -
Common stock grants and
exercise of options - - 309 3 1,729 -
Conversion of preferred
to common (14) - 77 1 (1) -
Dividends - - - - - (14,192)
Net income - - - - - 19,545
------- ------ ------- ------- ---------- ----------
Balance, December 31, 1993 2,221 22 23,260 233 249,713 25,308
Common stock grants and
exercise of options - - 414 4 2,851 -
Conversion of preferred
to common (1,186) (12) 6,535 65 (53) -
Issuance of warrants - - - - 3,450 -
Dividends - - - - - (16,721)
Net income - - - - - 12,372
------ ------ -------- ------ --------- ----------
Balance, December 31, 1994 1,035 $ 10 30,209 $ 302 $ 255,961 $ 20,959
====== ====== ======== ====== ========= ==========
<f/n> The accompanying notes are an integral part of these statements.
</TABLE>
35
<PAGE>
<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Notes 1 and 2)
(In thousands)
<CAPTION>
Year Ended December 31,
--------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Operating activities
Net income $ 14,597 $ 19,545 $ 12,372
Adjustments to reconcile net income to net cash
provided by operations
(Gain) loss on sales of properties 1,202 1,033 (1,969)
Exploration expense 1,515 2,960 6,505
Depletion, depreciation and amortization 31,505 58,762 76,553
Deferred taxes - - 967
Extraordinary item - early extinguishment of debt - 2,993 -
Gains on sale of securities (777) (2,283) (9,747)
Excess of equity in earnings over distributions 41 (189) (1,355)
Amortization of deferred credits (780) (3,846) (2,986)
Changes in operating assets and liabilities
Decrease (increase) in
Accounts receivable (4,669) (22,397) 11,024
Inventory and other 211 (3,354) (9,241)
Increase (decrease) in
Accounts payable 6,395 12,753 1,901
Accrued liabilities (1,352) 2,227 1,841
Other liabilities 365 319 361
Other 86 205 235
--------- --------- ---------
Net cash provided by operations 48,339 68,728 86,461
--------- --------- ---------
Investing activities
Acquisition, development and exploration (78,593) (194,264) (244,353)
Proceeds from investments 3,582 8,378 5,019
Outlays for investments (1,626) (27,594) (8,804)
Sale of properties 2,992 5,547 2,806
--------- --------- ---------
Net cash used by investing (73,645) (207,933) (245,332)
--------- --------- ---------
Financing activities
Issuance of common 722 1,528 922
Issuance of preferred - 99,325 -
Increase in indebtedness 29,700 68,159 187,138
Debt issuance costs - - (2,855)
Repayments of indebtedness (187) (25,000) -
Premium on debt extinguishment - (2,983) -
Dividends (10,489) (14,192) (16,721)
Deferred credits 2,594 2,796 2,356
Repurchase of common (1,261) - (1,149)
--------- --------- ---------
Net cash realized by financing 21,079 129,633 169,691
--------- --------- ---------
Increase (decrease) in cash (4,227) (9,572) 10,820
Cash and equivalents, beginning of year 24,712 20,485 10,913
--------- --------- ---------
Cash and equivalents, end of year $ 20,485 $ 10,913 $ 21,733
========= ========= =========
Noncash investing and financing activities
Gas plant capital lease - - $ 21,000
<f/n> The accompanying notes are an integral part of these statements.
</TABLE>
36
<PAGE>
<PAGE>
SNYDER OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND NATURE OF BUSINESS
Snyder Oil Corporation (the "Company") is primarily
engaged in the acquisition, production, development and exploration
of domestic oil and gas properties. The Company is also involved in
gas processing, transportation, gathering and marketing. The Company
is engaged to a modest but growing extent in international
acquisition, development and exploration and maintains a number of
special purpose subsidiaries which are engaged in ancillary
activities including gas transmission, water disposal and management
of oil and gas assets on behalf of institutional investors. The
Company, a Delaware corporation, is the successor to a company formed
in 1978.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts
of Snyder Oil Corporation and its subsidiaries (collectively, the
"Company"). Affiliates in which the Company owns more than 50% are
fully consolidated, with the related minority interest being deducted
from subsidiary earnings and stockholders' equity. The Company
accounts for its interest in joint ventures and partnerships using
the proportionate consolidation method, whereby its share of assets,
liabilities, revenues and expenses are consolidated with other
operations.
In 1994, the Company changed from the full cost to the
successful efforts method of accounting for its oil and gas
properties, in order to more accurately reflect its results as it
continues to expand its development and exploration efforts.
Accordingly, 1992 and 1993 statements of operations and the 1993
balance sheet have been restated to conform to successful efforts.
The cumulative effect was to reduce January 1, 1992, retained
earnings by $9.5 million. For the 1992 and 1993 years previously
reported, the effect of the accounting change restatement, was to
reduce net income by $6.0 million ($.27 per share) and $6.1 million
($.26 per share), respectively. Under successful efforts, oil and
gas leasehold costs are capitalized when incurred. Unproved
properties are assessed periodically on a property-by-property basis
and impairments in value are charged to expense. Exploratory
expenses, including geological and geophysical expenses and delay
rentals, are charged to expense as incurred. Exploratory drilling
costs, including stratigraphic test wells, are initially capitalized,
but charged to expense if and when the well is determined to be
unsuccessful. Costs of productive wells, developmental dry holes and
productive leases are capitalized and amortized on a unit-of-
production basis over the life of the remaining proved reserves. Gas
is converted to equivalent barrels at the rate of 6 Mcf to 1 barrel.
Generally, amortization of capitalized costs is provided on a
property-by-property basis.
Generally, the Company provides an impairment reserve for
significant proved and unproved oil and gas property groups to the
extent that net capitalized costs exceed the undiscounted future
value. During 1992, 1993 and 1994, the Company provided impairment
reserves of $3.4 million, $4.4 million and $5.8 million,
respectively.
The Company's investment in its Australian affiliate is
accounted for using the equity method, whereby the cash basis
investment is increased for equity in earnings and decreased for
dividends, if any were received. The affiliate's functional currency
is the Australian dollar. The foreign currency translation
adjustments reported in the balance sheet are the result of the
translation of the Australian dollar balance sheet into United States
dollars at yearend and the changes in the exchange rate subsequent to
purchase.
37
<PAGE>
<PAGE>
To a limited extent, the Company enters into commodities
contracts to hedge the price risk of a portion of its production. In
1994, the Company entered into certain gas sales arrangements in
order to lock in the price differential between the Rocky Mountain
and the NYMEX Henry Hub prices to reduce exposure to the Rocky
Mountain spot prices. The contracts included 31,000 MMBtu per day,
20,000 MMBtu for a period of ten years and 11,000 MMBtu through July
1995. At December 31, 1994, the net present value of the contracts
was estimated to be $4.9 million with no recorded carrying value.
All liquid investments with a maturity of three months or
less are considered to be cash equivalents. General and
administrative expenses are reduced by reimbursements for well
operations, drilling, management of partnerships and services
provided to unconsolidated affiliates. Reimbursements amounted to
$14.3 million, $17.8 million and $25.4 million, respectively, in
1992, 1993 and 1994.
Certain amounts in the 1992 and 1993 financial statements
have been reclassified to conform with the 1994 presentation.
(3) INDEBTEDNESS
The following indebtedness was outstanding on the
respective dates:
<TABLE>
<CAPTION>
December 31,
-----------------------
1993 1994
---------- ----------
(In thousands)
<S> <C> <C>
Revolving credit facility $ 114,901 $ 216,001
Other 66 50
---------- ----------
114,967 216,051
Less current portion (15) (17)
---------- ----------
Senior debt, net $ 114,952 $ 216,034
========== ==========
Convertible subordinated notes, net $ - $ 83,650
========== ==========
Capital lease - 20,551
Less current portion - (1,728)
---------- ----------
Capital lease, net $ - $ 18,823
========== ==========
</TABLE>
The Company maintains a $500 million revolving credit
facility. The facility is divided into a $400 million long-term
portion and a $100 million short-term portion. The borrowing base
available under the facility at December 31, 1994 was $250 million.
The majority of the borrowings under the facility currently bear
interest at LIBOR plus .75% with the remainder at prime, with an
option to select CD plus .75%. The margin on LIBOR or CD will
increase to 1% if the Company's consolidated senior debt becomes
greater than 80% of its tangible net worth. During 1994, the average
interest rate under the revolver was 5.5%. The Company pays certain
fees based on the unused portion of the borrowing base. Covenants
require maintenance of minimum working capital, limit the incurrence
of debt and restrict dividends, stock repurchases, certain
investments, other indebtedness and unrelated business activities.
Such restricted payments are limited by a formula that includes
underwriting proceeds, cash flow and other items. Based on such
limitations, over $100 million was available for the payment of
dividends and other restricted payments as of December 31, 1994.
38
<PAGE>
<PAGE>
In May 1994, the Company issued $86.3 million of 7%
convertible subordinated notes due May 15, 2001. The net proceeds
were $83.4 million. The notes are convertible into common stock at
$23.16 per share, and are redeemable at the option of the Company on
or after May 15, 1997, initially at 103.51% of principal, and at
prices declining to 100% at May 15, 2000, plus accrued interest. At
December 31, 1994, the fair market value of the notes, based on their
closing price on the New York Stock Exchange, was $75.9 million.
In November 1994, the Company entered into an agreement
with a bank whereby the bank purchased the recently constructed West
Wattenberg Gas Plant from the Company for $21 million and leased it
back. The lease has a term of seven years and includes an option to
repurchase the plant at the end of the lease for $4.2 million. As a
capital lease, the asset and related debt are recorded on the balance
sheet of the Company. At December 31, 1994, the Company's future
minimum rentals under the lease were $24.0 million. At December 31,
1994, the present value of net minimum capital lease payments
recorded as a liability in the accompanying balance sheet was $20.6
million, of which $1.7 million was classified as current.
In 1993, the Company retired $25 million of subordinated
notes and the related cumulative participating rights. The portion
of the payment in excess of principal and accrued interest was
expensed as an extraordinary item for $3.0 million.
Scheduled maturities of indebtedness for the next five
years are $1.7 million in 1995, $2.1 million in 1996, $2.2 million in
1997, $218.5 million in 1998 and $2.5 million in 1999. The long-term
portion of the revolving credit facility is scheduled to expire in
1998; however, it is management's policy to renew the facility and
extend the maturity on a regular basis.
Cash payments for interest were $5.4 million, $9.2 million
and $9.9 million, respectively, for 1992, 1993 and 1994.
(4) INVESTMENTS
The Company has investments in foreign and domestic energy
companies and long term notes receivable, which at December 31, 1993
and 1994, had a book cost of $29.4 million and $46.5 million,
respectively. The corresponding fair market values were $54.2
million and $48.2 million at December 31, 1993 and 1994,
respectively. In 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." Per the
pronouncement, investments carried on the cost basis must be adjusted
to their market value with a corresponding increase or decrease to
stockholders' equity. The pronouncement does not apply to
investments accounted for by the equity method.
In May 1993, the Company acquired 42.8% of the outstanding
shares of Command Petroleum Limited ("Command"), an Australian
exploration and production company, for $18.2 million. The
investment is accounted for by the equity method. The Sydney based
company is listed on the Australian Stock Exchange, and holds
interests in various international exploration and production permits
and licenses as well as a 45.4% interest in a publicly traded
Netherlands exploration and production company whose assets are
located primarily in the North Sea. In January 1994, Command
completed an offering of 43 million of its common shares, and in
February 1994 paid $1.1 million in cash and issued 2.5 million of its
common shares in return for an incremental interest in the
Netherlands company. Additionally in 1994, 51.9 million of stock
options were exercised and 4.7 million partly paid shares were
issued. As a result of these transactions, the Company's ownership
in Command was reduced to 29.0% and a $3.1 million gain was
recognized. The market value of the Company's investment in Command
based on Command's closing price at December 31, 1994 was $30.0
million, compared to a cost basis of $25.1 million.
39
<PAGE>
<PAGE>
In early 1993, the Company formed the Permtex joint
venture to develop proven oil fields in the Volga-Urals Basin of
Russia. To finance its portion of planned development expenditures,
the Company sold a portion of its investment in the project to three
industry participants. As a result, its equity basis investment was
reduced from 50% to 20.6% and a $3.5 million net gain was recorded.
The Russian investment had a cost and fair value at December 31, 1994
of $3.1 million.
The Company has investments in securities of publicly
traded domestic energy companies, not accounted for by the equity
method, with a total cost at December 31, 1993 and 1994 of $9.7
million and $15.4 million, respectively. The market value of these
securities at December 31, 1993 and 1994 approximated $13.3 million
and $12.2 million, respectively. Accordingly, at December 31, 1994,
investments were decreased by $3.2 million, stockholders' equity was
decreased by $2.1 million and deferred taxes payable were decreased
by $1.1 million as required by SFAS No. 115.
The Company holds $2.9 million in long term notes
receivable due from privately held corporations. All notes are
secured by certain assets, including stock and oil and gas
properties. At December 31, 1993 and 1994, the fair value of the
notes receivable, based on existing market conditions and the
anticipated future net cash flow related to the notes, approximated
their book value.
(5) OIL AND GAS PROPERTIES AND GAS FACILITIES
The cost of oil and gas properties at December 31, 1993
and 1994 includes $6.3 million and $23.7 million, respectively, of
unevaluated leasehold. Such properties are held for exploration,
development or resale and are excluded from amortization. The
following table sets forth costs incurred related to oil and gas
properties and gas processing and transportation facilities:
<TABLE>
<CAPTION>
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
Acquisition $ 62,538 $ 48,162 $ 70,255
Development 54,093 90,617 156,912
Gas processing, transportation and other 11,158 22,595 46,607
Exploration 3,014 5,787 5,514
-------- -------- --------
$130,803 $167,161 $279,288
======== ======== ========
</TABLE>
Development expenditures for the year ended December 31,
1994, were concentrated primarily in the DJ Basin of Colorado where
expenditures totalled $90.3 million. A total of 360 wells were
placed on production there in 1994, 90 were recompleted and 63 more
were in progress at December 31. In the Green River Basin of
southern Wyoming, 34 wells were placed on production with eight in
progress at yearend. In the horizontal drilling program in the
Giddings Field of southeast Texas, 23 wells were placed on production
in 1994, with nine in progress at yearend and one well abandoned. In
the Piceance Basin of western Colorado, 20 wells were placed on
production, with five wells in progress at yearend and one well
abandoned. The Uinta Basin development program in northeast Utah is
still in its early stages with two wells placed on production and
seven wells in progress at yearend.
During 1994, the Company expended $70.3 million for
domestic acquisitions, of which $44.7 million was for proven
properties and $25.6 million for unproven acreage. The most notable
production acquisitions were $13.9 million for an incremental
interest in the Barrel Springs unit in Wyoming, $6.6 million for
properties in the Piceance Basin, $5.0 million in the DJ Basin, $4.3
million in the Giddings area of southeast Texas and $6.6 million for
a controlling interest in Del Mar Petroleum, Inc., a company that
owns and operates properties in the Gulf of Mexico. The most
substantial acreage purchase involved a $9.7 million acquisition in
northeast Louisiana, of which $3.0 million related to production and
$6.7 million was for 330,000 net mineral acres which are classified
as unproven. Acquisitions are accounted for utilizing the purchase
method. The pro forma effect of the acquisitions was not material to
the Company's results of operations.
40
<PAGE>
<PAGE>
The Company's gas facilities expansion continued with
$41.5 million expended during 1994, primarily on facilities in the DJ
Basin. Construction of a new gas processing plant on the west end of
the Wattenberg Field with a cost of $21.3 million was completed in
the fourth quarter. Financing was obtained for the full project cost
under a seven-year capital lease with a fixed 8.2% interest rate. A
total of $8.7 million was expended to increase the Company's
gathering systems in the DJ Basin to add pipelines, feeder lines, an
additional compressor and new well connections for the continuing
drilling activity in the area. At the Roggen plant, $2.9 million was
expended to add a new de-ethanizer station, improve metering and
boost compression, among other projects. Another $8.6 million in
expenditures were for system expansions in the Piceance Basin,
Nebraska and the Washakie Basin.
(6) STOCKHOLDERS' EQUITY
A total of 75 million common shares, $.01 par value, are
authorized of which 30.2 million were issued at December 31, 1994.
In 1993, the Company issued 386,000 shares, with 309,000 shares
issued primarily for the exercise of stock options by employees and
77,000 shares issued on conversion of 14,000 preferred shares. In
1994, the Company issued 6,949,000 shares, with 414,000 shares issued
primarily for the exercise of stock options by employees (for which
122,000 shares were received as consideration in lieu of cash and are
held in treasury) and 6,535,000 shares issued on conversion of all
remaining shares of the 8% preferred. In 1993, the Company paid
first and second quarter dividends at the rate of $.05 per share and
increased the rate to $.06 per share in the third quarter. In the
third quarter of 1994, the dividend rate increased to $.065 per
share.
A total of 10 million preferred shares, $.01 par value,
are authorized. In December 1991, 1.2 million shares of 8%
convertible exchangeable preferred stock were sold through an
underwriting. The net proceeds were $57.4 million. In 1993, 14,000 of
the preferred shares were converted into 77,000 common shares.
Effective December 31, 1994, the remaining 8% convertible preferred
shares were converted into 6,535,000 common shares.
In April 1993, 4.1 million depositary shares (each
representing a one quarter interest in one share of $100 liquidation
value stock) of 6% preferred stock were sold through an underwriting.
The net proceeds were $99.3 million. The stock is convertible into
common stock at $21.00 per share and is exchangeable at the option of
the Company for 6% convertible subordinated debentures on any
dividend payment date. The 6% convertible preferred stock is
redeemable at the option of the Company on or after March 31, 1996.
The liquidation preference is $25.00 per depositary share, plus
accrued and unpaid dividends. The Company paid $9.1 million and
$10.8 million, respectively, in preferred dividends during 1993 and
1994.
The Company maintains a stock option plan for employees
providing for the issuance of options at prices not less than fair
market value. Options to acquire up to three million shares of
common stock may be outstanding at any given time. The specific
terms of grant and exercise are determinable by a committee of
independent members of the Board of Directors. The majority of
currently outstanding options vest over a three-year period (30%,
60%, 100%) and expire five to seven years from date of grant.
In 1990, the shareholders adopted a stock grant and option
plan (the "Directors' Plan") for non-employee Directors of the
Company. The Directors' Plan provides for each non-employee director
to receive 500 common shares quarterly in payment of their annual
retainer. It also provides for 2,500 options to be granted annually
to each non-employee Director. The options vest over a three-year
period (30%, 60%, 100%) and expire five years from date of grant.
At December 31, 1994, a total of 1.5 million options were
outstanding at exercise prices of $4.53 to $20.38 per share. At
December 31, 1994, a total of 533,000 of such options were vested
having exercise prices of $4.53 to $19.25 per share. During 1993,
309,000 options were exercised at prices of $4.53 to $9.13 per share,
and 23,000 were forfeited. During 1994, 414,000 options were
exercised at prices of $4.53 to $13.00 per share, and 2,000 were
forfeited.
41
<PAGE>
<PAGE>
Earnings per share are computed by dividing net income,
less dividends on preferred stock, by average common shares
outstanding. Net income available to common for the three years
ended December 31, 1994, was $9.8 million, $10.4 million and $1.6
million, respectively. Differences between primary and fully diluted
earnings per share were insignificant for all periods presented.
(7) FEDERAL INCOME TAXES
The Company adopted FASB Statement No. 109, "Accounting
for Income Taxes," effective January 1, 1992. At December 31, 1994,
the Company had no liability for foreign taxes. A reconciliation of
the United States federal statutory rate to the Company's effective
income tax rate follows:
<TABLE>
<CAPTION>
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
Federal statutory rate 34% 35% 35%
Utilization of net deferred tax asset (31%) (35%) (27%)
Prior year tax reimbursement - - (1%)
-------- -------- --------
Effective income tax rate 3% - 7%
======== ======== ========
</TABLE>
For book purposes the components of the net deferred asset
and liability at December 31, 1993 and 1994, respectively, were:
<TABLE>
<CAPTION>
1993 1994
---------- ----------
<S> <C> <C>
Deferred tax assets
NOL carryforwards $ 27,316 $ 56,902
AMT credit carryforwards 1,350 1,350
Reserves and other 1,804 907
---------- ----------
30,470 59,159
---------- ----------
Deferred tax liabilities
Depreciable and depletable property (25,732) (55,601)
Investments - (2,308)
---------- ----------
(25,732) (57,909)
---------- ----------
Deferred asset 4,738 1,250
Valuation allowance (4,738) (1,841)
---------- ----------
Net deferred tax asset (liability) $ - $ (591)
========== ==========
</TABLE>
For tax purposes, the Company had net operating loss
carryforwards of $162.6 million at December 31, 1994. These
carryforwards expire between 1997 and 2009. At December 31, 1994,
the Company had alternative minimum tax credit carryforwards of $1.4
million and depletion carryforwards of $1.5 million, both of which
are available indefinitely. Current income taxes shown in the
financial statements reflect estimates of alternative minimum taxes.
Cash payments during 1992, 1993 and 1994 were $1.0 million, $75,000
and $10,000, respectively.
(8) MAJOR CUSTOMERS
In 1992, 1993 and 1994, Amoco Production Company accounted
for 27%, 12% and 11%, respectively, of revenues. Management believes
that the loss of any individual purchaser would not have a material
adverse impact on the financial position or results of operations of
the Company.
42
<PAGE>
<PAGE>
(9) DEFERRED CREDITS
In 1992, an institutional investor agreed to contribute $7
million to a partnership formed to monetize Section 29 tax credits to
be realized from the Company's properties, mainly in the DJ Basin.
The initial $3 million was contributed in 1992, an additional $3
million contributed during 1993 and $1 million received in March
1994. In June 1994, the arrangement was extended and an additional
$1.8 million was received. In early 1995, a second investor was
added and the limited partners committed to contribute an additional
$5.0 million. As a result, this transaction is anticipated to
increase cash flow and net income through 1996. A revenue increase
of more than $.40 per Mcf is realized on production generated from
qualified Section 29 properties in this partnership. The Company
recognized $780,000, $3.8 million and $3.0 million of this revenue
during 1992, 1993 and 1994, respectively.
(10) COMMITMENTS AND CONTINGENCIES
The Company rents office space and gas compressors at
various locations under non-cancelable operating leases. Minimum
future payments under such leases approximate $2.4 million for 1995,
$2.5 million for 1996 and 1997, $2.4 million for 1998, and $2.0
million for 1999.
In 1993, the Company received a $5.3 million settlement on
a gas contract dispute. Of the proceeds, $3.5 million was reflected
as other income in 1993, with the remaining $1.8 million reflected as
a reserve for possible contingencies. In 1994, $232,000 was paid and
the remaining $1.6 million reported as income. In April 1993, the
Company was granted a $2.7 million judgment in litigation involving
the allocation of proceeds from a pipeline dispute. The judgment has
been appealed. The Company is a party to various other lawsuits
incidental to its business, none of which are anticipated to have a
material adverse impact on its financial position or results of
operations. The financial statements reflect favorable legal
judgments only upon receipt of cash, final judicial determination or
execution of a settlement agreement.
(11) UNAUDITED SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION:
Independent petroleum consultants directly evaluated 74%,
62%, and 58% of proved reserves at December 31, 1992, 1993 and 1994,
respectively, and performed a detailed review of properties which
comprised in excess of 80% of proved reserve value. All reserve
estimates are based on economic and operating conditions at that
time. Future net cash flows as of each year-end were computed by
applying then current prices to estimated future production less
estimated future expenditures (based on current costs) to be incurred
in producing and developing the reserves. All reserves are located
onshore in the United States and in the waters of the Gulf of Mexico.
43
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Quantities of Proved Reserves - Crude Oil Natural Gas
-------------- -------------
(MBbl) (MMcf)
<S> <C> <C>
Balance, December 31, 1991 19,678 247,169
Revisions (1,474) (21,620)
Extensions, discoveries and additions 3,403 48,802
Production (1,776) (23,090)
Purchases 13,190 41,933
Sales (819) (5,536)
---------- ----------
Balance, December 31, 1992 32,202 287,658
Revisions (4,908) 5,140
Extensions, discoveries and additions 4,022 90,166
Production (3,451) (35,080)
Purchases 4,372 85,850
Sales (307) (3,645)
---------- -----------
Balance, December 31, 1993 31,930 430,089
Revisions (296) (102,871)
Extensions, discoveries and additions 3,981 136,583
Production (4,366) (43,809)
Purchases 3,866 93,334
Sales (138) (2,075)
---------- ----------
Balance, December 31, 1994 34,977 511,251
========== ==========
</TABLE>
The Company's interests in the Russian joint venture
(Permtex) and its Australian affiliate (Command) are accounted for
under the equity method. At December 31, 1994, the Company's equity
in Permtex and Command proved reserves was 8,038 MBOE and 5,931 MBOE,
respectively.
44<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Proved Developed Reserves - Crude Natural
Oil Gas
------------ ------------
(MBbl) (MMcf)
<S> <C> <C>
December 31, 1991 9,094 136,229
============ ============
December 31, 1992 21,116 194,621
============ ============
December 31, 1993 18,032 268,349
============ ============
December 31, 1994 26,104 353,930
============ ============
Standardized Measure - December 31,
-----------------------------
1993 1994
------------ ------------
(In thousands)
Future cash inflows $ 1,272,649 $ 1,332,705
Future costs:
Production (a) (415,867) (469,947)
Development (168,510) (150,970)
------------ ------------
Future net cash flows 688,272 711,788
Undiscounted income taxes (82,202) (88,273)
------------ ------------
After tax net cash flows 606,070 623,515
10% discount factor (265,552) (261,833)
------------ ------------
Standardized measure $ 340,518 $ 361,682
============ ============
<f/n>
(a) Future production costs have been reduced by $937,000 and $1.0 million as of December 31, 1993
and 1994, respectively, to reflect the future revenues from the sale of sulphur, a by-product
of certain gas production. Sulphur is sold under a long-term contract at prevailing market prices.
(b) Standardized measure amounts at December 31, 1994, exclude the 49.9% minority interest in DelMar
Petroleum, Inc. of $3.3 million.
(c) At December 31, 1994, the Company's equity in the net present value of Permtex and Command proved
reserves was $14.2 million and $7.1 million, respectively. These amounts are not included in the
above standardized measure.
</TABLE>
45<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Changes in Standardized Measure - Year Ended December 31,
------------------------------------------
1992 1993 1994
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Standardized measure, beginning of year $ 210,903 $ 283,572 $ 340,518
Revisions:
Prices and costs (624) (70,433)(a) (73,330)(a)
Quantities (22,760) 6,632 (a) (42,260)(a)
Development costs 6,952 16,379 (12,995)
Accretion of discount 21,090 28,357 34,052
Income taxes (10,043) (7,181) 2,195
Production rates and other (7,443) (14,281) (9,506)
----------- ------------ -----------
Net revisions (12,828) (40,527) (101,844)
Extensions, discoveries and additions 48,417 57,782 68,002
Production (50,965) (85,700) (97,330)
Future development costs incurred 33,846 67,959 99,175
Purchases (b) 62,007 60,752 55,072
Sales (c) (7,808) (3,320) (1,911)
----------- ----------- -----------
Standardized measure, end of year $ 283,572 $ 340,518 $ 361,682
=========== =========== ===========
<f/n>
(a) In 1993 and 1994, $27.7 million and $35.6 million, respectively, in revisions were included in "Prices and
Costs" rather than "Quantities," because the reduction was due to reserves being classified as uneconomic at
then current price levels.
(b) "Purchases" includes the present value at the end of the period of properties acquired during the year plus
the cash flow received on such properties during the period, rather than their estimated present value at
the time of the acquisition.
(c) "Sales" represents the present value at the beginning of the period of properties sold, less the cash flow
received on such properties during the period.
</TABLE>
46
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. Reference is made to Item 8 on page 34.
2. Schedules otherwise required by Item 8 have been
omitted as not required or not applicable.
3. Exhibits
4.1.1 - Certificate of Incorporation of Registrant -
incorporated by reference from Exhibit 3.1 to the
Registrant's Registration Statement on Form S-4
(Registration No. 33-33455).
4.1.2 - Certificate of Amendment to Certificate of
Incorporation of Registrant filed February 9, 1990 -
incorporated by reference from Exhibit 3.1.1 to the
Registrant's Registration Statement on Form S-4
(Registration No. 33-33455).
4.1.3 - Certificate of Amendment to Certificate of
Incorporation of Registrant filed May 22, 1991 -
incorporated by reference from Exhibit 3.1.2 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-43106).
4.1.4 - Certificate of Amendment to Certificate of
Incorporation of Registrant filed May 24, 1993 -
incorporated by reference from Exhibit 3.1.5 to the
Registrant's Form 10-Q for the quarter ended June 30,
1993 (File No. 1-10509)
4.1.5 - Indenture dated as of May 1, 1994 between the
Registrant and Texas Commerce Bank National Association
relating to Registrant's 7% Convertible Subordinated
Notes due 2001.*
4.1.6 - Certificate of Designations of the Registrant's
$6.00 Convertible Exchangeable Preferred Stock -
incorporated by reference from Exhibit 3.1.5 to the
Registrant's Form 10-Q for the quarter ended June 30,
1993 (File No. 1-10509).
10.1 - Snyder Oil Corporation 1990 Stock Option Plan for
Non-Employee Directors - incorporated by reference from
Exhibit 10.4 to the Registrant's Registration Statement
on Form S-4 (Registration No. 33-33455).
10.1.1 - Amendment dated May 20, 1992 to the Registrant's
1990 Stock Plan for Non-Employee Directors - incorporated
by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993 (File No. 1-
10509).
10.2 - Registrant's Restated 1989 Stock Option Plan -
incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992
(File No. 1-10509).
10.3 - Regstrant's Deferred Compensation Plan for Select
Employees, adopted effective June 1, 1994.*
10.4 - Registrant's Profit Sharing & Savings Plan and
Trust as amended and restated effective October 1, 1993 -
incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1993 (File No. 1-10509).
47<PAGE>
<PAGE>
10.5 - Form of Indemnification Agreement - incorporated
by reference from Exhibit 10.15 to the Registrant's
Registration Statement on Form S-4 (Registration No.
33-33455).
10.6 - Form of Change in Control Protection Agreement -
incorporated by reference from Exhibit 10.11 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-43106).
10.7 - Long-term Retention and Incentive Plan and
Agreement between the Registrant and Charles A. Brown -
incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993
(File No. 1-10509).
10.8 - Agreement dated as of April 30, 1993 between the
Registrant and Edward T. Story - incorporated by
reference from Exhibit 10.8 to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-10509).
10.9 - Purchase and Sale Agreement dated December 11, 1992
between Atlantic Richfield Company and Registrant -
incorporated by reference to Report on 8-K dated
December 11, 1992 (File No. 1-10509).
10.10 - Warrant dated February 8, 1994 issued by
Registrant to Union Pacific Resource Company -
incorporated by reference from Exhibit 10.10 to the
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993 (File No. 1-10509).
10.11 - Fifth Restated Credit Agreement dated as of June 30,
1994 among the Registrant and the banks party thereto
- incorporated by reference from Exhibit 10.11 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 (File No. 1-10509).
10.12 - Master Equipment Lease Agreement dated November 3,
1994 between Registrant and NationsBank Leasing
Corporation ("NBL"), together with Equipment
Lease Schedule No. 1 dated November 3, 1994 between
Registrant and NBL and Facility Agreement dated
November 3, 1994 between Registrant and NBL.*
11.1 - Computation of Per Share Earnings.*
12 - Computation of Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.*
22.1 - Subsidiaries of the Registrant - incorporated by
reference from Exhibit 22.1 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1991
(File No. 1-10509).
23.1 - Consent of Arthur Andersen LLP.*
23.2 - Consent of Netherland, Sewell & Associates, Inc.*
27 - Financial Data Schedule.*
99.1 - Report of Netherland, Sewell & Associates, Inc.
dated February 10, 1994 relating to certain of the
Registrant's property interests.*
99.2 - Report of Netherland, Sewell & Associates, Inc.
dated February 11, 1994 relating to their audit of
reserve estimates.*
(b) No reports on Form 8-K in the fourth quarter of 1994
* Filed herewith.
48<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
/s/ John C. Snyder March 14, 1995
- ---------------------
John C. Snyder Director and Chairman of the Board
(Principal Executive Officer)
/s/ Thomas J. Edelman March 14, 1995
- ---------------------
Thomas J. Edelman Director and President
(Principal Financial Officer)
/s/ John A. Fanning March 14, 1995
- ---------------------
John A. Fanning Director and Executive Vice President
/s/ Roger W. Brittain March 14, 1995
- ---------------------
Roger W. Brittain Director
/s/ John A. Hill March 14, 1995
- ---------------------
John A. Hill Director
/s/ William J. Johnson March 14, 1995
- ---------------------
William J. Johnson Director
/s/ B. J. Kellenberger March 14, 1995
- ----------------------
B. J. Kellenberger Director
/s/ John H. Lichtblau March 14, 1995
- ----------------------
John H. Lichtblau Director
/s/ James E. McCormick March 14, 1995
- ----------------------
James E. McCormick Director
/s/ Alfred M. Micallef March 14, 1995
- ----------------------
Alfred M. Micallef Director
/s/ James H. Shonsey March 14, 1995
- ---------------------
James H. Shonsey Vice President - Finance
(Principal Accounting Officer)
49
===================================================================
SNYDER OIL CORPORATION,
Issuer
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Trustee
__________
INDENTURE
Dated as of May 1, 1994
__________
$75,000,000*
7% Convertible Subordinated Notes Due 2001
===================================================================
* Subject to increase to up to $86,250,000 as provided herein.<PAGE>
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TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION . . . . . . . . . . . 1
SECTION 101. Definitions . . . . . . . . . . . . . . . 1
SECTION 102. Compliance Certificates and Opinions. . . 13
SECTION 103. Form of Documents Delivered to Trustee. . 13
SECTION 104. Acts of Holders; Record Date. . . . . . . 14
SECTION 105. Notices, Etc., to Trustee and Company . . 15
SECTION 106. Notice to Holders; Waiver . . . . . . . . 15
SECTION 107. Conflict with Trust Indenture Act . . . . 16
SECTION 108. Effect of Headings and Table of Contents. 16
SECTION 109. Successors and Assigns. . . . . . . . . . 16
SECTION 110. Severability. . . . . . . . . . . . . . . 16
SECTION 111. Benefits of Indenture . . . . . . . . . . 16
SECTION 112. Governing Law . . . . . . . . . . . . . . 16
SECTION 113. Legal Holidays. . . . . . . . . . . . . . 17
SECTION 114. Incorporators, Stockholders, Officers
and Directors of the Company Exempt
from Individual Liability . . . . . . . . 17
ARTICLE II - FORMS OF SECURITIES . . . . . . . . . . . . . 18
SECTION 201. Forms Generally . . . . . . . . . . . . . 18
SECTION 202. Form of Face of Security. . . . . . . . . 19
SECTION 203. Form of Reverse of Security . . . . . . . 20
SECTION 204. Form of Trustee's Certificate
of Authentication . . . . . . . . . . . . 23
SECTION 205. Form of Election to Convert . . . . . . . 24
SECTION 206. Form of Assignment. . . . . . . . . . . . 25
SECTION 207. Form of Option of Holder to Elect to
Require Purchase . .. . . . . . . . . . . 26
ARTICLE III - THE SECURITIES . . . . . . . . . . . . . . . 26
SECTION 301. Title and Terms . . . . . . . . . . . . . 26
SECTION 302. Denominations . . . . . . . . . . . . . . 27
SECTION 303. Execution, Authentication,
Delivery and Dating . . . . . . . . . . . 27
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SECTION 304. Temporary Securities. . . . . . . . . . . 28
SECTION 305. Registration, Registration of
Transfer and Exchange . . . . . . . . . . 29
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . . . . . 30
SECTION 307. Payment of Interest; Interest
Rights Preserved. . . . . . . . . . . . . 31
SECTION 308. Persons Deemed Owners . . . . . . . . . . 32
SECTION 309. Cancellation. . . . . . . . . . . . . . . 33
SECTION 310. Computation of Interest . . . . . . . . . 33
SECTION 311. CUSIP Numbers . . . . . . . . . . . . . . 33
ARTICLE IV - SATISFACTION AND DISCHARGE. . . . . . . . . . 33
SECTION 401. Satisfaction and Discharge of Indenture . 33
SECTION 402. Application of Trust Money. . . . . . . . 34
ARTICLE V - REMEDIES . . . . . . . . . . . . . . . . . . . 35
SECTION 501. Events of Default . . . . . . . . . . . . 35
SECTION 502. Acceleration of Maturity Date;
Rescission and Annulment. . . . . . . . . 37
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee. . . . . . . . 38
SECTION 504. Trustee May File Proofs of Claim. . . . . 39
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities. . . . . . . . . 39
SECTION 506. Application of Money Collected. . . . . . 39
SECTION 507. Limitation on Suits . . . . . . . . . . . 40
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium and Interest . 41
SECTION 509. Restoration of Rights and Remedies. . . . 41
SECTION 510. Rights and Remedies Cumulative. . . . . . 41
SECTION 511. Delay or Omission Not Waiver. . . . . . . 41
SECTION 512. Control by Holders. . . . . . . . . . . . 42
SECTION 513. Waiver of Past Default. . . . . . . . . . 42
SECTION 514. Undertaking for Costs . . . . . . . . . . 42
SECTION 515. Waiver of Stay or Extension Laws. . . . . 42
ARTICLE VI - THE TRUSTEE . . . . . . . . . . . . . . . . . 43
SECTION 601. Certain Duties and Responsibilities . . . 43
SECTION 602. Notice of Default . . . . . . . . . . . . 43
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SECTION 603. Certain Rights of Trustee . . . . . . . . 43
SECTION 604. Not Responsible for Recitals or
Issuance of Securities. . . . . . . . . . 44
SECTION 605. May Hold Securities . . . . . . . . . . . 45
SECTION 606. Money Held in Trust . . . . . . . . . . . 45
SECTION 607. Compensation and Reimbursement. . . . . . 45
SECTION 608. Disqualification; Conflicting Interests . 46
SECTION 609. Corporate Trustee Required; Eligibility . 46
SECTION 610. Resignation and Removal, Appointment
of Successor. . . . . . . . . . . . . . . 46
SECTION 611. Acceptance of Appointment by Successor. . 48
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business. . . . . . . . . . 48
SECTION 613. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . 48
SECTION 614. Appointment of Authenticating Agent . . . 49
ARTICLE VII - HOLDERS' LISTS AND REPORTS BY TRUSTEE
AND COMPANY . . . . . . . . . . . . . . . 50
SECTION 701. Company to Furnish Trustee Names
and Addresses of Holders. . . . . . . . . 50
SECTION 702. Preservation of Information;
Communications to Holders . . . . . . . . 51
SECTION 703. Reports by Trustee. . . . . . . . . . . . 51
SECTION 704. Reports by Company. . . . . . . . . . . . 52
ARTICLE VIII - CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE . . . . . . . . . . . . 52
SECTION 801. Company May Consolidate, Etc.,
Only on Certain Terms . . . . . . . . . . 52
SECTION 802. Successor Substituted for Company . . . . 53
ARTICLE IX - SUPPLEMENTAL INDENTURES . . . . . . . . . . . 53
SECTION 901. Supplemental Indentures Without
Consent of Holders. . . . . . . . . . . . 53
SECTION 902. Supplemental Indentures with
Consent of Holders . . . . . . . . . . . 54
SECTION 903. Execution of Supplemental Indentures. . . 55
SECTION 904. Effect of Supplemental Indentures . . . . 55
SECTION 905. Conformity with Trust Indenture Act . . . 55
SECTION 906. Reference in Securities to
Supplemental Indentures . . . . . . . . . 55
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ARTICLE X - COVENANTS. . . . . . . . . . . . . . . . . . . 56
SECTION 1001.Payment of Principal, Premium and
Interest. . . . . . . . . . . . . . . . . 56
SECTION 1002.Maintenance of Office or Agency . . . . . 56
SECTION 1003.Money for Security Payments to Be
Held in Trust . . . . . . . . . . . . . . 57
SECTION 1004.Statements of Officers of Company
as to Default; Notice of Default. . . . . 58
SECTION 1005.Existence . . . . . . . . . . . . . . . . 58
SECTION 1006.Maintenance of Properties . . . . . . . . 58
SECTION 1007.Payment of Taxes and Other Claims . . . . 59
SECTION 1008.Further Instruments and Acts. . . . . . . 59
SECTION 1009.Waiver of Certain Covenants . . . . . . . 59
ARTICLE XI - REDEMPTION OF SECURITIES. . . . . . . . . . . 60
SECTION 1101.Right Of Redemption . . . . . . . . . . . 60
SECTION 1102.Applicability of Article. . . . . . . . . 60
SECTION 1103.Election to Redeem; Notice to Trustee . . 60
SECTION 1104.Selection by Trustee of Securities
to Be Redeemed. . . . . . . . . . . . . . 60
SECTION 1105.Notice of Redemption. . . . . . . . . . . 61
SECTION 1106.Deposit of Redemption Price . . . . . . . 61
SECTION 1107.Securities Payable on Redemption Date . . 62
SECTION 1108.Securities Redeemed in Part . . . . . . . 62
ARTICLE XII - CONVERSION OF SECURITIES . . . . . . . . . . 62
SECTION 1201.Conversion Privilege and Conversion
Price . . . . . . . . . . . . . . . . . . 62
SECTION 1202.Exercise of Conversion Privilege. . . . . 64
SECTION 1203.Fractions of Shares . . . . . . . . . . . 65
SECTION 1204.Adjustment of Conversion Price. . . . . . 65
SECTION 1205.Notice of Adjustments of Conversion
Price . . . . . . . . . . . . . . . . . . 72
SECTION 1206.Notice of Certain Corporate Action. . . . 73
SECTION 1207.Company to Reserve Common Stock . . . . . 74
SECTION 1208.Taxes on Conversions. . . . . . . . . . . 74
SECTION 1209.Covenant as to Common Stock . . . . . . . 74
SECTION 1210.Cancellation of Converted Securities. . . 74
SECTION 1211.Provisions in Case of Consolidations,
Merger or Sale of Assets; Special
Distributions . . . . . . . . . . . . . . 75
SECTION 1212.Trustee Adjustment Disclaimer . . . . . . 76
SECTION 1213.When No Adjustment Required . . . . . . . 76
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ARTICLE XIII - SUBORDINATION OF SECURITIES . . . . . . . . 76
SECTION 1301.Securities Subordinate to Senior
Indebtedness. . . . . . . . . . . . . . . 76
SECTION 1302.Payment Over of Proceeds Upon
Dissolution, Etc. . . . . . . . . . . . . 77
SECTION 1303.No Payment When Designated Senior
Indebtedness in Default . . . . . . . . . 77
SECTION 1304.Payment Permitted if No Default . . . . . 78
SECTION 1305.Subrogation to Rights of Holders of
Senior Indebtedness . . . . . . . . . . . 79
SECTION 1306.Provisions Solely to Define Relative
Rights. . . . . . . . . . . . . . . . . . 79
SECTION 1307.Trustee to Effectuate Subordination . . . 80
SECTION 1308.No Waiver of Subordination Provisions . . 80
SECTION 1309.Notice to Trustee . . . . . . . . . . . . 81
SECTION 1310.Reliance on Judicial Order or
Certificate of Liquidating Agent. . . . . 81
SECTION 1311.Trustee Not Fiduciary for Holders
of Senior Indebtedness. . . . . . . . . . 82
SECTION 1312.Rights of Trustee as Holder of
Senior Indebtedness; Preservation
of Trustee's Rights . . . . . . . . . . . 82
SECTION 1313.Article Applicable to Paying Agents . . . 82
ARTICLE XIV - RIGHT TO REQUIRE REPURCHASE. . . . . . . . . 82
SECTION 1401.Repurchase of Securities at Option of
the Holder upon Change of Control . . . . 82
SECTION 1402.Effect of Change of Control Purchase
Notice. . . . . . . . . . . . . . . . . . 86
SECTION 1403.Deposit of Change of Control Purchase
Price . . . . . . . . . . . . . . . . . . 87
SECTION 1404.Securities Purchased in Part. . . . . . . 87
SECTION 1405.Covenant to Comply with Securities
Laws Upon Purchase of Securities. . . . . 88
ARTICLE XV - DEFEASANCE AND COVENANT DEFEASANCE. . . . . . 88
SECTION 1501.Company's Option to Effect Defeasance or
Covenant Defeasance . . . . . . . . . . . 88
SECTION 1502.Defeasance and Discharge. . . . . . . . . 88
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SECTION 1503.Covenant Defeasance . . . . . . . . . . . 89
SECTION 1504.Conditions to Defeasance or Covenant
Defeasance. . . . . . . . . . . . . . . . 89
SECTION 1505.Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions. . . . . . 92
SECTION 1506.Reinstatement . . . . . . . . . . . . . . 92
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CROSS-REFERENCE TABLE
Trust Indenture
Act Section Indenture Section
----------- -----------------
310 (a) (1) . . . . . . . . . . . . . . . . . . 609
(a) (2) . . . . . . . . . . . . . . . . . . 609
(a) (3) . . . . . . . . . . . . . . . . . . N.A.
(a) (4) . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . 608, 610
311 (a) . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . 613
312 (a) . . . . . . . . . . . . . . . . . . . 701, 702
(b) . . . . . . . . . . . . . . . . . . . 702
(c) . . . . . . . . . . . . . . . . . . . 702
313 (a) . . . . . . . . . . . . . . . . . . . 703
(b) . . . . . . . . . . . . . . . . . . . 703
(c) . . . . . . . . . . . . . . . . . . . 703
(d) . . . . . . . . . . . . . . . . . . . 703
314 (a) . . . . . . . . . . . . . . . . . . . 704
(a) (4) . . . . . . . . . . . . . . . . . . 1004
(b) . . . . . . . . . . . . . . . . . . . N.A.
(c) (1) . . . . . . . . . . . . . . . . . . 102
(c) (2) . . . . . . . . . . . . . . . . . . 102
(c) (3) . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . 102
315 (a) . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . 514
316 (a) . . . . . . . . . . . . . . . . . . . 101
(a) (1) (A) . . . . . . . . . . . . . . . . 512
(a) (1) (B) . . . . . . . . . . . . . . . . 513
(a) (2) . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . 104
317 (a) (1) . . . . . . . . . . . . . . . . . . 503
(a) (2) . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . 1003
318 (a) . . . . . . . . . . . . . . . . . . . 107
N.A. means not applicable.
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture.
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INDENTURE, dated as of May 1, 1994, between Snyder Oil
Corporation, a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company"), having its
principal offices at 777 Main Street, Fort Worth, Texas 76102, and
Texas Commerce Bank National Association, a national banking
association duly organized and existing under the laws of the United
States of America, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY:
The Company has duly authorized the creation of an issue of its
7% Convertible Subordinated Notes Due 2001 (hereinafter referred to
as the "Securities"), and to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder, the valid
obligations of the Company, and to make this Indenture a valid and
binding agreement of the Company have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders of the
Securities, as follows:
ARTICLE I.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101 Definitions. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well
as the singular;
(b) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein,
have the meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally
accepted accounting principles;
(d) 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 of
this Indenture; and
(e) the words "Article" and "Section" refer to an Article
and Section, respectively, of this Indenture.
"Act" has the meaning specified in Section 104.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For the
purposes of this definition, the term "control," when used with
respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise (and the terms "controlling" and "controlled" have meanings
correlative to the foregoing).
"Agent" means NationsBank of Texas, N.A., when acting in
its capacity as agent under the Bank Credit Facility and any other
Person acting as agent, trustee or other fiduciary under the Bank
Credit Facility, when acting in such capacity.
"Authenticating Agent" means any Person appointed pursuant
to Section 614 to authenticate Securities on behalf of the Trustee.
"Bank Credit Facility" means the Fourth Restated Credit
Agreement dated July 1, 1993 among the Company, the lenders named
therein and the Agent, as heretofore amended and as the same may be
further amended, restated, supplemented or otherwise modified from
time to time, and any Refinancings thereof that may be effected,
whether or not with the same lenders or the same Agent and whether or
not the principal amount outstanding thereunder shall be thereby
increased.
"Bankruptcy Law" has the meaning specified in Section 501.
"Beneficial Owner" means, with respect to any shares of
Capital Stock, every Person who, for purposes of Rule 13d-3 under the
Exchange Act as in effect on the date of this Indenture, is the
beneficial owner of such shares of Capital Stock (and the terms
"Beneficially Owned" and "Beneficially Owns" have meanings
correlative to the foregoing).
"Board of Directors" means the board of directors of the
Company or any duly authorized committee of that board.
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"Board Resolution" means a copy of a resolution certified
by the Secretary or an Assistant Secretary of the Company to have
been duly adopted by the Board of Directors and to be in full force
and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means, when used with respect to any Place
of Payment or other location, each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions
in that Place of Payment or other location, as the case may be, are
authorized or obligated by law or executive order to close.
"Capital Lease Obligation" means an obligation of the
Company or any Subsidiary to pay rent or other amounts under a lease
of (or another arrangement conveying the right to use) real or
personal property thereof that is required to be classified and
accounted for as a capital lease or a liability on the face of a
balance sheet thereof in accordance with generally accepted
accounting principles. For purposes of this Indenture, the amount of
such obligation shall be the capitalized amount thereof and the
stated maturity thereof shall be the date of the last payment of rent
or any other amount due under such lease (or other arrangement) prior
to the first date upon which such lease (or other arrangement) may be
terminated by the lessee (or obligor) without payment of a penalty.
"Capital Securities" of any Person means all Capital Stock
of such Person, all options, warrants and other rights to subscribe
for or acquire Capital Stock of such Person and all Convertible
Securities of such Person.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated)
of corporate stock or other equity of such Person.
"Change of Control" has the meaning specified in Section
1401(a).
"Change of Control Notice" has the meaning specified in
Section 1401(b).
"Change of Control Purchase Date" has the meaning specified
in Section 1401(a).
"Change of Control Purchase Notice" has the meaning
specified in Section 1401(c).
"Change of Control Purchase Price" has the meaning
specified in Section 1401(a).
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"Closing Price" per share of Common Stock on any Trading
Day means, if the Common Stock is admitted to trading on the New York
Stock Exchange, the last reported sales price regular way or, in case
no such reported sale takes place on such Trading Day, the average of
the reported closing bid and asked prices regular way, in either case
on such Exchange or, if the Common Stock is not admitted to trading
on the New York Stock Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities
exchange, on the Nasdaq National Market or, if the Common Stock is
not listed or admitted to trading on any national securities exchange
or quoted on the Nasdaq National Market, the average of the closing
bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm that is selected from time to
time by the Company for that purpose and is reasonably acceptable to
the Trustee.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted and created under the Exchange Act,
or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to
it under the Trust Indenture Act, the body performing such duties at
such time.
"Common Stock" of any Person means each class of the
Capital Stock of such Person that is not Preferred Stock of such
Person. However, subject to the provisions of Section 1211, shares
issuable on conversion of Securities shall include only shares of the
class designated as Common Stock of the Company at the date of this
Indenture or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no
preference in respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation, dissolution or winding-
up of the Company and which are not subject to redemption by the
Company; provided, however, that if at any time there shall be more
than one such resulting class, the shares then so issuable of each
such class shall be substantially in the proportion which the total
number of shares then so issuable of such class resulting from all
such reclassifications bears to the total number of shares of all
such classes resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the
first paragraph of this Indenture until a successor Person shall have
become such pursuant to the applicable provisions of this Indenture,
and thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written
request or order signed in the name of the Company by its Chairman of
the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
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"Convertible Securities" of any Person means any and all
securities not constituting Capital Stock of such Person that are
convertible into or exchangeable for Capital Stock of such Person.
"Corporate Trust Office" means the principal office of the
Trustee in the City of Dallas, Texas, at which at any particular time
its corporate trust business shall be administered, which, as of the
date of this Indenture, is located at 1201 Elm Street, 30th Floor,
Dallas, Texas, Attention: Corporate Trust Department.
"corporation" means a corporation, association, company,
joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in Section
1503.
"Defaulted Interest" has the meaning specified in Section
307.
"Defeasance" has the meaning specified in Section 1502.
"Definitive Security" means a Security other than a
temporary Security.
"Designated Senior Indebtedness" means (i) all Senior
Indebtedness under the Bank Credit Facility if the sum of the
aggregate principal amount outstanding under the Bank Credit Facility
and the aggregate amount available for borrowing thereunder is equal
to or greater than $25,000,000 and (ii) all other Senior Indebtedness
having an outstanding principal amount equal to or greater than
$25,000,000; provided, however, that the agreements, indentures or
other instruments evidencing any Senior Indebtedness referred to in
clause (ii) above specifically state that such Senior Indebtedness
shall be classified as "Designated Senior Indebtedness" for purposes
of this Indenture.
"Event of Default" has the meaning specified in Section
501.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and any statutory successor thereto.
"Exchange Debentures" means the Company's 8% Convertible
Subordinated Debentures due 2006 and its 6% Convertible Subordinated
Debentures due 2008 issuable in exchange for the Preferred Stock of
the Company that is outstanding on the date of this Indenture.
"Guaranty" by any Person means any Obligation, contingent
or otherwise, of such Person guaranteeing any Indebtedness of any
other Person (the "primary obligor") in any manner, whether directly
or indirectly, and including, but not limited to, every Obligation of
such Person (i) to purchase or pay (or advance or supply funds for
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the purchase or payment of) such Indebtedness or to purchase (or
advance or supply funds for the purchase of) any security for the
payment of such Indebtedness, (ii) to purchase property, securities
or services for the purpose of assuring the holder of such
Indebtedness of the payment of such Indebtedness or (iii) to maintain
working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness (and the terms "Guaranteed,"
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that the Guaranty by any Person shall
not include endorsements by such Person for collection or deposit, in
either case in the ordinary course of business.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indebtedness" of any Person means, without duplication,
(i) every obligation of such Person for money borrowed; (ii) every
obligation of such Person evidenced by bonds, debentures, notes or
similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses; (iii) every
obligation of such Person under conditional sale or other title
retention agreements relating to assets or property purchased by such
Person or issued or assumed as the deferred purchase price of
property, assets or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business that
are not overdue by more than 90 days or are being contested by such
Person in good faith); (iv) every Capital Lease Obligation of such
Person; (v) every obligation of such Person with respect to any Sale
and Leaseback Transaction to which such Person is a party; (vi) every
obligation of such Person with respect to letters of credit, bankers
acceptances or similar facilities issued for the account of such
Person; (vii) the maximum fixed redemption or repurchase price of
outstanding Redeemable Stock of such Person; (viii) every obligation
of such Person with respect to performance, surety or similar bonds;
(ix) every obligation of such Person under interest rate swap, cap,
hedge, exchange or similar agreements, under foreign currency swap,
hedge, exchange or similar agreements or under commodity swap, hedge,
exchange or similar agreements; (x) every obligation of the type
referred to in clauses (i) through (ix) and clause (xi) of another
Person the payment of which such Person has Guaranteed or is
otherwise responsible for or liable for, directly or indirectly, as
obligor, Guarantor or otherwise; and (xi) every amendment,
modification, renewal and extension of an obligation of the type
referred to in clauses (i) through (x).
"Indenture" means this instrument as originally executed
and as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof, including, for all purposes of this
instrument and any such supplemental indenture, the provisions of the
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Trust Indenture Act that are deemed to be a part of and govern this
instrument and any such supplemental indenture, respectively.
"Interest Payment Date" means the stated due date of an
installment of interest on the Securities.
"Junior Subordinated Payment" means any payment or
distribution which may be payable or deliverable in respect of the
Securities by reason of the payment of any Indebtedness of the
Company that is subordinate in right of payment to the payment of the
Securities.
"Maturity Date" means, when used with respect to any
Security, the date on which the principal of such Security becomes
due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption on a
Redemption Date or otherwise.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" of any Person means the net income of such
Person net of non-cash charges taken as a result of accounting
changes required to be made by the Financial Accounting Standards
Board after the date this Indenture.
"Non-Payment Event of Default" means any event,
circumstance, condition or state of facts (other than a Payment Event
of Default) the occurrence or existence of which permits one or more
holders of Designated Senior Indebtedness (or a trustee or other
representative of the holders thereof) to declare such Designated
Senior Indebtedness immediately due and payable prior to the date on
which such indebtedness would otherwise become due and payable.
"Obligation" of any Person means any obligation of such
Person to pay principal of or premium, if any, or interest (including
interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, whether or
not a claim for such post-petition interest is allowed in such
proceeding) on any Indebtedness or any penalties, reimbursement or
indemnification amounts, fees, expenses or other amounts in respect
thereof.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee.
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"Opinion of Counsel" means a written opinion of legal
counsel, who may be an employee of or counsel for the Company, and
which shall be in form and substance reasonably acceptable to the
Trustee.
"Outstanding" means, when used with respect to Securities,
as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities as to which money for the payment or
redemption of which in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for
the Holders of such Securities; provided, however, that, if such
Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
(iii) Securities which have been replaced or paid
pursuant to Section 306 or in exchange for or in lieu of which
other Securities have been authenticated and delivered pursuant
to this Indenture, other than any such Securities in respect of
which there shall have been presented to the Trustee evidence
satisfactory to it that such Securities are held by a bona fide
purchaser in whose hands such Securities are valid obligations
of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given
any request, demand, authorization, direction, notice, consent or
waiver hereunder, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of any
such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities
and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of any such other
obligor.
"Paying Agent" means any Person authorized by the Company
to pay the principal of and premium, if any, and interest on any
Securities on behalf of the Company.
"Payment Blockage Period" has the meaning specified in
Section 1303.
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"Payment Event of Default" means any default in the payment
of principal of or premium, if any, or interest on or fees with
respect to any Designated Senior Indebtedness beyond any applicable
grace period with respect thereto.
"Permitted Junior Securities" means subordinated debt
securities of the Company (or any successor obligor with respect to
the Senior Indebtedness) provided for by a plan of reorganization or
readjustment that are subordinated in right of payment to all Senior
Indebtedness that may be outstanding to substantially the same extent
as, or to a greater extent than, the Securities are subordinated as
provided in this Indenture.
"Person" means any individual, corporation, partnership,
joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Place of Payment" means, when used with respect to the
Securities, the place or places where (subject to the provisions of
Section 1002) the principal of and premium, if any, and interest on
the Securities are payable as specified and as contemplated by
Section 301.
"Predecessor Security" of any particular Security means
every previous Security evidencing all or a portion of the same debt
as that evidenced by such particular Security. For purposes of this
definition, any Security authenticated and delivered under Section
306 in exchange for or in lieu of a mutilated, destroyed, lost or
stolen Security shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Security.
"Preferred Stock" of any Person means every share of each
class (however designated) of the Capital Stock of such Person that
ranks prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation, dissolution
or winding up, to any other share of such or any other class of the
Capital Stock of such Person.
"Proceeding" means (subject to the last paragraph of
Section 1302) (i) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case
or proceeding in connection therewith, relative to the Company or to
its creditors, as such, or to its assets, (ii) any liquidation,
dissolution or other winding up of the Company, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or
(iii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
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"Rating Agencies" means (a) S&P, (b) Moody's or (c) if S&P
or Moody's, or both, shall not make a rating of the Securities
publicly available, such nationally recognized securities rating
agency or agencies, as the case may be, as are selected by the
Company, which shall be substituted for S&P or Moody's, or both, as
the case may be.
"Rating Category" means (a) with respect to S&P, any of the
following categories: BB, B, CCC, CC, C and D (or equivalent
successor categories); (b) with respect to Moody's, any of the
following categories: Ba, B, Caa, Ca, C and D (or equivalent
successor categories); and (c) with respect to any other Rating
Agency, the equivalent of any such category of S&P or Moody's used by
such Rating Agency. In determining whether the rating of the
Securities has decreased by one or more gradations, gradations within
Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the
equivalent gradations for any other Rating Agency) shall be taken
into account (e.g., with respect to S&P, a decline in a rating from
BB+ to BB, as well as from BB- to B+, will constitute a decrease of
one gradation).
"Rating Decline" means that, principally as a result of a
Change of Control and on, or within 90 days after, the date of the
public announcement of such Change of Control (which period shall be
extended so long as the rating of the Securities is under publicly
announced consideration for possible downgrade by any Rating Agency),
any Rating Agency has lowered the rating of the Securities below what
such rating was as of the date the Securities were originally issued
by one or more gradation (including gradations within or between
Rating Categories).
"Redeemable Stock" of a Person means every Capital Security
of such Person that by its terms or otherwise is or may be (whether
at the option of the holder or otherwise) required to be redeemed or
otherwise purchased by such Person at any time prior to the Stated
Maturity of the Securities.
"Redemption Date" means, when used with respect to any
Security to be redeemed, the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price" means, when used with respect to any
Security to be redeemed, the price at which such security may be
redeemed pursuant to this Indenture, including, if applicable, any
accrued interest on such Security due upon such redemption pursuant
to the terms of this Indenture.
"Refinance" means, with respect to any specified
Indebtedness, to incur additional Indebtedness and use the proceeds
thereof to redeem, repurchase, retire for value, refinance or refund
such specified Indebtedness (and the terms "Refinancing" and
"Refinanced" shall have meanings correlative to the foregoing).
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"Regular Record Date" for the interest payable on the
Securities on any Interest Payment Date means the May 1 or November
1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date.
"Related Person" of any Person (the "Referent Person")
means, at any time, (a) if the Referent Person is the Company or any
Subsidiary, every Person (other than the Company and any Wholly Owned
Subsidiary) that at such time (i) is, or is controlled by, an
Affiliate of the Company or (ii) is, or is controlled by, a Person
that Beneficially Owns 5% or more of the outstanding Common Stock of
the Company or any Subsidiary or 5% or more of the outstanding Voting
Stock of the Company or any Subsidiary; and (b) in all other cases,
every Person that at such time (i) is, or is controlled by, an
Affiliate of the Referent Person or (ii) is, or is controlled by, a
Person that Beneficially Owns 5% or more of the outstanding Common
Stock of the Referent Person or any subsidiary thereof or 5% or more
of the outstanding Voting Stock of the Referent Person or any
subsidiary thereof. For purposes of this definition, the term
"controlled" shall have the meaning specified in the definition of
"Affiliate."
"Repurchase Event" has the meaning specified in Section
1401(a).
"S & P" means Standard & Poors Ratings Group, a division
of McGraw-Hill.
"Sale and Leaseback Transaction" means any arrangement with
any bank, insurance company or other lender or investor (other than
the Company or a Subsidiary), or to which such lender or investor is
a party, providing for the leasing by the Company or any Subsidiary
of any property or asset that has been or is to be sold or
transferred by the Company or any Subsidiary to such lender or
investor or to any Person (other than the Company or a Subsidiary) to
whom funds have been or are to be advanced by such lender or investor
on the security of such property or asset.
"Securities" has the meaning specified in the first recital
of this Indenture and, more particularly, means any Securities
authenticated and delivered under this Indenture.
"Securities Payment" means any payment or distribution of
any kind or character, whether by way of set-off or otherwise and
whether in cash, property or securities (including any Junior
Subordinated Payment) on account of principal of or premium, if any,
or interest on the Securities or on account of any purchase,
repurchase, redemption or other acquisition of Securities by the
Company.
"Security Register" has the meaning specified in Section
305.
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"Security Registrar" has the meaning specified in Section
305.
"Senior Indebtedness" means (i) all Obligations of the
Company under the Bank Credit Facility; and (ii) all other
Indebtedness of the Company (other than Indebtedness described in
clause (vii) of the definition of Indebtedness), whether now existing
or hereafter incurred or assumed; provided, however, that the
Obligations referred to in clause (ii) shall not include (a) any
Obligation owed to a Subsidiary or an Affiliate or Related Person of
the Company, (b) any Obligation that by the terms of the instrument
creating or evidencing the same is not superior in right of payment
to the Securities, (c) any Obligation in respect of the Exchange
Debentures, if and when issued in exchange for the Preferred Stock of
the Company outstanding on the date of this Indenture, or (d) any
Obligation constituting a trade account payable.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section
307(a).
"Stated Maturity" means, when used with respect to any
Security, the date specified in such Security as the fixed date on
which the principal of such Security is due and payable.
"subsidiary" of any Person means a corporation more than
50% of the outstanding Voting Stock of which is owned, directly or
indirectly, by such Person, one or more subsidiaries of such Person
or such Person and one or more subsidiaries of such Person.
"Subsidiary" of the Company means a corporation more than
50% of the outstanding Voting Stock of which is owned, directly or
indirectly, by the Company, one or more Subsidiaries or the Company
and one or more Subsidiaries.
"Trading Day" means each day on which the securities
exchange or automated interdealer quotation system, which is used to
determine the Closing Price is open for trading or quotation.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this Indenture until a successor Trustee shall
have assumed all of the duties and obligations of this Indenture
pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939
as in force at the date as of which this Indenture was executed,
except as provided in Section 905; provided, however, that in the
event the Trust Indenture Act of 1939 is amended after such date, to
the extent required by any such amendment, the term "Trust Indenture
Act" means the Trust Indenture Act of 1939, as so amended.
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"U.S. Government Obligations" has the meaning specified in
Section 1504.
"Vice President" means, when used with respect to the
Company or the Trustee, any vice president, whether designated by a
number or a word or words added before or after the title "vice
president."
"Voting Stock" of any Person means every share of any class
(however designated) of the Capital Stock of such Person that
ordinarily has voting power for the election of directors (or similar
governing body) of such Person, whether at all times or only as long
as no share of any senior class of Capital Stock has such voting
power, whether by reason of the occurrence of any contingency or
otherwise.
"Wholly Owned Subsidiary" of the Company means a Subsidiary
all of the outstanding Capital Stock of which (other than directors'
qualifying shares) is owned, directly or indirectly, by the Company,
one or more Wholly Owned Subsidiaries or the Company and one or more
Wholly Owned Subsidiaries.
SECTION 102. Compliance Certificates and Opinions. Upon
any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be
required under the Trust Indenture Act. Each such certificate or
opinion shall be in the form of an Officers' Certificate, if to be
given by an officer of the Company, or an Opinion of Counsel, if to
be given by counsel, and shall comply with the requirements of the
Trust Indenture Act and any other requirements set forth in this
Indenture.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture (except
for certificates provided for in Section 1004) shall include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and
the definitions herein relating thereto;
(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 each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
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(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee. In
any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary
that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only
one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as
to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon an opinion of
counsel, unless such officer knows, or in the exercise of reasonable
care should know, that the opinion with respect to the matters upon
which his certificate or opinion is based are erroneous. Any opinion
of counsel may be based, insofar as it relates to factual matters,
upon a certificate of, or representations by, an officer or officers
of the Company, stating that the information with respect to such
factual matters is in the possession of the Company, unless such
counsel knows, or in the exercise of reasonable care should know,
that the certificate or representations with respect to such matters
are erroneous.
SECTION 104. Acts of Holders; Record Date.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed
by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly
required, to the Company. Any such instrument or instruments
(and the action embodied therein and evidenced thereby) are
hereinafter sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and
(subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved by the affidavit
of a witness of such execution or by a certificate of a notary
public or other officer authorized by law to take
acknowledgements of deeds, certifying that the individual
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signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting
in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which
the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall
bind every future Holder of the same Security and the Holder of
every Security issued upon the registration of transfer thereof
or in exchange therefor in respect of anything done, omitted or
suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon
such Security. Without limiting the foregoing, a Holder
entitled hereunder to give or take any action hereunder with
regard to any particular Security (or his duly appointed agents)
may do so with regard to all or any part of the principal amount
of such Security.
(e) The Company may, in the circumstances permitted by the
Trust Indenture Act, set any day as the record date for the
purpose of determining the Holders of Outstanding Securities
entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other Act provided or
permitted by this Indenture to be given or taken by Holders of
Securities. With regard to any record date set pursuant to this
paragraph, the Holders of Outstanding Securities on such record
date (or their duly appointed agents), and only such Persons,
shall be entitled to give or take the relevant action, whether
or not such Persons remain Holders after such record date.
SECTION 105. Notices, Etc., to Trustee and Company. Any
request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Trustee at its Corporate
Trust Office, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
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expressly provided) if in writing and mailed, first class
postage prepaid, to the Company, addressed to it at the address
of its principal office specified in the first paragraph of this
Indenture or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver. Where this
Indenture provides for notice to Holders of any event, such notice
shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in
the Security Register, not later than the latest date (if any) and
not earlier than the earliest date (if any), prescribed for the
giving of such notice. In any case where notice to Holders is given
by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders.
Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance
upon such waiver.
In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification as shall be made with the
approval of the Trustee shall constitute a sufficient notification
for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act that is required under such Act to be a part
of and govern this Indenture, the latter provision shall control. If
any provision of this Indenture modifies or excludes any provision of
the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so
modified or excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience of reference only and shall not affect the
construction hereof.
SECTION 109. Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its respective
successors and assigns.
SECTION 110. Severability. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
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remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 111. Benefits of Indenture. Nothing in this
Indenture or in the Securities, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder,
the holders of Senior Indebtedness of the Company and the Holders of
Securities, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 112. Governing Law. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS THAT WOULD REQUIRE THE APPLICATION OF THE LAWS
OF ANY OTHER JURISDICTION, AND THE APPLICABLE FEDERAL LAWS OF THE
UNITED STATES OF AMERICA. THE COMPANY HEREBY CONSENTS TO AND
ACCEPTS, GENERALLY AND UNCONDITIONALLY, FOR ITSELF AND FOR ITS
PROPERTIES, THE NON-EXCLUSIVE JURISDICTION OF THE STATE OR FEDERAL
COURTS OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK IN ANY
DISPUTE ARISING UNDER OR IN CONNECTION WITH THIS INDENTURE, THE
SECURITIES OR ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO OR
THERETO AND HEREBY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION, SUIT OR PROCEEDING IN ANY SUCH
COURT, INCLUDING, BUT NOT LIMITED TO, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS. THE COMPANY
FURTHER IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED
BY ANY SUCH COURT IN CONNECTION WITH THIS INDENTURE, THE SECURITIES
OR ANY OTHER DOCUMENTS OR INSTRUMENTS RELATED HERETO OR THERETO FROM
WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. THE COMPANY
DESIGNATES AND APPOINTS CT CORPORATION SYSTEM (OR ANY SUCCESSOR
THERETO OR REPLACEMENT THEREFOR REASONABLY SATISFACTORY TO THE
TRUSTEE THAT IS DESIGNATED BY THE COMPANY FROM TIME TO TIME BY MEANS
OF AN OFFICERS' CERTIFICATE DELIVERED TO THE TRUSTEE SETTING FORTH
THE NAME AND ADDRESS OF SUCH SUCCESSOR OR REPLACEMENT) AS ITS AGENT
TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY ACTION, SUIT
OR PROCEEDING BROUGHT IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE VALID AND EFFECTIVE IN EVERY
RESPECT. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
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PROCESS OF ANY SUCH COURT BY THE MAILING OF COPIES THEREOF BY FIRST-
CLASS MAIL, POSTAGE PREPAID, TO THE COMPANY AT THE LOCATION SPECIFIED
AS ITS ADDRESS FOR NOTICE IN OR PURSUANT TO THIS INDENTURE. NOTHING
CONTAINED HEREIN SHALL AFFECT THE RIGHT OF ANY PERSON TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 113. Legal Holidays. In any case where any
Interest Payment Date, Redemption Date, Maturity Date or Stated
Maturity of any Security or the last date on which a Holder has the
right to convert his Securities shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the
Securities) payment of interest on or principal of or premium, if
any, on or conversion of the Securities need not he 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 Interest Payment Date,
Maturity Date, Redemption Date or Stated Maturity or on such last day
for conversion; provided, however, that no interest shall accrue for
the period from and after such Interest Payment Date, Redemption
Date, Maturity Date or Stated Maturity, as the case may be, if such
payment is made or duly provided for on the next succeeding Business
Day.
SECTION 114. Incorporators, Stockholders, Officers and
Directors of the Company Exempt from Individual Liability. No
recourse under or upon any obligation, covenant or agreement of this
Indenture or any indenture supplemental hereto or of any Security, or
for any claim based thereon or otherwise in respect thereof, shall be
had against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any successor
Person, either directly or through the Company or any successor
Person, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise,
it being expressly understood that this Indenture and the obligations
issued hereunder are solely corporate obligations, and that no such
personal liability whatever shall attach to, or is or shall be
incurred by, the incorporators, stockholders, officers or directors,
as such, of the Company or of any successor Person, or any of them,
because of the creation of the indebtedness hereby authorized, or
under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Securities or implied
therefrom; and that any and all such personal liability of every name
and nature, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every
such incorporator, stockholder, officer or director, as such, because
of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this
Indenture or in any of the Securities or implied therefrom, is hereby
expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of
such Securities.
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ARTICLE II
FORMS OF SECURITIES
SECTION 201. Forms Generally. The Securities and the
Trustee's certificate of authentication shall be in substantially the
forms set forth in this Article, with such appropriate insertions,
omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution
thereof.
The Definitive Securities shall be printed, lithographed
or engraved or produced by any combination of these methods on steel
engraved borders or may be produced in any other manner permitted by
the rules of any securities exchange on which the Securities may be
listed, all as determined by the officers executing such Securities,
as evidenced by their execution thereof.
SECTION 202. Form of Face of Security.
SNYDER OIL CORPORATION
7% Convertible Subordinated Note Due 2001
Number __________________ $___________________________
CUSIP_______________________
SNYDER OIL CORPORATION, a Delaware corporation (herein
called the "Company," which term includes any successor Person under
the Indenture hereinafter referred to), for value received, hereby
promises to pay to _______________________________________________
__________________________________________________________________
______________________, or registered assigns, the principal sum of
____________Dollars on May 15, 2001, and to pay interest thereon from
May 18, 1994 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on May 15
and November 15 of each year, commencing November 15, 1994, until the
principal hereof is paid or duly provided for, at the rate per annum
of 7% from the date of issuance of this Security until maturity or
earlier redemption. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be
the May 1 or November 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such interest
not so punctually paid or duly provided for will forthwith cease to
be payable to the Holder on such Regular Record Date and may either
be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be
fixed by the Trustee, notice whereof shall be given to Holders of
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<PAGE>
Securities not less than 10 days prior to such Special Record Date,
or be paid at any time and in any other lawful manner not
inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of and premium, if any, and
interest on, and the Change of Control Purchase Price, if any, and
Redemption Price with respect to, this Security will be made at the
office or agency of the Company maintained in the Borough of
Manhattan, the City of New York and at any other office or agency
maintained by the Company for such purpose, in such coin or currency
of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however,
that at the option of the Company, payment of interest may be made by
check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
The Indenture provides that no Holder of any Security shall
have the right to enforce any remedy under the Indenture except in
the case of the refusal or neglect of the Trustee to act after
receipt of notice of default and the request by the Holders of 25% in
aggregate principal amount of the Securities then outstanding and the
offer to the Trustee of such reasonable security or indemnity as it
may require; provided, however, that the foregoing limitations do not
prevent the Holder of any such Security from enforcing the right to
receive payment of principal of and premium, if any, and interest on
such Security on or after the respective due dates therefor or to
demand conversion of its Securities or require the purchase of its
Securities by the Company upon the occurrence of a Change in Control
in accordance with the Indenture.
Reference is hereby made to the further provisions of this
Security set forth herein, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to below by manual signature, this
Security shall not be entitled to any benefit under the Indenture and
shall not be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed.
Dated:
SNYDER OIL CORPORATION
By:___________________
Attest:
___________________________
Secretary
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of
Securities of the Company designated as its 7% Convertible
Subordinated Notes Due 2001 (hereinafter referred to as the
"Securities"), limited in aggregate principal amount to $75,000,000
(plus up to $11,250,000 to cover over-allotments) issued and to be
issued under an Indenture,
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<PAGE>
dated as of May 1, 1994 (herein called the "Indenture"), between the
Company and Texas Commerce Bank National Association, as Trustee
(hereinafter referred to as the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee, the holders of
Senior Indebtedness and the Holders of the Securities and of the
terms upon which the Securities are, and are to be, authenticated and
delivered.
Subject to and upon compliance with the provisions of the
Indenture, the Holder of this Security is entitled, at his option, at
any time on or before the close of business on May 15, 2001, or in
case this Security or a portion hereof is called for redemption, then
in respect of this Security or such portion hereof until and
including, but (unless the Company defaults in making the payment due
upon redemption) not after, the close of business on the fifth
Business Day preceding the Redemption Date (except that, with respect
to any redemption occurring on May 15, 1997 or within five business
days thereafter, the conversion right shall terminate at the close of
business on the Redemption Date such that all of the holders of
Securities to be redeemed will be entitled to receive the May 15,
1997 interest payment, assuming such holders held such Securities on
the Regular Record Date next preceding May 15, 1997), to convert this
Security (or any portion of the principal amount hereof equal to
$1,000 or an integral multiple thereof) into fully paid and
nonassessable shares (calculated as to each conversion to the nearest
1/100 of a share) of Common Stock of the Company at a conversion
price equal to $23.1575 aggregate principal amount of Securities for
each share of Common Stock (or at the current adjusted conversion
price, if an adjustment has been made as provided in the Indenture)
by surrender of this Security, duly endorsed or assigned to the
Company or in blank, to the Company at the office or agency
maintained by the Company in the Borough of Manhattan, the City of
New York or at any other office or agency maintained by the Company
for such purpose, accompanied by written notice to the Company
stating that the Holder hereof elects to convert this Security, or if
less than the entire principal amount hereof is to be converted, the
portion hereof to be converted, and, in case such surrender shall be
made during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the opening
of business on such Interest Payment Date (unless this Security or
the portion thereof being converted has a Maturity Date prior to such
Interest Payment Date), also accompanied by payment in New York
Clearing House or other funds acceptable to the Company of an amount
equal to the interest payable on such Interest Payment Date, on the
principal amount of this Security then being converted. Subject to
the aforesaid requirement for payment by the Holder and, in the case
of a conversion after the Regular Record Date next preceding any
Interest Payment Date and on or before such Interest Payment Date, to
the right of the Holder of this Security (or any Predecessor
Security) of record at such Regular Record Date to receive an
installment of interest (with certain exceptions provided in the
Indenture), no payment or adjustment is to be made on conversion for
interest accrued hereon or for dividends on the Common Stock issued
on conversion. The Company's delivery to the Holder of the fixed
number of shares of Common Stock of the Company (and any cash in lieu
of a fractional share of such Common Stock) into which the Security
is convertible shall be deemed to satisfy the Company's obligation to
pay the principal amount of the Security and all accrued interest
that has not previously been paid. The Common Stock of the Company so
delivered shall be treated as issued first in payment of accrued
interest and then in payment of principal. Thus, accrued interest
shall be treated as paid rather than cancelled, extinguished or
forfeited. No fractions of shares or scrip representing fractions of
shares will be issued on conversion, but instead of any fractional
interest the Company shall pay a cash adjustment as provided in the
Indenture. The conversion price is subject to adjustment as provided
in the Indenture. In addition, the Indenture provides that in case
of certain consolidations or mergers to which the Company is a party
or the transfer or lease of its properties and assets substantially
as an entirety, the Indenture shall be amended, without the consent
of any Holders of Securities, so that this Security, if then
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<PAGE>
outstanding, will be convertible thereafter, during the period this
Security shall be convertible as specified above, only into the kind
and amount of securities, cash and other property receivable upon the
consolidation, merger, transfer or lease by a holder of the number of
shares of Common Stock into which this Security might have been
converted immediately prior to such consolidation, merger or transfer
(assuming such holder of Common Stock failed to exercise any rights
of election and received per share the kind and amount of
consideration received per share by a plurality of nonelecting
shares).
The Securities are subject to redemption upon not less than
20 nor more than 60 days' notice by mail, at any time on or after May
15, 1997, as a whole or from time to time in part, at the election of
the Company, at the Redemption Prices (expressed as percentages of
the principal amount) set forth below, if redeemed during the 12-
month period beginning May 15 of the years indicated:
<TABLE>
<CAPTION>
Redemption
Year Price
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . 103.51%
1998 . . . . . . . . . . . . . . . . . . . 102.34%
1999 . . . . . . . . . . . . . . . . . . . . . 101.17%
2000 . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
together in the case of any such redemption with accrued interest to
the Redemption Date, but interest installments whose stated due date
is on or prior to such Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record
at the close of business on the relevant Regular Record Dates
referred to on the face hereof, all as provided in the Indenture.
The indebtedness evidenced by this Security is, to the
extent provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness, and
this Security is issued subject to the provisions of the Indenture
with respect thereto. Each Holder of this Security, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any
and all such purposes.
In the event there shall occur any Change of Control
constituting a Repurchase Event with respect to the Company, each
Holder of Securities shall have the right, at such Holder's option
but subject to the limitations, conditions and subordination
provisions set forth in the Indenture, to require the Company to
purchase on the Change of Control Purchase Date all or any part of
such Holder's Securities at a Change of Control Purchase Price equal
to 100% of the principal amount thereof, together with accrued
interest to the Change of Control Purchase Date, all as provided in
the Indenture.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may become due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights
and obligations of the Company and the rights of the Holders of the
Securities under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Securities at the time outstanding. The
Indenture also contains provisions permitting the Holders of
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<PAGE>
specified percentages in aggregate principal amount of the Securities
at the time outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
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 times, place and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this Security
for registration of transfer at the office or agency maintained by
the Company in the Borough of Manhattan, the City of New York or at
any other office or agency maintained by the Company for such
purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of
authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations
therein set forth, Securities are exchangeable for a like aggregate
principal amount of Securities of a different authorized
denomination, as requested by a Holder surrendering the same.
No service charge shall be made for any such registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Trustee and any agent of the Company or
the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not any
amount due in respect of this Security be overdue, and none of the
Company, the Trustee or any such agent shall be affected by notice to
the contrary.
No recourse for the payment of the principal of, premium,
if any, or interest on this Security, or for any claim based hereon
or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture or
any indenture supplemental thereto or in any Security, or because of
the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor Person,
either directly or through the Company, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the
issue hereof, expressly waived and released.
The Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York as
applied to contracts made and performed within the State of New York,
without regard to any principles of conflicts of laws that may
require the application of the laws of any other jurisdiction, and
the applicable Federal laws of the United States of America.
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<PAGE>
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
SECTION 204. Form of Trustee's Certificate of
Authentication.
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-
mentioned Indenture.
Dated:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Trustee
By_____________________________________
Authorized Signatory
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<PAGE>
SECTION 205. Form of Election to Convert.
CONVERSION NOTICE
The undersigned owner of this Security does hereby
irrevocably exercise its option to convert this Security, or the
portion hereof (which is $1,000 or an integral multiple thereof)
below designated, into shares of Common Stock of Snyder Oil
Corporation in accordance with the terms of the Indenture referred to
in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for
any fractional shares and any Securities representing any unconverted
principal amount hereof, be issued and delivered to the registered
Holder hereof unless a different name has been indicated below. If
shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. Any amount required to be paid by the undersigned
on account of interest accompanies this Security.
Portion of Security to be
converted ($1,000 or an
integral multiple thereof):
$_______________________
Date:___________________ Signature*: ____________________________
(Sign exactly as your name
appears on the Security in
every particular, without
alteration or enlargement
or any change whatsoever)
If shares of Common Stock are to be issued
and registered otherwise than to the
registered Holder named above, please
print or type name and address, including
zip code, and social security or other
taxpayer identification number.
_____________________________________
_____________________________________
_____________________________________
Signature Guarantee:
_______________________________
Member or member's organization
of the New York Stock
Exchange or commercial bank or
trust company having an office in
the United States
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<PAGE>
*Your signature must be guaranteed by a commercial bank or trust
company or by a member or members' organization of the New York Stock
Exchange.
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<PAGE>
SECTION 206. Form of Assignment.
ASSIGNMENT
The undersigned owner of this Security does hereby sell, assign and
transfer this Security unto:
_______________________________________
_______________________________________
(Insert assignee's Social Security or
other taxpayer identification number)
______________________________________
______________________________________
______________________________________
(Print or type assignee's
name, address and zip code)
and irrevocably appoints
______________________________________
______________________________________
as agent to transfer this Security on the books of the Company. The
agent may substitute another to act for him.
Date:______________ Signature*:________________________
(Sign exactly as your name
appears on the Security in
every particular, without
alteration or enlargement
or any change whatsoever)
Signature Guarantee:
__________________________
Member or members' organization of the
New York Stock Exchange or commercial
bank or trust company having an
office in the United States
*Your signature must be guaranteed by a commercial bank or trust
company or by a member or members' organization of the New York Stock
Exchange.
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<PAGE>
SECTION 207. Form of Option of Holder to Elect to Require
Purchase.
ELECTION TO REQUIRE PURCHASE
If you wish to elect to have this Security purchased by the
Company pursuant to Section 1402 of the Indenture, check the box: /
/
If you wish to elect to have only part of this Security
purchased by the Company pursuant to Section 1402 of the Indenture,
state the amount ($1,000 or an integral multiple thereof):
$________________________
Date:__________________ Signature*:__________________________
(Sign exactly as your name
appears on the Security in
every particular, without
alteration or enlargement
or any change whatsoever)
Signature Guarantee:
_______________________________
Member or members' organization of the
New York Stock Exchange or commercial
bank or trust company having an office
in the United States
*Your signature must be guaranteed by a commercial bank or trust
company or by a member or members' organization of the New York Stock
Exchange.
ARTICLE III
THE SECURITIES
SECTION 301. Title and Terms. The aggregate principal
amount of Securities which may be authenticated and delivered under
this Indenture is limited to $75,000,000 (and such additional
principal amount of Securities, if any, as shall be determined
pursuant to the next succeeding paragraph), except for Securities
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Sections
304, 305, 306, 906, 1108, 1202 or 1404.
Upon receipt by the Trustee of an Officers' Certificate
stating that the Underwriters (as defined below) have elected to
purchase from the Company a specified aggregate principal amount of
additional Securities (which are referred to in said Underwriting
Agreement as the "Optional Securities") not to exceed a total of
$11,250,000 for all such elections in accordance with this paragraph
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<PAGE>
pursuant to the Underwriting Agreement, dated May 10, 1994, between
the Company and CS First Boston Corporation, PaineWebber
Incorporated, Petrie Parkman & Co., Inc. and Smith Barney Shearson
Inc. (collectively, the "Underwriters"), the Trustee shall
authenticate and make available for delivery such specified aggregate
principal amount of such additional Securities to or upon a Company
Order, and such specified aggregate principal amount of such
additional Securities shall be considered part of the original
aggregate principal amount of the Securities.
The Securities shall be known and designated as the "7%
Convertible Subordinated Notes Due 2001" of the Company. Their
Stated Maturity shall be May 15, 2001, and they shall bear interest
at the rate per annum of 7% from the date of issuance thereof until
maturity or earlier redemption, payable semiannually on May 15 and
November 15 of each year, commencing November 15, 1994.
The principal of and premium, if any, and interest on the
Securities shall be payable at the office or agency maintained by the
Company in the Borough of Manhattan, the City of New York and at any
other office or agency maintained by the Company for such purpose;
provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security
Register.
The Securities shall be redeemable as provided in Article
XI.
The Securities shall be convertible as provided in Article
XII.
The Securities shall be subordinated in right of payment to
Senior Indebtedness, to the extent provided in Article XIII.
The Securities shall be subject to repurchase by the
Company, at the option of the Holders, to the extent provided in
Article XIV.
SECTION 302. Denominations. The Securities shall be
issuable only in registered form without coupons and only in
denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and
Dating.
(a) The Securities shall be executed on behalf of the
Company by its Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon
attested by its Secretary or one of its Assistant Secretaries.
The signature of any of these officers on the Securities may be
manual or facsimile.
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<PAGE>
Securities bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices
prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution
and delivery of this Indenture, the Company may deliver
Securities executed by the Company to the Trustee for
authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee
in accordance with such Company Order shall authenticate and
deliver such Securities as in this Indenture provided and not
otherwise.
Each Security shall be dated the date of its
authentication.
No Security shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless
there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence,
that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Security shall
have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section
309, for all purposes of this Indenture such Security shall be
deemed never to have been authenticated and delivered hereunder
and shall never be entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities. Pending the
preparation of Definitive Securities, the Company may execute, and
upon Company Order the Trustee shall authenticate and make available
for delivery, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the Definitive Securities
in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as evidenced by
their execution of such Securities.
If temporary Securities are issued, the Company will cause
Definitive Securities to be prepared without unreasonable delay.
After the preparation of Definitive Securities, the temporary
Securities shall be exchangeable for Definitive Securities upon
surrender of the temporary Securities, at any office or agency of the
Company designated pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary
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<PAGE>
Securities, the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a
like principal amount of Definitive Securities of authorized
denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as
Definitive Securities.
SECTION 305. Registration, Registration of Transfer and
Exchange.
(a) The Company shall cause to be kept at the
Corporate Trust Office of the Trustee a register (the register
maintained in such office and in any other office or agency
designated pursuant to Section 1002 being hereinafter sometimes
collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration of Securities and the
registration of transfers of Securities entitled to be
registered or transferred as herein provided. The Trustee is
hereby appointed the initial registrar (hereinafter referred to
as the "Security Registrar") for the purpose of registering
Securities and transfers of Securities as herein provided. The
Company may at any time replace such Security Registrar, change
such office or agency or act as its own Security Registrar. The
Company will give prompt written notice to the Trustee of any
change of the Security Registrar or of the location of such
office or agency.
Upon surrender for registration of transfer of any
Security at an office or agency of the Company designated
pursuant to Section 1002 for such purpose, the Company shall
execute, and the Trustee shall authenticate and make available
for delivery, in the name of the designated transferee or
transferees, one or more new Securities of any authorized
denominations and of a like aggregate principal amount.
At the option of the Holder, Securities may be
exchanged for other Securities of any authorized denominations
and of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make
available for delivery, the Securities which the Holder making
the exchange is entitled to receive.
(b) All Securities issued upon any registration of
transfer or exchange of Securities shall be the valid
obligations of the Company evidencing the same debt, and
entitled to the same benefits under this Indenture, as the
securities surrendered upon such registration of transfer or
exchange.
-31-<PAGE>
<PAGE>
Every Security presented or surrendered for
registration of transfer or for exchange shall (if so required
by the Company or the Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized
in writing, with the signatures guaranteed by a commercial bank
or trust company having an office in the United States or by a
member or members' organization of the New York Stock Exchange.
No service charge shall be made for any registration
of transfer or exchange of Securities, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1108, 1202 or 1404 not
involving any transfer.
The Company shall not be required
(i) to issue, register the transfer of or
exchange any Security, during a period beginning at the
opening of business 15 days before the day of the mailing
of a notice of redemption of Securities selected for
redemption under Section 1104 and ending at the close of
business on the day of such mailing, or
(ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part,
except the unredeemable portion of any Security being
redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities. If any mutilated Security is surrendered to the Trustee,
the Company shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a new Security, of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Trustee
1. evidence to their satisfaction of the destruction, loss or theft
of any Security and 2. such security or indemnity as may be required
by them to save each of them and any agent of either of them
harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee
shall authenticate and make available for delivery, in lieu of any
such destroyed, lost or stolen Security, a new Security of like tenor
and principal amount and bearing a number not contemporaneously
outstanding.
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In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security, pay
such Security.
Upon the issuance of any new Security under this Section,
the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of
the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Company, whether or
not the destroyed, lost or stolen Security shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of
this Indenture equally and proportionately with any and all other
Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost
or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights
Preserved. Interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date
shall be paid to the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date
(hereinafter referred to as "Defaulted Interest") shall forthwith
cease to be payable to the Holder on the relevant Regular Record
Date, notwithstanding the fact that such Holder was a Holder on such
Regular Record Date, and such Defaulted Interest may be paid by the
Company, at its election, as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered at
the close of business on a Special Record Date for the payment
of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at
the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior
to the date of the proposed payment, such money when deposited
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to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as provided in this clause (a).
Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest, which shall be not more than
15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by
the Trustee of notice from the Company in writing of the
proposed payment. The Trustee shall promptly notify the Company
of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security Register, not less than 10
days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close
of business on such Special Record Date and shall no longer be
payable pursuant to the following Clause (b).
(b) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities
may then be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this clause (b),
such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section and
Section 305, each Security delivered under this Indenture upon
registration of transfer of or in exchange for or in lieu of any
other Security shall carry the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any
Regular Record Date and on or prior to the next succeeding Interest
Payment Date (other than any Security whose Maturity Date is prior to
such Interest Payment Date), interest whose stated due date is on
such Interest Payment Date shall be payable on such Interest Payment
Date notwithstanding such conversion, and such interest (whether or
not punctually paid or duly provided for) shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on such Regular Record Date.
Except as otherwise expressly provided in the immediately preceding
sentence, in the case of any Security which is converted, interest
whose stated due date is after the date of conversion of such
Security shall not be payable.
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SECTION 308. Persons Deemed Owners. Prior to due
presentment of a Security for registration of transfer, the Company,
the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and
premium, if any, and (subject to Sections 305 and 307) interest on
such Security and for all other purposes whatsoever, whether or not
any payment due in respect of such Security be overdue, and none of
the Company, the Trustee or any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 309. Cancellation. All Securities surrendered for
payment, redemption, registration of transfer or exchange or
conversion shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled
by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or any other Person for
delivery to the Trustee) for cancellation any Securities previously
authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the
Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a
Company Order.
SECTION 310. Computation of Interest. Interest on the
Securities shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
SECTION 311. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use), and,
if so, the Trustee shall use "CUSIP" numbers in notices of redemption
as a convenience to Holders; provided, however, that any such notice
may state that no representation is made as to the correctness of
such "CUSIP" numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be
placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any
defect in or omission of such "CUSIP" numbers.
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of conversion, registration
of transfer or exchange of Securities herein expressly provided for)
and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(i) all Securities theretofore authenticated and
delivered (other than (A) Securities which have been
mutilated, destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306 and (B)
Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(ii) all such Securities not theretofore
delivered to the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their
Stated Maturity within one year, or
(C) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of clause (A), (B) or (C) above, has
(subject to Section 402) irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose an
amount sufficient to pay and discharge the entire indebtedness in
respect of Securities not theretofore delivered to the Trustee for
cancellation for principal of and premium, if any, and interest on
such Securities to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
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(b) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company in Sections 305, 306, 607,
608, 702, 1001, 1002 and 1003 and in Article XII shall survive until
the Securities are no longer outstanding.
SECTION 402. Application of Trust Money. Subject to the
provisions of the last paragraph of Section 1003, all money deposited
with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment to the Persons entitled thereto,
either directly or through any Paying Agent (including the Company
acting as its own Paying Agent), as the Trustee may determine, of the
principal of and premium, if any, and interest on the Securities for
whose payment such money has been deposited with the Trustee. The
Trustee shall hold all money deposited with it pursuant to Section
401 for the benefit of the Holders of such Securities, and the
Trustee shall be under no liability for interest thereon. All money
deposited with the Trustee pursuant to Section 401 (and held by it or
any Paying Agent) for the payment of Securities subsequently
converted shall be returned to the Company upon Company Request.
ARTICLE V
REMEDIES
SECTION 501. Events of Default. The term "Event of
Default," wherever used herein, means any one of the following events
(whatever the reason for such Event of Default and whether it shall
be occasioned by the provisions of Article XIII or be voluntary or
involuntary or be effected by operation of law or pursuant to any
judgment, decree or order or any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of the principal of or
premium, if any, on, or the Redemption Price of, any Security when
the same becomes due and payable at its Maturity Date, whether or not
such payment is prohibited by Article XIII; or
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(b) default in the payment of any interest upon any
Security when it becomes due and payable, and continuance of
such default for a period of 30 days, whether or not such
payment is prohibited by Article XIII; or
(c) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other
than a covenant or warranty a default in whose performance or
whose breach is elsewhere in this Section specifically dealt
with), and continuance of such default or breach for a period of
60 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of
the Outstanding Securities a written notice specifying such
default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(d) a default under any mortgage, indenture or
instrument under which there may be issued, or by which there
may be secured or evidenced, any Indebtedness of the Company in
excess of $10,000,000 either for borrowed money or representing
any Senior Indebtedness (other than indebtedness which is
nonrecourse to the Company beyond the property securing such
indebtedness), resulting in the acceleration of such
indebtedness prior to its express maturity; provided, however,
that if such default under such mortgage, indenture or
instrument shall be remedied or cured by the Company or waived
by the holders of such indebtedness, then the Event of Default
hereunder by reason thereof shall be deemed likewise to have
been thereupon remedied, cured or waived without further action
upon the part of either the Trustee or any of the Holders of the
Securities; and provided, further, that the Trustee (subject to
Sections 601 and 602) shall not have any rights, duties,
liabilities or responsibilities with respect to such default
unless and until the Trustee shall have received written notice
thereof at the Corporate Trust Office from the Company, the
trustee under any such mortgage, indenture or instrument, the
holder or holders of any such indebtedness or the agent of any
such holder or holders or the Holder or Holders of any
Outstanding Securities; or
(e) a decree or order by a court having jurisdiction
in the premises shall have been entered adjudging the Company as
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Company under any Bankruptcy Law,
and such decree or order shall have continued undischarged and
unstayed for a period of 60 days; or a decree or order of a
court having jurisdiction in the premises for the appointment of
a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or of its property, or for the winding
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up or liquidation of its affairs, shall have been entered, and
such decree or order shall have remained in force undischarged
and unstayed for a period of 60 days; or
(f) the Company shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing
of a bankruptcy proceeding against it, or shall file a petition
or answer or consent seeking reorganization under any Bankruptcy
Law, or shall consent to the filing of any such petition, or
shall consent to the appointment of a receiver or liquidator or
trustee or assignee in bankruptcy or insolvency of it or of its
property, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts generally as they become due.
Notwithstanding the 60-day period and notice requirement
contained in Section 501(c) above, with respect to a default under
Article XIV: (i) the 60-day period referred to in Section 501(c)
shall be deemed to have begun as of the date the Change of Control
Notice is required to be sent in the event the Change of Control
Notice indicates (or would, if sent, indicate) that the Company has
not timely complied with the covenant in the second sentence of
Section 1401(a), and either (a) the Holders duly elect to have at
least 25% in principal amount of Outstanding Securities repurchased
in accordance with the requirements of Article XIV, or (b) the
Holders of at least 25% in principal amount of the Outstanding
Securities or the Trustee thereafter gives the Notice of Default to
the Company, and if applicable, the Trustee, referred to in Section
501(c); and (ii) if the breach or default is a result of a default in
the payment when due of the Change of Control Purchase Price on the
Change of Control Purchase Date, such default shall arise on the
Change of Control Purchase Date, provided that either (a) the Holders
duly elect to have at least 25% in principal amount of Outstanding
Securities repurchased in accordance with the requirements of Article
XIV, or (b) the Holders of at least 25% in principal amount of the
outstanding Securities or the Trustee thereafter gives the Notice of
Default to the Company, and if applicable, the Trustee, referred to
in Section 501(c).
"Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors.
SECTION 502. Acceleration of Maturity Date; Rescission and
Annulment. If an Event of Default (other than an Event of Default
specified in Section 501(e) or 501(f)) occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than
25% in principal amount of the Outstanding Securities may declare the
principal of all the Securities to be due and payable, by a notice in
writing to the Company (and to the Trustee if given by Holders), and
upon the earlier of (a) the fifth Business Day after receipt by the
Company (and the Trustee if given by Holders) of any such written
notice and (b) a default in the payment of principal, or an
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acceleration of Indebtedness under any Senior Indebtedness or upon
any earlier time as such principal under any Senior Indebtedness
shall become immediately due and payable, such principal shall become
immediately due and payable. If an Event of Default specified in
Section 501(e) or 501(f) occurs, all unpaid principal and accrued
interest on the Securities then outstanding shall become and be
immediately due and payable without any declaration or other act on
the part of the Trustee or any Holder.
In the event of a declaration of acceleration under this
Indenture because an Event of Default set forth in Section 501(d) has
occurred and is continuing, such declaration of acceleration under
this Indenture shall be automatically annulled if the holders of the
accelerated indebtedness described in Section 501(d) have rescinded
their declaration of acceleration in respect of such indebtedness
within 90 days thereof and no other Event of Default has occurred
during such 90-day period which has not been cured or waived.
At any time after such a declaration of acceleration has
been made and before a judgment or decree for payment of the money
due has been obtained by the Trustee as hereinafter in this Article
V provided, the Holders of a majority in principal amount of the
Outstanding Securities, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences
if the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(a) all overdue interest on all Securities,
(b) the principal of and premium, if any, on any
Securities which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Securities,
(c) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by the
Securities, and
(d) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, and
(e) all Events of Default, other than the non-payment
of the principal of Securities which have become due solely by
such declaration of acceleration, have been cured or waived as
provided in Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
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SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if
(a) default is made in the payment of any interest on
any Security when such interest becomes due and payable and such
default continues for a period of 30 days, or
(b) default is made in the payment of the principal
of or premium, if any, on any Security at the Maturity Date
thereof, including the payment of the Redemption Price on any
Redemption Date,
the Company will, upon demand of the Trustee, pay to the Trustee, for
the benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal (and premium, if
any) and interest, and, to the extent that payment of such interest
shall be lawful, interest on any overdue principal (and premium, if
any) and on any overdue interest, at the rate borne by the
Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an
express trust in addition to the remedies specified in Section 502,
may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final
decree and may enforce the same against the Company or any other
obligor upon the Securities and collect the moneys adjudged or
decreed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon the Securities,
wherever situated.
If an Event of Default occurs and is continuing, the
Trustee, in addition to the remedies specified in Section 502, may in
its discretion proceed to protect and enforce its rights and the
rights of the Holders by such appropriate judicial proceedings as the
Trustee shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim. In case of
any judicial proceeding relative to the Company or any other obligor
upon the Securities, their property or their creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding
or otherwise, to take any and all actions authorized under the Trust
Indenture Act in order to have claims of the Holders and the Trustee
allowed in any such proceeding. In particular, the Trustee shall be
authorized to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments
to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment, or
composition affecting the Securities or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim
of any Holder in any such proceeding.
SECTION 505 Trustee May Enforce Claims Without Possession
of Securities. All rights of action and claims under this Indenture
or the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect
of which such judgment has been recovered.
SECTION 506. Application of Money Collected. Subject to
Article XIII, any money collected by the Trustee pursuant to this
Article V shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such
money on account of principal, premium, if any, or interest, upon
presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully
paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607;
SECOND: To the payment of the amounts then due and unpaid
for principal of and premium, if any, and interest on the
Securities in respect of which or for the benefit of which such
money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable
on such Securities for principal, premium, if any, and interest,
respectively; and
THIRD: The balance, if any, to the Company.
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SECTION Limitation on Suits. No Holder of any Security
shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice
to the Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal
amount of the outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of
such Event of Defaults in its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the
Trustee security or indemnity reasonably satisfactory to it
against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such
written notice, request and offer of indemnity has failed to
institute any such proceeding; and
(e) no direction inconsistent with such written
request has been given to the Trustee during such 60-day period
by the Holders of a majority in principal amount of the
Outstanding Securities; it being understood and intended that no
one or more Holders shall have any right in any manner whatever
by virtue of, or by availing of, any provision of this Indenture
to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and
ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest. Notwithstanding any other provision
in this Indenture but subject to the provisions of Article XIII, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and premium, if
any, and (subject to Sections 305 and 307) interest on such Security
on the respective Stated Maturities of such payments as expressed in
such Security (and in the case of redemption, the Redemption Price on
the applicable Redemption Date) and to convert such Security in
accordance with Article XII and to require the purchase of such
Security upon the occurrence of a Change in Control in accordance
with Article XIV and to institute suit for the enforcement of any
such payment and right to convert and require purchase, and such
rights shall not be impaired without the consent of such Holder.
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SECTION 509. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all
rights and remedies of the Trustee and the Holders shall continue as
though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder of any Security to exercise
any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient,
by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders. The Holders of a
majority in principal amount of the Outstanding Securities shall have
the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any
trust or power conferred on the Trustee; provided, however, that
(a) such direction shall not be in conflict with any
rule of law or with this Indenture, and
(b) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction.
SECTION 513. Waiver of Past Default. The Holders of not
less than a majority in principal amount of the Outstanding
Securities may on behalf of the Holders of all the Securities waive
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any past default hereunder and its consequences, except a default
(as) in the payment of the principal of or premium, if
any or interest on any Security as specified in clauses (a) and
(b) of Section 501,
(b) in respect of a covenant or provision hereof
which under Article IX cannot he modified or amended without the
consent of the Holder of each Outstanding Security affected or
(c) in respect of the right of a Holder of any
Security to convert such Security in accordance with
Article XII.
Upon any such waiver, such default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of this Indenture; but no such waiver
shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 514. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken, suffered or omitted by
it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess
costs against any such party litigant, in the manner and to the
extent provided in the Trust Indenture Act; provided that neither
this Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such undertaking or to make such an assessment
in any suit instituted by the Company or in connection with any suit
for the enforcement of the right to convert any Security in
accordance with the terms hereof.
SECTION 515. Waiver of Stay or Extension Laws. The
Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been
enacted.
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ARTICLE VI
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities. The
duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision
of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate security or indemnity
against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject
to the provisions of this Section.
SECTION 602. Notice of Default. If a default occurs
hereunder with respect to Securities, the Trustee shall give the
Holders of the Securities notice of such default as and to the extent
provided by the Trust Indenture Act; provided, however, that in the
case of any default of the character specified in Section 501(c), no
such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of time
or both would become, an Event of Default.
SECTION 603. Certain Rights of Trustee. Subject to the
provisions of Section 601:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request, direction, order or demand of the
Company mentioned herein shall be sufficiently evidenced by a
Company Request or Company Order, and any resolution of the
Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture
the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
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specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders
pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document,
but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may
see fit; provided, however, that the Trustee shall not thereby
be deemed to be required to act or be held to any higher duty of
care than existed prior to such inquiry; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of
Securities. 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 or liability whatsoever for their correctness. The
Trustee makes no representations 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 Securities
or the proceeds thereof.
SECTION 605. May Hold Securities. The Trustee, any
Authenticating Agent, any Paying Agent, any Security Registrar or any
other agent of the Company, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the
same rights it would have if it were not Trustee, Authenticating
Agent, Paying Agent, Security Registrar or such other agent.
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SECTION 606. Money Held in Trust. Money held by the
Trustee in trust hereunder need not be segregated from other funds
except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except
as otherwise agreed in writing with the Company.
SECTION 607. Compensation and Reimbursement. The Company
agrees:
(a) to pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to
time agree upon in writing for all services rendered by it
hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of
an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the
Trustee in accordance with the Trustee's performance of this
Indenture (including the reasonable compensation and the
expenses and disbursements of its non-employee agents and
counsel), except any such expense, disbursement or advance as
may be attributable to its negligence or willful misconduct; and
(c) to indemnify each of the Trustee or any
predecessor Trustee for, and to hold it harmless against, any
and all loss, damage, claims, liability or expense incurred
without negligence or willful misconduct on its part, arising
out of or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder, except
those attributable to its negligence or willful misconduct.
This obligation shall survive the maturity of the Securities.
The Trustee shall have a claim prior to the Securities as
to all property and funds properly held by it hereunder for any
amount owing it or any predecessor Trustee pursuant to this Section
607, except with respect to funds held in trust for the benefit of
the Holders of particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(e) or
Section 501(f), the expenses (including the reasonable charges and
expenses of its counsel) and the compensation for the services are
intended to constitute expenses of administration under any
applicable Federal or state bankruptcy, insolvency or other similar
law.
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The provisions of this Section shall survive the
termination of this Indenture.
SECTION 608. Disqualification; Conflicting Interests. If
the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture
Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall (a) be a
corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia,
(b) authorized under such laws to exercise corporate trust powers,
(c) have a combined capital and surplus of at least $50,000,000 (or,
in the case of the initial Trustee hereunder, have a combined capital
and surplus meeting the requirements of the Trust Indenture Act and
be a wholly owned subsidiary of a Person that would otherwise meet
the eligibility requirements of this Section), and (iv) be subject to
supervision or examination by Federal or state authority. If such
corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall
cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the
effect hereinafter specified in this Article VI. The Trustee shall
comply with Trust Indenture Act 310(b).
SECTION 610. Resignation and Removal, Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article
shall become effective until the acceptance of appointment by
the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving
written notice thereof to the Company. If an instrument of
acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(c) The Trustee may be removed at any time by Act of
the Holders of a majority in principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
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(d) If at any time:
(i) the Trustee shall fail to comply with
Section 608 after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a
Security for at least six months, or
(ii) the Trustee shall cease to be eligible
under Section 609 and shall fail to resign after written
request therefor by the Company or by any such Holder, or
(ii) the Trustee shall become incapable of acting
or shall be judged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company may remove the Trustee with
respect to all Securities, or (B) subject to Section 514, any Holder
who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all other similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office
of Trustee for any cause, the Company shall promptly appoint a
successor Trustee. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a
successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of
such appointment in accordance with the applicable requirements
of Section 611, become the successor Trustee and supersede the
successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation
and each removal of the Trustee and each appointment of a
successor Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders as their names
and addresses appear in the Security Register. Each notice
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shall include the name of the successor Trustee and the address
of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the
retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges
pursuant to Section 607, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money hold by such
retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor
Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified
and eligible under this Article VI.
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business. Any corporation into which the Trustee may
be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any corporation succeeding to
all or substantially all the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this
Article VI, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the
same effect as if such successor Trustee had itself authenticated
such Securities.
SECTION 613. Preferential Collection of Claims Against
Company. If and when the Trustee shall be or become a creditor of
the Company (or any other obligor upon the Securities), the Trustee
shall be subject to the provisions of the Trust Indenture Act
regarding the collection of claims against the Company (or any such
other obligor).
SECTION 614. Appointment of Authenticating Agent. The
Trustee may appoint an Authenticating Agent or Agents acceptable
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to the Company which shall be authorized to act on behalf of the
Trustee to authenticate Securities issued upon original issue and
upon exchange, registration of transfer, partial conversion or
partial redemption or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture and
shall be valid and obligatory for all purposes as if authenticated by
the Trustee hereunder. Wherever reference is made in this Indenture
to the authentication and delivery of Securities by the Trustee or
the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an Authenticating
Agent.
Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing
business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to
act as Authenticating Agent, having a combined capital and surplus of
not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or
to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of
such Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with
the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to
which such Authenticating Agent shall be a party, or any corporation
succeeding to all or substantially all of the corporate agency or
corporate trust business of such Authenticating Agent, shall continue
to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or
filing of any paper or any further act on the part of the Trustee,
the Company or such Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The
Trustee may at any time terminate the agency of an Authenticating
Agent by giving written notice thereof to such Authenticating Agent
and to the Company. Upon receiving such a notice of resignation or
upon such a termination, or in case at any time such Authenticating
Agent shall cease to be eligible in accordance with the provisions of
this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written
notice of such appointment by first-class mail, postage prepaid, to
all Holders of Securities, as their names and addresses appear in the
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Security Register. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No
successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section.
The Company agrees to pay each Authenticating Agent, as
appointed from time to time, such reasonable fees as may be agreed to
in writing with the Company, for services rendered under this Section
614.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the Trustee's
certificate of authentication, an alternate certificate of
authentication in the following form:
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Trustee
By:______________________________________
As Authenticating Agent
By:______________________________________
Authorized Signatory
ARTICLE VII
HOLDERS' LISTS AND REPORTS
BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee:
(a) semi-annually, not more than 10 days after each
Regular Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as
of such Regular Record Date, and
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(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any
such request, a list of similar form and content as of a date
not more than 15 days prior to the time such list is furnished;
excluding from any such list names and addresses received by the
Trustee in its capacity as Security Registrar or Paying Agent.
SECTION 702. Preservation of Information; Communications
to Holders.
(a) The Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as
provided in Section 701 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar or
Paying Agent. The Trustee may destroy any list furnished to it
as provided in Section 701 upon receipt of a new list so
furnished.
(b) The rights of Holders to communicate with other
Holders with respect to their rights under this Indenture or
under the Securities, and the corresponding rights and
privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
(c) Every Holder of Securities, by receiving and
holding the same, agrees with the Company and the Trustee that
neither the Company nor the Trustee nor any agent of any of them
shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Holders in
accordance with Section 702(b), regardless of the source from
which such information was derived, and that the Trustee shall
not be held accountable by reason of mailing any material
pursuant to a request made under Section 702(b).
SECTION 703. Reports by Trustee. The Trustee shall
transmit to Holders such reports concerning the Trustee and its
actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant
thereto.
A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock
exchange upon which any Securities are listed, with the Commission
and the Company.
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SECTION 704. Reports by Company.
The Company shall:
(a) file with the Trustee, within 15 days after the
Company is required to file the same with the Commission, copies
of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of said
Sections, then it shall file with the Trustee and the
Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary
and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act in respect
of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules
and regulations;
(b) file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to
time by the Commission, such additional information, documents
and reports with respect to compliance by the Company with the
conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations, including, in
the case of annual reports, if required by such rules and
regulations, certificates or opinions of independent public
accountants, conforming to the requirements of Section 102 of
this Indenture; and
(c) transmit by mail to all Holders, as their names
and addresses appear in the Security Register, within 30 days
after the filing thereof with the Trustee, such summaries of any
information, documents and reports required to be filed by the
Company pursuant to paragraphs (a) and (b) of this Section as
may be required by rules and regulations prescribed from time to
time by the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms. The Company shall not consolidate with or merge into
any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, unless:
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(a) the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a
corporation, partnership or trust organized and validly existing
under the laws of the United States of America, any State
thereof or the District of Columbia and shall have expressly
assumed, by an indenture supplemental hereto, executed and
delivered by the successor Person to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the
principal of and premium, if any, and interest on all the
Securities and the performance of every covenant of this
Indenture on the part of the Company to be performed or observed
by it and shall have provided for conversion rights in
accordance with Article XII;
(b) immediately after giving effect to such
transaction, no Event of Default, and no event which, after
notice or lapse of time, or both, would become an Event of
Default, shall have occurred and be continuing; and
(c) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, conveyance, transfer or lease
and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture comply with this
Article and that all conditions precedent provided for herein
relating to such transaction have been complied with.
SECTION 802. Successor Substituted for Company. Upon any
consolidation of the Company with, or merger of the Company into, any
other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance
with Section 801, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had been
named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders. Without the consent of any Holders, the Company and the
Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to
the Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities in
accordance with Article VIII; or
(b) to add to the covenants of the Company for the
benefit of the Holders, or to surrender any right or power
herein conferred upon the Company; or
(c) to secure the Securities; or
(d) to make provision with respect to the conversion
rights of Holders pursuant to the requirements of Section 1211;
or
(e) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the
Securities; or
(f) to cure any ambiguity, to correct or supplement
any provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect
to matters or questions arising under this Indenture which shall
not be inconsistent with the provisions of this Indenture;
provided, however, that such action pursuant to this clause (f)
shall not adversely affect the interests of the Holders in any
material respect.
SECTION 902 Supplemental Indentures with Consent of
Holders. Subject to Section 508, with the consent of the Holders of
not less than a majority in principal amount of the Outstanding
Securities, by Act of said Holders delivered to the Company and the
Trustee, the Company and the Trustee may 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 modifying in any manner the rights
of the Holders under this Indenture. Notwithstanding the foregoing,
no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Security affected thereby:
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(a) change the Stated Maturity of the principal of,
or the stated due date of any installment of interest on, any
Security, or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which any Security or
any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment
on or after the Stated Maturity or stated due date thereof (or,
in the case of redemption, on or after the Redemption Date), or
adversely affect the right of a Holder to convert any Security
as provided in Article XII, or modify the provisions of this
Indenture with respect to the subordination of the Securities in
a manner adverse to the Holders, or
(b) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required
for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and
their consequences) provided for in this Indenture, or
(c) modify any of the provisions of this Section or
Section 513 or Section 1009, except to increase any such
percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of
the Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
After a supplemental indenture under this Section becomes
effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the supplemental indenture. Any failure of
the Company to mail such notice, or defect therein, shall not,
however, in any way impair or affect the validity of such
supplemental indenture.
SECTION 903. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article IX or the
modifications thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Section 601)
shall be fully protected in relying upon, an Opinion of Counsel of
the Company stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
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SECTION 904. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article IX, this
Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Securities theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in
effect.
SECTION 906. Reference in Securities to Supplemental
Indentures. Securities authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article IX
may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new
Securities so modified as to conform, in the opinion of the Trustee
and the Company, to any such supplemental indenture may be prepared
and executed by the Company, and authenticated and made available for
delivery by the Trustee in exchange for Outstanding Securities.
ARTICLE X
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually pay
the principal of and premium, if any, and interest on the Securities
and the Redemption Price and Change of Control Purchase Price as and
when due, in accordance with the terms of the Securities and this
Indenture.
The Company shall pay interest on overdue amounts at the
rate set forth in the Securities, and it shall pay interest on
overdue interest at the same rate compounded semiannually (to the
extent that the payment of such interest shall be lawful), which
interest on overdue interest shall accrue from the date such amounts
became overdue.
SECTION 1002. Maintenance of Office or Agency. The
Company will maintain in the Borough of Manhattan, the City of New
York an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange, where Securities may be
surrendered for conversion and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be
served. The Company will give prompt written notice to the Trustee
of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such
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required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to
receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or
more other offices or agencies (in or outside the Borough of
Manhattan, the City of New York) where the Securities may be
presented or surrendered for any or all such purposes and may from
time to time rescind such designations; provided, however, that no
such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The
Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any
such other office or agency.
SECTION 1003. Money for Security Payments to Be Held in
Trust. If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of and premium,
if any, or interest on any of the Securities, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal, premium, if any, or interest so
becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents,
it will, on or prior to each due date of the principal of and
premium, if any, or interest on any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal, premium, if any, or
interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal, premium, if any,
or interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so
to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the
provisions of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the
principal of and premium, if any, and interest on the Securities
in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of
as herein provided;
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(b) give the Trustee notice of any default by the
Company (or any other obligor upon the Securities) in the making
of any payment of principal of and premium, if any, or interest
on the Securities; and
(c) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay
to the Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay, to
the Trustee all sums held in trust by the Company or such Paying
Agent, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent,
or then held by the Company in trust for the payment of the principal
of and premium, if any, or interest on any Security and remaining
unclaimed for two years after such principal, premium, if any, or
interest has become due and payable shall be paid to the Company on
Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published
once, in a newspaper customarily published on each Business Day and
of general circulation in the Borough of Manhattan, the City of New
York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date
of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 1004. Statements of Officers of Company as to
Default; Notice of Default.
(a) The Company will deliver to the Trustee, within
120 days after the end of each fiscal year of the Company ending
after the date hereof, a certificate, signed by the principal
executive officer, principal financial officer or principal
accounting officer, stating whether or not to the best knowledge
of the signers thereof the Company is in default (without regard
to periods of grace or requirements of notice) in the
performance and observance of any of the terms, provisions and
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conditions hereof, and if the Company shall be in default,
specifying all such defaults and the nature and status thereof
of which they may have knowledge.
(b) The Company shall file with the Trustee written
notice of the occurrence of any default or Event of Default
within five Business Days of its becoming aware of any such
default or Event of Default.
SECTION 1005. Existence. The Company will do or cause to
be done all things necessary to preserve and keep in full force and
effect its existence, material rights (charter and statutory) and
material franchises; provided, however, that the Company shall not be
required to preserve any such right or franchise if its Board of
Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company; and provided
further that a transaction that complies with Article VIII shall not
be deemed a breach of this Section 1005.
SECTION 1006. Maintenance of Properties. The Company will
cause all material properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept
in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as
in the judgment of the Company, may be necessary so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this
Section shall prevent the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business
or the business of any Subsidiary and could not reasonably be
expected to have a material adverse effect on the business and
operations of the Company.
SECTION 1007. Payment of Taxes and Other Claims. The
Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments
and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon
the Company or any Subsidiary or upon the income, profits or property
of the Company or any Subsidiary and (b) all material lawful claims
for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary,
unless the failure to pay or discharge any such tax, assessment,
charge or claim would not have a material adverse effect on the
business and operations of the Company and its Subsidiaries taken as
a whole; provided, however, that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity
is being contested in good faith by appropriate proceedings and for
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which adequate reserves in accordance with generally accepted
accounting principles have been made.
SECTION 1008. Further Instruments and Acts. Upon request
of the Trustee, the Company will execute and deliver such further
instruments and perform such further acts as may be reasonably
necessary or proper to carry out more effectively the purposes of
this Indenture.
SECTION 1009. Waiver of Certain Covenants. The Company may
omit in any particular instance to comply with any term, provision or
condition set forth in this Article X (other than Sections 1001
through 1004, inclusive), if before the time for such compliance the
Holders of at least a majority (or such greater amount as may be
specified in any such term, provision or condition) in principal
amount of the outstanding Securities shall, by Act of such Holders,
either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver
shall extend to or affect such term, provision or condition, except
to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 1101. Right Of Redemption. The Securities may be
redeemed at the election of the Company, as a whole or from time to
time in part, at any time on or after May 15, 1997, at the Redemption
Prices specified in the form of Security hereinbefore set forth,
together with accrued interest to the Redemption Date.
SECTION 1102. Applicability of Article. Redemption of
Securities at the election of the Company, as permitted by any
provision of the Securities or this Indenture, shall be made in
accordance with such provision and this Article XI.
SECTION 1103. Election to Redeem; Notice to Trustee. The
election of the Company to redeem any Securities pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the
Securities, the Company shall, at least 35 days prior to the
Redemption Date fixed by the Company (unless a shorter period shall
be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities to be
redeemed.
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SECTION 1104. Selection by Trustee of Securities to Be
Redeemed. If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than
60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities not previously called for redemption, by such
method as the Trustee shall deem appropriate and fair and which may
provide for the selection for redemption of portions (equal to $1,000
or any integral multiple thereof) of the principal amount of
Securities.
If any Security selected for partial redemption is
converted in part before termination of the conversion right with
respect to the portion of the Security so selected, the converted
portion of such Security shall be deemed (so far as may be) to be the
portion selected for redemption. Securities which have been
converted during a selection of Securities to be redeemed shall be
treated by the Trustee as Outstanding for the purpose of such
selection.
The Trustee shall promptly notify the Company and each
Security Registrar 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 Securities redeemed or to
be redeemed only in part, to the portion of the principal amount of
such Securities which has been or is to be redeemed.
SECTION 1105. Notice of Redemption. Notice of redemption
shall be mailed not less than 20 nor more than 60 days prior to the
Redemption Date to each Holder of Securities to be redeemed at his
address appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Outstanding Securities are
to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities
to be redeemed,
(d) that on the Redemption Date the Redemption Price
will become due and payable upon each such Security to be
redeemed and that interest thereon will cease to accrue on and
after that date,
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(e) the conversion price, and any adjustments
thereto, the date on which the right to convert the principal of
the Securities to be redeemed will terminate and the place or
places where such Securities may be surrendered for conversion,
(f) the place or places where such Securities are to
be surrendered for payment of the Redemption Price, and
(g) the CUSIP number of the Securities to be
redeemed.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense of
the Company.
SECTION 1106. Deposit of Redemption Price. At least one
Business Day prior to any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is acting
as its own Paying Agent, the Company shall segregate and hold in
trust as provided in Section 1003) an amount of money sufficient to
pay the Redemption Price of, and (unless the Redemption Date shall be
an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date other than any Securities
called for redemption on that date which have been converted prior to
the date of such deposit.
If any Security called for redemption is converted, any
money deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the redemption of such Security
shall (subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the last
paragraph of Section 307) be paid to the Company upon Company Request
or, if then held by the Company, shall be discharged from such trust.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after
such date (unless the Company shall default in the payment of the
Redemption Price and accrued interest) such Securities shall cease to
bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to
the Redemption Date; provided, however, that installments of interest
whose stated due date is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of
Section 307.
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If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal of and premium,
if any, on such Security shall, until paid, bear interest from the
Redemption Date at the rate borne by the Security.
SECTION 1108. Securities Redeemed in Part. Any Security
which is to be redeemed only in part shall be surrendered at an
office or agency of the Company designated for that purpose pursuant
to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate and make
available for delivery to the Holder of such Security, without
service charge, a new Security or Securities of any authorized
denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
ARTICLE XII
CONVERSION OF SECURITIES
SECTION 1201. Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of this Article,
at the option of the Holder thereof, any Security or any portion of
the principal amount thereof which is $1,000 or an integral multiple
of $1,000 may be converted into fully paid and nonassessable shares
of the Common Stock of the Company, at the conversion price,
determined as hereinafter provided, in effect at the time of
conversion. Such conversion right shall expire at the close of
business on May 15, 2001. In case a Security or portion thereof is
called for redemption, unless the Company defaults in making the
payment due upon redemption, such conversion right in respect of the
Security or portion so called shall expire at the close of business
on the fifth Business Day preceding the Redemption Date (except that,
with respect to any redemption occurring on May 15, 1997 or within
five business days thereafter, the conversion right shall terminate
at the close of business on the Redemption Date such that all of the
holders of Securities to be redeemed will be entitled to receive the
May 15, 1997 interest payment, assuming such holders held such
Securities on the Regular Record Date next preceding May 15, 1997).
Notwithstanding the foregoing, the Securities may not be converted
into shares of Common Stock at any time when the conversion thereof
is prohibited in accordance with the provisions of Article XIII.
The price at which shares of Common Stock shall be
delivered upon conversion (hereinafter referred to as the "conversion
price") shall be initially $23.1575 per share of Common Stock. The
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conversion price shall be adjusted in certain instances as provided
in Section 1204.
In case the Company shall, by dividend or otherwise,
declare or make a distribution on its Common Stock referred to in
paragraph (d) or (e) of Section 1204, the Holder of each Security,
upon the conversion thereof pursuant to this Article subsequent to
the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution and prior to the
effectiveness of the conversion price adjustment in respect of such
distribution pursuant to paragraph (d) or (e) of Section 1204, shall
be entitled to receive for each share of Common Stock into which such
Security is converted, the portion of the evidences of indebtedness,
shares of capital stock, cash or assets so distributed applicable to
one share of Common Stock; provided, however, that, at the election
of the Company (whose election shall be evidenced by a Board
Resolution filed with the Trustee) with respect to all Holders so
converting, the Company may, in lieu of delivering to such Holder any
portion of such distribution not consisting of cash or securities of
the Company, pay such Holder an amount equal to the fair market value
thereof (as determined in good faith by the Board of Directors, whose
determination shall be evidenced by a Board Resolution filed with the
Trustee). If any conversion of a Security entitled to the benefits
described in the immediately preceding sentence occurs prior to the
payment date for a distribution to holders of Common Stock which the
Holder of the Security so converted is entitled to receive in
accordance with the immediately preceding sentence, the Company may
elect (such election to be evidenced by a Board Resolution filed with
the Trustee) to distribute to such Holder a due bill for the
evidences of indebtedness, shares of capital stock, cash or assets to
which such Holder is so entitled, provided that such due bill (i)
meets any applicable requirements of the principal national
securities exchange or other market on which the Common Stock is then
traded and (ii) requires payment or delivery of such evidences of
indebtedness, shares of capital stock, cash or assets no later than
the date of payment or delivery thereof to holders of Common Stock
receiving such distribution.
SECTION 1202. Exercise of Conversion Privilege. In order
to exercise the conversion privilege, the Holder of any Security to
be converted shall surrender such Security, duly endorsed or assigned
to the Company or in blank, at any office or agency maintained by the
Company pursuant to Section 1002, accompanied by written notice to
the Company substantially in the form set forth in Section 205 at
such office or agency that the Holder elects to convert such Security
or, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted. Securities
surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest
Payment Date to the opening of business on such Interest Payment Date
shall (except for Securities whose Maturity Date is prior to such
Interest Payment Date) be accompanied by payment in New York Clearing
House funds or other funds acceptable to the Company of an amount
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equal to the interest payable on such Interest Payment Date on the
principal amount of Securities being surrendered for conversion.
Except as provided in the preceding sentence and subject to the last
paragraph of Section 307, no payment or adjustment shall be made upon
any conversion on account of any interest accrued on the Securities
surrendered for conversion or on account of any dividends on the
Common Stock issued upon conversion.
Securities shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of
such Securities for conversion in accordance with the foregoing
provisions, and at such time the rights of the Holders of such
Securities as Holders shall cease, and the Person or Persons entitled
to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock
at such time. As promptly as practicable on or after the conversion
date, the Company shall issue and shall deliver at such office or
agency a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu
of any fraction of a share, as provided in Section 1203.
In the case of any Security which is converted in part
only, as promptly as practicable on or after the conversion date the
Company shall execute and the Trustee shall authenticate and make
available for delivery to the Holder thereof, at the expense of the
Company, a new Security or Securities, of authorized denominations in
aggregate principal amount equal to the unconverted portion of the
principal amount of such Security.
The Company's delivery to the Holder of the fixed number of
shares of the Common Stock of the Company (and any cash in lieu of
any fractional share of Common Stock) into which the Security is
convertible shall be deemed to satisfy the Company's obligation to
pay the principal amount of the Security and all accrued interest
that has not previously been paid. The Common Stock of the Company
so delivered shall be treated as issued first in payment of accrued
interest and then in payment of principal. Thus, accrued interest
shall be treated as paid rather than cancelled, extinguished or
forfeited.
SECTION 1203. Fractions of Shares. No fractional shares
of Common Stock shall be issued upon conversion of Securities. If
more than one Security shall be surrendered for conversion at one
time by the same Holder, the number of full shares which shall be
issuable upon conversion thereof shall be computed on the basis of
the aggregate principal amount of the Securities (or specified
portions thereof) so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any
Security or Securities (or specified portions thereof), the Company
shall pay a cash adjustment (rounded to the nearest cent) in respect
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of such fraction in an amount equal to the same fraction of the
Closing Price per share of the Common Stock on the day of conversion
(or, if such day is not a Trading Day, on the Trading Day immediately
preceding such day).
SECTION 1204. Adjustment of Conversion Price.
(a) In case the Company shall pay or make a dividend
or other distribution on its Common Stock exclusively in Common
Stock or shall pay or make a dividend or other distribution on
any other class of capital stock of the Company which dividend
or distribution includes Common Stock, the conversion price in
effect at the opening of business on the day following the date
fixed for the determination of stockholders entitled to receive
such dividend or other distribution shall be reduced by
multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such
number of shares and the total number of shares constituting
such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day
following the date fixed for such determination. For the
purposes of this paragraph (a), the number of shares of Common
Stock at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company shall not pay any dividend
or make any distribution on shares of Common Stock held in the
treasury of the Company.
(b) Subject to the last sentence of paragraph (h) of
this Section, in case the Company shall pay or make a dividend
or other distribution on its Common Stock consisting exclusively
of, or shall otherwise issue to all holders of its Common Stock,
rights, warrants or options entitling the holders thereof to
subscribe for or purchase shares of Common Stock at a price per
share less than the current market price per share (determined
as provided in paragraph (i) of this Section) of the Common
Stock on the date fixed for the determination of stockholders
entitled to receive such rights, warrants or options, the
conversion price in effect at the opening of business on the day
following the date fixed for such determination shall be reduced
by multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock which
the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase
would purchase at such current market price and the denominator
shall be the number of shares of Common Stock outstanding at the
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close of business on the date fixed for such determination plus
the number of shares of Common Stock so offered for subscription
or purchase, such reduction to become effective immediately
after the opening of business on the day following the date
fixed for such determination. For the purposes of this
paragraph (b), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common
Stock. The Company shall not issue any rights, options or
warrants in respect of shares of Common Stock held in the
treasury of the Company.
(c) In case outstanding shares of Common Stock shall
be subdivided into a greater number of shares of Common Stock,
the conversion price in effect at the opening of business on the
day following the day upon which such subdivision becomes
effective shall be proportionately reduced, and, conversely, in
case outstanding shares of Common Stock shall be combined into
a smaller number of shares of Common Stock, the conversion price
in effect at the opening of business on the day following the
day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening
of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) Subject to the last sentence of this paragraph
(d) and to the last sentence of paragraph (h) of this Section,
in case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock evidences of its
indebtedness, shares of any class of capital stock, cash or
other assets (including Securities, but excluding (w) any
rights, options or warrants referred to in paragraph (b) of this
Section, (x) any dividend or distribution paid exclusively in
cash up to the greater of (i) retained earnings of the Company
on the date such distribution or dividend was declared and (ii)
Net Income of the Company during the four full fiscal quarters
preceding the date such distribution or dividend was declared,
(y) any dividend or distribution referred to in paragraph (a) of
this Section and (z) other than in connection with a tender
offer or other negotiated purchase made by the Company or any
Subsidiary for all or any portion of the Company's Common
Stock), the conversion price shall be reduced so that the same
shall equal the price determined by multiplying the conversion
price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by this paragraph (d) by
a fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (i) of this
Section) of the Common Stock on the date fixed for such
effectiveness less the fair market value (as determined in good
faith by the Board of Directors, whose determination shall be
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conclusive and described in a Board Resolution filed with the
Trustee), on the date of such effectiveness, of the portion of
the evidences of indebtedness, shares of capital stock, cash and
other assets so distributed applicable to one share of Common
Stock (collectively, the "Market Value of the Distribution") and
the denominator shall be such current market price per share of
the Common Stock, such reduction to become effective immediately
prior to the opening of business on the day following the later
of (i) the date fixed for the payment of such distribution and
(ii) the date 20 days after notice relating to such distribution
is required to be given pursuant to Section 1206(a) (such later
date of (i) and (ii) being referred to as the "Reference Date").
If the Board of Directors determines the fair market value of
any distribution for purposes of this paragraph (d) by reference
to the actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider the
prices in such market over the same period used in computing the
current market price per share pursuant to paragraph (i) of this
Section. For purposes of this paragraph (d), any dividend or
distribution that includes shares of Common Stock, rights,
options or warrants to subscribe for or purchase shares of
Common Stock or other securities convertible into or
exchangeable for shares of Common Stock shall be deemed instead
to be (A) a dividend or distribution of the evidences of
indebtedness, cash, assets or shares of capital stock other than
such shares of Common Stock, such rights, options or warrants or
such other convertible or exchangeable securities (making any
conversion price reduction required by and in accordance with
this paragraph (d)) immediately followed by (B) in the case of
such shares of Common Stock or such right, options or warrants,
a dividend or distribution thereof making any further conversion
price reduction required by paragraph (a) or (b) of this
Section, except (1) the Reference Date of such dividend or
distribution as defined in this paragraph (d) shall be
substituted as "the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution" and "the date fixed for such determination" within
the meaning of paragraphs (a) and (b) of this Section and (a)
any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the
meaning of paragraph (a) of this Section) or (c) in the case of
such other convertible or exchangeable securities, a dividend or
distribution of such number of shares of Common Stock as would
then be issuable upon the conversion or exchange thereof,
whether or not the conversion or exchange of such securities is
subject to any conditions (making any further conversion price
reduction required by paragraph (a) of this Section, except (i)
the Reference Date of such dividend or distribution as defined
in this paragraph (a) shall be substituted as "the date fixed
for the determination of stockholders entitled to receive such
dividend or other distribution" and "the date fixed for such
determination", and (ii) the shares deemed to constitute such
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dividend or distribution shall not be deemed "outstanding at the
close of business on the date fixed for such determination,"
each within the meaning of paragraph (a) of this Section). In
the event that, with respect to any distribution to which this
paragraph (d) of Section 1204 would otherwise apply, the Market
Value of the Distribution is greater than the current market
price per share, then the adjustment provided by this paragraph
(d) of Section 1204 shall not be made and in lieu thereof the
provisions of Section 1211 shall apply to such distribution.
(e) In case the Company shall, by dividend or
otherwise, at any time distribute to all holders of its Common
Stock cash (specifically including any distributions of cash up
to the greater of (x) retained earnings of the Company on the
date such distribution or dividend was declared and (y) Net
Income of the Company during the four full fiscal quarters
preceding the date such distribution or dividend was declared
but excluding any cash that is distributed as part of a
distribution requiring a purchase price adjustment pursuant to
paragraph (d) of this Section) in an aggregate amount that,
together with (i) the aggregate amount of any other
distributions to all holders of its Common Stock made
exclusively in cash within the 12 months preceding the date of
payment of such distribution and in respect of which no
conversion price adjustment pursuant to paragraph (d) of this
Section or this paragraph (e) has been made and (i) the portion
of the aggregate of any cash plus the fair market value (as
determined by the Board of Directors, whose determination shall
be evidenced by a Board Resolution) of consideration payable in
respect of any tender offer or other negotiated purchase by the
Company or a Subsidiary for all or any portion of the Company's
Common Stock concluded within the 12 months preceding the date
of payment of such distribution and in respect of which no
conversion price adjustment pursuant to paragraph (g) of this
Section has been made that is in excess of an amount equal to
the product of (x) the number of shares of Common Stock with
respect to which the aggregate tender offer or negotiated
purchase consideration is payable times (y) the average of the
daily Closing Prices per share of Common Stock on the five
consecutive Trading Days selected by the Company out of the 10
consecutive Trading Days next succeeding the date of payment of
the negotiated purchase consideration or expiration of the
tender offer, as the case may be, exceeds 20% of the product of
the current market price per share (determined as provided in
paragraph (i) of this Section) of the Common Stock on the date
fixed for stockholders entitled to receive such distribution
times the number of shares of Common Stock outstanding on such
date (excluding shares held in the treasury of the Company), the
conversion price shall be reduced so that the same shall equal
the price determined by multiplying such conversion price in
effect immediately prior to the conversion price reduction
contemplated by this paragraph (e) by a fraction of which the
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numerator shall be the current market price per share
(determined as provided in paragraph (i) of this Section) of the
Common Stock on the date of such distribution less the amount of
cash so distributed applicable to one share of Common Stock and
the denominator shall be such current market price per share
(determined as provided in paragraph (i) of this Section) of the
Common Stock on the date of such distribution, such reduction to
become effective immediately prior to the opening of business on
the day following the date fixed for the payment of such
distribution.
(f) In case the Company shall issue to an Affiliate
shares of its Common Stock at a net price per share less than
the current market price per share (determined as provided in
paragraph (i) of this Section) on the date the Company fixes the
offering price of such additional shares, the conversion price
shall be reduced immediately thereafter so that it shall equal
the price determined by multiplying such conversion price in
effect immediately prior thereto by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such additional
shares plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common
Stock so offered would purchase at the current market price and
the denominator shall be the number of shares of Common Stock
that would be outstanding immediately after the issuance of such
additional shares. Such adjustment shall be made successively
whenever such an issuance is made. For the purposes of this
paragraph (f), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common
Stock. This paragraph (f) shall not apply to Common Stock
issued to any Affiliate under bona fide benefit plans in which
only directors, officers and employees of the Company and its
Subsidiaries are eligible to participate adopted by the Board of
Directors and approved by the holders of Common Stock when
required by law.
(g) In case a tender offer or other negotiated
purchase (the "Current Purchase") made by the Company or any
Subsidiary for all or any portion of the Company's Common Stock
shall be consummated, if the aggregate of any cash plus the fair
market value (as determined by the Board of Directors, whose
determination shall be evidenced by a Board Resolution) of
consideration payable in respect of such tender offer or other
negotiated purchase is in excess of an amount equal to the
product of (i) the number of shares of Common Stock with respect
to which the aggregate tender offer or negotiated purchase
consideration is payable and (ii) the average of the daily
Closing Prices per share of Common Stock on the five consecutive
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Trading Days selected by the Company out of the 10 consecutive
Trading Days next succeeding the date of payment of the
negotiated purchase consideration or expiration of the tender
offer, as the case may be (the "Reference Price"), and the
amount of such excess, together with (A) the portion of the
aggregate of the cash, plus the fair market value (as determined
by the Board of Directors, whose determination shall be
evidenced by in a Board Resolution) of consideration payable in
respect of any tender offer or other negotiated purchase (the
"Prior Purchase") by the Company or a Subsidiary for all or any
portion of the Company's Common Stock concluded within the 12
months preceding the expiration of a tender offer or the
consummation of any negotiated purchase, as the case may be,
that is the subject of the Current Purchase (the "Current
Purchase Expiration Time") and in respect of which no conversion
price adjustment pursuant to this paragraph (g) has been made,
that is in excess of an amount equal to the product of (1) the
number of shares of Common Stock with respect to which the
aggregate consideration for the Prior Purchase was payable and
(2) the average of the daily Closing Prices per share of Common
Stock on the five consecutive Trading Days selected by the
Company out of the 10 consecutive Trading Days next succeeding
the date of payment of the negotiated purchase consideration or
expiration of the tender offer, as the case may be, with respect
to the negotiated purchase or tender offer that was the subject
of the Prior Purchase, and (B) the aggregate amount of any
distributions to all holders of the Company's Common Stock made
exclusively in cash (specifically including distributions of
cash out of retained earnings of the Company or Net Income of
the Company during the four full fiscal quarters preceding the
date such distribution or dividend was declared) within the 12
months preceding the expiration of the tender offer and as to
which no adjustment pursuant to paragraph (d) or paragraph (e)
of this Section has been made, exceeds 20% of the product of the
Reference Price times the number of shares of Common Stock
outstanding (including any tendered shares but excluding any
shares held in the treasury of the Company) on the Current
Purchase Expiration Time, the conversion price shall be reduced
so that the same shall equal the price determined by multiplying
such conversion price in effect immediately prior to the Current
Purchase Expiration Time by a fraction of which the numerator
shall be (D) the product of the Reference Price times the number
of shares of Common Stock outstanding (including any tendered
shares but excluding any shares held in the treasury of the
Company) on the Current Purchase Expiration Time minus (D) the
fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance
(up to any maximum specified in the terms of the tender offer or
other negotiated purchase) of all shares validly tendered and
not withdrawn or purchased in any negotiated purchase as of the
Current Purchase Expiration Time (the shares deemed so accepted
or purchased, up to any such maximum, being
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referred to as the "Purchased Shares") and the denominator shall
be the product of (1) such Reference Price times (2) such number
of outstanding shares (excluding any shares held in the treasury
of the Company) on the Current Purchase Expiration Time less the
number of Purchased Shares, such reduction to become effective
immediately prior to the opening of business on the day
following the Current Purchase Expiration Time.
(h) The reclassification of Common Stock into
securities other than Common Stock (other than any
reclassification upon a consolidation or merger to which Section
1211 applies) shall be deemed to involve (i) a distribution of
such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be
deemed to be "the Reference Date" within the meaning of
paragraph (d) of this Section), and (ii) a subdivision or
combination, as the case may be, of the number of shares of
Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which
such subdivision becomes effective," or "the day upon which such
combination becomes effective", as the case may be, and "the day
upon which such subdivision or combination becomes effective"
within the meaning of paragraph (c) of this Section). Rights,
warrants or options issued or distributed by the Company to all
holders of its Common Stock entitling the holders thereof to
subscribe for or purchase shares of Common Stock or preferred
stock, which rights, warrants or options (A) are deemed to be
transferred with such shares of Common Stock, (B) are not
exercisable and (C) are also issued or distributed in respect of
future issuances of Common Stock, in each case in clauses (A)
through (C) until the occurrence of a specified event or events
("Trigger Events"), shall for purposes of this Section 1204 not
be deemed issued or distributed until the occurrence of the
earliest Trigger Event.
(i) For the purpose of any computation under
paragraph (b), (d), (e), (f) or (g) of this Section, the
"current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily Closing Prices
for the 5 consecutive Trading Days selected by the Company
commencing not more than 10 Trading Days before, and ending not
later than, the date in question.
(j) The Company may, but shall not be required to,
make such reductions in the conversion price, in addition to
those required by paragraphs (a), (b), (c), (d), (e), (f) and
(g) of this Section, as it considers to be advisable in order
that any event treated for Federal income tax purposes as a
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dividend of stock or stock rights shall not be taxable to the
recipients.
(k) No adjustment in the conversion price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in the conversion price; provided,
however, that any adjustments which by reason of this paragraph
(k) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Article XII shall be made to the nearest
cent or to the nearest one-hundredth of a share of Common Stock,
as the case may be.
(l) Anything herein to the contrary notwithstanding,
in the event the Company shall declare any dividend or
distribution requiring an adjustment in the conversion price
hereunder and shall, thereafter and before the payment of such
dividend or distribution to stockholders, legally abandon its
plan to pay such dividend or distribution, the conversion price
then in effect hereunder, if changed to reflect such dividend or
distribution, shall upon the legal abandonment of such plan be
changed to the conversion price which would have been in effect
at the time of such abandonment (after giving effect to all
other adjustments not so legally abandoned pursuant to the
provisions of this Article XII) had such dividend or
distribution never been declared.
(m) Notwithstanding any other provision of this
Section 1204, no adjustment to the conversion price shall reduce
the conversion price below the then par value per share of the
Common Stock, and any such purported adjustment shall instead
reduce the conversion price to such par value. The Company
hereby covenants not to take any action (i) to increase the par
value per share of the Common Stock or (ii) that would or does
result in any adjustment in the conversion price that, if made
without giving effect to the previous sentence, would cause the
conversion price to be less than the then par value per share of
the Common Stock of the Company.
(n) Anything herein to the contrary notwithstanding,
no single event shall require or result in an adjustment in the
conversion price pursuant to more than one of the foregoing
paragraphs of this Section 1204.
SECTION 1205. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted by the Company as herein
provided:
(a) the Company shall compute the adjusted conversion
price in accordance with Section 1204 and shall prepare a
certificate signed by the Treasurer or any Assistant Treasurer
of the Company setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such
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adjustment is based, and such certificate shall forthwith be
filed (with a copy to the Trustee) at each office or agency
maintained for the purpose of conversion of Securities pursuant
to Section 1002; and
(b) a notice stating that the conversion price has
been adjusted and setting forth the adjusted conversion price
shall forthwith be required, and as soon as practicable after it
is required, such notice shall be mailed by the Company to all
Holders at their last addresses as they shall appear in the
Security Register.
SECTION 1206. Notice of Certain Corporate Action. In
case:
(a) the Company shall declare a dividend (or any
other distribution) on its Common Stock payable (i) otherwise
than exclusively in cash out of retained earnings of the Company
or Net Income of the Company during the four full fiscal
quarters preceding the date such distribution or dividend was
declared or (ii) exclusively in cash out of retained earnings of
the Company or Net Income of the Company during the four full
fiscal quarters preceding the date such distribution or dividend
was declared in an amount that would require a conversion price
adjustment pursuant to paragraph (e) of Section 1204; or
(b) the Company shall authorize the granting to all
holders of its Common Stock of rights, warrants or options to
subscribe for or purchase any shares of capital stock of any
class or of any other rights (excluding employee stock options
or other rights under employee benefit plans); or
(c) of any reclassification of the Common Stock of
the Company (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation or
merger to which the Company is a party and for which approval of
any stockholders of the Company is required, or of the sale,
transfer or lease of all or substantially all of the assets of
the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company or any Subsidiary of the Company
shall commence a tender offer for all or a portion of the
Company's outstanding shares of Common Stock (or shall amend any
such tender offer),
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Securities pursuant to
Section 1002, and shall cause to be mailed to all Holders at their
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last addresses as they shall appear in the Security Register, at
least 20 days (or 10 days in any case specified in clause (a), (b) or
(e) above) prior to the applicable record, effective or expiration
date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution
or granting of rights, warrants or options, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution, rights, options or
warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up, or (z) the date on which such tender offer
commenced, the date on which such tender offer is scheduled to expire
unless extended, the consideration offered and the other material
terms thereof (or the material terms of any amendment thereto).
SECTION 1207. Company to Reserve Common Stock. The
Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock,
for the purpose of effecting the conversion of Securities, the full
number of shares of Common Stock then issuable upon the conversion of
all outstanding Securities.
SECTION 1208. Taxes on Conversions. The Company will pay
any and all taxes that may be payable in respect of the issue or
delivery of shares of Common Stock on conversion of Securities
pursuant hereto. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in
the issue and delivery of shares of Common Stock in a name other than
that of the Holder of the Security or Securities to be converted, and
no such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such
tax has been paid.
SECTION 1209. Covenant as to Common Stock. The Company
covenants that all shares of Common Stock which may be issued upon
conversion of Securities will upon issue be fully paid and
nonassessable, free of preemptive or any similar rights, and, except
as provided in Section 1208, the Company will pay all taxes, liens
and charges with respect to the issue thereof.
The Company will endeavor promptly to comply with all
Federal and state securities laws regulating the offer and delivery
of shares of Common Stock upon conversion of Securities, if any, and
will list or cause to have quoted such shares of Common Stock on each
national securities exchange or in the over-the-counter market or
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such other market on which the Common Stock is then listed or quoted.
SECTION 1210. Cancellation of Converted Securities. All
Securities delivered for conversion shall be delivered to the Trustee
to be cancelled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 309.
SECTION 1211. Provisions in Case of Consolidations, Merger
or Sale of Assets; Special Distributions. Subject to any applicable
right of the Holders to have their Securities purchased pursuant to
the provisions of Section 1401, in case of any consolidation of the
Company with, or merger of the Company into, any other Person, any
merger of another Person into the Company (other than a merger which
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company) or
any transfer or lease of the Company's properties or assets
substantially as an entirety, the Person formed by such consolidation
or resulting from such merger or which acquires such properties or
assets, as the case may be, shall execute and deliver to the Trustee
a supplemental indenture providing that the Holder of each Security
then outstanding shall have the right thereafter, during the period
such Security shall be convertible as specified in Section 1201, to
convert such Security only into the kind and amount of securities,
cash and other property receivable, if any, upon such consolidation,
merger, sale, transfer or lease by a holder of the number of shares
of Common Stock of the Company into which such Security might have
been converted immediately prior to such consolidation, merger, sale,
transfer or lease, assuming such holder of Common Stock of the
Company (a) is not a Person with which the Company consolidated or
into which the Company merged or which merged into the Company or to
which such sale, transfer or lease was made, as the case may be (a
"Constituent Person"), or an Affiliate of a Constituent Person and
(b) failed to exercise his rights of election, if any, as to the kind
or amount of securities, cash and other property receivable upon such
consolidation, merger, sale, transfer or lease (provided that if the
kind or amount of securities, cash and other property receivable upon
such consolidation, merger, sale, transfer or lease is not the same
for each share of Common Stock of the Company held immediately prior
to such consolidation, merger, sale, transfer or lease by other than
a Constituent Person or an Affiliate thereof and in respect of which
such rights of election shall not have been exercised ("non-electing
share"), then for the purpose of this Section the kind and amount of
securities, cash and other property receivable upon such
consolidation, merger, sale, transfer or lease by each non-electing
share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Such supplemental
indenture shall provide for adjustments which, for events subsequent
to the effective date of such supplemental indenture, shall be as
nearly equivalent as may be practicable to the adjustments provided
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for in this Article. The above provisions of this Section shall
similarly apply to successive consolidations, mergers, sales,
transfers or leases.
If the Company makes a distribution to all holders of its
Common Stock that, but for the provisions of the last sentence of
paragraph (d) of Section 1204, would otherwise result in an
adjustment in the conversion price pursuant to the provisions of
Section 1204, then, from and after the record date for determining
the holders of Common Stock entitled to receive the distribution, a
Holder of a Security that converts such Security in accordance with
the provisions of this Indenture shall upon conversion be entitled to
receive, in addition to the shares of Common Stock into which the
Security is convertible, the kind and amount of evidences of
indebtedness, shares of capital stock, cash or assets comprising the
distribution that such Holder would have received if such Holder had
converted the Security immediately prior to the record date for
determining the holders of Common Stock entitled to receive the
distribution.
SECTION 1212. Trustee Adjustment Disclaimer. The Trustee
has no duty to determine when an adjustment under this Article XII
should be made, how it should be made or what it should be. The
Trustee has no duty to determine whether a supplemental indenture
under Section 1211 need be entered into or whether any provisions of
any supplemental indenture are correct. The Trustee shall not be
accountable for and makes no representation as to the validity or
value of any securities or assets issued upon conversion of
Securities.
SECTION 1213. When No Adjustment Required.
(a) Except as expressly set forth in Section 1204, no
adjustment in the conversion price shall be made because the
Company issues, in exchange for cash, property or services,
shares of Common Stock, or any securities convertible into or
exchangeable for shares of Common Stock, or securities
(including warrants, rights and options) carrying the right to
subscribe for or purchase shares of Common Stock or such
convertible or exchangeable securities.
(b) Notwithstanding anything herein to the contrary,
no adjustment in the conversion price shall be made pursuant to
Section 1204 in respect of any dividend or distribution if the
Holders may participate therein (on a basis to be determined in
good faith by the Board of Directors) and receive the same
consideration they would have received if they had converted the
Securities immediately prior to the record date with respect to
such dividend or distribution (a "Non-Adjustment Distribution").
All Non-Adjustment Distributions shall be ignored for purposes
of any computation under paragraph (e) or (g) of Section 1204.
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ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 1301. Securities Subordinate to Senior
Indebtedness. The Company covenants and agrees, and each Holder of
a Security, by his acceptance thereof, likewise covenants and agrees,
that, to the extent and in the manner hereinafter set forth in this
Article (subject to the provisions of Articles IV and XV), the
Indebtedness represented by the Securities and the payment of the
principal of and premium, if any, and interest on each and all of the
Securities are hereby expressly made subordinate and subject in right
of payment to the prior payment in full of all Senior Indebtedness.
SECTION 1302. Payment Over of Proceeds Upon Dissolution,
Etc. In the event of any Proceeding, the holders of Senior
Indebtedness shall be entitled to receive payment in full of all
amounts due or to become due on or in respect of all Senior
Indebtedness, or provision shall be made for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders
of Senior Indebtedness, before the Holders of the Securities are
entitled to receive any Securities Payment (other than a Securities
Payment in the form of Permitted Junior Securities) and before the
Securities may be converted into shares of Common Stock, and to that
end the holders of Senior Indebtedness shall be entitled to receive,
for application to the payment thereof, any Securities Payment (other
than any Securities Payment in the form of Permitted Junior
Securities), which may be payable or deliverable in any such
Proceeding.
In the event that, notwithstanding the foregoing provisions
of this Section, the Trustee or the Holder of any Security shall have
received any Securities Payment (other than any Securities Payment in
the form of Permitted Junior Securities) or the Holder of any
Securities shall have converted any Security into shares of Common
Stock before all Senior Indebtedness is paid in full or payment
thereof is provided for in cash or cash equivalents or otherwise in
a manner satisfactory to the holders of Senior Indebtedness, and if
the Trustee or such Holder, as the case may be, shall, at or prior to
the time of such Securities Payment have actual knowledge of such
fact, then and in each such event, such Securities Payment or shares
of Common Stock received upon conversion shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person
making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution
to or for the holders of Senior Indebtedness.
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The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the
Company following the conveyance or transfer of all or substantially
all of its properties and assets as an entirety to another Person
upon the terms and conditions set forth in Article VIII shall not be
deemed a Proceeding for the purposes of this Section if the Person
formed by such consolidation or into which the Company is merged or
the Person which acquires by conveyance or transfer such properties
and assets as an entirety, as the case may be, shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Article VIII.
SECTION 1303. No Payment When Designated Senior
Indebtedness in Default. In the event that any Payment Event of
Default shall have occurred and be continuing, no Securities Payment
(other than a Securities Payment in the form of Permitted Junior
Securities) shall be made and the Securities may not be converted
into shares of Common Stock unless and until such Payment Event of
Default shall have been cured or waived or shall have ceased to exist
or all amounts then due and payable in respect of Designated Senior
Indebtedness shall have been paid in full, or provision shall have
been made for such payment in cash or cash equivalents or otherwise
in a manner satisfactory to the holders of Designated Senior
Indebtedness.
In the event that any Non-Payment Event of Default shall
have occurred with respect to any Designated Senior Indebtedness and
be continuing, then, upon the receipt by the Trustee and the Company
of written notice of such Non-Payment Event of Default from the
trustee or representative for, or holders of, at least a majority in
principal amount of such Designated Senior Indebtedness, no
Securities Payment (other than a Securities Payment in the form of
Permitted Junior Securities) shall be made and the Securities may not
be converted into shares of Common Stock during the period (the
"Payment Blockage Period") commencing on the date of receipt of such
written notice and ending on the earlier of (a) the date on which
such Non-Payment Event of Default shall have been cured or waived or
shall have ceased to exist or any acceleration of the Designated
Senior Indebtedness to which such Non-Payment Event of Default
relates shall have been rescinded or annulled or such Designated
Senior Indebtedness shall have been discharged and (b) the 176th day
after the date of such receipt of such written notice. During any
360-day period the aggregate of all Payment Blockage Periods shall
not exceed 176 days and there shall be a period of at least 184
consecutive days in each 360-day period when no Payment Blockage
Period is in effect. For all purposes of this paragraph, no Non-
Payment Event of Default that existed or was continuing on the date
of commencement of any Payment Blockage Period shall be, or be made,
the basis for the commencement of a subsequent Payment Blockage
Period by a trustee or representative for, or holders of, Designated
Senior Indebtedness unless such Payment Event of Default or Non-
Payment Event of Default shall have been cured for a period of not
less than 90 consecutive days.
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In the event that, notwithstanding the foregoing, the
Company shall make any Securities Payment to the Trustee or the
Holder of any Security or the Holder of any Securities shall have
converted any Security into shares of Common Stock at a time when
such Securities Payment or conversion was prohibited by the foregoing
provisions of this Section, and if, at or prior to the time of such
Securities Payment or conversion, the Trustee or such Holder, as the
case may be, had actual knowledge of such fact, then and in such
event such Securities Payment or shares of Common Stock received upon
conversion shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any
Securities Payment with respect to which Section 1302 would be
applicable.
SECTION 1304. Payment Permitted if No Default. Nothing
contained in this Article or elsewhere in this Indenture or in any of
the Securities shall prevent (a) the Company, at any time except
during the pendency of any Proceeding referred to in Section 1302 or
under the conditions described in Section 1303, from making
Securities Payments, (b0 the application by the Trustee of any money
deposited with it hereunder to Securities Payments or the retention
of such Securities Payment by the Holders, if, at the time of such
application by the Trustee, it did not have actual knowledge that
such Securities Payment would have been prohibited by the provisions
of this Article or (c) the conversion of any Security by the Holder
thereof into shares of Common Stock or the retention of the shares of
Common Stock received by such Holder upon conversion, if, at the time
of conversion by such Holder, it did not have actual knowledge that
such conversion would have been prohibited by the provisions of this
Article.
SECTION 1305. Subrogation to Rights of Holders of Senior
Indebtedness. Subject to the payment in full of all amounts due and
to become due on or in respect of Senior Indebtedness, or the
provision for such payment in cash or cash equivalents or otherwise
in a manner satisfactory to the holders of Senior Indebtedness, the
Holders of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior
Indebtedness pursuant to the provisions of this Article to the rights
of the holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of and premium, if any, and
interest on the Securities shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of the
Senior Indebtedness of any cash, property or securities to which the
Holders of the Securities or the Trustee would be entitled except for
the provisions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Indebtedness by
Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness and
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the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior
Indebtedness.
SECTION 1306. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the
Securities on the one hand and the holders of Senior Indebtedness on
the other hand. Nothing contained in this Article or elsewhere in
this Indenture or in the Securities is intended to or shall (a)
impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation
of the Company, which is absolute and unconditional (and which,
subject to the rights under this Article of the holders of Senior
Indebtedness, is intended to rank equally with all other general
obligations of the Company), to pay to the Holders of the Securities
the principal of and premium, if any, and interest on the Securities
as and when the same shall become due and payable in accordance with
their terms; or 3. affect the relative rights against the Company of
the Holders of the Securities and creditors of the Company other than
the holders of Senior Indebtedness; or (c) prevent the occurrence of
an Event of Default or prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior
Indebtedness to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 1307. Trustee to Effectuate Subordination. Each
Holder of a Security by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate, as between the Holders of the Securities
and the holders of Senior Indebtedness, the subordination provided in
this Article and appoints the Trustee his attorney-in-fact for any
and all such purposes, including, in the event of any dissolution,
winding up or liquidation or reorganization under any applicable
bankruptcy law of the Company (whether in bankruptcy, insolvency or
receivership proceedings or otherwise), the timely filing of a claim
for the unpaid balance of such Holder's Securities in the form
required in such proceedings and the causing of such claim to be
approved. If the Trustee does not file a claim or proof of debt in
the form required in such proceedings prior to 10 days before the
expiration of the time to file such claims of proofs, then the
holders of Senior Indebtedness, jointly, or their representative
shall have the right to file an appropriate claim for and on behalf
of the Holders. Nothing contained herein shall be construed to
authorize the Trustee or the holders of Senior Indebtedness to
authorize or consent to or to accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder or to authorize
the Trustee or the holders of Senior Indebtedness to vote in respect
of the claim of any Holder in any such proceeding.
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SECTION 1308. No Waiver of Subordination Provisions. No
right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged
with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee or
the Holders of the Securities, without incurring responsibility to
the Holders of the Securities and without impairing or releasing the
subordination provided in this Article or the obligations hereunder
of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (a) change the
manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any Person liable in any manner for the
collection of Senior Indebtedness and settle or compromise Senior
Indebtedness (which, to the extent so settled and compromised, shall
be deemed to have been paid in full for all purposes hereof); (d)
apply any amounts received to any liability of the Company owing to
holders of Senior Indebtedness; and (e) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 1309. Notice to Trustee. The Company shall give
prompt written notice to the Trustee of any default or event of
default with respect to any Senior Indebtedness or of any fact known
to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article or any other provision of this Indenture,
the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the
Trustee in respect of the Securities, unless and until the Trustee
shall have received written notice thereof from the Company or a
holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject
to the provisions of Section 601, shall be entitled in all respects
to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this
Section at least five Business Days prior to the date upon which by
the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of and
premium, if any, or interest on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have
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full power and authority to receive such money and to apply the same
to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it
within five Business Days prior to such date.
Subject to the provisions of Section 601, the Trustee shall
be entitled to rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness (or
a trustee therefor) to establish that such notice has been given by
a holder of Senior Indebtedness (or a trustee therefor). In the
event that the Trustee determines in good faith that further evidence
is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 1310. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of the
Company referred to in this Article, the Trustee, subject to the
provisions of Section 601, and the Holders of the Securities shall be
entitled to rely upon any order or decree entered by any court of
competent jurisdiction in which any Proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the
Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article.
SECTION 1311. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness.
SECTION 1312. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's Rights. The Trustee in its
individual capacity shall be entitled to all the rights set forth in
this Article with respect to any Senior Indebtedness which may at any
time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee
of any of its rights as such holder.
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Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 607.
SECTION 1313. Article Applicable to Paying Agents. In
case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the
context otherwise requires) be construed as extending to and
including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee; provided, however,
that Section 1312 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
ARTICLE XIV
RIGHT TO REQUIRE REPURCHASE
SECTION 1401. Repurchase of Securities at Option of the
Holder upon Change of Control.
(A) If at any time there shall have occurred a Change
of Control (as defined below) with respect to the Company which
constitutes a Repurchase Event (as defined below), each Holder
shall have the right, at such Holder's option, subject to the
terms and conditions of this Indenture, to require the Company
to repurchase all or a portion of such Holder's Securities (in
denominations of $1,000 or integral multiples thereof), at a
purchase price equal to 100% of the principal amount of such
Securities, together with accrued interest to the Change of
Control Purchase Date (the "Change of Control Purchase Price"),
on the date (the "Change of Control Purchase Date") that is 60
days after the date on which the Company's Change of Control
Notice (as defined below) is mailed (or such later date as is
required by law), subject to substantial satisfaction by or on
behalf of the Holder of the requirements set forth in Section
1401(c). Promptly, but in any event within 29 days following
any such Change of Control constituting a Repurchase Event, the
Company hereby covenants, with respect to any Senior
Indebtedness that would prohibit the repurchase of Securities by
the Company in the event of such Change of Control, to either
(i) repay all such Senior Indebtedness in full; or (ii) obtain
the requisite consents under any agreement or instrument
pursuant to which such Senior Indebtedness is issued to permit
the repurchase of the Securities as provided below. The Company
shall first comply with the covenants in the preceding sentence
before it shall be required to repurchase Securities pursuant to
this Article XIV. The foregoing shall in no way limit the
occurrence of an Event of Default, including an Event of Default
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arising from a default under the covenants of the second
sentence of this Section 1401(a), and the right to declare all
the principal of the Securities to be immediately due and
payable in accordance with the provisions of this Indenture.
A "Change of Control" shall occur when: (i) all or
substantially all of the Company's assets are sold as an
entirety to any person or related group of persons; (ii) there
shall be consummated any consolidation or merger of the Company
(A) in which the Company is not the continuing or surviving
corporation (other than a consolidation or merger with a wholly
owned subsidiary of the Company in which all shares of Common
Stock outstanding immediately prior to the effectiveness thereof
are changed into or exchanged for the same consideration) or (B)
pursuant to which the Common Stock would be converted into cash,
securities or other property, in each case, other than a
consolidation or merger of the Company in which the holders of
the Common Stock immediately prior to the consolidation or
merger have, directly or indirectly, at least a majority of the
Common Stock of the continuing or surviving corporation
immediately after such consolidation or merger; or (iii) any
person or any persons acting together which would constitute a
"group" for purposes of Section 13(d) of the Exchange Act (other
than the Company, any Subsidiary, any employee stock purchase
plan, stock option plan or other stock incentive plan or
program, retirement plan or automatic dividend reinvestment plan
or any substantially similar plan of the Company or any
Subsidiary or any person holding securities of the Company for
or pursuant to the terms of any such employee benefit plan),
together with any affiliates thereof, shall Beneficially Own,
directly or indirectly, at least 50% of the total Voting Stock
of the Company.
Notwithstanding the foregoing provisions of this
Section 1401(a), a Change of Control shall not be deemed to have
occurred by virtue of the purchase by one or more underwriters
of Capital Stock of the Company pursuant to a firm commitment
underwriting in connection with a public offering of such
Capital Stock; provided, however, that upon the expiration of 20
Business Days following the acquisition by such underwriters of
Capital Stock of the Company pursuant to such a firm commitment
underwriting, such underwriters shall not Beneficially Own,
directly or indirectly, at least 50% of the total Voting Stock
of the Company.
A Change of Control as described above shall
constitute a "Repurchase Event" unless (i) the closing price per
share of the Common Stock on the five consecutive Trading Days
selected by the Company out of the 10 consecutive Trading Days
ending immediately after the later of the Change of Control or
the public announcement of the Change of Control (in the case of
a Change of Control under clauses (i) or (ii) of the definition
of Change of Control) or ending immediately before the Change of
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Control (in the case of a Change of Control under clause (iii)
of the definition of Change of Control) is at least equal to
105% of the conversion price of the Securities in effect
immediately preceding the time of such Change of Control, or
(ii) all of the consideration (excluding cash payments for
fractional shares) in the transaction giving rise to such Change
of Control to the holders of Common Stock consists of shares of
Common Stock that are, or immediately upon issuance will be,
listed on a national securities exchange or quoted in the Nasdaq
National Market, and as a result of such transaction the
Securities become convertible solely into such Common Stock and
there has not been a Rating Decline, or (iii) the consideration
in the transaction giving rise to such Change of Control to the
holders of Common Stock consists of cash, securities that are,
or immediately upon issuance will be, listed on a national
securities exchange or quoted in the Nasdaq National Market, or
a combination of cash and such securities, and the aggregate
fair market value of such consideration (which, in the case of
such securities, shall be equal to the average of the daily
Closing Prices of such securities on the five consecutive
Trading Days selected by the Company out of the 10 consecutive
Trading Days following consummation of such transaction) is at
least 105% of the conversion price of the Securities in effect
on the date immediately preceding the closing date of such
transaction.
(b) Within 29 days after the occurrence of a Change
of Control which constitutes a Repurchase Event, the Company
covenants that it shall mail a written notice (the "Change of
Control Notice") of Change of Control by first-class mail to the
Trustee and to each Holder (and to beneficial owners as required
by applicable law) and shall cause a copy of such notice to be
published in a daily newspaper of national circulation. The
notice shall state:
(i) the events causing a Change of Control
(setting forth a brief description of such event) and the
date of such Change of Control;
(ii) the date by which the Change of Control
Purchase Notice pursuant to this Section 1401 must be
given;
(iii) the Change of Control Purchase Date;
(iv) the Change of Control Purchase Price;
(v) the name and address of the Paying Agent and
the conversion agent;
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(vi) the conversion price and any adjustments
thereto and the place or places where Securities may be
surrendered for conversion;
(vii) that Securities as to which a Change of
Control Purchase Notice has been given may be converted
into Common Stock only if the Change of Control Purchase
Notice has been withdrawn in accordance with the terms of
this Indenture;
(viii) the procedures the Holder must follow to
exercise rights under this Section 1401 and a brief
description of such rights; and
(ix) the procedures for withdrawing a Change of
Control Purchase Notice.
The Change of Control Notice shall also state
whether or not the Company has satisfied its obligations with
respect to any Senior Indebtedness that would prohibit the
repurchase of Securities by the Company in the event of a Change
of Control pursuant to Section 1401(a). If the Company is
unable to satisfy such obligations, the Change of Control Notice
shall also state that the Company is or will be in default under
Section 501(c) of the Indenture, that receipt by the Company of
one or more Change of Control Purchase Notices by Holders of at
least 25% of the outstanding Securities will constitute a Notice
of Default thereunder, and that the failure of the Company to
cure such default within 60 days (or the then applicable time
period) will be an Event of Default allowing the Trustee or the
Holders of not less than 25% in principal amount of the
Outstanding Securities to declare the principal of all the
Securities to be due and payable immediately.
(c) A Holder may exercise its rights specified in
Section 1401(a) upon delivery of a written notice of purchase (a
"Change of Control Purchase Notice") to the Paying Agent at any
time prior to the close of business on the Change of Control
Purchase Date, stating:
(i) the certificate number or numbers of the
Security or Securities which the Holder will deliver to be
purchased;
(ii) the portion of the principal amount of the
Security or Securities which the Holder will deliver to be
repurchased, which portion must be $1,000 or an integral
multiple thereof; and
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(iii) that such Security or Securities shall be
repurchased pursuant to the terms and conditions specified
in this Article XIV.
The delivery of such Security or Securities to the
Paying Agent prior to, on or after the Change of Control
Purchase Date (together with all necessary endorsements) at the
offices of the Paying Agent shall be a condition to the receipt
by the Holder of the Change of Control Purchase Price therefor,
and the Change of Control Purchase Price shall be paid pursuant
to this Section 1401 only if the Security or Securities so
delivered to the Paying Agent shall conform in all respects to
the description thereof set forth in the related Change of
Control Purchase Notice.
The Company shall repurchase from the Holder thereof,
pursuant to this Section 1401, a portion of a Security if such
portion is $1,000 or an integral multiple of $1,000.
Notwithstanding anything herein to the contrary, any
Holder delivering to the Paying Agent the Change of Control
Purchase Notice contemplated by this Section 1401(c) shall have
the right to withdraw such Change of Control Purchase Notice at
any time prior to the close of business on the Change of Control
Purchase Date by delivery of a written notice of withdrawal to
the Paying Agent in accordance with Section 1402.
SECTION 1402. Effect of Change of Control Purchase Notice.
Upon receipt by the Company of the Change of Control Purchase Notice
specified in Section 1401, the Holder of the Security in respect of
which such notice was given shall (unless such notice is withdrawn as
specified in the following paragraph) thereafter be entitled to
receive solely the Change of Control Purchase Price with respect to
such Security. Such price shall be paid to such Holder (provided the
conditions in Section 1401 have been satisfied) promptly following
the later of (x) the Change of Control Purchase Date with respect to
such Security and (y) the time of delivery of such Security to the
Paying Agent by the Holder thereof in the manner required by Section
1401(c). Securities in respect of which a Change of Control Purchase
Notice has been given by the Holder thereof may not be converted into
shares of Common Stock on or after the date of the delivery of such
Change of Control Purchase Notice unless such notice has first been
validly withdrawn as specified in the following paragraph.
A Change of Control Purchase Notice may be withdrawn by
means of a written notice of withdrawal delivered to the office of
the Paying Agent at any time prior to the close of business on the
Change of Control Purchase Date specifying:
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(i) the certificate number or numbers of the Security
or Securities in respect of which such notice of withdrawal
is being submitted;
(ii) the portion of the principal amount of the
Security or Securities with respect to which such notice of
withdrawal is being submitted, which portion must be $1,000
or an integral multiple thereof; and
(iii) the portion of the principal amount, if any, of
such Security or Securities which remains subject to the
original Change of Control Purchase Notice and which has
been or will be delivered for purchase by the Company,
which portion must be $1,000 or an integral multiple
thereof.
In addition to the requirement that the Company must first
comply with the covenants set forth in Section 1401, there shall be
no repurchase of any Securities pursuant to Section 1401 if there has
occurred (prior to, on or after the giving, by the Holders of such
Securities, of the required Change of Control Purchase Notice) and is
continuing an Event of Default. The foregoing shall in no way limit
the occurrence of an Event of Default, including an Event of Default
arising from a default under the covenants in this Article XIV and
the right to declare the principal of the Securities to be
immediately due and payable in accordance with the provisions of this
Indenture.
SECTION 1403. Deposit of Change of Control Purchase Price.
At least one Business Day prior to the Change of Control Purchase
Date, the Company shall deposit with the Trustee or with the Paying
Agent (or, if the Company or a Subsidiary or an Affiliate of either
of them is acting as the Paying Agent, shall segregate and hold in
trust as provided in Section 1003) an amount of money sufficient to
pay the aggregate Change of Control Purchase Price of all the
Securities or portions thereof which are to be purchased as of the
Change of Control Purchase Date.
SECTION 1404. Securities Purchased in Part. Any Security
which is to be purchased only in part shall be surrendered at the
office of the Paying Agent (with, if the Company or the Trustee so
requires, due endorsement by, or written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or such Holder's attorney duly authorized in
writing) and the Company shall execute and the Trustee shall
authenticate and make available for delivery to the Holder of such
Security, without service charge, a new Security or Securities, of
any authorized denomination requested by such Holder in aggregate
principal amount equal to, and in exchange for, the portion of the
principal amount of the Security so surrendered which is not
purchased.
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SECTION 1405. Covenant to Comply with Securities Laws Upon
Purchase of Securities. In connection with any purchase of
Securities under Section 1401 hereof, the Company shall, to the
extent then applicable and required by law: (a) comply with Rule 13e-
4 (which term, as used herein, includes any successor provision
thereto) under the Exchange Act; (b) file the related Schedule 13E-4
(or any successor or similar schedule, form or report) under the
Exchange Act; and (c) otherwise comply with all Federal and state
securities laws so as to permit the rights and obligations under
Section 1401 to be exercised in the time and in the manner specified
in Section 1401.
ARTICLE XV
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1501. Company's Option to Effect Defeasance or
Covenant Defeasance. The Company may at its option by Board
Resolution, at any time, elect to have the provisions of either
Section 1502 or Section 1503 apply to the Outstanding Securities upon
compliance with the conditions set forth below in this Article XV.
SECTION 1502. Defeasance and Discharge. Upon the
Company's election to have this Section 1502 apply to the Outstanding
Securities, the Company shall be deemed to have been discharged from
its obligations with respect to the Outstanding Securities (including
the provisions of Article XIII hereof) on the date the conditions set
forth below are satisfied (hereinafter referred to as a
"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 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 Outstanding Securities to receive, solely from the trust
fund described in Section 1504 and as more fully set forth in such
Section, payments in respect of the principal of and premium, if any,
and interest on such Securities when such payments are due, (b) the
Company's obligations with respect to such Securities under Sections
305, 306, 607, 608, 702, 1002 and 1003, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder, (d) the
Company's obligations under Article XII and (e) this Article XV.
Subject to compliance with this Article XV, the Company may
exercise its option under this Section 1502 notwithstanding the prior
exercise of its option under Section 1503.
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SECTION 1503. Covenant Defeasance. Upon the Company's
election to have this Section 1503 apply to the Outstanding
Securities, the Company (a) shall be released from its obligations
under Section 1007, Section 1008, and the provisions of Article XIII
hereof, and (b) the occurrence of an event specified in Section
501(d) shall not constitute an Event of Default, and such Sections
and Article shall no longer apply with respect to or for the benefit
of the Company, the Securities, the Holders of Securities and the
holders of Senior Indebtedness on and after the date the conditions
set forth below are satisfied (hereinafter referred to as a "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
Sections or Article, whether directly or indirectly by reason of any
reference elsewhere herein to any such Sections or Article or by
reason of any reference in any such Sections or Article to any other
provision herein or in any other document, but the remainder of this
Indenture and such Securities shall be unaffected thereby.
SECTION 1504. Conditions to Defeasance or Covenant
Defeasance. The following shall be the conditions to the application
of either Section 1502 or Section 1503 to the Outstanding Securities:
(a) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 609 who shall agree to
comply with the provisions of this Article XV applicable to it)
as trust funds in trust for the purpose of making the following
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
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee or other qualifying trustee to pay and
discharge, the principal of and premium, if any, on and each
installment of interest on the Securities on the Stated Maturity
of such principal or the stated due date of such installment of
interest 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
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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, however, 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) In the case of an election under Section 1502,
the Company shall have delivered to the Trustee 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
income, 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 amounts, in the same manner and
at the same times as would have been the case if such Defeasance
had not occurred.
(c) In the case of an election under Section 1503,
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 Covenant Defeasance and will be
subject to federal income tax on the same amounts, 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) In the case of an election under Section 1502 or
1503, 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.
(e) At the time of such Defeasance or Covenant
Defeasance: (i) no default in the payment of all or a portion of
principal of or premium, if any, or interest on any Senior
Indebtedness shall have occurred and be continuing, and no event
of default with respect to any Senior Indebtedness shall have
occurred and be continuing and shall have resulted in such
Senior Indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise have become due
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and payable and (ii) (A) no other event of default with respect
to any Senior Indebtedness shall have occurred and be continuing
permitting the holders of such Senior Indebtedness (or a trustee
on behalf of the holders thereof) to declare such Senior
Indebtedness due and payable prior to the date on which it would
otherwise have become due and payable, (B) no judicial
proceeding shall be pending with respect to any such event of
default and (C) the Company and the Trustee shall not have
received a notice with respect to any such event of default from
any holder of Senior Indebtedness (or their representative or
representatives), or, in the case of either clause (A) or clause
(B) above, each such default or event of default shall have been
cured or waived or shall have ceased to exist.
(f) No Event of Default or event which with notice or
lapse of time, or both, would become an Event of Default shall
have occurred and be continuing on the date of such deposit or,
insofar as Sections 501(e) and (f) are concerned, at any time
during the period ending on the 90th 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
cause the Trustee to have a conflicting interest as defined in
Section 608 and for purposes of the Trust Indenture Act with
respect to any securities of the Company.
(h) 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.
(i) The Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent provided for relating to either
the Defeasance under Section 1502 or the Covenant Defeasance
under Section 1503 (as the case may be) have been complied with.
(j) Such Defeasance or Covenant Defeasance shall not
result in the trust arising from such deposit to constitute,
unless it is qualified as, a regulated investment company under
the Investment Company Act of 1940, as amended.
The subordination provisions of Article XIII shall no
longer apply to the Securities upon such Defeasance or Covenant
Defeasance.
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SECTION 1505. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee -
collectively, for purposes of this Section 1505, the "Trustee")
pursuant to Section 1504 shall be held in trust and applied by the
Trustee, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of the Securities, of all sums
due and to become due thereon, in respect of principal of and
premium, if any, and interest on the Securities, but such money need
not be segregated from other funds except to the extent required by
law. Money so held in trust, to the extent allocated for the payment
of Securities, shall not be subject to the provisions of Article
XIII.
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 1504 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 XV to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from
time to time upon Company Request any money or U.S. Government
Obligations held by it as provided in Section 1504 which, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, are in excess of the amount hereof which would then be
required to be deposited to effect an equivalent Defeasance or
Covenant Defeasance.
The provisions for subordination of the Securities set
forth in Article XIII are hereby expressly made subject to the
provisions for Defeasance or Covenant Defeasance in this Article XV
and, anything herein to the contrary notwithstanding, upon the
effectiveness of such Defeasance or Covenant Defeasance, such
Securities shall thereupon cease to be so subordinated.
SECTION 1506. Reinstatement. If the Trustee or Paying
Agent is unable to apply any money in accordance with Section 1502 or
1503 by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had
occurred pursuant to this Article XV until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance
with Section 1502 or 1503; provided, however, that if the Company
makes any payment of principal of or premium, if any, or interest on
any Security following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such
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Securities to receive such payment from the money held by the Trustee
or Paying Agent.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above
written.
SNYDER OIL CORPORATION
By:_______________________
Name:_____________________
Title:____________________
[SEAL]
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
Attest: _______________________ as Trustee
By:_______________________
Authorized Signatory
-99-
SNYDER OIL CORPORATION
DEFERRED COMPENSATION PLAN
FOR SELECT EMPLOYEES
As adopted February 23, 1994
ARTICLE 1 -- INTRODUCTION
1.1 Purpose of the Plan
The Employer has adopted the Plan set forth herein to provide a means
by which certain employees may elect to defer receipt of designated
percentages or amounts of their Compensation and to provide a means
for certain other deferrals of compensation.
1.2 Status of Plan
The Plan is intended to be a "plan which is unfunded and is
maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees" within the meaning of Sections 201(2) and
301(a)(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), and shall be interpreted and administered to the extent
possible in a manner consistent with that intent.
ARTICLE 2 -- DEFINITIONS
Whenever used herein, the following terms have the meanings set forth
below, unless a different meaning is clearly required by the context:
2.1 Account means, for each Participant, the account established for
his or her benefit under Section 5.1.
2.2 Change of Control means (a) the purchase or other acquisition in
one or more transactions other than from the Employer, by any
individual, entity or group of persons within the meaning of Section
13(d)(3) or 14(d) of the Securities Exchange Act of 1934 or any
comparable successor provisions, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act) of 50 percent
or more of either that outstanding shares of common stock or the
combined voting power of Employer's then outstanding voting
securities entitled to vote generally or (b) in connection or as a
result of any tender offer, exchange offer, merger or other business
combination or proxy contest the directors prior to such event no
longer constitute a majority of the directors of Employer, or (c) the
approval by stockholders of the Employer of a reorganization, merger,
consolidation or other business combination, in each case, with
respect to which persons who were stockholders of the Employer
immediately prior to such event do not immediately thereafter own
more than 50% of the combined voting power of the reorganized,
merged, consolidated or combined Employer's then outstanding
securities that are entitled to vote generally in the election of
directors or (d) the liquidiation or dissolution of Employer or sale
of all or substantially all of the Employer's assets.
2.3 Code means the Internal Revenue Code of 1986, as amended, from
time to time. Reference to any section or subsection of the Code
included reference to any comparable or succeeding provisions of any
legislation which amends, supplements or replaces such section or
subsection.
2.4 Compensation means the regular or base salary and cash bonuses
payable by the Employer or an Affiliate to an individual. For
purposes of the Plan, Compensation will be determined before giving
effect to Elective Deferrals and other salary reduction amounts which
are not included in the Participant's gross income under Sections
125, 401(k), 402(h) or 403(b) of the Code.
For purposes of the Plan, bonuses shall be deemed to have been earned
during the Plan Year in which the Employer accrues such bonuses for
federal income tax reporting purposes. Under the Employer's present
method of federal income tax reporting, regular bonuses paid in March
of a given year are accrued ratably during the prior year. Regular
<PAGE>
salary and special bonuses, as designated by the Board of Directors
or the Compensation Committee of the Board of Directors of Employer,
are included in Compensation at the time paid to the employee. Thus,
for example, Compensation for the Plan Year ending December 31, 1995
includes regular salary paid during 1995 and any regular bonus paid
during March 1996. As a result an Elective Deferral to defer, say,
10% of a Participant's 1995 Compensation will result in the deferral
hereunder of 10% of the Participant's 1995 salary and 10% of any
regular bonus paid to the Participant in March 1996 (any regular
bonus payable in March 1995 would not be affected to an election to
defer a portion of 1995 Compensation, since such bonus would be
included in 1994 Compensation).
2.5 Disability means a Participant's total and permanent mental or
physical disability resulting in termination of employment as
evidenced by presentation of medical evidence satisfactory to the
Administrator.
2.6 Effective Date means June 1, 1994.
2.7 Election Form means the participation election form as approved
and prescribed by the Plan Administrator.
2.8 Elective Deferral means the portion of Compensation during a
Plan Year which is deferred by a Participant under Section 4.1.
2.9 Eligible Employee means, on the Effective Date or on any Entry
Date thereafter, those employees of the Employer selected by the
Compensation Committee of the Board of Directors of Employer or by
such persons as the Compensation Committee may authorize to select
employees entitled to participate in the Plan.
2.10 Entry Date means, for each Participant, the date deferrals
commence in accordance with Section 4.1.
2.11 Employer means Snyder Oil Corporation, any successor to all or
a major portion of its assets or business which assumes the
obligations of Employer, and each other entity that is affiliated
with the Employer that adopts the Plan with the consent of the
Employer, provided that Snyder Oil Corporation shall have the sole
power to amend this Plan and shall be the Plan Administrator if no
other person or entity is so serving at any time.
2.12 ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time. Reference to any section or subsection
of ERISA includes reference to any comparable or succeeding
provisions of any legislation which amends, supplements or replaces
such section or subsection.
2.13 Incentive Contribution means a discretionary additional
contribution made by Employer as described in Section 4.3.
2.14 Insolvent means either (1) the Employer is unable to pay its
debts as they become due or (2) the Employer is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
2.15 Matching Deferral means a deferral for the benefit of a
Participant as described in Section 4.2.
2.16 Matching Deferral Limitation means, with respect to Elective
Deferrals of Compensation for any Plan Year made by any Participant,
$75,000 multiplied by the Matching Deferral Rate applicable to that
Participant for such Plan Year. The Compensation Committee may change
the Matching Deferral Limitation for any Participant or all
Participants at any time, provided that the Matching Deferral
Limitation applicable to Elective Deferrals of Compensation for any
Plan Year made by any Participant may not be reduced unless the Plan
Administrator has given written notice of such reduction to the
Participant not less than 10 days prior to the commencement of such
Plan Year.
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2.17 Matching Deferral Rate means, with respect to Elective Deferrals
of Compensation for any Plan Year made by any Participant, 33-1/3%.
The Compensation Committee may change the Matching Deferral Rate for
any Participant or all Participants at any time, provided that the
Matching Deferral Rate applicable to Elective Deferrals of
Compensation for any Plan Year made by any Participant may not be
reduced unless the Plan Administrator has given written notice of
such reduction to the Participant not less than 10 days prior to the
commencement of such Plan Year.
2.18 Participant means any individual who participates in the Plan in
accordance with Article 3.
2.19 Plan means the Snyder Oil Corporation Deferred Compensation Plan
for Select Employees as amended from time to time.
2.20 Plan Administrator means the person, persons or entity
designated by the Employer to administer the Plan and to serve as
agent for the Employer with respect to the Trust. If no such person
or entity is serving as Plan Administrator at any time, the Employer
shall be Plan Administrator.
2.21 Plan Year means, in the case of the first Plan Year, the period
from the Effective Date through December 31, 1994 and, for each Plan
Year thereafter, the 12-month period ending December 31.
2.22 Retirement Age means the age of 55 or such other age as shall be
determined as the normal retirement age for purposes of the
Employer's welfare and retirement plans as determined by the
Employer's Board of Directors or the Compensation Committee thereof.
No determination to increase the Retirement Age shall be effective
with respect to amounts credited to the Account of a Participant with
respect to Plan Years commencing prior to the time of such
determination.
2.22 Trust means the Rabbi Trust established by the Employer that
identifies the Plan as a plan with respect to which assets are to be
held by the Trustee.
2.23 Trustee means the trustee or trustees under the Trust.
ARTICLE 3 -- PARTICIPATION
3.1 Commencement of Participation
Any Eligible Employee who elects to defer part of his or her
Compensation in accordance with Section 4.1 shall become a
participant in the Plan as of the date such deferrals commence in
accordance with Section 4.1. Any individual who is not already a
Participant and whose account is credited with an Incentive
Contribution shall become a Participant as of the date such amount is
credited.
3.2 Continued Participation
A Participant in the Plan shall continue to be a Participant so long
as any amount remains credited to his or her Account.
ARTICLE 4 -- DEFERRALS AND INCENTIVE CONTRIBUTIONS
4.1 Elective Deferrals.
Any Eligible Employee may elect to defer a percentage or dollar
amount of one or more payments of Compensation for the next
succeeding Plan Year, on such terms as the Plan Administrator may
permit, by completing an Election Form and filing it with the Plan
Administrator prior to the first day of such succeeding Plan Year (or
any such earlier date as the Plan Administrator may prescribe),
provided that (1) an individual who is an Eligible Employee on the
3
<PAGE>
Effective Date may, by completing an Election Form and filing it with
the Plan Administrator within 30 days following the Effective Date,
elect to defer a percentage or dollar amount of one or more payments
of Compensation for the 1994 Plan Year, on such terms as the Plan
Administrator may permit, which are payable to the Participant after
the date on which the Eligible Employee files the Election Form and
(2) an Eligible Employee who is a new employee of Employer may, by
completing an Election Form and filing it with the Plan Administrator
within 30 days of the date such employment commences, elect to defer
a percentage or dollar amount of one or more payments of Compensation
for the Plan Year in which such employment commences, on such terms
as the Plan Administrator may permit, which are payable to the
Participant after the date on which the Eligible Employee files the
Election Form.
An election to defer a percentage or dollar amount of Compensation
for any Plan Year shall apply only to that Plan Year, unless the
Participant elects otherwise on the Election Form.
In addition, a Participant may elect to defer all or part of the
amount of any elective deferral contributions that were made on his
or her behalf to the Employer's 401(k) plan for the prior Plan Year
but which were treated as an excess deferral, an excess contribution
or otherwise limited by the application of the limitations of
Sections 401(k), 401(m), 415 or 402(q) of the Code, so long as the
Participant so indicates on an Election Form.
A Participant's Compensation shall be reduced in accordance with the
Participant's election hereunder and amounts deferred hereunder shall
be paid by the Employer to the Trust as soon as administratively
feasible and credited to the Participant's Accounts as of the date
the amounts are received by the Trustee.
4.2 Matching Deferrals
After each payroll period, the Employer shall contribute to the Trust
Matching Deferrals equal to the Matching Deferral Rate multiplied by
the amount of the Elective Deferrals credited to the Participants'
Accounts for such period under Section 4.1. Each Matching Deferral
will be credited as of the date it is received by the Trustee pro
rata in accordance with the amount of Elective Deferrals of each
Participant which are taken into account in calculating the Matching
Deferral. The amount of Matching Contributions credited to the
Account of any Participant with respect to Elective Deferrals of
Compensation for any Plan Year may not exceed the Matching Deferral
Limitation applicable to that Participant for such Plan Year.
Notwithstanding the foregoing or anything in Section 7.1, if the
amount of "Employee Deferral Contributions" (as defined in the
Employer's 401(k) Plan) made by a Participant during a Plan Year is
less than the maximum amount of Employee Elective Deferrals the
Participant is permitted to make to the Employer's 401(k) Plan (after
taking into account the employer's contribution allocated to the
Participant's account and any limitations imposed by the 401(k) Plan
or the Code), all Matching Deferrals, and any income and gain
thereon, credited to the Account of the Participant with respect to
Elective Deferrals of Compensation for such Plan Year shall be
forfeited and applied as provided in Section 7.7, unless the Plan
Administrator, in its sole discretion determines that the failure to
contribute such maximum amount to the Employer's 401(k) Plan is the
result of an administrative error by the Employer or other reasons
beyond the Control of the Participant.
4.3 Incentive Contributions
In addition to other contributions provided for under the Plan, the
Employer may, in its sole discretion, select one or more Eligible
Employees to receive an Incentive Contribution to his or her account
on such terms as the Employer shall specify at the time it makes the
contribution. For example, the Employer may contribute an amount to
the Participant's Account and condition the payment of such amount
and accrued earnings thereon upon the Participant's remaining
employed by the Employer for an additional specified period of time.
The terms specified by the Employer shall supersede any other
provision of this Plan as regards Incentive Contributions and
earnings with respect thereto, provided that if the Employer does not
specify (a) the terms on which such Incentive Contribution will vest,
the Incentive Contribution and earnings thereon will vest in the same
4
<PAGE>
manner as Matching Deferrals or (b) a method of distribution, the
Incentive Contribution and earnings thereon will be distributed in a
manner consistent with the election last made by the Participant
prior to the Plan Year in which the Incentive Contribution is made.
The Employer, in its discretion, may permit the Participant to
designate a distribution schedule for a particular Incentive
Contribution provided the designation is made before the Employer
finally determines that the Participant will receive the Incentive
Contribution.
ARTICLE 5 -- ACCOUNTS
5.1 Accounts
The Plan Administrator shall establish an Account for each
Participant reflecting Elective Deferrals, Matching Deferrals and
Incentive Contributions made for the Participant's benefit together
with any adjustments for income, gain or loss and any payments from
the Account. The Plan Administrator shall establish sub-accounts for
each Participant that has more than one election in effect under
Section 7.1 and such other sub-accounts as are necessary for the
proper administration of the Plan. As of the last business day of
each calendar quarter, the Plan Administrator shall provide the
Participant with a statement of his or her Account reflecting the
income, gains and losses (realized and unrealized), amounts of
deferrals and distributions of such Account since the prior
statement.
5.2 Investments
The assets of the Trust shall be invested in investment options
similar to the options available under the Employer's 401(k) Plan as
directed by the Plan Administrator, except that no portion of Trust
assets may be invested in securities issued by the Employer. Unless
the Plan Administrator, in its sole discretion, determines otherwise,
each Participant may designate the investments in which amounts
credited to such Participant's Account are invested.
ARTICLE 6 -- VESTING
6.1 General
A Participant will be immediately vested in, i.e., shall have a
nonforfeitable right to, all Elective Deferrals, and to all income
and gain attributable thereto, credited to his or her Account.
Subject to earlier vesting in accordance with this Article 6, a
Participant shall become vested in the portion of his or her Account
attributable to Matching Deferrals made with respect to Elective
Deferrals of Compensation for a given Plan Year as follows:
(a) 33-1/3% at the end of the Plan Year with respect to which the
Matching Deferrals are made;
(b) 33-1/3% at the end of the first Plan Year following the Plan
Year with respect to which the Matching Deferrals are made; and
(c) 33-1/3% at the end of the second Plan Year following the Plan
Year with respect to which the Matching Deferrals are made.
Any portion of a Participant's Account that have not vested on the
date that a Participant's employment with Employer terminates shall,
except as provided in this Article 6, shall be forfeited and applied
as provided in Section 7.7.
6.2 Change of Control
A Participant shall become fully vested in his or her Account
immediately prior to a Change of Control of the Employer.
5
<PAGE>
6.3 Death, Retirement or Disability
A Participant shall become fully vested in his or her Account
immediately prior to termination of the Participant's employment by
reason of Participant's death, retirement at or after the attainment
of the Retirement Age or Disability. Whether a Participant's
termination of employment is by reason of Participant's Disability or
retirement shall be determined by the Plan Administrator in its sole
discretion.
6.4 Discretionary Vesting
The Employer may, in its sole discretion, accelerate the vesting of
all or any portion of the Accounts of any Participant or all
Participants.
6.5 Insolvency
A Participant shall become fully vested in his or her Account
immediately prior to the Employer's becoming Insolvent, in which case
the Participant will have the same rights as a general creditor of
the Employer with respect to his or her Account Balance.
ARTICLE 7 - PAYMENTS
7.1 Election as to Time and Form of Payment
A Participant shall elect (on the Election Form used to elect to
defer Compensation under Section 4.1) the date at which the Elective
Deferrals and vested Matching Deferrals (including any earnings
attributable thereto) will commence to be paid to the Participant.
The Participant shall also elect thereon for payments to be paid in
either:
a: a single lump-sum payment; or
b. annual or monthly installments over a period elected by the
Participant up to 10 years, the amount of each installment to
equal the balance of his or her Account immediately prior to the
installment divided by the number of installments remaining to
be paid.
Each such election will be effective for the Plan Year for which it
is made and succeeding Plan Years, unless changed by the Participant.
Any change will be effective only for Elective Deferrals and Matching
Deferrals made for the first Plan Year beginning after the date on
which the Election Form containing the change is filed with the Plan
Administrator. Except as provided in Sections 7.2, 7.3, 7.4, or 7.5,
payment of a Participant's Account shall be made in accordance with
the Participant's elections under this Section 7.1.
7.2 Change of Control
A Participant may elect on the Election Form that, in the event of a
Change of Control, the Participant's entire Account balance
(including any amount vested pursuant to Section 6.2) will either (a)
be paid to the Participant in a single lump sum as soon as possible
following any Change of Control of the Employer or (b) be paid to the
Participant in a single lump sum as soon as possible following a
Change of Control of the Employer unless, prior to the Change of
Control, a majority of the members of the Board of Directors of the
Employer who are not Participants in the Plan determines that the
Change of Control would not reasonably be expected to increase
materially the economic risk of Participants who remain in the Plan
or (c) be paid in accordance with the other provisions of the Plan
without regard to any Change of Control. Unless the Participant shall
have elected otherwise on the Election Form, as soon as possible
following a Change of Control of the Employer, each Participant shall
be paid his or her entire Account balance (including any amount
vested pursuant to Section 6.2) in a single lump sum.
6
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7.3 Termination of Employment
Unless the Plan Administrator, in its sole discretion, determines
otherwise, upon termination of a Participant's employment for any
reason other than death, Disability and retirement after attainment
of the Retirement Age, the vested portion of the Participant's
Account shall be paid to the Participant in a single lump sum as soon
as practicable following the date of such termination. If the Plan
Administrator does determine not to make a lump sum payment to a
Participant under this Section, the Plan Administrator may, in its
sole discretion, determine to pay the vested portion of such
Participant's Account in a single lump sum at any time thereafter.
7.4 Disability
If the Participant's employment terminates by the reason of the
Participant's Disability, the amounts credited to a Participant's
Account with respect to any Plan Year shall be paid out in accordance
with the election made in accordance with Section 7.1 unless the Plan
Administrator, in its sole discretion, determines to pay such amounts
in one lump sum or the Participant shall have elected in such
Election Form to receive payment of the remaining balance of such
amounts in one lump sum if his or her employment terminates by reason
of Disability.
7.5 Death
If a Participant dies prior to the complete distribution of his or
her Account, the balance of the Account shall be paid as soon as
practicable to the Participant's designated beneficiary or
beneficiaries, in the form elected by the Participant under either of
the following options:
a. a single lump-sum payment; or
b. annual or monthly installments over a period elected by the
Participant up to 10 years, the amount of each installment
to equal the balance of the Account immediately prior to
the installment divided by the number of installments
remaining to be paid.
Any designation of beneficiary and form of payment to such
beneficiary shall be made by the Participant on an Election Form
filed with the Plan Administrator and may be changed by the
Participant at any time by filing another Election Form containing
the revised instructions. If no beneficiary is designated or no
designated beneficiary survives the Participant, payment shall be
made to the Participant's surviving spouse or, if none, to his or her
issue per stirpes, in a single payment. If no spouse or issue
survives the Participant, payment shall be made in a single lump sum
to the Participant's estate.
7.6 Unforeseen Emergency
If a Participant suffers an unforeseen emergency, as defined herein,
the Plan Administrator, in its sole discretion, may pay to the
Participant only that portion, if any, of the vested portion of his
or her Account which the Plan Administrator determines is necessary
to satisfy the emergency need, including any amounts necessary to pay
any federal, state or local income taxes reasonably anticipated to
result from the distribution. A Participant requesting an emergency
payment shall apply for the payment in writing in a form approved by
the Plan Administrator and shall provide such additional information
as the Plan Administrator may require. For purposes of this
paragraph, "unforeseen emergency" means an immediate and heavy
financial need resulting from either of the following:
a. expenses which are not covered by insurance and which the
Participant or his or her spouse or dependent has incurred as a
result of, or is required to incur in order to receive, medical
care; or
7
<PAGE>
b. any circumstance that is determined by the Plan Administrator in
its sole discretion to constitute an unforeseen emergency which
is not covered by insurance and which cannot reasonably be
relieved by the liquidation of the Participant's assets.
7.7 Forfeiture of Non-vested Amounts
To the extent that any amounts credited to a Participant's Account
are not vested at the time such amounts are otherwise payable under
Sections 7.1 or 7.3, such amounts shall be forfeited and shall, at
the option of the Employer, either be paid to the Employer or used to
satisfy the Employer's obligation to make contributions to the Trust
under the Plan.
7.8 Taxes
All federal, state or local taxes that the Plan Administrator
determines are required to be withheld from any payments made
pursuant to this Article 7 shall be withheld.
ARTICLE 8 - PLAN ADMINISTRATOR
8.1 Plan Administration and Interpretation
The Plan Administrator shall oversee the administration of the Plan.
The Plan Administrator shall have complete control and authority to
determine the rights and benefits and all claims, demands and actions
arising out of the provisions of the Plan of any Participant,
beneficiary, deceased Participant, or other person having or claiming
to have any interest under the Plan. The Plan Administrator shall
have complete discretion to interpret the Plan to decide all matters
under the Plan. Such interpretation and decision shall be final,
conclusive and binding on all Participants and any person claiming
under or through any Participant, in the absence of clear and
convincing evidence that the Plan Administrator acted arbitrarily and
capriciously. Any individual(s) serving as Plan Administrator who is
a Participant will not vote or act on any matter relating solely to
himself or herself. When making a determination or calculation, the
Plan Administrator shall be entitled to rely on information furnished
by a Participant, a beneficiary, the Employer or the Trustee. The
Plan Administrator shall have the responsibility for complying with
any reporting and disclosure requirements or ERISA.
8.2 Powers, Duties, Procedures, Etc.
The Plan Administrator shall have such powers and duties, may adopt
such rules and tables, may act in accordance with such procedures,
may appoint such officers or agents, may delegate such powers and
duties, may receive such reimbursements and compensation, and shall
follow such claims and appeal procedures with respect to the Plan as
it may establish.
8.3 Information
To enable the Plan Administrator to perform its functions, the
Employer shall supply full and timely information to the Plan
Administrator on all matters relating to the compensation of
Participants, their employment, retirement, death, termination or
employment, and such other pertinent facts as the Plan Administrator
may require.
8.4 Indemnification of Plan Administrator
The Employer agrees to indemnify and to defend to the fullest extent
permitted by law any officer(s) or employee(s) who serve as Plan
Administrator (including any such individual who formerly served as
Plan Administrator) against all liabilities, damages, costs and
expenses (including attorneys' fees and amounts paid in settlement of
any claims approved by the Employer) occasioned by any act or
8
<PAGE>
omission to act in connection with the Plan, if such act or omission
is in good faith.
ARTICLE 9 - AMENDMENT AND TERMINATION
9.1 Amendments
The Employer, upon action of its Board of Directors or an authorized
committee thereof, shall have the right to amend the Plan from time
to time, subject to Section 9.3, by an instrument in writing which
has been executed on the Employer's behalf by its duly authorized
officer.
9.2 Termination of Plan
This Plan is strictly a voluntary undertaking on the part of the
Employer and shall not be deemed to constitute a contract between the
Employer and any Eligible Employee (or any other employee) or a
consideration for, or an inducement or condition of employment for,
the performance of the services by any Eligible Employee (or other
employee). The Employer reserves the right to terminate the Plan at
any time, subject to Section 9.3, by an instrument in writing which
has been executed on the Employer's behalf by its duly authorized
officer. Upon termination, the Employer may (a) elect to continue to
maintain the Trust to pay benefits hereunder as they become due as if
the Plan had not terminated or (b) direct the Trustee to pay promptly
to Participants (or their beneficiaries) the vested balance of their
Accounts. For purposes of the preceding sentence, in the event the
Employer chooses to implement clause (b), the Account balances of all
Participants who are in the employ of the Employer at the time the
Trustee is directed to pay such balances shall become fully vested
and nonforfeitable. After Participants and their beneficiaries are
paid all Plan benefits to which they are entitled, all remaining
assets of the Trust attributable to Participants who terminated
employment with the Employer prior to termination of the Plan who
were not fully vested in their Accounts under Article 6 at that time,
shall be returned to the Employer.
9.3 Existing Rights
No amendment or termination of the Plan shall adversely affect the
rights of any Participant with respect to amounts that have been
credited to his or her Account prior to the date of such amendment or
termination.
ARTICLE 10 - MISCELLANEOUS
10.1 No Funding
The Plan constitutes a mere promise by the Employer to make payments
in accordance with the terms of the Plan and Participants and
beneficiaries shall have the status of general unsecured creditors of
the Employer. Nothing in the Plan will be construed to give any
employee or any other person rights to any specific assets of the
Employer or of any other person. In all events, it is the intent of
the Employer that the Plan be treated as unfunded for tax purposes
and for purposes of Title 1 of ERISA.
10.2 Non-assignability
None of the benefits, payments, proceeds or claims of any Participant
or beneficiary shall be subject to any claim of any creditor of any
Participant or beneficiary and, in particular, the same shall not be
subject to attachment or garnishment or other legal process by any
creditor of such Participant or beneficiary, nor shall any
Participant or beneficiary have any right to alienate, anticipate,
commute, pledge, encumber or assign any of the benefits or payments
or proceeds which he or she may expect to receive, contingently or
otherwise, under the Plan.
9
<PAGE>
10.3 Limitation of Participants' Rights
Nothing contained in the Plan shall confer upon any person a right to
be employed or to continue in the employ of the Employer, or
interfere in any way with the right of the Employer to terminate the
employment of an Participant in the Plan any time, with or without
cause.
10.4 Participants Bound
Any action with respect to the Plan taken by the Plan Administrator
or the Employer or the Trustee or any action authorized by or taken
at the direction of the Plan Administrator, the Employer or the
Trustee shall be conclusive upon all Participants and beneficiaries
entitled to benefits under the Plan.
10.5 Receipt and Release
Any payment to any Participant or beneficiary in accordance with the
provisions of the Plan shall, to the extent thereof, be in full
satisfaction of all claims against the Employer, the Plan
Administrator and the Trustee under the Plan, and the Plan
Administrator amy require such Participant or beneficiary, as a
condition precedent to such payment, to execute a receipt and release
to such effect. If any Participant or beneficiary is determined by
the Plan Administrator to be incompetent by reason or physical or
mental disability (including minority) to give a valid receipt and
release, the Plan Administrator may cause the payment or payments
becoming due to such person to be made to another person for his or
her benefit without responsibility on the part of the Plan
Administrator, the Employer or the Trustee to follow the application
of such funds.
10.6 Plan Does Not Affect Employment Rights
The Plan does not provide any employment rights to any Eligible
Employee or Participant. The Employer expressly reserves the right to
discharge an Employee at any time, with or without cause and with or
without prior notice, without regard to the effect such discharge
would have on the Employee's interest in the Plan.
10.7 Governing Law
The Plan shall be construed, administered, and governed in all
respects under and by the laws of the state of Texas. If any
provision shall be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions hereof shall
continue to be fully effective.
10.8 Headings and Subheadings
Headings and subheadings in this Plan are inserted for convenience
only and are not to be considered in the construction of the
provisions hereof.
The foregoing is the Deferred Compensation Plan of Snyder Oil
Corporation. The Plan was approved by the Compensation Committee of
the Board of Directors of Snyder Oil Corporation on February 22, 1994
and by the Board of Directors of Snyder Oil Corporation on February
23, 1994.
/s/ Peter E. Lorenzen
- -----------------------
Peter E. Lorenzen
Secretary
NATIONSBANK Master Equipment Lease
NationsBanc Leasing Corporation
Lease Agreement Number 08082-00300
- -------------------------------------------------------------
This Master Equipment Lease Agreement (this "Lease") dated as of
November 3, 1994 between NationsBanc Leasing Corporation ("Lessor"),
a corporation organized under the laws of North Carolina, having its
chief executive office at 2300 Northlake Centre Drive, Suite 300,
Tucker, GA 30084, (Telecopy No. 404-270-8454), and Snyder Oil
Corporation ("Lessee"), a corporation organized under the laws of
Delaware, having its chief executive office at 777 Main Street, Suite
2500, Fort Worth, TX 76102, (Telecopy No. 817-882-5895).
1. Lease Agreement
Subject to the terms and conditions contained herein and in the other
Transaction Papers (as herein defined), Lessor shall lease to Lessee,
and Lessee shall hire from Lessor, the units of personal property
(collectively with all attached parts, replacements, additions,
accessions and accessories attached thereto, the "Equipment")
described in one or more equipment schedules (each a "Schedule")
which incorporate by reference this Master Equipment Lease Agreement.
Each Schedule shall constitute a separate and independent lease and
contractual obligation of Lessee. Until a Schedule is duly signed
and delivered by Lessor, a Schedule signed and delivered by Lessee
constitutes an irrevocable offer by Lessee to lease the Equipment
described in such Schedule from Lessor. In addition to this Lease
and Schedules hereto, Lessor and Lessee are simultaneously herewith
entering into the following documents, instruments and agreements in
connection with the transactions contemplated hereby: (a) a Site
Lease Agreement (herein so called), (b) a Facility Agreement (herein
so called), and (c) an Environmental Indemnity Agreement (herein so
called). This Lease, any and all Schedules hereto, the Site Lease
Agreement, the Facility Agreement, the Environmental Indemnity
Agreement and all other documents, instruments, agreements and
certificates now or at any time hereafter delivered in connection
with this Lease, any Schedules hereto, the Site Lease Agreement, the
Facility Agreement or the Environmental Indemnity Agreement (as the
<PAGE>
same may be amended, modified or restated from time to time) are
collectively referred to herein as the "Transaction Papers".
2. Terms of Lease; Rentals and Deposit
The lease term with respect to any Equipment covered by a Schedule
shall consist of an "Interim Term" and a "Base Term" as provided in
the Schedule covering such Equipment. Lessee shall pay rent for the
Interim Term ("Interim Rent") as provided and in amounts determined
by Lessor as set forth in the applicable Schedule, and shall pay rent
for the Base Term ("Base Rent") in such amounts and at such times as
shall be specified in the applicable Schedule. At the time Lessee
signs and delivers a Schedule, Lessee shall deposit with Lessor such
additional sum ("Security Deposit"), if any, specified in such
Schedule as security for the payment and performance of any
obligations of Lessee hereunder or under the other Transaction
Documents.
3. Location and Use of Equipment
Each item of Equipment shall at all times be and remain in the
possession and control of Lessee at the address stated in the
Schedule covering such item. Lessee shall use, operate, protect, and
maintain the Equipment in compliance with all applicable insurance
policies, laws, ordinances, rules, regulations and manufacturer's
instructions. The Equipment shall be used solely for commercial or
business purposes and not for any consumer, personal, home or family
purpose. If requested by Lessor, Lessee shall cause each item of
Equipment to be and remain plainly and conspicuously marked by
insignia, stencilling, plaques, tags, decals or other forms of notice
to disclose Lessor's ownership of the Equipment. Lessee shell keep
the Equipment free and clear of any and all liens, encumbrances,
claims and charges (except for those created expressly by Lessor) and
shall not in any way encumber its rights hereunder or under any
Schedule.
4. Taxes
Lessee shall reimburse Lessor on demand for all taxes, assessments
and other governmental charges paid by Lessor in connection with the
Equipment or its use, ownership or operation while in Lessee's
<PAGE>
possession or the payment or receipt of rent or other charges under
any Schedule, including but not limited to foreign, federal, state,
county and municipal fees and taxes, ad valorem, sales (including any
sales taxes payable in connection with the purchase of the Equipment
by Lessor), use, excise, stamp and documentary taxes (other than
federal and state taxes based on Lessor's net income), and all
related penalties, fines and interest charges. Upon Lessor's
request, Lessee will immediately furnish to Lessor such information
as Lessor shall require in connection with the preparation and filing
of all returns relating to such taxes, assessments, or charges.
Lessee acknowledges that tax laws require that Lessor, as the legal
owner of the Equipment, is responsible for listing the Equipment for
all federal, state, county or municipal taxes applicable to the
Equipment. Lessee will declare, when listing property to taxing
authorities, the Equipment as LEASED equipment only.
5. Net Lease, Loss and Damage
(a) Each Schedule is a net lease. All costs, expenses and other
liabilities associated with the Equipment shall be borne by Lessee.
Lessee's obligations under any and all Schedules are absolute and
unconditional, and are not to be subject to any abatement, deferment,
reduction, setoff, defense, counterclaim or recoupment for any reason
whatsoever. Except as otherwise expressly provided herein, no
Schedule shall terminate nor shall the obligations of Lessee be
affected by reason of any defect or damage to, or any destruction,
loss, theft, forfeiture, governmental requisition or obsolescence of
the Equipment, regardless of cause.
(b) Lessee assumes all risk of damage to or loss, theft or
destruction of the Equipment from any cause whatsoever from the date
the Equipment is shipped by the vendor or manufacturer. In the event
of loss or destruction of the Equipment from any cause whatsoever
from the date the Equipment is shipped by the vendor or manufacturer
but prior to its acceptance by the Lessee, Lessee shall promptly pay
to Lessor all sums heretofore paid by Lessor to such vendor or
manufacturer and Lessor shall assign to Lessee all of its rights or
causes of action, if any, against such vendor or manufacturer. In
the event of damage of any kind whatsoever to any item of the
<PAGE>
Equipment on or after its acceptance by Lessee, Lessee shall, at
Lessor's option, either place the same in good repair, condition or
working order or if in the reasonable judgment of Lessor the
Equipment is determined by Lessor to be lost, stolen, destroyed or
damaged beyond repair, Lessee shall pay Lessor the Stipulated Loss
Value therefor. Upon such payment, the Lease of such Equipment shall
terminate and Lessee thereupon shall become entitled to such item of
the Equipment "As is and Where is" without warranty, express or
implied, with respect to any matter whatsoever. The Stipulated Loss
Value of any Equipment shall be determined by Lessor in accordance
with the provisions of the Schedule covering such Equipment.
Proceeds of insurance may be available for the repair or payment of
the Stipulated Loss Value, in accordance with Section 6 hereof.
6. Insurance
Lessee shall, at its expense, procure and maintain the following
insurance coverages on the Equipment until the Equipment is returned
to Lessor or Lessee's obligations with respect thereto under any
applicable Schedule are otherwise terminated: (i) insurance against
theft, fire, and such other risks as Lessor shall specify or (absent
any written specification by Lessor) as are customarily insured
against in Lessee's trade or industry, under policies naming Lessor
as loss payee, and (ii) comprehensive public liability and property
damage insurance, under policies naming Lessor as additional insured.
Each such insurance policy shall: (a) include provisions for the
protection of Lessor notwithstanding any action or inaction, neglect,
breach, violation, or default of or by Lessee of any warranty,
condition or declaration, (b) provide for payment of insurance
proceeds to Lessor to the extent of its liability or interest, (c)
provide that such policy may not be modified, terminated or canceled
unless Lessor is given at least thirty (30) days' advance written
notice thereof, (d) provide that the coverage is "primary coverage"
for the protection of Lessee and Lessor notwithstanding any other
coverage carried by Lessee or Lessor protecting against similar risks
or liabilities, and (e) be issued in such amounts (which in the case
of casualty insurance will never be less than the Stipulated Loss
Value of this Equipment covered thereby), with such deductibles, by
such insurance company, and otherwise in such form as shall all be
<PAGE>
reasonably satisfactory to Lessor. Lessee shall furnish Lessor with
certificates or other satisfactory evidence of such insurance, and
shall furnish Lessor with a renewal certificate for each policy at
least ten (10) days before the policy renewal date. Lessor shall
have no duty or examine any certificate or other evidence of
insurance, or to advise Lessee in the event that its insurance is not
in compliance with this Section 6. The proceeds of any public
liability or property damage insurance shall be payable first to
Lessor to the extent of its liability, if any, and the balance to
Lessee. The proceeds of fire, theft, or other casualty insurance
shall be payable to Lessor if any Event of Default has occurred which
is continuing or if the insurance proceeds resulting from such
casualty exceed $1,000,000. If no Event of Default has occurred
which is continuing, all insurance proceeds shall be used for the
full and complete repair or replacement of the affected Equipment,
(with any excess proceeds being paid to Lessee). If an Event of
Default shall have occurred which is continuing, such proceeds may,
at Lessor's sole option, be applied toward the payment of Lessee's
obligations under the applicable Schedule or for the repair or
replacement of the affected Equipment. Lessee hereby appoints Lessor
as Lessee's agent and attorney-in-fact with full power to do all
things (including but not limited to making, adjusting, and settling
claims, and receiving payments and endorsing documents, checks, or
drafts) necessary or advisable to secure payment due under any
insurance policy contemplated hereby.
7. [Intentionally Deleted]
8. Tax Indemnity
(a) All references to "Lessor" in this Section 8 shall include each
holder of a beneficial interest in any trust to which any interest of
Lessor in and to the Equipment or any Transaction Paper may be
assigned and shall also include each member of the affiliated group
of corporations, as defined in Section 1504 (a) of the Internal
Revenue Code of 1986, as amended (the "Code"), of which Lessor or any
such holder of a beneficial interest is a member.
<PAGE>
(b) Lessor and Lessee agree that Lessor shall be treated for federal,
state and local income tax purposes as the owner of the Equipment and
shall be entitled to take into account in computing its income tax
liabilities, all items of income, deduction, credit, gain or loss
relating to ownership of the Equipment as are provided under the Code
and applicable state and local tax laws to owners of similar
equipment (hereinafter collectively the "Tax Benefits").
(c) If (i) Lessor shall lose, shall be delayed in claiming, shall not
have a right to claim, shall be required to recapture (other than in
connection with a sale of the Equipment following the end of the
lease term, provided Lessee is not then in default), shall not be
allowed or shall not claim as a result of a written opinion or
independent tax counsel selected by Lessor to the effect that
Lessor's claiming of such Tax Benefits probably would not be upheld
by a court if the matter were litigated (that is, the chances of a
finding against Lessor are at least as great as the chances in favor
of Lessor), all or any portion of any Tax Benefits, under any
circumstances, at any time, and for any reason; or (ii) the federal,
state or local income tax rates in effect on the commencement date of
the lease term for such Equipment (the "Tax Rates") are changed with
respect to any period on or prior to the disposition of the Equipment
by Lessor, or (iii) Lessor is required under Section 467 of the Code
or otherwise to include in its gross income with respect to any
Schedule or item of Equipment any amount at any time other than
rentals and other amounts payable by Lessee hereunder at the times
such amounts are payable as provided herein, then Lessor and Lessee
agree that, upon Lessor's demand and at Lessor's option, either: (x)
all further rental payments with respect to such Equipment, if any,
shall be increased, or (y) Lessee shall pay to the Lessor a lump sum
amount, which shall in either case maintain the net economic after-
tax yield, cash-flow and rate of return Lessor originally anticipated
based on the assumptions (including Tax Rates) that were originally
utilized by Lessor in originally evaluating the transaction and
setting the rental therefor and the other terms thereof. Lessee
shall also pay to Lessor all interest, costs (including attorney's
fees) and penalties associated with the loss of Tax Benefits or the
change in Tax Rates, including costs of collecting amounts under this
Section 8.
<PAGE>
(d) For purposes of paragraph (c) above, Lessor shall at all times be
deemed to have sufficient taxable income and tax liability to be able
to utilize the Tax Benefits on a current basis and the fact that
Lessor may lose Tax Benefits solely because it either (i) has
insufficient taxable income or tax liability or (ii) is subject to
the alternative minimum tax shall not be taken into account.
9. Delivery, Acceptance and Return of Equipment
(a) Upon delivery to and acceptance by Lessee of any Equipment,
Lessee shall execute and deliver the Schedule relating to such
Equipment, identifying same and acknowledging receipt thereof, with
all information required on the Schedule fully completed. Lessee's
execution of such Schedule shall constitute acceptance of delivery of
such Equipment Lessee's acknowledgement that such Equipment is in
good operating order, repair, condition and appearance, is of the
manufacture, design and capacity selected by Lessee and is suitable
for the purposes for which such Equipment is leased.
(b) Subject to the provisions of any applicable Schedule, at the
expiration of the lease term with respect to any Equipment, including
any renewal thereof, upon demand Lessee shall, at its own expense,
return such Equipment to Lessor at a place reasonably designated by
Lessor, in the same operating order, repair, condition and appearance
as when received, reasonable wear and tear excepted. If upon such
expiration or termination Lessee does not immediately return an item
of Equipment to Lessor, such item shall continue to be held subject
to all the terms and conditions hereof, and Base Rent and other
charges shall continue to accrue and be payable hereunder with
respect to such item until it is returned to Lessor. Payment or
acceptance of any such rent or other charge shall not be deemed a
waiver of any default and shall not suspend or otherwise affect any
right or remedy hereunder including without limitation Lessee's
obligation to return immediately (and Lessor's right to take
immediate possession of) any such item.
<PAGE>
10. Maintenance
Lessee shall, at its own expense, maintain and keep the Equipment in
good working order, repair, appearance and condition and make all
necessary adjustments and repairs thereto and replacements thereof.
In furtherance of and in addition to the foregoing, Lessor agrees
that so long as no Event of Default has occurred which is continuing,
Lessee may, at its own cost and expense, make such modifications,
alterations, improvements and additions to the Equipment and
replacements of and substitutes for such Equipment and all components
and parts thereto as Lessee deems necessary or appropriate, and in
connection therewith and in connection with any required repairs or
replacements, Lessee may dispose of, in such manner and on such terms
as Lessee deems appropriate, any and all items of Equipment and parts
and components thereto which are damaged, destroyed, obsolete or no
longer used or useful in the operation of any plant or facility in
which the Equipment is deployed; provided, that, (a) Lessee may not
make any alteration, modification, improvement or addition to the
Equipment which impairs the originally intended function of the
Equipment, (b) Lessee may not dispose of any item of Equipment or any
part or component thereto unless Lessee replaces such item of
Equipment, part or component with a replacement which is in as good
a condition as, and has a value and utility at least equal to, the
item of Equipment, part or component being replaced (assuming that
the item of Equipment, part or component was in good condition and
repair at the time it was disposed of), and (c) all alterations,
modifications, improvements and replacements to the Equipment and
parts and components thereto shall become part of the Equipment for
purposes hereof and shall be the sole and exclusive Property of
Lessor (subject to Lessee's leasehold interest therein).
11. Renewal and Purchase
Except as set forth in the applicable Schedule, Lessee may not renew
or extend the lease term with respect to any Equipment, nor shall
Lessee have any option to purchase such Equipment.
12. Assignment of Warranties and Limitation of Responsibility
Lessor hereby transfers and assigns to Lessee, to the extent
allowable by law, for and during the lease term of each Schedule with
respect to any Equipment covered by such Schedule, the warranties, if
any, of the manufacturer issued on such Equipment, and hereby
authorizes Lessee to obtain at is own expense the customary service
furnished by the manufacturer in connection therewith. Lessee
<PAGE>
acknowledges that Lessor is not a manufacturer, the agent of a
manufacturer or engaged in the sale or distribution of the Equipment
and has not made, and does not hereby make, any representations as to
merchantability, performance, condition, fitness or suitability of
any of the Equipment for the purposes of Lessee or make any other
representation with respect thereto. Lessor shall not be liable to
Lessee for any loss, claim, liability, cost, damage or expense of any
kind caused, or alleged to be caused, directly or indirectly, by any
Equipment, or by an inadequacy thereof for any purpose, or by any
defect therein, or the use or maintenance thereof, or any repairs,
servicing or adjustments thereof, or any delay in providing or
failure to provide same, or any interruption or loss of service or
use thereof, or any loss of business, profits, consequential or other
damage of any nature. Lessee agrees that its obligations hereunder
shall not in any way be effected by any defect or failure of
performance of Equipment.
13. Personal Property
The Equipment shall remain personal property at all times,
notwithstanding the manner in which it may be attached or affixed to
realty, and title shall at all times continue in Lessor. Lessee
warrants that at any time any Equipment is leased hereunder, or is
removed to a new location that Lessee shall provide to Lessor written
notice thereof within 30 days of the date of such relocation and
either (i) the premises in which such Equipment will be installed
will be owned by Lessee free of any liens or encumbrances, or (ii) if
not owned by Lessee free of liens or encumbrances, the owner of such
premises and/or the holder of any such liens or encumbrances on such
premises shall have consented and acknowledged that such Equipment is
and shall remain personal property subject to all the provisions of
this Lease. Lessee will obtain and record such instruments and take
such steps as may be necessary to prevent any person from acquiring
any right in any Equipment paramount to the rights of Lessor by
reason of such Equipment being deemed to be real property. If any
third party should attempt to establish any legal right in any
Equipment, then Lessee shall, promptly after learning thereof, notify
Lessor in writing and, within thirty (30) days after such notice,
<PAGE>
either (i) cause such right to be waived or eliminated to the
satisfaction of Lessor or (ii) otherwise stay such action or
indemnify Lessor to Lessor's satisfaction.
14. Default and Remedies
(a) Each of the following shall constitute an Event of Default
hereunder and under any and all Schedules then in effect (each an
"Event of Default"); as used herein, "Event of Default" shall also
have the meaning given such term in the Facility Agreement; (1)
nonpayment when due of any installment of rent or other sum owing by
Lessee hereunder under any Schedule or under any other agreement
between Lessor and Lessee if such nonpayment continues for ten (10)
days; (2) Lessee's failure to perform and comply with any other
provision or condition hereunder or under any Schedule if such
failure continues for ten (10) days after written notice thereof by
Lessor to Lessee; (3) Except as permitted by Section 10 hereof,
Lessee's attempt to sell, lease or encumber any item of the Equipment
without Lessor's prior written consent, or the attachment of any lien
to any such item in favor of any one other than Lessor, or any
attempted levy, seizure or attachment on such item; (4) any
representation or warranty made by Lessee to Lessor hereunder or
under any Schedule, certificate, agreement, instrument or other
statement including income and financial statements, proves to have
been incorrect in any material respect when made; (5) the merger,
consolidation, reorganization or dissolution of, or transfer of a
controlling stock interest in Lessee or the suspension of Lessee's
present business; (6) Lessee's general assignment for the benefit of
creditors or commencement of any voluntary case or proceeding for
relief under the Bankruptcy Code, or any other present or future law
for the relief of debtors, or the taking of any action to authorize
or implement any of the foregoing; (7) the filing of any petition or
application against Lessee under any present or future law for the
relief of debtors, including proceedings under the Bankruptcy Code or
for the subjection of property of debtors to the control of any
court, receiver or agency for the benefit of creditors if such
petition or application is consented to by Lessee or not dismissed
within sixty (60) days from the date of filing; (8) a default exists
<PAGE>
under any other agreement or instrument of Lessee with or in favor of
Lessor; or (9) the attempted repudiation of any guaranties for
obligations of Lessee to Lessor; (10) the Pension Benefit Guaranty
Corporation's commencement of proceedings under Section 4042 of the
Employee Retirement Income Security Act of 1974 to terminate any
employee pension benefit plan of Lessee or any subsidiary of Lessee;
(11) the occurrence of any event described in clauses 6, 7, 8 or 10
of this Section 14 with respect to any guarantor or the person liable
for payment or performance of Lessee's obligations under this Lease.
(b) Upon the occurrence of an Event of Default, Lessor may at its
option; (i) proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by Lessee of the applicable
covenants hereunder and under any or all Schedules or to recover
damages for the breach thereof; or (ii) cancel Lessee's right of
possession of any or all of the Equipment, whereupon all rights of
Lessee to use the Equipment shall absolutely cease and terminate, but
Lessee shall remain liable as herein provided. Upon such
cancellation, Lessee shall, at its own expense, immediately redeliver
such Equipment to Lessor at a place within the continental United
States designated by Lessor. If Lessee shall fail to do so, Lessor
may retake possession of such Equipment by entering upon any premises
at any reasonable time, and thereafter Lessor may hold, possess,
sell, upgrade, lease to others or enjoy the same, free from any
rights of Lessee, its successors or assigns. If Lessor elects to
cancel Lessee's rights of possession of any Equipment, Lessor may
recover from Lessee any and all amounts that, under the terms of the
applicable Schedule, are then due or that have accrued to the date of
such termination, and may also recover forthwith from Lessee, as
damages for loss of its bargain and not as a penalty, an amount equal
to the Stipulated Loss Value of such Equipment as of the rental
payment date on or next preceding the date of default. However, if
Lessor recovers possession of such Equipment, Lessee's obligation
under the preceding sentence shall be reduced by (1) the net amount
Lessor in fact receives from the sale of any of such Equipment, or
(2) at Lessor's election, the present value (determined on the basis
of the "Discount Rate" as hereinafter defined) of the noncancelable
regularly scheduled rentals receivable under a subsequent lease of
<PAGE>
any of the Equipment, taking into account only the rentals receivable
from the commencement date of such subsequent lease until the end of
the lease term for such Equipment under the applicable Schedule. For
purposes of this Section 14, the Discount Rate shall be a rate of
interest equal to four percent (4%) plus the "Prime Rate" of
NationsBank of Georgia N.A., Atlanta, Georgia (or any successor
thereto), as announced on the day on which the commencement date of
such subsequent lease occurs.
(c) In addition to any amount recoverable under paragraph (b) above,
Lessor may recover from Lessee all Lessor's costs and expenses
incurred by reason of Lessee's breach or default, including without
limitation costs and expenses of repossession, storing, holding,
transporting, insuring, servicing, repairing, maintaining, renting
and selling any Equipment and collecting rents and other proceeds of
its disposition, and fees and expenses of attorneys in the amount of
fifteen percent (15%) of all amounts due on or after the time of such
breach or default (but not to exceed the amount actually incurred),
and other professionals employed by Lessor in connection with the
protection and enforcement of its title and interest in any and all
Equipment and its rights under any and all Schedules. From and after
the occurrence of an Event of Default, any installment of rent or
other sum owing under any Schedule that is not paid when due shall
accrue interest from the date of such Event of Default or (if later)
the date such amount becomes due to the date it is paid, at a per
annum rate equal to the lesser of (i) 15%, and (ii) the highest rate,
if any, permitted by applicable law.
(d) Except as otherwise expressly provided herein, all rights and
remedies of Lessor are concurrent and cumulative. The exercise or
partial exercise of any remedy shall not restrict Lessor from further
exercise of that remedy or any other remedy provided for herein or
otherwise available under applicable law. To the extent permitted by
applicable law, Lessee waives any rights now or hereafter conferred
by statute or otherwise that may require Lessor to sell, release or
otherwise use or dispose of any of Equipment in mitigation of
Lessor's damages or that may otherwise limit or modify any of
Lessor's rights or remedies.
<PAGE>
15. Assignment By Lessor
Lessor may assign or transfer, and Lessee hereby consents to the
assignment or transfer, of all or any part of any schedule or
Lessor's interest in any Equipment without notice to Lessee. Lessee
agrees that the liability of Lessee to any assignee of Lessor and any
subsequent assignee of such assignee shall be absolute and
unconditional and shall not be affected by any default hereunder of
Lessor whatsoever or by any breach of any warranty, express or
implied, in respect of any Equipment or Schedule. Lessee further
agrees that no such assignee shall be required to assume any of the
obligations of Lessor under any Schedule except (i) the obligation in
respect of the application of any insurance monies received by such
assignee, as hereinabove provided, (ii) that the assignee shall be
responsible for its own misconduct after the assignment, and (iii)
that any successor lessor shall be responsible for the Lessor's
duties hereunder after any such assignment. Lessee acknowledges that
no such assignment shall materially change Lessee's duties hereunder
or materially increase any burden or risk imposed on Lessee
hereunder.
16. Assignment by Lessee
Except as expressly permitted pursuant to Section 5.3 of the Facility
Agreement, Lessee shall not assign or in any way dispose of all or
any part of its rights or obligations under any Schedule or enter
into any sublease of all or any part of any Equipment without the
prior written consent of Lessor.
17. [Intentionally Deleted]
18. Miscellaneous
(a) Each Schedule is and is intended to be a lease, and Lessee does
not acquire hereby or under any Schedule any right, title, equity or
other interest in or to any Equipment, except the right to use the
same under the conditions hereof and under the additional conditions
set forth in the applicable Schedule. Lessee waives any right to
assert any lien or security interest on Equipment in Lessee's
possession or control for any reason.
<PAGE>
(b) The relationship between Lessor and Lessee shall always and only
be that of lessor and lessee. Lessee shall never at any time for any
purpose whatsoever be or become the agent of Lessor and Lessor shall
not be responsible for the acts or omissions of Lessee or its agents.
(c) At Lessor's request, Lessee shall execute, deliver, file and
record such financing statements and other documents as Lessor shall
deem necessary or advisable to protect Lessor's interests in the
Equipment and to effectuate the purposes of this Lease and the other
Transaction Papers. Lessee hereby irrevocably appoints Lessor as
Lessee's agent and attorney-in-fact for Lessee to execute, deliver,
file or record any such item and to take such action for Lessee and
in Lessee's name, place and stead.
(d) Lessor, its agents and employees shall have the right to enter
any property where Equipment is located to inspect any Equipment at
any reasonable time. Lessor's right to inspect the Equipment is
solely for the benefit of Lessor and shall not impose any obligation
of any kind whatsoever on Lessor.
(e) Lessee agrees to pay Lessor a late charge equal to five percent
(5%) of the rental on all rentals not paid by Lessee to Lessor within
10 days of when due and owing under the provisions of this Lease.
(f) To secure the full and punctual payment and performance of its
obligations under each Schedule and each other Transaction Paper,
Lessee hereby grants to Lessor a security interest in all of Lessee's
right, title and interest, whether now existing or hereafter arising,
in, under and to each other Schedule, lease, security agreement, or
other Transaction Paper between Lessor and Lessee, and each item of
Equipment or other tangible personal property covered thereby.
(g) Lessor's rights and remedies with respect to any of the terms and
conditions of each Schedule and each other Transaction Paper shall be
cumulative and not exclusive and shall be in addition to all other
rights and remedies in its favor. Lessor's failure to enforce
strictly any of the provisions of any Schedule shall not be construed
as a waiver thereof or as excusing Lessee from future performance.
<PAGE>
(h) If any provision of the Transaction Papers is held to be illegal,
invalid, or unenforceable under present or future laws effective
during the term thereof, such provision shall be fully severable, the
Transaction Papers shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a
part thereof, and the remaining provisions thereof shall remain in
full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance therefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable
provision there shall be added automatically as a part of the
Transaction Papers a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal,
valid or enforceable.
(i) All notices, requests and other communications to Lessor or
Lessee hereunder shall be in writing (including bank wire, telecopy
or similar writing) and shall be given to such party at its address,
telex or telecopy number set forth on the signature pages hereof or
such other address, telex or telecopy number as such party may
hereafter specify for such purpose by notice to the other party.
Each such notice, request or other communication shall be effective
(a) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this paragraph (i) and the appropriate
answerback is received or receipt is otherwise confirmed, (b) if
given by mail, one (1) business day after deposit in the mail with
first class postage prepaid, addressed as aforesaid, or (c) if given
by any other means, when delivered at the address specified in this
paragraph (i).
(j) Except as expressly provided herein and in the other Transaction
Papers, no representation, warranty, promise, guaranty or agreement,
oral or written, express or implied, has been made by either party
herein with respect to any Schedule or Equipment. THIS LEASE AND THE
OTHER TRANSACTION PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT
BY AND BETWEEN LESSOR AND LESSEE AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
LESSOR OR LESSEE, THERE ARE NOT UNWRITTEN ORAL AGREEMENTS BETWEEN
LESSOR AND LESSEE. Any provision of this Lease and the other
<PAGE>
Transaction Papers may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by Lessee and Lessor.
(k) To the extent permitted by applicable law, this is "finance
lease" under Section 2A-103(g) of the Uniform Commercial Code.
Lessee waives any right (i) to cancel or repudiate this Lease or any
Schedule governed hereby, (ii) to reject or revoke acceptance of any
item of Equipment, and (iii) to recover from Lessor any general or
consequential damages, for any reason whatsoever.
(l) THIS LEASE AND EACH OTHER TRANSACTION PAPER SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF GEORGIA, EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF
COLORADO NECESSARILY GOVERN THE ENFORCEMENT OF ANY REMEDY CONTAINED
IN THE SITE LEASE.
(m) LESSEE AND LESSOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
LEASE OR ANY OF THE OTHER TRANSACTION PAPERS AND FOR ANY COUNTERCLAIM
THEREIN.
In Witness Whereof, Lessor and Lessee have executed this Lease and
caused their respective seal to be affixed thereto as of the date
first above written.
NationsBanc Leasing Corporation
By:
Printed Name: Paul L. Frihse
Title: Senior Vice President
Snyder Oil Corporation Lessee
By:/s/ Peter E. Lorenzen
Printed Name: Peter E. Lorenzen
Title: Vice President, General Counsel
<PAGE>
NATIONSBANK Equipment Lease Schedule
NationsBanc Leasing Corporation
For Master Lease Agreement
- ------------------------------------------------
Schedule Number 1
This Schedule dated as of November 3, 1994 between NationsBank
Leasing Corporation, as Lessor, and Snyder Oil Corporation, as
Lessee, is executed pursuant to and is subject to the terms and
conditions of the Master Equipment Lease Agreement dated as of
November 3, 1994 (the "Lease"). Unless otherwise defined herein,
capitalized terms used in this Schedule have the respective meaning
assigned to such terms in the Lease.
Lessee hereby authorizes Lessor to insert herein the serial numbers
and other identification data of the Equipment, when determined by
Lessor, and dates or other omitted factual matters.
1. Description of Equipment: The Equipment is fully described on
Exhibit "A" attached hereto and made a part hereof. The total cost
to Lessor of such Equipment is $21,000,000.
2. Term of Lease with respect to Equipment: The Base Term of the
Lease for the Equipment described herein is for a period of 84 months
commencing on November 3, 1994 (the "Base Term Commencement Date")
and continuing through and including November 2, 2001. There is no
Interim Term for the Lease under this Schedule.
3. Rental. Base Rent shall be payable in eighty-four (84) rental
installments of $292,225.50 commencing on the Base Term Commencement
Date and continuing on the 3rd day of each succeeding month
thereafter. No Interim Rent is payable for the Lease under this
Schedule.
4. Security Deposit: No Security Deposit is payable for the Lease
under this Schedule.
<PAGE>
5. Stipulated Loss Value:
Upon the occurrence of any casualty loss or other event giving Lessor
the right to require immediate payment of the Equipment's Stipulated
Loss Value, Lessor shall calculate such Stipulated Loss Value and
give Lessee written notice thereof. In no event shall the
Equipment's Stipulated Loss Value exceed an amount computed by
multiplying the total cost of the Equipment to Lessor by the
Stipulated Loss Factor set forth in the table below for the Lease
Half-Year (as hereinafter defined) or other period within which the
casualty loss or other event giving Lessor the right to require such
payment occurs. A "Lease Half-Year" is a six-month period beginning
on the first day of the Base Term or any six month anniversary
thereof. The Stipulated Loss factor for the last Lease Half-Year of
the Lease Term shall also apply to all periods thereafter. The
Stipulated Loss Value shall be payable by Lessee on the first monthly
rental payment date following receipt from Lessor of notice
calculating the Stipulated Loss Value and demanding such payment.
Semi-Annual Period Stipulated Loss Factor
("Lease Half-Year")
After the:
1st monthly rental payment date 99.42%
6th monthly rental payment date 99.42%
12th monthly rental payment date 92.20%
18th monthly rental payment date 87.76%
24th monthly rental payment date 83.01%
30th monthly rental payment date 77.96%
36th monthly rental payment date 72.63%
42nd monthly rental payment date 67.01%
48th monthly rental payment date 61.13%
54th monthly rental payment date 54.98%
60th monthly rental payment date 48.55%
66th monthly rental payment date 41.84%
72nd monthly rental payment date 34.83%
78th monthly rental payment date 27.50%
84th monthly rental payment date 20.00%
<PAGE>
6. Assets, Class and Depreciable Life: Lessee hereby warrants and
represents that the above described Equipment qualifies under asset
guidelines class 13.20 "Exploration for and Production of Petroleum
and Natural Gas Deposits" and further qualifies as having a
depreciable class life general recovery period of seven (7) years.
7. Location of Equipment: The Equipment will be located at 13675
Weld County Road 34, Platteville, Weld County, Colorado 80651.
8. End of Base Term Fair Market Value Purchase Option: Upon the
expiration of the Base Term and payment by Lessee of all Base Rent,
and provided that no Event of Default shall have occurred and be
continuing, Lessee, at its option, may purchase all of Lessor's
right, title and interest in and to all, but not less than all, of
the Equipment for a purchase price equal to the fair market value of
the Equipment at such time which is herein stipulated to be
$4,200,000 plus any applicable taxes. In order to exercise such
option, Lessee shall give notice of its intention to exercise such
option at least 90 days prior to the expiration of the Base Term.
9. Renewal; End of Renewal Term Fair Market Value Purchase Option.
If the Lessee for any reason does not purchase the Equipment in
accordance with paragraph 8 hereof, the Base Term shall automatically
and without action on the part of Lessor or Lessee be extended for an
additional term of twelve (12) months at a monthly rent of $277,200,
with the first such rental being due and payable by Lessee on
November 3, 2001. Upon termination of the extended Base Term, the
Lessee shall either (i) return the Equipment to Lessor in accordance
with the terms of the Lease and the Facility Agreement, or (ii) upon
written notice delivered not less than ninety (90) days prior to the
expiration of such extended Base Term, purchase Lessor's right, title
and interest in and to all, but not less than all, of the Equipment
for its then fair market value, plus any applicable taxes. For
purposes of this paragraph 9 only, fair market value shall be
determined in accordance with the following procedure: promptly upon
receipt of Lessee's notice of its intention to exercise the purchase
option pursuant to this paragraph 9, Lessor and Lessee shall commence
discussions regarding the fair market value of the Equipment. If
<PAGE>
within 30 days after the sending of the notice, Lessor and Lessee
agree upon an estimate of the fair market value of the Equipment,
that estimate shall be binding upon both parties for purposes of this
Schedule. If the parties do not agree within 30 days after the
sending of the notice, each party shall promptly appoint an
appraiser. If, within 20 days after the expiration of the 30-day
period, the appraisers agree upon an appraisal of the fair market
value of the Equipment, that appraisal shall be binding upon Lessor
and Lessee for purposes of this Schedule. If the appraisals do not
differ by more than 4% of the Equipment's total cost, then the fair
market value shall be the average of such appraisals. If the
appraisals differ by more than 4% of the Equipment's total cost, then
such appraisers shall select a third appraiser. The Third appraiser
shall, at least 15 days prior to the expiration of the extended Base
Term make an appraisal of the fair market value of the Equipment,
which appraisal shall be binding upon Lessor and Less for purposes of
this instrument.
10. Early Termination Option: Beginning on the first anniversary of
the Base Term Commencement Date, and on each semi-annual anniversary
thereafter, provided that no Event of Default has occurred which is
continuing, Lessee may, upon giving Lessor not less than sixty (60)
days' prior written notice (which shall be irrevocable), terminate
the Base Term for not less than all the Equipment. Upon return of
not less than all the Equipment to Lessor, Lessor shall sell such
Equipment by public or private sale, for immediately available funds,
to a third party unrelated to Lessee. Lessee shall continue to pay
Lessor Base Rent until Lessor receives the proceeds of sale. Lessee
shall use diligent efforts to solicit bids and buyers for any such
sale. Lessor shall have the right, but no obligation, to solicit
bids or buyers for any such sale. The proceeds of sale shall be
applied in the order following to: (a) pay the reasonable expenses of
(i) holding and preparing the Equipment for sale, and (ii) selling
the Equipment, and (b) the remaining proceeds of sale to Lessor. If
the proceeds of sale received by Lessor as set forth in clause (b) of
this paragraph 10 are less than the Equipment's then "Termination
Value", as set forth below, Lessee shall promptly pay to Lessor, as
additional rent, at the same time and in the same manner as the
<PAGE>
proceeds of sale are required to be paid to the Lessor, an amount
equal to such deficiency, together with all other sums then due and
owing by Lessee hereunder. If the proceeds of sale received by
Lessor as set forth in Item (b) above are more than the Equipment's
then "Termination Value", as set forth below, Lessor shall pay to
Lessee an amount equal to such excess.
Termination Value
Option Date (expressed as a percentage of total cost)
Last Day of Month 12 93.70%
Last Day of Month 18 89.26%
Last Day of Month 24 84.26%
Last Day of Month 30 79.21%
Last Day of Month 36 73.63%
Last Day of Month 42 68.01%
Last Day of Month 48 61.88%
Last Day of Month 54 55.73%
Last Day of Month 60 49.05%
Last Day of Month 66 42.34%
Last Day of Month 72 35.08%
Last Day of Month 78 27.75%
11. Terms of Sale: Any sale of the Equipment by Lessor pursuant to
paragraphs 8, 9 or 10 of this Schedule shall be in accordance with
the following terms: (a) the purchase price shall be paid in cash or
by certified or bank cashiers check, (b) if such sale is pursuant to
<PAGE>
paragraph 8 or 9, the purchase price shall be paid on the last day of
the Base Term or the extended Base Term as applicable (in the case of
any sale made pursuant to paragraph 10, the purchase price shall be
paid on the date specified pursuant to the terms of any third party
bid accepted by Lessor), and (c) the Equipment will be sold on an
"AS-IS", "WHERE-IS" basis, with no representations or warranties
(express or implied) by Lessor as to any matter whatsoever, except
that no security interest, lien or encumbrance against such Equipment
then exists that has been created by Lessor.
12. Acknowledgement of Receipt of Equipment: Lessee acknowledges
that the Equipment described hereinabove has been delivered to and
received by it, is conforming as represented, and is acceptable and
satisfactory to it, and that the same has been accepted as Equipment
leased by Lessee under this Schedule.
Accepted by Lessee as of the 3rd day of November, 1994 ("Acceptance
Date").
NationsBank Leasing Corporation Snyder Oil Corporation
By: By:
Paul L. Frihse
Printed Name:
Title: Senior Vice President
By:
/s/ Peter E. Lorenzen
Printed Name:
Title: Vice President and General Counsel
<PAGE>
Exhibit A
Description of Equipment
All machinery, equipment and fixtures which, on the date hereof,
are located on, comprise a part of, or are used or useful in
connection with the ownership or operation of (a) a natural gas
processing plant (the "Plant") located on certain real property owned
by Lessee located in Weld County, Colorado and which is more
particularly described on Annex 1 attached hereto and incorporated
herein by reference for all purposes (the "Land"), and (b) fifty-five
(55) miles of pipelines, gathering systems and other natural gas
transportation equipment located in Weld County, Colorado utilized
for the purpose of transporting natural gas and other hydrocarbons to
and from the Plant (the "Pipeline Systems"). Without limiting the
foregoing, the Equipment shall include (w) all pipe, casings, seals,
insulators, vents, joints, compressors, connections, tanks, pumps,
pump sites, engines, racks, valves, instruments, meters, gauges,
measuring equipment, signs, posts, boilers, furniture, towers, air
conditioning and heating equipment, tools, spare parts, telephone and
other communication equipment and computers which, on the date
hereof, are located on, comprise a part of, or are used or useful in
connection with the ownership or operation of the Plant or the
Pipeline Systems, (x) the machinery, equipment and fixtures described
in Annex 2 attached hereto, (y) all accessions, additions and
replacements to, and substitutes for, the machinery, equipment and
fixtures described in this paragraph, and (z) all books, records,
manuals, plans and specifications related to the manufacture, use,
ownership, maintenance and operation of the machinery, equipment and
fixtures described in this paragraph.
<PAGE>
Annex 1
Legal Description
A parcel of land located in the Southeast quarter (SE1/4) of
Section 8, Township 4 North, Range 66 West of the Sixth Principal
Meridian, County of Weld, State of Colorado, more particularly
described as follows:
Commencing at the Southeast (SE) corner of Section 8, Township
4 North, Range 66 West of the sixth principal meridian, thence
North 90 degrees 00'00" West along the South line of the
Southeast quarter (SE1/4) of said Section 8, also being the
basis of bearing, a distance of 650.96 feet, thence North 00
degrees 00'00" East, a distance of 30.00 feet to the true point
of beginning; thence North 00 degrees 00'00" East distance of
660.00 feet; thence North 90 degrees 00'00" West, a distance of
1,320.00 feet; thence South 00 degrees 00'00" West, a distance
of 660.00 feet; thence South 90 degrees 00'00" East, a distance
of 1,320.00 feet to the true point of beginning.
Said parcel of land contains 20.00 acres, more or less.
<PAGE>
Annex 2
Certain Equipment
Pipeline Equipment (in the yard)
Two Twenty Inch Pig receivers with Yale Closures
One Twelve Inch Pig Receiver with Yale Closure
Process Equipment
Three Slug catchers 150 Psig 60" dia. 100' long V-201 ABC
Three Slug catchers 1100 Psig 48" dia. 130' long V-202 ABC
One Scrubber 60" dia. 12' vertical vessel V-203
One Condensate Stabilizer Skid mounted containing:
One scrubber 48" dia 8' tall 1100 psi rated V-245
One scrubber 48" dia 8' tall 250 psi rated V-204
Four Exchangers, E-201, E-202, E-203, and E-204.
Partical Filter F-805
Control valves, pipe and fittings
One Condensate Stabilizer Tower 36" dia by 48' tall T-1900
One Allis Chalmers Ro-Flo vane type compressor 50 hp K-610
One Air Compressor, Gardner Denver with dryer and building
Three FMC 200 hp Plunger Pumps Quinplex skid mounted with motor P-
55 ABC.
Three Sundstrand pumps 40 hp P-10 ABC
One Sundstrand pump P-50
One surge tank V-190 15,000 gallon 370 psi rated
One De-methanizer tower T-1000 52' dia by 80 ft
One Fuel Scrubber V-140
One Regen Scrubber V-130
One Process Skid containing:
Regeneration Cooler with Two Fans AC-710
Inlet Filter Separator F-800
Dust Filter F-810
Cold Seperator V-160
Liquid/Gas exchanger E-450
Reboiler E-440
Chiller E-470
<PAGE>
Side Heater E-430
Refrigerant Disengaging Vessel V-220
Control Valves and pipe
Two Methanol Pumps P-25 A and B
Refrigerant Surge tank V-210
Two Dehy Beds V-110 and V-120
Refrigerant Condenser Two Fans AC-730
Refrigerant Economizer V-205
Refrigerant Suction Scrubber V-240
Gas/Gas Exchangers E-400 and E-420
Expander/Compressor X-600/K-600 Mafi-Trench rated at 924/905
horse power skid mounted
One Flare Stack
Control
20 x 50 structure housing the Motor Control Center, the
Distributive Control System, and Variable speed drive for the
pipeline pumps
Compressor 60 x 270:
Overhead Hoist, insulated steel structure, lighting and
ventilation fans, gas detection, flame detection, Centerline
vents
Compression
Inlet
KC-531A Engine SN 32627 Compressor SN 326910
KC-531B Engine SN 32628 Compressor SN 326920
Refrigeration
K-630 Engine SN 295629 Compressor SN 292090
<PAGE>
Residue
KC-532A Engine SN 32625 Compressor SN 326930
KC-532B Engine SN 32626 Compressor SN 326940
Storage
Five 30,000 gallon Storage tanks, 250 psig rated.
One 18,000 gallon Storage tank, 250 psig rated.
Seven Used 300 bbl. Stock Tanks,
12' x 15' atmospheric
Hot Oil system
Pipe and related equipment
Instrumentation and Electrical equipment
Miscellaneous Consumable and Condensate Storage
Pipelines
Low Pressure Inlet
Two miles of 20" pipe including pig launcher/receiver
High Pressure Inlet
25 miles of 12" pipe including launcher/receiver
Liquid Pipeline to Amoco and Phillips
28 miles of 4" pipe including valve stations/measurement
<PAGE>
FACILITY AGREEMENT
executed as of
November 3, 1994
by and between
SNYDER OIL CORPORATION
and
NATIONSBANC LEASING CORPORATION
<PAGE>
THIS FACILITY AGREEMENT (this "Agreement") is entered into as of
the 3rd day of November, 1994, between SNYDER OIL CORPORATION, a
Delaware corporation ("Lessee"), and NATIONSBANC LEASING CORPORATION,
a North Carolina corporation ("Lessor").
W I T N E S S E T H
WHEREAS, Lessee has requested that Lessor enter into a Master
Equipment Lease Agreement of even date herewith and, pursuant to such
Master Equipment Lease Agreement and certain Schedules thereto,
acquire and lease certain equipment to Lessee to be used by Lessee at
a natural gas processing facility owned by Lessee located in Weld
County, Colorado; and
WHEREAS, Lessor has required, as a condition to entering into
the Master Equipment Lease Agreement and Schedules thereto and
acquiring and leasing equipment to Lessee thereunder, that Lessee
inter into this Agreement to evidence certain additional obligations,
covenants, agreements, representations, and warranties of Lessee
related to such Master Equipment Lease Agreement.
NOW, THEREFORE, for and in consideration of the agreements of
Lessor to enter into such Master Equipment Lease Agreement and
Schedules thereto and to lease certain equipment to Lessee
thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged and
confessed, Lessee hereby agrees with Lessor as follows:
<PAGE>
ARTICLE I
TERMS DEFINED
SECTION 1.1. Definitions. The following terms, as used herein,
have the following meanings:
"Adjusted Consolidated Cash Flow" means, with respect to Lessee
for any time period, Consolidated Cash Flow of Lessee for such time
period, adjusted, however, to reflect all revenues and expenses
(including lease operating expense, severance taxes, additional
overhead and other expenses) attributable to material oil and gas
properties purchased by Lessee or any of its Subsidiaries after the
first day of such period as if such properties had been owned by
Lessee or such Subsidiary on the first day of such period. As used
in this definition, "material oil and gas properties" means oil and
gas properties purchased for a purchase price not less than
$25,000,000.
"Affiliate" means, as to any Person, any subsidiary of such
Person or any Person which, directly or indirectly, controls, is
controlled by, or is under common control with such Person. For
purposes of this definition, "control" means the possession of the
power to direct or cause the direction of management and policies of
such Person, whether through the ownership of voting securities or
partnership interests, by contract or otherwise.
"Applicable Environmental Law" means any law, statute,
ordinance, rule, regulation, order or determination of any
governmental authority or any board of fire underwriters (or other
body exercising similar functions), affecting the ownership, leasing
or operation of any real or personal property owned, operated or
leased by Lessee or any of its Subsidiaries in any way pertaining to
health, safety or the environment, including, without limitation, all
applicable zoning ordinances and building codes, flood disaster laws
and health, safety and environmental laws and regulations, and
further including without limitation, (a) the Comprehensive
<PAGE>
Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986
(as amended from time to time, herein referred to as "CERCLA"), (b)
the Resource Conservation and Recovery Act of 1976, as amended by the
Used Oil Recycling Act of 1980 and the Solid Waste Recovery Act of
1976, as amended by the Solid Waste Disposal Act of 1980 and the
Hazardous and Solid Waste Amendments of 1984 (as amended from time to
time herein referred to as "RCRA"), (c) the Safe Drinking Water Act,
as amended, (d) the Toxic Substances Control Act, as amended, (e) the
Clean Air Act, as amended, (f) the Occupational Safety and Health Act
of 1970, as amended, and (g) all laws, rules and regulations of state
or any political subdivisions thereof having jurisdiction over the
ownership, leasing or operation of any real or personal property
owned, leased or operated by Lessee or any of its Subsidiaries which
relate to health, safety or the environment, as each may be amended
from time to time. The terms "hazardous substance", "petroleum",
"release" and "threatened release" have the meanings specified in
CERCLA, and the terms "solid waste" and "disposal" (or "disposed")
have the meanings specified in RCRA; provided, however, in the event
either CERCLA or RCRA is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to
the effective date of such amendment with respect to all provisions
of this Agreement; and provided further that, to the extent the laws
of any state or any political subdivisions thereof having
jurisdiction over the ownership, leasing or operation of any real or
personal property owned, leased or operated by Lessee or any of its
Subsidiaries establish a meaning for "hazardous substance",
"petroleum", "release", "solid waste" or "disposal" which is broader
than that specified in either CERCLA or RCRA, such broader meaning
shall apply.
"Authorized Officer" means, as to any Person, its Chairman,
Vice-Chairman, President, Executive Vice President(s), Senior Vice
President(s) or Vice President(s) duly authorized to act on behalf of
such Person.
<PAGE>
"Cash Flow from Operating Activities" means, for any Person for
any period, the cash flow from operating activities which would be
reflected on a statement of cash flow for such Person for such period
prepared in accordance with generally accepted accounting principles,
but in all events, applying the accounting methods adopted and
applied by Lessee for purposes of computing its consolidated cash
flow from operating activities for the six month period ended June
30, 1994 as reported on its consolidated statement of cash flow for
such period referenced in Section 3.4(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Cash Flow" means, with respect to Lessee for a
time period, consolidated net income of Lessee for such time period
as set forth in the financial statements delivered to Lessor pursuant
to Section 4.1(a) or (b), (a) exclusive of net gain or loss (after
provision for Taxes) on the sale of assets, other than inventory sold
in the ordinary course of business, during such time period, (b) plus
or minus, as appropriate, changes in deferred Taxes with respect to
such time period, and (c) plus depreciation, depletion, amortization
of principal and other non-cash charges for such time period.
"Consolidated Current Assets" means, for any Person at any time,
the sum of (a) consolidated current assets of such Person and its
Consolidated Subsidiaries including accounts or notes receivable (if
properly reserved in accordance with generally accepted accounting
principles), but excluding (i) prepaid expenses, and (ii) assets held
for resale, plus (b) in the case of Lessee, the unused portion of the
Senior Credit Facility to the extent then available to Lessee.
"Consolidated Current Liabilities" means, for any Person at any
time, the current liabilities of such Person and its Consolidated
Subsidiaries at such time but excluding, in the case of Lessee,
required principal payments under the Senior Credit Facility.
"Consolidated Liabilities" means, for any Person at any time,
the liabilities of such Person and its Consolidated Subsidiaries at
such time, but in any event including any Debt or Guarantee of such
<PAGE>
Person or any Consolidated Subsidiaries.
"Consolidated Senior Debt" means, for Lessee at any time, (a)
the consolidated Debt of Lessee and its Consolidated Subsidiaries at
such time, plus (b) the Consolidated Current Liabilities of Lessee
and its Consolidated Subsidiaries at such time in excess of the
Consolidated Current Assets of Lessee and its Consolidated
Subsidiaries at such time, minus, to the extent included in (a) or
(b) preceding, (c) (i) the principal balance of other Debt of Lessee
and its Consolidated Subsidiaries at such time which by its terms is
expressly subordinate to the obligations of Lessee under the Senior
Credit Facility, and (ii) Nonrecourse Debt of Lessee and its
Consolidated Subsidiaries at such time.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" means,
for any Person, at any time, any Subsidiary or other entity the
accounts of which would be consolidated with those of such Person in
its consolidated financial statements as of such time.
"Consolidated Tangible Net Worth" means, with respect to Lessee
at any time, the consolidated shareholder's equity of Lessee at such
time less the consolidated intangible assets of Lessee at such time.
For purposes of this definition "intangible assets" means the amount
(to the extent reflected in determining such consolidated
shareholder's equity) of all unamortized debt discount and expense,
unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, organization expenses and other
intangible items.
"Consolidated Total Covered Debt" means, with respect to Lessee
at any time, (a) the consolidated Debt of Lessee and its Consolidated
Subsidiaries at such time, plus (b) Consolidated Current Liabilities
of Lessee and its Consolidated Subsidiaries in excess of Consolidated
Current Assets of Lessee and its Consolidated Subsidiaries at such
time.
<PAGE>
"Debt" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (c) all other indebtedness (including capitalized lease
obligations, other than usual and customary oil and gas leases) of
such Person on which interest charges are customarily paid or
accrued, (d) all Guarantees by such Person, (e) the unfunded or
unreimbursed portion of all letters of credit issued for the account
of such Person, and (f) all liability of such Person as a general
partner of a partnership for obligations of such partnership of the
nature described in (a) through (e) preceding. "Debt" shall not
include liabilities and obligations expressly excluded from "Debt" in
the definition of "Debt" contained in the Senior Credit Agreement as
in effect on the date hereof.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time
or both would, unless cured or waived, become an Event of Default.
"Environmental Indemnity Agreement" means the Environmental
Indemnity Agreement of even date herewith by and between Lessee and
Lessor.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" means any event defined as an "Event of
Default" in Section 14(a) of the Master Lease and the Events of
Default set forth in Section 7.1 of this Agreement.
"Exhibit" refers to an exhibit attached to this Agreement and
incorporated herein by reference, unless specifically provided
otherwise.
"Facility" means the natural gas gathering, processing and
transportation facility owned (except to the extent of the Leased
Equipment) by Lessee located in Weld County, Colorado consisting of
a natural gas processing facility located on the Land and fifty-five
<PAGE>
(55) miles of pipelines and related equipment located on the Rights
of Way and used for the gathering, transportation and processing of
natural gas and other hydrocarbons. The Facility shall expressly
include (a) the Land, (b) the Rights-of-Way, (c) all improvements now
existing or hereafter constructed on the Land or the Rights-of-Way,
(d) all personal property and fixtures forming a part of, pertaining
to, affixed or attached to or situated upon, or used in connection
with, all or any part of such natural gas gathering, processing and
transportation facility, and including, without limitation, all
books, records, plans, specifications, manuals, pipe, casings, seals,
insulators, vents, joints, compressors, connections, tanks, pumps,
pump sites, engines, racks, valves, instruments, meters, gauges,
measuring equipment, signs, posts, boilers, furniture, towers, air
conditioning and heating equipment, tools, spare parts, telephone and
other communication equipment, computers and other machinery and
equipment of every type or character and all accessions, additions
and replacements to, and all substitutes for, the foregoing, (e) all
general intangibles, including all contracts, licenses, permits,
authorizations, documents, instruments and agreements in favor of or
to which Lessee is now, or may hereafter, become a party which are
necessary or useful for the ownership or operation of such natural
gas gathering, processing and transportation facility, and (f) all
proceeds and products of the foregoing.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any
Debt of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other
obligation (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions, by "comfort letter" or other similar undertaking of
support or otherwise) or (b) entered into for the purpose of assuring
in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term
<PAGE>
Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business.
"Initial Closing Date" means the date Lessor acquires the
Initial Equipment from Lessee and leases such Equipment to Lessor
pursuant to (a) Article II hereof, (b) the Master Lease, and
(c) Schedule No. 1.
"Initial Equipment" means the Leased Equipment described on
Exhibit A hereto to be acquired by Lessor from Lessee and leased by
Lessor to Lessee pursuant to Schedule No. 1 and the Master Lease.
"Land" means the real property located in Weld County, Colorado
on which the natural gas processing plant comprising a part of the
Facility is located and which is more particularly described on
Exhibit B attached hereto.
"Leased Equipment" means all property which is leased by Lessor
to Lessee pursuant to the Master Lease.
"Lien" means with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement, Lessee
and its Subsidiaries shall be deemed to own subject to a Lien any
asset which is acquired or held subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or
other title retention agreement relating to such asset.
"Margin Regulations" mean Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System, as in effect from time to
time.
"Margin Stock" means "margin stock" as defined in Regulation U.
<PAGE>
"Master Lease" means the Master Equipment Lease Agreement of
even date herewith by and between Lessor and Lessee, and "Master
Lease" shall specifically include all leases entered into by and
between Lessor and Lessee pursuant to the execution and delivery by
Lessor and Lessee of Schedules to such Master Equipment Lease
Agreement.
"Material Debt" means Debt of Lessee or any of its Subsidiaries
issued under one or more related or unrelated agreements or
instruments in an aggregate principal amount exceeding $5,000,000.
"Material Subsidiaries" means, for purposes of Section 8.1(e)
and (f) hereof, any Subsidiary or Subsidiaries of Lessee which
individually or in the aggregate meet any of the following criteria:
(a) its or their Cash Flow from Operating Activities for the period
of four fiscal quarters ending immediately prior to the occurrence of
any event with respect to such Subsidiary or Subsidiaries described
in Section 8.1(e) or (f) equals or exceeds ten percent (10%) of
Lessee's consolidated Cash Flow from Operating Activities for the
period of four fiscal quarters ending June 30, 1994, (b) its or their
gross revenues for the period of four (4) fiscal quarters ending
immediately prior to the occurrence of any event described in Section
8.1(e) or (f) with respect to such Subsidiary or Subsidiaries equals
or exceeds ten percent (10%) of Lessee's consolidated revenues for
the period of four (4) fiscal quarters ending June 30, 1994, (c) its
or their net income for the period of four (4) fiscal quarters ending
immediately prior to the occurrence of any event with respect to such
Subsidiary or Subsidiaries equals or exceeds ten percent (10%) of
Lessee's consolidated net income for the period of four (4) fiscal
quarters ending June 30, 1994, or (d) its or their assets as of the
last day of the fiscal quarter ending immediately prior to the
occurrence of any event described in Section 8.1(e) or (f) with
respect to such Subsidiary or Subsidiaries equals or exceeds ten
percent (10%) of Lessee's consolidated assets on June 30, 1994.
"Nonrecourse Debt" means indebtedness (a) secured solely by the
assets acquired with the proceeds of such indebtedness and (b) with
respect to which neither Lessee nor any of its Subsidiaries have any
<PAGE>
liability for repayment beyond the assets pledged.
"Permitted Encumbrances" (a) to the extent expressly stated, has
the meaning given such term in the Senior Credit Agreement in effect
on the date hereof, and (b) in each other case, means, with respect
to the Facility: (i) the rights of Lessor in and to the Leased
Equipment; (ii) the Site Lease, (iii) minor defects in title which do
not secure the payment of money and otherwise have no material
adverse effect on the value or operation of the Facility; (iv)
mechanic's, materialmen's, warehouseman's, journeyman's and carrier's
liens and other similar liens arising by operation of law or statute
in the ordinary course of business which are not delinquent (except
to the extent permitted by Section 4.5); and (v) liens for Taxes or
assessments not yet due or not yet delinquent, or, if delinquent,
that are being contested in good faith in the normal course of
business by appropriate action, as permitted by Section 4.6.
"Permitted Transfer" means a sale, transfer or assignment by
Lessee of the Facility, including, without limitation its rights in
and to all Leased Equipment and under the Master Lease, (a) to a
wholly owned Subsidiary of Lessee, (b) in connection with a sale,
transfer or assignment by Lessee of substantially all of the oil and
gas properties, pipelines, gathering systems, processing facilities
and similar assets owned by Lessee and its subsidiaries in the
Wattenberg Field in Morgan, Adams and Weld Counties, Colorado, or (c)
in connection with a sale, transfer or assignment by Lessee of
substantially all of the gas gathering, transportation, processing
and marketing assets owned by Lessee and its Subsidiaries in the
Wattenberg Field in Morgan, Adams and Weld Counties, Colorado;
provided that at the time of any sale, transfer or assignment
contemplated by (a), (b) or (c) of this definition, (x) no Default or
Event of Default shall have occurred which is continuing, (y) the
assignee or transferee shall expressly assume and agree to pay and
perform each and every obligation of Lessee under the Transaction
Papers pursuant to an assumption agreement and other documents in
form and substance acceptable to Lessor, and (z) Lessee shall not be
released from (and by written instruments and agreements in form and
substance acceptable to Lessor, shall expressly, ratify and confirm
<PAGE>
that it remains primarily liable for) the payment and performance of
each and every obligation of Lessee under the Transaction Papers.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including
a government or political subdivision or an agency or instrumentality
thereof.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time.
"Rights of Way" means all easements, rights of way, licenses,
permits, surface leases, certificates of convenience and authority,
documents, instruments, agreements, rights, interests and property
pursuant to which Lessee is granted the right to the use or occupancy
of real property for the construction, maintenance and operation of
all gathering lines, transportation lines and other pipelines
comprising a part of or used in connection with the Facility.
"Schedule No. 1" means Schedule No. 1 to the Master Lease to be
entered into on the date hereof by and between Lessor and Lessee
pursuant to which Lessor will lease the Initial Equipment to Lessee.
"Senior Credit Agreement" means the Fifth Restated Credit
Agreement dated as of June 30, 1994, by and among Lessee, NationsBank
of Texas, N.A. and the Banks from time to time parties thereto as the
same may hereafter be amended, modified, renewed, extended, restated,
increased or replaced from time to time, including, without
limitation, any replacement thereof entered into with banks or other
financial institutions which are not parties to the Senior Credit
Agreement as in effect or the date hereof.
"Senior Credit Facility" means the revolving credit facility
available to Lessee pursuant to the Senior Credit Agreement as the
same may be amended, modified, renewed, extended, increased,
refinanced or replaced from time to time.
<PAGE> "Site Lease" means that certain Site Lease Agreement of
event date herewith by and between Lessor and Lessee pursuant to
which Lessee has agreed to lease the Facility to Lessor and it
successors and assigns upon the occurrence of an Event of Default.
"Special Cash Flow Cure Period" means the period commencing on
the last day of any fiscal quarter for which Lessee's ratio of
Consolidated Cash Flow to Consolidated Total Covered Debt is less
than required by Section 6.4 and ending on the earlier of (a) ninety
(90) days following the expiration of such quarter, or (b) the date
specified in a written notice from Lessor stating that Lessor has, in
its discretion, selected such date as the expiration date for such
Special Cash Flow Cure Period.
"Subsidiary" means, for any Person, any corporation or other
entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors
or other persons performing similar functions (including that of a
general partner) are at the time directly or indirectly owned,
collectively, by such Person and any Subsidiaries of such Person.
The term Subsidiary shall include Subsidiaries of Subsidiaries (and
so on). Notwithstanding the foregoing, for all purposes of this
Agreement, DJ Partners, L.P. shall be deemed a "Subsidiary" of
Lessee.
"Taxes" means all taxes, assessments, filing or other fees,
levies, imposts, duties, deductions, withholdings, stamp taxes,
interest equalization taxes, capital transaction taxes, foreign
exchange taxes or other charges, or other charges of any nature
whatsoever, from time to time or at any time imposed by law or any
federal, state or local governmental agency. "Tax" means any one of
the foregoing.
"Transaction Papers" means this Agreement, the Master Lease, the
Site Lease, the Environmental Indemnity Agreement and all other
documents, instruments, agreements or certificates now or at any time
hereafter delivered in connection with this Agreement, the Master
Lease, the Site Lease or the Environmental Indemnity Agreement as the
same may be amended, modified or restated from time to time.
<PAGE>
SECTION 1.2. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder shall
be prepared in accordance with generally accepted accounting
principles as in effect from time to time, applied on a basis
consistent with the most recent audited consolidated financial
statements of Lessee and its Consolidated Subsidiaries delivered to
Lessor except for changes concurred in by Lessee's independent
certified public accountants and which are disclosed to Lessor on the
next date on which financial statements are required to be delivered
to Lessor pursuant to Section 4.1(a) or (b); provided that, unless
Lessor shall otherwise agree in writing, no such change shall modify
or affect the manner in which (a) compliance with the covenants
contained in Article V is computed such that all such computations
shall be made utilizing financial information presented consistently
with prior periods, or (b) the computations contemplated by the
definition of Material Subsidiary are made so that all such
computations shall be made using financial information presented
consistently with the financial information referenced in Section
3.4(b).
ARTICLE II
COMMITMENT WITH RESPECT TO
INITIAL EQUIPMENT; CLOSING CONDITIONS
SECTION 2.1. Commitment. Subject to the satisfaction of each
condition precedent set forth in Section 2.2 hereof and compliance by
Lessee with the other terms and provisions of this Agreement, Lessor
agrees to (a) purchase the Initial Equipment from Lessee for
$21,000,000 (said amount representing the total cost to Lessee of
such Initial Equipment), and (b) execute and deliver the Master Lease
and Schedule No. 1 thereto and lease the Initial Equipment to Lessee
thereunder.
<PAGE>
SECTION 2.2. Conditions to Initial Transaction. The obligation
of Lessor to purchase the Initial Equipment and lease such equipment
to Lessee pursuant to the Master Lease and Schedule No. 1, is subject
to the satisfaction by Lessee of each of the following conditions on
or before 5:00 p.m., Fort Worth, Texas time, November 3, 1994:
(a) Lessor shall have received each of the following
documents, instruments and agreements, duly executed and delivered by
all requisite parties, each of which shall, unless otherwise
indicated, be dated the Initial Closing Date;
(i) the Master Lease;
(ii) Schedule No. 1;
(iii) the Site Lease;
(iv) the Environmental Indemnity Agreement;
(v) a Warranty Bill of Sale in form and substance acceptable to
Lessor evidencing the conveyance of the Initial Equipment from Lessee
to Lessor;
(vi) certificates of insurance evidencing the physical damage,
property damage and comprehensive liability insurance maintained by
Lessee;
(vii) financing statements on Form UCC-1 or such other form
as Lessor shall request in form and substance acceptable to Lessor to
evidence and perfect Lessor's interests in and to the Initial
Equipment and the Facility evidenced by the Transaction Papers.
(viii) Lessee's Certificate of Incorporation and Bylaws and
resolutions of Lessee's board of directors authorizing the
transactions contemplated by the Transaction Papers, all of which
shall be accompanied by a certificate of Lessee's corporate secretary
certifying (A) that such documents are in full force and effect and
have not been waived, amended, modified, revoked or repealed in any
<PAGE>
respect, and (B) as to the incumbency and signatures of the corporate
officers of Lessee which shall execute and deliver the Transaction
Papers on behalf of Lessee;
(ix) a Certificate of Existence and Good Standing with respect
to Lessee issued by the Secretary of State of Delaware;
(x) a Certificate of Qualification as a foreign corporation and
a Certificate of Good Standing with respect to Lessee in each case
issued by the appropriate governmental authorities of the State of
Colorado; and
(xi) a waiver or consent in form and substance acceptable to
Lessor executed by the Banks which are parties to the Senior Credit
Agreement on the Initial Closing Date pursuant to which such Banks
consent to the transactions contemplated by the Transaction Papers.
(b) Neither a Default nor an Event of Default shall have
occurred which is continuing on the Initial Closing Date;
(c) Each representation and warranty contained herein and
in each other Transaction Paper shall be true and correct on the
Initial Closing Date;
(d) No material adverse condition shall exist with respect
to the Facility or the Initial Leased Equipment on the Initial
Closing Date as determined by Lessee in its sole discretion; and
(e) No material adverse change in the business, financial
condition, results of operations or prospects of Lessee or Lessee and
its Subsidiaries on a consolidated basis since June 30, 1994 as
determined by Lessee in its sole discretion.
SECTION 2.3. No Further Commitment. Subject only to the
commitment of Lessor with respect to the Initial Equipment contained
in Section 2.1 hereof, Lessor has no commitment to acquire or lease
any equipment or other assets to Lessee of any nature, and any
commitment other than that set forth in Section 2.1 to acquire or
lease any such equipment shall be made or declined by Lessor in its
sole and absolute discretion. To the extent Lessor elects to make
any such commitment, such commitment may be made subject to such
conditions precedent, representations, warranties, covenants or
agreements as Lessor may elect in its sole and absolute discretion.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
In order to induce Lessor to enter into the Master Lease and
acquire and lease Leased Equipment to Lessee thereunder, Lessee
represents and warrants to Lessor that:
SECTION 3.1. Corporate Existence and Power. Lessee (a) is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, (b) has all corporate power
and all material governmental licenses, authorizations, consents and
approvals required to carry on its businesses as now conducted and as
proposed to be conducted, and (c) is duly qualified to transact
business as foreign corporation in the State of Colorado and in each
other jurisdiction where a failure to be so qualified could have a
material adverse effect on its financial condition or operations.
SECTION 3.2. Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance of this
Agreement, the Master Lease, the Site Lease and the other Transaction
Papers by Lessee are within Lessee's corporate powers, when executed
will be duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default
under, any provision of applicable law or regulations or of the
certificate of incorporation or bylaws of Lessee or of any agreement,
judgment, injunction, order, decree or other instrument binding upon
such Person or result in the creation or imposition of any Lien on
any asset of Lessee or any of its Subsidiaries except Liens in favor
of Lessor.
SECTION 3.3. Binding Effect. This Agreement constitutes a
valid and binding agreement of Lessee; the other Transaction Papers,
when executed and delivered, will constitute valid and binding
obligations of Lessee, and will be enforceable in accordance with
their respective terms except as (a) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors rights generally, and (b) the availability of equitable
remedies may be limited by equitable principles of general
applicability.
SECTION 3.4. Financial Information. (a) The consolidated
balance sheet of Lessee as of December 31, 1993, and the related
consolidated statements of operations and cash flows for the fiscal
year then ended, reported on by Arthur Anderson & Co., copies of
which have been delivered to Lessor, fairly present, in conformity
with generally accepted accounting principles, the consolidated
financial position of Lessee as of such date and its consolidated
results of operations and cash flows for such fiscal year.
(b) The quarterly unaudited consolidated balance sheet of
Lessee as of June 30, 1994, and the related unaudited consolidated
statements of operations and cash flows for the portion of Lessee's
fiscal year then ended, fairly present, in conformity with generally
accepted accounting principles (subject to year end audit adjustments
which will not materially alter the accuracy of the information set
forth therein) applied on a basis consistent with the financial
statements referred to in Section 3.4(a), the consolidated financial
position of Lessee as of such date and its consolidated results of
operations and cash flows for such portion of Lessee's fiscal year.
(c) Except as disclosed in writing to Lessor prior to the
execution and delivery of this Agreement, since June 30, 1994, there
has been no material adverse change in the business, financial
position, results of operations or prospects of Lessee or any of its
Subsidiaries.
SECTION 3.5. Litigation. There is no action, suit or
proceeding pending against, or to the knowledge of Lessee, threatened
against or affecting Lessee or any of its Subsidiaries before any
court or arbitrator, any governmental body, agency or official (a)
which in any way relates to the construction, ownership or operation
of the Facility, (b) in which there is a reasonable possibility of an
adverse decision which could materially and adversely affect the
business, consolidated financial position or consolidated results of
operations of Lessee, or (c) which could in any manner draw into
question the validity of any of the Transaction Papers.
SECTION 3.6. Taxes and Filing of Tax Returns. Each of Lessee,
its predecessors and their respective Subsidiaries has filed all
material tax returns required to have been filed and has paid all
Taxes shown to be due and payable on such returns, including interest
and penalties, and all other Taxes which are payable by such party,
to the extent the same have become due and payable other than Taxes
with respect to which a failure to pay would not have a material
adverse effect on Lessee or its Subsidiaries. Lessee does not know
of any proposed material Tax assessment against it or any of its
Subsidiaries, and all Tax liabilities of each of Lessee, its
predecessors and their respective Subsidiaries are adequately
provided for.
SECTION 3.7. Title to Properties; Liens (Generally). Lessee
and each of its Subsidiaries have good and indefeasible title to all
material assets purported to be owned by them subject only to
Permitted Encumbrances (for purposes of this Section 3.7, Permitted
Encumbrances shall have the meaning given such term in the Senior
Credit Agreement as in effect on the date hereof).
SECTION 3.8. Business; Compliance (Generally). Lessee and each
of its Subsidiaries have performed and abided by all obligations
required to be performed by them to the extent Lessee individually or
Lessee and its Subsidiaries taken as a whole could be materially and
adversely affected under any license, permit, order, authorization,
grant, contract, agreement, or regulation to which any of them is a
party or by which any of them or any of their assets are bound;
provided that to the extent oil and gas properties owned by Lessee or
its Subsidiaries are operated by operators other than Lessee or its
Subsidiaries, Lessee has no knowledge that any such obligation
remains unperformed and the appropriate Person has diligently
enforced all contractual obligations of such operators to insure
performance.
SECTION 3.9. Licenses, Permits, Etc. (Generally). Lessee and
its Subsidiaries possess such valid franchises, certificates of
convenience and necessity, operating rights, licenses, permits,
consents, authorizations, exemptions and orders of tribunals as are
necessary to carry on their business as now being conducted except to
the extent a failure to obtain any such item would not have a
material adverse effect on Lessee individually or on Lessee and its
Subsidiaries taken as a whole; provided that to the extent oil and
gas properties owned by Lessee and its Subsidiaries are operated by
operators other than Lessee or its Subsidiaries, Lessee has no
knowledge that possession of such items has not been obtained, and
the appropriate Person has diligently enforced all contractual
obligations of such operators to obtain such items.
SECTION 3.10. Compliance with Law (Generally). The business
and operations of Lessee and its Subsidiaries have been and are being
conducted in accordance with all applicable laws, rules and
regulations of all tribunals, other than laws, rules and regulations
the violation of which could not (either individually or
collectively) have a material adverse effect on Lessee's individual
financial condition or operations or on the financial condition or
operations of Lessee and its Subsidiaries taken as a whole; provided
that to the extent oil and gas properties owned by Lessee and its
Subsidiaries are operated by operators other than Lessee or its
Subsidiaries, Lessee has no knowledge of non-compliance and the
appropriate Person has diligently enforced all contractual
obligations of such operators to insure compliance.
SECTION 3.11. Full Disclosure. All information heretofore
furnished by Lessee (or any other party in its behalf) to Lessor for
purposes of or in connection with the Master Lease, the Site Lease,
this Agreement or any other Transaction Paper or any transaction
contemplated hereby or thereby is, and all such information hereafter
furnished by Lessee or in its behalf to Lessor will be, true,
complete and accurate in every material respect or based on
reasonable estimates on the date as of which such information is
stated or certified. Lessee has disclosed to Lessor in writing any
and all facts (other than facts of general public knowledge) which
might reasonably be expected to materially and adversely affect or
might affect (to the extent Lessee can now reasonably foresee), the
business, operations, prospects or condition, financial or otherwise,
of Lessee or its Subsidiaries or the ability of Lessee to perform its
obligations under this Agreement.
SECTION 3.12. Environmental Matters. No real or personal
property owned or leased by Lessee or any Subsidiary of Lessee
(including without limitation, Lessee's and its Subsidiaries oil and
gas properties and related assets) and no operations conducted
thereon, and to Lessee's knowledge, no operations of any prior owner,
lessee or operator of any such properties, is or has been in
violation of any Applicable Environmental Law other than violations
which individually and in the aggregate will not have a material
adverse effect on Lessee and its Subsidiaries taken as a whole.
Neither Lessee, any Subsidiary of Lessee nor any such property or
operation is the subject of any existing, pending or, to Lessee's
knowledge, threatened action, suit, investigation, inquiry or
preceding with respect to Applicable Environmental Laws which could,
individually or in the aggregate, have a material adverse effect on
Lessee and its Subsidiaries taken as a whole. All notices, permits,
licenses, and similar authorizations, if any, required to be obtained
or filed in connection with the ownership or operation of any and all
real and personal property owned, leased or operated by Lessee or any
of its Subsidiaries, including, without limitation, notices,
licenses, permits and authorizations required in connection with any
past or present treatment, storage, disposal, or release of hazardous
substances, petroleums, or solid waste into the environment, have
been duly obtained or filed except to the extent the failure to
obtain or file such notices, licenses, permits and authorizations
would not have a material adverse effect on Lessee and its
Subsidiaries taken as a whole. To Lessee's knowledge, all hazardous
substances, if any, generated by or at any and all real or personal
property owned, leased or operated by Lessee or any of its
Subsidiaries have been transported, treated, and disposed of only by
carriers maintaining valid permits under RCRA and other Applicable
Environmental Laws. There has been no release or threatened release
of any quantity of any hazardous substances or petroleum on, to or
from any real or personal property owned, leased, or operated by
Lessee or any Subsidiary which was not in compliance with Applicable
Environmental Laws other than releases which would not, individually
or in the aggregate, have a material adverse effect on Lessee and its
Subsidiaries taken as a whole. Neither Lessee nor any Subsidiary has
any contingent liability in connection with any release or threatened
release of any hazardous substance, petroleum, or solid waste into
the environment which could have a material adverse effect on Lessee
and its Subsidiaries taken as a whole.
SECTION 3.13. Title to Facility. Lessee has good and
marketable title to the Facility, including, without limitation, all
Rights of Way, free and clear of all Liens other than Permitted
Encumbrances.
SECTION 3.14. Facility Compliance. The Facility was
constructed in full compliance with, and the Facility and its past,
present and anticipated operations comply in all respects with all
applicable licenses, permits, orders, authorizations and all
applicable laws, rules and regulations of governmental authorities,
including, without limitation, all applicable restrictive covenants,
zoning ordinances, building codes and flood disaster laws. Lessee
possesses such valid franchises, certificates of convenience and
necessity, operating rights, licenses, permits, consents,
authorizations, exemptions and orders of governmental authorities as
are necessary to own and operate the Facility in accordance with its
intended uses.
<PAGE>
ARTICLE IV
AFFIRMATIVE COVENANTS
Lessee agrees that, so long as the Master Lease is in effect or
Lessee has any obligation or liability to Lessor thereunder.
SECTION 4.1. Information. Lessee will deliver, or cause to be
delivered, to Lessor:
(a) as soon as available and in any event within ninety
(90) days after the end of each fiscal year of Lessee, consolidated
and consolidating balance sheets of Lessee as of the end of such
fiscal year and the related consolidated and consolidating statements
of income and changes in financial position for such fiscal year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all reported by Lessee in accordance with
generally accepted accounting principles and audited by Arthur
Anderson & Co. or other independent public accountants of nationally
recognized standing acceptable to Lessor;
(b) as soon as available and in any event within
forty-five (45) days after the end of each of the first three (3)
quarters of each fiscal year of Lessee, consolidated and
consolidating balance sheets of Lessee as of the end of such quarter
and the related consolidated and consolidating statements of income
and changes in financial position for such quarter and for the
portion of Lessee's fiscal year ended at the end of such quarter,
setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of Lessee's
previous fiscal year. All financial statements delivered pursuant to
this Section 4.1(b) shall be certified as to fairness of
presentation, generally accepted accounting principles and
consistency by the chief financial officer of Lessee;
(c) simultaneously with the delivery of each set of
financial statements referred to in Sections 4.1(a) and (b), a
certificate of an Authorized Officer, (i) setting forth in reasonable
detail the calculations required to establish whether Lessee was in
compliance with the requirements of Article V on the date of such
financial statements, (ii) stating whether there exists on the date
of such certificate any Default and, if any Default then exists,
setting forth the details thereof and the action which Lessee is
taking or proposes to take with respect thereto, and (iii) stating
whether or not such financial statements fairly reflect the business
and financial condition of Lessee as of the date of the delivery of
such financial statements;
(d) as soon as available and in any event by August 15 and
February 15 of each year, an operating statement for the Facility for
the semi-annual period ending the immediately preceding June 30 or
December 31, as applicable, substantially in the form of Exhibit C
attached hereto, which shall set forth for such six month period (i)
the average prices received by Lessee for hydrocarbons produced and
processed at the Facility, (ii) the cost of all natural gas and other
hydrocarbons purchased by Lessee and gathered, processed or
transported at or through the Facility, (iii) operating expenses
incurred in the operation of the Facility, (iv) volumes of natural
gas processed at the Facility, (v) volumes of natural gas liquids,
condensate, gasoline and other hydrocarbons produced in connection
with the operation of the Facility, and (vi) such other information
regarding the operation of the Facility as Lessor shall reasonably
request;
(e) immediately upon any Authorized Officer becoming aware
of the occurrence of any Default or Event of Default, including,
without limitation, a Default or Event of Default under Article VI,
a certificate of an Authorized Officer setting forth the details
thereof and the action which Lessee is taking or proposes to take
with respect thereto;
(f) promptly upon the mailing thereof to the stockholders
of Lessee generally, copies of all financial statements, reports and
proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all final
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent), post
effective amendments thereto and annual, quarterly or special reports
which Lessee shall have filed with the Securities and Exchange
Commission;
(h) promptly following the occurrence thereof, notice of
(i) any material adverse change in the financial condition of Lessee,
or (ii) the occurrence of any acceleration of the maturity of any
Debt owing by Lessee or any of its Subsidiaries or any default under
any indenture, mortgage, agreement, contract or other instrument to
which any of them is a party or by which any of them or any of their
properties is bound, if such default or acceleration might have a
material adverse effect upon their financial condition;
(i) promptly upon receipt of same, any notice or other
information received by Lessee or any Subsidiary of Lessee indicating
any potential, actual or alleged (i) non-compliance with or violation
of the requirements of any Applicable Environmental Law which (A)
relates in any way to the Facility to the extent such non-compliance
could result in liability to Lessee for fines, clean up or
remediation obligations or other liability in excess of $25,000 in
the aggregate, or (B) could result in liability to Lessee or any
Subsidiary for fines, clean up or any other remediation obligations
or any other liability in excess of $250,000 in the aggregate; (ii)
release or threatened release of any toxic or hazardous waste,
substance, or constituent, or other substance into the environment
which release would impose on Lessee or any Subsidiary a duty to
report to a governmental authority or to pay cleanup costs or to take
remedial action under any Applicable Environmental Law and which (A)
arises out of or results in any way from the operation of the
Facility to the extent that such release or threatened release (1)
involves more than two hundred (200) gallons of Hazardous Substances,
or (2) could result in liability to Lessee for fines, clean up or
remediation or other liability in excess of $25,000 in the aggregate,
or (B) could result in liability to Lessee or any Subsidiary for
fines, clean up and other remediation obligations or any other
liability in excess of $250,000 in the aggregate; or (iii) the
existence of any Lien arising under any Applicable Environmental Law
which (A) encumbers all or any part of the Facility and which secures
any obligation to pay fines, clean up or other remediation costs or
other liability in excess of $25,000 in the aggregate, or (B) secures
any obligation to pay fines, clean up or other remediation costs or
any other liability in excess of $250,000 in the aggregate. Without
limiting the foregoing, Lessee shall provide to Lessor promptly upon
receipt of same copies of all environmental consultants or engineers
reports received by Lessee or any Subsidiary of Lessee which (A)
relates in any manner to the Facility, or (B) would render the
representation and warranty contained in Section 3.12 untrue or
inaccurate in any respect;
(j) in the event any notification is provided by Lessee to
Lessor pursuant to Section 4.1(i) hereof or Lessor otherwise learns
of any event or condition under which any such notice would be
required, then, upon request of Lessor, Lessee shall, within 90 days
of such request, cause to be furnished to Lessor a report by an
environmental consulting firm acceptable to Lessor, stating that a
review of such event, condition or circumstance has been undertaken
(the scope of which shall be acceptable to Lessor) and detailing the
findings, conclusions, and recommendations of such consultant.
Lessee shall bear all expenses and costs associated with such review
and updates thereof, as well as all remediation or curative action
recommended by any such environmental consultant; and
(l) from time to time such additional information
regarding the Facility and the financial condition, business or
operations of Lessee and its Subsidiaries as Lessor may reasonably
request.
SECTION 4.2. Business of Lessee. The primary business of
Lessee and its Subsidiaries will continue to be the acquisition,
exploration for, development, production, transportation, processing
and marketing of liquid or gaseous hydrocarbons and accompanying
elements and related businesses.
SECTION 4.3. Maintenance of Existence. Lessee shall at all
times (a) maintain its corporate existence in the state of Delaware,
and (b) be in good standing and maintain its qualification to
transact business in the State of Colorado and in all other
jurisdictions where the failure to be in good standing or failure to
be qualified to transact business could have a material adverse
effect on the financial condition or operations of Lessee
individually or Lessee and its Subsidiaries taken as a whole.
SECTION 4.4. Right of Inspection. Lessee will permit and will
cause each of its Subsidiaries to permit any officer, employee or
agent of Lessor to visit and inspect the Facility, examine Lessee's
and its Subsidiaries books of record and accounts, take copies and
extracts therefrom, and discuss the affairs, finances and accounts
(including, without limitation, the operations of the Facility) of
Lessee and its Subsidiaries with Lessee's and its Subsidiaries'
officers, accountants and auditors, all at such reasonable times and
as often as Lessor may desire, all at the expense of Lessee. Lessor
covenants and agrees to preserve the confidentiality of any
information with respect to which Lessee, or any of its Subsidiaries
has an obligation of confidentiality to a third party (to the extent
such obligation has been disclosed to Lessor), except to the extent
Lessor is required to disclose such information pursuant to any
applicable law, rule or regulation of any governmental body or
pursuant to the order of any court of competent jurisdiction.
SECTION 4.5. Payment of Taxes and Claims. Lessee will, and
will cause each of its Subsidiaries to, pay (a) all Taxes imposed
upon it or any of its assets or with respect to any of its
franchises, business, income or profits before any material penalty
or interest accrues thereon and (b) all material claims (including,
without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law
have or might become a Lien (other than a Permitted Encumbrance) on
any of its assets; provided, however, no payment of Taxes or claims
shall be required if (i) the amount, applicability or validity
thereof is currently being contested in good faith by appropriate
action promptly initiated and diligently conducted in accordance with
good business practices and neither the Facility nor any material
part of the other property or assets of Lessee or any of its
Subsidiaries are subject to levy or execution, (ii) Lessee as and to
the extent required in accordance with generally accepted accounting
principles, shall have set aside on its books reserves (segregated to
the extent required by generally accepted accounting practices)
deemed by it to be adequate with respect thereto, and (iii) Lessee
has notified Lessor of such circumstances, in detail satisfactory to
Lessor.
SECTION 4.6. Compliance with Laws and Documents. Lessee will
and will cause each of its Subsidiaries to comply with all laws,
their respective certificates of incorporation, bylaws, partnership
agreements and similar organizational documents and all material
agreements to which Lessee or any of its Subsidiaries is a party, if
a violation, alone or when combined with all other such violations,
could have a material adverse effect on the financial condition or
operations of Lessee individually or Lessee and its Subsidiaries
taken as a whole.
SECTION 4.7. Operation of Facility. Lessee will operate the
Facility in a good and workmanlike manner and in accordance with all
applicable permits, authorizations, licenses and consents and all
applicable laws, rules and regulations of governmental authorities
and will pay all fees or charges of any kind in connection therewith.
Lessee will at all times comply fully with the terms of all Rights of
Way and pay all such amounts and take all other actions as are
required to preserve and maintain the Rights of Way in full force and
effect at all times; provided that Lessee will comply with and will
cause to be performed all of the covenants, agreements and
obligations imposed upon it or the Facility in the Permitted
Encumbrances and Rights of Way in accordance with their respective
terms and provisions and will take all actions, pay such amounts and
do all such further acts and things as are necessary to preserve and
maintain the Rights of Way in full force and effect at all times;
provided, that Lessee will not be required to maintain any Right of
Way in force if (a) such right of way is no longer being used by
Lessee in the operation of the Facility, (b) all Leased Equipment is
removed from such Right of Way and is either incorporated into
another part of the Facility or stored on the Land, and (c) Lessee
provides Lessor notice of its intent to abandon such Right of Way not
less than thirty (30) days prior to the effective date of such
abandonment. If Lessee receives a notice or claim from any
governmental authority pertaining to the Facility, including
specifically, but without limitation, a notice that the Facility is
not in compliance with any permit, authorization, license or consent
or any law, rule or regulation of any governmental authority, Lessee
will promptly furnish a copy of such notice or claim to Lessor.
SECTION 4.8. Repair and Maintenance of the Facility. Lessee
will maintain the Facility in a good operating order and condition,
causing all necessary repairs, renewals and replacements to be
promptly made, and will not allow any part of the Facility to be
misused, abused or wasted or to deteriorate.
SECTION 4.9. Environmental Law Compliance. Lessee will, and
will cause each of its Subsidiaries to, comply in all material
respects with all Applicable Environmental Laws related to the
ownership, leasing or operation of all other assets owned, operated
or leased by Lessee or any of its Subsidiaries, in each case,
including, without limitation, (a) all licensing, permitting,
notification and similar requirements of Applicable Environmental
Laws, and (b) all provisions of Applicable Environmental Laws
regarding storage, discharge, release, transportation, treatment and
disposal of hazardous substances, petroleum, solid waste or other
contaminants. Lessee will, and will cause each of its Subsidiaries
to, promptly pay and discharge when due all debts, claims,
liabilities and obligations with respect to any clean-up or
remediation measures necessary to comply with Applicable
Environmental Laws.
SECTION 4.10. Additional Cost Information. Lessee acknowledges
that Lessor has required that Lessee provide Lessor with invoices,
purchase orders, purchase contracts and other documentation required
by Lessor (the "Cost Information") to verify to Lessor's satisfaction
that the actual cost to Lessee of the Initial Equipment equals or
exceeds $21,000,000. Lessee hereby agrees that on or before December
23, 1994, Lessee will provide additional Cost Information verifying
that the actual cost of the Initial Equipment equals or exceeds
$21,000,000. If, upon receipt of such information, Lessor reasonably
determines that the actual cost of the Initial Equipment is less than
$21,000,000, then (a) Lessee shall immediately refund to Lessor the
difference between $21,000,000 and the actual cost of the Initial
Equipment as determined by Lessor, (b) each monthly payment of Base
Rent payable pursuant to Schedule No. 1 (i) during the initial Base
Term shall be reduced to 1.39155% of the actual cost of the Initial
Equipment as determined by Lessor (and Lessor will promptly credit
Lessee's account in an amount equal to the excess portion of monthly
payments of Base Rent previously received by Lessor), and (ii) during
the extended portion of the Base Term (as contemplated by Section 9
of Schedule No. 1) shall be reduced to 1.32% of the actual cost of
the Initial Equipment as determined by Lessor, (c) the stipulated
amount of the fair market value of the Leased Equipment for purposes
of the fair market value purchase option set forth in Section 8 of
Schedule No. 1 shall be reduced by twenty percent (20%) of the
difference between $21,000,000 and the actual cost of the Leased
Equipment as determined by Lessor, and (d) the actual cost of the
Leased Equipment for all other purposes of Schedule No. 1, including,
without limitation, for purposes of Sections 1, 5 and 10 of Schedule
No. 1, shall be the actual cost as determined by Lessor.
SECTION 4.11. Supplemental Documentation Regarding Rights of
Way. As soon as reasonably possible, but in all events on or before
January 3, 1994, Lessee shall (a) cause record title in and to all
Rights of Way to be transferred to Lessee, (b) deliver to Lessor
evidence satisfactory to Lessor that (i) record title in and to all
Rights of Way has been transferred to, and is vested in, Lessee, (ii)
such Rights of Way constitute all Rights of Way necessary for the
construction, maintenance and operation of all pipelines, gathering
systems, transportation lines and related machinery, equipment and
fixtures forming a part of the Facility, and (iii) that the Facility
has been constructed and lies wholly within the boundaries of the
Land and such Rights of Way, and (c) execute, deliver and file of
record (i) a supplement to the Site Lease, (ii) such UCC-1 financing
statement, and (iii) all such other documents, instruments and
agreements (all in form and substance satisfactory to Lessor) as
Lessor shall reasonably require to fully evidence and perfect of
record all rights and interests with respect to the Rights of Way
which are intended to be afforded to Lessor under the Site Lease.
SECTION 4.12. Evidence of Title; Survey and Insurance
Endorsement. As soon as available, but in all events on or before
December 3, 1994, Lessee shall provide to Lessor (a) a survey of the
land in form and substance acceptable to Lessor, but which will, in
all events, (i) contain a metes and bounds legal description of the
boundaries of the Land Site, (ii) contain a survey of the boundaries
of the Land with field notes corresponding to the metes and bounds
legal description, (iii) set forth the location of the major
equipment components and improvements located on the Land, and (iv)
contain a current surveyor's or engineer's certification in form and
substance acceptable to Lessor, (b) a copy of an Owner's Policy of
Title Insurance reflecting that Lessee holds good and marketable
title to the Land subject to no Liens other than Permitted
Encumbrances, and (c) endorsements to the policies of physical
damage, property damage and comprehensive liability insurance
maintained by Lessee in accordance with Section 6 of the Master Lease
reflecting that Lessor has been named as a loss payee and an
additional insured under each such policy.
<PAGE>
ARTICLE V
NEGATIVE COVENANTS
Lessee agrees that, so long as the Master Lease is in effect or
any obligation of Lessee thereunder remains unpaid:
SECTION 5.1. Negative Pledge. Lessee will not create, assume
or suffer to exist any Lien on all or any part of the Facility except
Permitted Encumbrances.
SECTION 5.2. Consolidations and Mergers. Lessee will not
consolidate or merge with or into any other Person; provided, that so
long as no Default or Event of Default exists or will result, Lessee
may merge or consolidate with another Person so long as Lessee is the
surviving corporation.
SECTION 5.3. Asset Dispositions. (a) Lessee will not sell,
lease, abandon or otherwise transfer the Facility to any other
Person, (b) Lessee will not sell, lease, abandon or otherwise
transfer substantially all of its assets to any other Person, and (c)
Lessee will not, and will not permit its Subsidiaries to, sell,
lease, abandon, or otherwise transfer substantially all of the assets
of Lessee and its Subsidiaries on a consolidated basis.
Notwithstanding the foregoing, Lessor will not unreasonably withhold
its consent to a Permitted Transfer.
SECTION 5.4. Use of Proceeds. The proceeds received by Lessee
in respect of the transactions contemplated by the Transaction Papers
will not be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any
Margin Stock, and none of such proceeds will be used in violation of
applicable law (including, without limitation, the Margin
Regulations).
SECTION 5.5. Transactions with Affiliates. Lessee will not,
and will not permit any Subsidiary, to engage in any material
transaction with an Affiliate of Lessee unless such transaction is
generally as favorable to Lessee or such Subsidiary as could be
obtained in an arm's length transaction with an unaffiliated Person
in accordance with prevailing industry customs and practices.
<PAGE>
ARTICLE VI
FINANCIAL COVENANTS
Lessee agrees that, so long as the Master Lease is in effect or
any obligation of Lessee thereunder remains unpaid;
SECTION 6.1. Consolidated Working Capital of Lessee. Lessee
will not permit the amount by which its Consolidated Current Assets
exceeds its Consolidated Current Liabilities as of the end of any
fiscal quarter to be less than $1,000,000.
SECTION 6.2. Current Ratio of Lessee. Lessee will not permit
the ratio of its Consolidated Current Assets to its Consolidated
Current Liabilities as of the end of any fiscal quarter to be less
than 1.0 to 1.0.
SECTION 6.3. Ratio of Consolidated Total Debt and Consolidated
Senior Debt to Consolidated Tangible Net Worth of Lessee. Lessee
will not permit its consolidated total Debt as of the end of any
fiscal quarter to exceed one hundred fifty percent (150%) of its
Consolidated Tangible Net Worth as of the end of such fiscal quarter.
Lessee will not permit its Consolidated Senior Debt as of the end of
any fiscal quarter to exceed one hundred twenty percent (120%) of its
Consolidated Tangible Net Worth as of the end of such fiscal quarter.
SECTION 6.4. Adjusted Consolidated Cash Flow Coverage of
Lessee. If, as of the end of any fiscal quarter the aggregate
Adjusted Consolidated Cash Flow of Lessee for (a) the fiscal quarter
then ended is less than five percent (5%) of Lessee's Consolidated
Total Covered Debt as of the end of such fiscal quarter, or (b) the
four fiscal quarters then ended is less than twenty five percent
(25%) of Lessee's Consolidated Total Covered Debt as of the end of
such fiscal quarter exclusive of such portion of Consolidated Total
Covered Debt, then, in either event, Lessee will, prior to the
expiration of the applicable Special Cash Flow Cure Period, make a
principal payment on its outstanding Debt in an amount such that, if
the principal so paid had not been outstanding at the end of such
fiscal quarter, the percentage set forth herein would have been
satisfied for such fiscal quarter.
<PAGE>
ARTICLE VII
INDEMNIFICATION
Lessee shall indemnify Lessor and hold Lessor harmless from and
against any and all liabilities, losses, damages, costs and expenses
of any kind, including, claims arising out of any negligence, strict
liability in tort or claims for infringement (and further including,
without limitation, the reasonable fees and disbursements of counsel
for Lessor in connection with any investigative, administrative or
judicial proceeding, whether or not Lessor shall be designated a
party thereto) which may be incurred by Lessor and which in any way
relate to or arise out of (a) this Agreement or any other Transaction
Paper, (b) any actual or proposed use of amounts paid by Lessor to
Lessee pursuant to the transactions contemplated by the Transaction
Papers, (c) the ordering, acquisition, rejection, installation,
possession, maintenance, use, ownership, condition, destruction,
operation, return or disposition of the Leased Equipment, or (d) the
construction, ownership, use, maintenance, condition, disposition or
operation of the Facility; provided that Lessor shall not have the
right to be indemnified hereunder for its own gross negligence or
willful misconduct, IT BEING THE EXPRESS INTENTION OF LESSEE THAT
LESSOR SHALL BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS ORDINARY
NEGLIGENCE. The indemnification provided for in this Article VII is
in addition to that contained in the Environmental Indemnity
Agreement. Lessee's obligations under this Article VII shall survive
any partial or total termination, expiration, or cancellation of the
Master Lease, this Agreement and all other Transaction Papers. For
purposes of this Article VII, "Lessor" shall include is shareholders,
directors, officers, employees, agent, attorneys and Affiliates.
<PAGE>
ARTICLE VIII
DEFAULTS
SECTION 8.1. Events of Default. In addition to the Events of
Default contained in the Master Lease and the Site Lease, the
occurrence of any one or more of the following events shall
constitute an Event of Default for all purposes of this Agreement,
the Master Lease, the Site Lease and all other Transaction Papers.
(a) Lessee shall fail to observe or perform any covenant
or agreement contained in Section 4.11, Section 4.12, Article V or
Article VI of this Agreement and, as to Section 6.1 through and
including 6.3 only, the continuance of such failure for a period not
to exceed thirty (30) consecutive days (with respect to the first
such failure within a given calendar year) and five (5) days (with
respect to the second and third such failures within a given calendar
year); provided that no grace period shall apply after the third such
failure in any calendar year;
(b) Lessee shall fail to observe or perform any covenant
or agreement contained in this Agreement or any other Transaction
Paper (other than those covered by Section 8.1(a)) for ten (10) days
after written notice thereof has been given to Lessee by Lessor;
(c) Lessee shall fail to cause the financial statements
described in Section 4.1(a) to be accompanied by the opinion without
qualification (except for qualifications required by changes in
accounting methods with which Lessee's auditors concur) of the
accountants preparing such opinion, that such financial statements
were prepared in accordance with generally accepted accounting
principles and fairly present the consolidated financial position and
results of operations of Lessee;
(d) Lessee or any of its Subsidiaries shall fail or pay
any Material Debt at maturity or any event or condition (i) shall
occur which results in the acceleration of the maturity of any
Material Debt of Lessee or any of its Subsidiaries, or (ii) shall
occur and continue for a period of thirty (30) days (or such shorter
cure period as is provided pursuant to the terms of such Material
Debt) which entitles (or, with the giving of notice or lapse of time
or both, would unless cured or waived, entitle) the holder of such
Material Debt to accelerate the maturity thereof;
(e) any Material Subsidiary of Lessee shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
(f) an involuntary case or other proceeding shall be
commenced against any Material Subsidiary of Lessee seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period
of sixty (60) days; or an order for relief shall be entered against
any Material Subsidiary of Lessee under the federal bankruptcy laws
as now or hereafter in effect;
(g) one (1) or more judgments or orders for the payment of
money aggregating in excess of $1,000,000 shall be rendered against
Lessee or any of its Subsidiaries and such judgment or order (i)
shall continue unsatisfied and unstayed (unless bonded with a
supersedeas bond at least equal to such judgment or order) for a
period of thirty (30) days, or (ii) is not fully paid and satisfied
at least ten (10) days prior to the date on which any of its assets
may be lawfully sold to satisfy such judgment or order;
(h) one (1) or more judgments or orders for the payment of
money aggregating in excess of the sum of (i) $20,000,000 plus (ii)
(A) the amount of such judgment which is covered by insurance to the
satisfaction of Lessor and its counsel, and (B) any amounts which
Lessee has deposited with the agent bank under the Senior Credit
Agreement (or any other party designated by the financial
institutions which are parties to the Senior Credit Agreement) to be
held as security for the payment of such judgment shall be rendered
against Lessee or any of its Subsidiaries, whether or not otherwise
bonded or stayed; or
(i) the Site Lease shall for any reason cease to
constitute a valid, binding and enforceable obligation of Lessee in
accordance with its terms or Lessee shall so state in writing.
SECTION 8.2. Remedies Upon Default. Upon the occurrence of any
Event of Default specified in Section 8.1, Lessor shall be entitled
to exercise any and all remedies available to Lessor under (a)
Section 14(b) of the Master Lease, (b) the provisions of the Site
Lease which are contingent upon the existence of an Event of Default,
including, without termination, Articles II and V thereof, and (c)
any other remedy available to Lessor under any other Transaction
Paper or applicable law which is contingent upon the occurrence of an
Event of Default, a "default", an "event of default", a "breach", a
"violation", or any similar event.
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Return of Leased Equipment; Storage Obligation.
In addition to Lessee's obligations under Section 9(b) of the Master
Lease, Lessee agrees that at the expiration of the lease term with
respect to any item of Leased Equipment, Lessee shall return such
Leased Equipment to Lessor clean and in good condition and working
order, ordinary wear and tear excepted, with all parts fully
functional, free and clear of all Liens, and free and clear of all
insignia, logos, advertising information or other markings made by
Lessee thereon. Upon request by Lessor, Lessee will, at its expense,
(a) deliver such Leased Equipment to any site or sites in the
continental United States designated by Lessor, and (b) to the extent
Lessor requests and Lessee has suitable space available, defer such
return and store such Leased Equipment for Lessor for up to ninety
(90) days. Lessor shall pay all costs of maintenance and insurance
on the Leased Equipment during such deferral period.
SECTION 9.2. Notices. All notices, requests and other
communications to Lessor or Lessee hereunder shall be in writing
(including bank wire, telecopy or similar writing) and shall be given
to such party at its address, telex or telecopy number set forth on
the signature pages hereof or such other address, telex or telecopy
number as such party may hereafter specify for such purpose by notice
to the other party. Each such notice, request or other communication
shall be effective (a) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section 9.2 and
the appropriate answerback is received or receipt is otherwise
confirmed, (b) if given by mail, one (1) business day after deposit
in the mails with first class postage prepaid, addressed as
aforesaid, or (c) if given by any other means, when delivered at the
address specified in this Section 9.2.
SECTION 9.3. No Waivers. No failure or delay by Lessor in
exercising any right, power or privilege hereunder or under any other
Transaction Paper shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by
law or in any of the other Transaction Papers.
SECTION 9.4. Expenses. Lessee shall pay (a) all out-of-pocket
expenses of Lessor, including reasonable fees and disbursements of
special counsel for Lessor in connection with the preparation of this
Agreement and the other Transaction Papers, any waiver or consent
hereunder or thereunder or any amendment hereof or thereof, and (b)
if an Event of Default occurs, all out-of-pocket expenses incurred by
Lessor including (i) fees and disbursements of counsel in connection
with such Default or Event of Default and collection and other
enforcement proceedings resulting therefrom, (ii) fees of auditors
and consultants incurred in connection therewith, and (iii)
investigation expenses incurred by Lessor in connection therewith.
The fees and disbursements of counsel for Lessor which Lessee is
required to pay pursuant to this Section 9.4 in connection with the
preparation of this Agreement and the other Transaction Papers
(excluding any amendments, modifications or supplements thereto
entered into after November 3, 1994 and expressly excluding the
supplement to the Site Lease and other documents contemplated by
Sections 4.11 and 4.12) and the closing of the transactions
contemplated hereby shall not exceed $12,500. The fees and expenses
of special counsel for Lessor incurred in connection with the
preparation, execution, delivery and recording of the supplement to
the Site Lease and other documents contemplated by Sections 4.11 and
4.12 shall be paid by Lessee in accordance with such counsel's
standard hourly rates.
SECTION 9.5. Right Set-Off. Upon the occurrence and during the
continuance of any Event of Default, Lessor and each of its
Affiliates are hereby authorized at any time and from time to time,
to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by
such Person to or for the credit or the account of Lessee against any
and all of the obligations of Lessee now or hereafter existing under
the Master Lease, this Agreement and any other Transaction Papers,
irrespective of whether or not Lessor shall have made any demand
under this Agreement or such other Transaction Papers and although
such obligations may be unmatured. Lessor agrees promptly to notify
Lessee after any such setoff and application made by Lessor; or any
of its Affiliates provided that the failure to give such notice shall
not affect the validity of such setoff and application. The rights
of Lessor under this Section 9.4 are in addition to other rights and
remedies (including, without limitation, other rights of setoff)
which Lessor may have.
SECTION 9.6. Amendments and Waivers. Any provision of this
Agreement, the Master Lease or the other Transaction Papers may be
amended or waived if, but only if, such amendment or waiver is in
writing and is signed by Lessee and Lessor.
SECTION 9.7. Survival. All representations, warranties and
covenants made by Lessee herein or in any certificate or other
instrument delivered by it or in its behalf under the Transaction
Papers shall be considered to have been relied upon by Lessor and
shall survive the execution and delivery to Lessor of such
Transaction Papers, including any Schedule to the Master Lease,
regardless of any investigation made by or on behalf of Lessor.
SECTION 9.8. Invalid Provisions. If any provision of the
Transaction Papers is held to be illegal, invalid, or unenforceable
under present or future laws effective during the term thereof, such
provision shall be fully severable, the Transaction Papers shall be
construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part thereof, and the remaining
provisions thereof shall remain in full force and effect and shall
not be affected by the illegal, invalid, or unenforceable provision
or by its severance therefrom. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision there shall be added
automatically as a part of the Transaction Papers a provision as
similar in terms to such illegal, invalid, or unenforceable provision
as may be possible and be legal, valid and enforceable.
SECTION 9.9. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided,
that, except under the circumstances permitted in Section 4.3 hereof,
Lessee may not assign or otherwise transfer any of its rights under
this Agreement or any other Transaction Paper. Lessor may sell,
assign, transfer or otherwise convey all or any part of its rights
under this Agreement and the other Transaction Papers at any time.
Without limiting the foregoing, the provisions of this Agreement
shall inure to the benefit of the holders of the beneficial interests
in any trust to which any interest of Lessor in and to the Equipment
or under this Agreement or any other transaction document may be
assigned.
(b) Subject to Lessee's prior written consent, such
consent to not be unreasonably withheld, Lessor shall have the right
to disclose any information in its possession regarding Lessee, its
Subsidiaries, the Facility or the Leased Equipment, or regarding to
any transferee, participant, potential transferee or potential
participant of any of rights of Lessor under the Transaction Papers
or any part thereof.
SECTION 9.10. GEORGIA LAW. THIS AGREEMENT AND EACH OTHER
TRANSACTION PAPER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF GEORGIA, EXCEPT TO
THE EXTENT THE LAWS OF THE STATE OF COLORADO NECESSARILY GOVERN THE
ENFORCEMENT OF ANY REMEDY CONTAINED IN THE SITE LEASE.
SECTION 9.11. Consent to Jurisdiction; Waiver of Immunities.
(a) Except to the extent the jurisdiction of the courts of the State
of Colorado is required for the exercise of the remedies provided in
the Site Lease, Lessee hereby irrevocably submits to the jurisdiction
of any Texas State or Federal court sitting in the Northern District
of Texas over any action or proceeding arising out of or relating to
this Agreement or any other Transaction Paper, and Lessee hereby
irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such Texas State or Federal
court. Lessee hereby irrevocably appoints Prentice-Hall Corporate
Systems, Inc. (the "Process Agent"), with an office on the date
hereof at 400 N. St. Paul, Dallas, Texas 75201, as its agent to
receive on behalf of Lessee proper service of copies of the summons
and complaint and any other process which may be made by mailing or
delivering a copy of such process to Lessee in care of the Process
Agent at the Process Agent's above address, and Lessee hereby
irrevocably authorizes and directs the Process Agent to accept such
service on its behalf. Such appointment and authorization shall be
automatically and immediately effective without the necessity of any
further action on the part of Lessee or Lessor in the event Lessee
ceases to maintain its principal executive office in the Dallas/Fort
Worth Metropolitan area. As an alternative method of service, Lessee
also irrevocably consents to the service of any and all process in
any such action or proceeding by the mailing of copies of such
process to Lessee at its address specified in Section 9.2. Lessee
agree that a final judgment on any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(b) Nothing in this Section 9.11 shall affect any right of
Lessor to serve legal process in any other manner permitted by law or
affect the right of Lessor to bring any action or proceeding against
Lessee or its Subsidiaries or their properties in the courts of any
other jurisdictions.
(c) To the extent that Lessee has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect
to itself or its property, Lessee hereby irrevocably waives such
immunity in respect of its obligations under this Agreement and the
other Transaction Papers.
SECTION 9.12. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become
effective when counterparts hereof have been signed by Lessor and
Lessee and delivered each to the other.
SECTION 9.13. No Third Party Beneficiaries. It is expressly
intended that there shall be no third party beneficiaries of the
covenants, agreements, representations or warranties herein contained
other than transferees or assignees of all or any part of any
Lessor's interest hereunder and permitted transferees or assignees of
all or any part of Lessee's interest hereunder.
SECTION 9.14. COMPLETE AGREEMENT. THIS AGREEMENT AND THE
OTHER TRANSACTION PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT
BY AND BETWEEN LESSOR AND LESSEE AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
LESSOR OR LESSEE. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
LESSOR AND LESSEE.
SECTION 9.15. WAIVER OF JURY TRIAL. LESSEE AND LESSOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION PAPERS AND FOR ANY COUNTERCLAIM THEREIN.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers
on the day and year first above written.
Lessee:
SNYDER OIL CORPORATION,
a Delaware corporation
By: /s/ Peter E. Lorenzen
Peter E. Lorenzen,
Vice President, General Counsel
777 Main Street, Suite 2500
Fort Worth, Texas 76102
Attn: James H. Shonsey
Telecopy No.: 817-882-5895
with a copy to:
Thomas J. Edelman
595 Madison Avenue
27th Floor
New York, New York 10022
Telecopy No.: 212-888-6877
Lessor:
NATIONSBANC LEASING CORPORATION,
a North Carolina corporation
By:
Paul L. Frihse
Senior Vice President
2300 Northlake Centre Drive, Suite 300
Tucker, Georgia 30084
Attn: Paul L. Frihse
Telecopy No.: 404-270-8454
<PAGE>
EXHIBIT A
Description of Initial Equipment
All machinery, equipment and fixtures which, on the date hereof,
are located on, comprise a part of, or are used or useful in
connection with the Facility. Without limiting the foregoing, the
Initial Equipment shall include (w) all pipe, casings, seals,
insulators, vents, joints, compressors, connections, tanks, pumps,
pump sites, engines, racks, valves, instruments, meters, gauges,
measuring equipment, signs, posts, boilers, furniture, towers, air
conditioning and heating equipment, tools, spare parts, telephone and
other communication equipment and computers which, on the date
hereof, are located on, comprise a part of, or are used or useful in
connection with the ownership or operation of the Facility, (x) the
machinery, equipment and fixtures described in Annex 1 attached
hereto, (y) all accessions, additions and replacements to, and
substitutes for, the machinery, equipment and fixtures described in
this paragraph, and (z) all books, records, manuals, plans and
specifications related to the manufacture, use, ownership,
maintenance and operation of the machinery, equipment and fixtures
described in this paragraph.
<PAGE>
<PAGE>
ANNEX 1
to Exhibit A
Certain Equipment
Pipeline Equipment (in the yard)
Two Twenty Inch Pig receivers with Yale Closures
One Twelve Inch Pig Receiver with Yale Closure
Process Equipment
Three Slug catchers 150 Psig 60" dia. 100' long V-201 ABC
Three Slug catchers 1100 Psig 48" dia. 130' long V-202 ABC
One Scrubber 60" dia. 12' vertical vessel V-203
One Condensate Stabilizer Skid mounted containing:
One scrubber 48" dia 8' tall 1100 psi rated V-245
One scrubber 48" dia 8' tall 250 psi rated V-204
Four Exchangers, E-201, E-202, E-203, and E-204.
Partical Filter F-805
Control valves, pipe and fittings
One Condensate Stabilizer Tower 36" dia by 48' tall T-1900
One Allis Chalmers Ro-Flo vane type compressor 50 hp K-610
One Air Compressor, Gardner Denver with dryer and building
Three FMC 200 hp Plunger Pumps Quinplex skid mounted with motor
P-55 ABC.
Three Sundstrand pumps 40 hp P-10 ABC
One Sundstrand pump P-50
One surge tank V-190 15,000 gallon 370 psi rated
One De-methanizer tower T-1000 52' dia by 80 ft
One Fuel Scrubber V-140
One Regen Scrubber V-130
One Process Skid containing:
Regeneration Cooler with Two Fans AC-710
Inlet Filter Separator F-800
Dust Filter F-810
Cold Seperator V-160
Liquid/Gas exchanger E-450
Reboiler E-440
Chiller E-470
Side Heater E-430
Refrigerant Disengaging Vessel V-220
Control Valves and pipe
Two Methanol Pumps P-25 A and B
Refrigerant Surge tank V-210
Two Dehy Beds V-110 and V-120
Refrigerant Condenser Two Fans AC-730
Refrigerant Economizer V-205
Refrigerant Suction Scrubber V-240
Gas/Gas Exchangers E-400 and E-420
Expander/Compressor X-600/K-600 Mafi-Trench rated at 924/905
horse power skid mounted
One Flare Stack
Control
20 x 50 structure housing the Motor Control Center, the
Distributive Control System, and Variable speed drive for the
pipeline pumps
Compressor 60 x 270:
Overhead Hoist, insulated steel structure, lighting and
ventilation fans, gas detection, flame detection, Centerline
vents
Compression
Inlet
KC-531A Engine SN 32627 Compressor SN 326910
KC-531B Engine SN 32628 Compressor SN 326920
Refrigeration
K-630 Engine SN 295629 Compressor SN 292090
Residue
KC-532A Engine SN 32625 Compressor SN 326930
KC-532B Engine SN 32626 Compressor SN 326940
Storage
Five 30,000 gallon Storage tanks, 250 psig rated.
One 18,000 gallon Storage tank, 250 psig rated.
Seven Used 300 bbl. Stock Tanks,
12' x 15' atmospheric
Hot Oil system
Pipe and related equipment
Instrumentation and Electrical equipment
Miscellaneous Consumable and Condensate Storage
Pipelines
Low Pressure Inlet
Two miles of 20" pipe including pig launcher/receiver
High Pressure Inlet
25 miles of 12" pipe including launcher/receiver
Liquid Pipeline to Amoco and Phillips
28 miles of 4" pipe including valve stations/measurement
<PAGE>
EXHIBIT B
Land
A parcel of land located in the Southeast quarter (SE1/4) of
Section 8, Township 4 North, Range 66 West of the Sixth Principal
Meridian, County of Weld, State of Colorado, more particularly
described as follows:
Commencing at the Southeast (SE) corner of Section 8, Township
4 North, Range 66 West of the sixth principal meridian, thence
North 90 degrees 00'00" West along the South line of the
Southeast quarter (SE1/4) of said Section 8, also being the
basis of bearing, a distance of 650.96 feet, thence North 00
degrees 00'00" East, a distance of 30.00 feet to the true point
of beginning; thence North 00 degrees 00'00" East distance of
660.00 feet; thence North 90 degrees 00'00" West, a distance of
1,320.00 feet; thence South 00 degrees 00'00" West, a distance
of 660.00 feet; thence South 90 degrees 00'00" East, a distance
of 1,320.00 feet to the true point of beginning.
Said parcel of land contains 20.00 acres, more or less.
<PAGE>
EXHIBIT C
REPORTING FORMAT
FOR
SEMI-ANNUAL WEST PLANT PERFORMANCE
Per MCF
of
FOR SIX MONTHS ENDING_____ Actual Throughout
Average Daily
Throughout (MMCFD) _____
Average Residue Price
($/gallons) $____
Average NGL Price
($/gallons) _____
Total Residue (MMCF) _____
Total NGL (thousand
gallons) _____
Revenues $____ $_____
Cost of Gas (____) (_____)
Gross Margin _____ ______ (*)
Direct Operating Expense (____) (_____)
Lease Expense (____) (_____)
Net Operating Cash Flow ______ _______
(*) Includes Gathering and Processing Margin
<TABLE>
EXHIBIT 11.1
SNYDER OIL CORPORATION
COMPUTATION OF NET INCOME PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1992, 1992 AND 1994
(In thousands except per share data)
<CAPTION>
Year Ended December 31,
--------------------------------
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
Income before extraordinary item $14,597 $22,538 $12,372
Extraordinary item-early extinguishment of debt 0 (2,993) 0
-------- -------- --------
Net income 14,597 19,545 12,372
Dividends on preferred stock (4,800) (9,100) (10,806)
-------- -------- --------
Net income available to common $ 9,797 $10,445 $ 1,566
======== ======== ========
Weighted average shares outstanding 22,722 23,096 23,704
Add common stock equivalents 6,823 10,356 11,706
-------- -------- --------
Weighted average common stock
and equivalents outstanding 29,545 33,452 35,410
======== ======== ========
Primary net income per share:
Income before extraordinary item $ .64 $ .97 $ .52
Extraordinary item-early extinguishment of debt - (.13) -
-------- -------- --------
Net income .64 .84 .52
Dividends on preferred stock (.21) (.39) (.45)
-------- -------- --------
Net income available to common $ .43 $ .45 $ .07
======== ======== ========
Fully diluted net income per share:
Income before extraordinary item $ .49 $ .67 $ .35
Extraordinary item-early extinguishment of debt - (.09) -
-------- -------- --------
Net income .49 .58 .35
Dividends on preferred stock - - -
-------- -------- --------
Net income available to common $ .49 $ .58 $ .35
======== ======== ========
</TABLE>
<TABLE>
EXHIBIT 12
SNYDER OIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1990 1991 1992 1993 1994
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Income before taxes, minority
interest and extraordinary item $ 4,154 $ 3,893 $15,027 $22,538 $13,510
Interest expense 6,273 8,452 4,997 5,315 10,337
------- ------- ------- ------- -------
Earnings before fixed charges $10,427 $12,345 $20,024 $27,853 $23,847
======= ======= ======= ======= =======
Fixed Charges:
Interest expense $ 6,273 $ 8,452 $ 4,997 $ 5,315 $10,337
------- ------- ------- ------- -------
Total fixed charges $ 6,273 $ 8,452 $ 4,997 $ 5,315 $10,337
======= ======= ======= ======= =======
Ratio of earnings
to fixed charges 1.66 1.46 4.01 5.24 2.31
======= ======= ======= ======= =======
</TABLE>
<TABLE>
EXHIBIT 12
SNYDER OIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(Unaudited)
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1990 1991 1992 1993 1994
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Income before taxes, minority
interest and extraordinary item $ 4,154 $ 3,893 $15,027 $22,538 $13,510
Interest expense 6,273 8,452 4,997 5,315 10,337
------- ------- ------- ------- -------
Earnings before fixed charges $10,427 $12,345 $20,024 $27,853 $23,847
======= ======= ======= ======= =======
Fixed Charges:
Interest expense $ 6,273 $ 8,452 $ 4,997 $ 5,315 $10,337
Preferred stock dividends 0 453 4,800 9,100 10,806
------- ------- ------- ------- -------
Total fixed charges $ 6,273 $ 8,905 $ 9,797 $14,415 $21,143
======= ======= ======= ======= =======
Ratio of earnings
to combined fixed charges
and preferred dividends 1.66 1.39 2.04 1.93 1.13
======= ======= ======= ======= =======
</TABLE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K into Snyder
Oil Corporation's previously filed Registration Statements Nos. 33-
35546, 33-48213 and 33-54809.
/s/ Arthur Andesen LLP
ARTHUR ANDERSEN LLP
Fort Worth, Texas
March 3, 1995
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
- ---------------------------------------------------------
As independent petroleum consultants, we hereby consent to the
incorporation of our reports included in this Form 10-K into Snyder
Oil Corporation's Registration Statements Nos. 33-35546, 33-48213
and 33-54809.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By /s/ Frederic D. Sewell
--------------------------
Frederic D. Sewell
President
Dallas, Texas
March 15, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 21,733
<SECURITIES> 0
<RECEIVABLES> 37,055
<ALLOWANCES> 0
<INVENTORY> 12,523
<CURRENT-ASSETS> 72,439
<PP&E> 786,837
<DEPRECIATION> 229,318
<TOTAL-ASSETS> 673,259
<CURRENT-LIABILITIES> 71,731
<BONDS> 318,507
<COMMON> 302
0
10
<OTHER-SE> 273,774
<TOTAL-LIABILITY-AND-EQUITY> 673,259
<SALES> 245,105
<TOTAL-REVENUES> 262,328
<CGS> 209,167
<TOTAL-COSTS> 229,850
<OTHER-EXPENSES> 6,505
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,463
<INCOME-PRETAX> 13,510
<INCOME-TAX> 967
<INCOME-CONTINUING> 12,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,372
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
February 6, 1995
Mr. John A. Fanning
Snyder Oil Corporation
777 Main Street, Suite 2500
Fort Worth, Texas 76102
Dear Mr. Fanning:
In accordance with your request, we have estimated the proved
reserves and future revenue, as of December 31, 1994, to the Snyder
Oil Corporation (SOCO) interest in certain oil and gas properties
located in Colorado, New Mexico, Texas, and Wyoming as listed in the
accompanying tabulations. As requested, lease and well operating
costs do not include the per-well overhead expenses allowed under
joint operating agreements for those properties operated by SOCO.
This report is based on constant prices and costs in accordance with
the guidelines of the Securities and Exchange Commission (SEC).
As presented in the accompanying summary projections, Tables I
through IV, we estimate the net reserves and future net revenue to
the SOCO interest, as of December 31, 1994, to be:
<TABLE>
<CAPTION>
Net Reserves Future Net Revenue
----------------------- ----------------------------
Oil Gas Present Worth
Category (Barrels) (MCF) Total at 10%
- ---------------------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Proved Developed
Producing 18,047,637 168,298,775 $318,615,200 $205,712,300
Non-Producing 1,292,266 13,343,739 25,414,300 14,766,700
Proved Undeveloped 4,542,989 68,174,870 66,322,400 19,469,100
---------- ----------- ------------ ------------
Total Proved 23,822,892 249,817,384 $410,351,900 $239,948,100
</TABLE>
The oil reserves shown include crude oil and condensate. Oil
volumes are expressed in barrels which are equivalent to 42 United
States gallons. Gas volumes are expressed in thousands of standard
cubic feet (MCF) at the contract temperature and pressure bases.
As shown in the Table of Contents, the properties in this
report have been subdivided into SOCO's significant property groups
behind the appropriate state tab. Included for each significant
property group are summary projections of reserves and revenue for
each reserve category along with one-line summaries of reserves,
economics, and basic data by lease. For the purposes of this report,
the term "lease" refers to a single economic projection.
The estimated reserves and future revenue shown in this report
are for proved developed producing, proved developed non-producing,
and proved undeveloped reserves. In accordance with SEC guidelines,
our estimates do not include any value for probable or possible
reserves which may exist for these properties. This report does not
include any value which could be attributed to interests in undevel-
oped acreage beyond those tracts for which undeveloped reserves have
been estimated.
Future gross revenue to the SOCO interest is prior to deducting
state production taxes and ad valorem taxes. Future net revenue is
after deducting these taxes, future capital costs, and operating
expenses, but before consideration of Federal income taxes. In
accordance with SEC guidelines, the future net revenue has been
discounted at an annual rate of 10 percent to determine its "present
worth." The present worth is shown to indicate the effect of time on
the value of money and should not be construed as being the fair
market value of the properties.
For the purposes of this report, a field inspection of the
properties has not been performed nor has the mechanical operation or
condition of the wells and their related facilities been examined.
We have not investigated possible environmental liability related to
the properties; therefore, our estimates do not include any costs
which may be incurred due to such possible liability. Also, our
estimates do not include any salvage value for the lease and well
equipment nor the cost of abandoning the properties.
Oil prices used in this report are based on a December 31, 1994
West Texas Intermediate posted price of $16.00 per barrel, adjusted
by significant property group or lease for regional posted price
differentials. Gas prices used in this report are based on average
December 1994 prices for each significant property group. Oil and
gas prices are held constant in accordance with SEC guidelines.
Lease and well operating costs are based on operating expense
records of SOCO. For non-operated properties, these costs include
the per-well overhead expenses allowed under joint operating
agreements along with costs estimated to be incurred at and below the
district and field levels. As requested, lease and well operating
costs for the operated properties include only direct lease and field
level costs. Headquarters general and administrative overhead ex-
penses of SOCO are not included. Lease and well operating costs are
held constant in accordance with SEC guidelines. Capital costs are
included as required for workovers, new development wells, and
production equipment.
We have made no investigation of potential gas volume and value
imbalances which may have resulted from overdelivery or underdelivery
to the SOCO interest. Therefore, our estimates of reserves and
future revenue do not include adjustments for the settlement of any
such imbalances; our projections are based on SOCO receiving its net
revenue interest share of estimated future gross gas production.
The reserves included in this report are estimates only and
should not be construed as exact quantities. They may or may not be
recovered; if recovered, the revenues therefrom and the costs related
thereto could be more or less than the estimated amounts. The sales
rates, prices received for the reserves, and costs incurred in
recovering such reserves may vary from assumptions included in this
report due to governmental policies and uncertainties of supply and
demand. Also, estimates of reserves may increase or decrease as a
result of future operations.
In evaluating the information at our disposal concerning this
report, we have excluded from our consideration all matters as to
which legal or accounting, rather than engineering, interpretation
may be controlling. As in all aspects of oil and gas evaluation,
there are uncertainties inherent in the interpretation of engineering
data; therefore, our conclusions necessarily represent only informed
professional judgments.
The titles to the properties have not been examined by
Netherland, Sewell & Associates, Inc., nor has the actual degree or
type of interest owned been independently confirmed. The data used
in our estimates were obtained from Snyder Oil Corporation, other
interest owners, various operators of the properties, and the
nonconfidential files of Netherland, Sewell & Associates, Inc. and
were accepted as accurate. We are independent petroleum engineers
and geologists; we do not own an interest in these properties and are
not employed on a contingent basis. Basic geologic and field
performance data together with our engineering work sheets are
maintained on file in our office.
Very truly yours,
/s/ Frederic D. Sewell
RKG:LCD
February 7, 1995
Mr. John A. Fanning
Snyder Oil Corporation
777 Main Street, Suite 2500
Fort Worth, Texas 76102
Dear Mr. Fanning:
In accordance with your request, we have audited the estimates
prepared by Snyder Oil Corporation (SOCO), as of December 31, 1994,
of the proved oil and gas reserves and future net revenue to the SOCO
interest in certain oil and gas properties located in the United
States. SOCO's estimates are based on constant prices and costs
which conform to the guidelines of the Securities and Exchange
Commission (SEC). The following table sets forth SOCO's estimates of
the proved reserves and future net revenue, as of December 31, 1994,
for the audited properties:
<TABLE>
<CAPTION>
Net Reserves Future Net Revenue
----------------------- ----------------------------
Oil Gas Present Worth
Category (Barrels) (MCF) Total at 10%
- ---------------------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Proved Developed
Producing 23,417,100 312,445,100 $492,950,400 $316,401,900
Non-Producing 2,686,900 41,484,500 66,879,900 38,673,800
Proved Undeveloped 8,873,300 157,321,300 151,958,300 59,291,600
---------- ----------- ------------ ------------
Total Proved 34,977,300 511,250,900 $711,788,600 $414,367,300
</TABLE>
In our opinion, the estimates of SOCO's net proved oil and gas
reserves, as shown herein and in certain computer printouts on file
in our office, are in the aggregate reasonable and have been prepared
in accordance with generally accepted petroleum engineering and
evaluation principles as set forth in the Standards Pertaining to the
Estimating and Auditing of Oil and Gas Reserve Information
promulgated by the Society of Petroleum Engineers. We are satisfied
with the methods and procedures utilized by SOCO in preparing the
December 31, 1994 reserve estimates, and we saw nothing of an unusual
nature that would cause us to take exception with the estimates, in
the aggregate, as prepared by SOCO.
The estimated reserves and future revenue shown herein are for
total proved reserves which include proved developed producing,
proved developed non-producing, and proved undeveloped reserves. Our
audit did not include consideration of probable or possible reserves
which might be established for these properties, nor did it include
any consideration of undeveloped acreage beyond those tracts for
which proved reserves have been estimated.
It should be understood that our audit does not constitute a
complete reserve study of SOCO's oil and gas properties. The
complete reserve study consists of properties evaluated by
Netherland, Sewell & Associates, Inc. as presented in our report
dated February 6, 1995, representing 57.8 percent of the total proved
present worth discounted at 10 percent, and properties evaluated by
SOCO, representing 23.6 percent of the total proved present worth.
Our audit consisted of a detailed review of properties making up 81.4
percent of the present worth for total proved reserves. In our
audit, we accepted without independent verification the accuracy and
completeness of the historical information and data furnished by SOCO
with respect to ownership interest, oil and gas production, well test
data, oil and gas prices, historical costs of operation and
development, and any agreements relating to current and future
operations of the properties and sales of production. If, however,
in the course of our examination something came to our attention
which brought into question the validity or sufficiency of any such
information or data, we did not rely on such information or data
until we had satisfactorily resolved our questions relating thereto
or had independently verified such information or data.
The above indicated reserve estimates were made in accordance
with guidelines prescribed by the SEC relating to the use of constant
prices and costs. The oil and gas prices for each of SOCO's
significant property groups are based on a December 31, 1994 West
Texas Intermediate posted price of $16.00 per barrel and average
December 1994 gas prices, respectively, and are held constant
throughout the life of the properties. Lease and well operating
costs are held constant at current levels for the life of the
properties. Future capital costs are included as required for
workovers, new development wells, and production equipment and are
also held constant until expenditure.
We are independent petroleum engineers with respect to SOCO as
provided in the Standards Pertaining to the Estimating and Auditing
of Oil and Gas Reserve Information promulgated by the Society of
Petroleum Engineers. We do not own an interest in these properties
and are not employed on a contingent basis.
We received the full cooperation of the engineering,
geological, and accounting personnel of Snyder Oil Corporation during
our review. Please let us know if we can be of further assistance in
this matter.
Very truly yours,
/s/ Frederic D. Sewell
RKG:LCD
